Ethical Decision Making By Business Leaders: The Impact Of Cognitive Biases And Strategies

Abstract

Business ethics refers to the examining right or wrong human behavior in business settings. A common human behavior in the business world is decision making, and some of the most important decisions made by business leaders are those that involve responding to ethical dilemmas. Leader ethical decision making is a skillset that can be improved to yield better results for organizations. Theoretical models have been used by leaders to guide decision making efforts in the past, but more effective models have been identified for guiding ethical decision making. The present study uses a historiometric approach to explore ethical decisions by business leaders in real-world settings through the lens of sensemaking, a theoretical model shown to improve ethical decision making outcomes. Mechanisms that operate on sensemaking are tested revealing specific cognitive biases that decrease leader ethical decisions and specific strategies that increase leader ethical decision making. Implications for biases and strategies are discussed and the financial impact of leader ethical decisions on organizations is explored.