Absolute Essentials of Business Behavioural Ethics

Nina Seppala

• Publisher: Routledge
• Year: 2020
• ISBN:
  9781000193534
• Edition: 1
• Topic: Business
• Subtopic: Business Ethics
• Index: Business

Behavioural ethics in business is an emerging field that has challenged some of the established wisdom about ethics and added some truly new insights into our understanding about decision-making and behaviour.

Why do seemingly responsible employees and managers sometimes act in bad ways? This book explains how people behave in real situations and what action can be taken to nudge behaviour in a more ethical direction.

This concise textbook is ideal for use in the classroom as core or additional reading on courses in business ethics and corporate social responsibility; organisational behaviour and psychology; and any module with ethics content (for example, accounting ethics and strategic management). Each chapter is presented as a story with details about the experimental designs and related research findings. The key features include learning outcomes, suggested class activities, mock assessment questions, and an annotated list of key readings and these provide a one-stop text for tutors and students interested in this increasingly important area of study.

Part I

Rise in behavioural ethics research

1 Introduction

Experimental approaches to the study of ethics

Learning outcomes

• Provide an overview of the factors that led to the development of behavioural ethics as a field of research.
• Explain the concept of bounded ethicality.

It is not difficult to think about a recent event that involves behaviour that most people would find unethical. The following events provide examples of unethical behaviour involving corporations, private individuals, and charitable organisations.

• Mortgage providers contributed to the financial crisis of 2007 by approving mortgage applications that did not meet the requirements set by government-sponsored bodies. Mortgages were passed to meet targets that were tied to individual bonuses and other rewards. Even after the financial crisis, this practice continued with several whistleblowers being silenced. When Sherry Hunt, a whistleblower working for Citibank, shared information about the practice with a government agency, it was found that only 70% of the mortgage applications approved by the bank satisfied the requirements against 95% reported by the bank.
• The fire of Grenfell Tower in London led to the death of over a hundred people. The fire has been described as one of the most horrible disasters in the history of modern London. There were however individuals who sought to benefit from the private donations and public support provided to the victims of the fire. In one case, a woman falsely claimed that her husband had died in the fire in order to live in a Hilton hotel and receive other benefits and support worth £19k.
• Peacekeepers and charity workers have been found to be involved in the abuse of children and other vulnerable groups in areas of conflict and natural disaster. In 2018, it became public knowledge that Oxfam employees had abused their power by hiring prostitutes in Haiti. Some of the prostitutes may have been under-age and highly vulnerable in the conditions following the earthquake in the country. Oxfam dismissed four staff members, but did not warn other organisations about the involvement of its former staff in prostitution.

There has been a surge of studies in behavioural ethics to understand why people behave in such unethical ways. The emergence of research in behavioural ethics has reflected developments in research technologies that have enabled the research community to draw new insights about the drivers of ethical and unethical behaviour. While behavioural ethics is a relatively new area of research, there are earlier studies in experimental psychology that have implications for the study of ethics. For example, Stanley Milgram studied obedience to authority in the 1960s in a series of experiments where participants were asked to administer electric shocks to another person. Milgram’s studies demonstrated that individuals rarely question authority even when they are asked to perform actions that are harmful for other people. Similarly, Philip Zimbardo ran an experiment about prison conditions in the 1970s at Stanford University. The experiment suggested that people adjust their behaviour to social norms and can behave in ways that they would not normally find acceptable. These studies are discussed in more detail in Chapter 2 as examples of early studies in behavioural ethics.

The new studies in behavioural ethics have tailed the development of brain imaging technology that has enabled neuroscientists to study the areas of the brain activated by ethical issues (e.g. Cushman et al., 2011). One of the findings has been that ethical issues activate both cognitive and emotional areas of the brain. More specifically, moral dilemmas pertaining to physical harm or commonly accepted norms activate brain areas responsible for the processing of emotions and, without the activation of emotions, moral judgements, and ethical behaviour relating to these issues changes (Koenigs et al., 2007). Another finding has been that people react to ethical dilemmas quickly based on their moral intuition without using deliberate decision-making (Haidt, 2001). Accordingly, moral judgements result from sudden feelings of approval or disapproval in our consciousness. Reasoning is predominantly employed to rationalise and explain the ethical choices that have been made on the basis of instinctive intuitions or what Bauman (1993) referred to as the moral impulse. Moral reasoning is also used to consider new situations and cases where intuition is not clear (Haidt, 2001). As a result, ethical decision-making and behaviour seem to take place intuitively based on learnt responses rather than through a rational consideration of different alternatives (Haidt, 2001). Haidt (2001) referred to the new findings about ethical behaviour as the emotional turn to highlight the importance of emotions in triggering ethical behaviour.

