ETHICS AND DECEPTION IN NEGOTIATION
Negotiation does leave space for some deception; however, its level has to be evaluated on both legal and ethical scales... An ethical dilemma between appropriate and inappropriate techniques for negotiation is often faced by negotiators. It is often said that "Effectiveness in negotiations depends in part upon one's willingness to lie."1 Lying is defined as "any intentionally...
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Negotiation does leave space for some deception; however, its level has to be evaluated on both legal and ethical scales...
An ethical dilemma between appropriate and inappropriate techniques for negotiation is often faced by negotiators. It is often said that "Effectiveness in negotiations depends in part upon one's willingness to lie."1 Lying is defined as "any intentionally deceptive message which is stated"2, and may take the form of misrepresentation, bluffing and deception.3 It is such an integral part of negotiation tactic that it is almost impossible to take part in the game of negotiation and not play it; also considered necessary and effective in some degree by most negotiators and scholars.4 However, no doubt, its permissibility and legitimacy in negotiation have to be testified on legal and other ethical grounds or standards. An effective negotiator also takes the elements of personal integrity, credibility and reputation, based on truthfulness, fairness and honesty, seriously.5 This is the point where most negotiators find themselves in an ethical dilemma – to be fair, but also mislead.6 The fault line between ethically appropriate and inappropriate behaviour is not clear. Therefore, legal, professional codes of ethics, morality, perceptions, practical experience have been used to arrive at ethical tests. The tremendous real-life professional challenges faced by negotiators, while keeping a high ethical standard during negotiations, shall always be an evolving study of best practices and techniques. This essay examines theoretical and practical elements faced by negotiators and a possible operating framework to support the best endeavours of negotiators.
LAW: The Minimum Standard
Fraud – law
In order to determine the legality of a deceptive behavioural tactic, a negotiator has to evaluate the law on fraud, apart from general duty of 'good faith' which regulates negotiations and is recognized by most legal systems.7 The laws may differ between countries, yet the underlying principles remain the same.8 In common law, a fraudulent bargaining tactic involves 6 elements: "When a speaker makes a (1) knowing, (2) misrepresentation of, (3) material, (4) fact, (5) on which the victim reasonably relies, (6) causing damage."9 Thus, to commit fraud, a negotiator needs to have knowing state of mind with respect to the misstatement. Often, questions arise when the negotiator recklessly disregards truth. Is it deemed fraudulent or just a mistake?10 Mostly, courts have taken a broader view to include recklessness within the definition of "knowing".11
Misrepresentation also requires a positive misstatement of fact - does it cover silence or non-disclosure?12 Generally, law imposes duty to disclose: "When the negotiator (a) makes a partial disclosure that is or becomes misleading in light of all facts, (b) has vital information about transaction not accessible to the other side, (c) when parties stand in fiduciary relationship, and (d) when special transactions are at issue, such as insurance contracts, securities etc."13 This gives rise to another question: Whether statements of opinion, intention, predictions, which are not statements of facts, covered by law?14 Courts appear to have taken a liberal approach to include lies regarding opinion or intention, if they intentionally conceal underlying set of facts.15 However, it depends upon facts and circumstances of each case.16
Finally, the essential element of fraud law lies in the detriment caused to opponent due to speaker's misstatement.17 To prove reliance upon misrepresentation that led to damage is challenging for a fraud victim. Without showing actual quantifiable loss, no claim for fraud arises.18 One obvious question arises about misrepresentations: Which do not cause damage, but still unethical? Law fails to account for such situations. For a non-lawyer negotiator, it is even more complicated to assess deceptive conduct based upon these complex legal notions. For Lawyers, regulations do not end here.
Professional code of conduct
Legal negotiations conducted by lawyers are regulated by rules of professional code of conduct – either enacted, by the state where a lawyer practises and is enrolled, or by internationally recognized bodies.19 This includes rules promulgated by the American Bar Association.20 Rules 4.1, 4.2, 4.3 are specifically relevant in negotiation context.21
Rule 4.1 (a) bars lawyers from misrepresenting material fact or law. The comments suggest that misrepresentation regarding estimates of price, value placed on a transaction, and intention regarding settlement claim are immaterial, but lies regarding alternatives are considered material.22 Further, Rule 4.1 (b) requires disclosure of material facts to third parties when necessary to avoid criminal or fraudulent act by a client, unless prohibited by Rule 1.6, which imposes duty on lawyers to keep client confidences.23 Rule 4.2 imposes an obligation on a lawyer to be fair and truthful in its dealing with other parties.24 While Rule 4.1 is qualified by confidentiality, there is no such restriction under Rule 4.2.
