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4 CHAPTER 1 The Relevance of Morality to Business

Is Business Bluffing Ethical?

way that made it sound a great deal better than it actually was. Another item in his product line was notorious among dealers for its "built-in obsoles- cence." He was holding back from the market a much-improved product because he did not want it to interfere with sales of the inferior item it would have replaced. He had joined with certain of his competitors in hiring a lobbyist to push a state legislature, by methods that he preferred not to know too much about, into amending a bill then being enacted.

In his view these things had nothing to do with ethics; they were merely normal business practice. He himself undoubtedly avoided outright false- hoods-never lied in so many words. But the entire organization that he ruled was deeply involved in numerous strategies of deception.

ALBERT Z. CARR

A RESPECTED BUSINESSMAN with whom I discussed the theme of this article remarked with some heat, "You mean to say you're going to encourage men to bluff? Why, bluffing is nothing more than a form oflying! You're advising them to lie!"

I agreed that the basis of private morality is a respect for truth and that the closer a businessman comes to the truth, the more he deserves respect. At the same time, I suggested that most bluffing in business might be regarded simply as game strat- egy-much like bluffing in poker, which does not reflect on the morality of the bluffer ....

I reminded my friend that millions of business- men feel constrained every day to say yes to their bosses when they secretly believe no and that this is generally accepted as permissible strategy when the alternative might be the loss of a job. The essential point, I said, is that the ethics of business are game ethics, different from the ethics of religion.

He remained unconvinced. Referring to the company of which he is president, he declared: "Maybe that's good enough for some business- men, but I can tell you that we pride ourselves on our ethics. In 30 years not one customer has ever questioned my word or asked to check our figures. We're loyal to our customers and fair to our sup- pliers. I regard my handshake on a deal as a con- tract. I've never entered into price-fixing schemes with my competitors. I've never allowed my sales- men to spread injurious rumors about other com- panies. Our union contract is the best in our industry. And, if I do say so myself, our ethical standards are of the highest!"

He really was saying, without realizing it, that he was living up to the ethical standards of the business game-which are a far cry from those of private life. Like a gentlemanly poker player, he did not play in cahoots with others at the table, try to smear their reputations, or hold back chips he owed them.

But this same fine man, at that very time, was allowing one of his products to be advertised in a

Pressure to Deceive Most executives from time to time are almost com- pelled, in the interests of their companies or them- selves, to practice some form of deception when negotiating with customers, dealers, labor unions, government officials, or even other departments of their companies. By conscious misstatements, con- cealment of pertinent facts, or exaggeration-in short, by bluffing-they seek to persuade others to agree with them. I think it is fair to say that if the individual executive refuses to bluff from time to time-ifhe feels obligated to tell the truth, the whole truth, and nothing but the truth-he is ignoring opportunities permitted under the rules and is at a heavy disadvantage in his business dealings.

But here and there a businessman is unable to reconcile himself to the bluff in which he plays a part. His conscience, perhaps spurred by religious idealism, troubles him. Before any executive can make profitable use of the strategy of the bluff, he needs to make sure that in bluffing he will not lose self-respect or become emotionally disturbed. Ifhe is to reconcile personal integrity and high standards

From Harvard Business Review 46 (1), 1968. Reprinted by permission of Harvard Business Review. Copyright © 1968 by the President and Fellows of Harvard College; all rights reserved.

of honesty with the practical requirements of busi- ness, he must feel that his bluffs are ethically justi- fied. The justification rests on the fact that business, as practiced by individuals as well as by corporations, has the impersonal character of a game-a game that demands both special strategy and an understanding of its special ethics.

The game is played at all levels of corporate life, from the highest to the lowest. At the very instant that a man decides to enter business, he may be forced into a game situation, as is shown by the recent experience of a Cornell honor graduate who applied for a job with a large company:

This applicant was given a psychological test which included the statement. "Of the follow- ing magazines, check any that you have read either regularly or from time to time, and double-check those which interest you most. Reader's Digest, Time, Fortune, Saturday Evening Post, The New Republic, Life, Look, Ramparts, Newsweek, Business Week, U.S. News & World Report, The Nation, Playboy, Esquire, Harper's, Sports Illustrated."

