The traditional approach to teaching ethics relies upon a fundamental assumption – that ethical decision making is a rational, logical, cognitive process. On that basis, the logical conclusion has always been that bad people do bad things.

However, research (Cima, Tonnaer, & Hauser, 2010) now challenges that assumption – with experiments showing that psychopaths have the same capacity for ethical decision making as the rest of us – they just don’t care. Further, only 4% of the population could be considered to be ‘bad’ or sociopathic (Stout, 2005). And reports into fraudulent behaviour in organisations (KPMG, 2013) show that 75% of perpetrators are insiders and 91% of perpetrators have no criminal history.

Clearly, not all bad things are done by bad people so, what’s going on?

The key distinction to make here is the difference between normative ethics, which poses the question “How ought we to behave?”, and practical ethics which considers what we actually do, in reality. In theory, we all like to think we are good moral people, so when we are presented with an ethical issue, we assume we put on our ethics thinking hat and consider what we should do, then do it. Turns out however that it isn’t quite that simple.

So, what happens in reality?

Social psychology research (Tenbrunsel, Diekman, Wade-Benzoni, & Bazeman, 2007) tells us that we can be a very different person at home than at work; we tend to re-write history in our favour; and we judge others’ ethical behaviour much more harshly than we judge our own. We also suffer from cognitive biases and perceptual blindness that can cause us to miss ethical issues completely (Chugh & Bazerman, 2007).

Researchers have now tested these theories using FMRI machines and the evidence from neuro-cognitive research also suggests that reason and rational thinking are not the primary drivers in the ethical decision-making process (Borg, Hynes, Van Horn, Grafton, & Sinnott-Armstrong, 2006; Reynolds, 2006; Reynolds, Leavitt, & DeCelles, 2010).

Why does any of this matter?

The conclusion to draw from this research and the anecdotal evidence is that the traditional character or dispositional approach to managing ethics in organisations will not work. In other words, if you assume that only bad people do bad things and that ethical decision making is a purely rational process, then your response to a breach is likely to be strict compliance measures and large deterrents or sanctions; but this approach will not work. And, when it doesn’t work, your organisation’s bottom line and other desired outcomes will continue to suffer.

Trevino and Nelson (2021) suggest that both ethical and unethical conduct within organisations is also the product of how the systems within the organisation align to promote positive (ethical) or negative (unethical) behaviour. They argue that to fully align the ethical culture of an organisation, the formal and informal organisational systems must send consistent motivational signals, messages and procedural guidance that drive ethical behaviour.

In addition, we now also know that a high level of psychological safety is essential for people to speak up and admit mistakes without fear of negative reprisal in the workplace (Schein & Bennis (1965); Kahn (1990); Edmondson (2018)).  Without it, history shows that inter-personal fear can stifle critical information sharing and lead to poor ethical decision-making, even where people have the best of intentions.

So in essence, at a personal level, leading with integrity requires the ability to honestly explore and reflect upon the influence of your own perspective on your decision-making and the conscious alignment of your actions with your espoused values.

At an organisational level, it requires aligning formal and informal systems to ensure you are sending consistent motivational signals, messages and procedural guidance that drive ethical behaviour.

This paper is based upon the doctoral research of my co-directors, Dr Alistair Ping PhD and Dr Mark Harvey: https://www.ethicsadvisoryservices.com.au/03-about