Inserting Ethics Into Decision Making

Int. J. Management Concepts and Philosophy, Vol. 5, No.
1, 2011
Inserting ethics into decision making

Paul C. Nutt
Fisher College of Business,
The Ohio State University,
2599 W Choctaw Dr.,
London, Ohio, 43140, USA
Fax: (614) 292-1272
E-mail: nutt.1@osu.edu
Abstract: Cases depicting decision debacles are used to illustrate how
ethical issues arise during decision making, their consequences, and the
dilemmas created for decision makers. The paper argues that coping with
ethical issues requires both awareness and a strategy. Uncovering the motives
behind ethically questionable positions provides awareness. Countering the
often-implicit incentives that encourage these positions helps decision makers
deal with one kind of ethical issue. Situations in which people have opposing
ethical positions pose a second kind of issue. To cope, decision makers should
look for values behind opposing views. Once core values are understood,
actions and practices that recognise them can be sought. Decision makers are
called on to alter a preferred course of action and their decision approach until
objections are removed and core values can be affirmed among stakeholders.
Keywords: ethics; decision making; case studies; values; stakeholders.
Reference to this paper should be made as follows: Nutt, P.C. (2011) Inserting
ethics into decision making, Int. J. Management Concepts and Philosophy,
Vol. 5, No. 1, pp.126.
Biographical notes: Paul C. Nutt is an Emeritus Professor in the Fisher
College of Business of Ohio State University. His books include The Strategic
Management of Public and Third Sector Organizations, which received a
Distinguished Book Award from the Academy of Management, Making Tough
Decisions, Why Decisions Fail, and Handbook of Decision Making. His
research on management decision making has been widely published, with
more than 150 articles in journals such as Management Science, Organization
Science, Strategic Management Journal and the Academy of Management
Journal. He is a Fellow of the Decision Sciences Institute and a Charter
Member of the Academy of Management Hall of Fame. He has received
numerous awards for his research including four Emerald awards, four best
paper awards from the Decision Science Institute and three from the Academy
of Management.
Copyright 2011 Inderscience Enterprises Ltd.
P.C. Nutt
Introduction
This paper builds on a series of studies, conducted over a quarter of a century, undertaken
to uncover how organisational leaders go about decision-making and the degree of
success realised (Nutt, 2008, 2010b). Four hundred decisions were collected that
uncovered decision making practices, accounting for the situation being confronted and
documenting success. Linking decision results to decision-making practices, controlling
for content and context, provided a telling practice appraisal. The decisions in the
database offer a first hand account of events and circumstances, allowing a probe into
why some practices work, and others go awry, seeking recommendations.
The findings were definitive. Half failed (Nutt, 1999). This makes failed decisions
a commonplace event in organisations, resulting in wasted resources and forgone
benefits (Nutt, 2002). But decision makers were not at the mercy of the situation.
The practices used had far more influence on success than changes in customer tastes,
the cost of money, draconian regulations, and other situational constraints that erect
barriers and pose difficulties. Success doubles when decision makers use best practices.
There were several key findings regarding best practices. This paper focuses on the
role of ethical issues. Unsuccessful decision-makers overlooked ethical considerations as
decisions were being made. Successful decision-makers took steps to find commonalities
in the values behind ethical positions. The paper shows how ethical issues arise and how
to insert ethics into decision making. Debacles in the case database, (decisions that
produce disastrous outcomes with long-term effects), are used to illustrate ethical
considerations that arise for a decision maker (Nutt, 2002, 2010a). The cases include
ill-advised products, such as the launch of New Coke, questionable acquisitions, such as
Fords purchase of Jaguar, and botched product recalls, such as Wyeths stonewalling a
recall of their diet drug Fen Phen (Nutt, 2010a). Debacles highlight both failure-prone
practices and what could be done differently. Examining decisions in this way
has precedents, such as Snyder and Page (1958) and their study of the Korean War,
Halls (1984) exposure of the Bay Area Rapid Transit fiasco, Mckies (1973) study of
Londons aborted third airport, and my study of the Snapple acquisition by Quaker (Nutt,
2002).
Ethical issues arise throughout a decision-making effort. Decision-makers, feeling
pressure to act, may push ahead and run over people whose interests could have been
served by making minor modifications in a proposed course of action. Consider Fed Ex
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. Furthermore, adopting a ready-made solution that pops up outside of a
formal search may seem a clever way to take decisive action to the decision maker. To
others, it can raise questions about the decision makers interests, even if he/she has none.
The perceived interests being served, and those neglected, often pose ethical issues.
Decision makers who forge ahead and gather evidence that supports the proposed
decision make such an evaluation appear to be motivated by attempts to conceal and
deceive.
Reactions to seeming ethical lapses often lead to opposition. Opposition takes shape
as tokenism or pitched battles, depending on the power of a critic. As outrage grows, the
extent to which critics will go to thwart a decision grows as well. Research shows that
this was often underestimated by decision makers, contributing to decision debacles. Let
us see how ethical issues arose in the case of light-rail for mass transit. This decision is
profiled in Table 1. To illustrate key points, ten additional debacles are drawn from my
case database and summarised in Table 2 that show how ethical issues arise and what can
be done to confront them.
Some illustrative cases
2.1 Urban transit revisited as light-rail

