Get answers to your most pressing business ethics-related questions.

Expanding on our mission to curate and distill ethics research for the business community, Ethical Systems has launched a new initiative soliciting questions to submit to one of our esteemed collaborators.

Selected questions and answers will be featured here and in the subsequent month's newsletter. Use the form below to submit your questions and explore our schedule of experts and previous Q&A's below.

Month Collaborator Title, Research and Work Selected Questions
and Answers
July / August 2017

Robert Bloomfield

  • Nicholas H. Noyes Professor of Management and Professor of Accounting at Cornell University’s Johnson Graduate School of Management

 

Q1. Is it okay to pay two different people different amounts for doing identical work?

A1. I’ll take “okay” to mean both moral and wise.

Is it moral to pay people differently for the same work?  The answer, to the extent there is one, depends heavily on circumstance, social norms and intent.  It is pretty standard practice to pay people less for the same work if they live in Vietnam rather than Chicago, if they live in Peoria rather than Silicon Valley, or if they have only a year of seniority rather than a decade.  People justify these differences by living standards, costs of housing and reward for loyal service, and I doubt you’d face many accusations of immorality these days.  But it’s hard to find any timeless principle here.  Long ago it was viewed as moral to pay men more than women because “they have to support a family”.  That argument is rarely viewed as good moral justification in developed countries these days, and arguments based on location and seniority may soon be viewed the same way we now view most pay differences driven by gender, race, ethnicity, appearance, or personal relationships:  as morally questionable.

Is it wise to pay people differently for the same work? Here it helps to distinguish between moral philosophy and moral sentiment.  Moral philosophy seeks to identify broad rules for what is and is not morally justified.  Moral sentiment simply describes what angers people.  Given that you are asking, you probably won’t be surprised to learn that people get very angry when they are paid less for the same job.  This reaction seems to be broadly shared with our animal brethren; take a look at this video of a Capuchin monkey who gets a boring cucumber for a simple task, and then sees her neighbor get a tasty grape for the exact same task.  Her retaliation and demotivation are pretty typical of what you can expect from a human in the same situation. 

 

Q2. As a financial advisor, how can I balance the expectations of my firm to recommend their funds versus the needs of my clients? Sometimes they are divergent but I know I have a duty to the company to push their products.

A2. I find it helpful to distinguish investment vehicles according to their profile and their quality.  Vehicles vary in when they pay off, how liquid they are, how risky they are overall, and which risks they hedge. Do they move with or against the stock market, gold prices, or real estate?  Vehicles that meet the same profile just described can still vary in quality due to different commissions or expected returns.  It is hard to be ethical when selling someone a vehicle that has a poor profile for the client, or that has lower quality than another vehicle with the same profile.  At a minimum, you would have to disclose those facts and your conflict of interest.  Even these disclosures have limited value—research shows that they are often ignored, and that sellers often view their disclosure as license to push their own interest even harder.  After all, they were upfront about it! 

Conflicts of interest pop up everywhere; your goal should be to make sure yours isn’t too extreme.  I once went door to door trying to sell overpriced vacuum cleaners.  I found I couldn’t in good conscience persuade families to buy a vacuum cleaner that didn’t suit their needs (poor profile) and that was worse than competitors offering similar products (poor quality).  I quit, but I wasn’t a very good salesman anyway.  That might be a much harder choice for you, especially if you are making a lot of money.  But it might still be the moral one.  It is far easier to be moral if your company sells a wide range of profiles of high quality.  If you can’t, you have a moral quandary, and you will need to share far more detail with a trusted advisor than you have given me.

 

Q3. My boss thinks mistakes at work are a result of poor character or morals. Her statements in several meetings support this. But often her directions are confusing and now morale is low. How do my colleagues and I shift the culture without her input or help my boss understand that she is contributing to a bad work atmosphere?

A3. Here’s the easy part:  your boss is wrong.  While some people are more competent or moral than others, circumstances have far more influence in who makes mistakes and acts immorally.  Take a look at the famous Milgram experiment, where subjects were asked to shock people to test whether such negative feedback would help them learn.  Even though it was all a ruse (no one was actually being shocked), these studies provide clear evidence that people are heavily influenced by their setting, not their character.  The “fraud triangle” pushes this insight a little further:  people behave badly when they are pressured to do so, can find opportunities to get away with it, and operate in a culture that makes it easy to rationalize bad behavior.  Psychologists would probably say that your boss is suffering from the ‘fundamental attribution bias’, attributing bad behavior to people’s natures rather than their circumstances.

Here’s the hard part:  you need to help your boss improve your circumstances without inducing too much resistance.  This becomes a matter of diplomacy.  I strongly recommend the book Difficult Conversations, as well as the simple advice to focus on what changes will help, rather than on who is to blame for past problems. 

 

Q4. I am about to take over my family business after heading sales for the past 8 years and we have used the same accountant forever. Lately, his work has been subpar and my Uncle mentioned that the books show we are losing money despite growing demand for our products. How do I, as the incoming CEO, make sure our accountant is doing right by us and acting ethically?

