Ethical Issues Analysis Framework Is there a right way to analyze an ethical issue? For students who have had an ethics or philosophy course, they know that ethics is a personal issue.
The study of ethics does not tell you what to do but instead presents a framework that can be used to study the ethical dimensions of various issues. An approach that is commonly applied in the area of business decision making is referred to as stakeholder analysis.
In stakeholder analysis, a business decision maker is asked to consider a broad set of constituencies in making business decisions.
Instead of focusing only on shareholders and maximizing shareholder wealth, management is encouraged to consider both the moral and social implications of their decisions in terms of how the decisions affect all stakeholders of the company.
Ethical Issues Analysis Framework
This broader set of stakeholders includes shareholders as well as employees, suppliers, customers, the local community, and any other party that might be affected by the decision.
Why worry about these additional stakeholders? For one reason, it will help you develop a more complete analysis of the decision, not just the impact on the immediate parties.
In the case above, Gamble appears to be focused on the profits of the company and keeping his and his staff’s jobs.
A more thorough stakeholder analysis might suggest that misstating the amortization expense could lead to lack of confidence in Shield’s financial reports, that if detected, could lead to a higher cost of capital and maybe even fines or other penalties. In the long run, Gamble, his staff, and other employees could lose their jobs in this scenario.
Specific Analysis Steps
Here are some specific stakeholder analysis steps that you can apply in the process of ethical awareness and decision-making:
Recognize an ethical situation or ethical dilemma. The first step is to know when you have a problem. To do that, you must develop your own personal ethics or conscience.
Ethical Issues Analysis Framework
Your ethics are a subset of society’s values. They come from family, educational, and religious institutions as well as from social movements and from your own reactions to all of these inputs. Being sensitive to and aware of the effects (potential harm or benefit) of one’s actions and decisions on individuals or groups is a first step in resolving ethical dilemmas.
Move toward an ethical resolution by identifying and analyzing the principal elements in the situation. Seek answers to the following questions in this sequence:
- What parties (stakeholders) may be harmed or benefited?
- Whose rights or claims may be violated?
- Which specific interests are in conflict?
- What are my responsibilities and obligations?
These questions should help you identify and sort out the facts.
Identify the alternatives and weigh the impact of each alternative on various stakeholders.
For instance, in financial accounting, which alternative methods are available to report the transaction, situation, or event? What is the effect of each alternative on the various stakeholders? Which stakeholders are harmed or benefited most?
Select the best or most ethical alternatives, considering all the circumstances and the consequences.
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