How to Make Ethical Decisions in Management

by Kirk Thomason; Updated September 26, 2017

Managers are often responsible for making a variety of business decisions. Those affected by decisions can be either internal or external stakeholders. Part of management’s responsibility when making decisions is to act ethically. Business ethics often involves following ethical or moral principles defined by society. Companies will need to internalize these principles so managers have a framework for ethical decisions. This framework — commonly called a code of ethics — provides managers with a blueprint for making decisions partly based on ethics.

Step 1

Implement a written code of ethics for managers to follow. The ethical principles contained in the code can be descriptive or normative. A descriptive code requires managers to question what people think is right and follow that pattern when making decisions. Normative ethics uses the ethics from society to help managers make decisions by focusing on the end result.

Step 2

Consider the effects of the decision on more than one group of stakeholders. For example, publicly held companies often look to maximize shareholder returns. Ethical decision making balances the maximization of shareholder profit with the effects of business activities on external stakeholders. Improvements in employee working conditions, the city surrounding the company or natural resources are common considerations in ethical decision making.

Step 3

Follow industry guidelines when making ethical decisions. Government agencies often regulate a host of business industries. Mining, health care, manufacturing and financial services all have strict regulations. Companies can mirror their code of ethics against the regulations or legal boundaries created by government agencies. This often results in the equitable treatment of all business stakeholders.

Step 4

Involve many different individuals in the decision-making process. Ethics and ethical views are often different among those working in a company. Having many individuals involved in decision making can help provide more insight to the direction of a company’s activities. Each individual can also represent a different group of stakeholders affected by the company.

Step 5

Review previous decisions. Companies may have a historical record for major business decisions. Previous decisions may provide information on what not to do in terms of ethical decisions. Ethical violations from previous decisions may prevent companies from making the same mistake again. This can prevent companies from weakening their market share from irresponsible actions and decisions.

References

  • "Business Ethics"; Richard T. DeGeorge; 2010

About the Author

Kirk Thomason began writing in 2011. In addition to years of corporate accounting experience, he teaches online accounting courses for two universities. Thomason holds a Bachelor and Master of Science in accounting.