Frisky executives and the extra cookie

As described in this story from the Los Angeles Times, last week the “top executive of insurance giant American International Group Inc.’s airplane leasing unit … had his salary cut by $1 million and was demoted after an affair with an employee… The company said its investigation of [the executive’s] behavior began after AIG received an anonymous complaint that alleged that a personal relationship had started between [the executive], who is married, and an unnamed ILFC employee under his supervision. Both parties acknowledged that they had engaged in a relationship that had since ended…”

Two thoughts occasioned by this story.

First, where a senior executive engages in this sort of conduct, a company that is serious about its compliance and ethics standards really has no choice but to clobber the executive. A weak response could adversely affect the sense of “organizational justice” at the company which, in turn, could imperil its C&E program, as discussed in this earlier post. What AIG did here, to my mind, seems like a model approach. (For more information on appropriate discipline for conflicts of interest please see the prior posts collected here.)

Second, there really do seem to be a lot of these cases. As described in this story from the Wall Street Journal, in the past few months two CEOs of leading US companies lost their jobs due to relationships with employees, as has happened to quite a few others in recent years.  

Is this just human nature at work? And, what do we know about human nature regarding ethics and leadership?

In recent speech at Princeton (which I learned of from this post in Doug Cornelius’ blog) the writer Michael Lewis described the results of an intriguing experiment on how being placed in leadership roles can impact behavior toward others:   

“…… a pair of researchers in the Cal psychology department staged an experiment. They began by grabbing students, as lab rats. Then they broke the students into teams, segregated by sex. Three men, or three women, per team. Then they put these teams of three into a room, and arbitrarily assigned one of the three to act as leader. Then they gave them some complicated moral problem to solve: say what should be done about academic cheating, or how to regulate drinking on campus. Exactly 30 minutes into the problem-solving the researchers interrupted each group. They entered the room bearing a plate of cookies. Four cookies. The team consisted of three people, but there were these four cookies. Every team member obviously got one cookie, but that left a fourth cookie, just sitting there. It should have been awkward. But it wasn’t. With incredible consistency the person arbitrarily appointed leader of the group grabbed the fourth cookie, and ate it. Not only ate it, but ate it with gusto: lips smacking, mouth open, drool at the corners of their mouths. In the end all that was left of the extra cookie were crumbs on the leader’s shirt. This leader had performed no special task. He had no special virtue. He’d been chosen at random, 30 minutes earlier. His status was nothing but luck. But it still left him with the sense that the cookie should be his.”

In our next posting, we will examine other behavioral ethics findings concerning power and ethics.