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International Business Policy: An Ethical perspective
Can You Be Rational and Ethical?
Marc Le Menestrel
My Intention…Is to empower individuals and companies to live a life they have reasons to value. In particular, I like to
Develop awareness of values, of their diversity, and of their importance
Analyze how values influence thinking, actions, and communication and how they can contribute to rationality
Identify strategies to anticipate ethical risks and nurture values-based behaviors
Create credible communication strategies
My ultimate goal is that you end up being more powerful in integrating your values into your decisions.
The Nature of Ethical Judgment
Are you an ethical person?
Is business ethical?
Which of these Spheres are White?
Some are still darker than others…
You feel good, full of energy
You may not be credible
And you may be blind to risks
You are honest
It feels bad
But you are more aware and anticipate
Looking at the good side
Looking at the bad side
Thinking Ethics as a Grey Zone
Our ethical judgments are bounded and biased by our emotions, our mental habits and
self-image, our cultural context, our work environment, our self-interest and our power
to act
This phenomenon is not necessarily intentional, but it can have significant
consequences.
We can develop, refine and structure our ethical consciousness. It requires to open our
mind and to be able to think beyond the justification of your ethical opinion.
It necessitates training and effort, outside our zone of comfort
Purely
ethicalPurely
unethical
Marc Le Menestrel, UPF & INSEAD, for
A Classification of Values Instrumental values (egoism):
Pursuing your self-interest. Causing good consequences to oneself: e.g. your salary (individual level); profit (corporate level)
Instrumental values (altruism):Pursuing others’ interest. Causing good consequences to others: e.g. your family, your boss (individual level; your employees, your customers, the society (corporate level)
Deontological values (idealism): Respecting rules and principles: e.g. your education; a code of conduct (individual level); the law, professional standards (corporate level)
Emotional values (virtue):Generating good feelings: e.g. sense of integrity, pride (individual level); positive ethical climate (corporate level)
Dual & Systematic Ethical Analysis
Can it harm? Which stakeholders?How much? When?
Can this be wrong? or unfair? According to laws & regulations? To
some ethical principle? If everyone does the same? All the time?
Does it feel bad? A sense of discomfort? An early warning signal
inside?
Would this be better kept secret? Is this taboo? Could it be publicly known?
Can it benefit? Which stakeholdersHow much? When?
Can this be right? and fair? Is this legal? Is this respecting ethical
principles, code of values? Can this be universalized?
Does it feel good?What virtue do I incarnate? Is this
respecting my integrity?
What would I like to be known? What is transparent?
To which extent is this unethical? To which extent is this ethical?
Marc Le Menestrel, UPF & INSEAD, for
Economic Rationality
The rational actor (you, a team, a company)1. Anticipates the consequences of his actions2. Evaluates these consequences according to his interest3. Chooses the action that leads to the best consequence.
Interest of the consequence
Ethical Dilemmas: tough choices
Less ethical
More ethical
An Ethical Dilemma arises when the action that best
favors the interest of the actor conflicts with the action
that is the most ethical
Best interest of the actor
Worse interest of the actor
First Discourse: Economic Rationality
Less ethical More Ethical
Bet
ter
Wor
se
Ethical Values
Sel
f-In
tere
st
Rational
Some insist that self-interest should be the sole and unique criterion of rational choice
Irrational
Second Discourse: Idealism
Less ethical More Ethical
Bet
ter
Wor
se
Ethical Values
Sel
f-In
tere
st
Rational
Some insist that ethical values should be the sole and unique criterion of choice
Irrational
Third Discourse: Corporate Social Responsibility
Less ethical More Ethical
Bet
ter
Wor
se
Ethical Values
Sel
f-In
tere
st
Rational
Some insist that interest and ethics always combine
Irrational
My Point
These 3 discourses miss many of the most difficult choices managers face in real life
They are just discourses.
In action, ethical issues are much less simplistic…
I believe that most of our decisions, if not all, do include some dilemma between our interest and
ethical values
Would you lie for a monetary gain?
Lying
Telling the truth
$ 1 000
$ 1
According to economic rationality, you should lie whenever you have an interest to do so.
According to idealism, you should never lie.
Should you pollute less?
Pollute less
Maintain profits
Increase costs
Continue Polluting
According to economic rationality, you should not care about pollution beyond its expected negative impact on profits
What do you think our children think about this logic?
?
Should a company respect the law?
Violate the law
Respect the law
What is the value of the law beyond the cost of the punishment?
Economic rationality answer is: zero!
What about the value of the spirit of the law?
? $ - 100 000(including the fine)
$ - 150 000
Should our supply-chain respect Human Rights?
Violate Human Rights
Economic Value
Respect Human Rights
Of course, companies do respect human rights even if it is costly. Don’t they?
Should we say everything?
Reveal risks associated with a
product or an activity
Favor regulation Threaten a
market growth
Avoid regulation, Maintain a
market growth
Hide the danger of a product or of an
activity
We often have an interest in hiding potential risksIndeed, sincerity in communication can be very costly…
Where is the limit between confidentiality and transparency?
Will you avoid corruption?
Paying no bribe
Winning a contract
Losing a contract
Paying a bribe
Is corruption a necessary evil……of economic competition?
What about conflicts of interest ? (1)
In the interest of the company
In your own interest
Against your own interest
Against the interest of the company
Why would you act in the interest of the company?
What about conflicts of interest ? (2)
In the interest of the company
In your own interest
Against your own interest
Against the interest
of the company
Reciprocally, could a company be motivated to act in the interest of its employees even when this is
against its self-interest?
Opening to Ethical Rationality
Less ethical More Ethical
Bet
ter
Wor
se
Ethical Values
Ideal
Rational choices between interest and ethics are often kept hidden.They are the most difficult. Acting in front of these ethical dilemmas is an art of surprise!
Irrational
Prioritytointerest
Prioritytoethics
Marc Le Menestrel, UPF & INSEAD, for
From here, a reactive strategy often consists in:
1.Deny2.Justify
3.Externalize
Such strategy raise ETHICAL RISKS
From here, a proactive strategy often consists in:
1.Acknowledge ethics2.Anticipate risk3.Imagine opportunities
Such strategy is open to IDEAL outcome!
? ?
Ethics beyond discourses
Explicitly and/or implicitly, you may be taught that interest is the (only) criterion for rationality
Lying, deception, pollution, human rights violations, law infringement, corruption, exploitation, etc are issues difficult to address in business education. They are nevertheless amongst the most important.
We do not choose the less ethical action rationally because it is a pleasure, but because we think we have an interest in doing so.
When we do so, we are inevitably tempted to deny the dilemma, the justify our action, and to pass the responsibility to others.We create ethical regrets and face ethical risks for the long term.
When choosing to act according to our values, even against our perceived interest, we focus attention towards making it an opportunity and create the conditions for an ideal outcome. It is often more difficult at first glance but can be full of good surprises!
Joan Miro, 1968
