Ethics in a competitive Market
Ethics in business is important. In our competitive economy winning is important as well. And we all know there is friction between the urge to win and the need to stay ethical. But what if not the urge to win, but the winning experience leads to unethical behaviour? Research shows that winning indeed leads to unethical behavior: Winning a competition predicts dishonest behavior, by Amos Schurr and Ilana Ritov.
The authors have conducted a series of studies on behaviour in the context of winning. The results suggest that people will cheat others after having won. So the fact of winning inspires people to behave dishonestly.
There have been a lot of examples of such unethical behaviour. The quest for yields has led to unacceptable behavior in corporations like Enron, Satyam, Parmalat… We all know the enormous problem Volkswagen has created for themselves by tinkering with their emission software. The financial crisis was about systems that have faded out ethical considerations. There have been many corporate scandals that suggest a fading of norms and a tolerance or even stimulation of doubtful behaviour.
Trust vs Control
And the thing which strikes me most, is that most companies where fraud has recently been committed, did have a corporate governance and rules in place. In recent years we have installed many control systems to prevent this from happening. But control is never 100% and we know control destroys trust.
If we can generalize the results of the study, we might think that we are wrong in focussing on trust. Should we focus on control instead? It’s not a binary story. You always need some control but you need to keep it as minimal as needed. And trust has to be as high as possible.
It’s a matter of balance. As always. And personally I have trouble believing that winning a game will lead to unethical behaviour. But what could solve it, is to install a climate where failure is acceptable; where winning is not a solitary but a collective game. If you need a certain level of control, let it be social control, more than procedural control. Anyway, zero tolerance for deviant behavior is essential.
Ethics and Trust
This zero tolerance is difficult to set up if you do not have the right people. So this is a plea to hire people you can trust. Trust is about competence, loyalty and integrity of people. You need to hire people with high ethical norms. If you do that you do not need to impose ethics. Ethics will be part of your culture.
Control is good. Trust is better.