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Ethics in Negotiation: Oil and Water or Good Lubrication?

H. Joseph Reitz, James A. Wall, Jr,, and Mary Sue Love

n his 1996 year-end column for Forbes, merchant banker and economist John Rutledge describes two weeks of negotiations over an acquisition for a private equity fund. The hours of bargaining were tense, long, hard, and far more complicated than he had envisioned. Nevertheless, he reports: Despite all the haggling, we ended on a friendly note. All of us-buyer, seller. lender-shook hands and clinked champagne glasses. As we were leaving, the seller said he would like to discuss teaming up with us in a joint venture. I beamed. Some buyers wouldnt have liked this. They think if the seller doesnt hate them at the end of a deal, they havent squeezed out every last drop of money. I disagree. We believe that when someone wants to do repeat business with us, it is the highest form of praise. Allowing your opponent in a transaction to walk away with his dignity, his humor, and his bearing intact, and with a pretty good deal in his pocket, is the right way to do business. Rutledge then lists a set of principles learned from his first business partner and admonishes his readers to .walk away from a deal, any deal, rather than violate your principles to win it., .The twist, of course, is that business organizations organized around principles are often more successful and make more money than those organized around the idea that greed is good. Nice guys often finish first. Rutledges thesis that ethical negotiating not only the right thing to do but frequently is is

also more profitable represents an argument more common today than in the socalled decade of greed in the 1980s-and one that finds more receptive audiences. Should business people take this as an article of faith? Or can reason bring us to similar conclusions? In probing that question, we shall list a number of questionable negotiation tactics or behaviors and evaluate them according to four commonly used ethical criteria. This will help us assess the costs and benefits of ethical versus unethical negotiation tactics. QUESTIONABLE NEGOTIATION AND ETHICAL CRITERIA TACTICS

Being the nice guy isnt so bad. It works, it feels better--and it pays off.

e all have a general idea of what negotiation is: two parties attempting to work out a trade of items or services that is acceptable to both sides. Each side has an array of tactics to employ in achieving this trade. Below are ten popular tactics, the ethics of which have been challenged over the years: 1. Lies-Statements made in contradiction to the negotiators knowledge or belief about something material to the negotiation. 2. PuffeQ~-Exaggerating the value of something in the negotiation. 3. Deception-An act or statement intended to mislead the opponent about the negotiators own intent or future actions relevant to the negotiations. 4. Weukening the opponent-Actions or statements designed to improve the negotiators own relative strength by directly undermining that of the opponent.

Ethics in Negotiation:

Oil and Water

or Good


5. Strengthening one b own positiolz-Actions or statements designed to improve the negotiators own position without directly weakening that of the opponent. 6. Nondisclosz*re-Keeping to oneself knowledge that would benefit the opponent. 7. I~~fomzatior2 exploitutiw-Using information provided by the opponent to weaken him, either in the direct exchange or by sharing it with others. 8. Change ofmindEngaging in behaviors contrary to previous statements or positions. 9. LX&-action--Acts or statements that lure the opponent into ignoring information or alternatives that might benefit him.

10. Maximizutiorz-The negotiators singleminded pursuit of payoffs at the cost of the opponents payoffs. How do negotiators decide if such tacticslaid out in greater detail in Figure l-are ethical? Our interviews with business people have yielded such comments as: l A lie is not a lie when a lie is expected. l When someone tells the truth, thats good: when someone lies, thats wrong. Its that simple. l Whats right or wrong r&lly depends bn the situation. The variety in comments vis-2-vis the first tactic indicates that opinions can vary as to what is ethical. Fortunately, moral reasoning can help

Figure 1 Questionable


Tactic Lies

Description / Clarification /Range

Subject matter for lies can include limits. alternatives, the negotiators intent. authority to bargain. other commitments, acceptahility of the opponents offers, time pressures, and availaIde resources. Among the items that cm he puffed up are the value of ones payoffs to the opponent. the negotiators own alternatives, the costs of vdi;lt one is giving up or is prepared to yield. importance of issues. and attributes of the products or services.

Acts and statements may include promises or threats. excessive misstatements of facts, or asking for concessions not wanted.

initial &man&.


