Compliance Glossary

Ethical Dilemma

Ethics are the moral standards and principles by which entities (individuals and organizations) govern their behaviors and decision-making. When these standards and principles conflict with each other in a decision-making situation, an ethical dilemma may occur.

What is an Ethical Dilemma?

An ethical dilemma takes place in a decision-making context where any of the available options requires the agent to violate or compromise on their ethical standards.

We observe that ethical dilemmas can be characterized by the following three elements:

  1. The agent must be faced with a choice or the need to make a decision.
  2. The agent must have more than one course of action available.
  3. The agent recognizes that all available courses of action require them to compromise on some personally held ethical standard or value.

Ethical standards are the moral frameworks that individuals and organizations use to guide their decision-making and differentiate between right and wrong. Companies and professional organizations may adopt their own ethical standards and require that employees/members adopt those standards as part of their personal business ethics.

Common ethical practices in the workplace include:

  • Telling the truth
  • Taking responsibility for one’s actions
  • Following company policies
  • Fulfilling professional obligations
  • Following through on commitments
  • Following the law
  • Acting in the best interests of shareholders
  • Acting in the best interests of customers
  • Acting in one’s own best interests
  • Treating others equally
  • Conducting sustainable business practices
  • Maximizing profits
  • Avoiding layoffs

Ethical dilemmas happen because ethics are inherently contradictory. Employees may face situations where compromising on telling the truth or following the law seems to serve other valued goals, such as maximizing profits or avoiding layoffs.

Types of Ethical Dilemma

There are several different types of ethical dilemmas that agents may encounter in the course of performing their roles and responsibilities:

  1. Epistemic dilemmas take place in a decision-making context where moral standards conflict and the agent cannot readily determine which ethical principle should take precedence over the other.
  2. A self-imposed dilemma is one created by the agent’s own errors in judgment, such as making competing promises to multiple organizations that cannot be fulfilled simultaneously. In contrast, a world-imposed dilemma is caused by circumstances outside the agent’s control.
  3. An obligation dilemma is one where an agent has multiple options and more than one of them is obligatory, while a prohibition dilemma occurs when all available options are prohibited.

What is an Example of an Ethical Dilemma?

Ethical dilemmas occur regularly in the business environment where employees make decisions that impact the success and profitability of organizations.

Employees may experience an ethical dilemma when deciding whether to report an incident of workplace harassment or declare a conflict of interest. In the first case, the employee might understand that the harassment is wrong, but feel guilty about getting their colleague in trouble. In the latter case, the employee might recognize their fiduciary duty to the organization, but feel a sense of loyalty to their family and friends that makes it difficult to do the right thing.

How Do You Identify an Ethical Dilemma?

Experts agree that identifying an ethical dilemma starts with recognizing your gut reaction to a problematic situation. If a decision seems to challenge your moral compass, it’s time to take a step back and investigate further. 

You might proceed by writing down:

  1. The decision you need to make.
  2. The various options or courses of action available.
  3. The ethical pros and cons of each available action.

How Do You Resolve an Ethical Dilemma?

An ethical dilemma does not always offer a clear solution that conforms with ethical norms. Here’s how entities can cope with the most challenging ethical dilemmas:

  1. Talk it Out – The best way to determine whether a dilemma exists is to discuss it with other people. A collective analysis of the situation can shed light on whether a dilemma really exists and the moral implications of each available option. This might involve reporting the incident to your company’s hotline so that you may discuss the situation with the compliance team and get proper guidance. 
  2. Understand Duties & Obligations – A great way to approach any ethical dilemmas is from the standpoint of understanding the agent’s duties in the situation. In a business context, a fiduciary duty to the organizations legally obligates the agent to act in the best interests of shareholders. Contractual obligations can also play a role in determining how to resolve an ethical dilemma.

Maximize the Good & Minimize the Bad – When a problem has no perfect solution, the best approach is to analyze the outcomes of each potential action and choose the action with the greatest positive impact and least negative impact.

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