Harvard Business Review
Originally published in April 2011
Here is an excerpt:
It’s well documented that people see what they want to see and easily miss contradictory information when it’s in their interest to remain ignorant—a psychological phenomenon known as motivated blindness. This bias applies dramatically with respect to unethical behavior. At Ford the senior-most executives involved in the decision to rush the flawed Pinto into production not only seemed unable to clearly see the ethical dimensions of their own decision but failed to recognize the unethical behavior of the subordinates who implemented it.
Let’s return to the 2008 financial collapse, in which motivated blindness contributed to some bad decision making. The “independent” credit rating agencies that famously gave AAA ratings to collateralized mortgage securities of demonstrably low quality helped build a house of cards that ultimately came crashing down, driving a wave of foreclosures that pushed thousands of people out of their homes. Why did the agencies vouch for those risky securities?
Part of the answer lies in powerful conflicts of interest that helped blind them to their own unethical behavior and that of the companies they rated. The agencies’ purpose is to provide stakeholders with an objective determination of the creditworthiness of financial institutions and the debt instruments they sell.