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principledreasoning
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AtPricewaterhouseCoopers,weoftenusethislaundrystoryinourEthicsTraining
programs.OurU.S.participantsrespond40percentfornumberoneand40percentfor
numbertwo;theremainderarearrayedacrosstheotherpotentialanswers.Additional
anecdotalcommentsfromourU.S.sampleindicatethatapproximately4outof100
unambiguouslysaythatitisokaytoliebecausetheydontagreewiththedry
cleaningpolicy.
TakingaStandonEthicalBehavior
InastillrelevantHarvardBusinessReviewarticle(January1982),
CananOrganizationHaveaConscience?
KennethGoodpasterandJohnMatthewsmakeacompellingargumentthatanethical
organizationonlyexistswhenitisthecompanynorm.Theauthorspromotethe
responsibilityofpersons.
Essentially,peopleshouldbeheldresponsibleregardlessoftheethicaldilemma,
providedtheyunderstandtherules.Theauthorspointtothreeconsiderations:
Peoplemustbeheldaccountablefortheiractions.
Peoplecannotbeheldaccountableforrulesthatareunclear.
Peoplearebasicallytrustworthyunlessinfluencedbycircumstancesthatare
confusing.
Ourworkintheareaofmanagementcompetenciessupportstheauthors
assertionthatethicalbehaviordependsontherightcompanynorms.Oursupportingdata
isbasedon2,000
interviewswithCEOsandtheirdirectreports.Wefindthatexecutivescontinueto
identifyintegrityasanecessaryattributeforsuccess.Wealsofindthat:
Organizationsdonotwantpeopletobehaveunethicallyandtheyexpectemployees
nottotakeshortcuts.

 Throughthecommunicationoftheirmission,values,andcodeofconduct,
organizationsgoonrecordasremindingemployeesthathonestyisaconditionof
employment.
Organizationsbelievetheyhavearesponsibilitytoenforceethicsthroughethics
offices,employeeactions,andotherenforcementactivities.
Ethicalbehaviorhastoconsiderbothpersonalandorganizationalcorevalues.Tobe
successfulatthis,acompanyhastogrowoutofastrictlycompliancemindsetandinto
anethicsorvaluesframeofmind.Asolelycompliancemindsetcarriesmanypitfalls.For
onething,rulesandregulationsarealwayschanging,
socompanieshavetocontinuallykeeptheiremployeesinformedofthelatestversionof
therule.Thisis
expensive,timeconsuming,andahumanresourcedrain.Moreover,theruleapproach
fosterstwocorollaries.First,ifacompanydoesnthavearuletocovereverysituation,
someemployeeswillassumetheycanbehaveastheypleaseinprincipledreasoning
53
Perspectives
ISSUE22000
principledreasoning
PrincipledReasoning
ANAPPROACHTOENCOURAGINGETHICALBEHAVIOR
ThomasCaseyandVictorPompa
Therightethicalresponsetoanygivensituationisnotalwaystheobviousone.Norisit
necessarilythesameresponseforeachpersonmakingthedecision.Ethicalreasoningis
complex.Whilepeoplegenerallywanttodotherightthing,thatright
thingistheproductofculture,peerpressure,example,rules,exceptions,andmuchmore.
Consequently,inabusinesssetting,
companypolicyalonewillnotensurethatanemployeewillmaketherightdecision
everytime.However,rulesarebasedon
principles,sometimesmoralprinciples.Bytakingaprinciplesapproachtomoral
reasoning,afirmcanhelpcreatebehaviorthatismoreconsistentwithethicalpractice
thanrulesalone.
Considerthesetwostories:
Ina1996editionofaLatinAmericannewspaper,anarticledescribedafamilyvisitto
DisneyworldinFlorida.Inordertogototheheadofeachline,thefamilyputoneoftheir
perfectlyhealthychildrenina
wheelchair.Thenewspaperarticleaskeditsreaders:Wasthisterrible?Or,wasthis
smart?
Thefeedbackreceivedbythepaperwasfairlyevenlydivided.FormanyoftheLatin
Americanreaders,
thisbehaviorwasacceptablebecausethereissomuchtoseeatDisneyworldandthelines
areverylong.

Youareonanairplaneflyingtoaveryimportantmeetingwithaprospectivecustomer
thenextday.Asyouarebeingserveddinner,theplanefliesthroughsometurbulence
andyouspillcoffeeontheonlysuityouhavewithyou.Thehotelwhereyouarestaying
canprovideovernightdrycleaningservice,
sotheresnoproblemfixingthestain.However,yourcompanyspolicyistonot
reimbursefordrycleaningexpenseswhileonbusinesstrips.Becausethisisclearlya
situationwhereyoureincurringdrycleaningexpensesforbusinessrelatedreasons,you
thinkthattheexpenseshouldbereimbursable.
Takeamomentandputyourselfinthissituation.Wouldyou:
1.Notseekreimbursementforthedrycleaningcharges.
2.Documenttheincidentandthechargesandincludeareceipt.
3.Chargetolaundryandincludeareceipt.
4.Chargetomiscellaneousexpensesandincludeareceipt.
5.Chargetomealsanddonotincludeareceiptorincludeafakereceipt.
2000ISSUE2
Perspectives
52
bronzesculpturebarbarabalik
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Themanwasveryawareofwherethecameraswerepositionedandrealizedhecouldput
thebriefcaseintohiscartandtakeitfromthebankattheendofhisshift.Instead,the
cleaningmansoughtouthissupervisorandtogethertheycalledthebankpresidentonhis
cellularphonetolethimknowoftheincident.Theresidentreturnedtothebank,
identifiedthebusinessman,andreturnedthemoneytohim.(Pleasekeepinmindthat
$10,000wasalotofmoneytoboththecleaningmanandhissupervisor.)
OnMondaymorningthePresidentcalledanallhandsmeetingatthebank,
communicatedthestory,andgaveeachofthemen$10,000.
Dramaticincidentslikethisonearepowerful.However,whataboutthemundanedayto
dayexpectationsthatorganizationshaveoftheiremployees?
AnEthicalReasoningTool
Ifyouthinkaboutit,eachofushasanethicsdecisiontoolinhisorherhead.Usually
wehavemorethanone.Butwearerarelyconsistentinapplyingourowncriteria.People
oftenjumpfromonetooltothenextasneededsothatethicssupportstheoutcomethey
needbringingtomindtheearlierstoryaboutthefamilyandthewheelchair.Itsnot
surprisingthatthenewspaperreadersweresplitonwhetherthefamilysdecisionwas
terribleorsmart.Inthatcontext,onthatday,thedecisionwasrightforthatfamily,
giventhefamilysculturalnormsandpeerexpectations.Inabusinesssetting,an
individualisworkingwithinhisorherpersonalframeworkaswellasthefirms.Itseven
moredifficultwhenindividualsworktogetherasagrouptoreachanagreementon
whatsethical.Theindividualsinthegroupalmostalwaysstartfrom

