Why Doing Bad in Business Is Rarely a Conscious Decision - IEDP
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Why Doing Bad in Business Is Rarely a Conscious Decision

How psychological, interpersonal and economic factors lead people to act unethically


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In the film ‘Margin Call’ a conscious decision is taken at the very top to ‘do bad’ and dump the bank’s toxic assets on an unsuspecting market. If doing bad consciously was happening at the height of the 2008 financial crash, according to researchers at Rotterdam School of Management’s Erasmus Centre of Behavioural Ethics, this is not the way unethically behaviour usually happens.

The researchers led by, Professor Marius van Dijke, found that very little bad behaviour is the result of conscious choice. More typically, a variety of psychological, interpersonal and economic factors lead people to act unethically – often without even realising it.

Van Dijke, director of the centre and professor of behavioural ethics at RSM, is developing a deeper and more nuanced understanding of the cultural and behavioural dynamics that lead businesses and other organizations astray. “What we try to do, what a behavioural ethics researcher tries to do, is understand from a psychological point of view what motivates and enables people to do these bad things” he explains in an article in the summer issue of RSM’s Outlook Magazine.

“Moral problems tend not to come with red flags attached to them.” he says. “Most of what we do and most of our perceptions never reach our conscious awareness… Most of our ethical behaviours or unethical behaviours are not driven by conscious processes, so you probably wouldn’t notice when your organization is slipping.”

Professor Van Dijke does however identify a series of psychological and other indicators that point towards the likelihood of unethical behaviour, whether conscious or not:

Personality. Both an individual’s and other people’s personalities can push peoples towards bad behaviour. A manager plays an important role in giving people a sense of an organization’s ethical boundaries and in setting the ethical tone of an organization.

The researchers found that neuroticism predicts unethical behaviour of leaders. Managers with neurotic tendencies, who have difficulty dealing with their own negative feelings and insecurity, can be hostile and anxious, and can resort to bullying their employees. Bullied, fearful, individuals are always a bit on the lookout and focused on their self-interest; thus tending to overlook ethical transgressions. If you as the beaten-down employee have a neurotic side too, the damage can be even greater.

Corporate culture. It is not just the personality of immediate supervisors that encourages bad behaviour. When the organization’s leaders pay no attention to issues of morality, moral climates tend to decline gradually, making it easier for people to act unethically or even think it’s a proper way to behave, towards outsiders at least. People also hate being treated in a disrespectful manner by their superiors and by the organization as whole and bad treatment can lead to bad behaviour.

Peer groups. Group or team loyalty can have a dark side. We are more likely to excuse the unethical behaviour of a member of our group or even emulate it than someone from outside. Group solidarity can be extremely powerful and, as in the case of the 2011 LIBOR interest-rate scandal, can sometimes extend to cover a whole industry sector.

Competition. Unethical behaviour can also be prevalent in highly competitive markets. The 2012 telephone-hacking scandal at the London tabloid press was driven by the desire of journalists and managers to beat the competition to ‘scoops’.

Complexity. Van Dijke points out that complex present day issues that should be considered in an ethical light may be interpreted instead as technical issues. For instance, we may consider scientific frauds or accounting frauds as problematic, but our brains simply have not evolved to recognise unethical behaviour when no specific victims suffer. Our brains evolved to recognise violence to a person or stealing their things as immoral, but not abstract acts.

Back to ‘Margin Call’, this is part of the reason that so many ethical dilemmas tend to crop up in the financial sector. “Nobody, including the insiders, properly understands the real complexities of what’s going on there. Because of these complexities, it is difficult to see what’s good or bad. That’s one major reason why so many of us easily do bad things – it’s because we have no idea that they are bad things.” says Van Dijke

One of Europe’s leading business schools, and ranked among the top three for research, RSM provides ground-breaking research and education furthering excellence in all aspects of management.

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