Panel discussions

Ethical Blindness

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When ethical blindness occurs, managers tend to make decisions only using a business-frame or a legal-frame, ignoring moral aspects. The failure to visualize moral components in a decision-problem causes even good managers to make bad decisions, at times with disastrous effect.

Mr P Jeyadevan
Executive Director & State Head – TN & Puducherry, Indian Oil Corporation Ltd (IOCL)

Ethics is related to moral and physical values. During primary classes and later during engineering education, we could clearly distinguish between right and wrong; in science and engineering, there is only one right way of doing things.

But when we went to management classes, there was a dilemma, especially with case studies. I found that some of my ‘rights’ were someone else’s ‘wrongs’ and some of their ‘rights’ were my ‘wrongs.’ The answer that I found to navigate this dilemma is to have an ethical headlamp to look at issues. With this, we can look at right and wrong in a balanced way and all of us will be able to work on a similar decision-making process, which is beneficial to the organisation, both in the long term and short term. Ethics is a real cementing factor to build the structure of an organisation and to keep it very stable. Technology plays a big role in helping us to be transparent. We need coherent communication across the organisation on the Code of Ethics. Today, there is a blitzkrieg of startups. I strongly suggest that startups must have an ethical foundation before they scale up.

Dr L S Ganesh
Professor (Retd), IIT Madras

Ethics is defined by what it is. There is a subtle difference between morals and ethics. When we talk about morals, we bring in the concept of God and Mother Nature. When we talk of ethics, we normally talk of the conduct of the human society. There are four contexts of life for every human being.

  • Me alone—Ethical behaviour is demanded as ethics must sit in your thoughts, words and actions.
  • Me in my family—You are dealing with whom you know and they also know you.
  • Me at work—You are with your colleagues, subordinates, peers, superiors and supply chain partners.
  • Me in public—These days we all are virtually in public. You deal with people whom you don’t know.

You have to be clear as to whether you have committed an error or a mistake or a sin. This distinction can be had only from your intention, which only you can judge. ~ Dr L S Ganesh

Ethics must be understood and practised in all these four contexts without violation. There are also personal ethics, interpersonal ethics and systemic ethics (public rules and regulations and public order). Ethical blindness seems to be a widespread phenomenon because many people are not aware of the basic tenets of ethics. They say that all is fair in love and war. If all your life is spent in love and war, does it mean that all you do can be unethical? It is a funny kind of stance that many people take. You have to be clear as to whether you have committed an error or a mistake or a sin. This distinction can be had only from your intention, which only you can judge. Nobody else can judge your intention. You are the master of your intention and knowledge.

Dr V R Menon
Ethics Coordinator, IOCL, TN & Puducherry

The destruction caused by ethical blindness is much more than what is caused by corruption and, therefore, the topic of ethical blindness requires increased focus by managers and executives. According to Harvard Business Review (Dec 2001), good managers often make unethical decisions and don’t even know about it.

Wells Fargo

Let me first touch upon three interesting anecdotes. First, The Wells Fargo case. It was the number two largest bank of the world in 2006. When Jim Collins wrote the famous book, ‘Good to Great,’ Wells Fargo figured in his list of 11 good-to-great companies. In 2015, there was a damning article in the Los Angeles Times which said that over 1.5 million unauthorized accounts were created by the sales executives of Wells Fargo with fraudulent signatures of customers.

Why did they do that? Because their Retail Banking Head, Carry Tolstedt, was very strict about targets; the number of accounts created by customers reflected in the share price. If the sale people were not able to do it, then she humiliated them. A US Consumer Financial Protection Agency fined Wells Fargo 185 M$ for the scandal. Both the CEO John Stumpf and Carry Tolstedt had to resign, foregoing their severance packages.

The question is, were those sales executives intentionally unethical? Interestingly, John Stumpf, the CEO was adjudged the best banker of the world by the Morning Star Magazine, a year before this happened. Carry Tolstedt was adjudged the 37th most powerful women in the world by Fortune Magazine. They were very efficient people but the pressure of targets made them unaware of the ethical implications of their actions.

