Emotions in Ethical Decision Making

Age-old philosophical prescriptions assume cool, rational, ethical decisions. But we are also beginning to understand how important emotions are to the ethical decision-making process. Importantly, emotions are not just an interference to good ethical judgment, as many used to believe. Instead, emotions often lead to right action.’’ For example, when we consider hurting someone, our brain reacts with a visceral negative emotion (‘‘an internal alarm’’) that keeps violence in check. And these reactions tend to happen very quickly, before we even have time to engage in rational thought.

Consider two classic philosophical dilemmas. In one, a runaway train is headed for five people who will die if nothing is done. You can save the five by diverting the train to a different track, where it would kill only one person. Should you divert the train?

In the second dilemma, you’re standing next to a stranger on a bridge over the tracks. The only way to save the five people is to push the stranger onto the tracks, where his body would stop the train. Should you push the stranger?

To philosophers, the rational logic in these scenarios is similar; in both cases, you would be intentionally sacrificing one person in order to save five people.

But, when asked, most people say that you should divert the train in the first dilemma but not push the stranger onto the tracks in the second. Psychologists now tell us that emotions explain the difference between the scenarios because the second scenario engages emotions more than the first. This hypothesis was supported in an experiment that used brain scans to track brain activity during decision making. In dilemmas like the second one, parts of the brain associated with emotional processing were more active, and those who decided that pushing the stranger would be right took longer to make a decision because emotions slowed down their thought processes.60 Most normal people would find it difficult, if not impossible, to actually take another’s life in such a situation. This reluctance is attributed to the strong feelings of revulsion that come up from just thinking about taking a human life. These reactions are likely hardwired into human beings through evolution because they aid our survival. Interestingly though, people who have damage to the prefrontal cortex of the brain have no such reaction. They are much more likely to simply make the utilitarian analysis and say they would kill one person to save the others.

So emotions are clearly important in ethical decision making, and continuing research will help us more fully understand the process. It seems clear that emotions can aid us in doing the right thing when they alert us to ethical concerns, cause us to act to help others in need, or keep us from violent reactions (because of sympathy for another, pangs of guilt, or automatically triggered negative feelings). Feelings of betrayal or moral outrage can also cause people to act in the interest of fairness.63 For example, people may be more willing to speak up about the unfair treatment of a coworker if they feel moral outrage about it.64 interestingly, and research has found that people will even forgo financial benefits if they feel they’re being unfairly treated. In some fascinating experiments, researchers have demonstrated that individuals will punish another individual they perceive to be unethical even if there is nothing for them to gain and something to lose. They will do this even if they don’t know the person who has been offended.65 Accordingly, research has shown that the parts of our brains associated with feeling satisfaction are activated when we consider retaliating against someone who has unfairly harmed us.66 The bottom line here is that we often act not because we have coolly and rationally decided on the best course of action, but rather because it ‘‘feels’’ like the right thing to do at the time. Often, such emotions can lead us to act ethically. But emotions can also interfere with good decision making when they lead to a (perhaps irrational) desire for revenge. For example, when a competitor ‘‘poaches’’ one of your best people, do you try to recruit someone away from the competitor just to get even or to do damage to the competitor when you should be focusing more rationally on who is best prepared to do the job?

Consider how General Motors managers handled a four-year legal battle with

VW over their allegation that a 56-year-old GM executive, Jose Lopez, took  boxes of GM proprietary documents when he left GM to join Volkswagen in 1993. In 1992, Lopez was GM’s worldwide purchasing czar, known for his ability to cut costs ruthlessly. The missing documents included information about GM’s suppliers and their prices for auto parts, as well as information about upcoming Opel car models in the GM Europe division. Fortune magazine referred to the four-year legal battle that ensued as a tale of ‘‘betrayal’’ and ‘‘revenge.’’ Lou Hughes, head of GM Europe, was furious that Lopez would take proprietary documents to its fiercest competitor. He insisted that there would be no settlement with VW as long as Lopez remained there.

When asked what he hoped to gain from the litigation, Hughes replied, ‘‘Look, this is not a question of business. This is a question of ethics.’’68 Years of investigation yielded no hard evidence to suggest that anyone at VW had actually used the secret GM information. Fortune suggested that at the time, ‘‘one might have expected GM to act pragmatically, find some face-saving exit, and return its attention to the car business.’’ That might have been the ‘‘rational,’’ coolheaded thing to do. Instead, GM escalated the fight, bringing a racketeering suit that was expected to drag on for years and cost tens of millions of dollars. When pragmatic board members questioned the action, the board chairman insisted that the company had to pursue the suit because it ‘‘had been terribly wronged.’’ ‘‘Some things aren’t measured in time and money. They’re just who we are.’’ Finally, in January 1997, the two companies settled the case. Lopez, who had already resigned from Volkswagen, was barred from doing any work for VW through the year 2000. Volkswagen paid GM $100 million and agreed to buy $1 billion worth of GM parts over seven years. Fortune asked, ‘‘But what, in the end did the long, bitter, and costly struggle accomplish? In the cold light of day, the answer seems simple and shocking: not much.’’ A huge company devoted years of attention and spent millions of dollars because its managers were morally outraged that their former friend had betrayed them. It was obviously an emotional reaction.

