The origins of ethical failures

As Mary Gentile puts it, my “commitment to ethical business was forged in the fire of personal experience”.

In 2004, I was publically named as a “whistleblower” in a trading scandal that rocked one of Australia’s largest banks. Prior to the incident, “values”, “integrity” and “morality” were nebulous concepts I read about in textbooks. Subsequent to the incident the true meaning of these words were revealed to me.

Although I did my best to put the experience behind me, in the years that followed ethical failure (unfortunately) became a growing industry. It was this that ultimately led me to author my book, The Origins of Ethical Failure. I felt that by combining my experience with the research from the behavioural sciences, I could illustrate how we are all, individuals and organisations alike, susceptible to unconscionable conduct.

Admittedly, although some guidance is offered, the book fails to provide any straightforward answers. Alas, none exist. The drivers of ethical failure are multidimensional and complex.

Consider the following non-exhaustive list: acceding to subtle pressure from authority figures, group dynamics that censure challenge and breed silence, an obsessive focus on targets, flawed incentive schemes, leaders seeking to gain or affirm power or status, our tendency to be averse to losses and display overconfidence, and the list goes on.

In all instances of systemic ethical failure, factors like these coalesce to create flawed systems. These systems foster the emergence of unethical conduct, which over time becomes normalised.

At this point, the system guides the behaviour of people within it, so much so that even those of seemingly good character can behave in very uncharacteristic ways. Hence the focus on identifying “rogues” or “bad apples” and holding them to account fails to properly address the true nature of the issue.

Preventing ethical failure

Fortunately, amidst the complexity, there are some steps leaders can take to build organisations (and industries) that are more resilient to ethical failure. It is after all the leaders who hold positions of power within a system that support and maintain its operation, ethical or otherwise.

Of all the measures available to them, arguably the most important is making purpose central to their organisation’s reason for being.

In organisations where money and money making is prioritised, privilege and self-interest can become virtues. In these environments, people lose sight of the non-pecuniary benefits associated with their work, and somewhat predictably the needs of customers, community and even the shareholder can be neglected. Once their relationship with the workplace becomes strictly economic, people are more likely to employ dubious means to reach the required ends, a situation the global financial crisis illustrated far too well.

It is once purpose is identified that the real work associated with ethical leadership begins. And it is hard work. Among other things, leaders must demonstrate, in both their actions and their words, a deep commitment to the organisation’s values and purpose.

They must embrace challenge, feedback and transparency, and empower those beneath them to shine a torch on wrongdoing. And they must make the difficult decisions that need to be made in organisations that choose to consistently place their principles ahead of their privileges.