Reference no: EM131661357

The Ethics of Confrontation

The “Don’t rock the boat” attitude is frequently seen as the virtuous road. Confrontation is messy—there are often hurt feelings. There are embarrassing revelations. There are destroyed careers. There are costs. Whether confrontation involves sexual misconduct by an assistant school principal or cooking the books by a manager or bond trader, the impact is the same. Human nature flees from such situations. Further, there is within human nature that rationalization that avoiding confrontation is being “nice,” and nice is associated with ethics. There are also the harsh realities of confrontation. To confront the assistant school principal with allegations and carry through with a disciplinary process for the loss of a license to teach are time-consuming and reflect on the school and administrators who hired him in the first place. There is exposure to liability. A good employee evaluation means that the employee is happy, there are no reviews, no messy discussions, and no allegations of discrimination. Not confronting a rogue trader means enjoying the ride of his performance and earnings and worrying about consequences at another time when perhaps something else will come along to counter- balance any of the harmful activities. Not insisting that a loan be written down carries with it the comfort of steady growth and earnings and a hope that future financial performance can make up for the loss when it eventually must be disclosed. There is a great deal of rationalization that goes into the avoidance of confrontation. There is a comfort in maintaining status quo. There is at least a postponement of legal issues and liabilities. Often, avoiding confrontation is a painless road that carries with it the hope that whatever lies beneath does not break through and reveal its ugliness. Often, confrontation carries with it the hope that a problem will solve itself or become a moot issue. The Harms of Avoiding Confrontation Postponing confrontation does not produce a better result when the issue at the heart of the needed confrontation inevitably emerges. Those harms include liability, individual harms, reputational damage, and the loss of income as the issue chugs along without resolution. Physical Harm In the Muroc case (Reading 6.21), all of the districts were liable for failing to take action and then issuing glowing letters of recommendation. Had the issue of sexual misconduct and the assistant principal been confronted the first time there was misconduct, there would not have been the remaining three schools and victims. Liability Increased Another example is the eventual confrontation between Ford and Firestone over who and what was responsible for the Ford Explorer debacle and the accidents and deaths. The two companies’ long-standing business relationship and an unwillingness to deal with data and questions accomplished little. With more information percolating on a regular basis, both companies acknowledged, even as they battled with each other in a media confrontation, that neither has emerged with its reputation intact in the public eye. Civil litigation and an investigation by the federal government as well as depositions of top executives in the companies trickled out to the public. Those depositions have had some inconsistencies with some of the public statements by Bridgestone/Firestone. For example, Bridgestone/Firestone has issued public statements that it was not aware of peeling issues with its tires used on the Ford Explorer. However, a deposition of Fire- Stone's chief of quality reveals that he believes he discussed the issue of the tires with the company’s CEO in 1999, a full year before the issue became public with the resulting recall. David Laubie, who retired from the company in May 2000, said that he handled consumer claims and quality control issues for the company and had received complaints that he passed along to the CEO in memo form as well as in their regular meetings. In testimony before Congress in September 2000, Firestone’s executive vice president, Gary Crigger, testified that the company only became aware of the problem in July or August 2000. Another issue in the case has been Firestone’s allegation that Ford did not put the proper tire pressure instructions with the Ford Explorer. Firestone said that Ford’s recommendation of an unusually low tire pressure, 26 pounds per square inch, caused the sidewalls to flex and get hot, which then weakened the tires. However, the depositions of both Mr. Laubie and the current quality control chief of Firestone indicate that no one from Firestone ever discussed the low tire pressure issue with anyone at Ford.95 The lack of confrontation before, during, and after the public revelations about some issue, what- ever that may prove to be, surrounding the Ford Explorer and its tires cost both companies in terms of reputation and perhaps liability. The Deceptive Lull of “Being Nice” One of the faulty assumptions in avoiding confrontation is that the “niceness” benefits the individuals affected. A good performance evaluation is beneficial to the employee. Not taking disciplinary action permits a teacher or administrator to continue his career and earn a living. Not raising a financial reporting issue means that shareholders can continue to enjoy returns and market value. Not questioning an employee’s unusual success means that the earnings figures stand unscathed. Many are protected when confrontation is avoided. The difficulty with the protection argument is that it presumes that the truth will not emerge. When it does, the preservation of a career in light of information introduces greater