Ethical Decision Making: Fairness and Justice Standards

EFFECTIVE EXECUTIVE NOV.2009

ORGANIZATIONAL LOYALTY

Ethical Decision Making: Fairness and Justice Standards

-- Dr. Paul C Nutt

Cases depicting decision debacles are often used to illustrate ethical issues that arise during decision making, their consequences, and how they create dilemmas for decision makers. This article argues that coping with an ethical issue requires both awareness and a strategy. Once core values are understood, actions and practices that recognize them can be sought. Decision makers are called upon to alter their course of action and their decision approach until objections are removed and core values can be affirmed among stakeholders.

A series of studies, conducted over a quarter of a century, were analyzed to uncover how organizational leaders go about decision making and the success realized (Nutt, 2008; 2010). Four hundred decisions were collected that revealed decision making practices, accounting for the situation being confronted and documenting success. In the research, linking decision results to decision making practices, controlling for content and context, provided a telling practice appraisal. The decisions in the database offered a firsthand account of events and circumstances allowing a probe into why some practices work, and others go awry, seeking for recommendations.

The findings were definitive; half failed (Nutt, 1999). This makes failed decisions a commonplace event in organizations resulting in wasted resources and forgone benefits (Nutt, 2002). Decision makers were not at the mercy of the situation. The practices used had far more influence on success than abrupt changes in customer tastes, the cost of money, draconian regulations, and other situational constraints that erect barriers and pose difficulties. Success rates double when decision makers used best practices.

There were several key findings regarding best practices. This article focuses on ethics. Unsuccessful decision makers in these studies overlooked ethical issues while making the decisions. Successful decision makers took steps to find commonalities in the values behind ethical positions. The article shows how ethical issues arise and lists the steps to be taken to insert ethics in decisions making. Decision debacles in the cases, which produced disastrous outcomes with long-term effects, prove to be a useful way to illustrate both (Nutt, 2002; 2010a). Examples include ill-advised products, such as the launch of New Coke, questionable acquisitions, such as Ford's purchase of Jaguar, and botched product recalls, such as Wyeth's stonewalling a recall of their diet drug Fen Phen (Nutt, 2010a). Debacles highlight both failure-prone practices and also what could have been done differently. Examining decisions in this way has considerable effect, such as Snyder and Page (1958) and their study of the Korean War, Hall's (1984) exposure of the Bay Area Rapid Transit fiasco, Mckie's (1973) study of London's aborted third airport, and my study of the Snapple acquisition by Quaker (Nutt, 2002).

Dr. Paul C Nutt is a Professor of Management in the College of Business, University of Strathclyde and is Professor Emeritus of Management Sciences, Fisher College of Business, The Ohio State University. He received his PhD degree from the University of Wisconsin – Madison – and a BS and MS from the University of Michigan, all in Industrial Engineering. His research interests include organizational decision making and radical change. He has written over 150 articles and 9 books on these topics that have received numerous awards for his research and teaching from the Decision Sciences Institute, the Academy of Management, Emerald citations, the Institute for Operation Research and Management Sciences (INFORMS), The Center for Creative Leadership, AAMC, FACHE, and others. He is a Fellow in the Decision Sciences Institute and a charter member of the Academy of Management's Hall of Fame. His recent books include Why Decisions Fail for Berrett-Koehler and The Handbook of Decision Making for Wiley (in press). His work has appeared in the Fortune, The Wall Street Journal, Fast Company Magazine, and NPR/PRI's Marketplace. He serves on several editorial review boards and consults and speaks for public, private, and non-profit organizations.

Ethical issues arise throughout a decision making effort. A proposed course of action can seem wrong-headed and provoke opposition. Decision makers, feeling the pressure to act, may barge ahead and run over people whose interests could have been served by making minor modifications in a proposed remedy. Consider FedEx looking for a way to assign new trucks to their drivers. It makes little difference to company officials which driver gets a new truck, but it is very important to the drivers. A way to allocate trucks to drivers may seem unethical if it overlooks what interested parties see as fair. Adopting a ready-made solution that pops up outside of a formal search may seem a clever way to take a decisive action to the decision maker. To others it may raise questions about the decision maker's vested interests, even if there are none. Interests being served and those neglected also pose ethical issues. Decision makers forge ahead and gather evidence that supports the proposed decision. Such an evaluation can appear motivated by an attempt to deceive and conceal, raising ethical issues.

Reactions to perceived ethical lapses often provoked opposition. Opposition takes shape as tokenism or pitched battles, depending on the power of the critic. As outrage grows, the extent to which a critic will go to thwart a decision grows as well. My research shows that this was often underestimated by the decision makers, thus contributing to decision debacles. Let us see how ethical issues arose in light rail for mass transit. This decision is profiled in Exhibit I. Several other debacles drawn from my cases are summarized in Exhibit II. These cases will be used throughout the article to illustrate key points.

Urban Transit Revisited As "Light rail"

For decades, urban planners have been urging public officials to adopt up-to-date mass transit systems. Planners argue that the US should have systems like those found in most European cities. San Francisco and Washington DC, among others, have spent huge sums to realize such an aim (Hall, 1984; Nutt, 1989).

Congestion and environmental decay motivate urban planners to find better solutions. Most American cities are experiencing rapid growth in their downtown areas and a simultaneous increase in the number of person-rips by autos. Existing highway systems that serve city centers are reaching peak capacity. Parking is limited, so the lack of supply makes it pricey. Forecasts predict this will soon lead to unacceptable levels of:

• Congestion leading to more travel time, travel cost, and inconvenience

• Pollution and noise

• Gasoline use and dependence on foreign oil

Trends also point to declines in the use of buses and other forms of public transportation. The loss of rider revenues has made public transportation system officials cut back service and call for more tax subsidies. Cities that lack urban transit systems miss federal funds earmarked for such projects.

Planners believe that mass transit is the best way for people to access downtown jobs and services and the only way to reduce pollution and noise that are degrading downtown areas (Dickey, 1983). Automobile-related remedies are neither efficient nor environment-friendly. Yet most forecasts predict an unbridled increase in automobile use. Only huge investments in urban transit systems that offer commuting options can stem the tide of automobiles. Other motivations are to access funds set aside for urban transit to realize a better return on federal block grants. The set-asides for urban transit are also justified as a step toward energy independence by reducing our dependence on foreign oil. Different parties have a different mix of goals. Federal players and their goals of lessening energy dependence use federal funding to subsidize urban transit. Elected officials must sort through all this to find the best options open to their city.

