Psychology of Corruption
Introduction: This presentation looks at some of the human factors that can contribute to corruption within an organization, and discusses how having a better understanding of the psychology of individuals who get involved in corruption can reduce organizational corruption risks.
The offshore oil and gas sector, including the FPSO sub-sector within it, entails elevated corruption risks because of the geographic areas involved and the nature of transactions.
Most corporate anti-corruption programs overlook the psychology of why individuals engage in corruption. However, by understanding the psychology of corruption, organizations will be in a better position to prevent misconduct where it begins, at the individual level.
Compliance training programs and policies should be realistic about human frailties/vulnerability and should offer upfront guidance that encourages employees to identify situations that require ethical reasoning and to reinforce that ethical decisions will be supported.
Below, I discuss the psychological factors that lead to corruption, how these psychological factors create ethical blind spots and what organizations can do to make their compliance programs ‘psychologically smart’.
The Uncomfortable Psychological Truths About Corruption:
Uncomfortable Truth Number 1 – Corruption is an expected outcome unless ethics are reinforced.
Corruption is a natural organizational outcome unless organizations take steps to prevent it. Let’s face it, businesses are set up, primarily, to make a profit. People make the ethical difference. A corporate organization will only generate integrity if it reinforces social responsibility alongside the profit motive. An organization set up solely or primarily to generate profit is highly vulnerable to corrupt outcomes.
UBC Law Professor/Writer, Joel Bakan, colorfully compares the corporation to a psychopath, a legally created entity without a moral or social conscience. The trappings of the modern corporation all conspire to create a business vehicle that is largely indifferent to social responsibility. Shareholders invest for a return with limited liability. The corporation is treated as if it were a separate legal person. The primary duty of the corporation as a person is to generate profit for shareholders. All of these considerations diffuse responsibility and make organizational accountability elusive. With profit as the central objective of the corporate person, there are inevitable incentives for the corporate person to cut corners on social responsibility to maximize profit. Accordingly, individual corporate managers need to be realistic about organizational corrupt risk and they should create countervailing incentives to promote corporate social responsibility.
Uncomfortable Truth Number 2 - most people are corruptible:
Social science studies tell us that most people disapprove of corruption/misconduct, yet those same people are easily (and unwittingly) corrupted. Duke Professor of Behavioral Sciences, Dan Ariely, has reported on various experiments that show: a) there is a human tendency towards small scale cheating; b) people who cheat ‘small’ still see themselves as “good”. This contradiction becomes a problem when the inherent human frailty towards petty cheating proliferates and becomes ‘big’ cheating. Ariely found that most big cheaters started out small and that the lines between petty cheating and serious cheating blurred over time.
Uncomfortable Truth Number 3 – corruption often occurs incrementally:
Corruption often manifests from a series of undeliberated and gradual choices and actions; individuals who become corrupt often suffer from ethical drift, a slow, almost imperceptible, descent into misconduct through a series of progressively harmful misdeeds.
“I have had lots of discussions with big cheaters. With one exception, all of them were stories of slippery slopes. You look at the sequence of the events – you look at the end – and you say, my goodness, what kind of monster would do this? But then you look at the first step they took and say, I can see myself under the right amount of pressure behaving badly. Then they took another step, another step, and another step. Most organizations go down a slippery slope rather than having some vicious plan.” - Dan Ariely.
Uncomfortable Truth Number 4 – bribery is easy to rationalize:
Many people don’t see bribery as wrong, or at least they don’t see it as especially harmful, because the victims are often indirect. This perception of detached harm makes it easier for people to justify bribery or in some cases to fail to appreciate its unlawfulness. Socio-psychologists refer to this phenomenon as disengagement of moral agency. Bribery does not involve a horrific crime scene - the victim is often indirect/abstract. It is easier for employees to get themselves entangled in ‘white collar’ crime because the victims, though real, aren’t there in front of them starring at them, triggering any sense of guilt or harm. Rationalizations also facilitate bribery; this mental struggle to suppress guilt is often the first signal of disengagement. Common rationalizations offered by bribers include: "nobody got hurt", "everyone else was doing it", "I was just doing my job”. Nick Leeson, the infamous investment banker who brought down Barings bank through reckless unauthorized trading, thought he was just doing his job (i.e. taking big risks for big pay offs).
