Ethics and Governance in Project Management

Small Sins Allowed and the Line of Impunity

Eduardo Victor Lopez, Alicia Medina

• Publisher: CRC Press
• Year: 2016
• Print ISBN: 9780367874896
• eBook ISBN: 9781315351933
• Edition: 1
• Topic: Business
• Subtopic: Project Management
• Index: Business

This book shows executive, project, program, and portfolio managers how ethical behavior can ensure that an organization has proper governance. Improper governance and unethical behavior have led to such well-known financial disasters as Enron and Madoff Investments. The book arms managers with two important tools: Small Sins Allowed (SSA) and Line of Impunity (LoI), which together can be the foundation for renewed and vigorous corporate governance. SSA is a powerful tool that helps managers establish a level above which adherence to ethical standards is expected. LoI aids managers in identifying ethical fault lines that may exist in a company and helps to keep unethical behavior in check.

Chapter 1
Antecedents

We are of different opinions at different hours, but we always may be said to be at heart on the side of truth.

– Ralph Waldo Emerson

1.1 The Beginning

When considering the source of ethics, one must take into account a number of factors, including parental examples at home, socialization in school, religious teachings, and the legal system. All of these compose a complex construct of universals (the portion of ethics norms that are widely accepted), and local beliefs (principles confined to a particular culture). Drucker (1954) saw morality manifested by real demeanor.

Relating the social values of a particular group with the ethical baggage of its individuals was a challenging task even before the concept of “rules of the game” was introduced by Milton Friedman (1970, p. 4), which made it cumbersome. He postulated: “In an ideal free market . . . [t]here are no social values, no social responsibilities in any sense other than the shared values and responsibilities of individuals.” He went further by saying that “there is one and only one social responsibility of business . . . increase its profits.”

Friedman’s concepts emphasize the detachment between business and ethics nurtured during an age of cultural conflict that challenged the world’s status quo. The 1960s (characterized by upheaval that included the Civil Rights Movement, the Vietnam War, anti-establishment hippies, and Soviet tanks putting an end to the Prague Spring) were followed by another decade of conflict, when the oil embargo, the Watergate scandal, the rise of the People’s Republic of China, violence in the Middle East, and the U.S. defeat in Vietnam undermined general confidence in the existing, established values (including ethics, attachment to a culture, view of authority, and family bonds, among others).

Such periods of change, characterized by intense experimentation and high failure rates, resulted in confusion. While the public was concerned with peace and tolerance, which increased their political awareness, Wall Street ran in a different direction—straight into a fundamental difference between the mundane and the business worlds. Thus, a new attitude toward individualism arose.

During those years, many young professionals endorsed Friedman’s thoughts, which were later recognized as neo-liberalism. As these professionals became corporate members and climbed the organizational ladders, the feeling of a liberal free market without an ethical commitment quickly took hold and excluded social values, leaving legality as the sole ethical bond. Much like the nonconformist Ranters in old England (around 1650), the professionals since the 1970s believed themselves to be above the moral law and felt that they were free to practice debauchery.

The 1980s adopted the language and logic of economics. Economic notions had, with their own inner logic, caused a fracture between economic reasons and moral purpose. Free-market logic subverted the meaning of morality, departing from the social and ethical values of society.

Projects as a way of organizing and performing work began during the 1950s as a need for U.S. space undertakings as well as in construction and other aerospace and defense initiatives. During the last five decades, project work has increased continuously, and methods, tools, and processes have been developed to implement it. Several disciplines and knowledge areas have been established within project management. There are a large number of tools for project planning, staffing, risk management, stakeholder management, and communication; however, there is not a single tool that provides support regarding ethical issues. The project management associations that establish standards (including the Project Management Institute [PMI], the International Project Management Association [IPMA], Axelos [PRINCE2], the Global Alliance for Project Performance Standards [GAPPS], the Australian National Competency Standards for Project Management [ANCSPM], the Australian Institute of Project Management Standards [AIPM], the South African Qualification Authority [SAQA NQF Level 5], and the Project Management Association of Japan [P2M]) focus on matters related to project management tools and processes, with no mention of project ethics beyond the codes of ethics. Dr. Thomas Grisham (2011, p. 1) commented that “neither the PMI, nor the IPMA, deal with the issue of bribes, which are common in many countries, and present in most. On international projects how is a project manager to deal with a local official who will not clear equipment through customs without a ‘tip’?”