Urban planners believe the only remedy is large scale infrastructure investment. Others question whether the dual goals of economics and reduced congestion, with the attended improvements in noise and pollution, can be realized. The history of such investments reveals some insights. Urban transit solutions take two forms –underground and light rail. The Bay Area Rapid Transit System, better known as BART, promised an exemplar underground system having air-conditioned cars with carpet, easy ticketing, quiet operation, clean and attractive stations to service 123 miles of the San Francisco bay area (Nutt, 1989). BART was to follow the corridor with the largest projected congestion between the two bay area cities of Oakland and San Francisco. The cost, projected at between $590 and $720 mn when first proposed, was to be met with bonds and subsidies to offset operating shortfalls, should they occur (Hall, 1984). The BART system is quite different from the plan.

Like many big-ticket projects, reality has little resemblance to the hype. Costs for BART ballooned to $1.3 bn – nearly double the forecast and $400 mn above legislative appropriations. This seemed deadly to planners who trimmed the planned 123-mile route to 75 miles to keep cost below $1 bn. Design and construction problems forced modifications that cut operating speeds to an average of 40 mph well below that of autos, and the claimed 70 to 80 mph. Problems encountered in tunneling across the bay, control system design, and subcontractor coordination hiked the cost to $1.6 bn for the 71 miles of coverage.

BART planners assumed that a clean and efficient urban transit system would entice people to abandon their cars and use the system. They also assumed that people would congregate near BART stations to live. Such assumptions belie long-standing patterns of behavior. There is no evidence that the urbanities, for whom BART was designed, would abandon their preferences for personal cars and low-density detached housing. The cost planners made these assumptions just to justify their decisions. It took 40 years for the predicted riders to materialize. In many big-ticket projects, such as London's millennium dome, forecasts are mere propaganda (Nutt, 2002). When BART first opened, use was so low that the operating deficit ballooned to $40 mn. To offset losses, one-half per cent of sales tax was passed in an emergency session of the California state legislature. After the dust settled, two dollars of subsidy was needed to create a dollar of revenue. Taxpayers put up the difference. For decades, BART remained an inefficient and an ineffective solution for urban congestion. The costs of operating BART were twice as high as a bus system and 50% greater than using an automobile. Subsidies that covered two-thirds of BART's operating costs were required to keep ticket prices competitive with the cost of commuting with an automobile. Despite the subsidies, urbanites resisted commuting with BART (Hall, 1984).

What can be learned from the BART debacle? There is no evidence that clean and efficient urban transit will alter the commuting preferences of urbanities. The availability of urban transit failed to convince bay area commuters to abandon their cars or to locate near stations to avoid parking and riding hassles. Only prohibitively high costs keep people from driving. Cost estimates for the system were overly optimistic, perhaps deliberately so. This pattern repeats for nearly every infrastructure project born of hype. Advocates resort to public relations rhetoric to confuse the issue and distract policy makers. BART proponents said, "the question is not can we afford BART but can we afford to not have BART" (Hall, 1984) to deflect hard questions about costs and the prospects of reducing urban congestion at the time. Assumptions of no technical snags and no inflation were ridiculous. Nevertheless, cities like Washington DC created an underground with these very same assertions and assumptions. When challenged, proponents offered defensive evaluations based on unrealistic projections buried in masses of incomprehensible detail.

The new bright idea is "light rail". Planners in cities like Sacramento, California, Columbus, and Ohio are now entertaining an "over ground" option to cut costs, operating electrical vehicles over reserved right-of-ways for rail and buses. Plans call for the development of under-used and abandoned rail corridors to connect urbanites to downtowns and to neighboring cities. Because a corridor exists, redevelopment is offered as a feasible and low-cost option. Again, ridership is assumed using a "build it and they will come" mentality.

Facts argue differently. In ten light rail projects, ridership ranged from 15% to 72% of forecasts. Construction and operating costs were always underestimated. Construction costs averaged 50% above estimates and operating costs 100% above estimates. The same overly optimistic projections of costs were made yet again (Pickrell, 1990). Old streetcar corridors have been paved over for roads long ago so a light-rail service must share city streets with the automobile. The connecting rail beds are even more problematic. Most have deteriorated from neglect and poor maintenance. All have half-century old technology, which is unable to support a European-style high-speed train. Stations have been lost to urban revival and sappy projects like convention centers. These and other over hyped infrastructure projects of equally dubious value now occupy the land. Finding space to develop downtown stations is difficult and costly. Existing train right-of-ways are far from where today's urban commuters live requiring a commute to access them. Park-and-ride can increase commuters' travel time and imposes parking hassles. This leads to low ridership and utilization, which drives up costs. Taxpayer subsidies are demanded. Sound familiar? The zealot's hype is translated into tenuous assumptions, defensive evaluations, and a failure to approach the dual goals of controlling commuting costs and reducing congestion.

Despite all this history, Columbus' Central Ohio Transit Authority (COTA) proposed a 13-mile rail line with most of it on existing rail right-of-ways and the rest to coexist with downtown roadways, with a price tag of $445 mn. An additional $90 mn would be needed to buy land for right-of-ways that connect to the old rail line, hiking the price tag to $535 mn. Scores of stations are to be built – many of them curbside in the downtown business area to compensate for the demolition of the downtown rail depot. Others are to have nearby lots for park-and-ride users. The alignment is to follow existing tracks along the major north-south interstate highway. Existing rail companies are to defer right-of-way to the project. Options that call for traffic engineering flow improvements, preferential treatment of cars with multiple riders, peak-period traffic management via staggered work hours, and bus lanes and express service are ignored in the COTA analysis because Federal transit funding sources do not allow bus-rail comparisons. As infrastructure projects often attract media attention, they are believed to enhance the image of politicians and others who realize them. Without this feature, appeals to deal with social concerns of noise and pollution are ignored.

