Ethical Blindness - Article

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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

organisation and to keep it very stable. Technology

Executive Director & State Head ‐ TN & Puducherry, Indian Oil Corporation Ltd (IOCL)

plays a big role in helping us to be transparent. We need

E

thics is related to moral and physical values.

During primary classes and later during engineering

education,

we

could

clearly

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.

distinguish between right and wrong; in science and

Dr L S Ganesh

engineering, there is only one right way of doing

Professor (Retd), IIT Madras

things.

that some of my 'rights' were someone else's 'wrongs'

E

and some of their 'rights' were my 'wrongs.' The answer

normally talk of the conduct of the human society.

that I found to navigate this dilemma is to have an

There are four contexts of life for every human being.

But when we went to management classes, there was a dilemma, especially with case studies. I found

ethical headlamp to look at issues. With this, we can look at right and wrong in a balanced way and all of us

thics 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

• Me alone—Ethical behaviour is demanded as ethics must sit in your thoughts, words and

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

actions.

• Me in my family—You are dealing with whom

cementing factor to build the structure of an 40

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• Me at work—You are with your colleagues,

phenomenon because many people are not aware of

subordinates, peers, superiors and supply

the basic tenets of ethics. They say that all is fair in love

chain partners.

and war. If all your life is spent in love and war, does

• Me in public—These days we all are virtually

it mean that all you do can be unethical? It is a funny

in public. You deal with people whom you

kind of stance that many people take. You have to be

don't know.

clear as to whether you have committed an error or a

Ethics must be understood and practised in all

mistake or a sin. This distinction can be had only from

these four contexts without violation. There are also

your intention, which only you can judge. Nobody else

personal ethics, interpersonal ethics and systemic

can judge your intention. You are the master of your

ethics (public rules and regulations and public order).

intention and knowledge.

Ethical



blindness

seems

to

be

a

widespread

Dr V R Menon

You have to be clear as to whether you have committed an

Ethics Coordinator, IOCL, TN & Puducherry

your intention, which only you

T

can judge.

According to Harvard Business Review (Dec 2001), good

error or a mistake or a sin. This distinction can be had only from

~ Dr L S Ganesh

he 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. managers often make unethical decisions and don't

even know about it.

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Were the managers of NASA intentionally unethical? They

Wells Fargo

were good guys but the

Let me first touch upon three interesting anecdotes.

cognitive space of their mind

First, The Wells Fargo case. It was the number two largest bank of the world in 2006. When Jim Collins

was fully occupied more by

wrote the famous book, 'Good to Great,' Wells Fargo

those timelines and there was

figured in his list of 11 good-to-great companies. In

no space for moral evaluation.

2015, there was a damning article in the Los Angeles

~ Dr V R Menon

Times which said that over 1.5 million unauthorized accounts were created by the sales executives of Wells Fargo with fraudulent signatures of customers.

NASA was going through a difficult time with public and political pressure weighing on it. They were

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

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

actions.

guru was the Chairman of Ford. He asked his team to

The Challenger Tragedy

make a 2,000$, 2000 lb car in 25 months because

Most of you would have heard of the horrific tragedy of NASA space shuttle Challenger. At that time,

Japanese small cars were selling well in the market and Ford wanted to give a stiff competition to them.

Morton Thiokol was a consultant to NASA. A day before

Ford Engineers worked hard and efficiently and

the launch, he suggested to NASA not to do the launch

they produced the car in record time, not costing more

because he feared there was a faulty component which

than 2000$, but during that process, they ignored some

could cause problems.

of those very safety aspects which would have prevented accidents. One of them was a safety

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mechanism that would have cost just 11$ but then it



In simple language, they were ethically blind. This shows how

would have crossed the red line of 2000$.

the stretch targets can cause a

Terrible accidents started to happen and people in

lot of unethical behavior

the car were burnt to death when an accident

unintentionally.

happened. The management had to take a decision

~ Dr V R Menon

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.

there was little moral evaluation.

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.

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

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.

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.