The negotiator here may cut off or eliminate some of the opponents alternatives, Mamr the opponent for his o\vn actions, use personally abrasive statements to or about the opponent. or undermine tlie opponents alliances. This tactic includes Idding ones own resources, including expertise, finances. and alliances. It dso includes presrntations of persuasive rationales to the opponent or third parties (e.g.. the public, the media) or getting mandates for ones position. Includes partial disclosure opponents misperceptions position or circunistance~. of facts, failure to disclow :I hidden fact. fiiilure to correct of the negotiators c)\\n or ignor;mw, and concealment the

Information provided t>y the opponent can IX mscd to exploit his weaknesses, close off his altrrnatives. generate tlem~mtls against him, or weaken his alliances. Inclucirs :rccepting offers one had claimed one wwiild not accept. ch:mging v,ithdr:c\ving promised offers. and making threats one promiaeci \vould not Also includes the failure to Iwh;ibe 21spdicted. demands.
he made.

Thee acts or statements c;m be as simple ;IS providing exccssi\,e information to the opponent. asking many questions, rvxcling questions, or burying the issue. Or they can Ix more complex. such as feigning weakness in one area so that the opponent concentrates on it and ignores another. Includes ciemancling the opponrnt make concessions that result in the negotiators gain :md the opponents equal or greater loss. Also entails converting a win-win situation into win-lose.

negotiators assess the ethical nature of lies and o&r tactics. Sunlmarized in Figure 2, the four criteria most widely used in business ethics today are the Golden Rule, utilitarianism, uniztersalism, and distributive justice. The Golden Rule Most managers tend to explain ethical behavior as a function of personal values. One of the most frequently cited values is the Golden Rule: Do unto others as you would have them do unto you. A relatively popular principle, perhaps its most famous and vocal advocate in industry was J.C. Penney, who used it in building and running his business from his youth until his nineties. In practice, it requires decision-makers to apply the same standards of fairness and equity to their own actions that they would demand of others. Universal&m A more complex ethical base is universalism, which argues that the rightness or wrongness of actions can be determined apriori, or before the actual outcomes of those actions can be realized. Ilased on a system of individual rights and obligations founded by philosopher Immanuel Kant, it argues that human beings are incapable of foreseeing all the outcomes of their decisions and actions, and thus should be held morally accountable for the way they made them. For an act or de&ion to be moral, it must meet several criteria: 1. It must respect the inherent worth and dignity of those involved or affected; people must never be used primarily as a means to an end. 2. It must be universally applicable to all human beings facing similar situations-there are no special treatments. 3. It must be consistent with all other universal moral principles. Consider the dilemma of downsizing. IJniversalism would permit downsizing for sound economic reasons, but it would require informing all those being laid off of that decision when it is made. Withl~olding such il~fot-n~~tionfrom employees to keep them working with the same level of dedication and effort would be unethical because it would be using them primarily as a means to an end. Unaware of their impending doom, they might make family, career, or financial decisions they would not have made with valid information about their employers plans. Utilitarianism In contrast to universalism, utilitarianism judges the rightness or wrongness of actions and deciEthic:, in Negotiation: Oil and Water or Good Lubrication?

Fimre 2 Ethical Criteria


Explanation /Interpwtation Do unto others as you would have them do unto you. People are not to be used as a means to an end. Do the greatest good for the greatest number of people.
Everyone is better off tIecause of this act.

Golden Rule Urziversalism ~lti~ita~.anj~~~ Distributive Justice

sions by their consequences. It argues that human beings ought to seek those alternatives that produce the greatest amount of good for the greatest number of people, or to maximize the total good produced. When seeking the greatest net good, one must consider all people likely to be affected by a set of alternatives and the array of outcomes (both good and bad) each alternative might generate for each person. Distributive Justice John RawIss ethical concept of justice implies that individuals have an obligation to exercise their own rights in a way that permits others to enjoy theirs. Justice occurs when all individuals get what they deserve; injustice, when people are deprived of that to which they have a right. In brief, this ethical norm asks, Is everyone (the group) better off because of this act? And for each person, it asks, Would you be willing to trade places with any of the other parties after this act takes plate? Rawlss concept of justice, like universalism, focuses on the process Ir~y which outcomes are distributed rather than on the outcomes themselves. Like Kants universalist perspective, Rawls attempts to derive a set of principles that would be acceptable to all rational people. In considering the justice of any process, we are asked to assume a ueil of ignorance. That is? we act as if we are ignorant of our ozun roles in the situation, and assume we could be assigned any role. Would we be willing to abide by our decision if we might be any of the players affected by it? According to Rawls, the veil of ignorance leads us to construct processes in which: 1. all members of the process could agree to be a part of it, regardless of the position they might happen to occupy in the process; 2. each person would have an equal right to the most extensive liberty that can accommodate similar liberties for others; 3. inequalities work to the benefit of all;

4. these inequalities are :ittachecl to positions th3t 3x accessible to all.

