1. Negotiation
GSCM 506-01
Ethics in Negotiations
Chapter 9
10 October 2012

2. What Do We Mean by Ethics and
Why Do They Matter in Negotiations?
Ethics:
• Are broadly applied social standards for what is
right or wrong in a particular situation, or a
process for setting those standards
• Grow out of particular philosophies which
– Define the nature of the world in which we live
– Prescribe rules for living together
• Result of global legal requirements or guidelines
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3. Four Approaches to Ethical Reasoning
• End-result ethics
– The rightness of an action is determined by evaluating its
consequences
• Duty ethics
– The rightness of an action is determined by one’s
obligation to adhere to consistent principles, laws and
social standards that define what is right and wrong
• Social contract ethics
– The rightness of an action is based on the customs and
norms of a particular society or community
• Personal ethics
– The rightness of the action is based on one’s own
conscience and moral standards 3

4. Examples of Ethical Conduct
that Arise in Negotiation
• Using ethically ambiguous tactics: It’s
(mostly) all about the truth
• Deception by omission versus commission
– Omission – failing to disclose information that
would benefit the other
– Commission – actually lying about the common-
value issue
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5. Rationalizations for Unethical Conduct
• The tactic was unavoidable
• The tactic was harmless
• The tactic will help to avoid negative consequences
• The tactic will produce good consequences
• “They had it coming,” or “They deserve it,”
• “They were going to do it anyway, so I’ll do it first”
• “They started it”
• The tactic is fair or appropriate to the situation 5

6. How Can Negotiators Deal With the
Other Party’s Use of Deception?
• Ask probing questions
• Phrase questions in different ways
• Test the other party
• “Call” the tactic
• Ignore the tactic
• Discuss what you see and offer to help the other
party change to more honest behaviors
• Respond in kind
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7. Ethical Standards to Follow in Negotiations
1. Ethical Perceptions 8. Governing Laws
2. Responsibilities to the 9. Small,
Employer Disadvantaged, and
Minority Owned
3. Conflict of Interest Businesses
4. Gratuities 10.Personal Purchases
for Employees
5. Confidential Information
11.Responsibilities to
6. Treatment of Suppliers the Profession
7. Reciprocity 12.Global Supply
Management
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8. Key Ethic Negotiation Considerations
 International Considerations and Law Applications
• Country Laws could apply (e.g., Supplier’s Country)
– Restraint of Trade laws
– Trade Compliance laws/regulations
• United Nation’s Convention on Contracts (UCC)
• Contracts for the International Sale of Goods (CISG)
• Foreign Corrupt Practices Act (FCPA)
– Anti-bribery Issues
– Record Keeping Requirements
– Penalty Provisions
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9. Restraint of Trade Laws Must Be Avoided
 Robinson-Patman Act
• Designed to prevent price discrimination that reduces
competition in interstate commerce
 Act prevents a supplier from offering the same quantity of a
specific material to competing buyers at different prices,
unless:
• One buyer is offered a lower price because his or her
purchases entail lower manufacturing or distribution costs
for the supplier
• One buyer is offered a lower price in order to meet the
legitimate bid of a competing supplier
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10. Key International Considerations
 United Nations’ Convention on Contracts for the
International Sale of Goods (CISG)
• Ensure there are no unethical conditions
attached to the sale of goods
• Stipulate in the purchase order or contract which
body of law is acceptable to both buyer and the
seller
• Stipulate a mutually acceptable “choice of
forum” at which any lawsuit will be heard
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11. Key International Considerations
 Foreign Corrupt Practices Act
•Anti-bribery issues
•Record keeping requirements
•Penalty provisions
 Amendment to the Securities Exchange Act of
1934
 Objective was to curtail U.S. corporate
involvement in foreign commercial bribery
activities
 Enhance the image of the United States
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12. Ethical Four Way Test
 Is it the TRUTH?
 Is it FAIR to all concerned?
 Will it build GOODWILL?
 Will it be BENEFICIAL to all concerned?
Most Importantly:
What Will People Think if Your Actions Show
Up in the Washington Post or Wall Street
Journal?
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13. 1. Ethical Perceptions & 2. Responsibilities
1. Avoid the intent and appearance of unethical or
compromising practice in relationships, actions,
and communications
2. Demonstrate loyalty to the employer by diligently
following the lawful instructions of the employer,
using reasonable care and only the authority
granted by the employer
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14. 3. Conflict of Interest & 4. Gratuities
3. Refrain from any private business or professional
activity that would create a conflict between
personal interests and the interests of the
employer
4. Refrain from soliciting or accepting money,
loans, credits, or prejudicial discounts, and
the acceptance of gifts, entertainment, favors,
or services from present or potential suppliers
that might influence, or appear to influence,
supply management decisions
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15. 5. Confidential Information & 6. Treatment of
Suppliers & 7. Reciprocity
5. Handle confidential or proprietary information
belonging to employers or suppliers with due care
and proper consideration of ethical and legal
ramifications and governmental regulations
6. Promote positive supplier relationships through
courtesy and impartiality in all phases of the supply
management cycle
7. Refrain from reciprocal agreements that restrain
competition
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16. 8. Governing Laws & 9. Small, Disadvantaged,
and Minority Owned Businesses
8. Know and obey the letter and spirit of laws
governing the supply management function, and
remain alert to the legal ramifications of supply
management decisions
9. Encourage all segments of society to participate
by providing access for small, disadvantaged, and
minority-owned businesses
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17. 10. Personal Purchases for Employees &
11. Responsibilities to the Profession
10.Discourage supply management’s involvement in
employer-sponsored programs of personal
purchases that are not business related
11.Enhance the proficiency and stature of the supply
management profession by acquiring and
maintaining current technical knowledge and the
highest standards of ethical behavior
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18. 12. Global Supply Management
12. Conduct international supply management in
accordance with:
• the laws, customs, and practices of foreign
countries,
• consistent with your country’s laws,
• your organization’s policies,
• and these Ethical Standards and Guidelines
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