1. The Challenges (and Opportunities) of Ethical Decision-Making
David E. Freel
Association of Government Accountants (AGA) Professional Development Conference
October 26, 2016

2. Thank you Thank you for the invitation to be here
Feel a certain 'kinship' from my experience
Thank you for your public service
Not always easy; sometimes thankless task
But remember, your service has meaning
10/26/16
2016 AGA Conf - Prof Freel

3. Who your speaker is Yes, I'm a Lawyer, and a proud one
Have 3 primary roles in life, in order:
Family
Education – 10 yrs - OSU graduate collegiate educator
Law
Litigator / Clinical Instructor OSU
Retired Regulator - 17 as Ethics Commission ED (2010, after 35 yrs; now 40+ in public service)
National/international opportunities exploring ethical issues, regulation, legislation across sectors
10/26/16
2016 AGA Conf - Prof Freel

4. Today's Presentation:
So, nothing’s really happened in the Ethics World since we last talked, huh?
Refresh what we mean by this “Ethics stuff,’” and why our decision process is critically important?
How do we overcome inherent “hurdles” to ethical outcomes?
Please feel free to ask Q's at any time
Wrong!
10/26/16
2016 AGA Conf - Prof Freel

6. VW
Forbes

9. Outlook from My Experience
Ethics/integrity is a core leadership competency
Most of us see ourselves as ethical
And, most of the time, we are and may even cast a shadow of integrity
But, many of us don't recognize our own capability to make the same wrong choice as someone whom we view at a distance
All of us, have the potential to act unethically, and make that wrong choice
Challenge is figuring out how to consistently clear inherent hurdles to integrity
10/26/16
2016 AGA Conf - Prof Freel

10. Dr. Catharyn A. Baird ELI and EthicsGame Creator
…all of us seem to have a desire to be ethical and/or to be perceived as ethical.
Citing the work of Norma Haan, et al, University of California, Berkeley, psychologist, and the book, On Moral Grounds: The Search for Practical Reality
10/26/16
2016 AGA Conf - Prof Freel

11. Last time I was here we defined our terms in light of natural differences:
Ethics - commonly described as:
Shared community values/principles/standards
Inclusive of, but much broader than, what some might think of "ethics", as purely compliance
And, as distinguished from Morality:
Our personal compass of core values/principles
Organizational Ethics as:
Values/ standards across the organization/ sector
10/26/16
2016 AGA Conf - Prof Freel

12. Another 'Ethics' Layer of Governance - Professional Standards:
Your Ethics Code for the AGA
ASPA Code of Ethics
Goals are more aspirational
Broader conceptual outlook
May be less defined, rigid
Often more positive than negative
10/26/16
2016 AGA Conf - Prof Freel

13. Summary: Leadership Ethics and Integrity Pyramid
Our Values
& Decisions
Corporate Values
Compliance & Ethics
Codes, Mission Statements
Law as a Foundation
 Baseline 
10/26/16
2016 AGA Conf - Prof Freel

14. Although I, along with some others in the Ethics arena, would suggest:
The true Q is not:
What is Government Ethics?
The real Q's are:
What do you want your Ethics to be?
What do you want your Leadership legacy to be?
10/26/16
2016 AGA Conf - Prof Freel

15. HBS Prof. Joseph L. Badaracco, Jr.
…life seldom presents [ethical] challenges and problems in the form of stark, either-or choices.
2016 AGA Conf - Prof Freel

16. Decision Process Contrasts When It Comes to Ethical Challenges:
Issue:
View:
Financial, legal, HR  IT issues, public policy challenges
Explicit and routine process
Subject to analyses
Often critical discussion
Ethics challenge 
Often left to instinct
“Gut” response
Ad hoc to the challenge
Difficulty is that we often use emotion, rather than reason, to resolve ethical issues.
Ordinarily, if we use reason, often it is to attempt to justify our action after the fact.
Prof Paine: Ethics - A Basic Framework
10/26/16
2016 AGA Conf - Prof Freel

17. Benefits of a Decision Making Process Noreena Hertz, Professor of Economics, University College London
Eyes Wide Open: How to Make a Smart Decision in a Confusing World
Anxiety, stress and fear can distort decisional choices
Stress – makes us prone to tunnel vision
Anxiety – become more risk-averse & deferential to authority
Need to mindfully acknowledge our feelings
Serves as “emotional thermostat;” recalibrates decision making
Acknowledge tendency to incorrectly process challenging news
Accept data that supports hope in stressful moments because it provides dopamine-like rush, but tend to ignore if not supportive
Must actively push ourselves to hear bad as well as good
Have to ask probing Q’s of experts and ourselves to overcome flaws and biases
2016 AGA Conf - Prof Freel
10/26/16

