LOUISIANA BANKERS ASSOCIATION 2014 LBA BANK COUNSEL CONFERENCE THE ETHICS OF NEGOTIATIONS
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1 LOUISIANA BANKERS ASSOCIATION 2014 LBA BANK COUNSEL CONFERENCE RITZ CARLTON, NEW ORLEANS, LOUSIANA THE ETHICS OF NEGOTIATIONS WILLIAM H. MCCLENDON, III DECEMBER 12,
2 I. THE ETHICAL FORCE This morning you deserve a special approach to this subject because I sense that you, in many ways, are experts in this area and have had extensive experience, not only in complying with ethical standards, but, more importantly, in providing the highest form of ethical legal counsel. Our discussion, therefore, will include but not be limited to a consideration of key Louisiana Rules of Professional Conduct. Instead, our focus will be on listening skills and the timeless values of courage, truthfulness, integrity and civility needed today in ethical negotiations. For forty years, I served as an attorney for a leading national bank during my practice with Taylor, Porter, Brooks & Phillips in Baton Rouge. I taught classes for the American Institute of Banking, The Banking School of the south, and at LSU Law Center where I am still teaching a course "Legal Negotiations and Professionalism." During my 10 years in North Carolina, I taught at the Tennessee Law School and in the Western Carolina University MBA program and graduate Engineering program. I am the author of Deal Makers, Negotiating More Effectively Using Timeless Values and am giving negotiation seminars to banks. This is a unique time, therefore, for me to share with you some of my experiences and leading lessons learned. The Louisiana Rules of Professional Conduct, effective March 1, 2004, contain much wisdom and should be studied carefully. These rules follow the ABA Rules and provide helpful background for minimum ethical considerations needed in negotiations. But, some scholars point out, there is a difference between "the floor of acceptable conduct, and the higher expectations others have for how they will be treated." These higher expectations others have for how they should be treated includes relationship building and active listening. Ethical and moral judgment is not a matter of decisions made once and for all, but of keeping our eye on distinctions. We need to see our own lives as stories with meaning and human dignity. As we become more aware of how complex moral judgments can be, we realize that ethics must be learned through reflection. (Adopted from Susan Neiman's book, Moral Clarity.) As we navigate through our ethical decision-making in our negotiations, we realize that intelligence is not just the ability to reason, but also the ability to use all of our cognitive skills to find relevant material. We learn to coordinate our two systems of thinking, one that articulates judgments and makes choices, and the other that creates ideas and feelings. Intuitive answers are very helpful, but they need to be checked by our conscious mind because the voice of reason sometimes is much fainter than the voice of an erroneous intuition. (Adopted from Daniel Kahneman's book, Thinking Fast and Slow.) 2
3 II. THE ETHICAL CONCEPTS Background Ideas. Pre-Socratic Being good is a purely subjective, personal matter because it is relative. Plato and Socrates There is an inherent difference between a good person and a bad person, and that difference between good and bad is real. (e.g., Saving Private Ryan movie.) Aristotle Ethics is related to Nature and the empirical experiences of life. "It is by doing just acts that the just man is produced...." (The Nicomachean Ethics.) Proverbs In the ABA Journal (March 1996), Law Professor Gordon Beggs points out that the first legal ethics courses in the early 19th century used Proverbs as examples of ethical principles for lawyers. He cited Proverbs 1:3 as an example, that a lawyer's purpose should be "... acquiring a disciplined and prudent life, doing what is right and just and fair." The Divine Proportion The Divine Proportion, also known as The Golden Section or Golden Ratio of exists in the Fibonacci number series, the Parthenon in Athens, the human form, DNA molecule, pine cones, sea shells, the Milky Way galaxy, and throughout nature. The constant presence of this uniform proportion throughout our created universe is convincing evidence that there is infused an intrinsic wisdom resulting in uniform standards of excellence in human relationships. This proportion is found in art and design, in musical scales, rhythm, and harmony. This sacred ratio was recognized by the Greeks and combined with "word" to mean "logos," in 1:1 of St. John's Gospel. Scientists write that the Divine Proportion "... is perpetual throughout the cosmos at all levels... is interwoven into the very fabric of our existence, providing us with the means to resonate, to attune with successively broader stages of self-identity... It is humanity's duty to reconnect and resonate with this deep code of nature, beautifying our world and our relationships with... golden standards of excellence." (Scott Olsen, The Golden Section: Nature's Greatest Secret.) "By deepening our understanding of the true nature of physical reality, we profoundly reconfigure our sense of ourselves and our experience of the universe." (Brian Greene, The Fabric of the Cosmos.) "A unique proportion 3
4 guides us, one that says the whole is in a perfect relation to its parts... like a musical sound with harmonious overtones, the Divine Proportion echoes an ancient wisdom..." and "provides us with a singular unique lens with which to view our universe." The author then quotes from Oliver Wendell Holmes, Jr., that "it is through... the more general aspects of the law... that you, not only become a great master in your calling, but connect your subject with the universe and catch an echo of the infinite..." (Priya Hemenway, Divine Proportion.) The Lawyer's Calling. Lawyers today need a way to link what they do on the job with their deepest values and commitments. For this reason, some scholars feel that "ethics is more a matter of deciding who you are and who you want to be than it is a matter of learning external codes or rules." Lawyers "... want their work to connect with the fundamental values that sustain them.... " (The Lawyer's Calling by Joseph G. Allegretti.) Remember that the word "client" is derived from Latin, "cliens," meaning "a person who has someone to lean on." The concept of a calling gives a kind of "moral compass." The moral life "is at least as much a matter of character as of decision, of "who should I be?", as much as "what should I do?"