“A N I N VESTI G ATI ON O F DE CISIO N-MAKING INF LUENC ES A N D E T H I CAL I SSUE S I N BUSI NE SS, W I TH R E F ERE NC E T O T WO F I L M S : ‘ ERIN BROCKOVICH’ AND ‘ROGUE
TR ADE R’
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Contents
1. Introduction.!
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2. Comparative analysis of possible individual and situational references on ethical decision making of the main characters of each film.!
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2.1 The importance in normative ethics: “what actors do”.!
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2.2. “Mental programming”. Geert Hofstede’s (1980, 1994) approach to ethics.!
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2.3. Personal Values.!
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2.4. Psychological factors. Lawrence Kohlberg (1969) Cognitive Moral Development.!
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2.5. Situational factors. Issue/Context Related Factors.!
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2.6. Issue Related Factors and Moral Intensity.!
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3. Comparative analysis of key ethical issues in the two films.!
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3.1 Key differences in consequentialist and non consequentialist theories.!
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3.2. Consequentialist Theories. Utilitarianism.!
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3.3. Non-consequentialist Theories. Ethics of Right and Justice.!
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3.4. Consequentialist Theories. Egoism.!
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3.5. Non-consequentialist Theories. Ethics of Duties.!
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3.6. Alternative perspectives on ethical theory.!
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4. Management implications.!
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4.1. Investment in cognitive moral development.!
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4.2. Motivation to act on moral hazard.!
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4.3. Restructure of roles/system changes.!
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4.4. Code of conduct/ethics.!
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5. Conclusion.!
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6. References.!
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1. Introduction.
With consumers, pressure groups and the media recognising the power of firms, ethical practice by firms is more important than ever. While the ethical decisions of firms and individuals
may not necessarily be a legal issue, their ability to impact on the well-being of others is substantial. The study of business ethics not only allows one to rationalise morality within a multitude of contexts but make more defined decisions of morality and what is wrong and right.
Kester et al. (n.d.) argues that the power of films to enlighten an audience that may lack business experience or any organisational context is key to the understanding the character and
situational factors of an ethical decision. While not a substitute, the use of films can highlight
the interplay of issues, principles and personalities that characterise particular ethical dilemmas (Padelford, 2004).
Rogue Trader highlights how the existence of loop holes in procedure and company philosophy
can lead to breaking the rules while Erin Brockovich shows the differences in the understanding of ethical decisions. Both films relay the importance of individual and situational references
when viewing ethical hazards.
2. Comparative analysis of possible individual and situational references on ethical decision making of the main characters of each film.
2.1 The importance in normative ethics: “what actors do”.
Individual’s perspective strongly determines the course of action taken when faced with an
ethical dilemma. First of all, it is naive to assume that all beings have the same “rational” perspective on what is deemed right and wrong in terms of morality. Descriptive ethics can provide and important addition to normative perspectives that tend to make assumptions about
the state of the world. As rather than telling one what people should do, the use of descriptive
ethics seek to describe what actually influences the decision making process.
2.2. “Mental programming”. Geert Hofstede’s (1980, 1994) approach to ethics.
Under Hofstede’s term of ‘mental programming’, he defines numerous individual characteristics that can effect an individual’s attitude to ethical decision making. For example, Erin Brokcovich embodies the values that can be described as “femininity” perceptive on ethics, placing
motivation of her actions on the basis of relationships and people. She makes numerous references during the film to support this; firstly, her past desire to attend medical school, her
statement in court “good mum, nice person, decent citizen” (Erin Brockovich, 5min). In contrast, Nick Leeson, the main character in the Rogue Trader, is money motivated placing high
motivation in “masculinity” perspective in ethics. His first year in trading was a big success despite breaking trade rules. Vitell et al. (1993) argues that context plays a role in forming the individuals school of thought. A background fostered by relationships is likely to produce a femi-
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nist approach to ethics. Likewise, an individual’s experience of achievement and material possessions is likely to produce a masculine approach to ethics.
Femininity and masculinity branches of ethics can translate into individualism and collectivism
motivations. The value of people and relationship naturally allows Brockovich to take a collective stance, where she sought a settlement against PG&E’s violation of human dignity, a social
orientation. Driven by his own desires, Leeson saw client money as a means to an end, not fully
recognising the potential cost to human dignity.