The wording of the ABA Rules, and specifically, the use of the word 'material', seems to give leeway to some amount of bluffing and puffing, which is considered common.25 For example, lying about bottom line or reservation price, exaggerated demand, is an accepted and prevalent norm during negotiation and may not be considered material.26 Such practices are considered effective bargaining tactics, as they enable testing and perceiving the opponent's commitment and limitation towards their preferences.27 Most professional negotiators term them as 'bluffs', which do not fall within the legal criteria of lying.28 In any case, it may be legal, only till a jury decides otherwise in a given case.
On the other hand, there is information clearly regarded as material: information regarding condition of a car by a car dealer in the salepurchase deal. Lies in this respect would fall within fraudulent conduct.29
In the above scenario, what is material and immaterial or fair and truthful raises relevant issues of construction and interpretation of ABA Rules. There are also other issues. Firstly, negotiation covers such a vast variety of issues, including terrorism to family to contractual disputes, and the process differs from place to place, subject matter to subject matter, that such norms require high degree of universality to cover all issues and situations, which is difficult.30 Secondly, bald use of words "fair" and "truthful" in the rules is not very useful and ambiguous, as it may be perceived differently in different circumstances and communities of negotiators.31 This issue demands specific concern in cross-culture negotiations. Thirdly, by imposing broad rules of confidentiality and disclosure in the same vein, these rules not only run contrary to lawyers' inherent belief to protect their client's interest and case, but also conflict with lawyers' self-interest and desire to win.32 The same law that categorizes unfair and unethical behaviour also requires a lawyer to lie and mislead to meet client interest.33 In other words, it creates an ethical conflict between loyalty towards wider ethical norms and clients' needs.34 Further, lawyers' willingness to comply with such rules is also doubtful.35 Few argue that compliance with ethical norms would injure interest, to suggest withdrawal from cases, in case of conflict; however, it does not seem to be an appropriate solution in all cases.36 Lastly, it is inevitable that these external rules on ethics conflict with internal rules, which cast further doubt on its enforceability.
The professional code of conduct, like law, is confined to set legal parameters. Lies or deceits, without proof or detriment, are let free by law, but that does not suggest they are ethically acceptable.37 Further, as negotiations normally take place behind closed doors, the legal elements which constitute misrepresentation, fraud, and deception remain unexamined and questionable in the negotiation context, unless brought under legal scrutiny. Consequently, in the absence of discovery and punishment, these standards are seen to be violated more easily and regularly. More so, in case of model ethical rules which are generally difficult to enforce.38 This sets in a customary trend, with many lawyers likely to violate these standards, which makes it more difficult for honest lawyers to comply, as it may disadvantage their clients' interest.39 Merely because everyone seems to behave in like manner does not make that behaviour ethically permissible. As rightly said, ethics is more demanding than law, self-interest, client interest, and customs.40
Legal norms are accompanied by their own limitations and often lead to ambiguity in absence of precedent. Yet, it cannot be doubted that to some extent, it provides baseline standard for acceptable negotiation conduct or behaviour. Nevertheless, an ideal and ethically conscious negotiator would test its behaviour on higher standards of ethics and morality.