Learning is often set aside and the same mistakes repeated. Looking at expected use, federal dollars, and other relevant factors, the same conclusions emerge. Mass transit infrastructure is a bad investment. A debacle was avoided in Columbus when local economic conditions tanked and light rail dropped off the politicians' agenda. Light rail zealots may not be practical, but they are persistent. Plans have popped up at regular intervals in Columbus over the past two decades. Votes rejected a plan only to have COTA planners float yet another plan a mere two years later. Critics claim that $535 mn for light rail makes no sense when buses can offer the same service for $95 mn. To defend the project a COTA planner said, "intuitively (we know that) people will ride light rail". Yes, but how many and how much of a subsidy will be required? A longtime COTA critic called the plan "a boondoggle", noting that today people are telecommuting. As this trend grows, the need to travel downtown declines and travel to the city edges will grow. Bus service is flexible and light rail is not. Nevertheless, the recent economic stimulus package calls for just such investments because they appear to be shovel-ready.

Ethical Fallout in Light Rail And Other Debacles

Pricey infrastructure projects often raise ethical concerns. Light rail proponents trotted out the same old arguments and force fit them to a new city. Light rail will encourage business, create jobs, stimulate growth, reduce dependency on foreign oil, as well as access "our share" of federal tax dollars that will go to others if we do not act. Oh, and by the way, it may even reduce congestion and its attended noise and pollution. Claims that seem bogus bring out critics. Many arguments born of hype are shallow, illogical, or outright misrepresentations. The very real problems of providing efficient and effective urban transit are swept away by the misrepresentations.

Like the other debacles, light rail prompt concerns about costs and benefits. When cost and benefit seem out of balance, critics come out of the woodwork. Decision makers in debacles express dismay at what was being said, often attributing it to their critic's lack of ethics. The proposed deep sea dumping site for the Brent Spar by Shell prompted vehement opposition from Greenpeace (see Exhibit II). Both Shell and Greenpeace saw the others' position as filled with deliberate errors. Shell officials were shocked at the outright misrepresentations in the claims of their critics. Environmental groups mobilized by Greenpeace believed that stopping "big oil" from making deep-sea dumping a routine practice. In the WACO debacle, critics saw the FBI and other law enforcement officials as oblivious to the loss of life that would result from an attack on the Branch Davidians' Compound. FBI and other law enforcement types were dismayed by what they saw as an unwillingness of public officials to seek swift punishment for law-breakers who had killed ATF agents just "doing their job". They were shocked by the intensity of the criticism leveled against them in the aftermath of the attack.

Divergent ethical positions provoke strong reactions, with each party vigorously defending the rightness of their position. Some of these positions are heartfelt, but many are born of convenience, habit, and personal interests. Let us turn our attention to what motivates these positions and how a suspension of ethics can result.

Suspending Ethics

Machiavelli advances a "dirty hands" explanation for decisions that ignores ethics (Nutt, 1989). People in power are thought to have dirty, or at least tainted, hands because they deal with unsavory issues. This can trap subordinates who serve those in power. "Dirty hands" now becomes "many hands," as underlings scamper to support the boss. The subordinate may feel obliged to use whatever means necessary to help those in positions above them. A less charitable explanation has the subordinate posturing for organizational spoils.

The failure to apply to personal standards when making decisions at work sets an ethical trap. Some public and private sector managers routinely misrepresent the effectiveness of their organizations in legislative and budget hearings, reasoning that they must be advocates. Honesty in conceding that a budget cut would do no harm would make a cut certain, but would not entice others to come forward with a similar admission. Managers in firms routinely overstate the accomplishments of their subordinates, thinking that rewards garnered for the marginal subordinate creates obligations, a form of slack, to be stockpiled for times when the going gets tough. In the military, anything below a near hundred-percent efficiency rating will damage a military career so high ratings are commonplace. This crimping of the evaluation scale makes it impossible to distinguish among officers who have made significant as opposed to routine accomplishments and, more importantly, whether troops would follow the officer in battle. People trying to hire someone face a similar dilemma. Letters of recommendation are expected to exaggerate a person's accomplishments. Deciphering such letters becomes a discounting game. The potential employer tries to figure out what is being said by looking for "damning with faint praise" and other cues that suggest reservations. Alternatively, they may just insert into the letter their own biases about a candidate. Such expectations make it difficult for anyone to be honest in a letter of recommendation so these practices are perpetuated to avoid damaging anyone.

Selectivity in reporting accomplis-hments puts on a "best face". Many people believe that advocacy is expected by their employer and that organizations have "special ethics". An organizational objective is treated as a "higher value" in which the ends justify the means. This view has been expressed in various ways, perhaps beginning with Machiavelli, who claimed that the mores and standards of justice applied to one's personal life have no bearing on work behavior. Machiavelli contends one must be ruthless in the pursuit of organizational interests and use deceit and guile as instruments of action. To do otherwise would betray an employer that one is pledged to represent. With similar issues in mind, Carr (1978) attempted to reconcile personal and business integrity by advancing the "practical requirements" of business. A double standard of morality is viewed as a practical necessity. How, for example, can one be honest with a competitor or an accreditation review body? Decision-makers distance themselves from deceptive practices, such as lying, by treating the situation as a game. In a game, people take steps to win something for the organization, which sets aside personal responsibility. People who suspend personal ethics and substitute the ethic to serve the organization are driven by self-indulgence, self-protection, self-righteousness, and self-deception (Catron, 1983).

Self-indulgence

The lust for power and the lure of greed corrupt public officials, sworn to a higher standard of conduct, and private sector managers expected to act in the best interests of their firm. Decisions with questionable ethics can be tempting, if they offer power or a lucrative payoff. In the acquisition of Snapple, Quaker's CEO seemed motivated solely by personal gain (Exhibit II). He believed that a takeover would strip him of the power and prerogative he enjoyed at Quaker. A new board could rein him in and impose approval steps that would slow his drive for exciting new business challenges. He had grown bored with Quaker and its staid product line (e.g., pet food) and sought the excitement of splashy deals (Burns, 1978). When the Snapple acquisition turned sour, he blamed others, contending that they failed to make the hoped for Gatorade–Snapple integration a reality. The fault lay with the CEO's failure to uncover incompatibility of Gatorade and Snapple in their production and distribution.