Using Multiple Criteria

Evaluating bargaining t:dcs raises the question of which of these four criteria takes precedence. If ;I tactic is conclonect by one criterion and condemned by another. what is a negotiator to do? In the first place. if applied corredy. these criteria ought to yield similx results. They zrt not designed to bring dxit different answers: rather, they art different ways of looking for the ~me ans\ver. Which criterion one uses can he a matter of personal prefcrence or mq 1x2 -. dictated hy the nature of the At first blush, it might seem dilemma. Utilitarixnism is useful that utilitarianism could when the numlxr make a case for lying under of affected parties is relatively small certain circumstances. A and knowx and negotiator might think this the outcomes are relatively preclictlie helps my company a lot able. However, and doesnt harm my when the numlxr of affected parties opponent very much. IN is large, knowedge of their preft2rences is unrelial~le. or outcomes are unpreclictahle. then other criteria are more useful. When dealing with unfamiliar situations (new technology), unfamiliar pxrties (new markets), or compltx issues (mergers 2nd acquisitions), principlehasecl criteria such 21suniversalism are going to I-z more relinblc than those. such as utilit:trianism, that recluirr predictions about very uncertain future events.


aving delineatecl these four standards. we shall now apply them to the ten qiiestionddtt negotiation tactics, from lying to maximizing,.

A lit is a statement made by ;Inegotiator that contradicts his knowlcclge or Ixliefs ahout somcthing material to the negotiations. In negotiating, lies are intended to deceive the opponent ahout values, intents, ohjectivcs, altf3nativcs, constraints, and beliefs. Examples include: l Why should I lmy it from you for $10.000 when Ive got another seller willing to let me have one just as good for $8,500?---when the buyer has no such alternative.

l I cant possibly pay $10,000. I have only S8,500 to spend; or My client has directed mc to pay no more than S9.000-when the ncgoti:ltor has no such constraints. Lying and the Golden Rule. Most religions. including Christianity, Judaism, and Islam, contain strict injunctions qainst lying. Some religions, however. permit lying when it is the only possihle way to prevent ;t greater harm. For ex:imple, you may lie to someone in a murderous rage in o&r to prevent ;I homicide. or to a drunken, abusive person in search of his usual victims. These escxptions are really not inconsistent with the Golden Rule. The question would he, Would you prefer to be lied to if that were the only wny to keep you from cxmmitting ;f terribfc cieecl? The rational answer is yes. The exampies of lying in ll~~(~t~lti~)ns, ~OLVever. do not prevent ~1greater hxm. They are simply examples of immediate self-interest, of doing harm 17);. deceit to further your own inttrest. The question wou1cl he, Worrlcl you prefer that others deceive you to enrich themselves :lt your expense? The r2tictnal answer is no. Lying and IJniversalism. In his late years. Kant ar~uecl that honesty bvas so important to the concept of intrinsic human \\Y)rth and dignity that uo lie coulcl he justified. The argument is that human beings rely on information to make decisions fbr themstdves. And to make the lxst decisions, they must have the truth. YVhen others clepI-ive them of the truth thrcqh lies, the victims of those lies may be led to make faulty decisions. Some will propose that lying is permissible when you believe your opponent is lying. They :tr,qie. in fact, that lying is the only clcfense against zn opponent \vho lies. But this ;trgument is flawed. First, there xc other options, one of which is to tcrminatc the negotiation. Second, you can try to discover the truth that will expose the lie, tlitis turning 2 tlisaclvantnge into ;tn aclvzntage. If you annot possibly ascertain the truth, then you must admit that you only believe your opponent to he lying; you dont know it as fact. Such a belief is not sufficient to justify :I lie. Lying and Utilitarianism. i\t first blush, it might seem that tltilitarianism could make a case for lying under cert:dn circumstances. A negotiator might think. This lie helps my company a lot and doesnt harm my opponent very IIILI~~. However. utilit:banism requires us to consider ~11 the possible consequences to all the people potentially affected t>y the action-and to consider all the people so affected as ecluais. We cannot wci@X the interests of some, such as ourseh~es, ~1sgreater than the interests of others. A further problem with attempting to justify lying through utilitarianism is that one must consider the effects of the lying itself. I3eyond the direct effects of 3 lie are the indirect effects of

