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Why Do Good People Do Bad Things in Business? Lessons from Research for Responsible Business Managers


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Promoting ethical behavior in business requires an understanding of why and when seemingly good people do unethical things. Research on this issue consists of theoretical models of moral decision-making and empirical studies of ethical sensitivity, attitudes and behaviors of people in various contexts. These studies reveal that explanations of unethical conduct include considerations of a person’s psychological disposition as well as the circumstances in which they live. They also identify general principles that explain why individuals might engage in unethical conduct. This chapter reviews studies conducted over the past 50 years and articulates lessons that can help business managers improve the ethical climate of business and ethical behavior of employees. While it does not break new ground, this discussion is important because it synthesizes scholarship in simple language accessible to both scholars and business professionals. This chapter also identifies directions for future research that can enhance and supplement these lessons.
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Why Do Good People Do Bad Things in
Business? Lessons from Research for
Responsible Business Managers
Harvey S. James, Jr.
Department of Agricultural & Applied Economics, University of Missouri, USA
In T. Issa and R. Wolf (Eds.), International Business Ethics and Growth Opportunities. Hershey,
PA: IGI Global.
Promoting ethical behavior in business requires an understanding of why and when seemingly
good people do unethical things. Research on this issue consists of theoretical models of moral
decision-making and empirical studies of ethical sensitivity, attitudes and behaviors of people in
various contexts. These studies reveal that explanations of unethical conduct include
considerations of a person’s psychological disposition as well as the circumstances in which
they live. They also identify general principles that explain why individuals might engage in
unethical conduct. This chapter reviews studies conducted over the past 50 years and articulates
lessons that can help business managers improve the ethical climate of business and ethical
behavior of employees. While it does not break new ground, this discussion is important because
it synthesizes scholarship in simple language accessible to both scholars and business
professionals. This chapter also identifies directions for future research that can enhance and
supplement these lessons.
Key words: Moral decision-making, ethical sensitivity, unethical behavior, moral development,
moral dilemma, self-interest, bounded rationality, opportunism, evil, disposition, authority,
business roles and routines, group pressure, herd morality, incentives, corporate culture,
rationalization, in-group versus out-group.
One of the most fundamental problems in business ethics is understanding why good
people do bad things. Business managers ask this when they discover evidence of lying, cheating
or stealing among their employees, such as the case of an employee of a Minneapolis business
accused of embezzling millions of dollars from his employer between 2005 and 2009 (Hanners,
2014). Stockholders and other business stakeholders ask this when they hear reports of
malfeasance by business executives, such as the recent case of a pharmaceutical company
executive accused of giving improper donations to Virginia politicians (Vozzella, 2013) or the
case of an oil company executive controlling secret off-shore bank accounts (Ball, 2014).
Consumers ask this when they learn that products they have purchased are tainted or defective
because of employee or corporate negligence, such as the case of General Motors fined in 2014
for delays in issuing recalls of automobiles with faulty ignition switches (Puzzanghera, 2014).
The question of why people do bad things, particularly in business, is important because
business ethics scandals often, if not usually, involve seemingly ordinary people. They are
colleagues, neighbors, acquaintances and sometimes even friends. Are people who engage in
unethical behavior bad, or are they people who do good in most situations, but who occasionally
succumb to ethical temptations? According to James (2006), Kish-Gephart, Harrison and
Treviño (2010) and others who have studied this particular question, the answer must account for
a complicated combination of individual, organizational and situational considerations.
The purpose of this chapter is to provide further insights by identifying clear and specific
lessons about human behavior from experimental and other empirical research conducted by
scholars since the mid-1960s. This is not an exhaustive review. Rather, this chapter presents a
selection of studies that offer lessons about why and when people may engage in unethical
behavior. Some of the studies surveyed here are well-known, while others are more
contemporary. Nevertheless, all of them are worth reviewing for at least three reasons. Firstly,
researchers are not always clear about the precise lessons that their studies provide about the
circumstances contributing to unethical behavior, in part because they typically write to other
scholars rather than directly to business managers. Thus, in this chapter I identify the
implications of these studies in clear and simple language. Secondly, it can be helpful to have in
a single source (a collection of) insights that might be known but which are scattered among a
broad and growing literature. Thirdly, because unethical behavior continues to strike business,
communities and societies at all levels (Ethics Resource Center, 2013), it is clear that these
lessons are not widely heeded, understood, respected, let along followed. These lessons need
repeating. Therefore, this review of the literature is both timely and essential. Business managers
who understand and utilize these lessons might become more capable of promoting ethical
behavior and discouraging unethical behavior within their business firms. Failing to heed these
lessons might result in a continuing problem of people in business doing things they ought not to
be doing.
This chapter will first provide a brief background of the issue and the literature, moving
towards the assumptions of behavior, providing explanations for unethical behavior with seven
lessons derived from the literature review, finally moving towards future research followed by
Although there can be many ways to think about and define unethical behavior,
Armstrong (1977) suggests that unethical behavior is knowingly making a decision that harms
others or that one feels, believes or knows to be irresponsible or wrong (see also Jones, 1991).
Using this definition, the question of why good people do bad things is really a question of why
people would knowingly make decisions that harm others or that they believe to be irresponsible
or wrong.
There is an extensive body of theoretical and empirical scholarship seeking to understand
and explain unethical conduct of people generally and of people in business in particular. The
most important foundations for theoretical studies on ethical and unethical behavior are
Kohlberg’s (1969, 1984) theory of moral development and Rest’s (1986) component model of
moral behavior. According to Kohlberg, individuals progress through six stages of moral
development, divided into three levels: (1) responding to external signals of reward and
punishment, (2) conforming to social expectations and roles, and (3) living by an internal
conscience of moral principles. According to Rest, moral decision-making consists of four
aspects: (1) interpreting the situation, (2) determining the appropriate moral action, (3) having an
intention to do the right thing, and (4) following through with the intended moral behavior.
Table 1. Important theories and models of ethical decision-making.
Main items in the model
Theory of Moral
Three levels of moral development are (1)
responding to external signals of reward and
punishment, (2) conforming to social
expectations and roles, and (3) living by an
internal conscience of moral principles.
Elements of Moral
Moral decision-making consists of interpreting
the situation, determining the appropriate moral
action, having an intention to do the right thing,
and following through with the intended moral
Interactionist model
Based on Kohlberg, ethical judgment determined
by level of cognitive moral development,
individual characteristics and the specific
contexts of the ethical dilemma.
