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bussiness_ethics.doc· Activity 3 - Conflict of Interest
1. Introduction
Written and Narrated by Associate Professor Lamar Pierce
Incentives are pervasive in every aspect of society. People are rewarded for taking certain actions, and not rewarded for taking others. Workers are paid for their effort and productivity, salespeople are paid for their sales, and small business owners are rewarded with profits for successful ventures. So long as these incentives are well-understood by everyone, they work reasonably well. They motivate effort, performance, and social welfare. But sometimes, individuals have incentives that conflict with their professional responsibilities, often in ways that are not transparent to the public or in their own minds. These conflicts of interest produce serious economic and social problems.
Conflicts of interest are pervasive in markets and in society, and can motivate professionals to act in ways that violate their responsibilities and hurt their client and employers. Doctors, for example, may face a conflict of interest when they are paid more for some procedures than for others. Their professional responsibility is to do what is best for a patient, but their financial incentive is not always aligned with this responsibility. If an oncologist profits from selling chemotherapy agents to their patients, and some agents are more expensive than others, this conflict becomes a problem. Most doctors would never think of profiting in ways that hurt their patients, but some may either consciously or subconsciously.
When there are conflicts of interest, you can almost guarantee that they will at least sometimes lead to bad outcomes. Surprisingly, in many states, real estate agents can represent both the buyer and the seller in a home transaction. The conflict in such transactions is clear. The agent could never have both parties’ best interests in mind, just as an attorney could never adequately represent both a plaintiff and defendant in civil lawsuit. Even professors face a conflict of interest when they’re designing courses that will be evaluated by students seeking high grades and low workload. If the professor is ultimately promoted based on their popularity with students, will they consider making the course a little bit easier?
The key implication is that managers and policy-makers must constantly evaluate whether professionals and employees might face incentives to act counter to their responsibility. Eliminating conflicts of interest is one of the simplest and most effective ways to reduce unethical behavior. But in order to do so, we must be willing to acknowledge that professional codes of conduct, like those followed by doctors, lawyers, accountants, and real estate agents, do not make people immune to these conflicts, and that these codes are rarely a justification for ignoring the likely outcomes that conflicts of interest create.
2. Task
– Watch the following videos:
https://www.youtube.com/watch?v=xnRpMQvW_ow
3. Activity
Based on the videos that you watch above, answer the following questions (approx 200-300 words)
· What conflicts of interest have you personally experienced in personal or professional roles?
· If you perceive a potential conflict for yourself, what are some ways you might ensure that this conflict doesn’t lead to unethical behaviour for you and others?
· When have others’ conflicts of interest impacted how you or those you know were treated?
· What types of policies can or do organizations implement to try to reduce conflicts of interest or their costs?
Activity 4 – Conformity Bias
1. Introduction
Written and Narrated by Professor Robert Prentice
Parents seldom accept as an excuse their child’s plea of "Hey everyone else is doing it." However, psychological studies demonstrate that those same parents, and everyone else, tend to take their cues for proper behavior in most social contexts from the actions of others. This pressure is called the conformity bias.
Psychologist Solomon Asch found that when he asked subjects to tell which of three lines is the same length as a fourth line, no one had difficulty unless they were placed in group with Asch’s confederates who gave obviously wrong answers. Under those conditions, almost all the subjects found it very painful to give the obviously correct answer in contradiction to the strangers’ wrong answers. In fact, most participants gave an obviously incorrect answer at least once during the study.
This bias to conform is much greater, of course, when the others in the group are co-employees and/or friends, or when the correct answer is not right there in black and white – as it was in the Asch Study – but is instead a subjective—like an ethical questions.
An employee at the accounting firm KPMG challenged the ethics of tax shelters that the firm was selling. He received a simple e-mail that said: "You’re either on the team or off the team."
Well everyone wants to be on the team. We all realize that loyalty is generally an important virtue. But it causes a pressure to conform and this pressure to conform, it can been argued, helped cause Ford employees to sell the Pinto despite awareness of its gas tank dangers, and helped A. H. Robins employees to continue to sell the Dalkon Shield contraceptive IUD despite knowing its ghastly medical consequences.
The impairment of individual decision making known as "groupthink" – where people deciding in groups often make more extreme decisions than any individual member initially supports – can exacerbate the conformity bias. It can be reasonably argued that loyalty and groupthink helped Morton Thiokol employees to remain silent about known O-ring dangers that caused the Challenger space shuttled disaster.
Psychological and organizational pressures can cause even people with good intentions to lie or otherwise act unethically. Good character isn’t always sufficient. As Albus Dumbledore told Harry Potter, "It takes a great deal of bravery to stand up to our enemies, but just as much to stand up to our friends."
2. Task – Watch the following videos:
https://www.youtube.com/watch?v=Gswmcc4TpxU
3. Activity:
Based on the videos that you watch above, answer the following questions (approx 200-300 words)
· Can you think of a time when you did something just because everyone else was doing it—even when it didn’t feel quite right to you? Do you regret it now?
· It was recently observed that "cheating is contagious." Does that sound true to you? Why or why not? If it is true, why might this be the case?
