Why Ethical People Make Unethical Choices
hbr.org/2016/12/why-ethical-people-make-unethical-choices
Eugene Soltes, Mark Chussil, Kimberly Nei and Darin Nei December 16, 2016
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 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.
Creating an Ethical Workplace
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.”
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
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— 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. 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.
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
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have to infuse everyday activities with ethical considerations and design policies and norms
that keep ethics top of mind. Jonathan Haidt, Professor of Business Ethics at NYU and
founder of 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.
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; download his free e-
book on Leading Transformation.
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