To build the Denver International Airport, Pena (Denver's mayor) undertook many questionable actions to realize his dream (Exhibit II). The campaigns to win voter approval were rife with raw politics and big money. Both his objective of securing new airport funding and the means used seem tainted. Contracts were given to friends who, in turn, invested in helping the DIA become a reality. The situation ripened to the point that the Securities and Exchange Commission questioned whether campaign contributions to Pena and Webb, his successor, were provided in exchange for lucrative legal and securities work in issuing $3.3 bn in airport bonds. A contract was negotiated with a law firm, owned by a close friend of Pena. City records show the firm was paid $220,000 to act as local disclosure council. A Chicago firm was paid $367,000 to act as national disclosure council. Both were heavy contributors to Pena's reelection campaign and lobbied Congress for the $500 mn Denver received in Federal airport funds. One of the bond underwriters, who received $1.4 mn from the sale of a $600 mn bond issue, was also active lobbying Congress for federal airport funding. In all, several million in contracts went to firms that appeared to be cronies of Pena and his successors, who then became campaign supporters. With Pena's election closely tied to the airport, these contracts posed questions of self-indulgence. And Pena's family-owned land on which the DIA was built.

Self-righteousness

Zealots are seduced by the "rightness" of their cause. Organizations have many people with causes. Together they have fashioned a cache of solutions, and each is looking for a home (Cohen et al, 1976). The solution champion will do whatever it takes to secure the adoption of ideas believed to be right, desirable, or needed. In the EuroDisney debacle, Disney officials became convinced that Eisner's quest for a park in Europe was right and acted as if it was justifiable to use any means available to realize it (Exhibit II). As shown in Exhibit II, both the Arena's supporters and the Telescope's advocates sold their ideas vigorously, if not candidly. The Quaker CEO's success at outsmarting Wall Street convinced him of his ability to pick a winner.

The self-righteous posture struck by law enforcement officials at Waco persuaded them there was no option other than attacking the compound. FBI officials saw their cause as just: These people cannot be allowed to escape – they killed law enforcement agents. Weak-kneed politicians and political appointees in the US Attorney General's office would let this happen. If the FBI were not allowed to assault the compound, the guilty would evade punishment. The longer FBI officials were involved in the standoff, the greater their frustration. To get action, FBI officials called gas canisters the "least aggressive" approach imaginable and discounted the risks of the gas to children and others in the compound. To push things along, they played on unconfirmed reports that Koresh had molested and beaten children in the compound. FBI and ATF agents were told by higher ups to support the "official position". Agents appear to have been under orders to describe the standoff in dire terms that threatened public safety, if they were to avoid a string of unpleasant assignments. Subsequently, it was acknowledged that Reno's briefings by the FBI contained misinformation. Still later, prosecutors destroyed evidence the Davidian survivors subpoenaed in their legal actions, still believing the cause to be right.

Self-protection

People in organizations are often caught up in doing what is asked. "Going along to get along" persuades people to support choices they would otherwise oppose fearing that opposition would be costly to their career. Organizational life reinforces the notion that compromise and accommodation are required – indeed demanded. This can be pervasive at times and people who keep faith with their personal ethics are a rarity. Data are fudged to make them support a supervisor's idea. People line up to tell higher-ups what they want to hear. Carried to extremes, this behavior can bring on whistle blowers that expose ethically questionable practices and cause long-term difficulties for an organization.

Shell officials wanted the case for deep-sea dumping to seem clean cut. Corners were cut and data fudged hoping to remove any doubt about the environmental responsibility of deepwater dumping. Shell officials made inaccurate estimates of toxic wastes in the Brent Spar. Thirty tons of sludge was estimated when the correct amount totaled 75 tons. When this came to light, company officials ignored it, fearing a correction would erode their case. The environmental impact of deep-sea dumping was unknown. Nevertheless, Shell officials used "best case" scenarios to predict the rate that the Spar would deteriorate, again to support their case. They worried about bad press but did not see their decision as setting a precedent for all kinds of deep-sea disposals, until environmental groups opposed them. Company officials were furious at the distortions of Greenpeace, but did not acknowledge their own errors until forced to. Even with their good intentions, Shell officials appeared to have postured about their environmental concerns to head off questions.

In the BeechNut apple juice scandal, LiCari was expected to "go along to get along" (Exhibit II). To go along, LiCari had to suspend his ethical concerns about company practices. He went through the motions for a while to avoid being seen as a malcontent that bucked high ups. Finally, tension between his beliefs and his suspicions about company practices forced confrontations that lead to his dismissal. Later, his whistleblowing nearly finished the company and ruined the careers of its top management.

Self-deception

An advocate role requires subordinates buy into a superior's agenda. Subordinates slide into an advocate posture through many small endorsements over the years. As the endorsements slowly build and take root, they are eased into believing in the superior's agenda and that it merits their steadfast support. This kind of self-deception is hard to resist. Being loyal to your boss seems reasonable and expected. To do so, treats every situation as requiring subordinates to do whatever it takes to support higher ups. Because nearly every decision has both communal and personal interests, there is subtle but very real pressure to support a superior's interests in a mixed-interest situation. Others are expected do the same and some higher body will sort it all out. Justifications include: everyone does it, higher authority implicitly condones it, or it is done only under dire circumstances.

Nestlé officials saw their infant formula marketing to third-world countries as appropriate and activist groups as making oversimplified claims to attract attention to their movements (Exhibit II). Key insiders had immense loyalty to Nestlé. All grew to see Nestlé as a moral organization that would not engage in unethical practices. It was easier to see the activists' motives as self-serving, bent on attacking an inherently evil multinational company, with no interest in the welfare of third-world children. There were two issues: misuse of the product and questionable marketing. One got confused with the other. Nestlé officials gravitated toward arguments about product misuse and away from whether their marketing was a contributing factor. Initially, evidence appeared to show that infant formula would benefit third-world users. Once seduced by this position, company officials found it hard to back away and admit that their actions were ill advised. Many small steps were taken until the company's position seemed to be as reasonable at the end of the seven-year boycott as it did initially. To the outsider, there was a clear-cut lapse of ethics in company marketing practices.

The top management team (TMT) at BeechNut conned themselves into believing they were doing no wrong selling apple juice made of glucose. Consumers bought the product so it must have value in the market place. The adulterated juice posed no health hazard. The TMT convinced themselves that the absence of a health hazard diminished the gravity of misrepresenting the product's contents. Compared to taking a $3.5 mn loss in hard times, selling the tainted inventory seemed inconsequential.

