Wednesday, February 16, 2011

Organisational Behaviour Lecture Series - Part 5 - Organizational Ethics - A Case Study - How to Resolve Ethical Dilemma

Business Ethics

[An updated excerpt from my Article titled PUTTING ETHICS BEFORE BUSINESS by VIKRAM KARVE published in the Journal INDIAN MANAGEMENT (The Journal of the All India Management Association) Vol 36 No 10 October 1997 issue pp 51-53]

Some people believe that ethics is of little concern to business people.

Ethics is ethics and business is business.
In fact, some say the the term Business Ethics is an oxymoron.

When faced with an ethical dilemma today, many upwardly managers tend to take the position that they must wear two hats and cloak themselves with two separate, conflicting codes of ethics. One ethical hat applies to the professional or technical aspects of their work (professional or technical ethics) and the other for their business behaviour (business ethics).

This leads to the development of a schizophrenic ethical personality, with the manager striving for professional excellence and high ethical standards for his own self, but resorting to unethical practices to achieve business success for his organization at all costs. Indeed this Dr. Jekyll and Mr. Hyde approach is at the heart of many ethical dilemmas in managerial decision-making.

One useful technique to resolve such ethical dilemmas is the CATWOE model adapted from Systems Management. Ethical dilemma occurs due to mismatch in ethical perspectives of various stakeholders involved in the ethical situation.  A CATWOE analysis helps the manager identify all stakeholders involved in a decision and their respective ethical perspectives.

CATWOE is an acronym to categorize various stakeholders:



To elaborate a bit:

C:   The ‘customers of the system’. In this context, ‘customers’ means those who are on the receiving end of whatever it is that the system does. Is it clear from your definition of “C” as to who will gain or lose from your decision?

A:   The ‘actors’, meaning those who would actually carry out the activities envisaged in the notional system being defined.

T:   The ‘transformation process’. What does the system do to the inputs to convert them into the outputs?

W:   Weltanschauung - The ‘world view’ that lies behind the root definition. Putting the system into its wider context can highlight the consequences of the overall system. For example the system may be in place to assist in making the world environmentally safer, and the consequences of system failure could be significant pollution.

O:   The ‘owner(s)’ – i.e. those who have sufficient formal power over the system to stop it existing if they so wished (though they won’t usually want to do this).

E:   The ‘environmental constraints’. These include things such as ethical limits, regulations, financial constraints, resource limitations, limits set by terms of reference, and so on.


(This case study pertains to the year 1997)

A state-of-the-art cutting-edge technology product (say something like a mobile phone – remember the year in 1997) is to be launched by a leading company simultaneously at different locations for the first time in the country on a certain date which has been widely announced and advertised and there is fantastic customer response and heavy bookings for the product.

A big event is planned in Pune for the launch for which a large number of dignitaries, customers and media have been invited, for extensive TV, media and press coverage. The manager’s career hinges on the success of the event and the launch.

Three days before the scheduled launch date the newly appointed regional manager’s deputy tells him that the trucks transporting the product have been detained at the octroi post outside Pune, ostensibly for want of some documents and the octroi inspector is demanding a bribe for immediate clearance of the consignment.

“Should we pay the bribe?” the deputy manager asks the regional manager.

CATWOE Analysis

To begin CATWOE analysis of the ethical situation, let us start with the key player – the regional manager who is the decision maker or the “T” of the CATWOE model.

The newly appointed regional manager may face a number of ethical dilemmas that may complicate his decision.

What is the meaning of the directive from his boss that the launch event must succeed at any cost…? Does his boss mean that the regional manager must do anything, legal or illegal, in order to ensure a successful launch…? Or does this directive imply and assume that the regional manager should act within bounds of the law and ethical propriety…?

Why has his deputy manager passed the ball in his court…? The deputy manager has been working in this office for a long time and surely such situations must have arisen before. The amount of the bribe is peanuts and well within the deputy manager’s scope to pay and he can surely “manage” this on his own. Then why is he asking the regional manager…?

Is it a trap to test the newly appointed regional manager’s honesty…?

The regional manager has many ethical obligations towards several parties. He has an obligation to obey the laws of the land but as an employee he also has owes a degree of obedience to his superiors and obligations to ensure the company’s success. This conflicting two-fold obligation comprises not only business and commercial success but also includes his duty to guard his company’s reputation, protect its interests and see that it doesn’t fall foul of the law.

Finally, the regional manager has a duty towards himself not to compromise his own personal conscience. At the same time he needs to look after his career interests for which a successful launch is vital. And he must safeguard himself against legal hassles if he is caught breaking the law.

