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Summarize your thoughts about which one of the stated organizational reasons is probably the most important, when considering why good people make unethical choices. 

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Student lists and provides some insight into 5 to 6 items from the reading(s) that are applicable and relevant to the topics discussed thus far in the course; provides comprehensive, thoughtful reflection about specific actions that would be taken.

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Student clearly communicates their ideas and uses good structure along with proper grammar and spelling.

Why Ethical People Make Unethical Choices Page 1 of 7

ETHICS

Why Ethical People Make
Unethical Choices
by Ron Carucci

DECEMBER 16, 2016

Most companies have ethics and compliance policies that get reviewed and signed

annually by all employees. “Employees are charged with conducting their business

affairs in accordance with the highest ethical standards,” reads one such example.

“Moral as well as legal obligations will be fulfilled in a manner which will reflect pride

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on the Company’s name.” Of course, that policy comes directly from Enron. Clearly it

takes more than a compliance policy or Values Statement to sustain a truly ethical

workplace.

Corporate ethical failures have become painfully common, and they aren’t cheap. In

the last decade, billions of dollars have been paid in fines by companies charged with

ethical breaches. The most recent National Business Ethics Survey indicates progress

as leaders make concerted efforts to pay holistic attention to their organization’s

systems. But despite progress, 41% of workers reported seeing ethical misconduct in

the previous 12 months, and 10% felt organizational pressure to compromise ethical

standards. Wells Fargo’s recent debacle cost them $185 million in fines because 5300

employees opened up more than a million fraudulent accounts. When all is said and

done, we’ll likely learn that the choices of those employees resulted from deeply

systemic issues.

YOU AND YOUR TEAM SERIES

Creating an Ethical Workplace

When You Feel Pressured to Do the
Wrong Thing at Work
by Joseph L. Badaracco

When Tough Performance Goals Lead to
Cheating
by Colm Healy and Karen Niven

Keep a List of Unethical Things You’ll
Never Do

Despite good intentions, organizations set

themselves up for ethical catastrophes by

creating environments in which people

feel forced to make choices they could

never have imagined. Former Federal

Prosecutor Serina Vash says, “When I first

began prosecuting corruption, I expected

to walk into rooms and find the vilest

people. I was shocked to find ordinarily

good people I could well have had coffee

with that morning. And they were still

good people who’d made terrible choices.”

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by Mark Chussil Here are five ways organizations

needlessly provoke good people to make

unethical choices.

It is psychologically unsafe to speak up. Despite saying things like, “I have an open

door policy,” some leadership actions may inhibit the courage needed to raise ethical

concerns. Creating a culture in which people freely speak up is vital to ensuring

people don’t collude with, or incite, misconduct. Elizabeth Morrison of New York

University, in Encouraging a Speak Up Culture, says “You have to confront the two

fundamental challenges preventing employees from speaking up. The first is the

natural feeling of futility — feeling like speaking up isn’t worth the effort or that on

one wants to hear it. The second is the natural fear that speaking up will lead to

retribution or harsh reactions.” A manager’s reactions to an employee’s concerns sets

the tone for whether or not people will raise future issues. If a leader reacts with even

the slightest bit of annoyance, they are signaling they don’t really want to hear

concerns.

There is excessive pressure to reach unrealistic performance targets. Significant

research from Harvard Business School suggests unfettered goal setting can

encourage people to make compromising choices in order to reach targets, especially

if those targets seem unrealistic. Leaders may be inviting people to cheat in two ways.

They will cut corners on the way they reach a goal, or they will lie when reporting how

much of the goal they actually achieved. Says Lisa Ordonez, Vice Dean and professor

at the University of Arizona, “Goals have a strong effect of causing tunnel vision,

narrowly focusing people at the expense of seeing much else around them, including

the potential consequences of compromised choices made to reach goals.” Once

people sense the risk of failure, they go into “loss prevention” mode, fearing the loss

of job, status, or at-risk incentives. The Veterans Administration learned this lesson

the hard way when trying to address the 115-day wait time in their Phoenix hospital.

