Behavioral ethics and C-suite behavior
As the COI Blog has discussed previously, CEOs often have different conflicts of interest from you and me. More generally we have seen from behavioral research that those with power may be at greater risk of engaging in unethical behavior than are others. In “’C’ Is for Crucible: Behavioral Ethics, Culture, and the Board’s Role in C-suite Compliance,” Scott Killingsworth carries this latter point forward a good distance, and does so in a way that should be of considerable interest to members of corporate boards, C&E officers and others with responsibility for promoting ethical and law abiding behavior in business organizations.
Killingsworth’s paper – which was presented at a RAND symposium in May and which can be downloaded here (and will be published later this year in a proceedings book from the symposium) – first describes “the powerful forces [that] converge in the C-suite to test the mettle of executives and the board that supervises them.” In this “crucible” one often finds greater temptations and pressures to engage in misconduct than typically face those in other parts of a company; a lack of effective controls to restrain those at the top; and the fact that “the winnowing process [for the C-suite] … selects, in some cases, for a much stronger-than-usual attraction to perquisites … that may be strong enough to overpower allegiance to ethical or legal rules.”
All of this is, of course, reasonably well known. But much less well known is the behaviorist (and other) research reviewed by Killingsworth that suggests a considerable amplification of the already substantial ethical risks of being in the C-Suite crucible. Within this body of work are studies concerning conflicts of interest, “motivated blindness” and “framing,” time pressure, irrationality and loss avoidance, overconfidence, power, and group dynamics. Of course, the risks identified in this research (some of which have been discussed in other posts in this blog ) do not affect only denizens of the C-suite, but the author does make a compelling case that overall the risks are significantly higher the higher one goes up the corporate ladder.
Killingsworth is also quick to point out that none of this suggests that boards of directors should micromanage their companies’ senior executives. Rather, he urges: “The greatest impact will be achieved if the board focuses on selecting executive leaders with unblemished records of integrity, working supportively with the [chief compliance officer] and other internal-control officers, maintaining continuity of ‘tone at the top’ as executives come and go, and promoting ethical leadership within the C-suite and ethical culture throughout the organization,” and he provides useful guidance with respect to each of these general areas. For instance, he offers a three-part strategy for “harness[ing] organizational culture as a means of effectively monitoring and governing the C-suite: by modeling and articulating the culture the board wishes to instantiate (and thereby sending a powerful implicit message to management); by explicitly engaging the C-suite with cultural and ethical-leadership responsibilities; and by taking advantage of a positive culture’s potential as a compliance ‘information and reporting system’ for the board.”
I urge you to read “’C’ Is for Crucible: Behavioral Ethics, Culture, and the Board’s Role in C-suite Compliance.” As was also the case with an earlier paper by the same author, it makes a substantial contribution to the C&E field by showing how the many compelling research findings of behavioral ethics can be put to use to make C&E programs more effective.