Ferrell and Gresham
Contingency Framework
Ethical decisions are affected by individual
factors, organizational stakeholders, and
opportunities for action.
Hunt and Vitell
General Theory of
Marketing Ethics
Ethical judgments include a combination of
teleology (e.g., utilitarian) and deontology (e.g.,
Kantian) evaluations.
Issue Contingent Model
Based on Rest, ethical judgments affected in part
by the moral intensity of ethical problem, and
moral intensity is comprised of magnitude of the
consequences, social consensus, probability of
effect, temporal immediacy, proximity, and
concentration of effect.
Theory of Planned
Ethical behavior affected by behavioral control
and behavioral intention, and behavioral
intention is affected by a person’s attitudes,
subjective norms, and perceived behavioral
Social Intuitionist
Moral judgment based on (quick) moral
intuition, and moral reasoning occurs after a
person has made a moral judgment.
One of the most widely used models of moral decision-making is Treviño’s (1986)
person-situation interactionist model. Treviño hypothesized that an individual’s ethical judgment
is determined by their level of cognitive moral development, individual characteristics and the
specific contexts of the ethical dilemma individuals face. The cognitive component of her model
is based on Kohlberg's framework. Other theories of ethical decision-making, as summarized in
Table 1, include Ferrell and Gresham’s (1985) contingency framework for ethical decision
making, Hunt and Vitell’s (1986) descriptive general theory of marketing ethics, which posits
that individuals consider both deontological as well as teleological factors, and Jones’s (1991)
issue contingent model, which places emphasis on the moral intensity of ethical problems that
people face. Ajzen’s (1991) theory of planned behavior has also been applied to the problem of
understanding unethical conduct (see, for instance, Chang, 1998). The common element of these
studies is that they presume or rely on the expectation that decision-makers are acting rationally
when making ethical judgments.
However, many scholars disagree with the assumption that people think rationally when
faced with moral dilemmas and personal conflicts of interests. For example, Sen (2009)
distinguishes between rationality and reasonableness, arguing that while rationality means that
individuals subject their behavior to “critical scrutiny,” reasonableness means that people are
able to articulate “good reasons” for the behavior that they take, such as when “a particular
choice [is] established in our mind through experience or habit formation” rather than through
“critical scrutiny” (p. 181). Haidt (2001) takes a different approach, arguing that moral reasoning
does not cause people to behave morally. Rather, moral judgments are usually made intuitively.
Moral reasoning occurs after the behavior and as a means people use to rationalize the decisions
they make, something akin to Schön’s (1987) reflection-in-action. The lesson here is that while
considerable effort exists among scholars to understand conceptually why people engage in
unethical behavior, a clear consensus is lacking. The reason is in part because there is an
unresolved debate about whether conceptual models of ethical decision-making should be
normative and focus on how people should act when facing ethical problems or whether the
models should be descriptive and focus directly on behavioral conditions that affect individual
behavior (Bazerman & Gino, 2012). More work is needed here, because conceptual models both
guide the type, scope and context of empirical work conducted by scholars and provide the basis
for interpreting the findings, since empirical research generally builds on a conceptual or
theoretical foundation (Ethridge, 2004). Stated differently, if we don’t have a clear conceptual
understanding of why, when and how seemingly good people do unethical things, then it might
be difficult to understand what the empirical evidence is telling us.
Empirical studies are voluminous. Helpful reviews include Collins (2000), O’Fallon and
Butterfield (2005), Treviño, Weaver and Reynolds (2006) and Kish-Gephart, Harrison and
Treviño (2010). These studies show that when faced with ethical problems, the judgments and
actions people take are affected by a variety of individual and contextual considerations, such as
age, nationality, psychological state, working conditions and observed behavior of others.
However, specific lessons for business managers are often difficult to discern from this research,
because researchers do not always explain the lessons in language applicable to the business
community at large. For example, Kish-Gephart, Harrison and Treviño (2010) conclude their
review of the literature by stating that
“Cumulative data suggest not only multiple sources or facilitators of unethical choice …
but also the intriguing possibility that these agents work at least sometimes through more
impulsive, automatic pathways than through calculated or deliberative ones” (p. 23).
But what specific lessons that managers can draw from this are unclear. Thus, this chapter is
important because it identifies seven lessons and principles that can be generalized from the
current body of research on why and under what circumstance people may engage in unethical
behavior, drawing especially on experimental studies. Therefore, this presentation is in the spirit
of Bazerman and Gino (2012), who advocate a behavioral ethics approach to understanding why
unethical behavior occurs in business. This will be elaborated upon in the next part of this
In order to understand why unethical behavior occurs, we need to understand people.
While this is a straight-forward and simple statement, it is also a complex issue to understand
people. Indeed, this is so because there are many issues that we do not know about how the
human mind works, it is necessary to make some assumptions about people. The first assumption
is that people usually act in ways that advance their interests (see, for instance, Miller, 1999).
According to Andre and Velasquez (1989), “The view that human beings act from self-interest
and from self interest alone is not new. It has long been the dominant view in psychology and in
much of Western thought (para. 4). This is a non-trivial assumption, yet it is not without
controversy. For example, some research suggests that prosocial behavior is motivated by
empathy or altruism rather than self-interest (Batson, Dyck, Brandt, Batson, Powell, McMaster,
& Griffitt, 1988; see also Stellar, Feinberg & Keltner, 2014). In other words, self-interest is
probably not the only motivating factor that can affect the ethical behavior of people.
Nevertheless, if we assume that self-interest is a motivation for the behavior of people, then the
question arises as to how that helps us understand and explain unethical behavior.
Some people believe that if it is true that people are self-interested, then that is also the
explanation for why we are plagued with ethical problems in business (see Miller, 1999). The
implication is that the solution to the problem of unethical behavior is to change the fundamental
nature of people so that they are not self-interested. This is neither a realistic policy nor a viable
explanation, because it does not answer the question of why people find it in their interest to
engage in unethical behavior. The importance of self-interest as an assumption of motivation is
that it requires us to focus on the questions of why and when. Why do some people believe they
are better off harming others or doing things they know or believe to be wrong rather than by
acting in some other way? What is it about the person or the person’s circumstances that make
them feel or believe that it is in their interest to harm others or otherwise engage in unethical
conduct? These questions naturally follow from the assumption that people are motivated to act
in their interest.