harm done to society in general by increasing cynicism and decreasing trust. The liar also suffers some loss of self-esteem by admitting that his success, however noteworthy, was achieved by dishonorable means. Cynicism and lack of trust entail significant costs for any society, which requires more laws, surveillance, and sanctionsnone of which add value to a transaction-to be in place before enacting agreements. Lying and Distributive Justice. Distributive justice requires us to be willing to take the role of either party in the situation. Would we willingly trade places with the party being lied to? No, because being lied to increases our chances of making a decision that is not in our best interests. Second, does a lie decrease the freedom to act of any of the parties? Yes; consistent with the maxim that the truth frees us to make the best decisions, a lie reduces that freedom. One can also argue that a lie decreases the freedom of the liar, whose subsequent statements and actions are now constrained to be (or appear to be) consistent with the lie. Suppose a buyer lies about her reservation price, claiming she could never pay more than $8,000 for an object for which she is willing to pay $9.000, and for which the seller is asking $11,000. If the seller reduces his price to $10,000, the buyer cannot reinforce that concession by raising her offer above $8,000, lest her lie be exposed. Lies constrain the freedom of both the victim and the liar. None of the four ethical models can justify lying in negotiations. Lying is seen to be what it is-an act of self-interest usually taken as a convenient alternative to (a) the hard work of preparing for negotiations, including improving ones knowledge about an opponent. or (b) walking away from a negotiation when one comes to believe the opponent is lying. Only when a lie is the only possible means of preventing a greater harm to another could it possibly be justified. Such an exceptional circumstance is extremely rare in most negotiations, and those circumstances, such as a hostage negotiation, would be dramatic enough to be relatively obvious. Puffery Puffery is exaggerating the value of something, such as its cost, condition, or worth. Negotiators will often exaggerate the value of alternatives, what they are giving up or are prepared to give up, the importance of issues, product or service attributes, or the value of their case. Examples: l I have a six-figure offer from another company-when no such offer has actually been made, or the offer is less than six figures. l This union will never give up the right to strike-when job security is actually more important.

l I consistently get up to 33 miles per galion-when in fact that happened only once in the cars lifetime. l We have enough evidence right now to put your client away for 20 years-when the real evidence at hand is less than convincing. Clearly, puffery is simply a euphemism for lying. Every one of these statements contradicts the negotiators knowledge or beliefs. Exaggeration may be considered by some as a milder form of lying in that there is a shred of truth in it; nevertheless, a statement that contradicts the truth is a lie. Like lies, exaggerations are intended to deceive and gain advantage at anothers expense.

Deception A deception is an act or statement intended to mislead another about ones own intent or future actions relevant to the negotiations. These include false promises or empty threats. excessive initial demands, careless statements of fact, and asking for things not wanted. Examples include: l If you give us the contract, well begin shipments in 30 days-when such a delivery date is known to be impossible (false promise). l If we dont settle this right now, the whole deal is off and well just find somebody elsewhen the negotiator has no intention of losing this deal (empty threat). l In order to accept a position on your board, I would expect to receive 20.000 shares of stock, luxury class travel and lodging, and to be named chair of the personnel committee-when what the negotiator really wants is 10,000 shares and a seat on the personnel committee (excessive demands, asking for things not wanted). l We need at least a $50,000 contribution from loyal supporters like you because our people tell us that the opposition plans to eliminate Medicare for people like you if they are elected-when the negotiator knows that the opponents will only seek to halt increases in Medicare spending (careless statement of facts). Some of these deceptive tactics clearly fall into the first category of lies. False promises and empty threats are statements made in contradiction to the negotiators knowledge or beliefs. We have already determined that lies are unethical. But what about excessive demands. careless statements of fact, asking for things not wanted, or distracting statements? Deception as a category of acts is clearly designed to profit at others expense-to lead others into acts that are not in their self-interest, or away from an act that is. In this light, deceptive acts can be seen to be unethical. None of us wants to be deceived. so deception fails the Golden Rule. It does not treat the deceived parties with respect, but takes advan-

Ethics in Negotiation:

