Simone de Colle

University of Virginiasd7ua@virginia.edu

Sustainability Advisory

Services

Managerial Decisions or

Organizational Ethical Failures? 

Bounded Business Ethics

Pedavena, 12 Giugno 2010

Bounded Business Ethics

My Research Approach

1. What are the sources of unethical behavior within business organizations?

2. What is “unethical”?

3. What are the (organizational/societal) consequences of (individual) ethical failures? (btw: not only negative…)

4. What is a “Bounded Business Ethics” approach to investigate these problems?

5. What can this approach tell us more about the Heineken-Pedavena case?

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3 of 6:

FOCUS OF MY RESEARCH

Org

aniz

atio

nal

Eth

ical

Fai

lure

s

Sources of unethical behavior

• Issue-related (Jones, 1991)• Context-based (Trevino

1986; Buttlefield, Trevino & Weaver, 2000)

AWARENESS FAILUREMoral

Awareness(lack of)

• Simon (1947)• Dunfee & Donaldson (1994)• Chugh, Bazerman, Banaji (2005)

FAILURE OF BOUNDED RATIONALITY/ETHICALITY

BoundedRationality &

Ethicality

• Kets De Vries (1980, 1984, 1991)• Messick and Bazerman (1996);

Messick (1999)• Reynolds (2006)• Milgram (1974)• Tenbrunsel & Smith Crowe ‘08

PSYCHOLOGICAL FAILURES

Neurosis and other psycho-logical traps(influence of)

• Freeman (1994)• Harris and Freeman (2008)

SEPARATION BIASESSeparation

Thesis(perpetuation of)

FAILURE OF IMAGINATION

Moral Imagination

(paucity of)

• Werhane (1999)• Rorty (2007)

• Kant/Mill/Aristotle• Gauthier (1982)• Rest (1986)

FAILURE OF MOTIVATION

Moral Motivation

/Intent(weak/lack of)

Bounded Business Ethics

Bounded Business Ethics

What is “ethical”?

In their Academy of Management Annals review of 30 years of research on ethical decision-making, Tenbrunsel and Smith-Crowe (2008: 547) states:

“In our review, it became readily apparent that one notable void in the field was a definition of the fundamental concept of “ethical”…

……without a universal understanding of the core dependent variable, research will remain inconsistent, incoherent and atheoretical”.

Bounded Business Ethics

From “unethical behavior” to Organizational Ethical Failures

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My tentative definition:

OEFs are decisions within business organizations that:

1)Involve unethical conduct in the decision-making process; and/or

2) Fail to continuously equilibrate in a fair and efficient way stakeholder interests.

= +Unethical Conduct

Organizational Ethical Failures

Decisions that generate behavior that is “illegal or morally unacceptable to the larger community” (Jones, 1991) or violate “accepted moral norms of

behavior” (Trevino et al. 2006

Stakeholder Equilibration

Failures

Decisions that fail to balance stakeholder competing claims in

a fair and efficient way (Venkataraman, 2002).

Bounded Business Ethics

Traditional Business Ethics research

More on OEFs

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= +Unethical Conduct

Organizational Ethical Failures

Stakeholder Equilibration

Failures

• Type I: Unethical conduct is necessarily an ethical failure in the process of decision making, but not necessarily an ethical failure in the outcomes;

• Type II: Stakeholder equilibration failures are necessarily ethical failures in terms of the outcomes of the decision making process;

• Not every organizational failure is an ethical failure;

• On the other hand, every Type II OEF will generate, over time, a loss of value for some stakeholders.

• Traditional Business Ethics research is focussing on “Type I OEFs”(“Unethical Conduct”).

Bounded Business Ethics

BOUNDED BUSINESS

ETHICS:

ITS EXPLANATORY

DOMAIN

…To Bounded Business Ethics

CLEAR ETHICALLY

JUSTIFIABLE DECISIONS

CLEAR UNETHICAL CONDUCT

GRAY ZONE:IS THIS ETHICAL?

Heineken/Pedavena Organizational Ethical Failures

From Traditional Business Ethics…

Heineken/Pedavena“Business decisions”

(as “Amoral Decisions”)

CLEAR ETHICALLY

JUSTIFIABLE DECISIONS

CLEAR UNETHICAL CONDUCT

GRAY ZONE:IS THIS ETHICAL?

Separation Thesis

Bounded Business Ethics

Decision-Makingand Organizational Ethical Failures

A MODEL INTEGRATING

OEFs

Start of the decision making

process

Ethical

ConductUnethicalConduct

Organiza-tional

Failure (poor perf.)

Good Organiza-

tional performance

(fair & efficient)Stakeholder Equilibration

Stakeholder Equilibration

Failure

(fair & efficient)

Stakeholder Equilibration

Stakeholder Equilibration

Failure

Type I

OEF(process)

Type II

OEF

(outcomes)

Type III

OEF (Process + outcomes)

There is no “amoral” decision: business and ethics are entangled

The case of Heineken-Pedavena (1/2)On September 22nd 2004 Heineken Italy decided to

close down the brewery of Pedavena, a small town in the Italian Dolomites, by the 31st of December 2004, and redistribute all beer production to the other 4 breweries owned by the Group in Italy. In the press release, Heineken’s Board explained its decision by pointing out that:

“…the strong competition by the other groups operating in Italy and other companies exporting in this country, require that Heineken strives for adequate levels of efficiency in production, which the Pedavena brewery is not able to provide because of its objective limitations, despite the important contribution, commitment and professionalism proven by the people of the Pedavena factory”.

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Bounded Business Ethics

The case of Heineken-Pedavena (2/2)From the perspective of traditional business ethics it

does not seem to be a clear case of “unethical conduct”: no ethical principle or moral standard seems to be violated. However, if we look at it from the perspective of Bounded Business Ethics, the following question becomes relevant:

Is Heineken’s Italy decision to dismiss its brewery in Pedavena an Organizational Ethical Failure?

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Bounded Business Ethics

Research questions1. Why did Heineken managers (initially) decide to close

the Pedavena brewery?

2. Why did the Pedavena workers reject the very generous redundancy package?

3. Why did the civil society of Pedavena (and other volunteers) decide to mobilize themselves to “save the brewery”?

Spazio ai protagonisti….

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Bounded Business Ethics

Qualche anno dopo….