Business Ethics Chap 3 PDF

Profits vs. Principles: Ethical Blindness and You It’s been said that “the road to Hell is paved with the best intentions.” Throughout history, atrocities have been committed under the guise of doing the right thing. Whether these acts stemmed from calculated, heartless decisions or were born...

Profits vs. Principles: Ethical Blindness and You It’s been said that “the road to Hell is paved with the best intentions.” Throughout history, atrocities have been committed under the guise of doing the right thing. Whether these acts stemmed from calculated, heartless decisions or were born from ignorance and Ethical Blindness, they serve as warnings to us all. We as future employers, leaders, and members of the business community must strive to ensure we do not fall prey to the same pitfalls and cognitive traps. In order to make good ethical decisions, we must train our sensitivity to ethical issues through practice and experience of real-world issues. In this chapter, we’ll explore some of these blind spots that obscure our moral vision, walk through a series of steps to implement an ethical system, and review some of the most egregious mistakes of the past. Strive to be Ethically Fit Ethical leadership is a matter of a habit. As humans, our minds and bodies are subject to entropy, and require continued effort in order to stay strong and not fall into decay. The same goes for our moral center. We must remain vigilant on a daily basis, aiming to do the most good and the least harm. Choosing to be ethical may not always be quick or convenient, but doing the “right” thing at times requires we sacrifice expediency in exchange for more substantial benefits. As you wake up each day, ask yourself “what good may I do today?” It may sound corny, but is an essential part of not only being a good person, but being an effective business leader. What is Ethical Blindness? When we fail to see the ethical implications of our decisions, we are suffering from Ethical Blindness, and we may act in a way or make decisions that hindsight we wouldn’t be proud of. In the following section, we’ll explore the most common causes of ethical blindness.  Factors Causing Ethical Blindness ( 1 / 2 ) Higher Stereotypes Tribalism Purpose A common justification for Relying on stereotypes simplifies When people divide into unethical behavior is done complex situations and opposing groups, it can in the name of serving individuals, bypassing critical lead to unethical some invisible authority thinking needed to understand behavior towards the figure whom we have no nuances. This shortcut can “other.” real contact with. contribute to widespread ethical blindness. Factors Causing Ethical Blindness ( 2 / 2 ) Fear of Group Exclusion Pressure The pressure to conform to group norms Individuals tend to align with the can overshadow personal ethics, leading to views of the majority, even when compromised decision-making. it conflicts with their personal ethics, prioritizing group cohesion over moral integrity.  Rationalization and Warning Signs If you find yourself thinking thoughts like these, let them serve as a warning sign you are rationalizing an unethical decision! This a business If I don’t, It’s not a big decision, not an somebody else deal… ethical one will!  The 8 Steps to avoid Ethical Blindness ( 1 / 9 ) 1 2 3 Identify Gather the Define the In Chapter 2, we discussed the stakeholder facts issues approaches to ethics in business: s consequentialist, deontological and virtue-based. Now, we’ll walk through a series of steps on how 6 4 5 Consider best to implement those systems. Note: Identify your Identify consequenc character obligations es and Ethical decision-making isn’t always integrity linear. While these are the “ideal” order to implement an ethical approach to a business decision or a 7 8 Think project, in real-world situations, creatively these steps may be called for out of about Check your order. potential gut actions The 8 Steps to avoid Ethical Blindness ( 2 / 9 ) Gather the Facts With all this talk of ethical systems, virtue, best practices, we can’t forget the most important step, and that’s doing your homework! Before you can act in the most ethical way, you need to know what’s going on first. “Getting the facts,” is easier said than done. Sometimes all the facts won’t be available to you, and if this is the case, your decision-making process should take this into account. The most heinous crimes often arise from an outright refusal to get the facts straight. For example, in the decisions leading up to the 2008 financial crisis, lenders required no financial proof of borrowers’ income. The 8 Steps to avoid Ethical Blindness ( 3 / 9 ) Define the Ethical When a decision is made