liability. Termination of an employee for cause may carry with it the difficulties of challenge and even litigation. Not terminating an employee for cause who goes on later to do more harm exposes the company to liability. The difficulty with not disclosing matters that affect earnings is that when those matters do emerge, there is not just the resulting restatement of earnings but also the accompanying lack of investor trust and resulting reduction in market value. The greatest harm in avoiding confrontation is that what the confrontation could have minimized is exacerbated by the postponement. The Ethics of Confrontation Although not widely accepted as a principle of virtue, there is an ethical duty of confrontation. Edmund Burke was a proponent of such a duty with his admonition of two centuries ago, “All that is necessary for evil to triumph is for good men to do nothing.” There is the more modern phraseology that holds that if there is a legal or ethical problem in a company and an employee or manager or executive says nothing, they become part of the problem. However, one of the reasons for the hesitancy in confrontation not discussed earlier is a certain degree of ineptness on the part of those who must do the confronting. If confrontation is indeed a virtue, are there guides for its exercise? The following offers a model for confrontation. Determine the Facts An underlying disdain for confrontation arises because too often those who do the con- fronting are wrong. Prior to confrontation, prepare as if you were working on a budget, a product launch, or a financing. Know what is happening or what has happened, and obtain as much background information as possible. Preparation also serves as protection for any fears of liability from taking action. Employers need to understand that well-documented personnel actions are not a basis for discrimination suits. And termination of employees who are harming others is not actionable if the harm is established. If You Don’t Know the Facts, or Can’t Know the Facts, Present the Issue to Those Involved and Affected Ford and Firestone will perhaps not know the issues of liability and accountability for years to come with regard to the Explorer and the tires. However, their lack of information should not have prevented them from confronting each other or confronting the customers and public with the information they did have. In the case of allegations or when an employee has raised a question about how a particular matter is being carried on the books, you may only be presented with one side. That lack of information need not preclude you from raising the question. In the case of the school administrator, the students made an allegation against the assistant principal. The principal has no way of knowing whether the allegation is true or false, but he can go to the assistant principal and raise the issue and then can proceed with the types of hearings or inquiries that can provide the information or at least constitute the confrontation. A financial officer can hear from employees a number of views on carrying certain items on the books. The very definition of materiality opens the door to that type ofdisagreement. But a good financial officer knows that an open discussion of the issue, and confrontation of the issue with those who tout various views, is the solution that serves the company best in the long run. Without such confrontation, the failure to listen to an employee’s view exacerbates the eventual fallout from a bad decision. The public confrontation of the issue is, in and of itself, insurance against the fallout should that decision prove to be wrong. Always Give the Opportunity for Self-Remedy One of the reasons confrontation enjoys such universal disdain is that very often the confrontation is done circuitously. If your attorney has done something questionable, confront him or her first, and then report them to the state bar for discipline. If an employee has engaged in misconduct, tell them, and don’t let him or her hear it from someone else. If earnings are overstated, employees should work within the company for self-remedy before heading to the SEC. One of the virtue constraints in the ethics of confrontation is having the courage to discuss the issues and concerns with those who are involved in creating them. An end run is not a confrontation. It is an act of cowardice that can result in the liability dis- cussed earlier. Don’t Fear the Fallout and Hassle The reasons for the lack of confrontation discussed earlier included the realistic observa- tion that many avoid confrontation because it is too much trouble. However, as also noted earlier, if there is a problem that remains unconfronted, it does not improve with age. Indeed, the failure to make a timely confrontation often proves to result in more costs in the long run. Hassles don’t dissipate as confrontation is postponed or avoided. Conclusion The ethics of confrontation are quite simply that confrontation is a necessary part of managing an honest business. Confrontation openly airs disagreement. Confrontation prevents the damage that comes from concealed truth. Confrontation preserves reputtions when it produces the self-remedies that are nearly always cheaper than those imposed from the lack of confrontation. Niceness is rarely the ethical route when issues and facts need to be aired. Confrontation, although not always pleasant, is often the only resolution of a problem

What factors contribute to the failure to confront an issue?

What are the consequences of the failure to raise an issue, whether legal or ethical, when it first arises?

What steps could a business take to encourage confrontation?