His tastes in reading were broad, and at one time or another he had read almost all of these magazines. He was a subscriber to The New Republic, an enthusiast for Ramparts, and an avid student of the pictures in Playboy.He was not sure whether his interest in Playboywould be held against him, but he had a shrewd sus- picion that if he confessed to an interest in Ramparts and The New Republic, he would be thought a liberal, a radical, or at least an intel- lectual, and his chances of getting the job, which he needed, would greatly diminish. He therefore checked fiveof the more conservative magazines. Apparently it was a sound decision, for he got the job.

He had made a game player's decision, con- sistent with business ethics.

A similar case is that of a magazine space sales- man who, owing to a merger, suddenly found him- self out of a job:

This man was 58, and, in spite of a good record, his chance of getting a job elsewhere in a busi- ness where youth is favored in hiring practice was not good. He was a vigorous, healthy man, and only a considerable amount of gray in his hair suggested his age. Before beginning his job search he touched up his hair with a blackdye to

CARR Is Business BLuffing EthicaL? 5

confine the gray to his temples. He knew that the truth about his age might well come out in time, but he calculated that he could deal with that situation when it arose. He and his wife decided that he could easilypass for 45, and he so stated his age on his resume.

This was a lie; yet within the accepted rules of the business game, no moral culpability attaches to it.

The Poker Analogy We can learn a good deal about the nature of bus i- ness by comparing it with poker. While both have a large element of chance, in the long run the win-. ner is the man who plays with steady skill. In both games ultimate victory requires intimate knowl- edge of the rules, insight into the psychology of the other players, a bold front, a considerable amount of self-discipline, and the ability to respond swiftly and effectively to opportunities provided by chance.

No one expects poker to be played on the ethi- cal principles preached in churches. In poker it is right and proper to bluff a friend out of the rewards of being dealt a good hand. A player feels no more than a slight twinge of sympathy, if that, when-with nothing better than a single ace in his hand-he strips a heavy loser, who holds a pair, of the rest of his chips. It was up to the other fellow to protect himself. In the words of an excellent poker player, former President Harry Truman, "If you can't stand the heat, stay out of the kitchen." If one shows mercy to a loser in poker, it is a per- sonal gesture, divorced from the rules of the game.

Poker has its special ethics, and here I am not referring to rules against cheating. The man who keeps an ace up his sleeve or who marks the cards is more than unethical; he is a crook, and can be punished as such-kicked out of the game Of, in the Old West, shot.

In contrast to the cheat, the unethical poker player is one who, while abiding by the letter of the rules, finds ways to put the other players at an unfair disadvantage. Perhaps he unnerves them with loud talk. Or he tries to get them drunk. Or he plays in cahoots with someone else at the table. Ethical poker players frown on such tactics.

Poker's own brand of ethics is different from ethical ideals of civilized human relationships. The

6 CHAPTER 1 The Relevance of Morality to Business

game calls for distrust of the other fellow. It ignores the claim of friendship. Cunning deception and concealment of one's strength and intentions, not kindness and open-heartedness, are vital in poker. No one thinks any the worse of poker on that account. And no one should think any the worse of the game of business because its standards of right and wrong differ from the prevailing tradi- tions of morality in our society.

Discard the Golden Rule This view of business is especially worrisome to people without much business experience. A min- ister of my acquaintance once protested that busi- ness cannot possibly function in our society unless it is based on the Judeo-Christian system of ethics. He told me:

I know some businessmen have supplied call girls to customers, but there are always a few rotten apples in every barrel. That doesn't mean the rest of the fruit isn't sound. Surely the vast majority of businessmen are ethical. I myselfam acquainted with many who adhere to strict codes of ethics based fundamentally on religious teachings. They contribute to good causes. They participate in community activi- ties. They cooperate with other companies to improve working conditions in their industries. Certainly they are not indifferent to ethics.

