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Legal Ethical Decision Making: Models, Steps & Framework

Lesson Transcript
Instructor: Kat Kadian-Baumeyer

Kat has a Master of Science in Organizational Leadership and Management and teaches Business courses.

Ethical decision making is the process of reviewing options and considering the consequences to make a decision that maximizes a positive outcome for the greater good. Learn about the legal aspects of ethical decision making, and explore models, steps, and frameworks for different approaches. Review the Golden Rule, public disclosure test, and universalization test for examples of how to practice ethical decision making. Updated: 09/30/2021

Ethical Decision-Making

As CEO of a company, your decisions could have far-stretching consequences. Any decision you make could affect many people. How do you know the right thing to do? We have an app for that! Not exactly, but there are several decision-making models that can steer your decision making in the right direction.

Ethical decision making is merely making decisions based on what ought to be done to benefit the maximum amount of people. It should include society as well as the environment. Three popular ethical decision-making models include:

  • The Golden Rule
  • Public Disclosure Test
  • Universalization Test

As we learn about the three models, it is important to think about three things. Who are we considering in the decisions we make? What is the purpose of the decisions we make? And how will our decisions impact others?

The Golden Rule

The Golden Rule is simple. It asks that you treat people the way you want to be treated. This is a lesson many of us learned in kindergarten. It involves taking the feelings of others into consideration when making decisions that affect them. Respect people in all of your exchanges. Although the concept is simple, applying it to business decisions can be challenging. Not every business decision can be made with the interest of others in mind.

This brings us to corporate social responsibility, and it means a corporation's responsibility to be aware of the environment and society when making decisions. Think accountability, integrity and honesty.

Back in 1968, the Ford Motor Company quickly designed and manufactured the Ford Pinto to compete with the newly emerging Japanese subcompact cars that were taking over United States highways. In their haste, an unnoticed problem with the fuel tank was looming that would eventually lead to 180 deaths, numerous serious burn injuries and thousands of burned cars.

Let's put the pieces together. In Grimshaw v. Ford Motor Company, Lily Gray and Richard Grimshaw, who was a teenage boy at the time, were traveling in their vehicle when they were hit from behind. Upon impact, the car burst into flames. Gray was killed instantly, and Grimshaw was left with debilitating burns. The family sued and was awarded millions in punitive and compensatory damages.

Within months of this case, the Pinto was in the headlines again. This time, it was discovered that there was a problem with the fuel tank. The original fuel tank could not withstand a direct hit, even at low speeds, without bursting into flames. The question of ethics becomes pivotal in the Pinto case as we learn Ford's response to the deaths and injuries. Ford was made aware of the vehicle's safety glitch sometime in the mid-70s but refused to make any changes to the design.

You see, Ford did a cost/benefit analysis weighing the benefits of making the changes to the cost of making the changes. In other words, Ford management asked themselves a crucial question: is it cheaper to settle on lawsuits than to make the change? In the end, they decided it was not cost-effective to make the change. The Golden Rule was not in the forefront of management's mind when considering the impact the vehicle flaw had on people.

Public Disclosure Test

Similar to the Golden Rule is the public disclosure test. This test asks that a business decision be something a company would be so proud of that it would not mind if the decision were to be broadcast on public television for the whole world to see.

Let's look at an example of how one Chinese baby milk producer was not mindful of the public disclosure test. Sanlu Group, a large milk distributor in China, produced baby milk powder that they knowingly fortified with melamine, an ingredient commonly used in making plastics. Human consumption of melamine can cause kidney and liver failure, especially in babies. As a result, several babies died from drinking the milk.

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