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How Environmental Perceptions Affect Our Commitment to Act Ethically (October 2011)

Reprint Article from Ethics Matters – October 2011

By Julie Ragatz

In a recently released working paper, Lisa Shu and her fellow researchers at the Harvard Business School conducted studies that revealed that the instances of honest attestations improved when subjects were asked to sign a document at the beginning rather than at the conclusion of a report. The team’s hypothesis is that signing at the beginning of the document increases ethical salience by framing the reporting exercise as having ethical implications at the outset. Signing at the end of a report does not have the same effect since individuals who have acted dishonestly by falsely attesting have already rationalized their behavior.

This rationalization is necessary since most individuals have a great deal invested in an image of themselves as ethical persons. When an individual’s actions fail to live up to their self-image, the result is “cognitive dissonance.” This can be described as a tension that occurs when individuals recognize the contradiction of their preferred self-image and their behavior. At this point, one of two things can happen: People can adjust their actions so they become better aligned with their ethical self-image, or they “reframe” their perceptions of the situation so their conduct does not violate their moral principles.

Shu’s work contributes to a wide body of research that establishes that people are influenced in important ways by their external environment and, perhaps more importantly, by the way in which they perceive their external environment. It is well-documented that all of us labor under cognitive biases that distort the information we receive and the weight this information is given in our decision making process. This indicates an important truth: When it comes to ethics, more is required than simply good intentions. Let me provide three examples of the way in which our perception of our environment can get in the way of our commitment to act ethically.

 3 Ways Our Perception Can Get In the Way of Acting Ethically

Self-serving bias allows individuals to interpret information in a way that reflects their perceived self-interest. In other words, people often believe what they want to believe. Outsiders are befuddled by the accounts of former Madoff investors and have difficulty believing sophisticated hedge fund managers would have been taken in by a scheme that refused to provide electronic trading statements, shunned the services of major accounting firms in favor of a small firm located in a strip mall, and continued to generate consistent returns in bleak markets. But many lost their life savings by refusing to consider the possibility that the evidence pointed to a different conclusion than the one they wanted to believe.

Motivated blindness enables people who often turn a “blind eye” when it is in their interest to do so. Out of the all the scandals that have recently plagued college athletics, perhaps few were as surprising as the downfall of Jim Tressel, the coach of the Ohio State Buckeyes football team. Tressel resigned from Ohio State after a scandal involving inappropriate gifts to players and his attempts to cover up these violations. After his resignation was announced, the media was buzzing about how someone so smart could have made such poor decisions. Tressel’s 2008 book The Winners Manual: For The Game of Life reflected a man who valued his deeply held ethical convictions. It is easy to be cynical and say that he was clearly willing to compromise his principles when the stakes were high enough, but I do not think it is that simple. My alternative hypothesis is that Coach Tressel, like most of us, was misled by his own desire not to see what was in front of him. In this case, he was “willfully blind” to the actions of some his boosters and players. When the time came where he could not avoid the truth, he did what many people have done before him – he acted to cover up.

Falling down the slippery slope: As people become increasingly accustomed to unethical behavior (either their own or behaviors by others within their environment), they gradually lose the ability to recognize the unethical nature of their own actions. I recall a conversation I had with a financial advisor who ultimately stole tens of thousands of dollars from his clients over a period of years. He described being horrified after the first incident but related how he became increasingly nonchalant with each theft. This is consistent with the phenomena of cognitive dissonance we spoke about earlier. As one continues to pursue actions that violate a cherished belief, individuals justify their actions to themselves and become “numb” to the ethical implications.

A Reason for Optimism?

You may be surprised to learn that even after all of this, I believe that there is good reason to be optimistic. Most people are committed to acting ethically and it may be possible to structure situations in a way that encourages and facilitates people doing the right thing. That’s why the research project of Shu and her colleagues is so helpful. It reveals to us a way in which we can encourage others and ourselves to act ethically. But in order to benefit from the insights generated from this body of research, we have to admit that more is needed than our good intentions, that the line between ethical intention and ethical action is not a smooth and easy path.¬†

About the Author
Julie Ragatz is the director of the Center for Ethics in Financial Services at The American College where she holds the Charles Lamont Post Chair in Ethics and the Professions. For more information about ethics and financial services education, visit

 Originally published in Corporate Compliance Insights, August 2011.
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