The intuitive nature of ethical decision-making is connected to the concept of bounded ethicality which refers to the unconscious nature of many ethical decisions (Bazerman and Tenbrunsel, 2011). Bounded ethicality means that people engage in unethical behaviour against their own values and intentions without realising that it is happening. The new experimental studies have been influenced by the bounded nature of ethical behaviour with researchers being interested in discovering hidden or unconscious factors that influence ethical behaviour.

It has been challenging to agree on a definition of ethics that would underpin experimental studies about ethical behaviour. In moral philosophy, theories of ethics explore the principles of right and wrong in reference to arguments about human nature. Many well-known philosophers have proposed universal principles that apply to all human beings on the basis of arguments about human dignity and what it means to lead a meaningful life. Other, more post-modernist thinkers have argued that universal principles are not achievable and it is only possible to conceive ethical standards for particular situations. In the context of behavioural ethics, ethical behaviour has been defined as the actions that do not harm others and are neither ‘illegal or morally unacceptable to the larger community’ (Jones, 1991). This definition ties ethics to commonly accepted standards of behaviour which may be incorporated in the law. However, the definition has been criticised because there are historical and current examples of shared standards that are not ethical, including slavery and child labour. Similarly, while laws often reflect ethical principles, laws can also encompass standards that would be difficult to defend on ethical grounds.

The difficulties in finding a definition of ethics that would provide a basis for behavioural studies has led many researchers to relate their work to the concept of dishonesty rather than ethics. In studies about dishonesty, ethical behaviour is framed as the opportunity to lie, steal, and perform other acts that most people would view as unethical in most circumstances. There is however a question about the applicability of the findings of these studies to other ethical decisions and behaviours. For example, people may be driven by self-interest to lie in order to accrue financial resources, but they would not cause physical harm to other people in order to benefit financially. It is therefore important to be cautious about the findings of experimental studies and how relevant they are for different types of ethical issues and decisions.

Until recently, the study of ethics has been strongly influenced by philosophical theories of the right and wrong. For example, insights from philosophy have been used to study whether people apply a utilitarian or a more rights-based approach to making decisions about ethics. The focus has been on understanding the different perspectives and arguments that can be made about a particular situation and recommending how individuals and organisations should behave on the basis of philosophical notions. In parallel, ethics has been studied as an area of developmental psychology to understand how individuals develop values and cognitive approaches for thinking through situations that involve moral choices (Kohlberg, 1984). In contrast to these more philosophical and developmental approaches, behavioural ethics emerged in the 2000s with a focus on studying how people really behave in situations involving moral choices, not how they should behave.

In parallel to the emergence of an increasing number of experimental studies about ethics in psychology, there has been a similar growth in the number of ethics studies in the field of behavioural economics. This growth has been fuelled by research findings suggesting that people do not always behave rationally to advance their self-interest. For example, in studies about tax evasion and corruption, researchers have found that while people are sensitive to sanctions and other incentives, they do not cheat as much as they would be expected to cheat based on the assumption that their behaviour is motivated by the goal of maximising their income and avoiding penalties (Irlenbusch and Villeval, 2015). As a result, research in behavioural economics has grown to understand the factors that explain the dynamics underpinning the honesty and dishonesty of economics actors. Studies in behavioural economics share a number of variables, measures, and experimental designs with studies in psychology, but there are also additional concepts studied in economics, including information asymmetry, externalities, and market institutions.

The focus in behavioural ethics research has been on the psychological processes and social or organisational factors that explain how people behave. One area of research has been the individual factors and psychological dynamics that influence ethical decision-making and behaviour. For example, a new concept in this area is the idea of a moral equilibrium which refers to the mental balance that people seem to unconsciously hold about their behaviour. Such individual influences on ethical behaviour are discussed in Part II of the book. Another set of experiments has focussed on the study of social and environmental factors that influence ethical behaviour. In this area of study, it has been found that people’s behaviour is affected by the norms of the community they belong to. Social and other situational factors are reviewed in Part II of the book.

In sum, responses to ethical dilemmas reflect a combination of factors that come together about the decision-maker’s individual characteristics, the wider situation including social norms, and the nature of the ethical issue itself. Behavioural ethics has been influenced by studies in neuroscience which suggest that ethical decision-making and behaviour can take place quickly and unconsciously. Studies in behavioural ethics often explore honesty and dishonesty because the research community has not agreed on a definition of ethics or a categorisation of ethical issues that would provide a framework for the study of behavioural ethics. Behavioural ethics research has taken place in both psychology and economics with similar research designs, variables, and measures. In psychology, research in behavioural ethics can be categorised into individual and situational factors, while research in economics also involves more market and societal level concepts such as externalities and market institutions.