The Challenger Tragedy

Most of you would have heard of the horrific tragedy of NASA space shuttle Challenger. At that time, Morton Thiokol was a consultant to NASA. A day before the launch, he suggested to NASA not to do the launch because he feared there was a faulty component which could cause problems.

Were the managers of NASA intentionally unethical? They were good guys but the cognitive space of their mind was fully occupied more by those timelines and there was no space for moral evaluation. ~ Dr V R Menon

NASA was going through a difficult time with public and political pressure weighing on it. They were supposed to do some 50 launches a year but were hardly able to do three. Those pressures and timelines worked on the NASA managers and they somehow convinced Morton Thiokol not to raise any objections to the launch. It was some sort of group think. They unanimously agreed to launch it. In the end, Challenger crashed killing all seven astronauts on board.

Were the managers of NASA intentionally unethical? They were good guys but the cognitive space of their mind was fully occupied more by those timelines and there was no space for moral evaluation. The effect? NASA never really recovered from that. Their space shuttle program was stalled for 32 years.

The Ford Pinto Fiasco

The third one is a very commonly discussed case of Ford Pinto car. Lee Iacocca, the famous management guru was the Chairman of Ford. He asked his team to make a 2,000$, 2000 lb car in 25 months because Japanese small cars were selling well in the market and Ford wanted to give a stiff competition to them.

Ford Engineers worked hard and efficiently and they produced the car in record time, not costing more than 2000$, but during that process, they ignored some of those very safety aspects which would have prevented accidents. One of them was a safety mechanism that would have cost just 11$ but then it would have crossed the red line of 2000$.

Terrible accidents started to happen and people in the car were burnt to death when an accident happened. The management had to take a decision whether to recall the cars. Just like we do in normal situations, they did a cost-benefit analysis. If they recalled and fitted the 11$ dollar mechanism and made the cars safer, they would have spent 137.5 M$. If they did not do it, what were the costs? They calculated the cost of litigation, cost of funerals, cost of sundry expenditure and cost of pain. It was much cheaper than the cost of recall.

In the end, they did not recall. Accidents started to happen and images of people burning came in newspapers. There was tremendous pressure on Ford and it stopped production of the cars and Ford Pinto disappeared. Were the Ford engineers intentionally unethical? No. They were just efficient. But it brought down part of the organization due to ethical lapse.

Thus they spoke

Now let us see what important people said about these three cases. “I really feel for Carrie and her team. We do such a good job in the area. I will fight this one to the finish,” said John Stumpf, CEO. This is when the Los Angeles Times report blew up in his face. He was trying to justify his executives being blind to the unethicality of such a vast nature.

The second is from Lawrence Mulloy, NASA Program Manager. When Morton Thiokol suggested postponing the launch, he blurted out, “My God, Thiokol, when do you want me to launch? Next April? If we miss the window now, then the next window for launch will be after few months.” What this shows is that his cognitive space was filled with timelines and there was little moral evaluation.

In simple language, they were ethically blind. This shows how the stretch targets can cause a lot of unethical behavior unintentionally. ~ Dr V R Menon

The third one is from Dennis Gioia, Recall Coordinator, Ford, about the Ford Pinto fires. He was the recall coordinator when the accidents started to happen. Denise Gioia finally quit in disgust.

He later had this to say: “After I left Ford, I now argue and teach that Ford had an ethical obligation to recall. But, while I was there, I perceived no strong obligation to recall, and I remember no strong ethical overtones to the case whatsoever.” In simple language, they were ethically blind. This shows how the stretch targets can cause a lot of unethical behavior unintentionally.

Obedience to Authority

Let me move on to excessive obedience to authority and power, and the role they play, and talk about the Milgram Experiment and Stanford Prison Experiment. In the Milgram Experiment process, Prof Stanley Milgram was investigating how obedience to authority leads to unethical behavior. He assigned some participants as teachers and some participants as learners.