1.2 Contrasting Views (1): "[People] can do good but only at their own expense."

When Friedman (1970, p. 3) asserted that “[people] can do good, but only at their own expense,” he was sharing “Adam Smith’s skepticism about the benefits that could be expected from those who affected to trade for the public good.”

This first view is shared by many managers. They believe that in order to win the respect of others, it is necessary to have a moral imperative through ethical content embedded into corporate visions; in this case, ethics is traded to obtain respect. Others proposed that a company could benefit from adopting an ethical approach to management, and that competitive advantage leading to increased returns could come from the creation of this kind of intangible assets. This view suggests the notion that ethics has a trading value related to financial proceeds.

There were those who proposed that demonstrating ethical and socially responsible behavior might lead to the necessary impetus for change, although they also recognized that financial performance is almost the exclusive parameter for measuring business success.

Drucker (1986, p. 256) stated: “There are important areas where managers, and especially business managers, still do not realize that in order to be permitted to remain autonomous and private they have to impose on themselves the responsibility of the professional ethic. They still have to learn that it is their job to scrutinize their deeds, words, and behavior to make sure that they do not knowingly do harm.”

After Friedman’s postulate, Drucker (1993) proposed a different approach considering that this view could alienate workers and affect their motivation, but his point of view was still concerned with efficiency rather than ethics, representing the typical thought of the 1990s, when ethics at face value was associated with its capacity to improve the bottom line.

Most of the publications related to strategic planning throughout the 1980s and early 1990s omitted any mention of ethical and moral terms. Any advice to build strategy on the basis of ethical reasoning was dismissed; instead, strategy and ethics were considered separate and unrelated matters.

Most of the Charters of Fundamental Rights and Freedoms across the globe recognize that “everybody may do whatever is not prohibited by law and no one may be forced to do what the law does not command” (Maddex, 1995, p. 249). This constitutes a necessary minimal approach to set up a standard across borders, avoiding engagement in moral controversies that are due to cultural differences.

What differentiates this attempt at establishing a global minimal standard with the ethical disengagement triggered in the 1970s is that while the Charters of Fundamental Rights and Freedoms offer some minimal standards with the intention to improve the status quo, some corporations chose to adhere to the minimal standard defined by law with the intention to decrease their exposure.

In an ever-changing world, in which technology accelerates the spread of socially defined values, the law is condemned to be a laggard, as lawmakers are not always able to keep pace with the changes. For this reason, attachment to the law as the exclusive ethical justification is not enough. Legal behaviors alone may not be generally recognized as ethical. There is a disconnect between the spirit of the law (morality) and the letter of the law (legality). As legality could not take into account every perception of morality, an ethical decision is one that is legal and morally satisfactory.

During the 1980s it was observed that there was increased attention to organizat ional ethics, although ethical decision making in organizations was still underrepresented.

A study by Robertson (2008) of the number of ethics-related articles that appeared in the Strategic Management Journal between 1996 and 2005 showed that immediately after the scandals surrounding Enron and WorldCom there was increased interest in the topic, although it lost momentum soon thereafter. The study also showed that the link between governance and ethics was underrepresented.

Different approaches, even disconnection between them, were the logical result of the state of confusion previously mentioned. One iconic lyric from 1969 said: “Confusion will be my epitaph, as I ...

Table of contents

• Dedication
• Contents
• Preface
• Acknowledgments
• About the Authors
• Chapter 1: Antecedents
• Chapter 2: Ethics
• Chapter 3: Context
• Chapter 4: Governance
• Chapter 5: Small Sins Allowed and the Line of Impunity
• Chapter 6: Ethical Issues and Ethical Dilemmas
• Chapter 7: The Ethics Cube
• Chapter 8: Final Words
• Glossary
• References
• Index