Clearly, anger and other emotions can influence thoughts and actions. Whether that is good or bad depends on whether the emotion leads to ‘‘right’’ or ‘‘wrong’’ action. If empathy or guilt lead you to recognize an ethical issue or think about the consequences of your actions for others, that’s a good thing. If moral outrage leads you to seek justice, that’s good as well. But moral outrage can also lead to a desire for revenge, and that may be the time to bring cooler heads to the decision to determine whether action based upon revenge is a good ethical (and business) decision. Those who are not as emotionally involved in the interpersonal issues may be able to offer a more rational and balanced assessment of the situation. In the GM– Volkswagen case, those pragmatic board members may have been right to support a quick settlement.

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Thinking about Integrity

You were also advised to think about your own character and integrity— to ask yourself what a person of integrity in a highly ethical community would do in the particular situation. But cognitive biases can get in the way here too. First, if your thoughts about yourself are controlled by illusion rather than reality, how can you make a good decision about your integrity? The basic idea here is that individuals are likely to think positively about their own ethics. They will unconsciously filter and distort information in order to maintain a positive self image. Psychologists know that people have an illusion of superiority or illusion of morality. Surveys have found that people tend to think of themselves as more ethical, fair, and honest than most other people.51 It’s obviously an illusion when the large majority of individuals claim to be more honest than the average person, or more ethical than their peers. It’s a little like Garrison Keillor’s mythical Lake Wobegon, where all the children are above average. There isn’t a whole lot you can do here except try to be honest with yourself. But this kind of illusion can lead to bad decisions—when physicians take gifts from salespeople because they’re sure they’re ethical and their decisions won’t be affected, or when mortgage lenders selling sub prime loans convince themselves that what they’re doing is contributing to the American dream.

Second, the virtue ethics approach suggests that you rely on the ethics of your profession (or other relevant moral community) to guide you. But consider the accounting professionals in recent cases, as when Arthur Andersen auditors signed off on audits that misrepresented the finances of companies such as Waste Management, Enron, and Adelphia

Certified public accountants are supposed to be guided by the AICPA code of professional ethics. The code says that, as professionals, auditors have a responsibility to act in the public interest to provide objective opinions about the financial state of the organization—be free of conflicts of interest, not misrepresent facts, or subordinate professional judgment to others. Given human cognitive limitations, however, this expectation is probably unrealistic. Consider what is likely to go through an auditor’s mind when deciding whether to provide a negative audit opinion on the financial statements of a big client. Auditors work closely with their audit clients, often over a long period of time. By contrast, auditors have no personal relationship with the ‘‘public’’ they are supposed to represent. Therefore, as biased information processors, their thinking is likely to emphasize the potential negative consequences of a qualified (or negative) audit opinion for themselves and the client—not for the public. The negative consequences for themselves and the client are clearer and more immediate. The auditor who offers a qualified audit may very well lose the client (and the money associated with that client) as well as the personal relationships forged over time. On the other hand, the consequences for the public of a qualified audit opinion are more ambiguous and likely spread over more people and time. It isn’t clear how much specific members of the public will gain or lose, especially if the misrepresentation is deemed to be small or unclear. So auditors can easily rationalize a decision that is consistent with their own and their company’s self-interest and downplay the potential consequences to an ambiguous, unknown public.

What is a professional organization to do? It is important to recognize that auditors (and other professionals) are human beings who are affected by cognitive limitations and biases. Given what we know about these biases, here are some potential solutions. First, auditors should be discouraged from developing personal relationships or socializing with their clients. Companies should change auditors every few years to avoid forging such personal ties. Second, audit firms should work hard to sensitize auditors to the likely negative consequences of financial misrepresentation for their own firms and the public. The Enron bankruptcy contributed to huge financial losses to its employees and investors and to the ultimate demise of Arthur Andersen.

Regular attention to the importance of maintaining the integrity and longterm reputation of the audit firm is essential, as is the leader’s role in creating a strong ethical climate. The reward system can be used to send important signals about what’s expected. For example, auditors who turn down client business or risk losing a client by providing a negative audit opinion should be supported and reinforced for doing so. Those auditors who risk the reputation of the firm should be disciplined.

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Thinking about Fact Gathering

In older article, we advised you to ‘‘get the facts’’ as an important first step in good ethical decision making. Be aware, though, that your thinking about the facts is likely to be biased. Research evidence suggests that you may look for the wrong ones or stop looking too soon because you think you already have all the facts you need.

We know that most people, including business students and business executives, are overconfident about their knowledge of the facts. For example, in research studies, people were asked factual questions. Then they were asked to judge the probable truth of their answers. For example, in response to the question, ‘‘Is Rome or New York farther north?’’ most people chose New York, and they believed that the probability was about 90 percent that they were right. Actually, they were wrong. Rome is slightly north of New York. Being overconfident can make you fail to search for additional facts or for support for the facts you have.

Even if you gather additional facts or support, another cognitive bias termed the confirmation trap may influence your choice of which facts to gather and where to look. All of us have the tendency to look for information that will confirm our preferred answer or choice and to neglect to search for evidence that might prove us wrong. If you were an investment banker who wanted to believe that mortgage backed securities were safe (because they were so profitable at the time), you were more likely to look for supportive information and ask a question like, ‘‘Historically, what percentage of mortgages have defaulted?’’ Given that question, the banker will probably underestimate the risk involved. Because of no-doc loans and other new and riskier sub prime mortgages, relying on historical default patterns no longer made sense. The meeting might take a very different turn if the banker were to ask, ‘‘What future problems are possible with this type of new product? What has changed? What haven’t we thought of?’’

