NegotiationGSCM 506-01

10 October 2012

Ethics in Negotiations

Chapter 9

What Do We Mean by Ethics and Why Do They Matter in Negotiations?

Ethics:

• Are broadly applied social standards for what is right or wrong in a particular situation, or a process for setting those standards

• Grow out of particular philosophies which– Define the nature of the world in which we live

– Prescribe rules for living together

• Result of global legal requirements or guidelines

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Four Approaches to Ethical Reasoning• End-result ethics

– The rightness of an action is determined by evaluating its consequences

• Duty ethics– The rightness of an action is determined by one’s

obligation to adhere to consistent principles, laws and social standards that define what is right and wrong

• Social contract ethics– The rightness of an action is based on the customs and

norms of a particular society or community• Personal ethics

– The rightness of the action is based on one’s own conscience and moral standards

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Examples of Ethical Conduct that Arise in Negotiation

• Using ethically ambiguous tactics: It’s (mostly) all about the truth

• Deception by omission versus commission– Omission – failing to disclose information that

would benefit the other– Commission – actually lying about the common-

value issue

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Rationalizations for Unethical Conduct • The tactic was unavoidable

• The tactic was harmless

• The tactic will help to avoid negative consequences

• The tactic will produce good consequences

• “They had it coming,” or “They deserve it,”

• “They were going to do it anyway, so I’ll do it first”

• “They started it”

• The tactic is fair or appropriate to the situation5

How Can Negotiators Deal With the Other Party’s Use of Deception?

• Ask probing questions

• Phrase questions in different ways

• Test the other party

• “Call” the tactic

• Ignore the tactic

• Discuss what you see and offer to help the other party change to more honest behaviors

• Respond in kind6

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Ethical Standards to Follow in Negotiations

1. Ethical Perceptions

2. Responsibilities to the Employer

3. Conflict of Interest

4. Gratuities

5. Confidential Information

6. Treatment of Suppliers

7. Reciprocity

8. Governing Laws

9. Small, Disadvantaged, and Minority Owned Businesses

10.Personal Purchases for Employees

11.Responsibilities to the Profession

12.Global Supply Management

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Key Ethic Negotiation Considerations

International Considerations and Law Applications

• Country Laws could apply (e.g., Supplier’s Country)– Restraint of Trade laws– Trade Compliance laws/regulations

• United Nation’s Convention on Contracts (UCC)

• Contracts for the International Sale of Goods (CISG)

• Foreign Corrupt Practices Act (FCPA)

– Anti-bribery Issues

– Record Keeping Requirements

– Penalty Provisions

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Restraint of Trade Laws Must Be Avoided

Robinson-Patman Act

• Designed to prevent price discrimination that reduces competition in interstate commerce

Act prevents a supplier from offering the same quantity of a specific material to competing buyers at different prices, unless:

• One buyer is offered a lower price because his or her purchases entail lower manufacturing or distribution costs for the supplier

• One buyer is offered a lower price in order to meet the legitimate bid of a competing supplier

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Key International Considerations

United Nations’ Convention on Contracts for the International Sale of Goods (CISG)

• Ensure there are no unethical conditions attached to the sale of goods

• Stipulate in the purchase order or contract which body of law is acceptable to both buyer and the seller

• Stipulate a mutually acceptable “choice of forum” at which any lawsuit will be heard

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Key International Considerations

Foreign Corrupt Practices Act•Anti-bribery issues•Record keeping requirements•Penalty provisions

Amendment to the Securities Exchange Act of 1934

Objective was to curtail U.S. corporate involvement in foreign commercial bribery activities

Enhance the image of the United States

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Ethical Four Way Test

Is it the TRUTH?

Is it FAIR to all concerned?

Will it build GOODWILL?

Will it be BENEFICIAL to all concerned?

Most Importantly: What Will People Think if Your Actions Show

Up in the Washington Post or Wall Street Journal?

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1. Ethical Perceptions & 2. Responsibilities

1. Avoid the intent and appearance of unethical or compromising practice in relationships, actions, and communications

2. Demonstrate loyalty to the employer by diligently following the lawful instructions of the employer, using reasonable care and only the authority granted by the employer

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3. Conflict of Interest & 4. Gratuities

3. Refrain from any private business or professional activity that would create a conflict between personal interests and the interests of the employer

4. Refrain from soliciting or accepting money, loans, credits, or prejudicial discounts, and the acceptance of gifts, entertainment, favors, or services from present or potential suppliers that might influence, or appear to influence, supply management decisions

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5. Confidential Information & 6. Treatment of Suppliers & 7. Reciprocity

5. Handle confidential or proprietary information belonging to employers or suppliers with due care and proper consideration of ethical and legal ramifications and governmental regulations

6. Promote positive supplier relationships through courtesy and impartiality in all phases of the supply management cycle

7. Refrain from reciprocal agreements that restrain competition

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8. Governing Laws & 9. Small, Disadvantaged, and Minority Owned Businesses

8. Know and obey the letter and spirit of laws governing the supply management function, and remain alert to the legal ramifications of supply management decisions

9. Encourage all segments of society to participate by providing access for small, disadvantaged, and minority-owned businesses

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10. Personal Purchases for Employees & 11. Responsibilities to the Profession

10.Discourage supply management’s involvement in employer-sponsored programs of personal purchases that are not business related

11.Enhance the proficiency and stature of the supply management profession by acquiring and maintaining current technical knowledge and the highest standards of ethical behavior

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12. Global Supply Management

12. Conduct international supply management in accordance with:

• the laws, customs, and practices of foreign countries,

• consistent with your country’s laws,

• your organization’s policies,

• and these Ethical Standards and Guidelines