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They set a new goal of reducing the wait to 14 days, which resulted in an alleged 24-

day wait. But employees said they felt compelled to manipulate performance records

to give the appearance of meeting these goals. As many as 40 veterans died waiting

for care at the Phoenix center, some more than a year. Organizations must ensure

people have the resources, timelines, skill and support they need to achieve targets

they are given, especially ambitious stretch goals.

Conflicting goals provoke a sense of unfairness. And once a sense of injustice is

provoked, the stage is set for compromise. Maureen Ambrose, Mark Seabright, and

Marshall Schminke’s research on organizational injustice clearly shows a direct

correlation between employees’ sense of fairness and their conscious choice to

sabotage the organization. Consider one organization I worked with whose pursuit of

growth created conflicting goals. The head of Supply Chain was given a $3.5 million

capital investment to overhaul a plant to triple its production. Some of that funding

came from the 25% budget cut in marketing in the same division. At the same time,

Sales divided its quota territories to raise topline performance. The intensity of

resentment in the salesforce at having to drive revenues with smaller territories was

compounded by having fewer marketing dollars to sell more product. The conflicting

goals created excess product capacity that was bottlenecked getting to market. Two

years later, the organization was indicted for channel stuffing.

Ethical behavior is not part of routine conversation. Too many leaders assume that

talking about ethics is something you do when there’s been a scandal, or as part of an

organization’s compliance program. Everyone gets their annual “ethics flu shot” in

the mandatory review of the compliance policy, and all is well for another year. Nick

Eply, professor at the University of Chicago, in Four Myths about Morality and

Business, says, “It’s a myth to think ‘Everyone is different and everything is relative.’

You actually have to teach people the relative value of principles relative to choices.”

Leaders have to infuse everyday activities with ethical considerations and design

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policies and norms that keep ethics top of mind. Jonathan Haidt, Professor of

Business Ethics at NYU and founder of Ethical Systems, says, “It’s important to talk

about the positive examples of ethical behavior, not just the bad ones. Focusing on

the positive reasons you are in business, and reinforcing the good things people do

strengthens ethical choices as ‘the norm’ of the organization.”

A positive example isn’t being set. Leaders must accept they are held to higher

standards than others. They must be extra vigilant about not just their intentions, but

how it is others might interpret their behavior. While they can’t control every

possible misinterpretation, leaders who know their people well make careful choices

in how they react to stressful situations, confront poor performance, how politic they

are in the face of controversy, and how receptive they are to bad news. Above all,

even in what might be considered the smallest “white lie,” ethical leaders are careful

not to signal that hypocrisy is ok. As an example, a leader may casually review an

employee’s presentation and provide feedback like, “I think we need to take these

two slides out — that data is inflammatory and we don’t want to derail the ultimate

outcome which is to convince the budget committee to give us the resources we

want.” While the leader might presume he has acted in the best interest of the group

— going to bat for resources they need- the person building the presentation has just

been told, “We can’t tell the entire truth because it could prevent us from getting

what we want.” Leaders must put themselves in the shoes of those they lead to see

what unintended messages they may be sending.

Organizations who don’t want to find themselves on a front-page scandal must

scrutinize their actions to far greater degrees than they may have realized. In an age

of corporate mistrust, creating ethical workplaces takes more than compliance

programs. It requires ongoing intensified effort to make the highest ethical standards

the norm, and ruthless intolerance of anything less.

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Ron Carucci is co-founder and managing partner at Navalent, working with CEOs and executives
pursuing transformational change for their organizations, leaders, and industries. He is the best-selling

author of eight books, including the recent Amazon #1 Rising to Power. Connect with him on Twitter

at @RonCarucci.

This article is about ETHICS

 F O L L O W T H I S T O P I C

Related Topics: R I S K M A N A G E M E N T | L E A D E R S H I P

Comments

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4 COMMENTS

Mark Mankin a day ago

I would like to see a graph that plots the ratio of CEO pay to the average employee against the

number of fines or other legal actions against the company per billion in revenue, maybe with a split

by industry and or number of employees. I would seek to prove a hypothesis that a high disparity in

pay is in its own right unethical, it at least is often internalized by the rank and file that the

executives are unethical. I also surmise that the impact on the organizations overall integrity would

make very little distinction between the two.

R E P L Y 2  0 

 J O I N T H E C O N V E R S A T I O N

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