A4. Before getting into ethics, let’s talk accounting.  It is very common for companies to experience growing demand and losses!  That will happen when you are underpricing your products, when you are struggling to find efficiencies at high volume, or any number of other reasons.  Before presuming that your accountant is incompetent, inattentive or unethical, ask your own people why you are losing money despite growing demand.  Your production folks might well respond “we are paying a bundle in overtime to meet demand”, or “we are paying a bundle to rework quality issues, because we can’t keep up.”  Your salesforce might well respond that sales are easy because all of your competitors have raised their prices and you haven’t.  Your human resources manager might well respond that you are paying a lot more for training, turnover, or travel.  None of these are failings of your accountant, unless you count on them to identify the causes of poor performance (rather than the usual outside accountant’s job of simply making sure they are reporting results accurately).  But if everyone is mystified, there might be something inappropriate going on among your employees or your accountant.

If your employees give you good direction on where to look, ask your accountant to look there.  If they are mystified, I’d still recommend you do that, unless you have good reason to think that your accountant is misbehaving or simply “subpar”.

Whether or not that exercise leaves you unsatisfied with your accountant, I don’t see any moral issues here.  You don’t owe a moral duty to retain your accountant.  It sounds like your accountant is being less attentive than before (and embezzlement is always an outside possibility), but your real problem is probably that your growing business needs someone who does more than make sure records are kept accurately.  You need someone who will tell you which parts of the business are going well or poorly, and where you should make changes.  That’s a lot more expensive than just getting the records right, and you might need to pay your current accountant more, or find someone else who will take on this additional work.  I have a free eBook I use with my Executive MBA students that provides a lot of advice on these matters:  What Counts and What Gets Counted.  Take a look.

June 2017

Dave Mayer

Q1. I am in sales for a large firm and I read that one potential client in my territory has recently been cited for an FCPA violation. But, they want to place a huge order with me and I am the only rep in the
area. I am conflicted. What should I do if I have a personal objection to taking on a new client even though I know it will make my year and the firm would be happy to have their business?

A1. This is a challenging situation. On one hand, it would be great to have this new client for financial reasons. On the other hand, it may go against a core principle. When I am in these types of situations I try to not engage in what psychologists call motivated moral reasoning. Motivated moral reasoning means that when wrestling with an ethical dilemma, we often come to the moral conclusion that is in line with our own self-interest. So, whenever you feel like a particular moral conclusion also benefits you personally, it is useful to reach out to neutral others for feedback.

In terms of your specific situation, I would ask myself several questions. First, is the FCPA violation for something substantive? Is it common for large firms to have some violations or is this an outlier? If it is a large violation then you may consider avoiding a relationship with this client. Second, could there be reputational costs from being aligned with this firm? If this firm has a history of unethical actions what might be the spillover effect on your business? There is research on stigma-by-association suggesting their bad actions can rub off on you and/or your firm. Or, perhaps there is not much of a reputational cost. It is important to consider whether this firms’ actions may damage perceptions of your company’s core values. Third, are you setting a precedent? We know research on the slippery slope of ethical decision making tells us that a small unethical decision can lead to more costly unethical decisions in the future. Only you know the specifics of this firm, their violation and your business but by asking yourself these questions and avoiding certain moral biases you should be able to make the best possible decision for the long term.

 

Q2. I was CCed on an email containing salary information of my colleagues. I saw that one of my teammates is making more than I am but they have less responsibility than I do. Can I use this info to my advantage and renegotiate my compensation?

A2. Sometimes ignorance is bliss. It is tough when you find out a coworker is better compensated than you (and with less responsibility nonetheless). Your reaction is consistent with what we would expect
from equity theory which posits that people feel it is unfair when someone believes they contribute more but get rewarded less than another person. Fortunately, there is a large scientific literature on
negotiation to help you figure out what to do.

The first thing to figure out is your BATNA (best alternative to a negotiated agreement). Let’s assume you go to your boss and say this compensation is unfair and the conversation does not go well. Do you have a better option (e.g., a more lucrative job offer)? If you do not have a solid BATNA
then trying to negotiate for a raise is risky. A second key is for you to focus on what you contribute rather than what someone else is being paid. It is generally more persuasive to management when you argue for why your credentials, experience and performance warrant increased compensation. If you can calmly but confidently describe your contribution and also have some objective data that your compensation is below the industry or company norms this can be persuasive.

Finally, think more holistically about your compensation. Most people focus on salary. Salary is one piece of the puzzle but also consider things like bonuses, flexible work schedules, benefits, opportunities for learning, a better title, an office, vacation time, etc. If you broach the conversation with management, think more broadly about compensation—there is more than just salary.

 

Q3. I work in HR for a small financial services company. I have hired several people for prominent sales and backend positions that have gone on to violate our ethics or compliance rules; one did so
inadvertently by promising something we could not deliver and one was let go for attempting to offer a payment for retaining our services. How can I better screen unethical behavior or traits in interviews? Am I doing something wrong?

