Your meatless burger company’s brand was a rising star before a criminal tampered with the product in grocery stores. Now three people who ate the burgers are dead, and you are faced with the difficult task of deciding what to do in response. What’s the most ethical strategy you can devise to save your company and balance the interests of customers, investors and employees?
Businesses frequently struggle to make ethically-responsible decisions that minimize legal risk for their organizations, employees, and customers. Choosing among legally-compliant options while balancing stakeholder interests is often complex and challenging. Ideally, business leaders hope that their decisions are both legal and ethical, and will also create value in the company that ultimately benefits all stakeholders.
Constance E. Bagley, Founder and CEO of Bagley Strategic Advisors LLC and a Senior Research Fellow at Yale University, developed a
decision tree intended to help business leaders navigate the relationship between law, value creation and ethics. Bagley suggests that determining the “right thing to do” in any situation begins with asking if the proposed action is legal. If your strategy complies with the law, you then ask whether the decision will maximize
shareholder value. The definition of shareholder value is not limited to just increasing business profits, but also considers the broader best interest of the company, including benefits to other
stakeholders. Effects on all stakeholders are contemplated when asking the next question in the decision tree—is the proposed action ethical? If the answer to this prong of the tree is “no”, then you are in the same position with the proposed action as you would be if the strategy was illegal—you shouldn’t do it!
Although the typical ideal path that Professor Bagley’s decision tree envisions is the progression from legal compliance, to maximization of shareholder value, and finally to an ethical decision, there are derivations. Looking back at the video and
James Burke’s response on behalf of Johnson & Johnson to the
Tylenol murders, we can see that the strategy to pull capsules from store shelves world-wide—with a loss of over $250 million--was not an option that initially increased shareholder value. However, this decision potentially saved human lives, and therefore this realization must be weighed against the dollars lost. Many would agree that Burke’s decision in this case clearly met the standard for “doing the right thing.”
As you can see from the Meatless Burger and Tylenol Poisoning scenarios, decision making is both a science and an art, and as such requires you to strike a delicate balance among strategic, legal, and ethical considerations. It’s tough to get just one aspect right, much less all three, especially when the decision maker faces financial, time, and other resource constraints. Yet there are methods and models that can guide your decision process. One such analytic tool is the
Three Pillar Model designed by
George Siedel, a Professor Emeritus of the Ross School of Business at the University of Michigan who designed the Meatless Burger scenario with Professor Christine Ladwig. Siedel’s model, which parallels Professor Bagley’s decision tree, is adapted from a required course on leadership that is taught in the MBA program at
Harvard Business School. The model focuses on the key foundations for decisions in business, politics, non-profit organizations, and everyday life: strategy, law and ethics (the Three Pillars).
The Three Pillar model is especially valuable when making business decisions, and you begin the process by devising a strategy that aligns with value creation for your company. You should think about these questions: What is the real issue here, and how is it affecting the business and stakeholders? What is the best solution/approach to this situation? What strategy will create value for the business and its stakeholders?
After devising your strategy, you should examine the related law. This may be a rule or regulation, or even proposed legislation, that will affect the strategy you’ve developed. After devising a legally-compliant strategy, you next conduct an
ethics analysis. To do this, work through these four steps of ethical decision making: (1) describe theethical dilemma, (2) identify the stakeholders involved, (3) analyze options (including how each group of stakeholders will be affected—the stakeholder analysis), and (4) make a decision based on your analysis. To help you in examining the ethics of a potential decision, you may apply the tests included in the video, such as the
Utilitarian Test, the
Newspaper Test, the
Family Test, and the
Mentor Test.
I think yes because laws were built off of ethics and the safety of everyone
Yes definitely it is: multinatinional companies are focus in earning money instead of assuming their responsibility with the consumers. As a scientist, I saw how do they reduce and replace some elements for the formulas of food and cleaning devices in order to reduce cost but the quality and efficiency is lowe and lower. Look what happened in Peru with Clorox two weeks ago.