Shell's management saw deep-sea dumping as ethical because it was legal. Furthermore, no one could show that a deep-sea disposal would cause irreparable damage to the ecosystem. Indications at the time, also pointed to growing environmental awareness. Shell officials saw themselves as environmentally responsible but failed to see that that the company had been colored by perceptions of "big oil" and its many irresponsible acts. Shell officials deceived themselves about the prospects of a public outcry and its intensity, and the ability of the company to distance itself from the actions of others in its industry. When a public outcry emerged, company officials could not defend a deep-sea disposal of the Brent Spar with legal niceties. Intense opposition has an impact on a company's bottom line.

Similar issues arise in the Pinto recall at Ford (Exhibit II). Staffers who coordinate product recalls apply two criteria: frequency and traceable causes to design or manufacturing flaws (Denhardt, 2000). Staffers in the recall office failed to see a "directly traceable cause" because higher ups at Ford had concealed the Pinto's crash-test data. The test data showed that eight of eleven of the Pintos tested had "potentially catastrophic gas tank ruptures" and that the three cars that survived the test had gas tank protection devices. Because federal standards that would have ruled the Pinto unsafe would not go into affect for some time, Ford officials reasoned that the car could be called safe, and concealed the test data. The car met legal safety standards when tested. A recall would be costly. The Pinto's profit margins were razor thin. Ford officials adopted a buyer beware principle. They reasoned that a buyer should know that economy cars of the time were made cheaply and not nearly as safe as bigger, more expensive ones. You get what you pay for. Finally, there was the "safety doesn't sell" mentality. Ford officials let these rationalizations justify putting recall benefits in dollar terms. The callowness of putting a dollar value on human life put a big dent in Ford's public image that persists to this day.

Staffers in the recall office at Ford engaged in self-deception as well. The job placed heavy time and emotional demands on them. At the time of the Pinto recall, there were 100 other recall campaigns underway and many others yet to be decided. The job required looking at human suffering – burns, injury, and death. Such pictures have a dulling effect after awhile. People's defense mechanisms take over to shield them from the psychic toll. Individuals continuing to work in such a job would find it difficult to believe their employer is responsible for all this death and misery. So when the recall office finally learned of the crash data, staffers compared the Pinto to other small cars and concluded that the Pinto was merely the "worst of a bad lot" (Denhardt, 2000). Denhardt also reports interviews that show recall staffers people at Ford have considerable remorse at their failure to apply personal ethics to their job.

Self-deception trapped light rail advocates as well (Exhibit I). Advocates truly believe in the need for mass transit. These needs are seen as so compelling that questions of financial feasibility can be set aside. This gives the critic a platform to raise questions. The ensuing flap blocks thinking about badly needed urban transit remedies that are fiscally responsible.

Playing Out Ethical Debates Based On Moral Position

Individuals who engage in self-protection, self-indulgence, and self-righteousness ignore their motivations. Those engaged in a self-deception bury them. Decision makers provoke opposition when they are unwilling or unable to see any point of view but their own. Advocates find themselves trapped by a disparity in who pays, who benefits, and who decides. Light rail proponents had a different view of how to balance these interests then a critic. Economists resolve such differences with "externalities". An infrastructure project has externalities if it produces benefits everyone can realize and it is impractical or impossible to bill for use, such as clean air. To insure that users pay for the benefits received; public funding with tax revenues or subsidies is required.

Proponents believe the benefits of light rail have externalities. The critic disagrees. The dispute turns on whether people can or will benefit from a light rail service. The light rail proponent contends that the public funds should be used to provide urban transit systems. When commuters use such a system in large numbers, all citizens will realize the benefits of reduced pollution, noise, and congestion. Proponents of light rail use a "build it and they will come" kind of logic. The critic argues that there is no evidence "they will come", which makes the benefit forecasts overly optimistic. Reality has been low use. Commuters can come but choose not to, preferring the convenience of a personal automobile. Without the projected rider revenue, subsidies will be needed in both light rail construction and operation so people who do ride will be subsidized with public dollars. The benefits of a light rail system have externalities that the ticket price cannot capture because people will not use light rail in sufficient numbers to pay for it. Because people's past behavior is the best prediction of future behavior, the critics argue that such projects are never feasible. Failing to see these arguments creates ethical issues.

A mismatch among who pays, benefits, and decides invariably raises an ethical issue. Downtown visionaries decide we need light rail, the public pays, and those lucky enough to have easy access ride and benefit. The mismatch poses the issue. Such a mismatch also created opposition to the Nationwide Arena (Plan A and B), the Telescope consortium, and the DIA (Exhibit II). In Plan A, the public was to help to pay for an arena decided on a "downtown elite" and used by those that could afford the outrageous ticket prices of professional sporting events. The public was to benefit from an arena by being able to live in a "major league city", a dubious claim rejected by the voters. In plan B, the taxpayer was billed for the land and improvements without their approval creating still another mismatch. Both plans prompted an ethical issues because of mismatches among the costs, benefits, and prerogatives to decide.

Pena decided that the city of Denver needed a new airport. DIA, like most airports, is being paid for with bonds and complex federal funding mechanisms that demand public dollars and public underwriting. A carrier does not pass on these costs to the traveler because folding gate charges into the price structure of a carrier would cause a huge jump in ticket prices. The public is claimed to benefit from a new airport because gate charges are not passed on to the air traveler. In fact, employees of local businesses do most of the flying. Local business leaders want an airport that offers service at below cost for the frequent flyer – the business traveler. Pena decides. Denver-area companies get disproportionate benefits. Public dollars pay for the DIA.

The university endorsed a telescope with no hope of breaking even. A large subsidy was needed, even if the most favorable revenue projections would have been realized (Nutt, 2002). When other university departments got wind of the plan they objected to the subsidy because it would draw down funds they depended upon. Again, there is a mismatch. The university president decided to bill all university departments to benefit the astronomy department.

Recalls, in the BeechNut and Ford cases, pose questions of profit taking by selling unsafe products or by misrepresenting them. In the acquisition of Snapple by Quaker, the CEO misrepresented his motives and who would benefit. To push their plan, Shell officials gave inaccurate estimates of the toxic inventory in the Bret Spar and gave best-case estimates of rate of deterioration and seepage of toxic waste expected in a deep-sea disposal sire. This resulted in understating the benefits of the proposed dumping to the company and in understating the costs to society. Profit appeared to be driving principle at Shell, a sure-fire way to bring out opposition. Shell officials created the impression that they had suspended their ethics for personal gain. Those who decided and imposed costs on others expected personal gains.

