Negotiation Ethics in Business: Avoid Common Traps

Three recent news stories illustrate how mistakes made during negotiations can compound during the implementation stage— and how you can reach more sustainable deals.

By — on / Negotiation Skills

Value Creation in Negotiation handshake

In business negotiations, we tend to assume that if we are not intentionally trying to deceive the other party, our behavior will meet the high standards we set for our negotiation ethics. In fact, a variety of common biases can lead us to compromise our negotiation ethics in business—even without our conscious knowledge.

Bounded Awareness and Ethical Fading

Over several years, Facebook negotiated more than 60 data-sharing partnerships with hardware manufacturers such as Apple and Samsung, as well as with four Chinese companies, the New York Times reported in June 2018. One deal provided personal data on Facebook users to Huawei, a Chinese telecommunications company that U.S. intelligence officials considered a national security threat.

Facebook’s deals with device makers were aimed at generating more mobile users and making inroads in China, where the social network has been banned since 2009. Facebook negotiators likely paid less attention to other critical issues, such as possible threats to user privacy, as well as any negative publicity or punishment that could result from data sharing.

Claim your FREE copy: Negotiation Skills

Build powerful negotiation skills and become a better dealmaker and leader. Download our FREE special report, Negotiation Skills: Negotiation Strategies and Negotiation Techniques to Help You Become a Better Negotiator, from the Program on Negotiation at Harvard Law School.

In his book The Power of Noticing: What the Best Leaders See, Harvard Business School professor Max H. Bazerman writes that negotiators and other decision makers often focus so narrowly on immediate goals that they overlook other important information. Bazerman and New York University professor Dolly Chugh call this common phenomenon bounded awareness.

The procility to focus on narrow financial and business goals can contribute to ethical fading, or the tendency for the ethical dimensions of a decision to fade from consideration, according to Notre Dame University professor Ann Tenbrunsel and the late David Messick. This can lead us to compromise our negotiation ethics in business—perhaps without even realizing it.

Because our intuitive judgments tend to be both less ethical and less rational than slower, more analytical decision making, all parties in a negotiation need time and space to sift through ethical issues in negotiation.

A Motivation Not to Notice

In 2008, Alain Dreyfus, an art dealer in Switzerland, was the winning bidder for an 1889 painting by the landscape impressionist Alfred Sisley in an auction held by Christie’s in New York.

Ten years later, Dreyfus asked the auction house to return the $338,500 he paid for the painting, titled First Day of Spring in Moret, plus interest, as the New York Times reported in 2018. Why the buyer’s remorse? Dreyfus had come to believe the Nazis stole the painting from its owner during World War II.

We are far less likely to notice others’ unethical behavior when we have incentives to ignore it.

According to the Toronto-based art-recovery company Mondex, a Jewish art collector named Alfred Lindon put the Sisley painting in a bank safe before fleeing Paris when the Nazis invaded. At one point, Mondex says, the painting was held by Nazi leader Hermann Goering. After one of Lindon’s heirs filed a claim related to the painting in a Paris court, Dreyfus said he was willing to return it to them after being refunded by Christie’s.

Dreyfus and Mondex argued that Christie’s erred in not consulting directories of looted items. But Christie’s said that it had had no reason to believe the painting had been looted and refused to refund Dreyfus.

It’s unclear whether Christie’s did sufficient due diligence in 2008. But the dispute points to another common pitfall in negotiation: motivated blindness—the tendency to ignore others’ unethical behavior when we have incentives to do so, write Bazerman, Chugh, and Harvard professor Mahzarin Banaji. An agent who stands to gain financially from a sale, for example, would have motivations to overlook signs of unethical behavior by one of the parties.

To improve our negotiation ethics in business, we need to minimize distractions that could prevent us from noticing wrongdoing, such as time pressure and fatigue. In addition, organizations should give their employees incentives to speak up when they encounter unethical negotiation tactics.

The Perils of Close Ties

In 2014, the state of New York committed to building a high-tech film studio outside Syracuse. The Central New York Film Hub, spearheaded by then–New York governor Andrew M. Cuomo and funded by some of his campaign donors, was supposed to create at least 350 technology jobs and attract major filmmaking projects.

Four years later, the state sold the film hub to a corporation set up by Onondaga County, where it was located, for just $1, the Times reported. What went wrong? The site failed to attract any high-caliber projects or offer good-paying jobs. The facility’s builder, COR Development, scored a lucrative construction contract, and its executives were charged with federal bid rigging, a Times investigation found.

Why did the state invest in an out-of-the-way film hub in the first place? Overconfidence about a project’s long-term success is common in the business world. Moreover, when we do business with those we know well, we have a strong motivation to downplay their flaws. In the process, we may overlook more suitable business partners.

These common errors can compromise negotiation ethics in business, both in one-on-one and group negotiation. How can you avoid them? First, before making a major investment, solicit estimates from unbiased experts of its likelihood of success. Second, cast a wide net when scouting for partners rather than settling for those you know best. Third, when partnering with those close to you, delegate your negotiations to a neutral party.

Have you noticed other potential pitfalls related to negotiation ethics in business?

The Program on Negotiation at Harvard Law School
501 Pound Hall
1563 Massachusetts Avenue
Cambridge, Massachusetts 02138
tel 1-800-391-8629
tel (if calling from outside the U.S.) +1-301-528-2676
fax 617-495-7818