For decades in the USA, urban planners have been urging public officials to adopt
up-to-date mass transit systems. Planners argue that the USA should have systems like
those found in Europe. San Francisco and Washington D.C., among others, have spent
huge sums to realise this aim (Hall, 1984; Nutt, 1989).
Congestion and environmental decay motivate the urban planners. Most US cities are
experiencing rapid growth in their downtown areas and a simultaneous increase the
number of person-trips by autos. Existing highway systems that serve city centres are
reaching capacity. Parking is limited, so the lack of supply makes it pricey. Forecasts
predict this will soon lead to unacceptable levels of congestion producing more travel
time, travel cost, and inconvenience; pollution and noise; and more dependence on
foreign oil. Trends also point to declines in the use of public transportation. The loss of
rider revenues for buses and the like prompt public transportation officials to 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 the pollution and noise that are degrading city
centres (Dickey, 1983). Automobile-related remedies are neither efficient nor
environmentally 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 realise a better return on federal block grants. The set-asides for urban transit
are also justified as a step toward energy independence by reducing dependence on
foreign oil. Different parties have a different mix of goals. Federal players who have
goals of lessening energy dependence use federal funding to promote urban transit.
Elected officials must sort through all this to find the best options open to their city.
Urban planners believe that 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 realised. 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 million when first proposed, was to be met with
bonds and subsidies to offset operating shortfalls, should they occur (Hall, 1984). The
realised system was quite different from the plan.
P.C. Nutt
Table 1
Light rail for urban transit
Claims
Urban congestion poses economic and social threats
Concerns
Recognised
Concerns about access to federal dollars, environment,

transit time, energy use
Hidden
Proponents image, hype, modern methods that apply and

do not apply
Directions
Use light rail technology
Options considered
Light rail technology (posture with others, such as traffic

control, bus options, and commuter incentives)
Extent of search and innovation
Limited to the pro-forma options others have uncovered
Use of evaluation
Defend the light rail option, demonstrating its features with

dubious assumptions
Impact of evaluation
Defend the idea by dramatising questionable benefitsand

covering up weaknesses
Barriers to action
Available funds do not begin to cover the most favourable

cost forecasts
Ethical concerns
Some travellers benefit, rest must subsidise

Build it and they will come mentality known to fail
Barriers to learning
Fear of failure, inability to reach over-hyped expectations
Like many big-ticket projects, reality had little resemblance to the hype. Costs for BART
ballooned to $1.3 billion nearly double the forecast and $400 million above legislative
appropriations. This seemed deadly to planners who trimmed the planned 123-mile route
to 75 miles to keep cost below $1 billion. Design and construction problems forced
modifications that cut operating speeds from the claimed 70 mph to 80 mph to an average
of 40 mph, well below that of autos. Problems encountered in tunnelling across the bay,
control system design, and subcontractor coordination hiked the cost to $1.6 billion 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
behaviour. There was no evidence that the urbanities, for which BART was designed,
would abandon their preferences for personal cars and low-density detached housing. To
justify the cost, planners made just these assumptions. But, it took 40 years for the
predicted riders to materialise.
In many big-ticket projects, such as Londons millennium dome, forecasts of cost are
sheer propaganda (Nutt, 2002). When BART first opened, use was so low the operating
deficit ballooned to $40 million. To offset losses, one-half percent of sales tax was passed
in an emergency session of the California state legislature. After the dust settled, two
dollars of subsidy were 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 BARTs
operating cost were required to keep ticket prices competitive with the cost of commuting
with an automobile (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 park and ride hassles. Only prohibitively high costs have curtailed
driving. Cost estimates for the system were overly optimistic, perhaps deliberately so.
This pattern repeats for most large infrastructure projects. 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 not to have BART (Hall,
1984) to deflect hard questions about costs and the prospects of reducing urban
congestion. Assumptions of no technical snags and no inflation were patently ridiculous.
Nevertheless, cities like Washington D.C. created an underground with these very same
assumptions. When challenged, proponents offer evaluations based on unrealistic
projections supported by incomprehensible analyses.
The new bright idea is light-rail. Planners in US cities like Sacramento, California
and Columbus, Ohio are now entertaining an over ground option to cut costs, operating
electrical vehicles over reserved right-of-ways. Plans calls for development of under-used
and abandoned rail corridors to connect urbanites to downtowns and to neighbouring
cities. Because a corridor exists, redevelopment is offered as feasible and low cost.
Again, ridership is assumed, using a build it and they will come mentality.
What are the facts? In ten light-rail projects, utilisation ranged from 15% to 72% of
forecasts. Construction costs averaged 50% above estimates and operating costs 100%
above estimates. The same overly optimistic projections of cost were made again and
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 and busses. The
connecting rail beds are even more problematic. Most are deteriorated from neglect and
poor maintenance. All have half-century old technology, which cannot support a
European-style high-speed train. Stations have been lost to urban revival projects, such as
convention centres. 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 todays 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 rider ship and utilisation, which drives up
costs. Taxpayer subsidies are demanded. The zealots hype is translated into tenuous
assumptions, defensive evaluations, and a failure to approach the dual goals of
controlling commuting cost and reducing congestion.
Despite this history, the 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 million. An additional $90 million
would be required to buy land for right-of-ways that connect to the old rail line, hiking
the price tag to $535 million. Scores of stations were to be built many of them curbside
in the downtown business area to compensate for the demolition of the downtown rail
depot others on nearby lots for park-and-ride users. The alignment was to follow
existing tracks along a major north-south interstate highway. Existing rail companies
were expected to offer right-of-way for the project. Options that called 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
P.C. Nutt
service were ignored in the COTA analysis because US transit funding sources does not
allow bus-rail comparisons. Because infrastructure projects attract media attention, they
are believed to enhance the image of politicians and others who propose them. Appeals to
deal with noise and pollution are ignored. Mistakes are repeated. Looking at expected
use, federal dollars, and other relevant factors, the same conclusion emerges mass
transit in the USA is a bad investment.
A debacle was avoided in Columbus when local economic conditions tanked and
light-rail dropped of politicians agenda. However, 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. Voters rejected a plan only to have COTA planners float yet another
plan a mere two years later. Critics claim that $535 million for light rail makes no sense
when buses can offer the same service for $95 million. 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 in the USA call
for just such investments because they appear shovel-ready.
2.2 Ethical fallout in light-rail and other debacles