In addition to the assumption of self-interest, Williamson (1985) stated that we need to
consider two other assumptions about people. The first is that there are limitations in the
cognitive abilities of people, which Simon (1991) and others have called bounded rationality.
The second is that people will take advantage of the cooperative or trusting behavior of others
when their interests and values are in conflict, which Williamson simply calls “opportunism.” At
a fundamental level, the basic difference between these problems is one of intentions. In the case
of “bounded rationally,” people intend to do well, but they make mistakes. In the case of
“opportunism,” people intend “to mislead, distort, disguise, obfuscate, or otherwise confuse”
(Williamson, 1985, p. 47) when they believe it is in their interest to do so.
The assumptions of self-interest, bounded rationality, and opportunism provide the
foundation for a consideration of general explanations for unethical behavior, which will be
elaborated upon in the following section.
There are two general explanations for why people engage in unethical behavior. The
first explanation is that people desire evil and want to do bad things. A corollary is that evil acts
are committed by evil people that is, by people who inherently desire to inflict harm on others
and whose satisfaction and well-being increase because others are harmed. This explanation
cannot be fully discounted, since there are bad (even evil) people in this world. Nevertheless, this
is a poor explanation for understanding business ethics problems in most contexts because
character and behavior are infinitely complex. Simply saying, “he did something bad because he
is a bad person” doesn’t answer the question “why?” Why do people do unethical, or evil,
The second explanation is that people want to do good but they either make mistakes or
they find that their interests conflict with those of others. A corollary is that ordinary, good
people can do very bad things under some circumstances. Even here the problem of explaining
unethical conduct in business is difficult, because behavior is affected by a complex web of
dispositional, psychological, motivational, environmental, situational, social and other factors.
However, this second explanation provides a direction for study and for ideas business managers
can consider when seeking to alleviate business ethics problems. What this second explanation
implies is that in order to understand unethical behavior, business managers need to understand
circumstances in which people not only error in their judgment about what the right thing is, but
also face conflicts between their personal interests and the interests and values of business
leaders or other business stakeholders.
There are two general approaches that scholars have considered when trying to
understand these kinds of circumstances in business. The first is dispositional. The dispositional
approach considers the inherent characteristics of people (Treviño & Nelson, 2011), such as the
role of moral awareness, moral judgment, and moral intent on ethical behavior (Rest, 1986) and
on the normative frameworks people use when making moral judgments, including the role of a
person’s emotions (Frank, 1988) and self-identity (Bergman, 2004). A person’s conscience and
ability to feel guilt and shame when they mistakenly or intentionally engage in unethical
behavior is central to dispositional perspective. Solutions based on dispositional considerations
therefore place the primary responsibility for alleviating unethical behavior on the individual.
This means that people must learn to police themselves by exercising moral restraint and by
learning to recognize when they are facing ethical dilemmas, especially when people know that
opportunistic behavior will not be detected (Rose, 2011).
Even though the dispositional approach places attention primarily on the individual, there
are some things that business managers can consider. For example, they might seek to appeal to a
person’s innate sense of moral duty and responsibility or to hire workers who are “moral” and
who are capable of being guided by an internal sense of right and wrong. They might also
regularly instruct their workers on what ethical dilemmas are and how employees can recognize
and overcome them. That said, while important and perhaps even necessary, the dispositional
approach is difficult for business managers to utilize because it is difficult if not impossible for
them to change the inherent moral characteristics of people or to know simply by looking at
people which ones are moral and which are not. Other individuals or institutions might be
effective in doing so, such as religious organizations, but generally not business managers.
The second approach is situational. In this approach, consideration is placed on the
context within which behavior occurs and the characteristics of organizations (Treviño &
Nelson, 2011), such as the organizational climate (Victor & Cullen, 1988) and the incentives and
disincentives created by the organizational structure (James, 2000). Broadly speaking, the
situational approach considers all aspects of the work environment of employees, from the social
norms guiding their behavior to the specific work requirements and expectations peculiar to each
worker’s job description. Business managers have some, though not perfect, control over
situational factors. Therefore, it can be helpful for them to consider how and why situational
factors can increase the likelihood that people will either make mistakes in judgment or act
The Seven Lessons
There is a very large literature from experimental and other studies examining why and
how situational considerations affect the ethical behavior of people. The following summarizes
some of these studies and describes seven specific lessons that we can learn from them about
how situational contexts and circumstances affect the ethical and unethical behavior of people.
Lesson One: People may harm others if asked to do so by a legitimate authority.
Although shocking to think about, there is considerable evidence demonstrating that
people will do bad things when asked, required or expected to do so by someone they recognize
as an authority (Tourish & Vatcha, 2005; Perlman, 2007). The most famous experimental
evidence of this is Stanley Milgram’s shock experiments (Milgram, 1963). In this experiment,
which has been replicated (see, for instance, Burger, 2009), subjects were asked by the
experimenter, who acted in the role of a scientist, to administer shocks to learners who did not
correctly “learn” (that is, remember) something. Subjects were told by the experimenter to
increase the voltage at each wrong answer given by the learner, up to 450 volts. On average,
subjects administered the maximum voltage two-thirds of the time, and this was even when they
heard the learner screaming in pain. In reality, the learner was a confederate to the experiment;
that is, the learner was not actually being shocked by the subject. However, the experiment
showed how frequently people can be made to do irresponsible or harmful things when
instructed to do so by someone in authority (Andre & Velasquez, 1988).
The lesson is that business managers can directly influence the likelihood that workers in
their firms will make ethical mistakes or deliberately engage in unethical conduct based on the
instructions that they give their workers. Stated differently, while business ethics research often
focuses on the qualities or characteristics of ethical leaders (Brown, Treviño & Harrison, 2005),
an important though overlooked consideration is what tasks managers give workers and how
they give them. First and foremost, managers should not tell workers to do unethical things, such
as to overcharge customers (Ross, 2010). Moreover, the tasks and associated instructions need
not be explicit statements to do wrong. If instructions are vague or ambiguous, for instance, then
workers may blame their unethical behavior on their superiors. Therefore, business managers
have a responsibility to give ethical instructions to their workers and to be clear in their
expectations. What this means is that in many circumstance, the responsibility for unethical
conduct lies with the person in charge in addition with the person who committed the act.
