Hidden Explanations For Unethical Company Behavior

Imagine you work for a company that emits toxic fumes. Under an industry agreement with regulators, your company agrees to run the emissions through a costly clean-up device. If you fail to comply, you face sanctions. Then imagine the same scenario, with no sanctions if you don't do the expensive clean-up. Under which scenario would you be more likely to cheat and avoid the clean-up? Surprise: a 1999 study, where subjects participated this simulated scenario, showed that those who faced a fine were more likely to cheat, not less.

In a fascinating New York Times op ed today, Max H. Bazerman, a Harvard business administration professor and Ann E. Tenbrunsel, a management professor at Notre Dame, discuss the counter-intuitive notion that business people engage in unethical behavior not because they intend to do something wrong, but because they're unconsciously fooling themselves. The authors call this "ethical fading" or "motivated blindness."

Another example, in a study published last year: Students in an experiment where they were given the same information about a fictitious company and asked to estimate its value. Some students played the role of buyer; others were sellers, buyer's auditors and seller's auditors. It's not shocking that buyers and sellerscame up with different values, favoring their own camps. But the auditors demonstrated significant bias too, with estimates that differed by 30%. Then real life auditors from big accounting firms tried the experiment, and logged similarly biased results.

Wouldn't transparency help, if all information were made public and biases and conflicts of interest exposed? Yet another study, from 2005, showed that people become even more ethically lax when they feel like others are watching.

Bazerman and Tenbrunsel point out that regulators, prosecutors and journalists focus on willful misconduct and simple intent. They/we assume it's possible to be objective. But humans are much more complicated than that, it turns out. One solution offered in the op ed: "Auditors should only audit; they should not be allowed to sell other services or profit from pleasing their customers." Unfortunately, it's tough to imagine a world where that would happen.

At the least, Bazerman and Tenbrunsel's book seems worth reading: Blind Spots: Why we Fail to do What's Right and What to Do About It.

Thanks to Susan Adams - Getting Ahead / Blogs Forbes