Over the last few decades, ethical scandals in business have been increasing. This could be due to increased media attention around the issue, or due to an actual increase in the number of occurrences: ultimately, it’s hard to say.

After all, there are many factors which can be attributed to the rise in numbers. Digital tools such as social media, cameras, and computers mean that our access to and ability to transfer information is more expansive than ever before.

These technologies, when combined with an increasing thirst in the media for controversial scandals and greater levels of policing from the general public, have created a potent combination which means organisations are under more scrutiny than ever before.

We cannot truly tell if scandals have increased, or we are simply better at detecting them.

When these scandals do break out, such as the Enron crisis, the FIFA corruption case, or the recent VW emissions case, questions inevitably arise as to who is to blame. For example, after the most recent financial crisis, we looked towards the banks to produce senior people whom we could solely blame and prosecute accordingly.

A more recent instance of this would be the scandal around corruption in championship football, during which Tommy Wright (Barnsley FC’s head coach) has become the human exemplification of poor conduct within the sport.

Interestingly, this has occurred alongside calls from the footballing community to investigate what they see as “wide spread corruption” within the game.

We cannot truly tell if scandals have increased, or we are simply better at detecting them.

Thus, despite being one of what seems to be many corrupt officials, Wright is currently shouldering most of the blame.

This is a common reaction to scandals: a few bad ‘apples’ are identified and the finger is solely pointed at them.

If we boil corruption down to the influence of a select few “bad” people, we can simply rid ourselves of their presence and move forward with a clean slate.

Unfortunately, this is never truly the case.

The language used to describe potentially unethical behaviour (“creative accounting” anyone?) can have a significant impact

There are usually many more people involved, sometimes whole departments of people, who were culpably ignorant to the scandal, and did nothing to prevent it.

So why is it that these seemingly honest and ethical people engage in highly unethical activities?

In order to understand this phenomena, we must address the issues at hand from an individual, corporate and societal level.

Firstly, the societal level is made up of wider issues which will directly or indirectly influence how individuals in organisations behave.

One example of this would be the subprime mortgage crisis, which lead to the economic collapse in 2008. This was set into motion decades before it actually occurred due to a pledge to increase home ownership by the Clinton administration.

This laid the ground work for the irresponsible lending practices and poor decision making from lenders who were promoting the “American Dream” of home ownership.

Essentially, societal issues lay down a framework which, in some circumstances, can provide a foundation for immoral business decisions.

However, societal issues are almost certainly out of our own sphere of influence. It is at a cultural level, where organisations will introduce values that an individual will come across on a day to day basis, where change could be made.

Most businesses have formal values and rules of conduct which are shared publically.

This often takes the form of a credo which they paint on all the walls, or a specific set of values (often tailored to fit the individual business) which they believe every employee should aspire to uphold.

But, crucially, these codes are often difficult to translate and align with the specific day to day challenges, tasks and decisions people make, so don’t automatically translate into business wide adoption.

Although this is often harmless, it can graduate into something more sinister. For example, the language used to describe potentially unethical behaviour (“creative accounting” anyone?) can have a significant impact on what we believe is right and wrong and lure us into unethical territory.

It can create situations of “moral blindness”: instances where our informal company culture about “making hard business decisions” can remove us from the ethical impact of the situation.

This can lead to poor decision making when combined with a culture which justifies profit or making gains for the benefit of shareholders “no matter what the cost”.

Finally, we must consider the individual level – as this level is where people can get involved in a scandal often without even noticing.

This is because humans have a ‘self-serving bias’, which means that our cognitive or perceptual processes can be distorted by our need to maintain or enhance our self-esteem.

In other words, we like to see ourselves in a more favourable light than the one reality sheds on us. This can lead to “ethical blind spots” in our behaviour, which cause us to act dishonourably without realising we are doing so, as we justify our morals with some kind of greater cause or overriding rule.

Our cognitive or perceptual processes can be distorted by our need to maintain or enhance our self-esteem.

Conversely, when we do actually participate in an unethical action, we have a tendency to misremember or re-shape our history so that it fits in with the positive image of ourselves.

Individuals also tend to rationalise their past activities and anchor any new behaviour by their most recent behaviour– meaning that unethical behaviour can easily become the new norm. Even a mastermind criminal must start out at the bottom as a petty thief.

The gradual rise from pickpocket to trafficker or worse is one that we can attribute to the repeated practice of unethical behaviour – which can eventually normalise even the most unethical deeds.

Organisations devote a lot of time and money to ethics training, but such training is often based around the central idea that we as individuals are logical, rational and predictable (e.g. we behave unethically when we perceived the rewards to outweigh the costs).

Behavioural ethics paints a very different view and allows us to rethink our approach to ethics training that incorporates a better understanding of how we actually behave.

By applying psychological insight to business ethics at each of these three levels, looking at the individual, cultural and societal aspects, we believe businesses can be more aware before a scandal takes over and, ultimately, unlock the key to finding out why it is that good people do bad things in business.

Pearn Kandola will be running a series of free Autumn Seminars providing advice for HR professionals. To find out more about this topic, or register for a complimentary place at the ‘Why good people do bad things: Behavioural ethics in business’ seminar on 18th October, visit www.pearnkandola.com or email [email protected].