Decisions! Decisions!

Making Sense of Ethical Dilemmas

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Decisions! Decisions! Making Sense of Ethical Dilemmas

We’re gaining ground quick on the 20-year anniversary of Enron and if there’s ever a poster child for poor ethical decision making, this is it. One unintended consequence of the Enron debacle is more and better research on ethical decision making. Take, for instance, a rather neat and provocative study by an Austrian team on the 10-year anniversary of Enron in 2011, which you’re free to look up in the Journal of Business Ethics.

The Research 

We’re not going to unpack the entire study for you, but these researchers offer some useful insight on how managers and leaders make sense of ethical dilemmas. The set-up is that the team approached a bunch of managers at the Austrian Central Bank and asked them to read some ethical scenarios and to rate or apply judgements of morality to each of the scenarios.

Emotion Plays into Decision Making 

What they found is that executives aren’t human calculators who take a rational, methodical, or robotical approach to understanding dilemmas by adding up costs and benefits in their heads. Rather, there are emotions and some decidedly uneconomic factors that play into the decision-making process. For instance, in one scenario entitled “Paul” an executive had to decide on laying off people to secure a bonus payment for himself and other executives/directors. In this on-line scenario, Paul refused to lay-off any personnel and, in the process, denied himself and other directors sizable bonuses. More than half of the Austrian Central Bank managers said that Paul’s decision was the moral one. And 25% said it was rather moral. This flies in the face of some of the core precepts of economics that assumes self-interest and maximization of personal gain. The authors chalk this up to a commitment orientation towards others that departs from maximizing personal utility. What’s particularly interesting is that this scenario purposefully created a tension between two seismic forces—leadership and management ethics versus incentives systems (e.g., bonus payouts).

Are “Moral” Leadership Decisions Too Good to be True? 

But for reasons that highlight why another Enron may be lurking around the next corner, go to bed thinking about this next statistic. Although 75% of the Austrian Bank execs think that Paul made the just and right decision, a quarter of participants would have sold out their employees for a bonus. Furthermore, more than 60% of this same sample believed that only 20% or less of their colleagues would make that same decision in real life. In other words, they thought that Paul was a unicorn and that most managers they know are greedy, would pocket the cash, and send their employees packing.

The Kimono wants more Pauls. Be like Paul.

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