A3. We know we want ethical employees but how do we know they are ethical when we hire them? Of course, employees are always on their best behavior during the interview process. I wrote about this topic in my Fast Company column a few months back. One important step is to not only focus on whether someone might be unethical but also to consider how they might contribute to the collective. Try to find employees who positively energize others and who are humble. Research tells us that they are not only more likely to do good but less likely to be unethical.

A second key is to figure out whether applicants have developed habits around making sure their behavior aligns with their values. As Aristotle told us over 2,000 years ago, ethical behavior comes from good habits and it is important to see if applicants have habits, mantras and rituals that guide their conduct. Another important reminder is that sometimes unethical decisions come from a lack of knowledge or adhering to a company norm rather than malice. In your example, this employee may have had good intentions but learned a process from a more-tenured employee. It is critical to treat these actions as learning experiences and to correct the behavior at a systemic level. If the poor behavior continues, you’ll know then that it is not a training issue but is a selection issue and it may be time to part ways.

 

Q4. I read your piece on fairness in Fast Company and recognized a lot of my feelings when I think things don’t go my way. But I still think my company is basically unfair when it comes to promotions and raises. What is the best way to overcome my anger when I think I am being treated unfairly?

A4. Almost all people feel the same way when we perceive unfairness. Research tells us that anger is the most common emotion in response to feeling slighted. And that feeling can build up over time such that it leads to dysfunctional behavior. For example, research demonstrates that when employees feel unfairly treated their anger often drives them to engage in counterproductive behavior that hurts the organization and their own careers. Although easier said than done, it is important to harness your anger into productive actions.

I would first confirm that the basis of your anger is steeped in fact. Do your colleagues generally agree with you about the unfairness regarding the promotion and raise process? Next, I would then find an appropriate outlet for your anger. There are benefits of getting out negative emotions via writing in a journal or talking to a friend or partner (provided it does not go from complaining to rumination). If you have decided that the process is objectively unfair and used methods to quell your anger, you could consider speaking to a trusted manager in a pragmatic rather than cathartic tone. I would focus specifically on the criteria for pay raises and promotions and what you can do to grow and develop to meet the criteria. If ultimately the process is unfair you’ll have to think deeply about whether this is where you want to stay.

May 2017

Max Bazerman

  • Straus Professor at the Harvard Business School and the Co-director of the Center for Public Leadership at the Harvard Kennedy School
     
  • Ethical Systems Interview
  • ES blog mentions
  • Author of Blind Spots: Why We Fail to Do What's Right and What to Do about It.

Q1. I work at a mid-size manufacturing company and one of my co-workers in sales consistently promises early deliveries to our customers.  I worry that my operations team cannot meet the client's expectations. How can I make my co-worker understand that he is over-promising about our capabilities? I worry that this will lead to undue pressure on the team, with potentially bad consequences for the company.

A1. There are multiple possible explanations for your co-workers behavior.  When salespeople aren’t doing what others in the organization think they should be doing, I find it useful to look at what they are being rewarded to do. So, often, organizations create systems that encourage one behavior and hope for a different behavior. So, I would look at what happens in your organization when a salesperson books a sale, with promises that will not be met. Are they rewarded for that behavior?

Perhaps the broader group should meet to discuss problems associated with meeting promises that are made to customers.  I wonder whether your co-worker even understands the issues that s/he is creating? Finally, if these systemic approaches are not effective or viable, I think that the manager needs to confront this difficult conversation, preferably soon than later.  Too often, humans avoid conflict, even when avoiding the conflict will only make the challenges tougher.

 

Q2. I can’t stand my company. They are some of the most unethical people I have ever encountered and it is only a matter of time before we are in the media for ethical lapses. If I move to a different company, will I be tainted by scandal if I leave after the story breaks?

A2. First, I think you should assess whether these ethical lapses deal with important and illegal activity.  If so, I strongly suggest that you get legal advice.  There are a number of not-for-profit organizations that help people who are caught in difficult ethical/legal situations.  One I have used and recommend is the Government Accountability Project - www.whistleblower.org. Given the magnitude of the problems that you are describing, I think that all employees who are aware are accountable for what is happening.You ask whether you might be tainted by the scandal if it reaches the media. I would encourage you to think about whether you are partially responsible if you take no action. The answer to this question might guide you on your next steps.

 

Q3. I feel like my annual ethics training is a waste of time. I know how I will react and I know I am ethical. Can you tell me why I still need training? If you write me a note, can I get out of it?

A3. Based on the information that you provide, I have neither the authority nor the inclination to write you a note to get out of the training.

Thus, I encourage you to take the training, and to think about the experience more ethnographically and positively.  I would encourage you to think about what form of training would be more useful.  I would recommend being clear and systematic in this assessment.  Perhaps get some of your fellow employees to join your assessment. Then, provide human resources a positive plan about how the company can more effectively create an ethical organization.