Regardless of these perceptions, bribery does in fact cause cause real harm; compliance programs should highlight that bribery is not innocuous and that it induces unlawful conduct and results in improperly awarded contracts (which may lead to safety issues etc.), improper diversion of funds (in effect, theft), money laundering etc. Bribes are often part of other serious crimes (e.g., bribes are often used to facilitate human trafficking across borders). The global bribery problem is massive; over a trillion dollars are “lost” in bribes every year.
Uncomfortable Truth Number 5 – lazy /routinized thinking strategies can cause us to switch off, ethically:
Almost everyone does the right thing when their moral reasoning is engaged. However, people don’t always act or make decisions in a deliberative /contemplative fashion, and they don’t always recognize when they are confronting ethical decisions. To make life easier, we rely on overlearned short-cut /intuitive decision making; but these routinized / habitual thinking styles are often faulty. People who have been caught up in bribery often report a kind of tunnel vision or inadvertence, which arose from ethical blind spots that subverted their ethical reasoning. An effective compliance program recognizes that hasty or pressurized decision making is a risk factor for corruption.
What are some of these common Ethical Blind Spots?
1. Overestimation of virtue bias. We are not as nearly good or as honorable as we think we are. Most people overestimate their own virtue and seek to preserve that overestimated self-image. This can lead to ethical blindness where the individual underestimates or glosses over the seriousness of their misconduct/mistakes. An individual who has gradually drifted into a series of increasingly serious corrupt acts may still say to themselves, “I haven’t done anything wrong; I’m still a good person.”
2. Conformist bias. Conformism is part of the human condition. Most of us don’t outgrow the urge for conformism. We allow group beliefs to shape our thoughts. Many people are vulnerable to group pressure (i.e., not rocking the boat). When misconduct is not labelled wrong, it can become normalized; and it can become a powerful organizational norm, which is difficult to resist. The concept of “teamwork” is seen as an organizational positive but in a corrupt organization it can be misused to preserve the status quo.
3. Use of euphemisms. People who have engaged in bribery often use euphemisms to downplay their misconduct. Bribes are never called bribes. It’s a business courtesy, success fee, perk, sweetener, encouragement, giving a little push etc. These verbal tricks assist with ‘plausible deniability’ but they also serve to downplay any sense of moral violation.
4. Loss aversion. Most of us hate to lose. The thought of losing a contract or a bonus, may, for example, cloud moral decisions. Business people, especially, are conditioned to succeed and will often go to great lengths to avoid losses (e.g. if we don’t pay, we won’t be awarded a contract).
5. Inertia of the status quo. There is a human tendency to act consistently with, and to normalize, past conduct/existing practice; this is typified in the statement, “we have always done it that way, how can we change?” Once a faulty practice takes root, it builds its own inertia. To resist a normalized (but flawed) way of working requires defiance and pushback, but these are traits that the workplace does not reward.
6. We are natural born rationalizers. Rationalization is second nature for most people. Rationalizations preserve our self-image and help us to justify our actions and our identity. Rationalizations can, however, become problematic when it comes to misconduct. People who engage in bribery/fraud often say things like, “what’s the problem? nobody got hurt", or “everyone else is doing it", or "I was just doing my job”. Most people want to see themselves as “good”; rationalizations can become a powerful invention of the mind that can be misused to allow people to see themselves as good whilst doing bad things.
7. Power corrupts. People are easily corrupted by power. Leaders, who typically have the most access to power and authority in an organization, are, in fact, at greatest risk of being meaningfully corrupted. Access to power increases corruptibility. This means that our leaders, the ones we count on the most, are also the most vulnerable to corruption risks. Ethical training is therefore especially important at the top level of organizations.
Overcoming ethical blind spots – recognizing that employees have ethical blind spots and assisting them to engage their ethical reasoning is the key to avoiding the slippery slope of corruption:
Suggestion 1 - Resist the urge to do ‘tick the box’ training. Instead, focus on real- life risks to inform your staff, especially leaders, about what is expected of them and how they should react when an ethical dilemma arises. Never think, “it can’t happen here”.
Suggestion 2 - Acknowledge in training and messaging that corporations and business units can engender organizational pressures that may lead to a slippery slope of corruption.
