HOW TO DESIGN AN ETHICAL ORGANIZATION

From Volkswagen’s emissions fiasco to Wells Fargo’s deceptive sales practices to Uber’s privacy intrusions, corporate wrongdoing is a continuing reality in global business. Unethical behaviour takes a significant toll on organizations by damaging reputations, harming employee morale, and increasing regulatory costs—not to mention the wider damage to society’s overall trust in business. Few executives set out to achieve advantage by breaking the rules, and most companies have programs in place to prevent malfeasance at all levels. Yet recurring scandals show that we could do better.

Interventions to encourage ethical behaviour are often based on misperceptions of how transgressions occur, and thus are not as effective as they could be. Compliance programs increasingly take a legalistic approach to ethics that focuses on individual accountability. They’re designed to educate employees and then punish wrongdoing among the “bad apples” who misbehave. Yet a large body of behavioural science research suggests that even well-meaning and well-informed people are more ethically malleable than one might guess. When watching a potential emergency unfold, for example, people are much more likely to intervene if they are alone than if other bystanders are around—because they think others will deal with the situation, believe that others are more qualified to help, or fail to recognize an emergency because others don’t look alarmed. Small changes to the context can have a significant effect on a person’s behaviour. Yet people in the midst of these situations tend not to recognize the influence of context. In Stanley Milgram’s famous obedience experiments, participants who were told by an authority figure to deliver increasingly powerful electric shocks to another person progressed to a much higher voltage than other people predicted they themselves would deliver. Context is not just powerful, researchers have learned; it is surprisingly powerful.