Pricey infrastructure projects often pose ethical concerns. Light rail advocates trot out the
same arguments and force fit them to the new city. Light-rail will encourage business,
create jobs, stimulate growth, reduce dependency on foreign oil, as well as accessing our
share of federal tax dollars that will go to others if we do not act. It may even reduce
congestion, noise, and pollution. Claims that seem bogus bring out critics who attack
arguments that seem shallow, illogical, or outright misrepresentations. Problems of
providing efficient and effective urban transit are swept away by misrepresentations.
Like other debacles, light-rail poses concerns about costs and benefits. Critics
respond to costs and benefits that seem out of balance. Decision-makers in debacles
express dismay at what was being said, often attributing it to a critics lack of ethics. The
proposed deep sea dumping site for the Brent Spar oil platform by Shell prompted
vehement opposition from Greenpeace (see Table 2). 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 mobilised
by Greenpeace believed that stopping big oil from making deep-sea dumping a routine
practice justified any means, even bogus data about environmental threats. 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 government agents
just doing their job. They were shocked by the intensity of the criticism levelled against
them after 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.

Table 2
Ethical issues provoked in decision debacles
Case description
Ethical issues
Quakers acquisition of Snapple

Quaker is a diversified company making products ranging from pet
food to cereal. The CEO Smithburg acquired Gatorade and marketed
it into a star. His approach to due diligence consisted of tasting the
product. Amid rumours of a takeover, the same approach was applied
to Snapple, hoping to acquire debt, making Quaker a less desirable
takeover target. Snapple, however, had neither manufacturing nor
distribution synergy with Gatorade. Gatorade was centrally produced
and Snapple locally by franchise with firm contracts. Snapple would
have to give up lucrative supermarkets to distribute Gatorade to their
smaller outlets. Snapple had $20 million in outdated inventory due to
poor inventory control procedures. An acquisition undertaken for
questionable reasons and faulty analysis proved to be disastrous.
Smithburg charged underlings to make it work and when they failed
blamed the failure on them. Snapple was sold for $300 million far
below its $1.8 billon purchase price.
Personal
interests
supersede
organisational
interests
Scapegoating to
cover tracks
Denver International Airport (DIA)

