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.
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.
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.
Disclaimer – The views expressed in this article are the personal views of the author and are purely informative in nature.
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