Lesson Two: People may act according to their assigned roles and business “scripts” or
There are a number of studies that demonstrate how the behavior of people is affected by
the scripts, roles and routines that they learn directly from leaders or indirectly from the
organizational or social culture (Lord & Kernan, 1987; Dionysiou & Tsoukas, 2013). Individual
behavior and self-perceptions can also be affected by how one dresses (Karl, Hall & Peluchette,
2013). Consider this simple idea: When people put on a costume, they might behave according to
how they are dressed. For instance, if they dress like a clown, then they might try to be funny; if
they dress like a super-hero, then they might try to act brave. The 1971 Stanford Prison
Experiment, conducted by Philip Zimbardo, is the best known example of this in an experimental
setting (Zimbardo, 2007). In this experiment, a “prison” was set up in the basement of the
Stanford University psychology building. Participants recruited for the study were assigned
either prison guard or prisoner roles. Guards were given uniforms, batons, and sunglasses, while
prisoners were “arrested” by police, kept in cells, and identified by guards by numbers. The
study was originally designed to last for two weeks, but it was halted after six days when guards
escalated sadistic and humiliating abuse on prisoners (see also Zimbardo, n.d.). In another set of
experiments, Armstrong (1977) showed that substantial proportion of managers may be
expected to bring serious harm to others in situations where they feel it is proper behavior for
their role (p. 17).
The lesson here is that many cases of unethical conduct by business executives and
employees can be explained by their “believing” that they are acting in a way expected of them
for the good of the business. For example, the lawyer representing executives of Westinghouse
and General Electric convicted of price-fixing in the 1960s said “They [the executives] were
driven to do what they did by reason of being devoted to the company…If this was what the
company wanted them to do, they thereupon did it” (Annenberg Foundation, 2012, p. 9). Related
research shows that a person’s organizational identity, or how a person’s sense of self-worth is
tied to the performance of a group or organization, affects their willingness to engage in behavior
that they might perceive is in the interest of the organization but which they may also believe to
be irresponsible, wrong, or harmful to others. Scholars refer to this as unethical pro-
organizational behavior (see Umphress, Bingham & Mitchell, 2010; Umphress & Bingham,
2011). Therefore, business managers have a responsibility to assign clear expectations of
behavior to their workers and to monitor them. However, more than making clear what is
expected of employees, it is important for business managers also to ensure that employees do
not feel a conflict between the roles they have within the business and other roles that they have,
such as in their profession, family or civic groups, since role conflicts can affect the ethical
behavior of individuals (Grover, 1993).
Lesson Three: People may do bad things as part of a group, even though they may never
consider doing so when acting alone.
There are many examples in which mob violence, mass riots and massacres are linked to
group pressure, crowd psychology or herd morality (Handwerk, 2005; Welner, 2011; see also
Sims, 1992). According to psychologists, the psychology of a crowd differs from that of an
individual (Reicher, 2001). The reason is that people can get swept up in the collective
movement and therefore do things they may never have considered when acting alone, such as
committing acts of violence against other people. If events within the group move too fast,
people may act without thinking until it is too late. The problem with such “groupthink” is that it
is easy to lose one’s identity – that is, to become anonymous. It is also easy for individuals to
feel a loss of individual responsibility, because responsibility can become diffused within groups.
Generally, the larger the group, the easier it is not to be noticed and the less responsible a single
group member may feel about the actions of the group. For example, if I cause the death of a
person, I might (and probably should) feel fully responsible for that terrible act. However, if I am
one of 300 individuals in a group that causes the death of someone, should I say that I am fully
or only partly responsible? If partly responsible, then is my responsibility one part of 300 or
something different? This example shows why it can be difficult for group members to feel
responsible for actions taken by the group.
A classic experiment documenting the role of group pressure on individual behavior was
conducted by Solomon Asch in the 1950s (Asch, 2004). In this study, subjects were shown two
cards. One card had one vertical line and the other card had three vertical lines of different
lengths. Subjects were asked to select, from the card with three vertical lines, the one that was
the same length as the single line on the first card. When making this choice alone, subjects
almost always selected the right line. However, when asked to make their decision within a
group, people erred when others in the group incorrectly selected the wrong line. What subjects
did not know was that members of the group were confederates to the experimenter; the
confederates knowingly selected the line of wrong length in order to determine whether the
subject would be able to choose independent of the group’s collective incorrect decision. Asch
was able to document that “an individual’s resistance to group pressure in these experiments
depends to a considerable degree on how wrong the majority is” (p. 25). In other words, the
greater the number of group members choosing incorrectly, the more likely it is that a single
person will also make an incorrect choice. Asch’s experiments and similar studies of conformity
have been replicated numerous times in a variety of countries (Sunstein, 2003).
Responsibility that people feel in groups can also be diffused as group tasks or activities
are divided among members of the group. For example, consider the extreme case of a firm that
makes a product that causes the death of a consumer, as illustrated by the Jack-in-the-Box
restaurant case in the U.S. in 1993 in which three children died and hundreds sickened by eating
beef tainted with the E. Coli bacteria (Porterfield & Berliant, 1995) or by the Remedia case in
Israel in 2003 in which three babies died and nearly two dozen more injured when fed vitamin-
deficient baby formula (Tsoref, 2008; Bob, 2013). Who is responsible for such deaths? The
individual who designed the product? The person who built a component of the product? The
person who oversaw its assembly? The person who marketed it? The person at the store who sold
it to the consumer? The company president? In this case, it is not clear who could be held
responsible, or if any particular person had a responsibility to raise a warning about a potential
harm. We could say that everyone had a shared responsibility, but is this valid? Is the secretary
to the human resources vice president as responsible as the person who designed the product? If
they have differently levels of responsibility, then how are we to apportion that responsibility?
The lesson here is that business managers must recognize that individuals working as a
group within a firm may feel differently about their decisions than when making decisions alone.
Therefore, in order to reduce the likelihood that groups make ethical mistakes or intentionally
engage in opportunistic acts, business managers should take responsibility for the actions of
workers collectively in their firms. They should also teach their workers the importance of being
responsible and hold individuals within their organizations responsible who are caught behaving
Lesson Four: People may respond to the incentives and disincentives created by or existing
within the business structure.