The degree to which an individual appreciates future rewards, where a short or long term approach can influence ethical decision making is important. Brockovich was driven to win compensation not just for today’s victims, but ensuring that “whatever your girls’ girls’ need” (Erin
Brochovich, 1h57min) was compensated for. One may contrast this against Leeson’s short
sightedness. The focus on only fulfilling the next target overruled his ability to gauge sustainability of his actions, “long term is tomorrow morning” (Rogue Trader, 29min).
2.3. Personal Values.
Personal values are regarded as ‘the moral principles of accepted standards of a person’ (Crane
and Matten, 2010). One such value that clearly divides the two lead characters is the issue of
integrity. Integrity in the context of business ethics is defined as an adherence to moral principles or values (Crane and Matten, 2010) and represents a unity of one’s beliefs, perhaps regarded as consistency. Leeson’s compromise on this duties to his clients for the sake of a bonus
shows little integrity. Brockovich demonstrates integrity through her consistency to her moral
principles of justice to reject an early settlement and to continue the investigation into PG&E
despite blackmail.
2.4. Psychological factors. Lawrence Kohlberg (1969) Cognitive Moral Development.
One should argue that differences in the understanding of the moral issue effect the individual’s ability to act on the moral issue. Psychological factors such as Kohlberg’s three stages of
moral development provide a good explanation of the actors decisions. Level one is primarily
concerned with self interest and the external rewards or punishments. Level two states that the
individual does what is expected of them by others. Leeson operates at a level between one and
two. The “masculinity” approach to ethics in combination to the socialisation of his morals by
the banking sector inevitability leads to breaking morals. Level three is the highest level of reasoning, where the individual develops a more autonomous level of decision making, emphasising the principles of justice and rights rather than external influences. Brockovich is very close
to this level. Her recognition of a greater cost to human dignity extends beyond a cash settlement. There are notes where clearly situational circumstances dictate to some extent influences on individual ethical decision making.
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2.5. Situational factors. Issue/Context Related Factors.
Hograth (1980) as cited in Micheal Bommer et al. (1987) states that people have limited information processing capacity, limiting the perception of the actor. The actor would be selective
in the perception of the information around them, arguing that environmental factors play a
stronger role before the use of individual factors.
(Source: Bommer et al. 1987)
For example, one may take for granted that within the context of an organisation people are
likely to do what they are rewarded for. Organisation rewards such as bonuses were a contributive factor in Leeson’s ethical decision making. He was willing to compromise ethical standards
to fulfil targets. Baker even states that “being good is not good enough” (Rogue Trader, 48min)
suggesting that the banking’s darwinist approach to survival encouraged Leeson to break the
rules. To some extent, Brockovich was motivated by the rewards in place. In light of PG&E
conviction Brockovich valued her bonus “I did a job, you should reward me accordingly. It’s not
complicated” (Erin Brockovich, 1h59min). Punishing unethical behaviour can provide a disincentive for individuals break ethical guidelines. If ethical violations are unnoticed and thus unpunished they are likely to be repeated (Crane and Matten, 2010). The ability to hide the losses
allowed Leeson to avoid punishment.
Underlying the influence of rewards and punishment is the degree of bureaucracy in business
organisations (Crane and Matten, 2010). Bureaucracy’s are formal in nature and often encumbers a hierarchical structure. Leeson’s decisions to transfer losses to the five-eights account ran
thorough his assistants who would transfer the money. His orders to his assistants were met
with little resistance suggesting that orders from superiors can “free” the individual from moral
decision making, suppressing their moral guilt. Given a “non professional” context a rational
actor would question Leeson’s motivations.
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2.6. Issue Related Factors and Moral Intensity.
The context of the issue inevitably effects the degree of moral intensity to the decision maker.
Moral intensity is defined as the relative importance of the ethical issue, a bearing on the process that decision makers go though. Jones (1991) identifies six factors that effect the perceived
moral intensity of a situation. Highlighting a few examples demonstrate the importance of
contextual events.