· Loyalty is generally considered a good quality. When a group to which you owe loyalty seems to be making a decision that seems unethical to you, how should you go about trying to balance your loyalty to the group against your own ethical integrity? Have you had an experience like that? If so, how did you resolve it?
· Can you explain how "groupthink" works? Can you think of a time when you have been subject to groupthink?
1. Introduction
Written and Narrated by Professor Robert Prentice
In the book he wrote about his crimes, disgraced lobbyist Jack Abramoff—Casino Jack—asked: "What was I thinking?" This is a familiar refrain among white collar criminals. Why can they see their ethical failings in retrospect, but not earlier when it really mattered?
Part of the explanation is what professors Ann Tenbrunsel and David Messick call ethical fading. Imagine that you work for a company in internal audit and your boss asks you to inappropriately massage some earnings numbers. And it happens to be the week that the company is deciding whom to lay off in the most recent round of cutbacks. And you want to keep your job, of course. It is possible that you will not even notice the ethical dimensions of the action you have just been asked to take by your boss. These ethical dimensions may just fade from view.
Ethical decisions are often made almost automatically by the parts of our brain that process emotions. Only later do our cognitive processes kick in. When we think we are reasoning to an ethical conclusion, often all we are really doing is searching for rationalizations to support the decision that we have already made instinctively.
As time distances us from the decision we have made, the ethical issues may start to reappear. We may feel the need to reduce the dissonance that results from the conflict of our view of ourselves as ethical people and the unethical action we have committed. Studies show that offering people an opportunity to wash their hands after behaving immorally are often enough to restore their self-image. There’s a reason we talk about starting with a "clean" slate.
Even if our minds cannot cause an ethical issue to fade from view, a process known as moral disengagement can mitigate the sting of an unethical decision. Moral disengagement is a process by which our brain enables us to turn off our usual ethical standards when we feel the psychological need to do so, just like we’d turn off a TV when a show comes on that makes us uncomfortable.
Studies show, for example, that people who want to buy an article of clothing that they know was manufactured with child labor will suddenly view child labor as less of a societal problem than they thought before. Moral disengagement allows us to suspend our personal codes of ethics, yet continue to view ourselves as ethical people.
There is no easy cure for ethical fading and moral disengagement. Our only option is to be vigilant in looking out for ethical issues and equally circumspect in monitoring our own actions and rationalizations.
2. Task – Watch the following Videos:
https://www.youtube.com/watch?v=BSHpeg1XLA0
3. Activity
Based on the videos that you watch above, answer the following questions (approx 200-300 words):
· Can you explain the concept of ethical fading and perhaps give an example of when it happened to you?
· Can you think of a situation where you were so intent upon pleasing an authority figure, fitting in with your friends, or achieving a goal that you failed to give an ethical issue your full attention? Did that situation cause you regret?
· Can you think of an example of a friend who might have been the victim of ethical fading? Or a person in the news recently?
1. Introduction
Written and Narrated by Professor Robert Prentice
In any kind of decision-making, context counts. The simple reframing of a situation or question can produce a totally different answer from the same person. For example, people would rather buy a hamburger made of meat labeled 75% fat free than meat labeled 25% fat. In fact, when questioned, these people will tell you that the 75% fat-free burger tastes better than the 25% fat burger, even though the burgers are identical.
When NASA was deciding whether to launch the ill-fated space shuttle Challenger, Morton Thiokol’s engineers at first opposed the launch on safety grounds. But when their general manager instructed the engineers to "put on their management hats," he reframed the decision from one focusing on safety to one focusing on dollars and cents. The engineers then unfortunately changed their decision.
We need to look beyond the obvious frame of reference in business – "will this be a profitable decision?" – and consider our actions from a broader perspective like "how will this look when it’s reported on the front page of the newspaper?"
Decisions made by business people often occur in a context where subjective factors predominate, and the framing of an issue is particularly influential. In Enron’s declining days, the company attempted to save money by encouraging employees to minimize travel expenses. An Enron employee later wrote that he intentionally flouted the new policy. While this seems like a clear ethical lapse, in the employee’s mind, he deserved to stay in the most expensive hotels and to eat at the best restaurants because of how very hard he was working. He framed the issue in terms of his narrow self-serving interests, not in the broader ethical context of adhering to company policy.
CFOs and accounting personnel at Enron, HealthSouth, and other scandal-ridden companies didn’t need a philosophy course to help them figure out that their manipulation of financial statements was unethical. Their problem was that at the time of their actions, their frame of reference was loyalty to the company and to the company’s goal of maximizing stock price. Had those employees been able to think in terms of the bigger ethical picture – for example, the impact of their actions on other people’s pension funds – they might have acted differently.
2. Task – Watch the following Video
http://ethicsunwrapped.utexas.edu/video/framing
3. Activities:
Studies show that people primed to think about business profits will make different choices than people facing the same decision who have been primed to think about acting ethically. Can you explain how that might affect you in your work life?
· Can you think of a situation where you made a decision that you regret and probably would have chosen differently had you looked at the choice in a different way?
· How do politicians and advertisers use framing to channel people’s decision?
· How might framing adversely affect your ethical decision making in your projected workplace?
· How can you work to ensure that ethical considerations stay in your frame of reference when you make decisions in your career and your life?