That most businessmen are not indifferent to ethics in their private lives, everyone will agree. My point is that in their office lives they cease to be private citizens; they become game players who must be guided by a somewhat different set of eth- ical standards.

The point was forcefully made to me by a Midwestern executive who has given a good deal of thought to the question:

So long as a businessman complies with the laws of the land and avoids telling maliciouslies, he's ethical. If the law as written givesa man a wide- open chance to make a killing, he'd be a fool not to take advantage of it. Ifhe doesn't, somebody else will. There's no obligation on him to stop and consider who is going to get hurt. If the law says he can do it, that's all the justification he needs. There's nothing unethical about that. It's just plain business sense.

This executive (call him Robbins) took the stand that even industrial espionage, which is frowned on by some businessmen, ought not to be considered unethical. He recalled a recent meeting of the National Industrial Conference Board where an authority on marketing made a speech in which he deplored the employment of spies by business orga- nizations. More and more companies, he pointed out, find it cheaper to penetrate the secrets of com- petitors with concealed cameras and microphones or by bribing employees than to set up costly research and design departments of their own. A whole branch of the electronics industry has grown up with this trend, he continued, providing equip- ment to make industrial espionage easier.

Disturbing? The marketing expert found it so. But when it came to a remedy, he could only appeal to "respect for the golden rule." Robbins thought this a confession of defeat, believing that the golden rule, for all its value as an ideal for soci- ety, is simply not feasible as a guide for business. A good part of the time the businessman is trying to do unto others as he hopes others will not do unto him'! Robbins continued:

Espionage of one kind or another has become so common in business that it's like taking a drink during Prohibition-it's not considered sinful. And we don't even have Prohibition where espionage is concerned; the law is very tolerant in this area. There's no more shame for a business that uses secret agents than there is for a nation. Bear in mind that there already is at least one large corporation-you can buy its stock over the counter-that makes millions by providing counterespionage service to indus- trial firms.. Espionage in business is not an eth- ical problem; it's an established technique of business competition.

"WE DON'T MAKE THE LAWS"

Wherever we turn in business, we can perceive the sharp distinction between its ethical standards and those of the churches. Newspapers abound with sensational stories growing out of this distinction:

lSee Bruce D. Henderson. "Brinkmanship in Business," HBRMarch-April1967, p. 49.

1. We read one day that Senator Philip A. Hart of Michigan has attacked food processors for deceptive packaging of numerous products.s

2. The next day there is a Congressional to-do over Ralph Nader's book, Unsafe At Any Speed, which demonstrates that automobile companies for years have neglected the safety of car-owning families.f

3. Then another Senator, Lee Metcalf of Montana, and journalist Vic Reinemer show in their book, Overcharge, the methods by which utility companies elude regulating govern- ment bodies to extract unduly large payments from users of electricity+

These are merely dramatic instances of a prevailing condition; there is hardly a major industry at which a similar attack could not be aimed. Critics of busi- ness regard such behavior as unethical, but the companies concerned know that they are merely playing the business game.

Among the most respected of our business insti- tutions are the insurance companies. A group of insurance executives meeting recently in New England was startled when their guest speaker, social critic Daniel Patrick Moynihan, roundly berated them for "unethical" practices. They had been guilty, Moynihan alleged, of using outdated actuarial tables to obtain unfairly high premiums. They habitually delayed the hearings of lawsuits against them in order to tire out the plaintiffs and win cheap settlements. In their employment poli- cies they used ingenious devices to discriminate against certain minority groups. 5

It was difficult for the audience to deny the validity of these charges. But these men were busi- ness game players. Their reaction to Moynihan's attack was much the same as that of the automo- bile manufacturers to Nader, of the utilities to Senator Metcalf, and of the food processors to Senator Hart. If the laws governing their busi- nesses change, or if public opinion becomes clam- orous, they will make the necessary adjustments. But morally they have in their view done nothing wrong. As long as they comply with the letter of

2Tbe Nelv York Times, November 21, 1966. 3New York, Grossman Publishers, Inc., 1965. 4New York, David McKay Company, Inc., 1967. 5Tbe New York Times, January 17, 1967.

