Ethics & Sustainability Leadership The Nature of Ethical Judgement

1. Ethics & Sustainability LeadershipThe Nature of Ethical Judgement Marc Le Menestrel marc.lemenestrel@upf.edu

2. Menu of the session How to think about ethics? How to act in front of ethical issues? How to communicate about ethical issues?

3. Introductory discussion Why do we talk about ethics nowadays? Why in this program? Why would you like to talk about ethics?

4. Questions close to you Are you ethical? Is business ethical?

6. Select the white spheres… Some are still darker than others…

7. Thinking Ethics as a Grey Zone Looking at the bad side Looking at the good side 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 Purely ethical Purely unethical • 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, outsideour zone of comfort Marc Le Menestrel, UPF & INSEAD, for

9. 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)

11. 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 stakeholders How 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

14. Would you lie for a monetary gain? $ 1 000 Lying $ 1 Telling the truth According to economic rationality, you should lie whenever you have an interest to do so. According to idealism, you should never lie.

15. ? Should you pollute less? Continue Polluting Maintain profits Increase costs Pollute less 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?

16. ? Should a company respect the law? Violate the law $ - 100 000 (including the fine) $ - 150 000 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?

17. 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?

18. Should we say everything? Hide the danger of a product or of an activity Avoid regulation, Maintain a market growth Favor regulation Threaten a market growth Reveal risks associated with a product or an activity We often have an interest in hiding potential risks Indeed, sincerity in communication can be very costly… Where is the limit between confidentiality and transparency?

19. Will you avoid corruption? Paying a bribe Winning a contract Losing a contract Paying no bribe Is corruption a necessary evil… …of economic competition?

20. What about conflicts of interest ? (1) Against the interest of the company In your own interest Against your own interest In the interest of the company Why would you act in the interest of the company?

21. What about conflicts of interest ? (2) Against your own interest In the interest of the company Against the interest of the company In your own interest Reciprocally, could a company be motivated to act in the interest of its employees even when this is against its self-interest?

22. Ethical Dilemmas: tough choices Best interest of the actor Less ethical Worse interest of the actor 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

23. Priority to Interest: A Reactive Attitude Less Sustainable ??? Economic objectives More Sustainable • We act unethically because we think it is in our interest. • We resist admitting the ethical issue (denial) • We insist on our good faith (justification) • We discard the alternative and tend to blame others (externalization) • We face ethical risks. In the worst case, we lose on both ethics and interest Marc Le Menestrel, UPF & INSEAD, for

24. Priority to Ethics: A proactive Attitude Less Sustainable ??? Economic objectives ??? More Sustainable • We resist acting unethically because we want to respect our values • We acknowledge the ethical dimension (Awareness) • We anticipate the ethical risks (Prudence) • We imagine an opportunity (Vision) • We face economic risks. In the best case, we win on both ethics and interest Ethicsis an art of surprise!

25. How to Communicate (un)ethically? Ethical questions are value-loaded, emotional and can be biased towards the unethical side. Ethical denials and justifications may nurture negative emotions in others. Ethical answers which strongly ascertain the ethical side are not necessarily perceived credible. Ethical answers which demonstrate awareness and consciousness of the unethical side, as well as pro-activeness towards the ethical side may enhance sincerity and trust. Marc Le Menestrel, UPF & INSEAD, for

26. Practical Implications Know who you are and what are the values for which you want to stand up Work on your ethical blind spot and learn to face your dark side so that you can transcend yourself Do not relegate ethics as a peripheral issue outside your work but integrate it within your thinking model Make sure the organization knows its ethical risks by identifying the main dilemmas and their temptations Allocate time and effort in the development of alternatives that are non-threatening but can generate future opportunities Create communicational spaces where honest discussions about values can be held, and appropriate circles where the line can be drawn between business interest and ethical values.

27. 27 Joan Miro, 1968

28. First Discourse: Economic Rationality Ethical Values Less ethical More Ethical Better Self-Interest Worse Rational Irrational Some insist that self-interest should be the sole and unique criterion of rational choice

29. Second Discourse: Idealism Ethical Values Less ethical More Ethical Better Self-Interest Worse Irrational Rational Some insist that ethical values should be the sole and unique criterion of choice

30. Third Discourse: Corporate Social Responsibility Ethical Values Less ethical More Ethical Better Self-Interest Worse Rational Irrational Some insist that interest and ethics always combine

31. EthicalValues Lessethical MoreEthical Better Worse Opening to Ethical Rationality • From here, a reactive strategy often consists in: • Deny • Justify • Externalize • Such strategy raise ETHICAL RISKS Priority to interest Ideal • From here, a proactive strategy often consists in: • Acknowledge ethics • Anticipate risk • Imagine opportunities • Such strategy is open to IDEAL outcome! ? ? Priority to ethics Irrational 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! Marc Le Menestrel, UPF & INSEAD, for