The inadequacies of Stapleton, Denvers close in airport included too
close and too short runways, which posed safety concerns and limited
fights in inclement weather at the countries sixth busiest airport. Pena,
in his candidacy for mayor of Denver saw this as an opportunity,
calling for a new airport instead of a planned renovation. Ballot
initiatives proved controversial, but after years of effort, the DIA was
approved. Pena spearheaded a state-of-the-art facility with a dramatic
mix of architecture and technology located more than an hours drive
from the city on land owned by his family. Studies and contracts were
let to family and friends to do key work. Costs were misrepresented to
make the project seem feasible. This increased airport financing cost
when its bond rating approached the junk designation. Technology
was faulty leading to long waits for bags and inter-airport transport.
Travellers grumbled about the time and cost to get to the Denver. The
DIAs opening was delayed five times. The project came in at $4.9
billion, well over budget, which more than doubled the cost per
passenger.
Source: Cases adapted from Nutt (2002)
Business
travellers
benefit,
taxpayers pay,
and politicians
decide
Penas personal
interests in the
project
P.C. Nutt
Table 2
Ethical issues provoked in decision debacles (continued)
Case description
Ethical issues
EuroDisney
Walt Disney had long-standing fascination with Europe and hoped for
some kind of presence there. Soon after a park opened in Tokyo to
record crowds Eisner, the current CEO, set out to realise Walts
dream. Two hundred sites were considered, quickly narrowing
possibilities to Spain and France. The French Government provided
considerable financial bait, offsetting the negatives of weather and
what was seen as the sour disposition of the French. At the park,
opening Eisner was pelted with Brie cheese. French intellectuals
called the park Euro-dismal. This continued a record of correcting
errors made in the last park, failing to anticipate the current one. The
Anaheim project failed to develop land around the park. Orlando had
plenty of land but underestimated hotel demand. In Tokyo, officials
failed to secure royalties for Disney characters. The French deal
seemed to overcome all this by getting cheap land at bargain prices
and government subsidies. Eisner forgot the park was just a short train
ride from Paris, arguably one of the travel destinations. As a result,
hotel occupancy was at 37%. Demand was influenced by costs and
limitations on picnicking and alcohol. Europeans wanted to see
Americana in America, if at all, and not in France. Losses reached $1
million a day, ending Eisners run as a miracle worker.
No alcohol just a
ploy
Use any means
necessary to sell
the idea
Waco
There were 82 fatalities in the Waco debacle, including 4 law
enforcement officers. The Branch Davidians, formed by disaffected
Seventh Day Adventists, was lead by David Koresh. Koresh solidified
his position with predictions from the book of Revelations that
Armageddon would be realised by an attack on the community. This
lead to stockpiling weapons at the compound; telling members they
were to stay in the compound until all were killed to realise Gods
judgment. Rumours of weapons cash prompted the ATF to attempt to
search the compound. They paraded around the compound for days,
when a simple knock on the door was all that was needed to serve a
warrant. A shootout ensued when government agents stormed the
compound, with four officers being killed. US Attorney General,
Janet Reno called in the FBI. More confrontations followed with the
FBI saying they wanted to negotiate but conveyed a different image
by parading Bradley armoured vehicles around the compound. No one
could say if Koresh should be treated as a Messiah, misguided, or
delusional, which hamstrung negotiation strategies. Ultimately, the
desire to punish the guilty won out and the compound was attacked.
The resulting loss of life provoked recriminations and lost reputations
for all involved.
Apprehending
law breakers
took precedence
over peoples
safety
Bogus
information
Dismissed risks
to current
administration

Table 2
Case description
Ethical issues
Shells disposal of the Brent Spar

The Brent Spar, a huge floating oil storage facility weighing nearly
15,000 tons, served the North Sea oil field off Scotland. Completion
of a pipeline rendered the Spar obsolete. Attempts to refurbish or sell
were unsuccessful. After decommissioning, issues arose concerning
its structural integrity. Company officials posed three disposal
options: dismantle in a port and sell for scrap, dump on location, or
dump at a deep-sea site. After analysis, a deep-sea site was selected
and governments in Norway and the UK were informed, with no
objections voiced. As this time approached to dump the Spar,
Greenpeace mounted a furious campaign to stop what they called a
precedent-setting environmentally irresponsible act. To make their
point, Greenpeace activists flew to the oil platform in a helicopter and
boarded it amid worldwide TV coverage. Several claims were made
by Greenpeace that were either exaggerated or outright
misrepresentations. Officials at Shell had made misrepresentations as
well, understating contaminates in the Spar and overstating its
structural integrity. Greenpeace argued that one misrepresentation
deserved another. The ensuing media feeding frenzy forced Shell to
abandon its plans and dismantle the spar in port, at a huge increase in
cost.
Not all deep-sea

disposal data
revealed
Overly
optimistic
environmental
impact estimates
Inaccurate toxic
waste inventory
BeechNuts Apple Juice

BeechNut in its hundred year history had evolved into a baby food
producer. An image of natural foods was promoted. After the
company was acquired by Nestl, officials were told to improve
profitability. As part of this effort, BeechNut sought a less expensive
apple juice supplier obtaining a contract with Universal Juice at 25%
below market. The R and D director, LiCari, became concerned at the
price and visited their facility finding 55-gallon vats but no mixing
facilities. Samples were sent to a laboratory that found the ingredients
to be unnatural, likely containing syrup additives. The information
was presented to the COO and CEO who dismissed the concerns and
forced out LiCari. Processing Apples Inc, a cooperative representing
apple growers, hired an investigator who reported that Universal Juice
buys no apples. PAI officials meet with the BeechNut top
management, asking them to join a lawsuit against Universal Juice.
They refused. Company officials stalled to unload 3.5 million in
inventory to developing countries, in violation of international law.
Subsequently, LiCari heard of top managements deceptions and
called the FDA. This gave the FDA leverage to force BeechNut to
terminate apple juice sales and to prosecute its top managers for
criminal wrongdoing. The CEO and COO were fined and jailed. The
cost to the company exceeded $25 million.
Mislabelling
Illegal sales to
developing
countries
Look like a
victim to cover
up being a
villain
10
P.C. Nutt
Table 2
Case description
Ethical issues
Nestls infant formula