(Source: Jones, 1991)
For example, immersing herself in the environment among the victims of the PG&E incident,
Brockovich has a higher moral intensity to the situation due to the feeling of “nearness”,
whereas, Leeson was operating in another geographical location, allowing him to face away
from those he is implicating. Jones highlights four levels of proximity in the forms of social,
cultural, psychological, or physical factors, and emphases that those who may operate a more
personal level of ethics (e.g. “femininity” ethics) would generate a better understanding of the
issue. The issue of health problems gave Erin Brockovich and the eventual fall of Barings bank
both generated high magnitude of consequences. An issue that has very low moral intensity
may lead to a situation failing to be recognised, until the intensity grows. Leeson respected the
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moral issue only when accumulating deficits grew out of control, enhancing the probability of
effect.
3. Comparative analysis of key ethical issues in the two films.
3.1 Key differences in consequentialist and non consequentialist theories.
Key ethical theories can generally be differentiated into two groups were we can measure the
moral judgment of an outcome based on the principles of the decision maker (nonconsequentialist) and outcome of an action (consequentialist perspectives). These theories in
particular could be described as “normative”, making certain assumptions about the nature of
the world, and how human beings should behave.
3.2. Consequentialist Theories. Utilitarianism.
The notion of utilitarianism is a key feature in the film Erin Brockovich. Crane and Matten
(2010) state the basic principle of utilitarianism as follows;
“According to utilitarianism, an action is morally right if it results in the greatest amount
of good for the greatest amount of people affected by the situation.”
Reflecting the notion of the “greatest good for the greatest number of people”, Brockovich’s
emphasises focus on collective welfare for the small town of Hinkley. Strongly linked to Kaler’s
(1999) theory of harm and benefit, where the harm of the citizens due to PG&E failure demanded justice in the form of compensation. Utilitarianism seeks to find an “ideal” view, one
that generates the greatest welfare for those effected. However, Derry and Green (1989) argue
that the notion of utilitarianism has complications. Firstly, is the PG&E compensation amount
of $333 million representative of the costs of human dignity? Moreover, should the benefits be
split evenly, who is one to decide the split of the money to each case giving rise to the “distributive” problem of justice.
3.3. Non-consequentialist Theories. Ethics of Right and Justice.
Brockovich was motivated by the ethics of rights and justice. Citizenship can be defined in
terms of a set of individual rights which firms and actors have duties to respect. Brockovich
applying utilitarian principles was aiming to bring justice against PG&E for the violation of
human rights. Generally, ethical theories based on fundamental human entitlements are very
powerful (Crane and Matten, 2010). Justice can be distributed in a manner of need and merit
which may inherit inequality among individuals. While an egalitarian approach may be fait it
might not provide the full compensation of justice to each individual. All the victims of
Hinkley had the opportunity to vote for a closed trial, each having their say on justice.
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3.4. Consequentialist Theories. Egoism.
Crane and Matten (2010) state that according to egoism, an action is morally right if the decision maker freely decides in order to pursue a long or short term desire. Leeson is subject to
this theory of ethics. Practically, this theory works fine once refined to accommodate a mechanism in society that makes sure that no individual egoist’s desires are pursued at the expense of
others. Given that Barings bank did not provide this mechanism in the form of controls or internal audit, it allowed Leeson to exploit the rules. While he had the intention of restoring the
accounts by the end of the financial year, making the ends justify the means, he lost control of
the situation. Egoist behaviour can be motivated from pity for others, this helps explain why
he kept his assistant’s job after she made an error. Wood et al. (1988) states that egoism remains
strong in the patterns of moral reasoning in professionals, estimates of 8 to 10% of the business world is egoist, suggesting this attitude is groomed into institutions.
3.5. Non-consequentialist Theories. Ethics of Duties.
Based on the idea of absolutism, where human’s possess eternal, abstract and unchangeable
principles. Kant states that if a decision is ethical it would pass all three maxims of consistency,
the preservation of human dignity and possessing universally acceptable responses among your
peers. In the case of PG&E, they either lacked the moral imagination to comprehend the
complexity of applying Kant’s framework or Kant’s framework is too optimistic of human nature. PG&E’s deceptive statement regarding the waters safety and the use of blackmail represent a violation of their duties. However, Charles Embry’s decision whistle-blow against his
employers by keep incriminating evidence shows that PG&E actions were not universally accepted, and thus according to Kant are unethical.