In an attempt to overcome the confirmation trap, it’s important that you consciously try to think of ways you could be wrong. Incorporate questions in your individual and group decision-making processes such as, ‘‘How could I/we be wrong?’’ ‘‘What facts are still missing?’’ and ‘‘What facts exist that might prove me/us to be wrong?’’ You may still miss some important facts, but you’ll miss less of them than if you didn’t ask these questions at all.

We also advised you to think about all the potential consequences of your decision for a wide variety of stakeholders. Who can argue with such sage advice? But psychologists have found a number of problems with how people think about consequences.

One way people simplify their decisions and make them more manageable is to reduce the number of consequences they consider. They’re especially likely to ignore consequences that are thought to affect only a few people. But consequences that affect only a few people can be serious. For example, a highly beneficial drug may have positive consequences for many and adverse consequences for only a few people. But what if those few people could die from side effects of the drug? Obviously, you wouldn’t want to ignore such serious consequences no matter how few people are affected. In attempting to consciously deal with this situation, it helps to consult a broad range of people who have a stake in the decision you’re making. Invite input from all interested parties, especially those who disagree with you and those with the most to lose. Ask them what

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ETHICAL AWARENESS AND ETHICAL JUDGMENT

We refer to this initial step in the ethical decision-making process as ethical awareness. With ethical awareness, a person recognizes that a situation or issue is one that raises ethical concerns and must be thought about in ethical terms. It is an important step that shouldn’t be taken for granted. Sometimes people are simply unaware that they are facing an issue with ethical overtones. And, if they don’t recognize and label the issue as an ethical one, ethical judgment processes will not be engaged. In fascinating new research, parts of the brain that are associated with recognizing the ethical nature of an issue were differentiated from those involved in other kinds of thinking. Researchers used functional magnetic resonance imaging (fMRI) in a study showing that when Executive MBA students identified ‘‘an important point or issue’’ in scenarios, a different part of the brain was more active when the issue had ethical overtones compared to more neutral issues.

In a different study, a part of the brain associated with emotional processing was activated when participants viewed morally relevant pictures compared to more neutral ones. So, it seems that something different happens in our brains when we begin thinking about an issue we recognize as having ethical overtones.

Consider the following ethical awareness example. Students are doing more online research for classroom assignments. The technology makes it easy to find up-to-date information, download it, and cut and paste it right into a paper that then gets submitted to a professor for a grade. Perhaps you have done this without thinking too much about it. However, in this process, students often overlook the fact that they may be plagiarizing—‘‘stealing’’ someone else’s intellectual property. Intellectual property is protected by copyright and patent laws in the United States. These laws are important because there would simply be no incentive to write a book, publish a magazine, or develop a new product if anyone could simply reproduce it freely without any attention to the rights of the person or company that invested time and resources to create it. The education community has adopted academic integrity rules that guide how students can fairly use intellectual property. In keeping with those rules, students are expected to paraphrase and then carefully reference all sources of information. When you’re quoting someone else’s words, these words must be put in quotation marks, and the exact citation to the source must be provided. In the pre-Internet days, this kind of research meant physically going to the library, searching the shelves for information, copying pertinent information by hand, making careful notes about the sources, and then organizing the information into a paper that had to be typed from scratch.

Plagiarism actually required conscious effort in those days. Now, information is so accessible and it’s so easy to simply cut and paste that it can be harder to recognize the ethical issues involved. But if your college has an academic integrity policy or honor code, your professor takes the time to explain the importance of academic integrity, the role of intellectual property in our society, the definition of plagiarism, and your responsibilities as a member of the higher education community, you should be more aware of the ethical issues involved. Under those circumstances, when you’re tempted to just cut and paste, you’ll be more likely to think about the ethical dimensions of your actions—the rights of the intellectual property owner, and whether your actions would be considered plagiarism by your professor and others in your academic community.

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DOW CORNING: AN ETHICAL CULTURE OUT OF ALIGNMENT?

Developing a strongly aligned ethical culture is easier said than done. Managers need to be careful because an organization may easily be lulled into thinking that its ethical house is soundly constructed, only to find that the roof has been leaking and it’s about to cave in. This may be what happened to Dow Corning.

Dow Corning had been recognized as a corporate ethics pioneer. It was among the first, in 1976, to establish an elaborate formal ethics program and structure. Then Chairman John S. Ludington set up a Business Conduct Committee comprised of six company executives each of whom devoted up to six weeks a year to the committee’s work and reported directly to the board of directors. Two of these members were given responsibility for auditing every business operation every three years. In addition, three-hour reviews were held with up to 35 employees who were encouraged to raise ethical issues. The results of these audits were reported to the Audit and Social Responsibility Committee of the board of directors. John Swanson, manager of corporate internal and management communication at the time, headed this effort and was quoted as saying that the audit approach ‘‘makes it virtually impossible for employees to consciously make an unethical decision.’’

This apparently impressive formal program failed to help the organization avoid its problem with breast-implant safety, however, despite documented warnings from a company engineer in 1976 that suggested that the implants could rupture and cause medical problems. It isn’t entirely clear why this well-intentioned ethics program failed. It’s likely that, although it was designed to cultivate an overall environment of ethical conduct, aspects of the ethical culture were out of alignment—sending employees different messages. ‘‘Layering in a bureaucracy is no substitute for a true corporate culture. Workers have a genius for discovering the real reason for a system and learn quickly how to satisfy its minimum requirements.’’ The system relied on managers to identify the key ethical issues covered by the auditors. Were these managers likely to alert the auditors to their most serious ethical problems? What would the consequences be? The system also relied on periodic planned audits. Did commitment to ethics peak during the planned audit sessions, only to disappear into the woodwork after the auditors left? We don’t know, but a comprehensive multisystem audit of the ethical culture might have provided the answer.

