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Wednesday, October 7, 2015

Reducing Bounded Ethicality: How to Help Individuals Notice and Avoid Unethical Behavior

By T. Zhang, P. O. Fletcher, F. Gino , and Max Bazerman

Executive Summary

Research on ethics has focused on the factors that help individuals act ethically when they are
tempted to cheat. However, we know little about how best to help individuals notice unethical
behaviors in others and in themselves. This paper identifies a solution: instilling a mindset of
vigilance. In an experiment, individuals playing the role of financial advisers recommended one
of four possible investments to their clients. Unbeknown to these advisers, one of the funds
under consideration was actually a fraudulent feeder fund of Madoff Investment Securities.
Results from this empirical study demonstrate that instilling vigilance by asking individuals to
indicate their suspicions prior to making a decision was critical to helping them notice fraudulent
behavior and act on that information. In contrast, committing to a decision prior to contemplating
suspicions precluded individuals from subsequently integrating critical information about the
fund’s fraudulent activity. We extend these findings to other interventions aimed to help
managers notice unethical behavior.

The entire paper is here.

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