Find and Reflect on Your Dilemmas
The showstopper for many business professionals is that ethical dilemmas are not readily given to structured analysis, as one values a firm or balances the books. Nevertheless, one can harness the questions raised in the field of ethics to lend some rigor to one’s reflections. Laura Nash (1981) abstracted a list of 12 questions on which the thoughtful practitioner might reflect in grappling with an ethical dilemma:
1 Have I defined the problem correctly and accurately?
2 If I stood on the other side of the problem, how would I define it?
3 What are the origins of this dilemma?
4 To whom and what am I loyal, as a person and as a member of a firm?
5 What is my intention in making this decision?
6 How do the likely results compare with my intention?
7 Can my decision injure anyone? How?
8 Can I engage the affected parties in my decision before I decide or take action?
9 Am I confident that my decision will be valid over the long-term future?
10 If my boss, the CEO, the directors, my family, or community learned about this decision, would I have misgivings?
11 What signals (or symbols) might my decision convey, if my decision were understood correctly? If misunderstood?
12 Are there exceptions to my position, “special circumstances” under which I might make an alternative decision?
In addition to analysis, you can bring moral imagination to the reflection on ethical dilemmas. Mark Johnson defines moral imagination as “an ability to imaginatively discern various possibilities for acting within a given situation and to envision the potential help and harm that are likely to result from a given action.”19 Patricia Werhane lists four qualities necessary for moral imagination: “(1) a disengagement from an individual’s role, particular situation, or context; (2) an awareness of the kind of scheme one has adopted or that is operating in a particular kind of context; (3) a creative vision of new possibilities—fresh ways to frame experiences and new solutions to present dilemmas; and (4) an evaluation of the old context, scope or range of conceptual schemes at work, and new possibilities.”20
Act on Your Reflections
This may be the toughest step of all. The field of ethics can lend structure to one’s thinking but has less to say about the action to be taken. Confronting a problem of ethics within a team or organization, one can consider a hierarchy of responses, from questioning and coaching to “whistle blowing” (either to an internal ombudsperson or if necessary to an outside source) and, possibly, to exit from the organization.
MINI-CASE: GREENMAIL PAYMENT BY WALT DISNEY PRODUCTIONS, 1984
Some of the most interesting reflections on ethics in business emerge in dilemmas between two “bads” (i.e., asking which is less bad) or two “goods” (i.e., asking which is better). Choosing one ultimately impinges on another good, or perhaps commits a bad in the process. Consider the case of the attempted takeover of Walt Disney Productions by the corporate raider Saul Steinberg in June 1984. Disney’s CEO, Ronald Miller, faced the dilemma of whether to fight the takeover or pay “greenmail” to make Steinberg go away. The case discussion here highlights the kind of ethical considerations that Laura Nash’s framework can address.
Assessment of the Problem
Greenmail is the payment of a premium share price by a takeover target to a hostile buyer for the buyer’s accumulated shares in the target. Paying greenmail could be considered unethical for four reasons. First, it is a discriminatory payment; not all public shareholders enjoy the right to sell their shares to the company at the price paid to the greenmailer. It violates an implied duty of fairness to all shareholders. Second, it is viewed as the triumph of certain agents’ self-interest: senior managers rarely welcome the consequences of a hostile takeover and, so it is argued, sacrifice shareholders’ wealth by paying greenmail to preserve their jobs. Third, it is believed to effect significant transfers of wealth from the remaining public shareholders to a more powerful raider. Research finds that the rest of the shareholders are poorer after greenmail; thus, the consequences are bad. Fourth, greenmail payments (like blackmail) are actions not freely conceived and may set the pattern for further intimidation; expediency is a bad precedent. From a virtues perspective, greenmail is like a flashing sign that says, “We are weak.” Against such a list, no conditions appear to exist under which management would be justified in paying greenmail. Do the considerations in the case of Walt Disney’s greenmailing by Saul Steinberg warrant such a conclusion?
Origins of the Problem
In large part, Disney brought the unsolicited tender offer upon itself. Since the death of the founder, Walt Disney, in 1966, the firm had invested heavily in projects that failed to provide an adequate return. This led to a depressed share price. But the firm also retained assets such as a film library and valuable raw land in Florida that might be sold at a high profit. Steinberg saw this opportunity to buy Disney, restructure the firm, and earn a sizable return.
One significant influence in this problem was the intrinsic value of Disney. Before the hostile bid, Disney’s shares were trading around $47.50 apiece. Steinberg revealed in a filing with the SEC that he paid an average of $63.25 per share to acquire a toehold stake in Disney before mounting his hostile bid. This suggested that he estimated the true value of Disney to be something greater than his cost basis. The estimates of securities analysts at C. J. Lawrence ($64.00 to $99.00/share) and Goldman Sachs ($75.00/share) supported the views that Steinberg did not overpay for his shares and that the shares might be worth considerably more than his cost. The disparity among the valuations existed simply because Disney was worth one thing on a business-as-usual basis and something much higher if restructured.
Duties of Disney’s CEO and Board
Ron Miller, the CEO of Disney, was Walt Disney’s son-in-law. He was seen by many as the torchbearer for his father-in-law’s artistic and corporate vision. Unfortunately, as neither an artist nor an experienced theme-park professional, he carried none of the cachet of Walt Disney’s persona. Miller was a former professional football player who as CEO was greatly expanding the firm’s activities in real estate development. In the hostile tender offer, Miller confronted the dilemma of whether to serve Walt’s vision or the interests of shareholder value maximization. Legal obligation of the board and CEO rested on the latter.
Consequences
It is uncertain how employees or suppliers might fare after a takeover by Saul Steinberg, but his predilection to break the linkage between films and theme parks might lower the enjoyment for customers. On balance, greenmail to preserve the status quo might serve the interests of these groups. As for shareholders, circumstances might exist in which they would be better off after the greenmail payment even if they were discriminated against, their agents acted in self-interest, and the action was not freely taken. A decision involves weighing the evident costs of greenmail versus the potential benefits. One might argue that to place a price on discrimination or the loss of free choice is impossible and that managerial self-interest is always bad. Yet, in many ways every day, individuals submit to discrimination or loss of choice to enhance their own welfare. Furthermore, managerial self-interest is not harmful per se to shareholders; managerial and shareholder self-interest undoubtedly coincide in a wide range of decisions.
The key question is whether Disney’s shareholders would receive any benefits to offset the costs of greenmail.