Leaders should be interested in creating a strongly aligned ethical culture because American employees strongly prefer working for such an organization. A 2006 study found that 82 percent of Americans would actually prefer to be paid less but work for an ethical company than be paid more but work for an unethical company. Importantly, more than a third of people say that they’ve left a job because they disagreed with the company’s ethical standards. So having a strong ethical culture is an important way to retain the best employees.

Another reason leaders need to create and maintain a strongly aligned ethical culture is that the U.S. Sentencing Commission revised its guidelines for sentencing organizational defendants in 2004 see www.ussc.gov for more   evaluated the effect of the original 1991 guidelines, it noted that many organizations seemed to be engaging in a kind of ‘‘check-off approach’’ to the guidelines. In responding to guideline requirements to qualify for reduced sentencing and fines, these organizations would establish formal ethics and/or legal compliance programs, including ethics offices, codes of conduct, training programs, and reporting systems. But the commission learned that many of these formal programs were perceived to be only ‘‘window dressing’’ by employees because they were inconsistent with the employees’ day-to-day organizational experiences. The commission subsequently revised its guidelines to call for developing and maintaining a strong ethical culture. As a result, many companies are now assessing their cultures to determine how they’re doing in relation to ethics so if they do get into legal trouble, they can demonstrate that they have been making sincere efforts to guide their employees toward ethical conduct.

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ETHICAL LEADERSHIP Executive Leaders Create Culture

Executive leaders affect culture in both formal and informal ways. Senior leaders can create, maintain, or change formal and informal cultural systems by what they say, do, or support. Formally, their communications send a powerful message about what’s important in the organization. They influence a number of other formal culture dimensions by creating and supporting formal policies and programs, and they influence informal culture by role modeling, the language they use, and the norms their messages and actions appear to support.

The founder of a new organization is thought to play a particularly important culture-creating role. Often, the founder has a vision for what the new organization should be. He or she often personifies the culture’s values, providing a role model for others to observe and follow, and guides decision making at all organizational levels. For example, Thomas Jefferson founded the University of Virginia. Although he’s long gone, it’s said even today that when the governing board of the university is faced with a difficult decision, they’re still guided by ‘‘what Mr. Jefferson would do.’’ Founders of small businesses frequently play this culture-creating role.

Herb Kelleher is the legendary founder of Southwest Airlines, often cited as the best-run U.S. airline. The no-frills airline started in 1971 and has been growing and flying pretty high ever since, despite many difficulties in its industry. Southwest Airlines has never served a meal, and its planes are in and out of the gate in 20 minutes. During Kelleher’s tenure as CEO and chairman, other airlines went bankrupt, suffered strikes, or disappeared. But Southwest continued to succeed even after the terrorist attacks of September 11, 2001, that sent the entire industry reeling. The secret is thought to be the company’s culture and an esprit de corps inspired by Kelleher—he believes in serving the needs of employees, who then take great care of customers and ultimately provide shareholder returns. The culture combines efficiency, a family feeling, and an emphasis on fun. In support of efficiency, pilots have been known to load luggage or even clean planes if necessary. During a fuel crisis, Kelleher asked employees to help by providing money-saving ideas. The response was immediate: within only six weeks after Kelleher’s request, employees had saved the company more than $2 million. In the area of fun, Kelleher has always been known for his crazy antics, jokes, and pranks. He settled business disputes by arm wrestling; and when a fellow airline CEO criticized Southwest’s promotion that featured Shamu, the killer whale, Kelleher sent him a huge bowl of chocolate pudding  with a note reading, ‘‘With love, from Shamu.’’16 Employees are encouraged to make flying fun, so that customers leave every Southwest flight with a smile, and they’re encouraged to do that in a way that’s spontaneous, emotional, and from the heart.17 Southwest is seen as a leader in its industry and regularly shows up near the top of Fortune magazine’s most admired companies. It continues to perform well even after Kelleher stepped down as CEO in 2001. In explaining how they have remained so successful, Colleen Barrett   referred to the culture, saying that Southwest does ‘‘everything with passion. We scream at each other and we hug each other . . . we celebrate everything.’’18 The walls at Southwest’s headquarters are literally covered with photos of employees dressed in crazy outfits or with their pets. But the company is also financially conservative and cost conscious, and these cultural attributes contribute to their ongoing success.

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How Culture Influences Behavior

Employees are brought into the organization’s culture through a process called enculturation, or socialization. Through socialization, employees learn ‘‘the ropes.’’ Socialization can occur through formal training or mentoring, or through more informal transmission of norms of daily behavior by peers and superiors. New members learn from observing how others behave or through informally transmitted messages. When effectively socialized into a strong culture, employees behave in ways that are consistent with expectations of the culture. They know how to dress, what to say, and what to do. With socialization, people behave in ways that are consistent with the culture because they feel they are expected to do so. Their behavior may have nothing to do with their personal beliefs, but they behave as they are expected to behave in order to fit into the context and to be approved by peers and superiors.8 As an example, the president of a huge financial firm once took a young, high-potential manager out to lunch and walked him right over to Brooks Brothers for a new suit. ‘‘You can’t get where you’re going in a cheap suit,’’ the president told the young man, who continued to buy his suits at Brooks Brothers.