3.6. Alternative perspectives on ethical theory.
Based on the theme of integrity and the influences of justices and utilitarianism, there are also
approaches based on virtue ethics were ‘good actions come from good persons’. Manifested by
the notions of honesty, mercy and loyalty. Brockovich’s desire for justice enables her to lead the
good life, providing to the holistic needs of society. Doris (1998) argues while “leading the good
life” is attractive for society and the individuals that populate it, it is subject to arguments over
how ideals are constructed. As situational influences can potentially lower the moral intensity
of ethical decision making, there are barriers translating the ideas of virtue ethics into action.
4. Management implications.
Business ethics are too important to be left purely to chance, one can make recommendations
to managers to prevent the series of events that can lead to unethical decision making through
the use of specific policies, practices and programmes.
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4.1. Investment in cognitive moral development.
Management researchers argue that business environments such as bureaucracy can dampen
ethical decision making. Trevino (1992) argues that CMD based education has a significant impact on moral reasoning, thereby informing individuals on various levels of Kohlberg’s theory
can have a positive impact on moral development. Correlated with both group decision making exercises and the influence of good leadership, individuals have the propensity to develop
an encouraging attitude to the values of business ethics. The ability to recognise the moral issue in itself is key in linear theories. Moreover, Kohlberg suggests that at the highest level of
CMD, the individual has the ability to perceive the ethical hazard without the interference of
external influences like bureaucracy.
4.2. Motivation to act on moral hazard.
The ability to inform individuals of the process of ethical decision making will not encourage
the discretion of individuals to act unless an appropriate system is in place. Research from the
Ethics Resource Centre (2010) shows an increasing retaliation rate for reporting misconduct to
their superiors (up from 12% to 15% between 2007 and 2009), where the most common form
of retaliation is the exclusion from manager decisions and work activity (62%). Not only unethical, but also damaging to work commitment, unless managers are mindful to ethical decision making then events such as PG&E would repeat. U.S. financial regulations, for example,
Sarbanes Oxley (SOX) provide an anonymous channel for the public/employees to confide in.
Although there is an anonymous channel, research into moral intensity shows that if there is a
high social consensus over the ethical decision, then action is more likely, managers should be
more open to ethical considerations. Watchdogs need to be implemented to avoid manager
retaliation.
4.3. Restructure of roles/system changes.
Minkes et al. (1999) highlight that improving ethics within a business requires a restructure and
changes in firm practice. A CEO maintaining a journal of ethical problems, audits, open discussions with managers of ethics and seminars between managers and staff can improve standards.
While managers fear that expressing an open opinion of ethics may be hazardous to promotion, in reality it represents a niche market, one becoming increasingly popular. A responsible
CEO can account for the actions of the organisation by following this system of ethical reporting. Governing bodies would need to inspect the intentions of the CEO, possibly by expanding
the roles of non-executives. The use of ethics consultants as a third party can help a firm develop a system from the top-down.
4.4. Code of conduct/ethics.
The use of a written code of conduct can increase ethical standards. Becker (1987) states that a
code of ethics is easy to enforce and can be used as an aid for managers to use when refusing an
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unethical request impersonally. Empirical evidence shows that while firms believe codes of ethics can improve standards, they will be hard to enforce. Who is one to state what is and is not
ethical within an industry or firm? Co-operation between societies, firms and governing bodies
is essential, although costly in time.
5. Conclusion.
In conclusion, enforcing managerial techniques is a difficult challenge on the issue of business
ethics. Motivation, systems and roles must be adapted to inspire a code of ethics. To prevent
an individual deviating from a code of conduct requires full commitment from society, firms
and watchdogs alike to improve standards.
The difficulty of enforcing business ethics standards is reflected in the films of Erin Brockovich and Rogue Trader. Actors under pressure may look for such loop holes in the system.
Though one must note that while the films portray the message that is generally consistent
with real examples, their dramatisation in nature means that an audience should not consider
the events on face value.
The analysis of both films demonstrates significant importance to both individual and situational factors that clearly influence ethical decision making. Individual factors can be attributed to the moral judgements actors make. However, in terms to the recognising ethical problems and committing an action to them, it is situational factors that appear most influential.
Considering situational factors strongly influence individual behaviour, those in such corporate
contexts require efficient systems and codes of conduct for developing ethical decision making.
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Soderbergh, S., 2000. Erin Brockovich, Jeresy Films/Universal Pictures.
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