If people are motivated to act in their interest, then we should expect that they respond to
incentives and disincentives. According to Condly, Clark and Stolovitch (2003), numerous
studies support this assessment. Simply put, people will do things that bring them rewards and
avoid things that result in something unpleasant, such as fines and punishments. Therefore, if
there are direct incentives for people to behave unethically in business firms, then we should not
be surprised when unethical behavior occurs (Kerr, 1975). An important consideration here is the
reward, monitoring, and compensation system that directly pays workers for behaving
unethically (James, 2000). For instance, many financial scandals can be traced to compensation
systems that reward employees for doing unethical things and that do not reward them for doing
the ethical but unprofitable action (Tenbrunsel, 1998). An example is the LIBOR (London inter-
bank offered rate) financial scandal, in which traders fraudulently manipulated bank interest and
other financial rates. According to The Economist (2012), the scandal arose because “those
involved in setting the rates have often had every incentive to lie, since their banks stood to profit
or lose money depending on the level at which LIBOR was set each day” (para. 7). In fact,
financial conflicts of interests might be the most important source of perverse incentives
resulting in unethical conduct, in part because people often fail to recognize when they face a
conflict of interest (More, Tetlock, Tanlu, & Bazerman, 2006).
An example of perverse incentive systems in business is offered by the humorist Scott
Adams (1995). He explained how a software company wanted to improve the quality of the
software it produced. So, it instituted an incentive system whereby software engineers were paid
$20 for each bug or flaw in the software they found, and $20 for each bug they fixed. The
problem was that the software engineers providing the quality checks were the same ones who
wrote the original software code. The result was that the engineers created software with flaws
that they then found and corrected. Adams reported that the company halted the incentive
program after one week, but not before one software engineer received $1,700 from the incentive
Corporate culture is also important in providing incentives and disincentives for ethical
behavior. In fact, some scholars believe that corporate culture is as important, if not more so,
than business strategy and other considerations (Gandz & Hayes, 1988; Chen, Sawyers &
Williams, 1997; Goodpaster, 2013), although strong moral identities can mitigate the influence
of corporate culture and perverse reward systems on ethical judgments (Ashkanasy, Windsor,
Treviño, 2006; Caldwell & Moberg, 2007). For example, in some cases, managers can send a
signal that unethical conduct will not be punished when they fail to take actions against workers
caught violating the law or company policies. In other cases, people can become “ethically
blind” (Palazzo, Krings, & Hoffrage, 2012), in that they do not recognize that they are facing an
ethical problem. This can occur when people focus on the rewards and sanctions offered by firms
rather than on their behaviors or the implications of their behaviors beyond how they are
rewarded (see Bazerman & Tenbrunsel, 2011).
The lesson here for business managers is that they need to review carefully what it is that
they reward their workers to do. They also need to monitor carefully how employees respond to
company compensation plans, especially noting any individuals or groups of employees who
respond with an excessive drive to achieve organizational objectives. Goodpaster (2004) says
this is a problem defined by an “unbalanced pursuit of purpose in either individuals or
organizations” (p. 5). Symptoms include fixation on company objectives, rationalization and
detachment, which is the belief that one’s worth is defined by rewards received. Business
managers therefore need to help workers see the business’s objectives and rewards in a proper
perspective, perhaps by emphasizing the broader social responsibility of business. They should
not place too much pressure on employees to meet sales or other performance goals (Litzky,
Eddleston, & Kidder, 2006). They also need to listen to workers who raise concerns or
objections. Too often, people who raise alarms about problems with company reward and
compensation systems are the ones who are punished by being reprimanded, bullied or fired (see,
for instance, Matthiesen, Bjorkelo & Burke, 2011). Instead, for the good of the business, and the
people employed there, business managers should listen to and respect people who raise
concerns about ethical problems in the business firm.
Lesson Five: People may rationalize unethical conduct the more they think others do it.
People often take their ethical cues by observing what others do. If others behave
ethically, then people may respond to the “social norm” and behave ethically themselves. If
others lie, cheat or steal, however, then people may believe the social norm accepts such
behavior and behave accordingly (Felps, Mitchell, & Byington, 2006; Kerr, Rumble, Park,
Ouwerkerk, Parks, Gallucci, & van Lange, 2009). James and Hendrickson (2008) show this is a
study of Missouri farmers, who were surveyed in 2006 to determine what they thought about
various ethical scenarios and how often they believed the problems occurred. The authors found
that farmers recognize three different types of ethical problems those that are harmful, are
unlawful, and are in bad taste. They also found a strong correlation between how acceptable
farmers view an unethical conduct and how frequently they perceived it in their community,
suggesting that the more frequently a farmer believes the action occurs, the more tolerant he or
she is of the unethical action.
The lesson here for business managers is that they need to be aware of what people
within their organization are doing. Ways to do this might include meeting informally with
employees, visiting production sites and otherwise just observing what workers are doing. Thus,
it is important to be aware of the business firm’s organizational culture, since culture is created
by the interaction of individuals within groups. Moreover, responsible business managers know
that others within their organization see what they do, so the ethical (or unethical) behavior of
business managers can be used to establish the social norm of behavior with the organization.
Simply stated, if business managers want their workers to behave ethically, then they need to
behave ethically as well. This includes not only not doing unethical things but also not appearing
to lie, cheat or steal. Appearances matter. Even seemingly innocent comments and actions can be
perceived by others as showing a tolerance of unethical behavior.
Lesson Six: People may engage in unethical conduct if they see others within their in-group
doing so, but they are less likely to behave unethically if they see out-group members doing so.
This lesson builds on the previous one but recognizes that people not only take their
ethical clues from what they observe others doing, but also show a particular concern about the
behavior and opinion of others with whom they identify or want to associate (Randall &
Fernandes, 1991; Cialdini & Goldstein, 2004). If I see people in my group behave differently
than people in another group, then I may be more likely to follow the behavior of my group. This
is a logical reaction for humans, who are strongly social creatures (Frith & Frith, 2009).
Experimental evidence of this in the context of ethical behavior is provided by Gino,
Ayal and Ariely (2009). In this study, students at a university were asked to complete a task as
quickly as possible, to evaluate their performance themselves, and then to pay themselves based
on how they scored their performance. Given the set-up of the experiment, it was expected that
some subjects would cheat by saying that had correctly completed the task when in reality they
might not have. As part of the experiment, a confederate to the experiment was the first to stand
and announce that he had completed the task quickly, which was not possible given the nature of
the tasks that students were asked to complete. In one version of the experiment, the confederate
wore a sweatshirt from the university the students attended. In this case, a lot of students cheated.
However, in another version of the experiment, the confederate wore a sweatshirt of a rival
university. In this setting, the number of students in the study who cheated was relatively low.
This suggests that if we observe members of our social group behaving unethically, then we may
think the norm allows this behavior, so we may be more likely to behave unethically.
