In addition to Law Based Ethical Standards there are more general ethical standards. In other words, we've been talking about the overlap between law and ethics. But in certain situations, there are standards that might come into play when you're dealing with the right side of the ethics circle where there is no overlap. And let's take a look at those standards now because those are also very important since the law doesn't cover every ethical dilemma that you will encounter in negotiations. In terms of general ethical standards These are the main categories, there are organizational standards. There is the possibility of looking at a mentor and asking yourself, what would my mentor do when I'm faced with an ethical dilemma? And there are various personal standards. And I'll try to give you some examples of these standards. Let's start with the Organizational Standard. A few years ago there was a tragic situation in Chicago where a number of people took Tylenol and died as a result of poisoning. For instance, the second bullet there indicates a 27-year-old postal worker took tylenol and died. His brother and sister-in-law visited his home after the death and they took the same tylenol and they were also killed. The reasons for the death, cyanide poisoning. Someone tampered with bottles of tylenol in a store. They never found the person, and the manufacturer of Tylenol, Johnson &Johnson's, had a huge market share collapse. Before the episode, their market share was 35% of the market, which was 15% of Johnson & Johnson's profits. So, Johnson & Johnson had a very limited time to decide what to do. There were very intense internal negotiations within the company. The company considered recalling the product and 150 other alternatives. And finally, at the end of the day, what they came up with was a reliance on an organizational standard, the J&J credo. We believe our first responsibility is to the doctors, nurses and patients. Then to mothers and fathers and all others who use our products and services. Such as the injured parties. And when they looked at this organizational standard, then the decision became easy although it was very tough financially. Johnson & Johnson decided to recall 31 million bottles of tylenol which resulted in a $100 million loss. Then the following month, they came up with a special packaging. They announced triple sealed packaging to try to eliminate the problem in the future. And within two years, they had recovered their market share. They had achieved a 33% market share. So, an example of a company using an organizational standard to do the right thing and eventually the company in this case rebounded financially. Here's an example of relying on a mentor when your faced with an ethical dilemma. So we've got a young attorney who's involved in negotiations. He works for Qualcomm and the other party accidentally sent a fax that spelled out their negotiating strategy to this young attorney. And as he indicates in this article he was thrilled. To receive this fax with all this confidential information. So he immediately ran into the CEO's office with the fax. But, as he indicates here, before he could start to read it, the CEO asked, was this meant to go to us? And when I told him it wasn't, he said, send it back. I left with my tail between my legs. He's a very ethical person. So in your work, in your persona life, if you can think of a mentor who has high ethical standards, try to ask yourself what would this person do when you're faced with an ethical dilemma in negotiation. Here's an example of the gut test, which is basically how does your negotiating strategy feel in your guts? This is from the book Getting to Yes. Tourist bought a beautiful Kashmir rug from a family who had worked a full year to make it. The tourist cleverly offered to pay in German marks, and then offered worthless money from the inflationary pre-World War II Weimar period. Only when he told the story to shock friends back home, did he begin to think about what he had done to this family. In time, the very sight of his beautiful rug turned his stomach. Like this tourist, many people find they care a lot more in life than money, and beating the other side. Very common test is to ask how would you feel explaining your actions in a negotiation to your family? How would you feel if this, if your actions were printed on the front page of a newspaper? Here's a standard use it that comments simple self-test when deciding on the right course of action. Ask yourself if you would be embarrassed to have your family members learn of your actions or to have them reported on the front page of the local newspaper. If so, then don't do it. Legendary investor Warren Buffet uses a similar standard. I want my employees to ask themselves whether they are willing to have any contemplated act appear the next day on the front page of their local paper, to be read by their spouses, children, and friends. And then finally there is a golden rule standard. The golden rule as it turns out is part of every major religion in the rule. It's basically the rule of doing unto others as you would have them do unto you. Treating others as you want to be treated. And what that equates to in negotiation is fundamentally. Treating other people fairly. Most people want to be treated fairly, and therefore under the golden rule should treat others fairly. Let me ask you this question. I do a modified version of this in my course. Let's