Economic Development Ethics Training International Economic Development Council Washington, DC PRESENTERS: DR. JAMES SCHMIDTKE ASSOCIATE PROFESSOR OF MANAGEMENT CALIFORNIA STATE UNIVERSITY FRESNO JANET COE, CECD ECONOMIC DEVELOPMENT MANAGER CITY OF ANAHEIM IEDC Training Session – Increasing discussion of ethics – Tools for making ethical decisions – The IEDC Code of Ethics – Case studies Ethics Dr. James M. Schmidtke California State University Fresno Ethical Models • • • • Utilitarian Kantian Justice Theory Integrative Social Contracts Theory Principles of Values Based Reasoning Utilitarianism Right action must maximize overall good, or good from the standpoint of the entire human community Kantian Deontology One ought to treat others as having intrinsic value in themselves. One ought only to act such that the principle of one’s act could become a universal law of human action. • Universality • Reversibility Justice Model • How equitably are the costs and benefits of actions distributed? – Costs and benefits should be equitably distributed – Rules should be impartially applied – Those damaged because of inequity or discrimination should be compensated • Distributive justice – Equitable distribution is based on performance Justice Model • Procedural justice – Ensure that people affected by managerial decisions consent to the decision-making process – Ensure that the process is administered impartially • Compensatory justice – If distributive and procedural justice fail, those hurt by inequitable distribution of rewards are compensated Integrated Social Contracts Hypernorms Consistent Norms Moral Free Space Illegitimate Norms Fundamental Paradigms of Right vs. Right Decisions • Truth versus Loyalty • Individual versus Community • Short-term versus Long-term • Justice versus Mercy 11 Trolley Problem A runaway trolley is hurtling down the tracks toward five people who will be killed if it proceeds on its present course. You can save these five people by diverting the trolley onto a different set of tracks, one that has only one person on it, but if you do this that person will be killed. Is it morally permissible to turn the trolley and thus prevent five deaths at the cost of one? A runaway trolley is hurtling down the tracks toward five people who will be killed if it proceeds on its present course. You are standing next to a large man on a footbridge spanning the tracks. The only way to save the five people is to push this man off the footbridge and into the path of the trolley. Is that morally permissible? YES 62% YES 13% NO 38% NO 87% Ethical Traps: Why Good People Make Bad Decisions • False Consensus Effect – Social forecasting • Unconscious Bias – Implicit Association Test • Incrementalism – Slippery slope of unethical acts • Incentives – Unintended Consequences 13 Responses to Ethical Dilemmas: Example 1 You are in charge of testing a new software package that your company has recently developed. It will be launched in a week, which means you will need to set up round-the-clock testing before then. You have to assign people to two teams – one daytime shift and one graveyard shift. You decide to let your married employees off of the graveyard shift because many of them have kids. Q: This undoubtedly shows your sensitivity, but is it ethical? NO (%) DEPENDS (%) YES (%) Responses to Ethical Dilemmas: Example 2 You notice one of your best employees taking printer paper, highlighters, and post-it notes home in her laptop bag. This employee has worked at the firm for many years, but there is a rule against this and clear procedures for providing employees with supplies if they choose to work at home. According to company policy, you are required to fire this employee on the spot. You decide not to fire her. Q: Is your decision ethical? NO (%) DEPENDS (% ) (%) YES Responses to Ethical Dilemmas: Example 3 Your department has been going through some tough times, but your boss has been working on a new project that she believes will help turn things around. Others in the firm are dubious of this project (including you), but your boss has already made a decision to go ahead with it. In the meantime, she asks you to tell others that no decision has been made. You feel a bit awkward about this because you may have to lie to other people in the firm. You decide to follow your boss’s orders. Q: Is your behavior ethical? NO DEPENDS (%) (% ) YES (%) Breaking it Down by Responses Shifts % of Resp Supplies Est. % Yes Yes Depends Depends No No Lie Yes Depends No % of Resp Est. % % of Resp Est. % Evidence of False Consensus 100 80 Actual 60 Estimated Percentage of Others (Average) 40 20 0 Shifts Supplies White Lie False Consensus What does false consensus mean? - Assuming that everybody else has a similar point of view How about social projection? - Assuming (when convenient) that others are similar to you and so would behave like you in similar circumstances Most of us are unaware that this bias exists. Some argue that false consensus is more responsible for “unethical” decision making than any other factor. They result in poor ‘models of the world’ SUPPOSE YOU CONSIDER DOING X TO BE LEGITIMATE a) False consensus induces a belief that others consider doing x to be legitimate b) Social projection induces a belief that if you choose to do x then others would also choose x in the same circumstances c) Therefore likely to choose x BUT IF (a) OR (b) IS FALSE, YOU ARE IN TROUBLE! Unconscious Biases • Implicit Attitude Test measures implicit association of pairing (e.g., White Good, Black & Bad; Fair & Nice; Dark & Nasty, etc.,) • Measures Implicit Bias Most individuals have implicit associations which leads to unconscious prejudice. Source: Banaji et. al. Incrementalism: Milgram’s Shock Experiment E – Experimenter S – Teacher (Subject) A – Learner (Confederate) Perpetuating Incrementally Bad Behavior • Start with one minor infraction – Justified on the basis that it is minor. • A more serious one seems less serious now that the minor infraction has