Beyond Law: Ethics and Morality
"Don't govern your life by what's legal or illegal, govern by what's right or wrong."41 In negotiation, people who rely on the letter of legal rules as a strategy for plotting unethical conduct are very likely to get into deep trouble. But people who rely on a cultivated sense of right and wrong ...are likely to do well."42
The Schools
Beyond legal prohibitions, negotiators have to form their own decision about truth telling and formulate their own strategy on ethics, guided by moral aspirations and other pragmatic considerations including reputation, personal integrity, etc.43 In this process of constructing its own ethical framework, a good starting point for the negotiator would be to analyze the three most common schools of bargaining ethics prescribed by Professor Shell44;
1. The "It's a Game" Poker School – This school sees negotiation as a "game" of poker with certain "rules", as defined by legal regime alluded above.45 It considers all conduct or behaviour which falls within these rules as ethical, whereas outside as unethical.46 Thus, all bargaining tactics are considered part of the game as long as it is legal.47 Like a game of poker, this school assumes deception and bluffing as essential for effective game playing, as it also assumes that these tactics are legal, and thus, there are no hard feelings against the deceiver.48 However, Poker School has its own disputed points: Firstly, it assumes bargaining as game; secondly, as legal rules differ between communities, industries and jurisdictions, it is impossible to know the rules by hand; and thirdly, law of fraud is uncertain even within one jurisdiction.49
2. The "Do The Right Thing Even If It Hurts" Idealist School – This school derives its force from philosophy and religion.50 It considers bargaining as a social process without any unique set of rules and applies the same ethical principles followed at home to negotiations; if it is wrong to mislead in regular social discourse, it is also wrong in negotiations.51 Idealists firmly believe in honesty and candidness, and even at the cost of selfinterest, deception is rarely permitted.52 People are not treated as means. Lies designed to achieve personal gains are considered unethical. Idealists disapprove the notion of negotiation perceived as a game and take negotiations more seriously than members of Poker School.53 Idealists have such strict principles and limitations that it is, sometimes, unrealistic to proceed with them at the bargaining table.54 At the same time, they are easily susceptible to exploitation, especially at the hands of those who do not follow the same standards, which may prejudice client's interest.55 However, no doubt, this school aspires to live to the highest standard of personal integrity and reputation.56
3. The "What Goes Around Comes Around" Pragmatist School – It includes some elements of its own combined with the previous two schools.57 This school is concerned about negative effects of deceptive conduct on existing and future relationships.58 Like Poker School, it prefers not to use lies and misleading conduct, as they come around to haunt the user in the long run, causing injury to credibility, which is essential to preserve relationships and reputation in the community.59 Although the pragmatist may lie more often than an idealist, it draws a line between lies and facts, which are irrelevant to the transaction and hard to pin down; thus, a misleading statement to justify them is acceptable.60 Pragmatist school also suggests usage of deceptive blocking techniques – tactics to avoid answering questions (e.g. answer a different question, change the subject, ask another question, etc.), at the same time protect their leverage, while minimizing its negative effect on relationship and reputation.61
To summarize, behaviour is considered ethical as long as it is within the boundaries of Poker School. Poker School comes not only with the uncertainties of legal regime, but also ignores moral standards, which are not covered by law. Thus, it may not meet expectations of the conscientious negotiator. Idealist standards are another extreme with high ethical demands, which may be difficult to follow and commit to, especially in tricky situations. At the same time, it is ideal for negotiators with high standards of integrity and credibility. The pragmatists' approach balances the other two schools. It appears to be an ideal middle ground for negotiators concerned about reputations, relationships and ethics, along with permissible usage of deceptive techniques. However, negotiators are free to adopt the school they most relate to, during negotiations, or create their own school with attributes of one or more schools.
Ethical tests
Apart from the above, it is also suggested that negotiators subject themselves to the following five tests, when struggling with ethicality of their behavior;62
1. The front-page test63 – tests negotiators' comfort level, if their actions and statements appear on the front page of a newspaper or are reported on TV; or if they have to appear before a board of inquiry to narrate their acts.64 If a negotiator does not feel completely comfortable with this exercise, then his behaviour may be questionable and regarded as unethical.65
2. Reverse Golden Rule66 – states "Do unto others as you would have them do unto you."67 Each side in negotiation generally finds its own views and action justified, and only recognises faults of the other side.68 However, this strategy puts the negotiator in the shoes of an opponent, to question himself, how he would feel if the tables were turned and his opponent did the same to him.69 If he would not like such behaviour, that means the behaviour in question may be regarded as unethical.70
3. Role modeling71 – poses various questions to the negotiator as a role model.72 And, if he would advise others to behave or act in that way; including would he be proud to see his child acting this way; or if everyone bargained this way, would the resulting society be desirable?73
4. Third-party advise74 – Advise of a neutral and impartial third-party who can assess the situation purely on facts not tainted by personal opinion and his belief or perception on the negotiators' behaviour may be regarded helpful in distinguishing between ethical and unethical conduct.75 5. Strengthen your bargaining position76 – A wellprepared negotiator is less likely to be tempted to lie. This strategy requires a negotiator to strengthen his position by preparing in advance, including analyze facts, information and interests, conduct market research, improve alternatives, options, decide on reservation price, etc.
