Unit 2: Ethical dilemmas and functional ethics
Business Ethics and Corporate Social Responsibility notes · PTU syllabus (MBA 106-18)
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Unit summary
Managers face situations where values conflict and no option is free of cost. This unit covers the characteristics of ethical dilemmas, ethical decision making and reasoning, the dilemma resolution process, and ethical considerations in marketing, accounting, finance, human resources and the environment.
After this unit you can
- Explain the characteristics of ethical dilemmas
- Apply models of ethical decision making and reasoning
- Resolve ethical dilemmas through a structured process
- Explain ethical issues in marketing, accounting, finance, HR and the environment
PTU syllabus topics
- Characteristics of ethical dilemmas
- ethical decision making and reasoning
- dilemma resolution process
- ethical considerations in marketing/accounting/finance/HR/environment
- 1
Recognise the ethical issue
- 2
Get the facts
- 3
Identify stakeholders
- 4
Evaluate options
Utility, rights, justice
- 5
Decide and test
Would I be comfortable if it were public?
- 6
Act and reflect
Topic 1
Ethical dilemmas and their characteristics
An ethical dilemma is a situation where a decision-maker must choose between options that each involve compromising some ethical principle or stakeholder interest.
- Characteristics: two or more conflicting values, no clearly right answer, significant consequences for others, choice cannot be avoided, decision must be justified.
Truth vs loyalty
Report a colleague's fraud or protect the friendship
Individual vs community
Personal bonus vs team or society
Short term vs long term
Meet the quarter's target vs build trust
Justice vs mercy
Strict rules vs compassion for circumstances
Example
A sales manager is asked to backdate invoices to meet the year-end target: loyalty to the boss conflicts with honesty to auditors and investors.
Topic 2
Ethical decision making and reasoning
- Ethical reasoning: applying moral principles systematically to reach a justified conclusion.
- Factors influencing decisions: individual (values, moral development, locus of control), issue-related (moral intensity — magnitude, probability, proximity), organisational (culture, rewards, peers, leadership) and external (law, competition).
- 1Moral awareness
Recognise the ethical issue
- 2Moral judgement
Decide what is right
- 3Moral motivation
Prioritise ethical values
- 4Moral action
Act on the decision despite pressure
- Quick tests: legality test, newspaper (publicity) test, golden rule, "would I want my family to know?", stakeholder-impact test.
Topic 3
Dilemma resolution process
- 1
Recognise the issue
- 2
Get the facts
- 3
Identify stakeholders and options
- 4
Evaluate options
Utilitarian, rights, justice, virtue tests
- 5
Decide and test
Newspaper test, consult a mentor
- 6
Act and reflect on the outcome
- Laura Nash's twelve questions and the Blanchard-Peale three questions (Is it legal? Is it balanced? How will it make me feel about myself?) are popular aids.
Topic 4
Ethics in marketing
- Issues: misleading or surrogate advertising, dark patterns, hidden charges, price gouging, unsafe products, misuse of customer data, marketing to children.
- Safeguards: ASCI code, Consumer Protection Act 2019 and the CCPA's guidelines on misleading ads and dark patterns (2023), DPDP Act 2023 on personal data.
Topic 5
Ethics in accounting and finance
- Accounting: window dressing, creative accounting, revenue manipulation, off-balance-sheet items, auditor independence.
- Finance: insider trading, front running, mis-selling, price manipulation, conflicts of interest, money laundering.
- Safeguards: Ind AS, auditing standards, audit committees, NFRA, SEBI PIT Regulations 2015, whistle-blower mechanisms.
Example
IL&FS (2018) and Satyam (2009) both involved concealment in financial statements and auditor failures.
Topic 6
Ethics in human resource management
- Issues: discrimination in hiring and promotion, unequal pay, harassment, privacy of employee data, unsafe workplaces, unfair layoffs, exploitation of contract labour.
- Safeguards: POSH Act 2013, Code on Wages 2019 (equal remuneration), Occupational Safety Code 2020, transparent appraisal, grievance redressal.
Topic 7
Ethics and the environment
- Issues: pollution, depletion of resources, climate change, hazardous waste, biodiversity loss.
- Principles: polluter pays, precautionary principle, sustainable development, intergenerational equity.
- Corporate practices: environmental management systems (ISO 14001), carbon disclosure, circular economy, net-zero targets; legal backing — Environment Protection Act 1986, NGT (2010), EPR rules for plastic.
Example
The Bhopal gas tragedy (1984) remains the defining case of corporate environmental and ethical failure in India.
Key terms
- Ethical dilemma
- Choice between options each compromising some value
- Moral intensity
- Degree to which an issue demands ethical consideration
- Newspaper test
- Would the decision be acceptable if reported publicly?
- Creative accounting
- Manipulating accounts within or beyond rules to mislead
- Dark pattern
- Deceptive design that tricks users online
Quick revision
- Dilemma: conflicting values, no clear answer, unavoidable choice.
- Influences: individual, issue, organisational and external factors.
- Rest's model: awareness, judgement, motivation, action.
- Resolution: facts, stakeholders, options, tests, act, reflect.
- Functional ethics: marketing, accounting, finance, HR, environment.
Important exam questions
Practice questions written to the PTU exam pattern for this unit's syllabus: short answers (Section A style) and long answers (Sections B and C style).
Short-answer questions
- Q1.What is an ethical dilemma?
- Q2.Name the four components of Rest's model.
- Q3.What is the newspaper test?
- Q4.State two unethical accounting practices.
- Q5.What is the polluter pays principle?
- Q6.Give two HR ethics issues.
Long-answer questions
- Q1.Explain the characteristics and types of ethical dilemmas with examples.
- Q2.Discuss the factors influencing ethical decision making.
- Q3.Describe the process of resolving an ethical dilemma.
- Q4.Discuss ethical considerations in marketing, finance and human resource management.
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