Infant formula was developed in the 1930s as a substitute for
breastfeeding. Nestl experienced strong sales until the market
saturated and birth rates fell. Selling infant formula to third-world
countries begun to replace the lost sales. After aggressive marketing,
the company realised $300 million in third-world sales from its
campaign. This provoked critics to voice concerns. A report called
The baby killer was produced that claimed infant formula misuse
was the direct cause of infant deaths. Nestls unaffordable prices
(50% of a familys income) coaxed mothers in poverty-stricken areas
to stretch their supply by diluting it. Nestl responded by contending
that new mothers unable to provide breast milk supplement it with
animal milk mixed with water and mashed roots; and that formula
was a superior solution. Company officials refused to change their
advertising; contending that ads coaxing the use of infant formula
were just business, and that they could not be accountable for product
misuse caused by poverty. The controversy grew until the World
Health Organization took note of a new report called Nestl kills
babies and called for a suspension of third-world sales. A worldwide
boycott ensued. Nestl officials covered up the effects of the boycott,
refusing to revamp the controversial marketing practices and
continued to promote third-world sales for seven more years. Nestl
chose to fight the boycott until its industry association called for the
adoption of an ethical marketing plan for infant products by infant
formula producing companies. Nestl officials never fully adopted the
code, believing they were unjustly attacked by critics with an agenda.
Ignore how
product is being
used
Assume critics
have self interest
The Ford Pinto

Fords recall blunders have a long history. The Pinto, with its
exploding gas tanks, arguably heads the list. The safety of the car was
in doubt from the beginning when crash tests found 8 of 11 cars
failed. The three that did not fail had a gas tank fix. Company officials
rejected a fix of $2.35 a vehicle, $137 million in total, as too
expensive. They reasoned that the cost of a fix exceeded the cost of
paying those injured and their families, estimated at near $50 million
for injury compensation and car value (as shown in court documents).
Ford officials reasoned they were making a low cost car that could not
be expected to perform perfectly. There was risk to owning one. Ford
safety standards exceeded those in place when the car was
manufactured. Company officials trotted out their motto of a
2,000-pound car to $2,000, to resist a recall. A tragic accident
occurred when three college girls stopped on a berm in a Pinto. A
read-end collision exploded the gas tank killing all inside. Lawsuits
ensued that made public Fords policy regarding recalling the Pinto.
The company dodged a huge loss in court with a technicality but
company reputation was damaged for decades, contributing to the
current sorry state of the US auto industry.
Profit drives
principle
Cover up of test
data for Pinto
Misrepresent
frequency of
problem

Table 2
11
Case description
Ethical issues
Nationwide arena
Local leaders in Columbus, the largest city in Ohio, had long sought a
sport team to overcome the cities cow-town image. They quickly
determined that team-less cities are involved in a one-sided courtship,
drawn into a bidding wars to offer new stadiums with luxury boxes
and other amenities to attract the attention of sports team owners.
When the National Hockey League (NHL) listed Columbus as a
potential site, it galvanised yet another effort. Local leaders put
together a plan to attract a franchise. Following the courtship strategy,
they proposed a 0.5% sales tax to fund an arena, called issue 1, to
house the team and lure the NHL into the city. Officials claimed there
was no plan B to capture the long sought-after professional team.
After a bitter campaign, the voters rebelled and soundly defeated the
proposal. The next morning, plan B emerged with several local
leaders putting up the funds to build an arena, with surreptitious
public monies to gift and fix an unused site in the downtown area,
presented as urban development. To sweeten the pot, arena real
estate taxes were to be slashed to a fraction of the facilities worth,
with the principal partner, Nationwide Insurance, to offer the public
schools a token sum to compensate for the $65 million if the arena
was valued at market. Local community officials were aghast at the
proposal, but the arena was build as planned. Current market
conditions have forced Nationwide to seek help to fund the bonds
used to finance the project, with no takers.
The contingency
plan
Trade public
schools for
sports team
The use of
public money
after the defeat
of issue 1
The university telescope