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

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

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

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

In such a culture, the consequences do not come into your mind. Cognitive

Toxic Organizational Culture When the organizational culture is only based on

disengagement happens. This can also cause ethical blindness.

the bottom-line mentality—increased profit at whatever cost without looking at the sustainability of the society,

These issues are very relevant

what will happen? The toxic organization's culture and

to all organizations.

the pressures of the organization will make banal even

~ Dr V R Menon

evil things. 'Banality of evil' is a famous phrase used by the philosopher Hannah Arendt, talking about very

and they believed that they were applying electricity.

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.

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

This is especially true for us in Indian conditions.

government authority to get an approval. If I say, "Go

We respect individuals, elders and teachers. We touch

and bribe," immediately the moral emotions like shame

their feet and therefore there is an innate process which

and regret come up and these are stumbling blocks for

makes us obedient to authority and that can cause

our unethical behavior. When we convert them as good

unethical behaviours.

words and say, "Go and give a gift to that person," we suppress those moral emotions and get affected by

The Poison of Power

'Bounded Ethicality.'

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 14day 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.

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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

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In‐group bias, implicit prejudice,

him something unviable. He rationalises his action and

conflict of interest and over

becomes immune to his unethicality.

claiming credit are examples of implicit biases. These are deep‐ rooted.

Some of the Possible Remedies: • Shape the environment with transparency, salience and openness.

~ Dr V R Menon

• Rely more on data and less on intuition.

• Make your ethical stand know to others.

• Remain vigilant to implicit biases.

violations. Our mind does not have the capability to

• Take ‘joint decisions’ and have a devil’s

understand that incremental increase and then we fall into the depth of unethicality.

advocate.

• Follow the Publicity Test of Ethics

Ethical Practices: Indian Oil Way

Implicit Biases In-group bias, implicit prejudice, conflict of interest

In India Oil, we have a full-fledged vigilance

and over claiming credit are examples of implicit

department and ethics codes. Our vigilance department

biases. These are deep-rooted. For example, when we

is represented at the board level. We have strong

have in-group bias, we tend to unconsciously favour

foundations, yet we are moving beyond all those things.

people from our group and disfavour people from outgroup. These biases cloud our objectivity and cause ethical blindness.

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

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

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.

others to blame for our unethical actions) and

We have a mix of officers and staff who meet

distorting consequences (we tend to believe that we

regularly and whose primary function is to understand

caused good, though we caused harm and selectively

if there are any ethical infractions happening here. If

remembering the good things) are all examples of moral

so, what actions can be taken? They discuss and

disengagement. For example, I give a stressed target to

suggest. They also plan and take part in many socially

my subordinate and an impossible time frame. He

responsible projects, promote volunteerism like blood

understands that it is neither impractical nor viable. So

donation camps or tree plantation projects, or

he either manipulates the data to show a good

collecting clothes and giving to the needy in the society.

performance, or achieves the target using unfair means.

Because of these positive actions, people’s energy will

He would still think it is not his fault as his boss gave

be diverted and used for a positive purpose. It improves

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Ms Sarada Jagan

We changed our Vision

MD (HR & Corporate Services), The Sanmar Group

Statement to read what it is

O

today. In short, it is: Where integrity meets excellence. ~ Ms Sarada Jagan

ur 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

the ethical climate of the organization. Another is the

understand what ethics means to them.

Ethics Training. Our unit conducts training within Tamil

We changed our Vision Statement to read what it

Nadu. We have trained all executives in business ethics,

is today. In short, it is: Where integrity meets

including ethical blindness. We have trained all staff

excellence. We don't want to do business any other way.

members for ethics and social responsibility. They

We want to do it with integrity. The Ethics Manual

create a solid foundation on which we can build on.

addresses our Vision and our guiding principles or the

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.

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

Increase Salience

typical dilemmas that we face in business situations

We also wanted to increase the Salience of Ethics

and ask our employees to choose the option that is

in the organization. We have frequent ethics broadcasts

appropriate for Sanmar group and understand why

so that they reach all the employees. We have also fixed

Sanmar wants them to do it that way. New employees

posters

social

on their first day in our company undergo a quick

responsibility, the importance of sustainability and

session on Ethics. At the end of the session, a

about ethics. The purpose is to increase the salience.

declaration is signed by them that they have

in

all

operational

units

about

• 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.

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. 

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