The teachers were supposed to give electric shock to the learners if they didn’t learn enough, progressively increasing from 15 volts to 450 volts. Actually, no voltage was applied but the teachers did not know that and they believed that they were applying electricity.

In such a culture, the consequences do not come into your mind. Cognitive disengagement happens. This can also cause ethical blindness. These issues are very relevant to all organizations. ~ Dr V R Menon

Milgram asked the teachers before they started the experiment if they were willing to apply 450 volts and all of them said, ‘No.’ But as the experiment progressed, Prof Stanley Milgram, gave very authoritative instructions, “Do it, Do it.” 65% of them applied 450 volts. 100% of them applied 300 volts. As there was no compulsion, they could have quit the experiment. They did not, because of the magnetic power of authority.

This is especially true for us in Indian conditions. We respect individuals, elders and teachers. We touch their feet and therefore there is an innate process which makes us obedient to authority and that can cause unethical behaviours.

The Poison of Power

The Stanford Prison Experiment was conducted by Prof Philip Zimbardo in the Stanford University lab. He took random participants using a public advertisement. He segregated them as prisoners and prison guards to understand their behavior. It was supposed to be a 14-day experiment but he had to stop the experiment on the sixth day because the designated guards started to become abusive to the prisoners. Power engulfed them and without that awareness, they started abusing, maybe because of pent up anger or so. The context of power and role can make us ethically blind.

Toxic Organizational Culture

When the organizational culture is only based on the bottom-line mentality—increased profit at whatever cost without looking at the sustainability of the society, what will happen? The toxic organization’s culture and the pressures of the organization will make banal even evil things. ‘Banality of evil’ is a famous phrase used by the philosopher Hannah Arendt, talking about very nasty criminals. In such a culture, the consequences do not come into your mind. Cognitive disengagement happens. This can also cause ethical blindness. These issues are very relevant to all organizations.

Bounded Ethicality

What psychological mechanisms can cause ethical blindness? One is the use of euphemisms—use of nice words instead of harsh, blunt words. For example, I may want to tell my subordinate to go and bribe some government authority to get an approval. If I say, “Go and bribe,” immediately the moral emotions like shame and regret come up and these are stumbling blocks for our unethical behavior. When we convert them as good words and say, “Go and give a gift to that person,” we suppress those moral emotions and get affected by ‘Bounded Ethicality.’

Mythical numbing happens if you are in an organization, in a location or in an operational unit where unethicality abounds, everybody is getting bribe or something like that, then even if you are of an utmost, straightforward character with integrity of the highest order, still you get affected. After some time, you get numb, just like your senses become numb if you are in the Arctic region. That, in turn, affects your ethicality. Slippery slope is another aspect. We start with the smaller deeds like taking a stationary home from office and incrementally, increase our ethical violations. Our mind does not have the capability to understand that incremental increase and then we fall into the depth of unethicality.

In-group bias, implicit prejudice, conflict of interest and over claiming credit are examples of implicit biases. These are deep-rooted. ~ Dr V R Menon

Implicit Biases

In-group bias, implicit prejudice, conflict of interest and over claiming credit are examples of implicit biases. These are deep-rooted. For example, when we have in-group bias, we tend to unconsciously favour people from our group and disfavour people from out-group. These biases cloud our objectivity and cause ethical blindness.

Moral Disengagement

Though we know we are unethical, we disengage. Displacement of responsibility (we only follow orders and our boss is to blame for unethicality); diffusion of responsibility (all have unethical behaviour, hence my action is not unethical); attribution of blame (finding others to blame for our unethical actions) and distorting consequences (we tend to believe that we caused good, though we caused harm and selectively remembering the good things) are all examples of moral disengagement. For example, I give a stressed target to my subordinate and an impossible time frame. He understands that it is neither impractical nor viable. So he either manipulates the data to show a good performance, or achieves the target using unfair means. He would still think it is not his fault as his boss gave him something unviable. He rationalises his action and becomes immune to his unethicality.

