Volkswagen recently admitted that millions of clean diesel cars sold worldwide contain software to fool regulators. In contrast to the GM safety scandal, however, where unclear standards and communications issues contributed to the production of unsafe vehicles, it will be pretty hard for VW to find a rationale for its use of technology that blatantly violated regulations. This is particularly difficult given VW’s high profile efforts to assert its “greenness” – and many laudable efforts to support these assertions. When this type of event happens, the question always comes up: How do people that, in all likelihood, are reasonable, ethical people, end up making such unethical decisions.
One possible answer can be that they are able to develop rationalizations for why these decisions are not unethical. In a paper published in Journal of Business Ethics, we argue that these clearly faulty rationalizations don’t occur over night. We propose that corruption in organizations often spreads through a process of overcompensation, where rationalization and action interact in a dynamic way. To give people a margin of error in defending unethical behavior, rationalizations are developed that that ‘over-shoot’ the actual corrupt deed. This overshoot then provides an impetus for more serious forms of illegality. In other words, the over rationalizations push out the boundaries of what might be considered ethical, so when the next decision is made, the reference point for ethical decision making has moved. This occurs in a cycle, eventually leading to decisions that to the common person would seem blatantly unethical.
To avoid this escalation, you need an organization that questions these types of rationalizations early on. This requires a strong culture, and organizational mechanisms to double check ethically questionable decisions.
See the entire paper at: http://scholarworks.rit.edu/cgi/viewcontent.cgi?article=1600&context=article
Question to Ask the Prof: My car was damaged and the insurance company agreed to pay for the rental of a car while mine was being fixed. When I arrived there were no rental cars available, even though I had a confirmed reservation. I waited 30 minutes for my car, but it was a gas guzzling pickup truck instead of the sedan that I was promised. I told the agent I was not satisfied with the service or the truck, and she told me that I could return the truck with an empty tank of gas. That seemed fair and I felt more satisfied, but now I realize that I will be doing very little driving during this time, and I will probably return the truck with an almost full tank of gas. I could use the truck for a trip that my wife and I will be taking, but I’d rather use her fuel efficient car. Would it be unethical for me to siphon the gas into my wife’s car?
A (Professor Palanski): One relevant question is: what are you actually buying when you buy a tank of gas? Gas really does not have much value in and of itself – instead its value is comprised of the ability to operate a vehicle for a certain amount of time and distance. A good-faith understanding of the rental car representative’s offer was to prevent you from suffering any undue financial hardship because you had to drive a gas guzzler instead of a more fuel-efficient car. In effect, s/he was not giving you a tank of gas, but instead saving you from having to pay more than you normally would for your gas.
Question to “Ask the Prof”: Is it different being ethical as a student as compared to being a “professional”?
A (Professor Barbato): A professional is expected to self-regulate his or her behavior, because outsiders don’t have the knowledge or expertise to regulate these behaviors. A doctor is an obvious example, because he or she is the only one with enough knowledge about a patient to determine the proper treatment. A professor who is grading a student is in a similar situation. If professionals don’t impose high ethical standards on themselves, then the profession cannot operate effectively, and the cost of regulation from the outside will be very burdensome. For this reason, it is especially grievous when a professional violates ethical norms. We use the term, “moral intensity” to understand that there are degrees of moral transgressions, so when a professional uses his or her professional privileges to commit moral transgressions it is worse. For instance, when a doctor uses his or her privileges to dispense drugs illegally, like the case of Michael Jackson’s doctor, that is worse than if a common criminal dispenses drugs illegally, even though the outcomes are the same.
A student does not fall into this category. He or she is expected to behave ethically, but a transgression by a student is no different than the same transgression by anyone else.
Question to Ask the Prof: If it is the norm to bribe public officials when doing business in a foreign country and it is hard to get anything done if you don’t, is it unethical to offer bribes?
A (Professor Barbato): Corruption and bribery distort the marketplace so that the most deserving actors don’t gain what they deserve. This is unfair and unethical, and it results in suboptimal outcomes in the aggregate. However, we must remember that business ethics is a practical endeavor, and cannot solely rest on lofty principles that deny the realities of the world in which we behave. For instance, there are societies where bribery is part of the game, so to speak. In other words, if you don’t bribe, then you can’t participate, and everyone knows that and everyone accepts that. This would be like bluffing in poker. It may not seem very honest, but everyone understands that it is part of the game. However, business should not simply accept the status quo, it must also be an ethical leader in trying to change the status quo. So honest businesses should participate in such an economy, but they should also take the lead in trying to change these economies into more honest and fair economies. They should not use the excuse that “everyone does it” to free themselves of all their ethical obligations. So, like so many cases of business ethics, the answer is to be practical and principled at the same time.