18. Sensibility - Our "gut"; "instinct"
Nothing wrong with ethical lens influenced by sensibility
Research supports  based in part upon our prior experience
Facing instantaneous responses, following our instinct generally produces ethical outcomes
When we face complex ethical challenges instinct alone is often insufficient  requires us to consider a strategic process:
Ex.'s of a start-up, new compensation incentives, employee actions, new customer initiatives or competitive challenges, etc.
Might use Wells Fargo as an ex.
10/26/16
2016 AGA Conf - Prof Freel

19. HBS Prof Paine's Ethics Decision Making Framework:
Facts and Ethical Issues
Stakeholders
Ethical Standards
Objectivity and Transparency
10/26/16
2016 AGA Conf - Prof Freel

20. Stakeholders Anyone that can affect or is affected by a decision
Office Holder/Boss
The Public
Media
Political/Personal Opponents
Family, Friends, Colleagues
You
10/26/16
2016 AGA Conf - Prof Freel

21. 1. Facts and Ethical Issues
Stop and Think - Emotion can derail objectivity
Trust "gut" to alert you to issue, but critically examine facts and issues
Appreciate the difficulty and potential bias in fact gathering, in data - facts can be fluid
Be careful to exercise critical thinking and ask Q’s to assure the accuracy of data
To help offset our natural bias in "framing" info in the manner most acceptable to our preconceptions
10/26/16
2016 AGA Conf - Prof Freel

22. 2. Stakeholders Identify stakeholders
Those affected or can affect decisions
Who's making the decision?
Impact and consequences of actions upon stakeholders
Ethical issues may not be self-evident
10/26/16
2016 AGA Conf - Prof Freel

23. 3. Ethical Standards
Explore Duties, Rights, Best Practice, & Commitments to Stakeholders
10/26/16
2016 AGA Conf - Prof Freel

24. Ethical Standards - Impact on Stakeholders - Four Q’s:
Is the action consistent with the actor's basic duties?
Does it respect the rights and other legitimate claims of affected parties?
Does it reflect best practice?
What expectations/processes do we see that work that we can put in place to encourage/support ethical choice?
Whistle blower anonymity and safe space, for ex.
Is it compatible with the actor’s own deeply held commitments (core values)?
10/26/16
2016 AGA Conf - Prof Freel

25. 3. Ethical Standards CODEX principles
Explore Duties, Rights, Best Practice, & Commitments to Stakeholders
Ex of Whistle Blower ethical motivations
Law (Rules/ CFR requirements) as baseline
Code of Ethics, Mission, Vision and Values
May be more than one ethical answer
CODEX principles
10/26/16
2016 AGA Conf - Prof Freel

26. Prof. Paine's CODEX
Paine supports discussion of standards by the compilation of 8 Ethical Principles found in leading ethical codes: Fiduciary Act in company's best interest Property Respect property & others property rights Reliability Keep your commitments Transparency Conduct business openly and truthfully Dignity Respect dignity of all people Fairness Treat everyone fairly Citizenship Act as responsible community members Responsiveness Be responsive to legitimate claims/concerns
10/26/16
2016 AGA Conf - Prof Freel

27. GM, Takata, and

28. Presentation by Gates Garrity-Rokous
Compliance Team Build
Presentation by Gates Garrity-Rokous
Chief Compliance Officer - OSU

29. 4. Objectivity and Transparency
Rationalizations can create hurdles to objectivity
Conflicts of Interest can threaten our impartiality
10/26/16
2016 AGA Conf - Prof Freel

30. Some of the Hurdles/Rationalizations to Ethical Decision Making:
Slippery slope
Victim mentality
Everybody does it
Cultural context - organizational and demographic "practice" or "the way things are done"
Don’t challenge ‘authority’, obedience mentality
Forgetfulness of the '2 Rules'
Conflicting Interests – self-interest
"Inappropriate" self-interest - evolutionary influence
"Moral disengagement"
2016 AGA Conf - Prof Freel
10/26/16

31. Michael Josephson
Self-interest has a powerful tendency to disable our objectivity and befuddle our ability to live up to moral principles.
10/26/16
2016 AGA Conf - Prof Freel

32. Why is Self-Interest critical to a discussion of ethics?
10/26/16
Why is Self-Interest critical to a discussion of ethics?
Affects us all
Can have a very positive impact; but also negative one
Even the most thoughtful and upstanding of us
Can influence us negatively even when we are trying to prevent it from doing so
Difficult to compensate for a bias for which we are unaware
HBR article on “Inappropriate” self-interest
Inappropriate Self-Interest: A Beguiling and Unconscious Influence on Decision Making by Sydney Finkelstein, Jo Whitehead, Andrew Campbell 
Inappropriate Self-Interest: A Beguiling and Unconscious Influence on Decision Making
by Sydney Finkelstein, Jo Whitehead, Andrew Campbell  - Harvard Business Review article
2016 AGA Conf - Prof Freel