well, it shouldn’t issues always feel easy, or done as a snap decision. A well-made decision can be a laborious process. With our example from Chapter 2 about Leo in the auto-factory, we need to consider the rights of the workers, the laws behind what’s required in notifying them of the factory closing, our loyalty to Leo as a friend, or our superiors at the company, (and the list goes on) all at once. It would be easy to go with the first thing that comes to mind, focus on that issue, and make a decision based on that. In cases like this, it’s best to think of as many angles to the problem as we can, and think through which deserves the most weight. The 8 Steps to avoid Ethical Blindness ( 4 / 9 ) Identify Stakeholders Being Ethical means adopting a certain level of empathy. We need to see the problem through the eyes of others, and think about how our decision will play out for them. In our auto-factory closure case, we’d need to consider not only our friend Leo and our superiors, but our fellow managers, the rest of the factory workers, their family members, the local township, and society in general. Taking the time to do this will help you to define additional ethical issues you otherwise would never have thought of. Ideally, you would be able to “test” the waters a decision with a group of certain stakeholders, by asking them how they would feel if a certain choice were to be made. The 8 Steps to avoid Ethical Blindness ( 5 / 9 ) Identify the Consequences Unlike the previous steps, your goal here isn’t to consider every possible consequence that will play out. Instead, think of which outcomes will have the highest likelihood of occurring and which will bring the most negative consequences with them. The Symbolic consequences also matter in terms of perception, either from the public or our employees. For example, if you were to accept a box-seat tickets to a football game in order to meet with a client, even if it were to maintain a good relationship with them, what kind of message would that send to your employees? Maintain transparency as much as possible to your stakeholders. Some decisions will of course need to be made In private, but the general rule is if something needs to be kept a secret, then something isn’t right. The 8 Steps to avoid Ethical Blindness ( 6 / 9 ) Identify Obligations Who is holding you accountable? Certain stakeholders depend on figures of authority or leadership to maintain good faith in their decision- making. The obligations you identify will vary depending on the people involved and the roles they play. For example, our faith in the financial system partly depends on auditors’ obligation to truthfully report a company’s financial difficulties and on rating agencies’ duty to accurately grade financial instruments. The 8 Steps to avoid Ethical Blindness ( 7 / 9 ) Consider your character and integrity Thomas Jefferson once said “Never suffer a thought to be harbored in your mind which you would not avow openly.” While we are entitled to our own private thoughts, a good question to ask yourself is, would you be comfortable with your decision being published on social media, or a newspaper? Another good question to ask yourself is what would someone you respect do? If you are part of a professional community, what would they advise? The 8 Steps to avoid Ethical Blindness ( 8 / 9 ) Think creatively about potential actions This is one of the most important steps in avoiding blindness, yet is also important for all matter of logic- based problem solving. Simply asking yourself, “what am I missing here? What detail am I overlooking?” Thinking creatively means stepping away from the mindset of asking “what should I do” to “what could I do.” The 8 Steps to avoid Ethical Blindness ( 9 / 9 ) Check Your Gut Like creative thinking, this approach may seem somewhat contrary to ethical decision making. While rational thinking is important, we sometimes need to engage our emotions –especially empathy. If you’re faced with a decision and something doesn’t feel right, it’s important to pay attention to that feeling. The key to finding the balance between letting your gut guide you without letting it dictate your decisions.  Quick Test Ethics director Carl Skooglund of Texas Instruments devised the following Quick Ethics Test: Is it legal? Does it align with your values and principles? If you do it, will you feel bad? How will it look in the newspaper? If you know it’s wrong, don’t do it, period! If you’re not sure, ask. Keep asking until you get an answer.  