Behavioral Ethics and Management Accountability for Compliance and Ethics Failures

As discussed in the initial post in this series, behavioral ethics can help C&E officers prove important things about their programs that they already know anecdotally but which others might not accept in the absence of scientific data.  (The second post addressed what behavioral ethics teaches us about conflicts of interest and  third  described certain behavioral ethics implications for C&E communications.)  In this post we explore what behavioral ethics research can help to prove about what has long been an area of great challenge for many C&E programs: the need to hold managers responsible for the C&E transgressions of their subordinates.

A key tenet of behavioral ethics is “motivated blindness.” As described by Max Bazerman and Ann Tenbrunsel in a piece from the Harvard Business Review Blog Network : “mounting research shows that we often fail to notice others’ unethical behavior if it’s in our interest not to notice. This failure of oversight — called ‘motivated blindness’ — is unconscious and common.”  

Bazerman and Tenbrunsel recount the apparent impact of motivated blindness on what was one of the most jarring business ethics stories of 2011:  how “Warren Buffett, known for his embrace of ethical business practices, failed to understand the unethicality of [an important subordinate’s] actions when he learned of them, and intervene.”  They also argue that motivated blindness may have played a role in “the failure of major accounting firms to see the corruption in the books of the firms that they audit” and “the failure of security rating agencies to accurately gauge the riskiness of the instruments they rate…”

From the perspective of a C&E program, motivated blindness underscores the importance of the Sentencing Guidelines expectation that organizations should impose discipline on employees not only for engaging in wrongful conduct but “for failing to take reasonable steps to prevent or detect” wrongdoing by others  – something relatively few companies do well (and some don’t do at all).

To meet this important expectation, companies may wish to take the following measures:  

– build the notion of supervisory accountability into their policies – e.g., in the managers’ duties section of a code of conduct;

– speak forcefully to the issue in C&E training and other communications for managers;

– train investigators on the notion of managerial accountability and address it in the forms they use so that they are required to determine in all inquiries if a manager’s being asleep at the switch led to the violation in question;

– publicize (in an appropriate way) that managers have in fact been disciplined for supervisory lapses;

– have auditors take these requirements into account in their audits of investigative and disciplinary records.

Taken together, these steps will doubtless be seen as strong medicine – at least by some companies.  But behavioral ethics teaches that motivated blindness is a strong disease.

Our next post in this series  will be on behavioral ethics and C&E risk assessment.  And,  for a discussion of  an important book on behavioral ethics by Bazerman and Tenbrunsel – Blind Spots – please see the initial post in this series.