Some of the Possible Remedies:

  • Shape the environment with transparency, salience and openness.
  • Rely more on data and less on intuition.
  • Make your ethical stand know to others.
  • Remain vigilant to implicit biases.
  • Take ‘joint decisions’ and have a devil’s advocate.
  • Follow the Publicity Test of Ethics

Ethical Practices: Indian Oil Way

In India Oil, we have a full-fledged vigilance department and ethics codes. Our vigilance department is represented at the board level. We have strong foundations, yet we are moving beyond all those things.

We have a State Ethics Committee (SEC) formed by senior officers. We plan, initiate and monitor various ethical initiatives for improving the ethical culture. That is the major point, the top of the pyramid. The SEC reports to the State Head. There is a lot of support from the top management that is very important. Below the Ethics Committee, we have created Ethics Circles, like we have Quality Circles in many companies. Ethics Circles are created in all operational units.

We have a mix of officers and staff who meet regularly and whose primary function is to understand if there are any ethical infractions happening here. If so, what actions can be taken? They discuss and suggest. They also plan and take part in many socially responsible projects, promote volunteerism like blood donation camps or tree plantation projects, or collecting clothes and giving to the needy in the society. Because of these positive actions, people’s energy will be diverted and used for a positive purpose. It improves the ethical climate of the organization. Another is the Ethics Training. Our unit conducts training within Tamil Nadu. We have trained all executives in business ethics, including ethical blindness. We have trained all staff members for ethics and social responsibility. They create a solid foundation on which we can build on.

We changed our Vision Statement to read what it is today. In short, it is: Where integrity meets excellence. ~ Ms Sarada Jagan

We have also created an anonymous ethical feedback mechanism where people can report, without fear of retribution, violations including mis- reporting of data and sexual harassment. We have a set protocol on how to handle all these cases. The SEC goes into it, recommends action and submits to the State Head.

Increase Salience

We also wanted to increase the Salience of Ethics in the organization. We have frequent ethics broadcasts so that they reach all the employees. We have also fixed posters in all operational units about social responsibility, the importance of sustainability and about ethics. The purpose is to increase the salience.

I suggest that a body to promote ethical awareness may be formed under the aegis of MMA to promote ethics in the corporate world. MMA can also conduct regular training sessions/workshops on Ethics. Organisational members can collaborate and exchange best practices.

Ms Sarada Jagan
MD (HR & Corporate Services), The Sanmar Group

Our ethics philosophy and practices are written in a manual that runs to around 200 pages. We took KPMG’s help in 2002 to articulate in a formal manner what the group has been practising ever since Mr Sankar ran the Sanmar group. We conducted sensitisation workshops to employees to understand what ethics means to them.

We changed our Vision Statement to read what it is today. In short, it is: Where integrity meets excellence. We don’t want to do business any other way. We want to do it with integrity. The Ethics Manual addresses our Vision and our guiding principles or the philosophies. To make people understand them, we have come up with general business principles, illustrated with examples and recommended what one should look at and what one should not look at.

We also have our Code of Conduct. We have Ten Codes. We have systems in place and an ombudsman to administer all these. We end these manuals with 42 typical dilemmas that we face in business situations and ask our employees to choose the option that is appropriate for Sanmar group and understand why Sanmar wants them to do it that way. New employees on their first day in our company undergo a quick session on Ethics. At the end of the session, a declaration is signed by them that they have understood the Ethics Code and they will abide by its letter and spirit. We do ethics dipstick tests periodically to find out gaps and provide re-training where required. In the last three years, instead of classroom training, we have branded all these initiatives and coined it emotively as, ‘Ethically Ours.” ‘It is not ethics of Sanmar but our ethics.’ This has led to greater employee involvement.