... "I must have a sense of the kind of person I am and hope to be if I am to decide what to do in a particular case." (Adopted from The Power of Ethical Management by Kenneth Blanchard and Norman Vincent Peale.) III. THE RULES "ARTICLE 2. COUNSELOR RULE 2.1. ADVISOR In representing a client, a lawyer shall exercise independent professional judgment and rendered candid advice. In rendering advice, a lawyer may refer not only to law but to other considerations such as moral, economic, social and political factors that may be relevant to the client's situation." Part of official comment "(1) a client is entitled to straightforward advice expressing the lawyer's honest assessment.... a lawyer should not be deterred from giving candid advice by the prospect that the advice will be unpalatable to the client." "(2)... It is proper for a lawyer to refer to relevant moral and ethical considerations in giving advice...." "(4)... Where consultation with a professional in another field is itself something a competent lawyer would recommend, the lawyer should make such a recommendation...." 4
5 MODEL RULE 4.1 TRUTHFULNESS IN STATEMENTS TO OTHERS "In the course of representing a client, a lawyer shall not knowingly: (a) make a false statement of material fact or law to a third person;..." Part of Official Comment... "Misrepresentation. (1) A lawyer is required to be truthful when dealing with others on a client's behalf, but generally has no affirmative duty to inform an opposing party of relevant facts. A misrepresentation can occur if the lawyer incorporates or affirms a statement of another person that the lawyer knows is false. Misrepresentations can also occur by partially true but misleading statements or omissions that are the equivalent of affirmative false statements. For dishonest conduct that does not amount to a false statement or for misrepresentations by a lawyer other than in the course of representing a client, see Rule 8.4." ABA Formal Opinion excerpts: "... a party's actual bottom line or the settlement authority given to a lawyer is a material fact. A deliberate misrepresentation or lie to a judge in pretrial negotiations could be improper under Rule 4.1." "Statements of Fact. (2)... Under generally accepted conventions in negotiation, certain types of statements ordinarily are not taken as statements of material fact. Estimates of price or value placed on the subject of a translation and a party's intentions as to an acceptable settlement of a claim are ordinarily in this category,..." "MODEL RULE 8.4. MISCONDUCT "It is professional misconduct for a lawyer to:... (c) Engage in conduct involving dishonesty, fraud, deceit or misrepresentation;..." PREAMBLE: A LAWYER'S RESPONSIBILITIES (1) "A lawyer, as a member of the legal professional, is a representative of clients, an officer of the legal system and a public citizen having special responsibility for the finality of justice." (2) "... As negotiator, a lawyer seeks a result advantageous to the client but consistent with requirements of honest dealings with others...." (7) "... a lawyer is also guided by personal conscience and the approbation of professional peers...." 5
6 (9) "... These principles include a lawyer's obligation zealously to protect and pursue a client's legitimate interests, within the bounds of the law, while maintaining a professional, courteous and civil attitude toward all persons involved in the legal system." IV. THE BLUFFING PROBLEM One approach to bluffing, without making a false statement of material fact, is to preface your statements so that "at this time" they are truthful: "At this time, my settlement price is $." "My present assessment of the value is $." Sometimes, it is more appropriate simply to deflect the authority question with humor, saying, "Sam, you know we can't discuss authority, either one of us, so let's talk about what is fair." V. THE NEED TO LISTEN Listening with Four Ears. First, to what the other is clearly saying. Second, to what the other is clearly not saying. Third, to what the other is genuinely trying to say, but doesn't. Fourth, to what you are saying to yourself through your informed intuition. Listening to create relationships and establish trust. Focusing on "face-giving" and feelings, making deposits to their self-esteem account. Listening through the pause. Determining interests behind positions to see as the other does. "This respectful listening allows us not only to know the other but to be known from the other's point of view." (Parker J. Palmer, To Know As We Are Known.) Richard Lugar, the six-term Senator from Indiana and former head of the Foreign Relations Committee, said that the United States is "... still in a position to lead the world. And to me, leadership is about talking to people rather than at them, and listening, and occasionally even changing your point of view." (Emphasis added.) 6
7 Listening to gain perspective. Going to the balcony. "Chair flying" it to recreate a vivid picture of what happened. Adopting the mediation approach by asking good questions. Being aware of cultural differences. Communicating through signals as was tapped on the prison walls at the Hanoi Hilton (meaning "God Bless.") "Letting loose" with dialogue and small talk. - Reagan and Gorbachev in Reykjavik, Iceland. VI. THE ETHICAL FORCE OF TIMELESS VALUES Recognizing humility as the only lens through which great things can be seen. (Parker J. Palmer.) Exercising sound ethical judgment in negotiations by anticipating the issues that are likely to come up, and sharing ethical decision-making with others. Storing possible answers in our informed intuition creates an ethical database which increases our confidence to handle the sticky situation. Remembering that trust and integrity are precious resources, easily squandered, and very hard to regain. Ethics are not purely subjective but are rooted in timeless values that transcend time and place. The key concept here is "balance," balancing grit with grace in dynamic tension, balancing our competitive skills and will to win with timeless values of courage, truthfulness, integrity and civility VII. THE LEADING LESSONS LEARNED. 7
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