Business ethics have certainly been in the spotlight over the last couple of years – with scandals involving Libor-fixing, failing to prevent money laundering, and breaking the rules around defaulted mortgages to name a few. Recently major organizations have been lumped with hefty fines for questionable moral practices. Are dubious morals inevitable for successful business?
In his recent paper on ethical reasoning, eminent psychologist Robert Sternberg suggests that organizations suffer from ethical drift – a gradual, unconscious lowering of moral standards. While businesses compete for profit, the boundaries between right and wrong become blurred and people’s ethical frame of reference shifts. Human biases like being unrealistically optimistic about an outcome, believing ourselves to be all-powerful, all-knowing and invincible, and the tendency to justify our own behavior no matter how morally hollow (finessing my expenses is OK because I pay for lots of things which I forget about) means that few people recognize the problem, let alone know how to tackle it.
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Rules and legislation aren’t the answer – there’s always a loophole to be found and the focus becomes navigating the system, rather than doing what’s right. Instead we need leaders with a strong moral compass. They, in turn, need to teach not just right vs. wrong, but a way of negotiating ethical dilemmas so that their followers always act with integrity.