differentplaces,relyingondifferentpersonaldecisiontools.Attimes,theymayfindthe
processsofrustratingthattheypretendtoagreeontherightthingandthengoofftodo
theirownthing.principledreasoningthoseareaswhererulesdontexist(evenifthe
behaviorisunsavory).Second,iftheruleisntenforcedandtheresnoworryabout
gettingcaught,thensomepeoplewillbreaktherulebecausemanypeoplefollowrules
onlytoavoidpunishment.Sinceweallknowthatmostrulesareunderenforced,it
sonlyamatteroftimebeforeemployeesbreakimportantrules.Someoftheselapses
couldcauseembarrassmentforthefirm,orworse.
Granted,financialfirmsareboundbyrulesandregulationsinmanypartsoftheir
business,forexample,SECregulationsandfederalandstatelaws.Thereisnoroomfor
discretionintheseareas.However,therearemanyotherareasofbusinesspracticewhere
employeesdohavediscretiontoactforthegoodoftheircustomersandother
stakeholders.Asemployeesgoabouttheireverydaywork,theywillhavetomake
decisionswheretherearenorulesandwheretherightdecisionisntobvious.Smart
firmstrytodemonstratethatrulesarebasedonprinciples.Inaconfusingsituation,these
principlescanhelpevaluatethegoverningrulesanddetermineacourseofaction.
Becausethisisahigherlevelofmoralreasoningthanonebasedsolelyonrules,itcan
createbehaviorthatismoreconsistentwithgoodethicalpractice.Ifafirmwantsto
moveinthisdirection,ithastomodel,encourage,andrewardethicalthinking,rather
thanblindcompliancewithrules.Inourdrycleaningstory,forexample,thefirstchoice
usuallyrepresentsstraightforwardcompliancewithrules.Thesecondchoiceto
documenttheincidentandsubmitareceiptisanexampleofprincipledreasoning.
Thethirdandfourthchoicesareambiguous.Ontheethicalside,thetravelerisproviding
areceiptandnottryingtodisguisetheexpense.Theaccountingdepartmentwillknow
whattheexpenseis.Onthequestionableside,thetravelerisnotexplainingthesituation,
whichwouldjustifythedeviationfrompolicy.Sothetravelermaybehopingthatthe
xpensewillbereimbursedbecausenobodynoticesitasanexception.Thefifthchoiceis
lyingandplainlydishonest.Itdemonstratesalackofintegrity.Ifthefirmacceptsonly
thefirstchoice,itisdemonstratingitsownlimitedmoralreasoning.Incontrast,afirm
thatisbuildingatrulyethicalculturewilltendtowardprincipledreasoningandpayfor
thesuittobecleanedeventhoughitmaydisturbthefirmsaccountants.
ASouthAmericanbankerencounteredaninterestingsituationandusedittopromotehis
companyscorevalueofethicalbehavior:
OnaFridayeveningjustbeforeclosing,abusinessmanenteredthesafedepositroomina
bankandtransferred$10,000toasmallbriefcase.Hewasdistractedandleftthebriefcase
onthefloorwhenhelefttheroom.Thenextpersonintotheroomwasacleaningman
whofoundthebriefcase.
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PuttingItAllTogether
Ethicaldecisionmakingiscomplex.Whilepeoplegenerallywanttodothe
rightthing,awiderangeoffactorsinfluencesthem.Culture.Peerpressure.Rules.
Regulations.Fear.Policies.Whathasgonebefore.Andmuch,muchmore.Consequently,

itisimpossibleforacompanytoprescribewhatdecisionanemployeeshouldmakein
everysituation.Moreover,acompanycannotassumethatemployeeswillmaketheright
ethicalchoiceseverytime,sincesituationswillarisethatchallengetheirpersonalvalue
systems.Thus,toreinforceethicalbehavior,companiesneedtocreateabroaderfirm
widecontextforethicalbehavior,acontextthatisbasedonprincipledreasoninganda
solidunderstandingoftherules.Thoughyoucannotlegislateethicalbehavior,youcan
definehowtothinkaboutanygivensituationaspartofanethicalframework.The
diagrambelowillustratessomeofthestepswehavediscussedforconsideringa
perceivedethicaldilemma.Todeterminethemostappropriatecourseofaction,
anemployeewillfindithelpfultokeepinmindthatthedecisionwillimpactnotonlyhis
orherfutureflexibility,butalsothatofotheremployees,thecustomers,andthecompany
asawhole.Withoutethicalbehavior,theentirefirmiscompromised.