CARR Is Business Bluffing Ethical? 7

the law, they are within their rights to operate their businesses as they see fit....

Violations of the ethical ideals of society are common in business, but they are not necessarily violations of business principles. Each year the Federal Trade Commission orders hundreds of companies, many of them of the first magnitude, to "cease and desist" from practices which, judged by ordinary standards, are of questionable morality but which are stoutly defended by the companies concerned.

In one case, a firm manufacturing a well-known mouthwash was accused of using a cheap form of alcohol possibly deleterious to health. The com- pany's chief executive, after testifying in Washington, made this comment privately:

We broke no law.We're in a highly competitive industry. If we're going to stay in business, we have to look for profit wherever the law per- mits. We don't make the laws. We obey them. Then why do we have to put up with this "holier than thou" talk about ethics? It's sheer hypocrisy. We're not in business to promote ethics. Look at the cigarette companies, for God's sake! If the ethics aren't embodied in the laws by the men who made them, you can't expect businessmen to fill the lack. Why, a sud- den submission to Christian ethics by business- men would bring about the greatest economic upheaval in history!

It may be noted that the government failed to prove its case against him.

CAST ILLUSIONS ASIDE

Talk about ethics by businessmen is often a thin decorative coating over the hard realities of the game:

Once I listened to a speech by a young execu- tive who pointed to a new industry code as proof that his company and its competitors were deeply aware of their responsibilities to society. It was a code of ethics, he said. The industry was going to police itself, to dissuade constituent companies from wrongdoing. His eyes shone with conviction and enthusiasm.

The same day there was a meeting in a hotel room where the industry's top executives met with the "czar" who was to administer the new

8 CHAPTER 1 The Relevance of Morality to Business

code, a man of high repute. No one who was present could doubt their common attitude. In their eyes the code was designed primarily to forestall a move by the federal government to impose stern restrictions on the industry. They felt that the code would hamper them a good deal less than new federal lawswould. It was, in other words, conceived as a protection for the industry, not for the public.

The young executive accepted the surface explanation of the code; these leaders, all expe- rienced game players, did not deceive them- selvesfor a moment about its purpose.

The illusion that business can afford to be guided by ethics as conceived in private life is often fos- tered by speeches and articles containing such phrases as, "It pays to be ethical," or, "Sound ethics is good business." Actually this is not an eth- ical position at all; it is a self-serving calculation in disguise. The speaker is really saying that in the long run a company can make more money if it does not antagonize competitors, suppliers, employees, and customers by squeezing them too hard. He is saying that oversharp policies reduce ultimate gains. That is true, but it has nothing to do with ethics. The underlying attitude is much like that in the familiar story of the shopkeeper who finds an extra $20 bill in the cash register, debates with himself the ethical problem-should he tell his partner?-and finally decides to share the money because the gesture will give him an edge over the s.o.b. the next time they quarrel.

I think. it is fair to sum up the prevailing attitude of businessmen on ethics as follows:

We live in what is probably the most competi- tive of the world's civilized societies. Our customs encourage a high degree of aggression in the indi- vidual's striving for success. Business is our main area of competition, and it has been ritualized into a game of strategy. The basic rules of the game have been set by the government, which attempts to detect and punish business frauds. But as long as a company does not transgress the rules of the game set by law, it has the legal right to shape its strategy without reference to anything but its prof- its. If it takes a long-term view of its profits, it will preserve amicable relations, so far as possible, with those with whom it deals. A wise businessman will not seek advantage to the point where he generates dangerous hostility among employees, competi-

tors, customers, government, or the public at large. But decisions in this area are, in the final test, decisions of strategy not of ethics.