Key readings

Haidt, J. 2008. Morality. Perspectives on Psychological Science 3 (1), 65–72.

Jonathan Haidt developed the social intuitionist model of moral judgement. In this article, he provides a review of how moral psychology has developed as a field from the work of Emile Durkheim to today’s affective and evolutionary approaches to morality.

Mock assessment questions

• What developments led to the emergence of behavioural ethics as a field of research?
• How would you define ethics? What are the limitations of this definition?
• What is meant by the notion of bounded ethicality and how does it relate to the emotional turn in the study of ethics?

Class exercise

Ask students to spend three minutes online, identifying one recent event involving unethical behaviour. Students should be able to summarise the event, what is (un)ethical about it, and the consequences of the event for individuals and other affected parties. Randomly ask five students to share the details of the event they identified.

2 Historical experiments in the study of ethics

Learning outcomes

• Explain the implications of the Milgram studies and the Stanford Prison Experiment for the study of ethics.
• Be able to discuss the limitations of the Milgram studies and the Stanford Prison Experiment.

The Milgram studies on obedience to authority and the Stanford Prison Experiment are some of the best-known studies in the history of social psychology. They are reviewed in this chapter to explore their implications for the study of ethical behaviour. Even though both studies were framed as studies about other phenomena, they both relate to behaviour that people would generally find unacceptable. Indeed, research participants themselves were surprised about their behaviour during the experiments.

Milgram obedience to authority experiments

Some of the earliest experimental studies shedding light on ethical behaviour were conducted by Stanley Milgram at Yale University in the 1960s. Milgram’s studies about obedience to authority showed that individuals are reluctant to disobey authority, even when they are asked to carry out questionable acts. Milgram (1965) later summarised the results of his studies by concluding that ‘in certain circumstances it is not so much the kind of person a man is, as the kind of situation in which he is placed, that determines how he will act’.

Milgram started his research in the aftermath of the trial of Adolf Eichmann who had worked in the Nazi regime during the Second World War supervising deportations to extermination camps. Eichmann’s defence argued that he was following the orders of higher authorities without agreeing to the goals of the regime. The trial was witnessed by Hannah Arendt (1964) who observed that Eichmann’s actions were predominantly motivated by professional ambition rather than ideology. Arendt saw Eichmann as a mundane and average person who spoke in clichés and did not seem to think for himself. It is in this context that Milgram was interested in understanding the role of authority and obedience in ‘evil’ acts such as the organised genocide that took place during the Second World War. Milgram (1963) started the article in which he described his experiments by saying:

Gas chambers were built, death camps were guarded, daily quotas of corpses were produced with the same efficiency as the manufacture of appliances. These inhumane policies may have originated in the mind of a single person, but they could only be carried out on a massive scale if a very large number of persons obeyed orders.

Milgram (1965) recruited a total of 40 male participants for his first study about obedience through newspapers adverts. The participants were told that the study was about the effect of punishment on learning. The experimental set-up involved three people: an experimenter, a teacher, and a learner. Upon arrival, the participants were instructed to take a slip of paper from a hat to determine whether they would play the role of a teacher or a learner. In reality, the draw was rigged and each participant became a teacher who was instructed to teach pairs of words to a learner. A 47-year-old accountant played the role of the learner, while the role of the experimenter was played by a high-school biology teacher wearing a laboratory coat.

In the experiment, the learner was seated into a chair and connected to an electrode in a separate room. The participants read a series of words to the learner through an intercom system and the learner communicated his answers through switches that lit an answer box placed in the front of the participant. The participants were instructed to administer electric shocks to the learner if the learner made mistakes. They were shown to use a mock generator with voltage levels ranging from 15 to 450 to administer the shocks. The volts were described on the generator as varying from ‘slight shock’ to ‘danger: severe shock’. The participants were told that ‘although the shocks can be extremely painful, they cause no permanent tissue damage’. Their instruction was to administer a shock each time the learner gave an incorrect answer and to increase the voltage every time they administered a new shock. When the shocks reached 300 volts, the learner pounded on the wall of the room where he was located. This pounding was repeated at 315 volts after which the learner made no sound or gave no answers. The experimenter encouraged the participants ...

Table of contents

• Cover
• Half Title
• Series Page
• Title Page
• Copyright Page
• Contents
• PART I: Rise in behavioural ethics research
• PART II: Individual factors
• PART III: Situational factors
• Bibliography
• Index