Ethical Rationality

Next, we turn our attention to working out ethical differences before positions harden and become intractable. This calls for ethical rationality to be given status equal to that accorded logical and economic rationality and political rationality. Logic is used to search for actions warranted by reason, economic rationality by analysis. Politics is employed to search for actions warranted by self-interest. Ethics guides a search for actions warranted by standards of fairness and justice. Ethical rationality can be inserted into decision-making with two steps. First, neutralize interests that prompt self-indulgences, self-righteousness, self-protection, and self-deception. Second, confront ethical considerations as they arise during the decision-making process. Ethical debates are managed by aligning costs, benefits, and the prerogatives to decide.

Neutralizing The Motives To Ignore Ethics

An organization's ethical image erodes when company officials slip into self-indulgent and self-righteous postures, when self-protection is forced on people, and when self-deception governs how people get ahead. Zealots prey on people needed to support their ideas, making their life miserable until support is given. Zealots create elaborate games to make their idea seem warranted and support of it freely given. Decisions became an elaborate pretense in which the zealot directs things from behind the scenes and gives public assurances that mislead to avoid difficult questions. Every decision is compartmentalized so the zealot can evade responsibility for ethical lapses. The game that results can offer an untroubled mind and a secure position for a time. If decision makers' play games with ethics, they may dodge responsibility in today's decision, but end up with a debacle in tomorrows. To stop the gradual erosion of personal ethics, decision makers must insert ethics into decision making. Let us turn our attention to how this can be done.

To insert ethics into situations rife with self-indulgence, self-righteousness, self-protection, or self-deception the decision maker neutralizes the motives that pull people toward each. Corrective action is found in eliminating the often-implicit incentives that encourage ethically questionable behavior.

Neutralizing Self-righteous and Self-indulgent Behavior

Exposing a vested interest neutralizes zealots. Require the zealot to build communal benefits into their ideas and question what appear to be personal gains. This can be difficult for a subordinate, but not for a peer or a superior. It does require the decision maker to pose questions, seeking to uncover the interests of people who can influence or be influence by a decision.

Discourage self-indulgent behavior with fraud by proof systems. Examples include tamper resistant systems with auditing procedures, such as those found in financial management. Safeguards can be found by adapting the inspector general function in the federal government and applying the "ethics in government" act to companies. The most important step to take is to make it clear, by actions as well as words, that self-indulgent behavior is unethical and will not be tolerated. This is what Buffett did after his take-over of Salomon Brothers, the investment banking division of Solomon, Inc. The company was reeling from illegal trading and a CEO whose slash and burn tactics encouraged subordinates to follow these practices. Buffett charted a new course. He made this crystal clear with a startling memo that said, in part, "...you are expected to report instantaneously and directly to me, any illegal or moral failure of an employee of Salomon... When in doubt, call me," (Sims, 1991). He included his home phone number to drive home his message. He noted that minor indiscretions, such as padding expense accounts, were excepted to illustrate insignificant events. Buffett fired top managers who were tied to ethical wrongdoing to show that actions would follow his words and that these new expectations would be enforced. Only people that would commit to ethical principles were hired. By these actions, he imprinted his image as of one of the countries most ethical investors on the company.

Neutralizing Self-protection

Show people caught up in self-protection another path. According to studies, people who raise ethical questions in organizations are not subjected to penalties or harassment (Nutt, 1989). Point this out to show that defensive actions are seldom required. State the ethical positions of the company clearly, as Worthington Industries does by printing the "golden rule" and its application to all company transactions on the back of every employee's business card. Another step is to vest mediation responsibility in the organization's top people. Make ethical standards have equal standing with economic, logical, and political rationality when making decisions. Reinforce this. Show that ethical questions are always welcome by including questioning as company policy. Have the policy include the machinery to pose ethical questions. The "designated ethics official" who provides mediation for disputes that arise in a federal agency offers a model. Dispute channels have an added advantage of eliminating the disastrous consequences that follow whistleblowing. Such channels provide the means to raise questions and express concerns. Courts rule in favor of companies with dispute channels and against whistleblowers (Nutt, 1989). People with concerns are expected to use dispute channels to question proposals. Target individuals that fail to do so as dissidents and managed them in a post-incident damage control.

Neutralizing Self-deception

Self-deception is countered by getting people to see that having a reason for a choice is no substitute for choosing right. Subordinates create a deception when they push their own ideas by selectively including what will support their case, leaving everything else out. The deception is justified by mixed-motive situations in which someone will benefit – so why not us and not them. The pressure to make such choices is gradual and insidious, disconnecting the demands of a job from one's personal ethics. To avoid such disconnects insert ethics as a decision making criterion with the same importance as economic, logical, and political criteria. Embed standards for fairness and justice into the fabric of the organization by putting them in job descriptions, mentoring, and formal discussions. Show how deceptions work against organizational interests.

An organization benefits when justice and fairness standards seep into its culture. This discourages misleading fitness reports as well as bogus threats of dire consequences if capital budget requests are not approved. Remove the incentive to ask for more than is needed, expecting a cut. If the pattern of deceit and game playing can be deterred, leaders will get a better fix on the true needs of their organizations. Legislative hearings, budget meetings, and similar forums take on increased importance because real needs are being considered.

Aligning Costs Benefits And Prerogatives

People caught up in indulgences, righteousness, and protectionism claim they are serving the interests of their employer. Either a legal or a functionalist view of business ethics results. The legal view holds that business firms are not a creation of society, but an autonomous entity expected to make a profit. Officials in the companies involved in the debacles appear to embrace this view. As Friedman supposedly said, "The business of businesses is business" (Nutt, 2002). The functionalist view is even more dogmatic. A form of "Social Darwinism" is advocated, leading company officials to believe that they are expected to make a profit anyway they can. People caught up in a deception have a different view. They adhere to a variation on fundamentalism that calls on them to do whatever it takes to maximize profit without deceptions. Such individuals deceive themselves about their own deceptions (see Exhibit II).