The Individual and the Game An individual within a company often finds it diffi- cult to adjust to the requirements of the business game. He tries to preserve his private ethical stan- dards in situations that call for game strategy. When he is obliged to carry out company policies that challenge his conception of himself as an eth- ical man, he suffers ....

If an executive allows himself to be torn between a decision based on business considera- tions and one based on his private ethical code, he exposes himself to a grave psychological strain.

This is not to say that sound business strategy necessarily runs counter to ethical ideals. They may frequently coincide; and when they do, everyone is gratified. But the major tests of every move in business, as in all games of strategy are legality and profit. A man who intends to be a winner in the business game must have a game player's attitude.

The business strategist'S decisions must be as impersonal as those of a surgeon performing an operation-concentrating on objective and tech- nique, and subordinating personal feelings ....

All sensible businessmen prefer to be truthful, but they seldom feel inclined to tell the whole truth. In the business game truth-telling usually has to be kept within narrow limits if trouble is to be avoided. The point was neatly made a long time ago (in 1888) by one of John D. Rockefeller's associates, Paul Babcock, to Standard Oil Company executives who were about to testify before a government investigating committee: "Parry every question with answers which, while perfectly truthful, are evasive of bottom facts."6 This was, is, and probably always will be regarded as wise and permissible business strategy.

FOR OFFICE USE ONLY

An executive's family life can easily be dislocated if he fails to make a sharp distinction between the

6Babcock in a memorandum to Rockefeller (Rockefeller Archives).

ethical systems of the home and the office-or if his wife does not grasp that distinction. Many a businessman who has remarked to his wife, "I had to let Jones go today" or "I had to admit to the boss that Jim has been goofing off lately," has been met with an indignant protest. "How could you do a thing like-that? You know Jones is over 50 and will have a lot of trouble getting another job." Or, "You did that to Jim? With his wife ill and all the worry she's been having with the kids?"

If the executive insists that he had no choice because the profits of the company and his own security were involved, he may see a certain cool and ominous reappraisal in his wife's eyes. Many wives are not prepared to accept the fact that business operates with a special code of ethics. An illuminating illustration of this comes from a Southern sales executive who related a conversa- tion he had had with his wife at a time when a hotly contested political campaign was being waged in their state:

I made the mistake of telling her that I had had lunch with Colby, who givesme about half my business. Colby mentioned that his company had a stake in the election. Then he said, "By the way, I'm treasurer of the citizens' commit- tee for Lang. I'm collecting contributions. Can I count on you for a hundred dollars?"

Well, there I was. I was opposed to Lang, but I knew Colby. If he withdrew his business I could be in a bad spot. So I just smiled and wrote out a check then and there. He thanked me, and we started to talk about his next order. Maybe he thought I shared his political views. If so, I wasn't going to lose any sleep over it.

I should have had sense enough not to tell Mary about it. She hit the ceiling. She said she wasdisappointed in me. She said I hadn't acted likea man, that I should havestood up to Colby.

I said, "Look, it was an either-or situation. I had to do it or risk losing the business."

She came back at me with, "I don't believe it. You could have been honest with him. You could have said that you didn't feel you ought to contribute to a campaign for a man you weren't going to vote for. I'm sure he would haveunderstood."

I said, "Mary, you're a wonderful woman, but you're way off the track. Do you know

CARR Is Business Bluffing Ethical? 9

what would have happened if I had said that? Colby would have smiled and said. 'Oh, I did- n't realize. Forget it.' But in his eyes from that moment I would be an oddball, maybe a bit of a radical. He would have listened to me talk about his order and would have promised to give it consideration. After that I wouldn't hear from him for a week. Then I would telephone and learn from his secretary that he wasn't yet ready to place the order. And in about a month I would hear through the grapevinethat he was giving his business to another company. A month after that I'd be out a job."

She was silent for a while. Then she said, "Tom, something is wrong with businesswhen a man is forced to choose between his family's security and his moral obligation to himself. It's easyfor me to sayyou should have stood up to him-but if you had, you might have felt you were betraying me and the kids. I'm sorry that you did it, Tom, but I can't blame you. Something is wrong with business!"