As the schools provide overall guidelines on ethical behaviour, the tests provide guidance for evaluating one's own specific act, which helps to categorize it within ethical and unethical conduct. It lends support to the concept of self-criticism, a useful tool against self-justification.
What if the other side uses dirty bargaining tactics? – Learn the Art of Self-Defense
No matter which ethical school one follows, it is inevitable to come across opponents who may use illegal or unethical bargaining tactics.77 These tactics influence a negotiator's ethical decision-making.78 As rightly said, "In negotiations, often the challenge is the other side's behaviour, not yours."79 The other side's lie is the most common incentive for one to lie.80 There is no end to these so-called "defensive-ethics", wherein opponent's unethical behaviour encourages one to respond with the same behaviour.81 It seems to be the most obvious and self-justified reaction, when it is not. Effective self-defense tactics can help combat such dirty opponent tactics, which may include constant probing for information, asking direct questions, raising the issue with the opposite side, conducting due diligence, verifying all material information, focusing on your needs and interests than the other side's lie, involving third-party, using objective criteria, maintaining standards, using truth to advantage, caveating settlement agreement (e.g. representations and warranties), inventing alternate options.82 The idea is to avoid falling into the opponent's trap, where you lose your legal and ethical privileges.83
Most negotiators fail to realize that there is no end to lying. A lie would lead to another lie, and the more one has to pay to be honest, more the time and effort to reach a settlement.84 It not only reduces the bargaining zone, but also destroys a perfectly negotiable deal, leaving both parties disappointed.85 Even when a negotiator manages to deceive its opponent to get a favourable deal, benefits are short-term and often come to haunt in the long-term.
Conclusion
Talking about ethics in negotiation, there is no black and white answer. Negotiators have to often walk down the fault line, deal with ambiguity to find their own ethical framework. Many suggest formulation of more formal and strict ethical rules to reflect higher morality as the solution.86 But negotiation as a field with such vast boundaries, it is impossible to confine it to a universal paradigm. Professor James White rightly suggests - "To draft effective legislation is difficult; to draft effective ethical rules is close to impossible."87
Ethics does matter, and so do reputation, personal integrity, credibility, and relationships in negotiation. Thus, it is important to stick to truth as far as possible, but this does not imply absolute obligation to be candid and truthful at all times. Negotiation does leave space for some deception; however, its level has to be evaluated on both legal and ethical scales. In case of dilemma, start with law as minimum standard and aspire to reach higher towards ethical standards. Together, the schools of ethics and the tests provide exhaustive guidance to a negotiator in ethical dilemma, at the bargaining table. Additionally, its self-regulating nature protects negotiators from incentives or temptations of a lie. Negotiators may find its own school of ethics, where it can aim as high as an idealist. However, it is important to note, if you fall below the Poker School standards, you also fall below the required ethical standards, with real risk of legal or criminal liability, which shall be avoided. In such extreme circumstance, it is better to withdraw than to lie.
When the other side is lying – defend yourself from liars. Defensive ethics is not the solution – knowing the right selfdefense tactic is.
2. Roy J. Lewicki and Robert J. Robinson, 'Ethical and unethical bargaining tactics: An empirical study' (1998) 17(6) J Bus Ethics 665.
3. Lewicki and Robinson 1998 (n2).
4. Wetlaufer 1990 (n1); Roberts and Palmer 2005 (n19).
5. Carrie Menkel-Meadow and Michael Wheeler, What's fair: Ethics for negotiators (John Wiley & Sons 2004).
6. James J. White. 'Machiavelli and the Bar: Ethical Limitations on Lying in Negotiation' (1980) 5(4) American Bar Foundation Research Journal 926.