Oil and Water or Good Lubrications

tage of their trust or vulnerability, so it fails the test of universalism. It does not create the greatest good for the greatest number of people, but only allows the deceiver to profit at the expense of the deceived, violating the standards of utilitarianism. And it limits the deceived persons choices, failing the test of distributive justice. In the end, then, deception fails all four tests of ethical behavior. Weakening the Opponent A tactic for improving your relative position is to weaken that of your opponent, either psychologically or economically. Direct attacks are generally aimed at lowering anothers self-esteem, often through guilt or embarrassment. Indirect attacks include closing off anothers alternatives or undermining his support or alliances. Frequently, the means for weakening ones opponent involve lying, deception, or exaggeration. You could blame your opponent for damage caused by others or of unknown origin, or create the impression that he was the author of harm done to you or others when no real harm had been done. We have already demonstrated that such tactics are unethical. But what about those cases in which the negotiator can weaken an opponent by telling the truth? The morality of the tactic depends on a number of factors. Information about your own position (Our company will be bankrupt if we increase wages by that much) would meet ethical criteria. Such admissions are usually painful, and you should be permitted to make personal sacrifices under any of the frameworks we have studied. They typically involve uncertainty and risk for the discloser; the opponent may ignore or even exploit such knowledge. However, when the information concerns the opponent, the situation becomes murkier. Can you ethically publicize personal information about an opponent that would undermine his support or embarrass him in some way? If you obtained that information in confidence during the negotiations. you may not use it to do your opponent harm for your benefit. It would be permissible only if revealing the information ~vould prevent a greater harm to others, such as disclosing e\+dence of criminal activity. If you did not obtain the information in confidence. the moral question cold shift to one of intent: Would you be morally required to reveal the information if you and your opponent were not negotiating? In other \vorcls, your benefit in the revelation should not influence your decision. The difference between taking risks for oneself and doing direct harm to another is best understood in the context of distributive justice. A key maxim is whether an action would increase 10

or decrease the others freedom. Risk-taking and self-disclosure increase an opponents options, so they are permissible. Harming him reduces his options, and thus requires other justification. Strengthening Ones Own Position A host of tactics are designed to iniprove ones own position without doing direct harm to the opponent. Instead of involving lying, deception, or exaggeration, they entail ability, effort, and intelligence. Moreover, conceptually at least, they are available to all parties in a negotiation. Again, distributive justice tells us inequalities are permitted as long as all parties have the opportunity to pursue them. If you work harder, train better, prepare more effectively, or create and follow a more successful strategy than your opponents, you have done them no direct harm. You are willing to permit them to do their best in preparation and execution. We are all permitted to improve ourselves; none of the four ethical frameworks deny self-improvement. Under the Golden Rule, we are willing to permit others to strengthen themselves. According to utilitarianism, the net benefits of strengthening go to those who have done the lbest job-+ survival of the fittest outcome. Under universalism, one can argue that preparation and discipline in execution actually enhance the dignity of ones opponent. To be well-prepared is to show respect for the other; shoddy preparation is actually demeaning to an opponent. Nondisclosure We have determined that negotiators are ethically required to tell the truth-lying, deception, and exaggeration are wrong. Hut are they required to tell the zchole truth? May a negotiator withhold factual information that could be of use to an opponent? The answer depends on the nature of the hidden truth. If failure to disclose the truth would harm ones opponent, it would be unethical. Hiding a product or service defect or flaw that would mislead the other about the value of the item being bargained for would be wrong. If, to induce ;I potential buyer into paying a higher price. you fail to disclose a lien on property- or a mechanical problem with an automobile you are attempting to sell, you are wrong. Jclst so, potential buyers who fail to disclose information revealing that they are, in fact. unlikely to be able to make payments on a purchase are acting unethically. However, you are not required to disclose personal information that could be harmful to your case. You need not reveal that you are able and/or willing to pay far more for an item than the asking price. And you are not required to

disclose your reservation price, although you are not permitted to lie about it. Likewise, if you-as a buyer-suspect that the value of an offered item is greater than the asking price, you are not required to disclose that fact to the seller, presuming the seller has the competence to assess the value of the object. It would be wrong to take advantage of someone incapable of evaluating the worth of an object. From a different perspective, are you permitted to disclose the true value of an object to a misinformed seller? Yes; there is nothing wrong with being more generous in a negotiation than you are morally required to be, as long as you are negotiating for yourself. However, if you are acting as an agent for another, you are required to obtain the best deal that is legally and ethically permissible, so you cannot disclose the true value. Exploiting Information

thing happens to alter the attraction of the object for one of the parties. The need is diminished or increased; an attractive alternative appears or vanishes; ones ability to pay is changed. May you abruptly change your negotiating position in light of these new circumstances? As long as you are not breaking a commitment or agreement, you are permitted to change your mind. You may decide to accept an offer you said you would never accept, or to pay a higher price than your original reservation price. If you intentionally lied about your reservation price, the act of lying was wrong. However, paying more than you said you would pay or accepting less than you said you would accept is not wrong-your act is doing no harm to your opponent; in fact, it benefits him. May you withdraw an offer you have made? Yes, providing your withdrawal meets the legal requirements and the opponent has not accepted the offer. However, once the opponent has ac-