Are you saying Yes it's necessary to consider both, or yes legal compliance is enough?
I am of the view that it's equally important to consider ethics as well even though not complied by law. That's because that's one of the social responsibilities of the business (even though voluntary). Moreover, it would help the firm also to increase its goodwill in the market and attract more customers.
Of course law is important, but I think ethics is more important. It's because if a person wait a long time but a really old person comes, I think that I need to respect them and be kind because the old person can fall or get injured by standing a long time.
As a scientist, I saw how do they reduce and replace some elements for the formulas of food and cleaning devices in order to reduce cost but the quality and efficiency is lowe and lower
Ethics and principles must always take precedence over what is legal.
I think both are necessary because without one it is still dangerous to you and maybe others to.
Yes! Definitely. Even meeting the legal demand, companies still need to take ethics into considerations to provide the safety to everyone.
I think that being legally compliant is not enough as being seen as an ethical company in the public eye makes a company more profitable in the long run.
Yes because even though we have the law to help, you also have to remember that not everyone obeys it. It never hurts to add ethics when making a business, always make sure that you have something to back it up.
the law sets minimum standards of behavior while ethics sets higher norms of behavior. The laws set minimum standards of ethical behavior. Ethical people go beyond the laws.
absolutely. about 60% of your profit is due to the trust of the consumer.
I believe so cause the laws were built off everyones safety.
I think it is necessary to consider both law and ethics when making a business decision because you have to pay attention to both sides of how a problem could be solved in business decision making but I think ethics i more important because it depends on how you do things.
It is necessary to consider both law and ethics when making a business. Just because something is legal doesn't always mean that it's right. When you own a company your customers are your priority. You want them to feel comfortable buying your products. You want to be fair and let people know that you value them.
I think yes because laws are made to protect us and ethics are us how we act and the respect we have.
I think is good to see both sides because we can keep people safe and we have to use our ethics and we have to be supported by the law
I think yes because the law makes everything safer
it is not necessary, since it all goes to the person who is making the decision if he/she is willing to think about ethics or not. Everything goes back to the morals and beliefs of the individual. In addition, it comes to the situation and each situation is going to be dealt with in a unique way.
Yes because some laws are made off ethics.
Yes, in my belief. That is the foundation of laws.
yes because laws are based off ethics.
In my opinion, the business needs to be legally compliant. Also, every type of business (for-profit and not-for-profit) was set up to service the customers. Therefore, ethical aspects (the act of stakeholders) should be considered when making a business decision. That's why we should note that not everyone acts the same way; hence, there are expectations based on the situations.
yes because you want to keep doing hwat you are doing legal while doing the right thing
Absolutely, i think law and ethics are like checks and balances. We need both when making a decision in business. Without one the other would over power and it would be strictly ethical or strictly lawful. I think being legally compliant is enough in certain situations such as the car seatbelt dilemma. We need ethics in the law just as we need law and ethics in the business sector. All law and no ethics could have many potential drawbacks, all ethics and no law could also surprisingly have potential drawbacks.
Law and ethics are tricky because something can be completely legal while being completely unethical. Context is so important when discussing whether or not to go through with a business decision and I personally do not even believe that following a specific method such as utilitarianism applies for some situations. Although it is important to make decisions off of concrete and strong foundational values, it is okay to veer off the path depending on what is at stake.
i believe that it is necessary in order to provide the best results
Yes. because in the long run if the illegal actions catch up with you it can undo everything you've worked for and you would be in an even worst position than you you were in before.
Yes because if you don't think ethically the people that buy from you will eventually stop buying from you and you business will go down. That will effect your employees which are people to. So making an ethical decision in business is very important.
I don't think that is necessarily true. at least not always. Were Jim Crow's laws built off of ethics?
I don't think that is necessarily true. at least not always. Were Jim Crow's laws built off of ethics?
I don't think that is necessarily true. at least not always. Were Jim Crow's laws built off of ethics?