Viewing time is the bottom line for an Astronomy department in a
university. Without it, departments experience lagging reputations and
no prospect of securing National Science Foundation funding. Ohio
States department had no viewing access, putting them in a difficult
position. A new university president was hired who began a quest to
improve OSUs reputation. With the trustees blessing, he formulated a
plan to develop big science, large investments to launch lagging
departments into the big time. Huge investments in a super computer
and a cancer centre vaulted participating department ratings upward
and a similar surge seemed possible for astronomy. With this in mind,
a telescope partnership to be built on Mt. Graham in Arizona was
begun, with trustee approval. The consortium partners morphed the
project from $11 million to $20 million, as the latest in optics were
added by astronomers from the partnering universities. These budget
changes were never formally approved. The state legislators saw a
chance to head off a boondoggle and questioned why not build in
Ohio, knowing the answer. Other university departments questioned
whether spending these sums in other areas would do more to close
the reputation gap. Budget setbacks caused by declines in state
funding and controversy in the state legislature prompted the trustees
to ignore sunk costs and terminate the project.
Project cost
Personal
aspirations of the
project
champions
Big university
subsidies
required with
best case
scenario
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P.C. Nutt
Suspending ethics
Machiavelli (1952) advanced a dirty hands explanation for decisions that ignore ethics
(Nutt, 1989). People in power are thought to have dirty, or at least tainted, hands because
they deal with unsavoury 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
organisational spoils.
The failure to apply personal standards when making decisions at work sets an ethical
trap. Some public and private sector managers routinely misrepresent the effectiveness of
their organisations 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
100% 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
persons 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 clues that suggest reservations. Alternatively, they may just read
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.
Many believe that best face advocacy is expected by employers and that
organisations have special ethics. An organisational objective is treated as a higher
value in which the ends justify the means. The mores and standards of justice applied to
ones personal life have no bearing on work behaviour. Machiavelli contended that one
must be ruthless in the pursuit of organisational 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 organisation, which sets aside
personal responsibility. People who suspend personal ethics and substitute the ethic to
serve the organisation are driven by self-indulgence, self-protection, self-righteousness,
and self-deception (Carton, 1983).
3.1 Self-indulgence
The lust for power and the lure of greed corrupts public officials, sworn to a higher
standard of conduct, as well as private sector managers expected to act in the best
13
interests of their firm. Decisions with questionable ethics can be tempting, if they offer
power or a lucrative payoff. In the acquisition of Snapple, Quakers CEO Smithburg
seemed motivated solely by personal gain (Table 2). Smithburg believed that a take-over
was likely and 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 acquisitions. 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
Smithburgs failure to see that both the production and distribution of Gatorade and
Snapple lacked synergy.
To build the Denver International Airport (DIA), Pena (Denvers mayor) undertook
many questionable actions to realise his dream (Table 2). 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, helped make the DIA 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 billion 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 Penas re-election campaign and lobbied
congress for the $500 million Denver received in Federal airport funds. One of the bond
underwriters, who received $1.4 million from the sale of a $600 million 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 Penas election closely tied to the airport, these
contracts posed questions of self-indulgence. And Penas family owned the land on
which the DIA was built.
3.2 Self-righteousness
Zealots are seduced by the rightness of their cause. Organisations 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 Eisners quest for a park in Europe was justified
and acted as if it was permissible to use any means available to realise it (Table 2). As
shown in Table 2, both the Nationwide Arenas supporters and The Ohio State University
telescopes advocates sold their ideas vigorously, if not candidly. The Quaker CEOs
success at out-smarting 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 (refer to Table 2 for more detail). 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
14
P.C. Nutt
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 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. After it was acknowledged that Renos briefings by the
FBI contained misinformation, prosecutors destroyed evidence Davidian survivors had
subpoenaed in their legal actions, still believing the cause to be right.
3.3 Self-protection
People in organisations are often caught up in doing what is asked. Going along to get
along persuades people to support choices they would otherwise oppose, believing that
to do otherwise would be costly to their career. Organisational 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 support a supervisors idea. People line up to tell higher-ups what they want
to hear. Carried to extremes, this behaviour can bring on whistle blowers who expose
ethically questionable practices and cause long-term difficulties for organisations.
Shell officials wanted the case for deep-sea dumping of the Brent Spar to seem clean
cut. Corners were cut and data fudged, hoping to remove any doubt about the
environmental impact 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 totalled 75 tons. When this came to light, company officials ignored it, fearing a
correction would erode their case. Shell officials used best case scenarios to predict the
rate that the Spar would deteriorate, again to support their case. Until environmental
groups opposed them, officials worried only about bad press, failing to see their decision
as precedent setting for all kinds of deep-sea disposals. Company leaders 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
(Table 2). To go along, LiCari had to suspend his concerns about company practices that
appeared to substitute glucose for apples in their apple juice baby food. He went
through the motions for a while to avoid being seen as a malcontent who bucked high
ups. Finally, tension between his beliefs and his suspicions about company practices
forced confrontations that lead to his dismissal. Later, his whistle blowing nearly finished
BeechNut and ruined the careers of its top management.
3.4 Self-deception
An advocate role requires subordinates to buy into a superiors agenda. Subordinates
slide into an advocate posture through many small endorsements over the years. As the
endorsements slowly build and take root, people are eased into believing in a superiors
agenda and that it merits their steadfast support. This kind of self-deception is hard to
resist. Being loyal to your supervisor seems reasonable and expected. Because nearly
every decision has both communal and personal interests, there is a subtle but very real
pressure to support a superiors interests in a mixed-interest situation. Others are
expected do the same and let some higher body sort it all out. Justifications include
15
everyone does it, higher authority implicitly condones it, or it is done only under dire
circumstances.
Nestl officials saw their marketing of infant formula to third-world countries as
appropriate and activist groups as making oversimplified claims to attract attention to
their movements (Table 2). Key insiders had immense loyalty to Nestl. All had grown to
see Nestl as a moral organisation that would not engage in unethical practices. It was
easier to view the activists motives as self-serving, bent on attacking an inherently evil
multi-national 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. Nestl 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 impossible to back away and admit that their actions
were ill-advised. Many small steps were taken until the companys 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 at BeechNut was persuaded they were doing nothing
wrong by 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 top
management team convinced themselves that the absence of a health hazard diminished
the gravity of misrepresenting the products contents. Compared to taking a $3.5 million
loss in hard times, selling the tainted inventory seemed inconsequential.
Shells 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 coloured 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. Criticism has had an
impact on the companys bottom line.
Similar issues arise in the Pinto recall at Ford (Table 2). 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 Pintos 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 effect 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 Pintos 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 were not nearly as safe as bigger, more expensive ones.
You get what you pay for. Finally, there was the safety doesnt sell mentality. Ford
officials let these rationalisations justify putting recall benefits in dollar terms. The
callowness of putting a dollar value on human life put a big dent in Fords public image
that persists to this day.
16
P.C. Nutt
Staffers in the recall office at Ford engaged in self-deception as well. The job placed
heavy work 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. Peoples defence mechanisms take over to shield them from
the psychic toll. Individuals continuing 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 at Ford have considerable remorse at their
failure to apply personal ethics to their job.
Self-deception trapped light-rail advocates as well (Table 1). 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.
3.5 Playing out ethical debates