Effective negotiators uncover information about themselves,;heir opponents, and the object of a negotiation during both the preparation phase and the negotiation itself. If that information is gained by legal and ethical means, no ethical proscription forbids a negotiator from using it. If you learn that your opponent rea& wants what you have to offer-in fact, values it more than he is disclosing-you are permitted to raise your asking price. If you learn that your opponent has fewer options than he suggests, thereby raising his valuation of what you have to offer, you may do likewise. As long as that information is legally and ethically accessible to both parties, you are permitted to use it to strengthen your position. Are you permitted to use information obtained by illegal or unethical means? Certainly not if you had a hand in the unethical or illegal actcommitted it yourself or induced someone else to commit it. But what if information so gained became public knowledge, and you had nothing to do with either the discovery or the publication of that information? Then you would be permitted to exploit it. Earlier, we concluded that one is not permitted to do direct harm to an opponent: however, if the harm has already been done by another, one may take advantage of it. If a police report of a burglary reveals that your opponent has a greater need or ability to pay for an item over which you are negotiating, you are ~eumitted to use the information to your advantage. May you use it to defame your opponent, thereby decreasing his options or weakening his alliances? No. because that would be doing direct harm to him that would not be done without your action. Change of Mind in the course of negotiations, some-

any way, you may not ethically withdraw it even if it is legal to do so. Reneging on agreements is wrong from all standpoints. You would not wish others to do so to YOLI. It does more harm than good, not only to your opponent but to the general level of trust among negotiators. And you certainly would not be willing to trade places with the person who accepted your offer. Of course, you are permitted to ask an opponent to withdraw his acceptance of your offer or release you from your commitment because of changed circumstances. However, if he refuses to do so, then you are morally bound to your agreement Distraction Negotiators are sometimes tempted to protect a weakness or conceal their interest in a particular issue by distracting their opponents. As long as the distractive tactic did not involve lying, puffery, or outright deception, is one ethically permitted to distract an opponent? We concluded earlier that you need not disclose harmful information about yourself if the nondisclosure would do no harm to another. We can assume that the other is entitled to a fair outcome in the negotiation; however, he is not entitled to maximize his outcomes at your expense. He may attain them through his skill, your ineptitude, or other factors: YOLI are not depriving

As long as that information is legally and ethical/y accessible to both parties, you are permitted to use it to strengthen your position. M



him of his rights by limiting his outcomes to something 1Mween fair and maximization. Distraction as a tactic does not reduce an opponents options, according to ciistrihutive justice. It also provides him with information-if he is skilled enough to uncover it-about youi perceptions of what .VOZ~ believe to be important and Lvhat you believe hcl considers to be important. If you evade answering certain yuestions, your opponent may learn that you do so to protect a weakness. Burying issues that you SW as important or surrounding critical questions with questions you consider trivial reflect your o\\n judgments. They may not be correct; they do not limit the opponents options: they provide :m opponent with opportunities to learn from them: they certainly invoh~e risk on your part. Neither the Golden hle nor univcrs:tIism woulci prohibit distraction. Maximization Is it ethic31 to pursue your own payoffs 3t anothers expense? Yes. but it depends on the manner in which the gain is pursued. Keep in mind that a negotiation has two facets. First, one side usually does not have the same goals as the other, yet both share a god in that they avant to have an exchange with the other I side. A machine shop operator buying bolts from a n13n71ifacturer has ;i goal that differs from the manufacturers. The I operator wants a low price and the manufacturer seeks ;I high one. Yet they 130th want an exchange. ixcause the machine shop operator needs bolts to produce machines and the manufacturer prefers money to an invent0i-j~ of bolts. In the negotiated exchange. the two sides usually bargain over :I numl,er of items. And the value of each item differs for e;~ch side. In the bolt negotiation, there might he four issues: antirust coating, bolt strength. cleIi\.ery schedule. and method of payment. For the machine shop operator, the first two items would IX very important. He needs anti-rust coating so that the bolts dont rust in inventor): and hc must have strong bolts in order to produce high-quality machines. 13ecause these two characteristics art important, he is willing to pay handsomely for them. I3y contrast. the bolt manufacturer knmvs he can put 3n anti-rust coating on the bolts rathei inexpensi\rely, and, mith some minor mociifications of his production process, produce very strong bolts. Consequently, the bolts are of lo\\.