Ethical Blind Spots Slippery Slope Once you start a certain habit, it can be hard to stop. Get into the habit of telling a little white lie to avoid trouble, and you’ll soon find yourself lying about everything. In a business setting, ethical breaches like accepting seemingly innocuous gifts can later turn into bribes. Dieselgate, the emissions scandal perpetrated by Volkswagen, began as a small tweak to their emissions systems but later became a policy of outright cheating on how their systems handled reading Co2. Ethical Blind spots Broken Windows Theory While similar to “Slippery Slope,” the “Broken Windows Theory” is more concerned with environment. The theory states that neighborhoods with broken windows, dilapidated buildings, overturned trashcans, etc. tend to set the precedent for more illicit behavior to take place. This theory outlines an important point in ethics in business: environment sets the precedent for the ethical behavior of employees. We tend to ascribe ethically sound behavior to individuals, however the key determinant in behavior is the environment. In the Enron scandal, for example, the environment there was set from the top down that the bottom line mattered more than being honest on the balance sheet.  Ethical Blind Spots Obedience to Authority The Milgram Experiments were an example of people following orders of an authority figure despite knowing they were causing harm. It’s easy to hear about this experiment and say you wouldn’t keep shocking the person on the other side of the screen. In reality, 65% of the people who took part in this experiment kept following instructions. The same type of ethical blindness occurs in business settings often. When a superior is telling you what to do, despite you knowing in your heart it’s wrong, it can be hard to say “no.” Ethical Blind Spots The Path to Evil What is Evil if not an intentional abuse of power to cause harm? The Stanford Prison Experiment was a larger-scale culmination of the Milgram experiment’s blind adherence to authority. It shares elements of the Slippery Slope Theory, with one ethical breach begetting a more egregious one. The experiment shares several parallel elements with the Holocaust. The two events had similar steps: dehumanization, de-individualization, no fear of punishment, adherence to group ideology, and ultimately passive acceptance of evil acts. Take a look at some current events happening in today’s world, and you may see at different stages along the Path to Evil. In the business world, we see an example of this through a now often-referred to breach of ethics by the automaker Ford in the 1970s…  Mini Case-Study: Ford Pinto The Ford Pinto was released by Ford motor company in 1970. It was found that the car was prone to its gas tank leaking, igniting, or even exploding from a minor rear-end collision. Engineers at Ford devised a cheap way to prevent this by placing a plastic buffer behind the gas tank. Ford executives ran a cost-benefit analysis, and determined the cost of implementing this plastic buffer would be more expensive than the likely amount of lives lost from the mechanical defect. The case has led to modern-day class-action lawsuits, tort reform, and a number of other legal precedents that we now find commonplace on both sides of the pond. Mini Case-Study: Wells Fargo Scandal In 2016, banking-giant Wells Fargo drew public ire when it was discovered that millions of financial products (savings accounts, credit applications, etc.) were opened under customers’ names without their knowledge or consent. The ethical breach was due to aggressive sales quotas. The slogan “8 is Great” was a repeated mantra at sales meetings, meaning each customer should have 8 different financial instruments with the bank. Just because it rhymes, doesn’t mean it’s a good idea! Employees fearing for their job safety and careers, discarded any notions of ethical practices by engaging in fraud at mass scale. Decades of building up trust with their consumer base was, in the span of a few years, thrown away.  Key Takeaways There’s a difference between being a good person, and following a system of best ethical practices. The same goes for the “bad apples.” It’s not about the individual, but the systems in place for individuals to follow in order to increase the likelihood of sound decisions. Ethical fitness, much like our physical fitness, is a matter of consistency and not letting ourselves slide down a slippery slope when it becomes inconvenient to do so. Ethical Blindness is inherent to everyone. Due to our human nature, we all are prone to the same blind spots. When making decisions, we must remain aware of our blind spots, and strive to not fall victim to them. Catchy slogans like “8 is Great!” may seem like a good justification for something, but doesn’t make them right. A good question to ask yourself when making a decision is: “If this were to be published in my social media feed, would I be OK with that?”