Reference no: EM133214406

Lying

Earlier in this chapter, we discussed the definitions of lying and how lying relates to distorting the truth. We mentioned three types of lies, one of which is joking without malice. The other two can become troublesome for businesses: lying by commission and lying by omission. Commission lying is creating a perception or belief by words that intentionally deceive the receiver of the message-for example, lying about being at work, expense reports, or carrying out work assignments. Commission lying also entails intentionally creating "noise" within the communication that knowingly confuses or deceives the receiver. Noise can be defined as technical explanations the communicator knows the receiver does not understand. It can be the intentional use of communication forms that make it difficult for the receiver to actually hear the true message. Using legal terms or terms relating to unfamiliar processes and systems to explain what was done in a work situation facilitate this type of lie.

Lying by commission can involve complex forms, procedures, contracts, words that are spelled the same but have different meanings, or refuting the truth with a false statement. Forms of commission lying include puffery in advertising. For example, saying a product is "homemade" when it is made in a factory is lying. "Made from scratch" in cooking technically means that all ingredients within the product were distinct and separate and were not combined prior to the beginning of the production process. Many food and cleaning supply labels use the word "natural" to imply that its ingredients are healthier, organic, or nongenetically modified. In reality, the word "natural" is not regulated and does not have to mean any of these things.

Omission lying is intentionally not informing others of any differences, problems, safety warnings, or negative issues relating to the product or company that significantly affect awareness, intention, or behavior. A classic example of omission lying was in the tobacco manufacturers' decades-long refusal to allow negative research about the effects of tobacco to appear on cigarettes and cigars. When lying damages others, it can be the focus of a lawsuit. For example, prosecutors and civil lawsuits often reduce misconduct to lying about a fact, such as financial performance, that has the potential to damage others. A class-action lawsuit was filed against Ticketmaster for charging what customers thought were order processing and UPS delivery fees that actually turned out to be profit centers for the firm.21 Manipulating financial reports to inflate earnings is also a form of omission lying that can result in fraud.

The point at which a lie becomes unethical in business is based on the context of the statement and its intent to distort the truth. A lie becomes illegal if it is determined by the courts to have damaged others. Some businesspeople may believe one must lie a little or that the occasional lie is sanctioned by the organization. The question you need to ask is whether lies are distorting openness and transparency and other values associated with ethical behavior.

Conflicts of Interest

A conflict of interest exists when an individual must choose whether to advance his or her own interests, those of the organization, or those of some other group. The three major bond rating agencies-Moody's, Standard & Poor's, and Fitch Ratings-analyze financial deals and assign letters (such as AAA, B, CC) to represent the quality of bonds and other investments. Prior to the financial meltdown, these rating agencies had significant conflicts of interest. The agencies earned as much as three times more for grading complex products than for corporate bonds. They also competed with each other for rating jobs, which contributed to lower rating standards. Additionally, the companies who wanted the ratings were the ones paying the agencies. Because the rating agencies were highly competitive, investment firms and banks would "shop" the different agencies for the best rating. Conflicts of interest were inevitable.

To avoid conflicts of interest, employees must be able to separate their private interests from their business dealings. Organizations must also avoid potential conflicts of interest when providing products. The U.S. General Accounting Office found conflicts of interest when the government awarded bids on defense contracts. Conflicts of interest usually relate to hiring friends, relatives, or retired military officers to enhance the probability of getting a contract.

To avoid conflicts of interest, employees must be able to separate their private interests from their business dealings. Organizations must also avoid potential conflicts of interest when providing products. The U.S. General Accounting Office found conflicts of interest when the government awarded bids on defense contracts. Conflicts of interest usually relate to hiring friends, relatives, or retired military officers to enhance the probability of getting a contract.2 Please read the Experimental Exercise (textbook page 69). In a one-page paper (not including the Title or Reference pages) describe what you would do regarding the following:

If you refuse to accept the business without any legitimate reasons (presently, there are none), your company will be blacklisted in that country-which amounts to about 20 percent of gross yearly profit.

If you accept the business and do not pay the 3 percent commission, the purchasing manager will make much trouble when he receives your shipment. No doubt he will not release the 5 percent bank guarantee letter about the quality and quantity of the material.

If you accept the business and pay the 3 percent commission, you feel that it would malign your company's reputation and your beliefs.