27 Psychological Reasons Why Good People Do Bad Things
The FBI escorts Ralph Cioffi, who formerly managed a Bear Stearns subprime hedge fund.
The white-collar crimes that lead major companies to collapse usually begin with seemingly minor ethical 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.
We've put together some of his most interesting insights on the situations and behavioral biases that lead people to do wrong.
Thanks to Dr. Kaptein for letting us feature his work.
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.
Source: Muel Kaptein
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.
Source: Muel Kaptein
Social bond theory
Bill Pugliano/Getty Images
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.
Source: Muel Kaptein
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.
Source: Muel Kaptein
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.
Source: Muel Kaptein
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.
Source: Muel Kaptein
Self-serving bias
AP Images
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.
Source: Muel Kaptein
Conspicuous consumption
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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.
Source: Muel Kaptein
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.
Source: Muel Kaptein
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.
Source: Muel Kaptein
Reactance theory
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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.
Source: Muel Kaptein
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.
Source: Muel Kaptein
Broken window theory
AP
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.
Source: Muel Kaptein
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.
Source: Muel Kaptein
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.
Source: Muel Kaptein
Winner take-all competition
AP
In situations where there is a clearly-defined 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.
Source: Muel Kaptein
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.
Source: Muel Kaptein
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.
Source: Muel Kaptein
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.
Source: Muel Kaptein
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.
Source: Muel Kaptein
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.
Source: Muel Kaptein
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.
Source: Muel Kaptein
The compensation effect
Jasper Juinen/Getty Images
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.
Source: Muel Kaptein
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.
Source: Muel Kaptein
Bad communication
Daniel Goodman / Business Insider
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.
Source: Muel Kaptein
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.
Source: Muel Kaptein
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