occurred. – Contrast effect + the rule of consistency (if I have done it, it must not be so bad). • Slippery slope to un-ethicality – Boiling Frog Syndrome – Change Blindness • Inability to detect changes in environment • Gradual erosion of others’ ethicality Source: Gino & Bazerman, 2009 Two Important but Often Ignored Maxims • Principiis obsta: Resist the beginnings – Think carefully about what appear to be small transgressions from the norm • Finem respice: Consider the ends – Think carefully about where a small deviation today might lead you tomorrow How to Improve Ethical Decisions • Establish organizational values • Integrate them and provide support systems • Communicate them with organizational members • Connect them with policies and decision making How to Improve Ethical Decisions • Discuss underlying ethical principles • Clarify ethical behavior • Discuss legal issues • Focus on practical applications Need to Balance • Conflicting stakeholder issues – – – – Public Private Social Nonprofit • Issues – Privacy – Access to data – Confidentiality Decision Making Checklist • Need to gather information • Need to consider multiple perspectives (different ethical models) • Consider consequences • Seek input • Draw your conclusions • Take Action Take Away: Ethics Leadership is the ability to make tough choices Recruiters major complaint about college graduates is their “inability to make tough choices”, to “take a stand and offer an articulate and coherent” justification for their choices. Your competitive advantage is “intellectual depth”. Proposes a framework for making tradeoffs Utilitarian, Kantian, Justice, Integrated Social Contracts Identifying if there is an underlying conflict in core value propositions helps Justice vs. Mercy Truth vs. Loyalty Individual vs. Community Short-term vs. Long-term Take Away: Ethics Watch out for common ethical traps that drive our behavior in the wrong direction False Consensus Implicit Biases Incrementalism – Slippery slope of ethicality Understand company policies and procedures Establish personal code of conduct PROMOTING AN ETHICAL CULTURE Three Components 1. Formal Code of Conduct – IEDC Code of Ethics can be a model 2. Education and training 3. Consequences IEDC CODE OF ETHICS IEDC Code of Ethics 1. Act to bring respect to the profession. IEDC Code of Ethics 2. Display integrity and honesty both in fact and in appearance. Authority Who is accountable for what? INTEGRITY Purpose Principles What is my intent? What I stand for? IEDC Code of Ethics 3. Maintain objectivity. Conducting Official Duties with Bipartisanship Conflict of Interest IEDC Code of Ethics 4. Represent the community. Private Public Non-Profit Community Interest Social IEDC Code of Ethics 5. Keep stakeholders informed. IEDC Code of Ethics 6. Maintain confidentiality. Try to Find the Most Effective Balance Reporting Requirements IEDC Code of Ethics 7. Respect public records and reporting requirements. Try to Find the Most Effective Balance Reporting Requirements IEDC Code of Ethics 8. Cooperate with peers and improve professional abilities. Productivity Rises Sharing Knowledge and Information Efficiency Goes Up Respect and Confidence in the Profession Grows IEDC Code of Ethics 9. Do not discriminate. IEDC Code of Ethics Act Ethically Think Broadly Learn Willingly Provide Opportunities 10. Comply with the IEDC Code of Ethics. Behave Respectfully Teach Effectively Professional Conduct Ensure Quality Asses Fairly Act Professionally Support Peers Solicit Feedback CASE STUDIES Case Studies • Groups of 5 • Discuss the case study scenario(s) and question(s) as a group • Report back discussion to the entire audience Case Study 3: Investing in Cities where you Work • Is there a potential conflict of interest here? • What should Johns next step be, disclosure or concealment of his investments? Case Study 7: My Boss Asked Me To • What course of action should Jane take if any? • How could this ethical dilemma have been avoided? Case Study 8: Bribe or Finders Fee? • Is this a bribe or just creative marketing? • What ethical principles should be adhered to in economic development marketing? Case Study 9: Shopping the Project Around • Has the consultant committed an ethical breech? If so, what is the proper channel for censure? • Should the local economic developer report the consultant for shopping the project after the location decision has seemingly been made by the owner? Case Study 10: Start-up Development Company • Is there an ethical dilemma here? • Is this an instance of unconscious sexism? • What would you do if you were the young woman? Case Study 10: Start-up Development Company • Sexism in the workplace can make for a very tense and uncomfortable work environment • Economic developers should have a heightened awareness of their language and behavior as to not engage in any form of sexist behavior Case Study 13: Managing Conflicts of Interest • Is there a conflict of interest here? • Was the lawsuit filed by historic preservation groups appropriate or was it extreme? • The planning commission member sought legal counsel before partaking in the vote. What else could he have done to further avoid the appearance of a conflict on interest? Case Study 14: Respecting Roles and Responsibilities • Should the manager have remained in order to hear the comments and perhaps offer his input? WORKING WITH VIOLATIONS Working with Ethics Violations • Violations can never be eliminated. • Procedures for review and consequences. Reviewing Ethical Violations • Main components of reviewing ethics violations: – Was there a violation? – Investigate – Impose consequences • Impartiality, written documentation, and an appeals process. IEDC Ethics Violations Review • No official IEDC procedure. • The training manual includes information on the procedures that IEDC intends to adopt. CONCLUSION • Key Points: – Proceed carefully when facing ethical questions and situations. – Remember you represent the profession. – Know and follow the IEDC Code of Ethics.