“The secret of life is honesty and fair dealing. If you can fake that, you’ve got it made.” Groucho Marx

“There’s one way to find out if a man is honest – ask him. If he says, ‘Yes’, you know he is a crook.  Groucho Marx

As Groucho Marx humorously touches on, we all want to be honest and to be considered honest and ethical.  In business and in life, this can be a challenge.

Ethical Challenges and Pitfalls

Bounded Ethicality: People often act unethically without even being aware that they are being unethical.  This often happens in heat of the moment when decisions are made under stress.  We then compound the issue by justifying to our ourselves why we behaved as we behaved.  Once we have justified that to ourselves in our own minds, we do not consider the behavior to be unethical.

Blind Eyes: As Max Bazerman writes in his excellent book, Why We Fail to Do What’s Right and What to Do About It, if we are motivated to turn a blind eye to unethical behavior (we gain something from the unethical behavior) then we often will not see the behavior.

“A core finding of behavioral ethics: that people who have a vested self-interest in a situation have difficulty approaching the situation without bias, even when they view themselves as honest.”  Max Bazerman

Judging Behavior: We all too often judge behavior not by the ethicality of the decision; but by the result.  As such, a behavior that is done with unethical intentions that turns out fine will be judged far better than a behavior that is done with the best of intentions that turns out poorly.  In short, we judge others and how ethical they are by their actions.

Our Ethical Example: While we judge others by their actions, we judge ourselves by our intentions.  The leadership challenge is that we may do something with the best of intentions, but our action is perceived by others as unethical or unfair, either because the action in and of itself is judged to be unethical or (as above) the result turns out to be unethical.

The Conflict of Interest Paradox:  It has repeatedly being shown (both in social psychological experiments and in surveying real-life examples) that when individuals disclose a conflict of interest, it gives them a license to engage in further immoral behavior.  As an example, doctors who disclose conflicts of interest (being paid by companies to do research, etc.) are more likely to exaggerate or engage in biased behavior than doctors who are being paid by companies to do research, but who do not disclose this fact.

What Then Must Be Done?

For each of us to be more ethical leaders, we need to first understand these ethical pitfalls and consider them in our decision making.  A short list of actions that we can do to be more ethical leaders:

• In preparing for a stressful situation or meeting, pre-commit to our intended ethical course of action and set limits on our behavior by sharing it with other people beforehand.
• Realize when we have a self-interest and fight hard to not let this self-interest affect our decisions or actions.  For one example, we need to evaluate unexpected good fortune.  As it were, we need to look gift horses in the mouth.
• As in decision making in general, we need to evaluate decisions and behaviors by the process and quality of the decision-making, not by the result.
• We need to understand how our decisions and actions are perceived.  Most importantly, we need to explain the “why” behind our decisions and actions so that others may understand the ethical basis of our behavior even if the decision or action turns out poorly.

Finally, we need to ethic proof our companies:

• Vet our employees.  Hire good, honest people and push to expel unethical people even when they are high performers or are performing a job that is vital to the company.
• Do not overwhelm our companies with countless and complex rules and procedures.  Instead, have fewer, but always clear cut, policies and procedures that allow for little ambiguity in their interpretation.  Among the deadliest enemies of ethical behavior are bad policies and procedures.
• Ensure that we emphasize that we value being ethical over just following the law.  Can we have all the decisions in our company be such that we would not be upset if the details of the decision were published on the front page of The Wall Street Journal?
• Trust but Verify.  We still need to have the controls in place to spot unethical and illegal behavior when it first starts.  We need to oversee the behaviors of all of our employees and we need it to be known that we are overseeing their behaviors.

Best of luck to all of us to be more ethical leaders today, tomorrow and every day.