Lying in Business

by | May 21, 2016 | Business

In my years of teaching ethics to business students, I must have heard it all when it comes to justifying deception and lying in business.

In my years of teaching ethics to business students, I must have heard it all when it comes to justifying deception and lying in business. The excuses go something like this: “Everybody does it; I would lose business if I didn’t. If I don’t low-ball my bids and my competitors do, I can’t win any projects. It’s OK to promise customers more than the product can deliver to get the deal. And how are you supposed to attract investors, unless you make the business look better than it actually is?” Such rationalizations for dishonesty—faking reality to gain a value—typically are based on pragmatism, or expedience: the ends justify the means. Supposedly, in the pursuit of profits, any means are justified.

Abhorring the ‘selfishness’ of pragmatism, some students combine pragmatism with altruism to morally justify lying: lying is permitted, not for any selfish reasons such as profit making, but for the sake of helping others. For example, a manager giving a dishonest performance evaluation to protect an unproductive employee is considered moral because it supposedly helps the employee (while sacrificing the manager’s and his department’s ability to be productive). One student argued that faking facts is morally justified when acting on behalf of a client, such as negotiating deals, to protect the client’s interests, as per a fiduciary duty.  In the student’s argument, this is altruistic because the agent risks losing his reputation if caught lying to ‘protect’ a client.

The problem with the above justifications is that they are not valid: they serve no-one’s interests and are destructive, no matter what the alleged motivation for dishonesty. Values cannot be obtained by faking reality; yet we need values to survive and succeed.

Consider the arguments from pragmatism or altruism: faking to maximize profits or to help others. While it is possible to make a short-term gain by deceiving investors, customers and others, profits cannot be made in the long term, or others helped, by faking.

Creating and trading material values can only be done by adhering to facts, not by distorting or evading them. Winning a contract based on a low-ball bid does not change the fact that executing the project has real costs that have to be paid, either by increasing the price to the client (the contract permitting), or the bidder eating the costs. Neither consequence is in either party’s interest. An unhappy customer means no repeat business, negative references to others, and diminished prospects for the bidder. The effect of the bidder having to eat the costs evaded in the dishonest bid is more immediate: money lost on the project, and potentially, a bankruptcy. Values cannot be obtained by faking reality.

An altruist motivation to dishonesty—‘protecting’ others—does not change its destructive nature. Instead of hurting the deceiver and his victims only, also those that the dishonesty is designed to protect will be harmed. A positive performance evaluation given to an unproductive employee to ‘protect’ his job does not change the facts he has been unproductive and that unproductivity will detract from the company’s performance, jeopardizing the continuing employment of everybody—including the employee who was being ‘protected’ by deception. Values cannot be obtained by faking reality.

Similarly, trying to ‘protect’ a client’s interests by deception may work in the short term, but will end up harming both the deceiver and the client in the long run. In competitive bidding, the client will end up losing when the deceptive agent loses buyers to more honest agents, and the agent will suffer damage to his reputation and ability to win other clients. Values cannot be obtained by faking reality.

Honesty—not faking reality to gain values—is the truly selfish (not expedient) alternative to these deceptive practices. It is not just in the self-interest of the honest person himself, but also in the interest of all those with whom he interacts. Winning bids for projects honestly means that the projects can be delivered as promised—leading to satisfied clients, more business and profits. Giving honest performance evaluations will either help employees improve, or make them leave and find jobs where they can be productive. Negotiating for clients without deception will lead to better and more deals, and stronger reputation for the agents. (Note: honesty means exactly its definition, not faking reality to gain values, and does not involve a duty to provide information, such as revealing one’s lowest acceptable price at the outset of negotiations.)

Business people should be honest because values—construction projects, productive employees, real estate deals, and long-term profits—can only be obtained by not faking reality.

Jaana Woiceshyn teaches business ethics and competitive strategy at the Haskayne School of Business, University of Calgary, Canada. How to Be Profitable and Moral” is her first solo-authored book. Visit her website at profitableandmoral.com.

The views expressed above represent those of the author and do not necessarily represent the views of the editors and publishers of Capitalism Magazine. Capitalism Magazine sometimes publishes articles we disagree with because we think the article provides information, or a contrasting point of view, that may be of value to our readers.

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