Suggestion #3: Listen for weak signals. Genuine complaints and concerns may not always be voiced forcefully because of organizational pressures. Staff with real concerns may not express them forcefully and may at first test the waters. “Weak signals” are a known phenomenon in the health and safety world as a leading indicator of bigger issues. ‘Speak up’ campaigns should be accompanied by “Listen well’ messaging.
Suggestion 4 - Recognize that corruption often occurs slowly and imperceptibly. Don’t ignore small acts of misconduct (which may deserve calling out) or for that matter don’t ignore small acts of integrity (which deserve to be reinforced).It’s important to let staff/managers know that you want to hear from them on issues, big or small, and that they understand the slippery slope nature of corruption.
Suggestion 5 - Promoting candor, reflection, and open discussion in meetings and interactions will lead to more ethical decisions. Make it easy for people to speak up at meetings.
Suggestion 6 - Organizations should recognize that everyone has ethical blind spots and that short cut thinking/reasoning and organizational pressures may lead to a slippery slope in which employees fall into corruption. Organizations should help employees to identify when they are at risk of making hasty and unethical decisions and encourage them to say, “hang on, let’s discuss if this makes sense” or “hang on, what is being proposed is risky or isn’t right.”
Final suggestion - Tone from the top is critical in combatting corruption. A simple message from management that it supports ethical business is crucial, but this message needs to be backed up by actions that are consistent with the message. Organizations that get in trouble often have executive members who put their head in the sand and fail to show ethical leadership when confronted with ethical challenges. A healthy and ethical organization is one where corporate leaders practice active ethics and make it easy for employees to avoid ethical blind spots.
References/Credits:
Nick Kochan and Robin Goodyear, Corruption: The New Corporate Challenge, (Basingstoke: Palgrave MacMillan, 2011)
Ernst & Young, Integrity in the Spotlight, 15th Global Fraud Survey https://assets.ey.com/content/dam/ey-sites/ey-com/en_gl/topics/assurance/assurance-pdfs/ey-integrity-in-spotlight.pdf; the survey was based on interviews with over 2550 executives in 55 countries.
Hui Chen and Eugene Soltes in their article “Why Compliance Programs Fail – and How to Fix Them”, Harvard Business Review March-April 2018.
Sai global Exploring the Behaviour and Psychology Behind Corruption, an Interview with Richard Bistrong https://richardbistrong.com/content/uploads/2017/05/SAI-Interview-FINAL.pdf.
Joel Bakan, The Corporation: the Pathological Pursuit of Profit and Power, Simon & Schuster, 2004.
Dan Ariely is a professor of behavioural economics at Duke University, studies dishonesty and author of “The Honest Truth about Dishonesty https://www.bing.com/videos/search?q=dan+ariely+honest+truth+youtube&view=detail&mid=A0D474DD748308166485A0D474DD748308166485&FORM=VIRE; https://knowledge.wharton.upenn.edu/article/dan-ariely-dishonestys-slippery-slope/;
James A Fanto, “Corporate Misbehavior by Elite Decision Makers” (2005), Brooklyn Law Review 70:4 1165; James A Fanto, “Corporate Misbehavior by Elite Decision Makers” (2005), Brooklyn Law Review 70:4 1165;
James Golbert and Maurice Punch, “Because They Can: Motivations and Intent of White-Collar Criminals”, in H Pontell and G Geis, International Handbook of White Collar and Corporate Crime (New York: Springer Science and Business Media, 2007);
From The Psychology of Fraud: Why Good People Do Bad Things, broadcast on NPR’s All Things Considered on May 1, 2012.
John M. Darley,The Cognitive and Social Psychology of the Contagious Organizational Corruption, 70 Brook.L.Rev.(2005). Available at:https://brooklynworks.brooklaw.edu/blr/vol70/iss4/2;
Wang, F., and X. Sun. (2016). “Absolute Power Leads to Absolute Corruption? Impact of Power on Corruption Depending on the Concepts of Power One Holds”. European Journal of Social Psychology, 46: 77-89.
Seer, Gino Bazerman, Ethical Blindspots: explaining unintentional unethical behaviour. Current Opinion in Psychology, 2015, 6: 77-81., https://www.hbs.edu/faculty/Publication%20Files/Ethical+Blind+Spots_4db0de5b-5177-457d-be51-7f0d5d9f3f12.pdf.
From How Can Business Leaders Prevent Unethical Company Decisions? by Prudy Gourguechon, Forbes.com, May 21, 2018.