Conversely, if we observe unethical conduct in members of an “outside” group or rival
organization, then norms of appropriate behavior within our group could be reinforced as the
group seeks to differentiate itself from the other group (see also Duke University, 2009).
Importantly, these findings are affected by whether others observe the actions of group
members. For example, Gino, Gu and Zhong (2009) show through experiments that the effect of
in-group pressure to behave unethically can be mitigated when there is an outside observer. The
reason, according to the scholars, is that “when out-group observers are present, people tend to
feel guilty about in-group member’s selfish or unethical behavior” (p. 1301). In other words,
when I am only with members of my group, I may succumb to the temptation to follow the bad
examples of other group members or not feel bad if I see others in my group doing something
wrong. However, if I know that someone not of my group is watching me, I may be less inclined
to follow the bad examples.
The lesson here for business managers is that they need to create a positive culture that
reinforces ethical conduct of workers. This is done in part by fostering a sense of collective
identity among workers, but not at the expense of harming a person’s sense of right or wrong.
Ideally, business managers should implement plans that help workers understand how and why
their organization should have a reputation for ethical behavior. In addition, business managers
should be transparent about what they are doing, not only to employees and other stakeholders
but to outside observers, such as the general public. Indeed, transparency can be a strong
motivation for appropriate behavior among group members (Palanski, Kahai & Yammarino,
Lesson Seven: People may engage in minor acts of social deviancy if their ability to rationalize
is not impeded by signals that such behavior is wrong.
Research has shown that when there is a personal gain to engaging in unethical behavior,
then people have a tendency to rationalize away reasons for avoiding the bad behavior
(Tenbrunsel & Messick, 2004). An example would be when someone taking paper supplies from
his or her employer for personal use thinks it is the company’s responsibility to make sure
things like this don’t happen” or “other people do this and have not been punished, so maybe the
company thinks it is okay.” These rationalizations can mitigate feelings of guilt that result from
someone doing something they know or suspect they should not have done.
Bersoff (1999) demonstrated the effect of such rationalization on ethical behavior in a
carefully crafted experiment in which college students were overpaid for their participation (paid
$8.25 instead of $6.25). The objective of the study was to determine if the students pointed out
the error in payment. Bersoff conducted variations of the experiment that altered how easily
students could rationalize that it is acceptable to keep the overpayment without notifying the
payer, or, in Bersoff’s language, neutralize cognitive or emotional considerations that such an
action is wrong. For example, some participants were told the experiment was funded by a
private company while others were told the study was being financed personally by a doctoral
student running the experiment. Other participants were directly asked if the amount paid to
them was correct. Still others were presented, during the experiment, with a story about a woman
who took office supplies from her employer home for personal use. Bersoff found that
participants were more likely to report the overpayment when they were told the study was
personally funded, were asked if the amount was correct, and were presented with the story of
the woman taking office supplies. Combinations of these manipulations further increased rates of
participants pointing out the overpayment. Bersoff concluded that these results show that the
more difficult it is for people to rationalize unethical behavior, the less likely they are to do it.
The lesson here is that business managers can affect how easily their employees
rationalize unethical conduct by what they communicate to them and by the formal and cultural
signals they foster within the organization about what is appropriate and what is inappropriate
behavior. Stated differently, people are less likely to engage in unethical or inappropriate
conduct if they receive signals that such behavior is wrong or if it is difficult to rationalize or
justify the behavior. One of the most important signals a business manager can give employees is
from his or her observed behavior, even when employees do not usually observe the actions of
leaders. For example, Treviño and Brown (2004) make the distinction between being perceived
as a “moral person” and being perceived as a “moral manager.” Whereas being a “moral person”
is based on what people see a manager do, being a “moral manager” means the leader “leads
others on the ethical dimension, lets them know what is expected, and holds them accountable
(p. 75). The combination of these two characteristics matters most. For example, a strong moral
manager who is perceived as a weak moral person would be a hypocrite, and hypocrisy among
business managers is a serious impediment to the promotion of ethical conduct within firms.
Summary of Seven Lessons of Why Do Good People Do Bad Things in Business
The lessons presented above provide a clear message about why and under what
circumstances employees in business firms might engage in unethical behavior. Although there
is nothing inevitable about the behavior of employees that is, just because members of a group
behave badly does not mean that a particular group member will follow their behavior the
research summarized here shows a compelling connection between the situational and
organizational features and functions of firms and the ethical behavior of employees.
Fortunately, business managers can learn from these lessons. As an outcome of this
research, Table 2 summarizes the lessons that business managers can learn from this research, as
described in more detail earlier in this chapter. Although it is prudent to note that this list of
lessons is not fully comprehensive, it does point toward important issues in business in relation
to the ethical and unethical conduct of people. Moreover, the specific responses that business
managers can take are also not particularly novel. However, collectively they provide important
guidance for business managers seeking to improve the ethical climate of their businesses. Since
ethical problems continue to exist, these lessons clearly need to be repeated, studied, respected
and, most importantly, implemented.
Table 2. Lessons from research on why and when people might engage in unethical conduct in
Lesson from Research
Appropriate Business Manager Response
People may harm others if asked to do so by a
legitimate authority
Do not require employees to behave unethically
Make task instructions clear
Take responsibility for what happens in the business firm
People may act according to their assigned roles
and business “scripts” or expectations
Make expectations of employee behavior clear
Monitor employees
Minimize conflicts of interests employees face
People may do bad things as part of a group, even
though they may never consider doing so when
acting alone
Understand that employees behave differently in groups than
when working alone
Take responsibility for actions of the group
Hold individuals in groups responsible for specific unethical
actions they take
People may respond to the incentives and
disincentives created by or existing within the
business structure
Review the reward and compensation system of the firm
Monitor employee behavior when incentives are introduced or
Help employees place business objectives in proper
Do not put too much pressure on employee performance
Listen to employee reports about problems in the firm
Do not retaliate against people who bring bad news
People may rationalize unethical conduct the more
they think others do it
Be aware of the organizational culture
Set a good example by being a moral person
People may engage in unethical conduct if they see
others within their in-group doing so, but they are
less likely to behave unethically if they see out-
group members doing so
Reinforce the desirability of ethical conduct
Foster a healthy collective identity among workers
Be transparent about managerial actions and policies
People may engage in minor acts of social
deviancy if their ability to rationalize is not
impeded by signals that such behavior is wrong
Reinforce what is appropriate and inappropriate conduct
Make sure signals about appropriate behavior are consistent
throughout the organization
Set a good example by being a moral person
Be a moral manager by setting clear expectations and by
holding people accountable for their actions
Future research on ethical behavior of people in business will continue, utilizing the full
array of scholarly tools available. These will include not only improvements in our theoretical
models of human decision-making but also experiments, surveys, interviews, case studies and
participant observation. Four directions seem to the follow from the presentation of lessons in
this chapter.
