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27 Psychological

Reasons Why Good


People Do Bad Things

The FBI escorts Ralph Cioffi, who formerly managed a Bear


Stearns subprime hedge fund.

White-collar crimes
The white-collar crimes that lead major companies
to collapse usually begin with seemingly
minorethical violations that spiral into something
much bigger.
The question of what motivates smart and talented
people to commit fraud is fascinating, and is the
subject of a new paper by Dr. Muel Kaptein of the
Rotterdam School Of Management.

Tunnel vision

Tunnel vision
Setting and achieving goals is important,
but single-minded focus on them can
blind people to ethical concerns.
When Enron offered large bonuses to
employees for bringing in sales, they
became so focused on that goal that
they forgot to make sure they were
profitable or moral. We all know how that
ended.

The power of names

The power of names


When bribery becomes "greasing the
wheels" or accounting fraud becomes
"financial engineering," unethical
behavior can seem less bad.
The use of nicknames and
euphemisms for questionable
practices can free them of their
moral connotations, making them
seem more acceptable.

Social bond theory

Social bond theory


In large organizations, employees can
begin to feel more like numbers or
cogs in a machine than individuals.
When people feel detached from the goals
and leadership of their workplace, they are
more likely to commit fraud, steal, or hurt
the company via neglect.

The Galatea effect

The Galatea effect


Self image determines behavior. People
who have a strong sense of themselves as
individuals are less likely to do unethical things.
Alternatively, employees who see themselves
as determined by their environment or having
their choices made for them are more likely to
bend the rules, as they feel less individually
responsible.

Time pressure

Time pressure
In a study, a group of theology students were told
to preach the story of the good Samaritan, then
walk to another building where they'd be filmed.
Along the way, they encountered a man in visible
distress.
When given ample time, almost all helped. When
they were deliberately let out late, only 63 percent
helped. When encouraged to go as fast as
possible, 90 percent ignored the man.

Acceptance of small theft

Acceptance of small theft


There are dozens of small temptations in
any workplace. Stationary, sugar
packets, and toilet paper frequently go
home with employees.
Those small thefts are ignored. So are
slightly larger ones, like over-claiming
expenses or accepting unauthorized
business gifts. It doesn't take long for
people to begin pushing those limits.

Self-serving bias

Self-serving bias
Few people believe they're average; most
think they're smarter and more
ethical than those around them.
That can lead to feelings of injustice. If
somebody else gets a promotion, it's not
down to their performance and capacity, it
must be something else. Those feelings,
and overestimation of other's biases can
lead to unethical behavior.

Conspicuous consumption

Conspicuous consumption
Extreme wealth, or environments that
reflect it can lead to unethical behavior. For
employees, seeing excessive bonuses or
perks that they don't show leads to feeling
of injustice and jealousy which may lead
them to unethical behavior.
Research by Kathleen Vohs shows that the
mere presence of money makes people
more selfish, as they focus on success and
individual needs over other factors.

The Pygmalion effect


The greater the expectation placed
upon people, the better they perform

The Pygmalion effect


The way that people are seen and
treated influences the way they
act. When employees are viewed
suspiciously and constantly treated
like potential thieves, they are more
likely be thieves.
This effect occurs even in employees
who aren't initially inclined towards
unethical behavior.

Environmental influence

Environmental influence
Employees reflect their environment.
If corruption, major or minor, is a part of
their workplace, they become blind to its
occurrence and its possible costs.
A study incorporating participants from a
variety of countries found that the less
transparent and more corrupt the
participant's country of origin, the more
willing they were to accept or give bribes.

Reactance theory

Reactance theory
Rules are designed to prevent unethical
behavior, but when they're seen as unjust
or excessive they can provoke the opposite
reaction.
This is known as reactance theory. People
resent threats to their freedom, and
they often manifest that resistance by
flouting certain rules.

Obedience to authority

Obedience to authority
Obedience to authority is ingrained in our
culture and workplace. When someone in
a position of authority asks an employee
to do something unethical or illegal, they
can find it difficult to say no.
It's easier to justify bad behavior, and
when people see themselves as an
instrument of another's wishes, they
feel less responsible.

The blinding effect of power

The blinding effect of power


Powerful people appear more corrupt
because they're caught more publicly.
However, a recent study found that when
given power, people set ethical rules
much higher for others than they do
themselves.
If someone is influential and sets rules for
others, they can begin to see themselves
as morally distinct from their employees,
and not subject to the same rules.

