Free Business Essays - The Ethics Of Business Bluffing
In his essay, Is Business Bluffing Ethical? Albert Carr contends that business, like poker, warrants a certain amount of bluffing. He holds that business is a game, and so long as all those playing are doing so with an understanding of the rules of the game, personal ethics do not necessarily apply in the same way they would in a businessperson's personal life (Carr 1968). To consider his argument, one must first come to working definitions of . Carr sees bluffing as distinguishable from lying in two important ways. First, it is done in such a way or situation that the whole truth is not expected (Carr 1968). For example, if one asks a car salesperson, What is the best price you can offer on this car? most would not expect the price he or she quotes to be the real best price. Instead, the savvy car buyer takes it as a starting point for negotiation (Allhoff 2003). Second, bluffing usually involves withholding part of the truth about a matter, rather than stating falsehoods (Carr 1968). Bluffing can therefore be consider a game strategy employed by one or more persons who withhold, misrepresent, exaggerate, or in some way allow others to misinterpret the truth to enhance the strength of their position during negotiations (Car 1968, Allhoff 2003).
Business ethics is a bit more difficult to define. Chryssides and Kaler (1993) believe it is a by-product of the actions taken in a variety of ethical situations. While in part a system of normative behaviours agreed upon by the majority of those involved in business, business ethics may also be thought of as the spoken and unspoken guidelines of the business community that exist to assist those in the business world in resolving questions of conduct (Chryssides and Kaler 1993). In this paper, we will examine the ethics of bluffing and game strategy behaviour through an analysis of Carr's essay. Main points of this comparison will be related to well-known cases related to business ethics, with an integration of James Shad's statement regarding ethics in the business community and Freidman's theories regarding business and ethics.
Carr presents several main assertions that bluffing in the business arena should be viewed in a similar manner to bluffing in poker. First, it is an expected activity in the game of business. Carr considers business a game, and one in which bluffing is what any good game player does. He contends that since most seasoned business people will expect bluffing, and even use it as a strategy themselves, anyone who doesn't bluff is likely to lose (Carr 1968). However, Carr does not consider the dangers of people getting caught up in the game idea. If business is a game rather than the real world, then players can act in a way removed from the real-world results of their decisions. Wolfe (1990) contends that business students trained to view business from a game model viewed human beings as units or numerical symbols of some sort. Their moral sensitivities were attuned to winning (14). Such an attitude leads to unethical decisions, not those in the best interest of the business or community.
Carr also argues that since bluffing is expected, everyone (at least all experienced business people) is playing by the same rules. This supports bluffing if the same rules argument is valid. However, Carr does not present a clear picture of how the players in the business game acquire these spoken and unspoken rules of business (Carr 1968). In some passages, Carr seems to think that convention determines the rules, whereas in others he seems to think that the law delineates boundaries and all acts within those boundaries are permissible (Allhoff 2003, 284). Regardless of how rules are determined, there must be some endorsement of the rules by the participants. For example, if a shop owner tells a child to take a piece of candy and the child does, it is considered ethically correct. However, if the child the decided to take candy whenever he felt like it, without having the shop owner's permission, it would be shoplifting.
All parties must clearly understand the rules of the engagement (Wolfe 1990). This does not always occur in the business environment. An example of this would be some current labour negotiations. More and more non-professionals are becoming involved, which dilutes any shared understandings there may have been in the past (Provis 2000, 155). In other words, not everyone in the negotiations has the same understandings of the rules of the game. Because of this, an appearance of deceptive bluffing can often be explained as an exchange of genuine concessions while it still may be considered ethical to exploit the novice collective bargainers (Provis 2000, 145). Carr's assertion that everyone does or should understand the role of bluffing cannot be applied evenly throughout such a large and diverse business community as exists in our society.
Carr contends business is a game played to win. However, his analogy is weak at this point because business differs from other types of games. In most athletic games, for example, there is a winner and a loser, and participants know at the outset that one party will win and the others lose. Business, however, in its best practise, should be a win-win situation. There is no prior agreement, nor reason to assert that only one group should win in negotiations between management and labour (Koehn 1997). Instead it is hoped both will be pleased by the final result. More importantly, everyone knows the rules and agrees to them before beginning the game, and these rules stay fixed throughout play (Koehn 1997). This differs from Carr's description of rules and games in respect to bluffing.
Given business people's mandate to serve the interests of their company, there is pressure to bluff if it leads to a profitable result. Sometimes this leads them to act in one way on the job and another way in their personal lives. Carr considers this to be a normal part of the business world (Carr 1968). The rules of ethical behaviour in business differ from those in personal life, making something wrong at home not necessarily wrong at work (Allhoff 2003). It might be considered shrewd business tactics to tell two suppliers that they can both have one's account, for instance, but would be considered cruel to tell both one's children they can go on a trip, if in reality only one can do so. Similarly, parents often tell their children to do unto others as they would have done to them, also known as the golden rule, yet will be rewarded for taking advantage of a situation that presents at work (Carson 2005).