The Stakeholder View

Those with a legal or functionalist view of ethical standards position themselves to act in their employer's interests. Doing whatever it takes to serve company interests can get a decision maker in trouble if the decision violates the ethical expectations of others. Ethical questions can be turned aside when company interests are derived using with a "stakeholder approach" (Freeman, 1984). A stakeholder analysis considers obligations to a broad array of constituencies. The decision maker uncovers the interests of stockholders, creditors, employers, customers, communities in which the organization operates the environment, and the public. Consider the positive and negative effects of the decision on each constituency. Attempt to align the costs, benefits, and prerogatives of each constituency. Not all interests can be served, but all can be considered. Such a position shows that standards of fairness have been applied, which often removes objections of people who can become opponents. A stakeholder approach discourages incentives that draw people toward indulgence, righteousness, protectionism, and deception. If the costs, benefits, and prerogatives of constituent groups can be aligned, ethical issues evaporate.

Value-based Differences

Ethical convictions about practices to be followed, and choices to be made, often point people in very different directions. Differences arise because beliefs about what is fair, and just, can vary from one person to another, making an ethical position "value-based" (Johnson, 1993; Werhane, 1999). People rarely grasp these values because the ethical position staked out says little about the values that ground it. Emotional outbursts from a concerned stakeholder verbalize an objection but not the values that prompted the objection. Decision makers who try to mediate such a dispute find themselves on a slippery slope. Missed value signposts make for an unknown terrain and hard going in an effort to scale the slope and find a mutual understanding.

Officials at Nestlé and Shell, and the Nationwide Arena's leadership group, failed to grasp their own motives, let alone their critics. The critic's motives are also visceral and misunderstood. All that was being expressed was outrage – not the standards of fairness and justice that provoked this reaction. The ethical lapses identified in such outbursts reveal little about the value-based positions behind them. The ensuing debate is forged by a conviction that the other party is unethical. This is sure to prompt conflict. Intractable positions with no way out become likely. The powerful decision maker steam-rolls the opposition or the opposition brings down the decision maker. Both leave resentment in their wake that festers to poison the next encounter. To resolve the confrontation, decision makers must see how ethical positions form, how values are hidden in the positions, and what to do to cope.

• How Disagreements Arise

Consider two decisions, both based on true events, which show how interested parties develop very different views of what is ethical and unethical.

A large company with three hundred corporate engineers scrapped its performance appraisal approach and put in its place one that ranked people from one to three hundred or from best to "least best". This was done to precisely draw a line that indicates which of the engineers get rewards, such as a salary increase, and to "rank and yank", targeting engineers at the bottom of the list for counseling or dismissal. The ranking approach is believed to overcome the deficits in traditional appraisal systems in which the ratings for several criteria, such as creativity, initiative, and appearance, are added up. Engineering supervisors manipulate the system by rating average people above average on the criteria. A "Lake Woebegone" outcome results in which everyone is rated above average. The new system called for supervisors who had worked with each engineer to share with one another what they knew about the individual being rated. Each engineer is discussed. First a vote is taken to find the best (# 1), then the second best (# 2), and so on. This seemed more accurate than the old approach because information must be shared publicly before each ranking decision is settled upon. All of the engineering supervisors have the opportunity to call attention to a high performer. A comparison of virtues of the engineers is thought to reflect each engineer's true value to the company before the rating.

Of course, any system can be "gamed" by a clever individual. An "old hand" explained how. "...I brought up each of my key people early, much before others that I knew were better. I got a crony to second my nominations. (Of course, I seconded his). Then I argued vehemently for "my guy" and feigned dismay when others pushed him out. After a few tries, I had built my social credit: I had graciously given way to others and their arguments on several occasions. Then, I could cash in on my social credit and slip my candidate ahead of more deserving people." By graciously accepting each defeat and by looking stricken at his "failure", the old hand built up his stock with his peers to be cashed in later on to push "his people" up in the rankings.

Consider a second case. Here a consultant deliberately prepares a sloppy presentation to trip up company officials, according to their biases, keeping them from questioning a proposed study. Words are misspelled early on in the presentation to give the "tidy bowl" types something to criticize. They snicker and point out spelling errors. (Be careful to misspell words that the tidy bowl type is able to recognize.) A heart-felt thanks puts them out of the game. Later, an ill-advised sub-study is trotted out to give people who hate consultants and question their motives something to bash. After a fight, this part is reluctantly dropped. The consultant-haters now feel they have done their part by cutting some of the fat from a bad proposal. These deceptions are needed because the study is a ruse. The CEO has all ready decided what he wants to do, and wants the study to make it seem legitimate. The consultant was hired to carry out a phony study to help the CEO get done what the CEO wants to get done.

• Hidden Values

In my executive training sessions, participants are asked if these actions are ethical or not and why. There is seldom an agreement. Typically, half of the executives see the old hand in the rating game as unethical, half as ethical. Arguments in support of the old hand's tactics include building loyalty, protecting ones people, and expecting of the same gaming by others. Arguments that go the other way cite misrepresenting a person's value to the company and enticing game playing by others.

The reaction to the consultant's presentation is much the same. Half think he is clever and half are appalled. Those who agree with the consultant's tactics believe that a consultant must do what the CEO wants. Supporting the CEO is seen as an investment to get future business. Others note that the CEO may not be able to disclose his/her plans. Still, others assume that a CEO has the knowledge and prerogatives to make such a judgment: a CEO would know what is best. It is the consultant's obligation to do what the CEO asks. People who find these tactics unethical are more suspicious of CEO's motives. They see the consultant as losing long-term credibility when people are manipulated. Others see the tactics as discouraging people to offer their ideas when some of these ideas may be beneficial. Again, there is little agreement about what is or is not ethical.

Note how these reactions say little about values. The values provoking the executives to conclude that an action is or is not ethical are missing from what they use as arguments. The executives who find actions to be ethical tacitly accept lying as a "necessary evil." Executives who see these actions as unethical do not accept lying. Executives who see the result as justifying the means resolve a means – ends conflict in favor of ends. Ends do not justify means for others. Views of means and ends suggest a key value.

The "social construction of reality" offers additional insights (Argyris et al, 1987). The appearance of reality is taken to be reality. For example, if people seem to agree that an employee is "bad", no one bothers to collect data to confirm this view. Hearsay is accepted as fact. This "fact" then frames how everyone views the employee. Evidence of a good performance by the "bad" employee is set aside as a "special case". Each positive contribution is drowned in past evidence that disagrees, producing in a "yes but" assessment. The executives who work for altruistic people see the old hand and the presenter as having the company's interests at heart. Executives, skeptical of the motives of the old hand and the presenter, have different experiences and develop different expectations. Here people are believed to follow their self-interests. This is forged by values that call for one to be skeptical.