Firstly, the primary limitation of the empirical studies underlying these lessons is that
they were not conducted within business settings. For example, many of these studies were
conducted on university campuses using college students as research subjects, such as the
experiments conducted by Zimbardo (2007), Gino, Ayal and Ariely (2009), and Bersoff (1999).
Peterson (2001) shows that results of experiments using college students differ “both
directionally and in magnitude” from studies using subjects from non-student (adult) populations
(p. 450). Therefore, future research needs to replicate these studies in the business environment.
Secondly, the review by Kish-Gephart, Harrison and Treviño (2010) suggests three main
areas of focus that future research should consider the characteristics of the individual, the
characteristics of the organization and the characteristics of the ethical issue. While each of these
areas of focus is important, it is equally important to examine how these characteristics combine
and interact to affect ethical behavior. According to these scholars, “there is a need for broader
band research that investigates more complex configurations of individual, moral issue, and
organizational environment variables” (p. 23). If, as this chapter has shown, various aspects of
organizational features affect the incentives and disincentives that people face in business to
behave unethically, then can we conclude that people with a strong moral compass will be less
tempted, for instance, to rationalize and reason unethical behavior or to follow the “bad apples”
in a group than people with a weak moral compass? If so, then how, and why? What does it
mean to be tempted? When can business managers rely on an employees’ moral disposition
rather than on external safeguards to prevent or mitigate unethical behavior? These are important
questions that studies considering combinations of these characteristics might be in a better
position to examine.
Thirdly, research needs to continue with behavioral studies that can inform both
academics and practitioners on unethical business practices, even when there is disagreement
among scholars about the conceptual models developed to explain why good people sometimes
do bad things. Bazerman and Gino (2012), for example, state that an important implication of
behavioral studies is that they help “students and professionals better understand their own
behavior in the ethics domain [so that they can] compare it to how they would ideally like to
behave” (p. 101). The problem is not that people do not know what the right answer might be.
Rather, it is that they often know what the right answer might be, but they have incentives to do
what they know or believe to be inappropriate or wrong (see James, 2003). Understanding when
and why this occurs requires that we examine actual behavior of individuals rather than
theoretical models of behavior, which is the primary focus of behavioral ethics studies. It also
requires that we understand how people think, reflect and contemplate on their circumstances,
especially if people are unable to articulate what they would do if they were to face a difficult
situation, even though they might make the right decision when actually placed in that
circumstance a difference that Schön (1992) defined as “reflection-in-action” in contrast with
“knowing-in-action” (p. 11). Thus, it is very important that research moves to think more
seriously about individuals, their values, their moral compass, their motivation and how these
would intertwine with organizational culture, regulations and frameworks.
Fourthly, based on medical studies relating to trust, research focusing on a neurological,
biological or medical basis to unethical decision-making is emerging. For example, research
demonstrates that the hormone oxytocin increases the likelihood that people will trust others
(Kosfeld, Heinrichs, Zak, Fischbacher, & Fehr, 2005). Are there hormones that affect the ability
of people to identify and reason through ethical dilemmas, or that affect the degree to which
people are tempted to do things they know to be wrong? Is there a medical basis for why some
people may do the right thing in one context but the wrong thing when the context changes? For
example, Damásio (1994) argued that emotion plays an important role in decision-making,
especially in assessing the morality of one’s actions. If so, then how does a person’s emotional
state, which can often vary dramatically in the short-term and long-run, affect the degree to
which he or she is willing to be tempted? Can the emotional center of humans be manipulated so
that they are less willing to rationalize unethical conduct? How does emotion affect the ability of
people to think reflectively or to contemplate their actions and circumstance? These and similar
questions clearly show that neuroscience and medical can contribute in helping us understand
what happens in the human mind and body when people are faced with incentives to do things
they ought not to be doing. This suggests that trying to understand why good people do bad
things in business is a complex issue that might take us to think seriously about combining
research in ethics with neurological research.
As highlighted in this chapter, there might be diverse ethical problems that occur in
business. Many of these problems arise because of the situation, context or environment within
which people work. Since there is a growing need for guidance on how business managers and
others can respond to the widespread problem of unethical conduct in business, this chapter has
summarized research studies that provide clear lessons that managers can use to improve the
ethical climate of their businesses.
Implied in this discussion is the understanding that business managers have control or
influence over many things that affect the incentives of their employees to behave unethically.
For example, business managers can control what they do and say, since what they do and say
has an effect on the tendency of employees to do things that they know or believe to be
irresponsible or wrong. Business managers can also manipulate many aspects of the business
organization defining the incentives and disincentives that enhance or mitigate ethical problems
for employees. They can do this through the ways they structure their compensation programs
and by how they deal with employees found to engage in unethical conduct. Thus, this chapter is
a reminder that there is a connection between management and the ethical conduct of their
employees, a connection that links to the incentives created by the organizational structure and
culture of business firms.
Most importantly, the lessons provided here are independent of geopolitical and
socioeconomic considerations. Thus, the role of authorities in influencing the ethical conduct of
employees or the effect of group dynamics on what individuals do applies both in developed and
in developing countries as well as in the East and the West. While specific circumstances might
affect the degree to which people feel the temptation to engage in unethical conduct, the lessons
presented here are still applicable. For example, we might expect the effect of authoritative
instructions on employees whether direct or implied to behave unethically to be stronger in
cultures in which respect of authority is considered a virtue. Similarly, the effect of group
pressure to behave unethically might be stronger in cultures in which conformity is prized.
Therefore, the lessons presented here can and should be adapted to local contexts.
Regardless of specific circumstances, the lessons presented here need to be heeded.
Responsible management is in part about prevention. That is, it is better to prevent unethical
behavior than to deal with its consequences after problems arise. Recognizing that people are
self-interested but might also be prone to make mistakes or to engage in actions that can harm
others, business managers can and should learn from a growing yet extensive scholarly literature
that seeks to understand human behavior. This chapter has outlined some of this literature, with
an objective of identifying specific things that business managers can do to help improve the
ethical climate of business. Business managers who utilize these lessons by improving the ethical
culture of their businesses are behaving responsibly.