A cynic 3 retort to these evaluations might be, Ethics are fine in theory, can negotiate ethically and sleep well at night, but II be hungry tomorrow, and next week.

cost to him. However, the delivery scheduic is important to the manufacturer. as is the method of payment. Specifically, he would prefer to make deliveries when he is sending bolts to other c-ustamers in the city, and he wants the shop owner to use 3 standard invoicing system that cuts the amount of paperwork. In this setting, it would be unethical for the manufacturer to maximize his own goals--at the machine-shop owners expense-on every item. To do so would violate the Golden Rule; he probably \voulci not want the operator to h~have in this mnnner. It violates the universalism criterion because it exploits the opponent; that is, it uses the opponent for the benefit of the negotiator rather than permitting the opponent, as well as the negotiator. to share adequately in the negotiation benefits. It also violates the utilitarianism criterion because this approach does not provide the greatest good to the greatest number. Kather, it forces the negotiation into a win-lose result and does not allow the two sides to iniprove their total joint benefit. Likewise, it violates the distributive jlistice criterion because evctyone is not better off from this act. How. then, should the negotiator ixugain if all items are fixed sum (My loss is your gain) and of equal value to the negotiator and opponent? The utilitarian criterion proffers no guiclante here I3ecause there is no \2riation in the total value; rather, all points have equal total value. Moreo\Ser. distributive justice provides modest instruction I~~iuse everyone will not IX better off in the various agreement points. However, the univcrsalism and Golden Kule criteria do assist us. The former dictates that the negotiator must consider the well-being of the opponent. Therefore, it posits that the negotiator can press his own interests up to the point at which the well-being of the opponent is endangered. The Golden Rules dictate is consistent with this idea; the negotiator should pursue his own interests only 3s far 3s lie would want the opponent to do so. APPLYING ETHICS TO NEGOTIATIONS: OIL ON WATER?

cynics retort to these evalu:itions might he. Ethics are fine in theory. I can negotiate ethically and sleep well at night, but Ill IX hungry tomorrou; and next week. In other words, some might expect that ethical bargaining would lead to lo\v payoffs, or no agreement. or one that costs them their job. How do vx respond to that? True. ethical b-gaining does entail risks and sometimes seems to place 21negotiator in 2 vunerable position. Yet the ethical route. for opera tional 3s lvell ;IS moral reasons. is the preferable


one, because unethical negotiation has four major costs that are often overlooked: rigidity in future negotiations; a damaged relationship with the opponent; a sullied reputation; and lost opportunities.
l l l l

Rigid Negotiating Even when it is successful, unethical behavior has a personal cost for negotiators. If their lies, deceptions, and puffery yield high-outcome agreements, they will repeat those behaviors in subsequent negotiations, because such actions have paid off. In addition, they will tend to attribute their success to such acts. Consequently, unethical negotiators will sacrifice some of their flexibility, creativity, and openness to others ideas, thereby trapping themselves into a rigid bargaining approach that will eventually be matched by their opponents. Keep in mind that unethical negotiating is not as advantageous as it may seem. One may lie about an alternative; but doesnt silence about an alternative prove as valuable as the lie? Wouldnt the comment Id better find another buyer be just as potent as the statement *Ive got another buyer? Moreover, it is a wiser strategy to interrupt the negotiation, find another buyer. and Let the original opponent know about it than to lie about already having another buyer. Damaged Relationships tinethical negotiation also mars the retationship between the two sides, causing emotional fallout (such as anger) as well as higher operational costs. When the negotiation is a single eventsuch as the sale of building materials-a negotiator who has been the victim of unethical behavior is less likely to implement the deal fulty, perhaps not detivering all the materials. Or he wilt be less than cooperative when post-agreement problems arise, such as if some of the building materials are defective or do not meet construction specifications. When negotiations are of a repeated nature, the costs of unethical behavior mount. Todays bargainer becomes an embittered. enemy rather than tomorrows customer. Such an enemy might refuse to bargain with an unethical opponent, could return to the table with some open Machiavellian tactics of his own, or, more devastatingly, could voice no complaints but secretly seek revenge in the next round. Sullied Reputation