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 have a different view of how to balance these interests
than does a critic. Economists resolve such differences with externalities. An
infrastructure project has externalities if it produces benefits everyone can realise 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 realise
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 ride will be subsidised with
public dollars. Because people will not use light-rail in sufficient numbers to pay for it,
the benefits of a light-rail system have externalities that the ticket price cannot capture.
The critics argue that such projects are never feasible, which creates an ethical issue.
A mismatch between who pays, benefits, and decides invariably poses 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 Denver International Airport (Table 2). In the Nationwide Arena
Plan A, the public was to help to pay for an arena decided on by a downtown elite and
17
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 issue from the misalignment of costs, benefits, and prerogatives to
decide.
Pena, the mayor, decided that the city of Denver needed a new airport. The Denver
International Airport, 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 traveller 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 traveller. 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 traveller.
Pena decides. Denver-area companies get disproportionate benefits. Public dollars pay for
the DIA.
The Ohio State University endorsed a telescope with no hope of breaking even. A
large subsidy was needed, even if the most favourable revenue projections would have
been realised (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 misalignment. The university president decided to bill all university
departments to benefit the Astronomy department.
Recalls, in the BeechNut and Ford cases, posed questions of profit taking by selling
unsafe products or by misrepresenting them. In the acquisition of Snapple by Quaker, the
CEO Smithburg 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
Working out ethical differences is recommended before positions harden and become
intractable. This calls for ethical rationality to be given status equal to that accorded
logical, economic, 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, neutralise 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.
18
P.C. Nutt
4.1 Neutralising the motives to ignore ethics

An organisations ethical image erodes when company officials slip into self-indulgent
and self-righteous postures, when self-protection is forced on people, and when selfdeception 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 pretence in which the zealot directs things from behind the scenes and gives
public assurances that mislead to avoid difficult questions. Every decision is
compartmentalised 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 todays 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.
Decision makers are called on to neutralise the pull toward self-indulgence,
self-righteousness, self-protection, or self-deception. Corrective action is found in
eliminating the often-implicit incentives that encourage ethically questionable
behaviour.
4.1.1 Neutralise self-righteous and self-indulgent behaviour

Exposing a vested interest neutralises zealots. Require zealots 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 decision makers peers or superiors.
Each can encourage communal interests by asking the decision maker to pose questions
that seek to uncover the interests of people who can influence or be influenced by a
decision.
Discourage self-indulgent behaviour 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 behaviour is unethical and will not be tolerated. This is
what Buffett did after his take-over of Salomon Brothers, the investment banking
division of Salomon, 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 exempt 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.
19
4.1.2 Neutralise Self-protection

Show people caught up in self-protection another path. According to studies, people who
raise ethical questions in organisations 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 company transactions on the back of every
employees business card. Another step is to vest mediation responsibility in the
organisations top people. Allow ethical standards to 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
whistle blowing. Such channels provide the means to raise questions and express
concerns. Courts rule in favour 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.
4.1.3 Neutralise 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 ones 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 organisation by putting them in job descriptions, mentoring, and formal
discussions. Show how deceptions work against organisational interests.
An organisation 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 organisations. Legislative hearings, budget
meetings, and similar forums take on increased importance because real needs are being
considered.
4.2 Align 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 is
offered. 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 said, The business of businesses is
business (Nutt, 2002). The functionalist view is even more dogmatic. A form of social
20
P.C. Nutt
Darwinism is advocated, enticing company officials to believe that they are expected to
make a profit any way 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 maximise profit without deceptions. Such individuals deceive themselves about their
own deceptions (see Table 2).
4.2.1 The stakeholder view