Broken window theory

Broken window theory


Former New York City Mayor Rudy Giuliani
popularized the "broken window theory" when he
led a sweeping effort to lower crime rates. The
idea was to crack down on smaller, petty crimes,
and clean up the city to create some semblance
of order, and discourage larger crimes.
When people see disorder or disorganization,
they assume there is no real authority. In that
environment, their threshold to
overstepping legal and moral boundaries is
lower.

The free-rider problem

The free-rider problem


"If nobody else steals stationary, the
company won't notice if I do. If nobody
else in the area pollutes, they won't
notice if a tiny bit of waste is released."
Positive and ethical behavior can
sometimes engender an opposite
reaction. If total damage is limited,
people feel as though they can
take more liberties.

The foot in the door

The foot in the door


When a figure in authority asks
someone to skirt the rules, they want
to seem like a team player.
Giving in modifies self perception. A
person may begin to think of
themselves as extremely loyal,
someone who gets things done. In that
frame of mind, they may be willing to
do increasingly unethical things.

Winner take-all competition

Winner take-all competition


In situations where there is a clearlydefined winner and loser, people are
more likely to cheat. They desperately
want to avoid the financial and
reputational costs of losing.
The people most likely to cheat may not
even be those farthest behind, but
rather those who are just short of their
goal.

Cognitive dissonance and rationalization

Cognitive dissonance and rationalization

When people's actions differ from


their morals, they begin to rationalize
both to protect themselves from a
painful contradiction and to build up
protection against accusations.
The bigger the dissonance, the
larger the rationalization, and the
longer it lasts, the less immoral it
seems.

Problematic punishments

Problematic punishments
Attaching fines or other economic
punishments to immoral behavior can
have an undesired effect. Once something
is cast in those terms, it loses its moral
connotation and becomes an entirely
different calculation.
Rather than being about whether
something is right or wrong, it becomes an
economic calculation about the likelihood
of getting caught versus the potential fine.

Lack of sleep and hypoglycemia

Lack of sleep and hypoglycemia


The rewards of unethical behavior are
something people struggle with on a daily
basis. As simplistic as it sounds, people who
are hungry or tired have less self control.
Research has found that tired participants
asked to complete math tasks significantly
over-report correct answers. While being
tired or hungry won't make someone
embezzle, it leaves them more open to
moments of weakness.

Escalating commitment

Escalating commitment
Big thieves usually start out as small thieves.
One way such actions become a slippery
slope leading to ever greater misconduct is
the feeling that there's no way out.
This has been seen in recent rogue traders
like Jerome Kerviel and Kweku Adoboli. They
got bonuses for taking big risks, but when
those risks became big losses, they took
even larger risks to try and make up for
them.

The induction mechanism

The induction mechanism


People compare their present
behavior to what they've done in
the past. Another way people slide
down the slope of unethical behavior is
to stop seeing that behavior as bad.
As the unethical becomes routine, the
extremely unethical, once unthinkable,
enters the realm of possibility.

Market and shareholder pressure

Market and shareholder pressure


Former Citigroup CEO and Chairman
Charles Prince once said, "As long as the
music is playing, you've got to get up and
dance."
He was referring to the leveraged buyout
market in 2007. Before the collapse,
there was intense pressure for
managers to join in on the huge and
risky profits, despite the evident
bubbliness of the market.

The compensation effect

The compensation effect


Sometimes people, having been moral and
forthright in their dealings for a long time,
feel as if they have banked up some kind
of "ethical credit," which they may use to
justify immoral behavior in the future.
An experiment from Nina Mazar and Chen-Bo
Zhong found that people who have just
bought sustainable products tend to lie and
steal more afterwards than those who bought
standard versions.

Negative consequences of transparency

Negative consequences of transparency

Transparency usually serves to reduce


unethical behavior, as it increases the
likelihood of getting caught. Experiments
examining the publication of conflicts of
interest have found a perverse effect.
The effect comes from something called
"moral licensing." If a conflict of interest is
publicly disclosed, it can seem less
problematic, as if it has been agreed that it's
all right. That can lead people to indulge their
bias.

Bad communication

Bad communication
Issues of corruption and morality are
often treated as black and white,
wrongdoers are badly punished, and
gray areas are not discussed.
That can lead to an environment
where rather than sounding out
ideas that border on unethical,
people push and test their limits.

The pressure to conform

The pressure to conform


Nobody likes being a nuisance. In
order to fit in with a group,
people do things they might not
otherwise. That can lead them to
ignore abuses for the sake of peace
or unity and go along with
questionable decisions.