33. Recognizing “Inappropriate” Self-Interest:
Three questions:
Are any options likely to be especially attractive or unattractive, particularly given the short-term interests of the decision makers?
Are these interests likely to conflict with the interests of the main stakeholders?
Are any conflicting interests likely to be strong enough to significantly distort the decision?
10/26/16
2016 AGA Conf - Prof Freel

34. Bandura's Moral Disengagement
Moral Self-Regulation System
Underlying values and standards that potential actions are judged against
Cognitive Disengagement Processes
Moral justification
Euphemistic language
Advantageous comparison
Displacement of responsibility
Diffusion of responsibility
Distortion of consequences
Attribution of blame
Dehumanization
Behavior
Example:
Stealing is wrong; Breaking the law is wrong
Use friend’s copyrighted movies/ CD's
“I’m just borrowing them”
= Euphemistic language
Stanford Prof Albert Bandura

35. 4. Objectivity and Transparency
Rationalizations can create hurdles to objectivity
Conflicts of Interest can threaten our impartiality
"Inappropriate" self-interest
Some suggested solutions/strategies
Paine's 3 Tests of Long-Term outcomes
Visibility
Generality
Legacy
Voicing our Core Values
Transparency
10/26/16
2016 AGA Conf - Prof Freel

36. Some of Prof Gentile V to V’s (Darden) “Starting Assumptions”:
I want to act ethically
Studies  most people want to be ethical
I have done this before and can do this more often, and better
It is easier in some contexts than others
I am more likely to do this if I have thought about how I may respond
Mastering and delivering responses to rationalizations can empower others who share my views to act
But I cannot assume I know who those folks are
10/26/16
2016 AGA Conf - Prof Freel

37. Prof Gentile's "To-Do" List (7 Pillars):
Self-knowledge, self-image, and alignment
Develop your own 'story'; 'align' it with who you are
Purpose - Define (own/share) your purpose
Values - Recognize and appeal to "shared" values of others
Normality - Expect conflicts and don't overreact
Reasons and rationalizations - Anticipate your response
Voice - Learn and practice voicing your own values
Choice - Choose to act and enable others to do so
Know what has and not worked in the past; no choice is a decision
Courage may be required, and + outcomes are not guaranteed
10/26/16
2016 AGA Conf - Prof Freel

38. 4. Objectivity and Transparency
Rationalizations can create hurdles to objectivity
Conflicts of Interest can threaten our impartiality
"Inappropriate" self-interest
Some suggested solutions/strategies
Paine's 3 Tests of Long-Term outcomes
Voicing our Core Values
"Creative" Ethical Alternatives
Transparency
10/26/16
2016 AGA Conf - Prof Freel

39. One Potential Solution - Bend the Rules - Quiet Leaders
Creative, ethical problem solving
Quiet leaders:
Don't break the rules
But don’t want to be mechanical and cause harm
Look to imaginative and creative means, and only if necessary, bend the rules
Use this means as an opportunity to uphold their values and commitments
HBS Prof Badaracco
10/26/16
2016 AGA Conf - Prof Freel

40. Creative Ethical Alternatives
Finally, if we start with, and prioritize notions of the best ethical solution, we may avoid many of ethical challenges and significant accountability costs
10/26/16
2016 AGA Conf - Prof Freel

41. Paine's - Basic Ethics Framework (Adapted):
10/26/16
Paine's - Basic Ethics Framework (Adapted):
Facts and Ethical Issues
Stakeholders assessment
Ethical Issues and the impact of options
Identifying Standards
Duties, Rights, Best Practice, Core Values
Creative Ethical alternatives - may be more than 1
Impartiality Objectivity
Protect against self-interest, bias, rationalization
Transparency, Fairness
Reflection
2016 AGA Conf - Prof Freel

42. Summary: Leadership Ethics and Integrity Pyramid
Our Values
& Decisions
Corporate Values
Compliance & Ethics
Codes, Mission Statements
Law as a Foundation
 Baseline 
10/26/16
2016 AGA Conf - Prof Freel

43. Some simplistic ethical tests:
Trust your “gut,” particularly in instantaneous events
"Stop and Think" in difficult circumstances, and use your brain to "frame" ethical options (4 Q's; law; codes)
Seek the experience or wisdom of others re: your ethical options
What don't you want your Mom (or loved one, or future employer) to read on Facebook about your actions?
Will you be able to sleep at night or look yourself in the mirror taking the action?
Don't forget the "2 Rules"
What do you want your leadership integrity to be?
10/26/16
2016 AGA Conf - Prof Freel

44. Michael Josephson
We judge ourselves by our intention, but we are judged by our last worst act.
10/26/16
2016 AGA Conf - Prof Freel

45. And... Nice People, Relax!
2016 AGA Conf - Prof Freel

46. Groucho Marx
Those are my principles. And if you don't like them... I have others.
10/26/16
2016 AGA Conf - Prof Freel

47. Thank You Again! Thank you for your attention Questions?
David E. Freel
10/26/16
2016 AGA Conf - Prof Freel