But individuals may behave according to the culture for another reason— because they have internalized cultural expectations. With internalization, individuals have adopted the external cultural standards as their own. Their behavior, though consistent with the culture, also accords with their own beliefs. They may come into the organization sharing its values and expectations, thus making for a very smooth transition. Or, they may internalize cultural expectations over time. In the above example, the young manager may have initially bought the Brooks Brothers suit because he felt compelled to; but over time, he continued to buy those suits perhaps because he had internalized the expectation and wanted to do so.

The concepts of socialization and internalization apply to understanding why employees behave ethically or unethically in an organization. Most people prefer to behave ethically. When they join an organization with a strong ethical culture, the messages about honesty and respect resonate with their personal beliefs and are easily internalized. They act ethically because it’s natural for them to do so and consistent with the cultural messages they’re receiving. But unfortunately, most employees can be socialized into behaving unethically, especially if they have little work experience to contrast with the messages being sent by the current unethical culture. If everyone around them is lying to customers, they’re likely to do the same as long as they remain a member of the organization.

ETHICAL CULTURE: A MULTI SYSTEM FRAMEWORK

We said earlier that ethical culture can be conceptualized as representing a slice of the organization’s broader culture. Ethical culture is created and maintained through

a complex interplay of formal and informal organizational systems Formally, executive leader communications, selection systems, orientation and training programs, rules, policies and codes, performance management systems, organizational structures, and formal decision-making processes all contribute to creating and maintaining ethical culture. Informally, heroes and role models; norms of daily behavior; rituals, myths, and stories; and language indicate whether the formal ethics-related systems represent reality or facade. The next section provides examples of each of these important ethical culture systems. Although we discuss these systems separately, keep in mind that they are all interconnected.

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When you’re asked to make a Snap Decision

Many business people place value on the ability to make decisions quickly; and, as a result, many of us can feel pressure to make up our minds in a hurry. This can be a particular issue when people are inexperienced for whatever reason—this may be their first job or a new company or industry—and they may feel a need to prove their competence by making decisions quickly. Obviously, that can be dangerous. The ethical decision-making tools described earlier assume that you’ll have some time to devote to the decision—to consider multiple sides of the issue and the inherent conflicts with any one course of action. Do your best to get the time to assess, think through, and gather more information. Also consider the following guidelines when a quick decision seems called for:

1. Don’t underestimate the importance of a hunch to alert you that you’re facing an ethical dilemma. Your gut is your internal warning system. As one senior executive at a multinational computer company said, ‘‘the gut never lies.’’ When your gut tells you something’s wrong, consider it a warning siren.

2. Ask for time to think it over. Most snap decisions don’t have to be that way.

Say something like, ‘‘Let me think about it, and I’ll get back to you soon.’’

Bargaining for time is a smart way to give yourself a break—then you can really think about the decision and consult with others. It’s better to take the time to make a good decision than it is to make a bad decision quickly and have lots of time to regret it. Would you rather be known as cautious or reckless?

3. Find out quickly if your organization has a policy that applies to your decision.

4. Ask your manager or your peers for advice. You should consider your manager the first line of defense when you encounter an ethical dilemma.

Regardless of your level within the organization, never hesitate to ask for another opinion. This is where a trusted network comes in handy. If you have friends in human resources or the legal department, you can float the issue with them on a casual basis to see if there even is an issue.

5. Use the quick-check New York Times test (the disclosure rule). If you’d be embarrassed to have your decision disclosed in the media or to your family, don’t do it.

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HYPOCRITICAL LEADERSHIP

Perhaps nothing can make us more cynical than a leader who talks incessantly about integrity and ethical values but then engages in unethical conduct, encourages others to do so either explicitly or implicitly, rewards only bottom-line results, and fails to discipline misconduct. This leader is strong on the communication aspect of moral management but clearly isn’t an ethical person— doesn’t ‘‘walk the talk.’’ It’s a ‘‘do as I say, not as I do’’ approach. Al Dunlap made no pretense about ethics. All that mattered was the bottom line, and he didn’t pretend to be a nice guy. But hypocritical leadership is all about ethical pretense. The problem is that by putting the spotlight on integrity, the leader raises expectations and awareness of ethical issues. At the same time, employees realize that they can’t trust anything the leader says. That leads to cynicism, and employees are likely to disregard ethical standards themselves if they see the leader doing so.

Jim Bakker remains the best public example of hypocritical leadership. In the late 1970s and early 1980s, Bakker built Praise the Lord  ministry into one of the world’s biggest religious broadcasting empires. At its peak, Bakker’s television ministry reached more than 10 million homes and had 2,000 employees. Bakker, along with his wife, Tammy Faye, claimed to be doing ‘‘the Lord’s work’’ as he raked in millions of dollars, convincing the faithful to purchase a limited number of lifetime memberships in two hotels he claimed would be built at the PTL’s Heritage USA Christian theme park. The problem was that the 25,000 lifetime memberships in the Heritage Grand Hotel morphed into 66,683 memberships. And, instead of the limited 30,000 memberships at the proposed Heritage Towers, PTL sold 68,755 memberships. You do the math. It would be impossible to provide promised services to this many people. On top of that, the second hotel was never completed. The funds donated for these projects were being tapped to support PTL operating expenses, including huge salaries and bonuses for the Bakkers and other top PTL officials. When questioned at times about PTL’s finances, Bakker referred to the organization’s annual audits conducted by big auditing firms such as Deloitte and Laventhol. Unfortunately, PTL filed for bankruptcy in 1987, three months after Bakker resigned in disgrace. The IRS revoked PTL’s tax-exempt status, and in 1989 Bakker was convicted on fraud and conspiracy charges. He spent eight years in prison.30