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Bounded Rationality: Limitations in the ability of a person to understand the scope of a
problem or to evaluate potential solutions to the problem.
Conflict of Interest, Values or Duties: A situation in which the interests (things one might care
about), values (things one believes are important as an end in themselves), or duties (things one
has an obligation to do) of a person are not compatible with the interests, values or duties of
other individuals or organizations.
Corporate culture: The ideas, beliefs, attitudes, values, standards and expectations shared by
individuals within an organization (usually a business firm) that are implied or understood by
employees but which are not formally written as organizational rules.
Dispositional approach: A focus on the inherent characteristics or psychological qualities of a
person, with particular emphasis on a person’s moral awareness, moral judgment and moral
Ethical Dilemma: A situation in which a person faces an incentive or pressure to engage in
unethical conduct, often arising out of a conflict of interest or values, or a situation in which a
person does not know what the right answer or course of action is.
Moral Reasoning: The process of evaluating the morality, or rightness or wrongness, of a
situation or action, usually involving some degree of reflection, thinking, or logic analysis.
Opportunism: A situation in which a person is able to take advantage of the vulnerability of
others by lying, cheating, stealing, misleading, confusing or other inappropriate actions.
Self-interest: A desire to advance or enhance things that a person cares about.
Situational approach: A focus on the external context within which a person makes a decision,
with particular emphasis on the incentive and disincentives a person considers.
Unethical behavior: Knowingly making a decision that harms others or that a person knows,
feels or believes to be irresponsible or wrong.
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A series of financial scandals revealed a key weakness in the American business model: the failure of the U.S. auditing system to deliver true independence. We offer a two-tiered analysis of what went wrong. At the more micro tier, we advance moral seduction theory, explaining why professionals are often unaware of how morally compromised they have become by conflicts of interest. At the more macro tier, we offer issue-cycle theory, explaining why conflicts of interest of the sort that compromise major accounting firms are so pervasive.
Research on moral judgment has been dominated by rationalist models, in which moral judgment is thought to be caused by moral reasoning. The author gives 4 reasons for considering the hypothesis that moral reasoning does not cause moral judgment; rather, moral reasoning is usually a post hoc construction, generated after a judgment has been reached. The social intuitionist model is presented as an alternative to rationalist models. The model is a social model in that it deemphasizes the private reasoning done by individuals and emphasizes instead the importance of social and cultural influences. The model is an intuitionist model in that it states that moral judgment is generally the result of quick, automatic evaluations (intuitions). The model is more consistent than rationalist models with recent findings in social, cultural, evolutionary, and biological psychology, as well as in anthropology and primatology.
The phrase “corporate culture” is used in a more general sense to mean the culture of any organized group or institution. In a narrower sense, “corporate culture” refers to the culture of a business corporation. In most contexts, however, the two senses are interchangeable. A corporation's culture impacts its behavior in significant ways, as much as if not more than strategy, which is often thought to be overriding in decision-making. The subject of corporate culture, however, goes beyond the debate over which is more important. The 2009 National Business Ethics Survey reflects the ethics component of culture. Its results show that an ethical corporate culture “continues to have a profound impact on pressure, observed misconduct, reporting of observed misconduct, and rates of retaliation against reporters” (Ethics Resource Center 2009). It also found that “actions and perceptions of top managers drive the ethical culture of the company and have a significant impact on outcomes.”
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The role of leaders in influencing unethical behavior in the workplace After years of focusing on explaining and predicting positive employee attitudes (e.g., job satisfaction, employee commitment) and behaviors (e.g., employee citizenship, work performance), organizational behavior researchers have increasingly turned their attention to understanding what drives costly misconduct in organizations (Bennett & Robinson, 2000; Giacalone & Greenberg, 1997; Robinson & Bennett, 1995; Robinson & O'Leary-Kelly, 1998; Treviño, 1986; Vardi & Wiener, 1996). Although researchers have used a variety of terms to describe such employee behavior (e.g., deviance, antisocial behavior, misbehavior, counterproductive behavior, unethical behavior), all of them share a concern with counternormative behavior intended to harm the organization or its stakeholders (O'Leary-Kelly, Duffy, & Griffin, 2000). Unethical behavior in organizations has been widely reported in the wake of many recent high-profile corporate scandals. As researchers and practitioners consider what may be driving such behavior, leaders are coming under increasing scrutiny ...
When confronted with an ethical dilemma, most of us like to think we would stand up for our principles. But we are not as ethical as we think we are. InBlind Spots, leading business ethicists Max Bazerman and Ann Tenbrunsel examine the ways we overestimate our ability to do what is right and how we act unethically without meaning to. From the collapse of Enron and corruption in the tobacco industry, to sales of the defective Ford Pinto and the downfall of Bernard Madoff, the authors investigate the nature of ethical failures in the business world and beyond, and illustrate how we can become more ethical, bridging the gap between who we are and who we want to be.Explaining why traditional approaches to ethics don't work, the book considers how blind spots like ethical fading--the removal of ethics from the decision--making process--have led to tragedies and scandals such as the Challenger space shuttle disaster, steroid use in Major League Baseball, the crash in the financial markets, and the energy crisis. The authors demonstrate how ethical standards shift, how we neglect to notice and act on the unethical behavior of others, and how compliance initiatives can actually promote unethical behavior. Distinguishing our "should self" (the person who knows what is correct) from our "want self" (the person who ends up making decisions), the authors point out ethical sinkholes that create questionable actions.Suggesting innovative individual and group tactics for improving human judgment,Blind Spotsshows us how to secure a place for ethics in our workplaces, institutions, and daily lives.
This study examines the impact of a social desirability response bias as a personality characteristic (self- deception and impression management) and as an item characteristic (perceived desirability of the behavior) on self-reported ethical conduct. Findings from a sample of college students revealed that self-reported ethical conduct is associated with both personality and item characteristics, with perceived desirability of behavior having the greatest influence on self-reported conduct. Implications for research in business ethics are drawn, and suggestions are offered for reducing the effects of a socially desirable response bias.
Executive Summary In the aftermath of recent corporate scandals, managers and researchers have turned their attention to questions of ethics management. We identify five common myths about business ethics and provide responses that are grounded in theory, research, and business examples. Although the scientific study of business ethics is relatively new, theory and research exist that can guide executives who are trying to better manage their employees' and their own ethical behavior. We recommend that ethical conduct be managed proactively via explicit ethical leadership and conscious management of the organization's ethical culture.