Are bad ethical choices deliberate or Accidental?

Perhaps not so simple.

Ethical decision making is an old an ongoing problem for leadership. This problem often presents in terms of moral choices forming complex decision-making scenarios that result in leadership failure. When ethics are viewed in through the moral lens, hindsight often appears clear but during the decision-making process this clarity often muddles in lack of information or understanding. Within this framework, ethical decision making appears purposeful but in reality the differences between deliberate and accidental ethical choices should be clarified to avoid future unethical decision-making and increase leadership success.

Deliberate Unethical Decision Making

Deliberate unethical decision making occurs when leadership purposely makes unethical decisions. This situation is denoted by having knowledge of their actions and the consequences of those actions. Perhaps the most well-known and unethical leadership decision making occurred at WorldCom between 1998 and 2002 when the CEO, Bernie Ebbers, fraudulently borrowed $366 million against the value of the company stock to cover losses on stock (Ndekugri & Twum-Danso, 2019). Ebbers also took loans from WorldCom for the purpose of funding personal investments which included a “$100 million for a ranch in Canada, $658 million in Mississippi timberlands, and a $14 million Georgia shipyard” (Ndekugri & Twum-Danso, 2019). Ebbers accomplished this fraud by misleading investors with fraudulent accounting practices altering public statements concerning the company finances (Moberg, 2003). When the financial house of cards came apart, the WorldCom bankruptcy would prove to be the largest in American history (Ndekugri & Twum-Danso, 2019).

Ultimately, what led to the decision of Ebbers and other leaders as well as the accountants to commit fraud, was found to be simple greed and an unwillingness to admit failure:

WorldCom company performance was on the decline however, management insisted it was doing great; this was due to the fact that the company had also used general accrual account to accumulate excess accruals that could later be used to offset expenses for the benefit of the company (Ndekugri & Twum-Danso, 2019).

At the heart of this decision making resided a corporate culture ripe for corruption as management followed leadership with what is known as bottom line thinking (Asif, Qing, Hwang, & Shi, 2019). Bottom line thinking occurs when leadership places profit above all other considerations including ethics. This thinking has a top-down effect in which company culture and behavior are driven without regard for fiduciary responsibility.

This deliberate decision-making has a long history as many leaders have acted unethically in the name of profits. Another case that went far beyond financial losses occurred in the 1970s when the Ford Motor Company decided to continue producing the Ford Pinto despite being aware of a design flaw that would cause the vehicle to explode in certain accident situations (Strother, 2018). Ford performed a cost benefit analysis which determined that the cost of recall and possible litigation were outweighed by profit (Strother, 2018).

While the decision to recall vehicles in the face of human casualties appears obvious, research has shown that this decision making is not as clear as it appears. In an experiment where business students were presented with the same choices that Ford executives faced concerning the Pinto, “56.8% of students chose to pay for the deaths” (Strother, 2018). The reason this decision making occurred is due to a silo effect within organizations in which ethics become confined to small groups of leaders or even a single leader without input. As a result of this ethical silo, leaders make decisions based on limited understanding or with limited focus on the results of the ethical issue (Asif, Qing, Hwang, & Shi, 2019). While this does not excuse the actions of Ford it does explain how reputable companies can veer into unethical decision-making.

Accidental Unethical Decision Making

Well-meaning companies are not exempt from unethical decision-making and attempts to maintain ethics sometimes backfire. Starbucks has a long history of commitment to social justice issues and ethical marketing practices yet found itself making unethical decisions when the company tried to protect its brand. While Starbucks is known for paying higher prices to be a responsible purchaser of coffee, buying from local and small companies in many developing countries such as Ethiopia, the company also must protect its brand and competitive advantage. When Ethiopia desired to trademark brands of coffee in order to increase coffee sales by millions of dollars, Starbucks fought this decision (Crane, 2006).

Starbucks used legal and financial strength to block trademarking efforts in order to maintain prices for coffee in Ethiopia. For example, Sumatra Coffee purchased at Starbucks is not trademarked by Sumatra coffee growers and has no patent or trademark protection globally. Starbucks claimed its actions protected the ethical supply chain but Oxfam claimed Starbucks needing to do more to help these poor countries protect their assets in the global market (Crane, 2006).

Giving Starbucks the benefit of the doubt, the company likely engaged in what many consider unethical behavior accidentally due to the company protecting its business. Had Starbucks not fought the trademarking, the company might well have lost its control over the ethical supply chain already in place, a dilemma for sure. What is not arguable is the fact that Starbucks maintains price control over coffee grown in Ethiopia and Ethiopia growers have no control over their product beyond selling it to Starbucks, raising the ethics quandary.

Learning from Unethical Behavior

Both deliberate and accidental unethical decision making provide learning points for leadership. In cases such as WorldCom, loopholes in the law allowed for some of the unethical decision-making to flourish. Prior to the Sarbanes/Oxley Act accounting practices were not enforced by both legal and legal practices such as taking responsibility for corporate fraud (Ndekugri & Twum-Danso, 2019). Today, CEOs and accountants are legally responsible for signing off on corporate statements and reports and can be held criminally accountable.

More than just legal measures, ethical leadership decision making also finds root in developing firm values that built into the company operations and mission. WorldCom might never have occurred if the operations of the company were designed with ethical decision making in mind. This ultimately avoids bottom-line thinking because it places ethics above profit (Ndekugri & Twum-Danso, 2019).

Likewise, Ford’s silo ethical decision making might never have occurred if leadership is designed in a manner that it has a shared ethical approach. In a metanalysis of ethical leadership it was found that:

Supportive behaviors of ethical leaders, such as openness to input from employees and willingness to provide resources for employees, may enhance employee engagement [29] which ultimately leads to employee creativity [21]. These positive exchanges between ethical leaders and employees provide the employees with opportunities to develop expertise, cognitive thinking, and motivation to participate creatively within in the ethical parameters (Crane, 2006).

This shared ethics within organizations may also positively impact accidental unethical decision-making by creating a more transparent environment. In the case of Starbucks, one part of the company leadership appears disconnected from the ethics as it acts in manner that is designed solely to protect profit. In a shared ethical approach to leadership, this problem would be less likely to occur because the leaderships ethics would be connected harmoniously throughout the company (Asif, Qing, Hwang, & Shi, 2019).

While ethical decision-making may appear simple and even deliberate in hindsight, this view lacks critical understanding of the forces that empower leaders to make unethical decisions. Most notably, the view of ethics as a top-down system may need to be reassessed. Entrusting small groups of leaders or a single leader with the ethical development of an organization may need to be rethought in a shared organizational responsibility.

References

Asif, M., Qing, M., Hwang, J., & Shi, H. (2019). Ethical Leadership, Affective Commitment, Work Engagement, and Creativity: Testing a Multiple Mediation Approach. Sustainability, 11(16), 4489.

Crane, M. (2006, November 28). When is being good not good enough? Retrieved from Forbes: http://www.forbes.com/2006/11/28/leadership-starbucks-charity-lead-citizen- cx_mc_1128companies.html

Ndekugri, A., & Twum-Danso, E. (2019). Curbing Corporate Scandals for Global Business Success. Journal of Finance, Accounting and Management, 10(1), 1–8.

Strother, S. (2018). When Making Money is More Important Than Saving Lives: Revisiting the Ford Pinto Case. Journal of International & Interdisciplinary Business Research, 5(11), 166–181.

Photo by Smartworks Coworking on Unsplash

Article Updated: 11/4/2021