CATWOE - The Dramatis Personnae and their Ethical Perspectives

The actors include the various persons demanding the bribe and the company employees / agents involved the the payment / delivery process of the bribe. It could set a bad precedent as both the company and newly appointed regional manager could acquire a reputation that they can be easily “milked” and are ethically vulnerable. Furthermore, paying the bribe could create an attitude amongst employees and junior staff that, in this company, bribery is simply a standard operating procedure.

It is most likely that employees expecting to be held accountable to the manager and company rules will begin to distrust both the manager and the company itself, for in today’s world employees reject the “Do as I say, but not as I do” notion.

The directive the the launch must be a success at all costs (secure business at all costs) conveys the message that the company’s top management is concerned with only results not with the means to achieve the results. It encourages employees to abdicate moral responsibility for their actions and take refuge in the “I was only following orders” excuse thereby shifting the blame and trying to clear one’s conscience. When senior management fosters an attitude that anything goes, experience suggests that it probably will and there is every chance that scams and scandals may occur.

It must also be remembered that to the extent the company gains sales for non-business reasons it runs the risk of being complacent about the quality of its products or services. If it no longer feels the need to respond to the demands and dynamics of market or the challenge of technological advancements, it risks losing its competitive edge.

The ethical dilemma here is that on the one hand the regional manager must keep his promises to his customers regarding timely delivery and on the other hand not lose sight of the fact that bribes represent unproductive deadweight that raises the cost of doing business which in turn is passed on to the customer.

The oft given argument “well, others are doing it, so why not us” is certainly not valid. The prevailing ethical environment depends on the moral behaviour of the majority of citizens, or in this case the ethical environment is determined by the organizational ethical behaviour and also the moral values and code of conduct of the existing industry.

But one thing is sure – in the long term, it is not beneficial to conduct business in an environment where lying, stealing, bribery, cheating and other immoral activities are permitted and practised by the majority. That is why bribery is illegal in virtually every country in the world.

WELTANSCHAUUNG (World View Predominantly Held)
On the ethical plane, bribery and corruption is almost universally condemned as it violates the core ethical values of honesty and integrity.

SUGGESTED SOLUTION (to the Ethical Dilemma)

CATWOE analysis presents a holistic view of the ethical perspectives of concerned stakeholders involved in the ethical dilemma. In the ethical situation analysed here in this case study, it clearly suggests that it is the long-term interests of the stakeholders involved in the ethical decision that the regional manager should:
1. Decline to pay the bribe.
2. Apprise the top management of his decision.
3. Use the three days time available and try to resolve the issue in the proper manner, with the help of the top management, intervention at higher levels and threat of counter-exposure if necessary.
4. Take customers into confidence to cater for the “worst case scenario”.
5. Ask the top management promulgate a code of ethics which clearly prohibits all types of bribes and illegal payments.


Business ethics concentrates on moral standards as they apply to business policies, institutions and behaviour of top management and employees who work within these organizations. Business ethics is applied ethics as it incorporates ethical analysis involving all stakeholders (CATWOE Model) and applies the conclusions of this analysis to resolve ethical dilemma.

Business is a cooperative activity whose very existence requires ethical behaviour, as any unethical behaviour on the part of any of the stakeholders is detrimental to business interests. Business cannot strive without ethics so it is in the best interest of business to promote ethical behaviour among all its stakeholders as well as within its larger society.  
When employees believe that their organization is ethical, they are more willing to contribute to their organization’s interests, as they see the Managers’ leadership as legitimate and they will readily follow what their managers and supervisors tell them to do.  Thus, ethics is sine qua non for any business and term “Business Ethics” is certainly not an oxymoron.


Copyright © Vikram Karve 2010
Vikram Karve has asserted his right under the Copyright, Designs and Patents Act 1988 to be identified as the author of this work.
© vikram karve., all rights reserved.

VIKRAM KARVE educated at IIT Delhi, ITBHU, The Lawrence School Lovedale, and Bishop's School Pune, is an Electronics and Communications Engineer by profession, a Human Resource Manager and Trainer by occupation, a Teacher by vocation, a Creative Writer by inclination and a Foodie by passion. An avid blogger, he has written a number of fiction short stories and creative non-fiction articles in magazines and journals for many years before the advent of blogging. His delicious foodie blogs have been compiled in a book "Appetite for a Stroll". A collection of his short stories about relationships titled COCKTAIL is being published soon and Vikram is currently busy writing his first novel and with teaching and training assignments. Vikram lives in Pune with his family and his muse – his pet Doberman girl Sherry, with whom he takes long walks thinking creative thoughts.

Vikram Karve Creative Writing Blog
Academic and Creative Writing Journal Vikram Karve:
Professional Profile of Vikram Karve:
Foodie Book:

© vikram karve., all rights reserved.  


1 comment:

chudexs said...

Nice read
i saw ur foto with ur dog is so nice and
i feel u love the dog, and dog too
nice blog, keep writing.