A more recent example of hypocritical leadership is Lord John Browne, formerly the CEO of BP. Under Browne’s leadership, the company launched a $200 million ‘‘Beyond Petroleum’’ campaign to promote its image as a highly socially responsible company that would deliver performance without trading off worker safety or environmental concerns. But when BP’s Texas City plant exploded  and two big oil spills occurred in Alaska, regulators and employees cited cost cutting on safety and negligence in pipeline corrosion prevention as causes. It seemed that the Beyond Petroleum campaign was more about words than action. Greenpeace awarded Browne the ‘‘Best Impression of an Environmentalist’’ award in 2005, and the CEO was finally asked to resign in 2007 after a scandal in his personal life surfaced. The lesson is pretty clear. If leaders are going to talk ethics and social responsibility  they had better ‘‘walk the talk’’ or risk cynicism or worse.

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When you’re asked to make a Snap Decision

Many business people place value on the ability to make decisions quickly; and, as a result, many of us can feel pressure to make up our minds in a hurry. This can be a particular issue when people are inexperienced for whatever reason—this may be their first job or a new company or industry—and they may feel a need to prove their competence by making decisions quickly. Obviously, that can be dangerous. The ethical decision-making tools described earlier assume that you’ll have some time to devote to the decision—to consider multiple sides of the issue and the inherent conflicts with any one course of action. Do your best to get the time to assess, think through, and gather more information. Also consider the following guidelines when a quick decision seems called for:

1. Don’t underestimate the importance of a hunch to alert you that you’re facing an ethical dilemma. Your gut is your internal warning system. As one senior executive at a multinational computer company said, ‘‘the gut never lies.’’ When your gut tells you something’s wrong, consider it a warning siren.

2. Ask for time to think it over. Most snap decisions don’t have to be that way.

Say something like, ‘‘Let me think about it, and I’ll get back to you soon.’’

Bargaining for time is a smart way to give yourself a break—then you can really think about the decision and consult with others. It’s better to take the time to make a good decision than it is to make a bad decision quickly and have lots of time to regret it. Would you rather be known as cautious or reckless?

3. Find out quickly if your organization has a policy that applies to your decision.

4. Ask your manager or your peers for advice. You should consider your manager the first line of defense when you encounter an ethical dilemma.

Regardless of your level within the organization, never hesitate to ask for another opinion. This is where a trusted network comes in handy. If you have friends in human resources or the legal department, you can float the issue with them on a casual basis to see if there even is an issue.

5. Use the quick-check New York Times test (the disclosure rule). If you’d be embarrassed to have your decision disclosed in the media or to your family, don’t do it.

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PRACTICAL PREVENTIVE MEDICINE

Doing Your Homework

There’s no doubt that you’ll encounter ethical dilemmas—every employee probably encounters hundreds of them during a career; the only thing in doubt is when. Your mission is to be as prepared as possible before you run into a problem. The more informed you are the more effective you’ll be in protecting yourself and your employer. The best ways to do that are to learn the rules of your organization and your profession, and to develop relationships that can help you if and when the need arises.

You can learn the rules in various ways. First, read your company’s code of ethics (if it has one) and policy manual. Since most policy manuals are huge, you obviously can’t memorize one. If you skim the contents, some of the rules will sink in—you may not remember the exact policy, but at least you’ll probably remember that one exists and where to find it.

Second, ask questions. Managers, executives, and peers will admire your initiative when you ask what they think is ‘‘important around here.’’ Since many organizational standards are unwritten, and they differ from company to company, the best way to find out about them is by asking. Query your coworkers (including management) about what kinds of ethical situations are most common in your organization and how your organization generally handles those issues. Ask your manager how to raise ethical issues within your organization. Since he or she will certainly tell you to raise an issue with him or her first, be sure to find out how you raise an issue in your manager’s absence. This not only gives you a road map for raising issues, but it also sends a signal to your manager that ethics are important to you.

Finally, develop relationships with people outside of your chain of command.

Get to know people in human resources, legal, audit, and other departments; they might be able to provide information, help you raise an issue or determine if something even is an issue, or vouch for your credibility in a crisis. You might also want to join a professional group or association. Many professions have developed ethical standards apart from those that may exist in your company, and it can be helpful to know other people in your profession who can advise you if a crisis arises in your company. Some may say this is being political, but we think it’s just plain smart to network with people outside of your immediate job and company. It’s the difference between being a victim of circumstance and having the power, the knowledge, and the network to help manage circumstances.

After you’ve done your homework and learned about your company’s standards and values, you may find that your values and your employer’s values are in conflict. If the conflict is substantial, you may have no choice but to look for work in another organization.

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Employee Attraction and Commitment

Organizations are concerned about their ability to hire and retain the best workers. The evidence suggests that employees are more attracted to and more committed to ethical organizations. ‘‘People who know that they are working for something larger with a more noble purpose can be expected to be loyal and dependable, and, at a minimum, more inspired.’’

Graduating students at nearly 150 colleges and universities now sign or recite the ‘‘Graduation Pledge,’’ in which they promise to ‘‘take into account the social and environmental consequences of any job’’ they consider. They also pledge to ‘‘try to improve these aspects of any organizations’’ where they work. Elite universities such as Harvard and Cornell are participating. Prospective employers should be very interested in these graduates and their concerns that go beyond just making a living.

