Moral Compass & Intelligence in Ethical Decision-Making in Business

Instructor: Erin Tigro
Personal values play an integral role in how leaders make ethical decisions in their businesses and organizations. This lesson explorers how personal values are transformed into ethical business decisions.

The Milgram Experiment

Imagine you were placed in an experiment that was secretly testing your morality. One famous 1963 Yale University experiment did just that. Researcher Dr. Stanley Milgram told his participants to follow the instructions until the experiment was over - no matter what else they saw or heard.

Volunteers sat at a table containing a large dial and a big red button in the center. The device was hooked up to another volunteer in the next room, visible and audible to the participant. Milgram explained that the device would shock another volunteer in another room, but no real harm would be done.

Milgram instructed his participants to repeatedly increase the voltage and shock the volunteer again. As the experiment progressed, the volunteer in the other room was clearly in agony with every shock. When participants became uncomfortable with the continued delivery, Milgram's responses were designed to be authoritative, simple prods, like ''It is absolutely essential that you continue.''

The volunteer in the other room was not actually being shocked, but Milgram's participants didn't know that. The majority of them continued to deliver shock after shock at Milgram's prodding.

Over 65% of participants continued the shocks to the highest level.

Milgram's study confirmed his hypothesis. Although people's values made them uncomfortable hurting another human being, an authority figure standing behind them and telling them repeatedly that they must continue was enough to overcome their sense of right and wrong.

In the Milgram experiment, more than 65% of the subjects delivered shocks to the highest level simply because Milgram told them to continue.
Milgrams Experiment Chart

Moral Compass

This sense of right and wrong (in a specific situation) could be called a moral compass and it plays a significant role in the ethical decision-making process.

When a hiker picks up a compass, he or she hopes that its ability to point north will come in handy and perhaps even save their life. But before a compass can do that, the person holding it must have an understanding of the map.

In other words, the compass doesn't tell you where to go, but it does tell you how to get there.

That's true with a moral compass as well. Milgram's experiment was designed to demonstrate how easy it was to make someone abandon their moral compass. In order for the moral compass to have any real value, the person holding it must have moral intelligence.

Moral Intelligence

Moral intelligence is the 'map' that makes the moral compass useful. It is the ability to judge or distinguish between right and wrong, and to understand how making the right choices will lead to a moral destination.

Many business leaders who ultimately lose their true north never intended to do so, and most were good people who made a series of small decisions that deviated slightly from what they knew to be right.

For a hiker, being off by only a few degrees is not very critical on short hikes, but can put them miles from their destination in the long run. So it is in business as well.


A great example of losing one's moral compass is the fate of the company Enron, an energy trading company that was once one of the most innovative and successful of its time. However, the company began to have some losses, and then buried them in pretend partnerships and invented revenues.

Kenneth Lay was the CEO of corrupt energy giant Enron.
Kenneth Lay

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