assume that someone has just given me $1,000. And they have asked me to divide this $1,000 with you. So this is a gift, but I'm supposed to divide it with you. I get to decide how much of the $1,000 I get to keep, and how much goes to you. After I've made my decision, you can either accept or reject the division that I have made. If you reject the way I divided the money, neither of us gets anything and the thousand dollars goes back to the donor. So again, I've just received a $1,000 from someone who tells me I'm supposed to split it with you. I decide how much I get of the thousand. You get to decide whether you'll accept that split. And if you don't accept it, we both receive nothing. Okay? So here is my split. I'm going to keep $900 and I'll give you $100 of the split. Would you accept that split or reject the split? Write down accept or reject. When I do this exercise in class and a student is offered this type of split. The large majority of students would reject this split. But then I ask them as I'll ask you now, what's your BATNA? What's your alternative when you reject the split? Think about that. When you reject $100, your BATNA is zero. So logically, if you were an economically rational person, what's the lowest amount you should accept in this split? You should accept one penny because then you're better half than having nothing. So why would you, I'm assuming that most of you rejected this split, except for those you who are economically rational. Why would you reject the split? Why would you reject $100? Forget about the $1,000 split, if I just walked up to you right now and said, will you accept this $100 or not? I'm guessing 100% of you would accept the $100. So why would you reject the $100 as part of this split? My guess is, based on many experiments in class, you would reject the split because you think it's unfair. You think it's unfair that I kept $900 and that you are only receiving $100. Most students in my class think it's unfair unless they receive at least $300. Some people want even more than that. So bottom line, we are not entirely economically rational beings. Fairness is important to us in life and especially in negotiation. So that's a very important principle to keep in mind when you're faced with an ethical dilemma, when you're dealing with other people. And it's also important to keep in mind that you should consider fairness when judging your own actions that might not affect other people. For example, you often have to balance the financial rewards of a negotiation, versus a fairness standard. Once, I was in charge of an executive program for a large company. And as part of this executive program, I hired a famous professor to teach for a week in the program. And we paid him $50,000. To teach the weak, and did a great job. The following year, the company told me that they were gonna have to cut back their budget. So I had to cut back each professor's payment. In this case, I cut back this professor's payment to $40,000, which was equivalent to the cutbacks of the other professors. And he was very upset with this, he said this is unfair I receive $50,000 last week, I'm not gonna teach for you this week. I knew he wasn't doing any other teaching that week. But he decided that fairness was more important to him than receiving $40,000 for one week of teaching. And we all have to balance that. Is fairness that important to you that you would give up $40,000? Was he acting in an economically rational manner? That's the kind of dilemma that we face. Because of the importance of fairness to us, and to the other side. Attorneys often hear from their clients I want to sue that company, they treated me unfairly. And the attorney tries to point out this lawsuit's gonna cost a lot of money. Are you willing to pay a lot of money to justify your principals of fairness? And sometimes the client pursues the lawsuit and does end up losing a lot of money. So think about this when making decisions, how important is fairness in relation of financial analysis of the negotiation. One final point regarding fairness, and that is, when you have a reputation for being honest and fair, it often can result in substantial benefits, financial benefits, in future negotiations. And here's an example. Let's go back to Warren Buffett, legendary investor. He decides to buy a $23 million company from Wal-Mart. Now typically, when somebody buys a company of this value, there are lot of transaction costs. Millions of dollars in legal and accounting fees. A lot of time spent in doing due diligence. In this case, all of that was avoided and Buffet concluded the negotiations with a two hour meeting and a handshake. Why? We did no due diligence, we knew everything would be exactly as Walmart said it would be and it was. In other words, he trusted Walmart as being a company that was fair and honest. And, as a result, both sides saved a lot of time and money. So, in conclusion, keep in mind that there are the three law-based ethical standards that we discussed. And, those very valuable guides during negotiations. And, what I would recommend before you enter into negotiations. Select one or more of the general ethical standards to use for guidance when ethical issues arise. Sometimes when ethical issues arise, it's tough to select a standard in the heat of the moment. So try to adopt one or more of these standards in advance, perhaps right now, and use it as a guide for future negotiations.