Carr contends businesses have the right to operate in their own best interests, provided they are not violating any laws. There is a distinct difference, however, between legal and ethical. Slavery, exploitation of child labour, discrimination, and any number of other unethical behaviours have been legal at one time. This does not make them morally right (Allhoff 2003). In addition, some of the examples of legal bluffing presented by Carr are, in fact, illegal. For example, his description of a produce manager passing off bad tomatoes in packs of good ones is illegal, violating the Uniform Commercial Code (Beach 1985).
Finally, Carr holds even ethical conduct in the world of business can usually be traced back to some self-profiting result. For example, Coop supermarkets advertise that they promote organic products and sustainability. Their Coop Naturalplan, they state, not only results in high-quality organic products for their customers, but also contributes to protection of the environment. In addition, Coop plans to donate 10 million Swiss Francs each year to support activities and projects focussing on sustainability (Coop 2004, 27). Carr would contend that this in some way benefits Coop, by providing them with product or brand differentiation from rival supermarkets, by giving them free positive advertising, and by developing good will in the community, which should in turn encourage more people to shop at and spend more at Coop.
On one hand, Carr makes a strong argument. On the other, however, there are considerations resulting from actual examples of ethical (or unethical) decisions in the marketplace. One of the most famous, or perhaps infamous, cases of business ethics was the Ford Pinto. The ultimate breach of ethical behaviour is to sell a product knowing it to be dangerous or to operate a plant in such a way as to threaten the lives of workers or the community (Anon 2003, 24). In this case, Ford bluffed to customers about the Pinto's safety. Ford rushed the pinto into production in 1971 to compete with foreign imports. In doing so, they did not discover that the gas tank could explode if the car was hit from behind until the tooling for the car was underway (Sherefkin 2003). Rather than slow production or spend on expensive retooling, they introduced the car as-is. Their decision was determined by cost-benefit analysis: the exploding tanks could be fixed at a cost of $11 per vehicle, or $137 million over the life of the Pinto. Estimated deaths and injuries from the gas tank would cost Ford $48 million (Anon 2003). The company sold Pintos to unsuspecting customers for eight years before the gas tank problem was brought forth by independent journalists. It is hard to consider ethical a course of argument that considers a human life worth less than an eleven-dollar repair.
James Shad would also disagree with Carr. A former head of the US Securities and Exchange Commission, he is quoted as saying, Ethics pays It's smart to be ethical (Chryssides and Kaler 1993, 27). In the Ford Pinto case, the ethical course of action would be to correct the gas tank, and it would have paid off for Ford. Ford was forced to settle numerous lawsuits as a result of the Pinto, one for $128 million dollars (Sherefkin 2003). Their cost-benefit analysis did not properly consider the value of human life, and ended up costing the company a lot of money in addition to damaging its reputation. To Carr's credit, what Ford did was negligent and therefore illegal; this is why they had to pay so much in damages to Pinto victims. Although he uses a few illegal examples, Carr separates legal but ethically questionable behaviour from illegal behaviour in his essay (Carr 1968).
Milton Friedman, the Nobel Prize winning economist, in general disagrees with Mr. Shad and supports Carr. While not advocating the kind of recklessness pursued by Ford in the Pinto situation, Freidman nonetheless contends that businesses have only one social responsibility and that is to increase their profits (Chryssides and Kaler 1993, 230). That is, a businessperson, when he or she takes on a job, agrees to be first responsible to the good of the company. The company's goal is to make profit. Therefore the businessperson is paid to contribute to that company profit. To not do so, in and of itself, would be unethical behaviour, since the person was hired explicitly for such contribution (Chryssides and Kaler 1993). For example, assume a businessman must pretend to support a social cause for which he has no interest whatsoever because it is important to a customer. The customer invites him to a fundraiser dinner, and talks about the cause on several occasion. The businessman bluffs by pretending to be interested in the cause, but really only plays along to secure the customer's continued business. Friedman and Carr would see this businessman as a wise game player, while Shad would want him to explain his beliefs in the hope the customer would respect his honesty.
For those supporting the businessman's behaviour, he is being ethically responsible to his company and the people it employs (Chryssides and Kaler 1993). Should he stop bluffing, he is likely to cost his company money, which could lead to layoffs and the company eventually going under. They would consider that the businessman acted in a way that preserved his personal beliefs about a cause but cost others their jobs and livelihood to be unethical, particularly considering he was hired to make profits for the company.
Another example would be laying off a person who had worked at the company for many years. This might cause difficulty for the worker, particularly if he or she is older and unlikely to find a similar position. However, the manager's first responsibility is to the company and its profitability. If the layoff would not cause harm within the company, such as negatively impact the motivation of other workers, the manager is ethically required to act in the best interest of the company and lay the worker off. In both these cases the ends justify the means, at least in the opinions of Carr and Friedman.