This wife saw the problem in terms of moral obligation as conceived in private life; her hus- band saw it as a matter of game strategy. As a player in a weak position, he felt that he could not afford to indulge an ethical sentiment that might have cost him his seat at the table. [This article was written in 1968. It reflects an attitude towards women that has been deservedly criti- cized in recent thinking.]

PLAYING TO WIN

Some men might challenge the Colbys of busi- ness-might accept serious setbacks to their busi- ness careers rather than risk a feeling of moral cowardice. They merit our respect-but as private individuals, not businessmen. When the skillful player of the business game is compelled to sub- mit to unfair pressure, he does not castigate him- self for moral weakness. Instead, he strives to put himself into a strong position where he can defend himself against such pressures in the future without loss.

If a man plans to take a seat in the business game, he owes it to himself to master the principles by which the game is played, including its special ethi- cal outlook. He can then hardly fail to recognize that an occasional bluff may well be justified in

10 CHAPTER 1 The Relevance of Morality to Business

terms of the game's ethics and warranted in terms of economic necessity. Once he clears his mind on this point, he is in a good position to match his strategy against that of the other players. He can then determine objectively whether a bluff in a given situation has a good chance of succeeding and can decide when and how to bluff, without a feeling of ethical transgression.

To be a winner, a man must play to win. This does not mean that he must be ruthless, cruel,

harsh, or treacherous. On the contrary, the better his reputation for integrity, honesty, and decency the better his chances of victory will be in the long run. But from time to time every businessman, like every poker player, is offered a choice between cer- tain loss or bluffing within the legal rules of the game. Ifhe is not resigned to losing, if he wants to rise in his company and industry, then in such a cri- sis he will bluff-and bluff hard ....

Business and Game-Playing: The False Analogy

DARYL KOEHN

A NUMBER OF BUSINESS writers have argued that business is a game and, like a game, possesses its own special rules for acting. While we do not nor- mally tolerate deceit, bluffing is not merely accept- able but also expected within the game of poker. Similarly, lies of omission, overstatements, puffery and bluffs are morally acceptable within business because it, like a game, has a special ethic which permits these normally immoral practices (Carr, 1968). Although critics of this reasoning have used deontological and utilitarian arguments (Bowie, 1993) to show that deceit in business is just as immoral as it is in any other realm of human prac- tice, little attention has been paid to the fact that the argument is one of analogy This oversight is unfortunate, given the strong intuitive appeal Carr's argument has to both business persons and to commerce students.

This paper aims to redress this oversight by crit- ically scrutinizing the form, as well as the content, of Carr's argument. The analogical argument for business' special ethic is only as strong as the alleged similarities between business and game- playing. In this paper, I will show that this analogy is quite weak and incapable of either providing much insight into business or of offering a reason to think that the ethics of business are, or even could be, like those of a game. I will also show in

passing that we might draw very different conclu- sions about the right way to act if business is analo- gized to other playful activities (e.g., a co-operative group treasure hunt) instead of poker. To make my argument, I will describe characteristic traits of a game and consider trait-by-trait whether business shares these features.

Trait One: Agame isplayed to win All competitive sports and many games are played to win. Of course, both have a social dimension. But the player who does not at least try to play well and to beat her opponents will likely not be much in demand as a golf or bridge partner. Where there are winners there are also losers. Business, how- ever, is not an activity in which one player- management-wins while the other players- customers, employees, suppliers-lose. While some corporations no doubt have an "us versus them" mentality, many routinely aim at "win-win" situations. They do so because they know they can- not stay in business if they aim at defeating those with whom they interact. True, businesses do com- pete with one another, But their individual survival requires that they try to prosper by accustoming their customers, to predictably satisfactory service and products so that these customers will buy from

From Journal of Business Ethics 16: 1447-1452, 1997. © 1997 Kluwer Academic Publishers. Printed in the Netherlands. Reprinted with permission from Kluwer Academic Publishers.