Those with a legal or functionalist view of ethical standards position themselves to act in
their employers 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 cannot 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 organisation
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.
4.2.2 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 all ethical positions value-based
(Johnson, 1993; Werhane, 1999). People rarely grasp values because the ethical position
staked out says little about the values that ground it. Emotional outbursts from a
concerned stakeholder verbalise an objection but not the values that prompted the
objection. Decision makers who try to mediate such disputes 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 Nestl and Shell, and the Nationwide Arenas leadership group, failed to
grasp their own motives, let alone their critics. The critics 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.
21
4.2.3 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 draw a line indicating engineers that get
rewards, such as a salary increase, and to rank and yank, targeting engineers at the
bottom of the list for counselling 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 manipulated the system by rating average people above average on all
criteria, creating a Lake Woebegone effect in which everyone is 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 (number 1), then the second best (number 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 engineers true value to the company before the
rating.
Of course, any system can be gamed by a clever individual. An old hand explained
how. He said
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 blocking a
proposed study. Words are misspelled early on in the presentation to give the tidy bowl
types something to criticise. They snicker and point out spelling errors. (Be careful to
misspell words that the tidy bowl type is able to recognise.) A heartfelt 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
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P.C. Nutt
support of the old hands tactics include building loyalty, protecting ones people, and
countering gaming by others. Arguments that go the other way cite misrepresenting a
persons value to the company and enticing game playing by others.
The reaction to the consultants presentation is much the same. Half think he is clever
and half are appalled. Those who agree with the consultants 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 consultants obligation to do what
the CEO asks. People who find these tactics unethical are more suspicious of CEOs
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
favour 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 companys interests at heart. Executives, sceptical 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 sceptical.
None of the decision-makers in the debacles (Tables 1 and 2) considered the ethical
positions of stakeholders, let alone probing for values behind them. Lets turn our
attention to how this can be done.
4.2.4 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
23
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 keep people from sharing 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 during
claim reconciliation and option identification.
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 decisions stakeholders. They may include insiders,
such as peers, superiors, subordinates, and outsiders, such as stockholders, board
members, creditors, suppliers, alliance partners, todays and tomorrows 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, misrepresentation, 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 centred 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 present 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
24
P.C. Nutt
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 has been argued that a persons ethical stance is rooted in their 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 organisations 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 record ethical lapses with a scorecard that gives them an ongoing read on
managements moral compass. When an ethical issue arises, opposition can take shape
as a pitched battle or as tokenism. Both bleed away energy and create delays.
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 organisation. 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 misalignment 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.
Several issues merit additional attention. The paper offered an organisational
behaviour treatment of ethics. There are other useful perspectives including uncertainty,
information processing, cognitive biases, and human frailties. More work seems needed
to address ethics from these perspectives. The focus here was on the decision maker.
More work is needed to address how vested interests arise, and can be managed, as well
25
as how stakeholders with ethical issues can be identified, consulted, and managed. The
considerable literature on stakeholder management will be of value here.
References
Argyris, C., Putnam, R. and Smith, D.M. (1987) Action Science, Jossey-Bass, San Francisco,
California.
Bardaracco, Jr., J.L. (1997) Defining Moments: When Managers Must Choose Between Right and
Right, Harvard University Press, Cambridge, Mass.
Burns, J. M. (1978) Leadership, Harper & Row, New York.
Carr, A. (1978) Is business bluffing ethical?, Harvard Business Review, JanuaryFebruary, p.114.
Carton, B. (1983) Ethical postures and ethical posturing, American Review of Public
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Cohen, M.D., March, J.P. and Olsen, J.P. (1976) A garbage can model of organizational choice,
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Nutt, P.C. (2002) Why Decisions Fail: Avoiding The Blunders and Traps that Lead to Debacles,
Berrett-Koehler, San Francisco, CA.
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(Eds.): Handbook of Decision Making, Wiley-Blackwell Ltd., Oxford, UK, in press.
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Citations for the illustrative cases

Beimborn, E. and Horowitc, A. (1993) Measurement of transit benefits, Center for Urban
Transportation Studies, Milwaukee, WI, prepared for the Urban Mass Transportation
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Transit Authority, Columbus, OH.
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Inserting Ethics Into Decision Making

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Int. J. Management Concepts and Philosophy, Vol. 5, No.

Inserting ethics into decision making

Copyright 2011 Inderscience Enterprises Ltd.

Inserting ethics into decision making

Some illustrative cases

2.1 Urban transit revisited as light-rail

Light rail for urban transit

Urban congestion poses economic and social threats

Concerns about access to federal dollars, environment,

Proponents image, hype, modern methods that apply and

Use light rail technology

Light rail technology (posture with others, such as traffic

Extent of search and innovation

Limited to the pro-forma options others have uncovered

Defend the light rail option, demonstrating its features with

Defend the idea by dramatising questionable benefitsand

Available funds do not begin to cover the most favourable

Some travellers benefit, rest must subsidise

Fear of failure, inability to reach over-hyped expectations

Inserting ethics into decision making

2.2 Ethical fallout in light-rail and other debacles

Inserting ethics into decision making

Ethical issues provoked in decision debacles

Quakers acquisition of Snapple

Denver International Airport (DIA)

Ethical issues provoked in decision debacles (continued)

Inserting ethics into decision making

Ethical issues provoked in decision debacles (continued)

Shells disposal of the Brent Spar

Not all deep-sea

BeechNuts Apple Juice

Ethical issues provoked in decision debacles (continued)

Nestls infant formula

The Ford Pinto

Inserting ethics into decision making

Ethical issues provoked in decision debacles (continued)

The university telescope

Inserting ethics into decision making

Inserting ethics into decision making

3.5 Playing out ethical debates

Inserting ethics into decision making

4.1 Neutralising the motives to ignore ethics

4.1.1 Neutralise self-righteous and self-indulgent behaviour

Inserting ethics into decision making

4.1.2 Neutralise Self-protection

4.1.3 Neutralise self-deception

4.2 Align costs, benefits, and prerogatives

4.2.1 The stakeholder view

4.2.2 Value-based differences

Inserting ethics into decision making

4.2.3 How disagreements arise

4.2.4 Coping with divergent values

Inserting ethics into decision making

Inserting ethics into decision making

Citations for the illustrative cases

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