But how does this related to the Pinto decision? One can hardly argue that the ends justified the means in this situation. Wolfe (1990) contends that seeing business as a game leads directly to decisions such as the Pinto at Ford. In business, managers think and speak about winners, losers, offensive strategies, defensive postures, corporations gaining ground or losing ground, striking out or scoring or hitting it out of the park, and on and on (Wolfe 1990, 12). This game analogy is reinforced throughout the business degree program. Students are trained to understand the business environment by seeing humans as units and then assigning a number to the unit studied; the numbers are then accumulated and either assigned another symbol or directly plugged into some formula or model (Wolfe 1990, 12). Business people and students then play with the numbers to account for various possibilities of what may happen in the business environment. How much will 180 burn deaths cost us in earnings? If we wait to make design changes, we could save $137 million! Questions like these become simply components of a game, not life-and-death considerations related to real human beings. Indeed, human beings become units, which business people can move, trade off, capture, or even destroy (Wolfe 1990, 13). The strongest argument against Carr is that while business can be played, it is not a game, and thinking of it as such can lead to unethical and regrettable decisions.
I agree in part with Carr's analogy, and feel in many ways it must be considered in a case-by-case basis. While Wolfe has shown that it can certainly be dangerous to view business as a game, there are game aspects that caused such analogies to be made in the first place. I believe that the game analogy can be useful in situations involving monetary considerations, but should not be used in situations involving harm or death of human beings. For example, one situation used by both Carson (2005) and Allhoff (2003) in their discussions of bluffing is a person buying a house. If the seller wants at least $200,000 for the house and the buyer can pay up to $220,000, then some compromise must be reached regarding price. The buyer might offer $195,000, stating it is as high as they can go. This would be considered by most to be a reasonable and wise bluff. Who knows, the seller may take their offer. The seller, however, may counter with a limit of $210,000, but offer to paint the house as part of the deal. The house does need a paint job. Now the delineations of the game have been set. The home buyer can reasonably be expected to know the seller will go a bit less than $210,000, and the seller can be reasonably expected to know the buyer will pay more than $195,000. The best negotiator of the two is likely to win this game, and end up with a price closer to his or her original offer.
I believe that bluffing is ethical in this case. It is a negotiation tool, and will be viewed as such by both parties, because those buying or selling a house will either research how it is done and learn this or engage the services of a real estate agent who can and will inform them of how the process works. The chances of them not knowing how price negotiations work in this situation are remote (Carson 2005). Since it is a financial transaction and the goal of the business game is monetary, bluffing is ethical in this situation. There is not the chance of injury or death based on the decision.
However, if the possibility of harm to a person exists, bluffing is not an ethical manner to conduct business. One example in this situation would be the Ford Pinto case, placing a cost-benefit analysis on human life and suffering was completely inappropriate and unwarranted, and the company eventually paid for their error. Another example might be a prescription drug that helps a certain disease but has a rare but deadly side effect. The drug company has a responsibility to report this rare side effect, even if it will only affect a few people and may negatively impact sales. To do otherwise puts the company's customers at risk, and is unethical.
In conclusion, the concept of bluffing in business ethics is a complex issue with many offering different opinions about it and a variety of applications in real life situations. Some contend that bluffing is just part of the game of business (Carr 1968). For others, it is a moral responsibility of persons hired to contribute to company profits (Chryssides and Kaler 1993). Still others consider it morally questionable and advocate a departure from game analogy by the business community (Allhoff 2003). Regardless of opinions, however, bluffing will continue to be used in many business transactions, and the wise and ethical businessperson will do so only in situations where human lives are not at stake.
REFERENCES
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Anon 2003. Profits Before People. Canada & the World Backgrounder; vol. 68, issue 6, May 2003, pp. 24-28.
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Carr, A. 1968. Is Bluffing Ethical? Reprinted in An Introduction to Business Ethics, by George Chryssides and John H. Kaler. Chapman and Hall, London, 1993.
Carson, T. 2005. The Morality of Bluffing: A Reply to Allhoff. Journal of Business Ethics, Vol.56, Iss. 4; Feb 2005, pg. 399.
Chryssides, G. and Kaler, J. 1993. An Introduction to Business Ethics. Chapman and Hall, London, 1993.
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Koehn, D. 1997. Business and game-playing: The false analogy. Journal of Business Ethics, vol. 16, no. 12/13, Sep 1997, pp. 1447-1453.
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Sherefkin, R. 2003. Lee Iacocca's Pinto: A fiery failure; Exploding gas tanks killed and maimed hundreds and wrecked Ford's reputation. Automotive News, 15 June 2003.
Wolfe, A. 1990. The corporate apology. Business Horizons, vol. 33, no. 2, March-April 1990, pp. 10-15.
