I examine unethical behaviour in business and professional services.
Hardly a day goes by but we read of another corporate scandal involving dishonesty of one form or another. Major banks, as well as household names such as Rolls Royce, VW and Tesco, are reported as paying settlements running into hundreds of millions. The legal sector is no exception and the latest scandal involving former human rights lawyer Phil Shiner is one example. So why does this keep happening and what can be done about it?
Susceptibility to influence
I have just finished Professor Robert Cialdini’s new book, Pre-suasion – a revolutionary way to influence and persuade. It is an astonishing catalogue of our susceptibility to cues that have been proven to influence our subsequent choices and actions. For example, simply being asked whether you consider yourself an adventurous person before answering questions put by a street survey agent makes it vastly more likely that you will willingly hand over your email and phone number. They are unsettling revelations, not least because this knowledge in the hands of the unscrupulous can be used against us for profit.
AI in the wrong hands
Perhaps because references to the accelerating impact of AI in our working and personal lives are so prevalent, at least in my spheres of interest, my first thought was how Cialdini’s evidence-based methods could be put into use on a mass scale using AI. My conclusion is that all it needs is a business with targets to reach and investors to please. While dystopian projections of the impact of technology abound, exemplified by Channel 4’s ‘Black Mirror’ series, we should not sleep walk into the insidious infiltration of influence techniques designed to divert us from truly free choice.
Professor Cialdini acknowledges the possibility that what he has revealed will be misused and addresses it head on; though in doing so confronts another human factor in play, namely the predisposition to act unethically for financial gain. He refers, among other sources, to Ernst & Young Global Fraud Surveys (2013, 2014) ‘documenting that many senior business leaders know the heavy reputational costs of recognised unethical conduct but are willing to enact or permit such conduct when it raises company fiscal outcomes’.
Cialdini refers to the VW diesel emissions debacle which led to the company’s largest loss in its history and its reputation going from 70% favourable to 80% unfavourable. He offers some possible explanations as to why senior business leaders persist in such behaviour and concludes that they simply don’t think they will get caught.
The ‘power paradox’ and reward bias
I find myself saying ‘surely not’; surely such things could not be allowed to happen in a major organisation that must be subject to controls that prevent such behaviour. Another book I have read recently is The Power Paradox – how we gain and lose influence by Dr Dacher Keltner, who demonstrates that those who are afforded power tend to believe that the rules that apply to others don’t apply to them. Regrettably this thesis also rings true.
Reward bias is one of 25 cognitive biases explored by Charlie Munger, Warren Buffet’s long-time business partner, in a paper entitled ‘The psychology of human misjudgement’. The proposition is that when there is a reward incentive most people will do whatever it takes to obtain it, including behaving unethically. When the power paradox is combined with reward bias it is easy to see how business leaders might behave unethically and so, surely, we should expect it and be ready to deal with it.
The consistency trap
In his earlier bestseller, Influence – The Psychology of Persuasion, Robert Cialdini explained our tendency to act in consistency with our choices. This may explain the otherwise puzzling fact that unethical conduct can be suspected, or even known, and yet nothing is done to investigate or address it until, for example, a whistle-blower sounds an alarm that cannot be ignored. When that happens, many will express outrage despite having previously turned a blind eye to the situation. The explanation may be that it is safer to act in accordance with existing choices, for example by staying with an existing supplier, than it is to take affirmative action in consistency with commonly stated values.
What is the cure?
Human nature being what it is, the answer must be that deterrence rather than cure is all that is achievable. Bribery, corruption, fraud, and dishonesty in general are corrosive and can be addressed by law, provided there is a willingness to report and bring offenders to account. Too many are ‘getting away with it’ right under the noses of those who prefer the counsel of the three wise monkeys (hear no evil; speak no evil; see no evil). Corporate responsibility includes being prepared to deal with dishonesty decisively.
My sense is that professional standards and sanctions have a real impact on legal professionals because, having worked to obtain a professional qualification, the majority are not willing to risk being prevented from practising and so lose their livelihood. Company directors are far less likely to be prevented from working, or being appointed as a director, because they have bent the rules.
Reputation is all-important in professional services and when it is lost the consequences can, and should be, catastrophic. Some providers of professional services have been, and will continue to be, drawn into unethical conduct and their clients must be prepared to subject even the most established relationships to scrutiny. Unethical conduct is a zero-sum game in which both clients and the profession are losers until the perpetrator is brought to account.