Why do people in good organizations do bad things?

Research is exploring the "ethical paradox" that having higher standards could make people act less morally at work
Why do people in good organizations do bad things?
Photo: Lindsey Wasson (Reuters)
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Organizational ethics is having a moment. It’s now accepted for corporate leaders to say they care about ethics as much as profit, even, sometimes, more than profit—though such claims certainly aren’t always reflected in reality.

But the centering of ethics in business highlights an interesting problem: When organizations become more ethical, the strength of forces pulling those organizations in other, non-ethical directions also potentially grows.

Muel Kaptein, professor in business ethics and integrity management at RSM Erasmus University in Rotterdam, the Netherlands, puts forward this theory in a recent paper. Kaptein says it helps explain why organizations sometimes struggle to improve, despite their intentions, or why places with high ethical standards sometimes fail to maintain those standards, and even collapse.

What is an ethical organization?

Over the past 20 years, Kaptein suggested, we’ve seen banks, insurance companies, and pharmaceutical companies going through scandals, then making improvements, only to be hit, a few years later, by another scandal. Some people might attribute this to poor practices that have not been addressed but merely papered over. But Kaptein has a different interpretation: The organizations do indeed improve ethically, he suggests, but that very improvement throws up new problems for them to solve.

Cyclical failures in company ethics don’t happen “because they’re bad, or have bad attitudes,” Kaptein said. “No, this is because it’s more difficult to stay ethical than to become ethical.”

Several different models exist to assess how ethical an organization is, and Kaptein points out that previous research by both himself and others has found that individuals in ethical organizations can be prompted to act more ethically. The factors that pull against that tendency aren’t an inevitable slippery slope, therefore. But for anyone who has ever felt some of the problems with working at a “good” place, they’re fascinating.

Why might people start to act unethically?

Kaptein suggests there are four “forces” that can pull an ethical organization off kilter, and gives examples of behavioral changes each might bring about.

First is the “upward” force, or a potential tendency for an ethical organization to keep trying to get better. What’s the problem with that? One unwanted side effect, suggests the research, is that employees are incentivised to keep searching for problems even where there are none. That could result, for example, in a manager putting undue pressure on their team, or employees becoming more deeply stressed than is necessary, even creating problems to solve that don’t exist.

The need to always improve can also prove detrimental by suggesting that nothing is ever good enough. If, every time a high standard is met, the bar gets raised, it will eventually get raised impossibly high, the paper suggests.

Forbidden fruit and other temptations

Just as there is an “upward” force pushing organizations to become ever better, so there is also a “downward” force: The more ethical an organization becomes, the paper argues, “the more seductive unethical behavior becomes.”

One example it gives is the “forbidden fruit” effect. In other fields, it’s been demonstrated that “prohibiting smoking, marijuana, cybersex, and graffiti makes them more attractive,” the paper notes. In a business context, it cites a 2013 paper which looked at vehicle emissions testers, showing that as testing standards rose, it became more attractive to manipulate them, because this would please anyone whose vehicle passed the test. A second cited paper showed that rating agencies developed high standards for giving credible information to investors, “but once these standards were established, inflated ratings started to increase in frequency because they became more profitable since their advice was trusted.”

The paper lays out two further forces (backward and forward), each of which has potential associated effects that could stymie an organization’s attempts to improve.

The work is theoretical, but it could prove useful to business leaders who find themselves caught in one of the traps Kaptein identifies, or in a combination of them. And it helps shed some light on the complex reasons why it seems so hard for even purpose-driven companies to keep getting better, and to meet their own—and the world’s—increasingly high standards.