Recent surveys confirm that it may be important to consider how potential and current employees are affected by an organization’s ethics. In a survey conducted by Working Woman magazine, ‘‘a strong majority of those polled said that they would not work for a company with a history of environmental accidents, insider trading or worker accidents, or a law firm that defends known racketeers.’’30 In another survey conducted by a national opinion research firm, ethical corporate behavior, honest company communications, and respectful treatment ranked among employees’ five top-ranked goals—before good pay, which was 11th on the list, and job security, which ranked 14th. Ethical corporate behavior was ranked so high because ‘‘workers translate the ethics of the company into how they’re personally treated.’’ People ‘‘want to be proud of where they work.’’ They ‘‘don’t want to work for bandits, and when companies get negative publicity for their activities, workers suffer.’’

Managers Care about Ethics

Managers care about ethics in part because they face the thorny problem of how to prevent and manage unethical behavior in their ranks. Ask any manager for examples, and be prepared to spend the day listening. More than their jobs depend on this concern—managers can be held legally liable for the criminal activities of their subordinates.

Further, the U.S. Chamber of Commerce estimates that workplace theft costs U.S. businesses between $20 billion and $40 billion each year, and employees are thought to be responsible for much of it.32 In addition to self-interested behavior, employees may engage in unethical behavior because they think (rightly or wrongly) that it’s expected or that their behavior is justified because they’ve been treated unfairly. Or they simply may not know they are doing something that’s considered to be unethical.

Whatever its source, subordinates’ unethical behavior is a management problem that won’t go away. It becomes even more of a challenge as restructuring continues to reduce management layers, thus leaving fewer managers to supervise more workers. With more workers to supervise, the manager can’t directly observe behavior. Restructuring also increases the number of part-time or contingency workers. These workers are likely to feel less loyalty to the organization and may be more prone to engage in unethical behaviors such as theft.

Furthermore, more workers may cross the line between ethical and unethical behavior in response to fierce business competition and strict focus on the bottom line. Employees may believe that they can help the company succeed (at least in the short term) by fudging sales figures, abusing competitors, or shortchanging customers. Those who are potential layoff candidates are also more likely to flirt with impropriety.  Many perceive the message to be: ‘‘reaching objectives is what matters and how you get there isn’t that important.’’ Therefore today’s managers may have to work even harder to communicate the idea that ethical conduct is expected, even in the midst of aggressive competition.

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The Motivation To Be Ethical

Classical economists assume that practically all human behavior, including altruism, is motivated solely by self-interest—that humans are purely rational economic actors who make choices solely on the basis of cold cost-benefit analyses. But a new group of economists who call themselves behavioral economists have found that people are not only less rational than classical economists assumed, but more moral. Much evidence suggests that people act for altruistic or moral purposes that seemingly have little to do with cost-benefit analyses.24 For example, people will mail back lost wallets to strangers, cash and all; help strangers in distress; and donate blood marrow for strangers or a kidney to a family member. Also, the large majority of people will refrain from stealing even if it’s easy to do so.

In his book The Moral Dimension, Amitai Etzioni25 cited many more examples and research evidence to document his claim that human action has two distinct sources: the pursuit of self-interest and moral commitments. Accordingly, most human decisions are based on ethical and emotional considerations as well as rational economic self-interest. People are motivated by both economic and moral concerns.

In a typical behavioral economics experiment called ‘‘the ultimatum game,’’ subject A in the experiment receives 10 one-dollar bills and can give subject B any number of them. Subject B can choose to accept or reject A’s offer. If B accepts, they each get what was offered. If B rejects the offer, each gets nothing. From a pure economics perspective, A would do best offering B one dollar and keeping the rest. B should accept that offer because, in economic terms, getting one dollar is better than nothing. But most A subjects offer B close to half the total, an average of about four dollars. B subjects who are offered one or two dollars generally reject the offer. Economists can’t explain this result based upon rational self-interest. People’s sense of fairness seems to be driving both subjects’ behavior. Interestingly, when people play the game with a machine, they are more likely to play as classical economics would predict because they don’t expect a machine to be ‘‘fair.’’ Autistic A players (whose autism means that they don’t take others’ feelings into account) also play as the theory would predict. So most people expect fair play in their interactions with other human beings, and they will even forgo economic benefits in order to maintain a fair system.

Neuroscience is also beginning to substantiate the moral sense that develops in humans. New imaging technologies have allowed scientists to locate a unique type of neuron in the brain—spindle cells—that light up when people perceive unfairness or deception. Only humans and African apes have these cells. But an adult human has over 82,000 of them, whereas a gorilla has around 16,000 (perhaps explaining why a gorilla might save a human child). A chimp has less than 2,000. In humans, these cells appear at around 4 months of age and gradually increase with moral development.

In 2003, neuroscientists looked inside the brains of people playing the ultimatum game using functional magnetic resonance imaging (fMRI) scans. They found that unfair offers were associated with heightened activity in parts of the brain associated with strong negative emotions as well as in other parts of the brain associated with long-term planning. Those who rejected the unfair offers had more activity in the emotional part of the brain, which is the part that usually wins out.

