My daughter's elementary school is big on character. They start teaching the character values at day one of Kindergarten, both in the classroom and through regular school-wide assemblies. It's a great thing, a complement to the behaviors and ethic that we teach at home. The challenge comes, of course, when the decisions and choices turn out to be not quite as black and white as they seem.
As a writer, I certainly wish the ethical decisions were as clear as the simple values my daughter learns. Creating characters often feels like an exercise in character development for me. I don't know how it works for you, but characters and their stories come to me in two ways. The first is when they seem to spring into being, like the goddess Athena, fully formed from my head. Characters like these certainly present their own challenges, generally being pesky independent sorts, but they don't usually offer any ethical dilemmas.
It's the second type that are the troublemakers. This batch is the characters I run across in real life. How do you use a flesh and blood person as a character? Sometimes they raise only minor concerns, such as the character whose name is the same as that boy from my daughter's preschool class. That's an easy choice, even when you love the name. Just pick a new one and get over it.
But when the real-life character uses more than just someone's name, the choices get much harder. Sometimes it's a case where I come up with a character as a means to vent some spleen at a person or persons who have royally pissed me off. It's cathartic to write those characters, but should they ever be allowed to escape my journal or password-protected document file? Probably not, unless I can find a way to take that initial too close to real life characterization and morph it into someone far less recognizable. For the most part I find, if I can't do the latter, as a writer, the ethical thing to do is to be satisfied with the former, the getting it all out and letting go.
The most difficult characters for me, though, are the ones that really belong to someone else. I'm not talking about plagiarism. I'm talking about that great story someone tells you about their friend, or family member, or neighbor. The one who is so compelling, who gets into such scrapes and adventures that you love them from the start, be they villain or hero. You hear their story and your first thought is "What a great character." From that thought, my writer's brain starts sucking up all the details, working on fleshing out the person, wondering if I can ask the storyteller what they looked like, or do they have a picture, or... Oh crap.
It doesn't take too long for the 'Oh crap' to hit. That's the realization of "Oh crap what am I doing? I'm raiding this person's life, their private memories." And I know at that moment, I can't use it, any of it, this wonderful character, with their fantastic story. Not now. Maybe, just maybe, when the storyteller is dead, along with every other person we know in common who might know the person, or at least the story. Or maybe never.
It's not always so personal. Sometimes the character and story spring from an event - a fire, a murder, a natural disaster. The character is not a particular who in real life, but rather a sum of experiences of many 'whos". Then the ethical question is: Do I have the right to profit from someone's pain? Plenty of people do this of course - just pick up a tabloid. But can I do it? Am I taking a tragedy and making some meaning from it, or am I just a vulture, picking over the bones? Those characters require time, distance. I set them aside for later, when the pain isn't as fresh, and make the decision then.
So, I wish I could write that story about my father-in-law's cousin who...but I can't. If I'm to be a writer of character, I can't use characters that can hurt someone, someone real who lives in my world, not the world of letters and pages.