None of the decision makers in the debacles (Exhibit I &II) considered the ethical positions of stakeholders, let alone probing for values behind them. Let's turn our attention to how this can be done.

Coping with Divergent Values

Decision makers can uncover ethical concerns by prodding. Call upon people to reveal their ethical worries as claims being made, interests are disclosed, directions are set, courses of action considered, and evaluation data are being collected.

As the decision making effort unfolds, ask people to indicate anything that have questionable ethics for them. To encourage this, apply a billboard and a moral code test – Ask people to imagine the reaction if the discussion were to appear verbatim in a newspaper. Set the tone by telling people to propose only actions that conform to their ethical standards and object to actions that raise ethical questions. Introducing ethics is tricky business, as there are no moral absolutes. Providing a moral tone allow questions to be raised will bring borderline actions into focus. Ethical issues can be flushed out when a proposed action receives an ethical review. An ethical review makes it easier to overcome the rigidity, dogmatism, and group-think that keeps people from sharing their ethical concerns (Janis, 1989).

To uncover concerns that escape the attention of insiders, conduct a formal "ethical review' at two key places in the decision making process. One is undertaken as claims are being forged, the other when actions are being contemplated. Carry them out with the claim reconciliation and option identification steps. Polling can be carried out with a mail or telephone survey, or in a focus group. For each, the first step is to identify the decision's stakeholders. They may include insiders, such as peers, superiors, subordinates, and outsiders, such as stockholders, board members, creditors, suppliers, alliance partners, today's and tomorrow's customers, as well as representatives of communities in which the company operates and the general public. Make the more important stakeholders survey respondents or group members. Ask them to review the claims or the options being considered for ethical concerns. To do this a participant is called upon to voice both the concern and the value-based position that prompted the concern. For instance, a person may object to the old hands tactics in the rating case because it distorts the ratings, and this is not fair. The distortion of results is the concern and the value is fairness.

List the concerns and values separately to de-couple them. Examine the values on the list to find core values that lie behind the stated ones. Core values can be affirmative such as justice, service, freedom, dignity, honesty, or trust. A core value calls for avoiding things like omission, deception, manipulation, misrepresen-tation, lies, veiled threats, cheating, or espionage. Test the core value behind each ethical claim by asking two questions. Ask how the concern in the claim or the course of action being considered evokes the value? Then ask how the claim or option could be modified to affirm the positive values and avoid the negative ones? If value clashes are uncovered, form a broadly representative group. Use the values that uncovered to provoke a discussion in the group. In discussion, seek an action (a claim or an option) that will adhere to the core values identified. If managed carefully, a "mutuality relationship" is created that replaces a self-orientation in which people suspend their ethics (Nutt and Backoff, 1993).

A dialogue among a community of stakeholders about ethical actions is centered on the management of relationships, where ethics is invariably located. If the decision maker can make stakeholders sensitive to ethical concerns, these concerns are less apt to be set aside to satisfy perceived obligations. To do this, make all discussions of what is acceptable adhere to the highest common denominator, not the lowest. Reconcile ethical debates by setting out and then accepting the values behind each position. When decision makers highlight ethical issues in this way advocacy will be seen in a new light – a demand to abandon personal ethics. This makes decision making self-reflective and thus self-conscious by the focus on "what is right". Decision makers ease unethical actions off the table by showing a proponent how he/she would be seen by advocating such an action.

Ethical issues offer "defining moments" (Bardaracco, 1997). In some, one either does the "right thing" or takes another path. Such decisions have a right and a wrong course of action and decision-makers do or do not adopt ethical principles to find it. Most decisions are far muddier than this and choices create winners and losers that are less apparent. If the choice is between right and right, some will gain and others will lose. All one can do is balance conflicting interests and uncover the fallout. In a right-wrong choice, decision makers do or do not come clean, as in the BeechNut decision. Here the dilemma is finding a way to introduce an ethical position.

Why do so many high level decision-makers ignore ethical considerations when making decisions? Why do successful companies allow this to happen? The debacles show that greed and self-interest play a role but do not fully explain the absence of ethical considerations. Johnson (1993) finds that company leaders lack "moral imagination". They fail to see the broader context in which a decision is apt to be viewed and do not apply "moral point of view" to what they recommend and what they do. This narrowed perspective stems from the paucity in moral imagination, not the more base motivations of self-interests and greed. To evade the trap set by an ethical lapse, look for the variety of reactions that the decision can evoke. The polling approach exposes the decision maker to the possibilities and consequences in a decision. This opens decision makers up to a broader range of issues, consequences, and solutions so decisions can be made that evade the parochial interests in mixed-interest situation by inserting a communal one. Without the two recommended reviews, well intending decision makers may lose sight of this.

Summary

It was argued that a person's ethical stance is rooted in his/her standards of fairness and justice. What the individual believes to be fair, and just, is imposed on a decision, and how the decision is made. Standards are applied to what the individual sees. This may or may not capture what actually takes place. Both the appearance and the reality of an ethical lapse can spell trouble. Strong reactions are provoked by a decision seen to be threatening to an organization's image or to its traditions of fair play. Concerned individuals may be moved to use of any means at their disposal to prevent the erosion of image or a departure from fair play. A lack of vocal opposition can be misleading. People often file ethical lapses in a scorecard that gives them an ongoing read on management's moral compass. Opposition can take shape as a pitched battle or as tokenism. Both bleed away energy and create delays.

An analysis of decision failures finds that ethics are suspended by self-indulgent and self-righteous motives. In addition, ethics are set aside when self-protection and self-deception are required to get ahead in an organization. Each can create an ethical issue. An issue takes shape when decision makers are unwilling to admit that ethics have been suspended or when a proposed action has a mal-alignment in who pays, benefits, and decides. It was argued that giving ethical rationality equal standing with logical, economic, and political rationality in decision making helps to manage such issues. Finally, it was argued that ethics lack absolute qualities. There are no rules or tests to determine if a position taken by an individual is ethical or unethical. Instead, defining stakeholders broadly and uncovering their value-based concerns shifts the discourse from the lowest to the highest common denominator, seeking actions that embrace the values people believe to be crucial.