7. G. Richard Shell, 'Bargaining with the devil without losing your soul', What's fair: Ethics for negotiators (2004).
8. Ibid.
9. Ibid.
10. Ibid.
11. Ibid.
12. Ibid.
13. Ibid.
14. Ibid.
15. Ibid.
16. Ibid.
17. Ibid.
18. Ibid.
19. Simon Roberts and Michael Palmer, Dispute processes: ADR and the primary forms of decision-making (Cambridge University Press 2005).
20. ABA Model Rules of Professional Conduct ("ABA Rules").
21. White 1980 (n6).
22. Robert H. Mnookin, Scott R. Peppet and Andrew S. Tulumello, Beyond winning: Negotiating to create value in deals and disputes (Harvard University Press 2000).
23. Ibid.
24. Ibid; White 1980 (n6).
25. G. Richard Shell. 'When is it Legal to Lie in Negotiations?' (1991) 93 Sloan Manage Rev; Alan Strudler. 'On the ethics of deception in negotiation' (1995) Business Ethics Quarterly 805.
26. Ibid.
27. Shell 2004 (n7) 61.
28. Ibid.
29. Ibid.
30. White 1980 (n6); Roberts and Palmer 2005 (n19); Mnookin, Peppet, Tulumello 2000 (n22); Douglas R. Richmond. 'Lawyers' Professional Responsibilities and Liabilities in Negotiations' (2009) 22 Geo.J.Legal Ethics 249; Ghauri PN, International business negotiations (Emerald Group Publishing 2003).
31. Ibid.
32. Ibid.
33. Wetlaufer 1990 (n1) 1219.
34. Roberts and Palmer 2005 (n18).
35. White 1980 (n6).
36. Mnookin, Peppet, Tulumello 2000 (n22).
37. Wetlaufer, 1990 (n1) 1235.
38. Mnookin, Peppet, Tulumello 2000 (n22).
39. White 1980 (n6); Roberts and Palmer 2005 (n19).
40. Wetlaufer, 1990 (n1).
41. Shell 1991 (n24) 99.
42. Ibid.
43. Meadow and Wheeler, 2004 (n5).
44. Shell 2004 (n7).
45. Ibid.
46. Ibid.
47. Ibid.
48. Ibid.
49. Ibid.
50. Ibid.
51. Ibid.
52. Ibid.
53. Ibid.
54. Ibid.
55. Ibid.
56. Ibid.
57. Ibid.
58. Ibid.
59. Ibid.
60. Ibid.
61. Ibid.
62. Leigh L. Thompson, The mind and heart of the negotiator (5th, International edn, Pearson 2012).
63. Ibid.
64. Ibid.
65. Ibid.
66. Ibid.
67. Ibid.
68. Roger Fisher, William L. Ury and Bruce Patton, Getting to yes: Negotiating agreement without giving in (Penguin 2011).
69. Ibid.
70. Ibid.
71. Thompson 2012 (n62).
72. Ibid.
73. Fisher, Ury, Patton 2011 (n68).
74. Thompson 2012 (n62).
75. Ibid.
76. Ibid.
77. Ann E. Tenbrunsel and David. Messick. 'Ethical fading: The role of self-deception in unethical behavior' (2004) 17(2) Social Justice Research 223; Ann E. Tenbrunsel. 'Misrepresentation and Expectations of Misrepresentation in an Ethical Dilemma: The Role of Incentives and Temptation' (1998) 41(3) Academy of Management Journal 330; Peter Reilly. 'Was Machiavelli Right-Lying in Negotiation and the Art of Defensive Self-Help' (2008) 24 Ohio St.J. on Disp. Resol. 481.
78. Ibid.
79. Mnookin, Peppet, Tulumello 2000 (n22).
80. Thompson 2012 (n62).
81. See (n77).
82. Fisher, Ury, Patton 2011 (n68); Mnookin, Peppet, Tulumello 2000 (n22); Meadow and Wheeler, 2004 (n5).
83. Howard Raiffa, J. Richardson and D. Metcalfe. 'Negotiation analysis: The art and science of collaborative decision making' (2002); Douglas Stone, Patton and Sheila Heen, Difficult conversations: How to discuss what matters most (Penguin 2010).
84. Ibid.
85. Ibid.
86. Meadow and Wheeler, 2004 (n5).
87. White 1980 (n6).
Disclaimer – The views expressed in this article are the personal views of the author and are purely informative in nature.