table. At times, they are even apt to embellish. Thus, an unethical reputation often permeates the business environment and precedes or accompanies its owner to the bargaining arena. Consequently, the opposing negotiator expects unethical behavior. A building contractor once commented about a subcontractor, Hell lie to you, cheat you, steal from you. and then brag about it, if you give him a chance. Once an opponent has experienced unethical behavior, he will prepare to counteract your unethical tactics in the future. Moreover, he wilt suspect that they are present, even if they are not. And often he will use them as excuses for his own obstinate behavior. Lost Opportunities The most detrimental effect of unethical behavior comes in the negotiation itself. The explanation for this is somewhat complex, but with assistance from a simple example it can he quickly understood: The essence of a productive negotiation is trading a packqeof issues in which each side concedes heavily on issues that are of low cost (or value) to it in return for major concessions on issues that are of high cost (or value) to it. A company supplying tractor seats to John Deere probably finds that the cost of painting them green and packing them ten to a carton for shipment is not very difficult. If Deere places high value on green seats packed ten to a carton, it would be wise for the supplier to agree (or concede) on these issues. In turn, the firm could have John Dcerc-with its targe storage facilities-accept the suppliers entire production run and store it until used. This concession would cost Deere quite little and would be a major benefit to a small company with limited storage facilities. Most negotiations have manifold issues like these-namely, they are of tow cost to one side and high value to the other. For the negotiators, the key is to find as many of these issues as possible and arrange trades among packages of them. In such trades, the first step is to determine which issues--of those currently under negotiation-have differential vatue to the two sides. To locate these, the parties must exchange valid information. If either side lies, deceives, or engages in puffery or distracts the other, it is very difficult, if not impossible, to determine the winwin trades, because the opponent does not receive accurate information. Moreover, the unethicat behavior, if detectecl, motivates the opponent to withhold information (that he feels will be used against him) about the cost and values of the issues. Not only does unethical behavior underi~~ine the first step toward package trading, it also pre-

Seldom do victims of unethical behavior hold their tongue, in public or across the bargaining
Ethics in Negotiation: Oil and Water or Good Lulxication?


eludes the second: discovery of new issues. Productive negotiations are those that grow beyond the issues on the table. A simple expansion is one in which both sides agree on a two-year contract, even though the negotiation began with a one-year frame. A more complex expansion, taken from our earlier example, might be that Deere and its seat supplier jointly discover that Deere has vibration-reduction expertise that the supplier could use in its production machines. And the supplier has discovered a method for mixing and applying paint that makes it highly chip-resistant-which Deere would no doubt find useful. With an open, trusting negotiation, the two sides probahly would IX able to ferret out the two new issues and, through some creative discussions. arrange a trade on these or explore the prices for each technology transfer. Here the impact of unethical bargaining is clear. Not only does it undermine the negotiators capabilities to reach win-\\in agreements on the current issues, it also interferes with discussions that Lvould bring new, mutually profitable issues to the table. oming full circle. then, we agree with John Rutledge that ethical negotiation is not only morally right, it is frequently more profitable. Business men and women often feel they move into a different ernironment when they negotiate-one in which anything goes and the rules are understood hy all players. Yet negotiations today are not a separate function: they are an integral part of all business environments. Joint ventures. purchasing options, labor contracts, leasing agreements, salaries and benefits, day-to-day disputes. mergers. and spinoffs are a11 negotiated. And in such bargaining, ethical rules must apply. The four we ha\,e

touched on-the Golden Rule, universalism, utilitarianism, and distributive justice-rule out several negotiation tactics, guide the use of some, and permit the use of others. This guidance does not make negotiating easy. With their high stakes, complexity, deadlines, uncertainty, emotions. and stress, negotiations will always remain tough going. But those who take care to negotiate ethically should find the process better for them-personally, interpersonally, and economically. 0
Richard T. DeGeorgr, York: Prentice-Hall. Larue (Burr Bxsiness

Et!?thic.s. ed. (Nem 4th


Tone Hosnxr, Morul Leadership in Bz~sirzess Ridge, IL: Richard D. Irwin, 1994): Ch. 4.

H. Joseph Reitz is the Koch Faculty Fellow at the International Center for Ethics in Business of the University of Kansas in Lawrence, Kansas. James A. Wall, Jr. is a professor of management at the University of Missouri, Columbia, Missouri, where Mary Sue Love is a doctoral candidate in management.