Psychology and Ethical Behavior

Economic decisions can trump ethical ones

Today’s New York Times has a guest column by two management experts who have studied ethical decision-making in business. Their findings suggest that the line of reasoning that fines and penalties should deter unethical behavior is not borne out by research. Instead, these measures seemed to encourage irresponsibility because they led to makng choices solely on the basis of gain or loss, instead of on the basis of right and wrong::

“An economic analysis would predict that the threat of sanctions would increase compliance with the agreement. Instead, participants who faced a potential fine cheated more, not less, than those who faced no sanctions. With no penalty, the situation was construed as an ethical dilemma; the penalty caused individuals to view the decision as a financial one.”

This is relevant to everyday decisions in business as well as the overall way of thinking about safety and responsibility. On the one hand,, it suggests that deregulation should not lead to any increase in unethical behavior, because fines and penalties don’t act as deterrents. On the other hand, it also suggests that the “invisible hand” of the market would not serve as much of a deterrent to unsafe or unethical behavior, either. The argument that companies would not knowingly risk expensive disasters because they would hurt the bottom line doesn’t seem to have been borne out by last year’s BP oil spill. Instead, it suggested that a combination of accepting risk and diffusion of responsibility among the contractors did indeed lead to cutting corners and trying to save a few dollars in profit, leading to the disaster we all saw.

Diffusion of responsibility is the concept that was described in the social psychology research that followed the murder of Kitty Genovese, a New York resident, in the 1960’s. Researchers used it to explain why none of the witnesses called police or tried to intervene: everyone assumed that it was someone else’s responsibility. As we hear about BP suing its contractors over the explosion and spill, I’m reminded of the theory. No doubt, the attorneys who litigate the case will want to turn that psychological theory into a financial reality by establishing that BP had a right to expect its contractors to act responsibly, but was not responsible for ensuring that they did.

So what are we to do if neither the threat of fines nor the threat of economic losses seems to deter irresponsible or unethical behavior? Are we doomed to endure more Enrons and Deepwater Horizons? Perhaps the idea of social interest, Alfred Adler’s central concept, can help. Being aware of the effect of our behavior on others, and of having a responsibility to contribute to the common good as a central purpose of life, will help us to serve as responsible consumers, investors, leaders, and neighbors.

You may also know this as the Golden Rule.

Psychology and Ethical Behavior by Fitzgerald Counseling is licensed under a Creative Commons Attribution-NoDerivatives 4.0 International License.