Role of External Factors in Ethical Behavior: Commitment and Transparency
In earlier posts, I discussed elements of the paper Why Good People Sometime Do Bad Things: 52 Reflections on Ethics at Work by Muel Kaptein, professor in business ethics at the Rotterdam School of Management of Erasmus University Rotterdam. Kaptein reviews the results of numerous “classic and recent experiments” looking at human behavior and allocates the results under seven factors.
- Commitment on the part of directors, managers, and employees in the organization: The more the organization treats its people with respect and involves them in the organization, the more these people will try to serve the interests of the organization.
- Transparency of behavior: The better people observe their own and others’ behavior, and its effects, the more they take this into account and the better they are able to control and adjust their behavior to the expectations of others.
The Mood of the Day
The discussion on commitment begins in Chapter 32 and presents several research projects that demonstrate how the mood of the individual may influence one’s ethical decisions. A study by Nicolas Gueguen supports the notion of feeling good leads one to also do good.
Gueguen’s study tested whether the rate at which diners tipped wait staff could be influenced. Half the diners at a French bar were given a marketing flyer for a local night club with the bill. The other half were given a written joke. Not only did the joke increase the percentage of tipping to 42% from 25%, the advertisement created a negative mood that dropped the tipping rate to 19%.
When we are in a good mood, we often look to the more positive side of the situation. As firms provide positive, value-oriented working environments, the mood in the office will be supportive of employee well-being. This environment will, in turn, help employees to feel better about their position and to be motivated to pursue the goals of the firm.
Decades of Theory
Chapter 37, the last discussion on commitment, focuses on the notions of cognitive dissonance and rationalization. Studies on these topics date back more than six decades in attempts to understand why everyday ethical individuals have lapses in their decision-making process.
Cognitive dissonance occurs when there are differences between our beliefs and the actions we want to take. These differences create internal unease and stress. Rationalization is the process we internalize to overcome the discomfort of the cognitive dissonance. We use techniques to persuade ourselves that the conflicting actions are acceptable.
Chris Dickerson and colleagues ran a study at a college campus that sought to conserve water by reducing shower times of students. The study tested different strategies for reducing water consumption. The processes were presented to the students as they headed to the showers.
|Student Group||Avg. Times (minutes)|
|Sign a petition against wasting water||4.08|
|Complete a water usage survey||4.08|
|Both sign petition and complete the survey||3.40|
Either action alone achieved the desired positive effect. The positive results were amplified through the alignment of the belief outlined in the survey and the actions of the petition. As firms maintain the alignment of their actions with their values, employee commitment should strengthen behind those organizations.
Mirror, Mirror, on the Wall
Opening the discussion on transparency, Chapter 38 introduces the topic of self-awareness and its influence on our actions. A simple mirror creates the sense of being watched and can reduce our likeliness of engaging in unethical activities.
Arthur Beaman and colleagues conducted a study around the candy collection practices of children at Halloween. The test had trick-or-treaters self-serve themselves from a candy bowl after being directed to take only one piece. The average for extra helping was 33%. That decreased to only 9% when a mirror was placed behind the bowl.
Through their reflections, these youngsters were alerted to the negative issue of taking extra candy. Employers that provide time, space, and resources for self-awareness develop employees motivated to embrace the values important to making ethically sound decisions.
Kaptein concludes the discussion on transparency in Chapter 42, which presents potential side effects of transparency. In a study by Wesley Schultz and colleagues, they show that transparency can bring everyone to the norm, including those that are currently outperforming those expectations.
Nearly 300 households in a California community had their energy consumption measured for a week. Reports were sent out shortly thereafter to all the homes. Those that were above-average users decreased their usage by 5.7% in the weeks that followed. But those that were below-average users increased their usage by 8.6%. Here, simply knowing your status led to both positive and negative results as each group reacted to what is considered the norm.
A Role for CFA Institute
The bright light of disclosures is useful when everyone is working toward common values and accepted practices. CFA Institute has been promoting transparent business practices through the Global Investment Performance Standards and the CFA Institute Asset Manager Code. Compliance with these voluntary industry standards allow firms to demonstrate their commitment to obtaining client outcomes in a manner that supports the integrity of the global capital markets.
In the final entry of this series, I will review the factors of “openness” and “enforcement.”
If you liked this post, consider subscribing to Market Integrity Insights.
Photo Credit: ©Getty Images/Olivier Le Moal