One more word about bribery. Some societies use gifts to reinforce cooperation and loyalty; two values that lead to higher ethical behaviors. Without a certain level of cooperation and loyalty, it is hard for businesses in some societies to arrive at optimal levels of productivity. Although these gifts may seem like bribes that have the goal of corrupting, they can actually be seen as gifts with the goal of enhancing trust and cooperation. Once again, business must be both ethical and practical in situation like these.
Question to “Ask the Prof”: What is the relationship between ethics and business ethics?
A (Professor Barbato): Ethics asks the question, “How should I live my life?”, and it uses moral philosophy and moral reasoning to explore and answer that question. Business ethics asks, “How should a business live its life?” or more appropriately, “How should a business behave?”, and it uses moral philosophy and moral reasoning to explore and answer that question. The key word in all the above questions is “should.”
Our very own Professor Barbato was quoted in Bloomberg regarding the recent concerns regarding potential Nepotism in the National Basketball Players Association. President Derek Fisher, who raised these concerns and asked for an investigation has been asked to resign.
Click Here to Read the Article and see what Professor Barbato things about it. You can also see an earlier post on Nepotism.
Question to Ask the Prof:
Q: Iberdrola, the company who bought RG&E wants to raise the rates to the customers by 16%. They also promised when they bought the company they wouldn’t raise the rates, is it right that they can do this now.
A (Professor Barbato):
Because the company is regulated, they won’t be able to raise the rates unless they convince a regulatory agency that such an increase is justifiable. The ethics of raising the rates has little to do with a promise they made not to raise rates. They shouldn’t have made such an impossible promise and people shouldn’t have believed them. A promise is simply an emphatic way of indicating your intentions. However, those intentions may have to change for a very good reason, and in that case you would have to break your promise. You would also have to break a promise if keeping your promise meant that you would be doing something unethical. A promise should never be binding for all circumstances and everyone should understand that.
Question to Ask the Profs:
Q: What does it mean to say that ethics and values are non-negotiable?
A (Professor Barbato): Probably the person who made this statement was trying to emphasize the importance of staying true to your values and always behaving in an ethical manner. There are different ways to say this. The person could have said, “You should never do anything unethical” or “Always behave with integrity.” Of course, statements like these don’t provide much guidance when faced with an ethical dilemma where values may conflict or different ethical principles may not agree. Nevertheless, it’s not a bad idea to remind ourselves of the importance of seeing the world through an ethical lens, so statements that offer such a reminder are welcome.
A (Professor Rothenberg): This seems to be referring to a person’s personal moral code, and the moral principles that they would hold above all others. For example, some people might say that taking another life violates a moral code that is “non-negotiable.” However, as noted by Professor Barbato, ethical dilemmas are situations in which you may have to compromise one aspect of your moral code to honor another aspect of it. I would argue that most things are negotiable, but for some, this negotiation only occurs if another, more important, moral imperative is in jeopardy.
Question to “Ask the Profs”
Q: I am a lawyer who is taking a course in statistics. While talking to my professor during office hours, he asked me for free legal advice. Was this an unethical move on his part? Not going to do anything about it, just wondering in case he does it again.
A (Professor Barbato): Because the professor is grading you, then it would not be ethical for him or her to seek or accept anything of substantial value from you, including legal advice. However, if this was just a casual conversation, and if the professor asked a simple question, such as a yes or no question, then it would not be unethical. Like most ethical dilemmas, there is no clear dividing line between a gift of substantial value and a casual conversation that strays into friendly advice, but if we are talking about advice that you would charge more than $25 or $50 for, then I would not be comfortable with you offering such a gift or with the professor asking.
Question to Ask the Professor:
Q: Why do so many companies lump legal compliance and business ethics into a single reporting unit where legal compliance often seems to dominate ethics?
A: From Guest Respondent, James Nortz, Compliance Director, Bausch & Lomb)
Some companies do have separate compliance and ethics functions. Generally speaking, the division of labor between these departments is as follows: “Ethics” writes and trains on the company code of conduct, answers questions regarding the code and proper conduct, responds to and investigates reports of misconduct and reports to company leaders on relevant misconduct statistics. “Compliance” writes policies and procedures and builds compliance systems to mitigate or manage compliance risks. At B&L our department does both and also performs risk assessments, systems evaluations and is engaged in work to improve organizational health.
In my view the distinctions that are often drawn between “legal compliance” and “ethics” are artificial and not particularly important. We are in the behavior business. Compliance with the law is one of many ethical obligations we are concerned with. Our job is to assist the organization in lowering its legal and ethical (reputational risks associated with extra-legal stakeholder expectations) risks. Aside from a convenient way to divide labor in a corporation, I’ve never been persuaded that there is any advantage to establishing separate compliance and ethics departments.
Here are two additional articles that talk more about this:
Defining the CECO’s Role ACC Docket, 2008, http://www.acc.com/resource/v9248
Is a Dedicated Compliance and Ethics Office Right for You from ACC Docket – July/August 2010