Beyond being hardwired for fairness and altruism, employees are also concerned about their personal reputations. In today’s work environment, success depends on an individual’s ability to work effectively with others. Trust greases the wheels of working relationships with peers across departments and on project teams. We disagree with the old adage that ‘‘nice guys (or gals) finish last.’’ If it looks like bad guys (or gals) come out ahead, this is generally a short-run result. A reputation for being difficult to work with, dishonest, or mean often catches up with you as coworkers withhold important information and promotions go to others. Given the importance of relationships to effectiveness in business today, your reputation for integrity is an essential ingredient for success and personal satisfaction. This is even truer in an age of social networking that can send news of bad behavior to a broad audience in seconds.

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Aren’t Adults’ Ethics Fully Formed and Unchangeable?

Another false assumption guiding the view that business ethics can’t be taught is the belief that one’s ethics are fully formed and unchangeable by the time one is old enough to enter college or a job. However, this is definitely not the case. Research has found that through a complex process of social interaction with peers, parents, and other significant persons, children and young adults develop in their ability to make ethical judgments. This development continues at least through young adulthood. In fact, young adults in their twenties and thirties who attend moral development educational programs have been found to advance in moral reasoning even more than younger individuals do.18 Given that most people enter professional education programs and corporations as young adults, the opportunity to influence their moral reasoning clearly exists.

Business school students may need ethics training more than most because research has shown they have ranked lower in moral reasoning than students in philosophy, political science, law, medicine, and dentistry.19 Also, undergraduate business students and those aiming for a business career were found to be more likely to engage in academic cheating (test cheating, plagiarism, etc.) than were students in other majors or those headed toward other careers.20 At a minimum, professional ethics education can direct attention to the ambiguities and ethical gray areas that are easily overlooked without it. Consider this comment from a 27-year-old Harvard student after a required nine-session module in decision making and ethical values at the beginning of the Harvard MBA program.

Before, [when] I looked at a problem in the business world, I never consciously examined the ethical issues in play. It was always subconscious and I hope that I somewhat got it. But that [ethics] was never even a consideration. But now, when I look at a problem, I have to look at the impact. I’m going to put in this new ten-million-dollar project. What’s going to be the impact on the people that live in the area and the environment. . . . It’s opened my mind up on those things. It’s also made me more aware of situations where I might be walking down the wrong path and getting in deeper and deeper, to where I can’t pull back.

In 2004, Harvard’s MBA class of 1979 met for its 25-year reunion. The alumni gave the dean a standing ovation when he said that a new required course on values and leadership was his highest priority and then pledged to ‘‘live my life and lead the school in a way that will earn your trust.’’22

It should be clear from the above arguments that ethics can indeed be taught.

Ethical behavior relies on more than good character. Although good upbringing may provide a kind of moral compass that can help the individual determine the right direction and then follow through on a decision to do the right thing, it’s certainly not the only factor determining ethical conduct. In today’s highly complex organizations, individuals need additional guidance. They can be trained to recognize the ethical dilemmas that are likely to arise in their jobs; the rules, laws, and norms that apply in that context; reasoning strategies that can be used to arrive at the best ethical decision; and the complexities of organizational life that can conflict with one’s desire to do the right thing. For example, businesses that do defense-related work are expected to comply with a multitude of laws and regulations that go far beyond what the average person can be expected to know.

The question of whether ethics should be taught remains. Many still believe that ethics is a personal issue best left to individuals. They believe that much like proselytizing about religion, teaching ethics involves inappropriate efforts to impose certain values and control behavior. But we believe that employers have a real responsibility to teach employees what they need to know to recognize and deal with ethical issues they are likely to face at work. Failing to help employees recognize the risks in their jobs is like failing to teach a machinist how to operate a machine safely. Both situations can result in harm, and that’s just poor management. Similarly, we believe that, as business educators, we have a responsibility to prepare you for the complex ethical issues you’re going to face and to help you think about what you can do to lead others in an ethical direction.

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Shouldn’t Employees Already Know the Difference between Right and Wrong?

A belief associated with the good/bad apple idea is that any individual of good character should already know right from wrong and can be ethical without special training— that a lifetime of socialization from parents and religious institutions should prepare people to be ethical at work. You probably think of yourself as an individual of good character, but does your life experience to date prepare you to make a complex business ethics decision? Did your parents, coaches, and other influential people in your life ever discuss situations like the one that follows? Think about this real dilemma.

You’re the VP of a medium-sized organization that uses chemicals in its production processes. In good faith, you’ve hired a highly competent scientist to ensure that your company complies with all environmental laws and safety regulations. This individual informs you that a chemical the company now uses in some quantity is not yet on the approved Environmental Protection Agency (EPA) list. However, it has been found to be safe and is scheduled to be placed on the list in about three months. You can’t produce your product without this chemical, yet regulations say that you’re not supposed to use the chemical until it’s officially approved. Waiting for approval would require shutting down the plant for three months, putting hundreds of people out of work, and threatening the company’s very survival. What should you do?

The solution isn’t clear, and good character isn’t enough to guide decision making in this case. As with all ethical dilemmas, values are in conflict here—obeying the letter of the law versus keeping the plant open and saving jobs. The decision is complicated because the chemical has been found to be safe and is expected to be approved in a matter of months. As in many of today’s business decisions, this complex issue requires the development of occupation-specific skills and abilities. For example, some knowledge in the area of chemistry, worker safety, and environmental laws and regulations would be essential. Basic good intentions and a good upbringing aren’t enough.

James Rest, a scholar in the areas of professional ethics and ethics education, argued convincingly that ‘‘to assume that any 20-year-old of good general character

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