Blind Spots
Why We Aren’t As Ethical As We
Think We Are
Ann E. Tenbrunsel
University of Notre Dame
Shoneys
Despite our best
intentions….
• Almost half of employees state that they have
observed misconduct in the workplace.
Ethics Resource Center 2011
• 80% of MBAs state they feel less prepared to face
ethical dilemmas the longer they are in school.
Aspen Institute 2008
• The tolerance for unethical conduct has increased
Ernst & Young,12th Global Fraud Survey 2012
• The amount of dishonesty and corruption in all our
social institutions is likely to increase significantly in
the future.
Josephson Institute 2009
Behavioral Ethics
The emerging field of behavioral ethics—a
field that seeks to understand how people
actually behave when confronted with ethical
dilemmas—offers insights that can round out
our understanding of why we often behave
contrary to our best ethical intentions.
Bazerman and Tenbrunsel, 2011
Ethical Blind Spots
Ethical Illusions
Ethical Fading
Dangerous Reward Systems
Motivated Blindness
Ethical Blind Spot #1
“This stuff is for other
people”
Biased perceptions of our ethicality
“I’m here to tell you right off
the bat that I am not guilty
of any criminal wrongdoing…
I will fight this thing every
step of the way. I will fight, I
will fight, I will fight, till I
take my very last breath. I
have done nothing wrong.”
Tozzi, nytimes.com, 12/18/08
The judge who sentenced him called his
conduct “extraordinarily evil.” He,
however, took issue with the judge’s
description. To characterize him as “this
monster and this evil person,” he said, “I
just think that was totally unrealistic and
unfair.”
“Madoff Says He Was Made a ‘Human Piñata’”
The New York Times, 6/28/2011
"All of these irresponsible
and unsubstantiated
allegations….are false.“
News International Statement
July, 2009
But “good” organizations
are different…
Observation of misconduct:
• Business: 56%
• Government: 57%
• Nonprofits: 55%
National Nonprofit Ethics Survey, 2007
And ethical people behave
differently….
Survey of 31 libraries in America and the UK
• Ethics books more likely to be stolen than
non-ethics books
• Looking only at obscure philosophy books,
used most likely by graduate students and
professors:
ethics books 50-150% more likely to be
stolen than non-ethics books
“Do Ethicists Steal More Books?” Schwitzgebel ,2009
Ethical Illusions
Please rate your honesty in comparison to those
in this room on a scale of 0 to 100, with 50
being the average. For example, if you think
that you are less honest than all others in this
room, rate yourself a “0”; if you think you are
more honest than all others, rate yourself a
“100”. If you think you are average rate
yourself a “50”. All numbers between 0 and 100
are acceptable.
Ethical Illusions
1. Your bargaining ability 57
2. Your decision making ability 74
3. Your intelligence 65
4. Your cooperativeness 72
5. Your honesty 86
6. Your physical attractiveness 52
7. Your level of life experiences 67
8. Your driving ability 75
9. Your mental stability 75
10. Your aesthetic skills 60
11. The expected length of your life 65
12. How rich you will be before you die 52
13. The refinement of your eating preferences 52
14. The amount of time you give to charitable causes 38
15. How many good friends you have 45
Understanding our ethical illusions:
An example of a behavioral approach
Prediction
Forecasting
Errors
Action
Revisionary
Ethics
Recollection
Tenbrunsel, Diekmann, Wade Benzoni, & Bazerman, “Why we aren’t as ethical as we think we are: A
temporal explanation”, Research in Organizational Behavior, 2010.
Prediction Errors: An example
Imagine the following:
You are interviewing for a research assistant position. You are
being interviewed by a male (age 32) in an office on campus.
Below are several of the questions that he asks you during the
course of the interview.
• Do you have a boyfriend?
• Do people find you desirable?
• Do you think it is important for women to wear
bras to work?
Woodzicka and La France, 2001
Prediction Errors: An Example
Predicted behaviors (i.e., forecasts)1
• 68% indicated they would refuse to answer the questions
• 62% would ask interviewer why or say it was inappropriate
• 28% indicated they would take more drastic measures (getting
up and leaving or rudely confronting interviewer)
Actual behaviors
• No one refused to answer the questions
• 52% ignored the harassment and answered the questions
• 26% politely asked interviewer why he asked the questions
(most did so only at the end of the interview)
1Participants
could indicate multiple responses
Charitable Giving: What really
happens at the time of the decision?
84% predicted they would give
Only half did so….
Why don’t we behave as
we predicted we would?
Desirability versus Feasibility
Visceral Forces
• Hunger
• Tired
• Fear
Ethical Fading
Recollection: A Rose Colored Glasses
Experience
“Crimes of Others Wrecked Enron, Ex-Chief Says”
“As Mr. Lay describes it, the Enron collapse was the outgrowth of
the wrong-headed and criminal acts of the company's finance
organization, and specifically its chief financial officer, Andrew S.
Fastow. He says that both he and the board were misled by Mr.
Fastow about the activities and true nature of a series of off-thebooks partnerships that played the decisive role in the company's
collapse.
Yet, Mr. Lay still argues that some of the company's most
controversial decisions -- including some that set up financial
conflicts of interest for Mr. Fastow that could well be
unprecedented in corporate America -- were made for good reasons
and could only been as mistakes in hindsight”
Eichenwald
The New York Times, 6/27/2004
Revisionary Ethics
Biased Attributions
Post hoc Rationalizations
Rationalizations
After informing BBA in a phone call in 2008 that
Barclays had not been reporting accurately, a senior
Barlcays treasury manager remarked:
"We're clean, but we're dirty-clean, rather
than clean-clean."
"No one's clean-clean," the BBA
representative responded.
BBC
Timeline: Libor-fixing scandal
9/26/2012
Rationalizations and COI:
Acceptability of Gifts
301 Residents
21.7%
Reminding of Sacrifice
47.5%
(hours worked, hours of sleep, salary, and
education-related debt)
Exposure to Rationalization
60.3%
“Some physicians believe that the stagnant salaries and rising
debt levels prevalent in the medical profession justifies
accepting gifts and other forms of compensation and
incentives from the pharmaceutical industry.”
Sah and Loewenstein, 2010
Revisionary Ethics
Biased Attributions
Post hoc Rationalizations
Confirmatory Searches
“Adjustable” ethical standard
Understanding our ethical illusions:
An example of a behavioral approach
Prediction
Forecasting
Errors
Action
Revisionary
Ethics
Recollection
Tenbrunsel, Diekmann, Wade Benzoni, & Bazerman, “Why we aren’t as ethical as we think we are: A
temporal explanation”, Research in Organizational Behavior, 2010.
The Problem
Effective decision-making requires accurate
planning and reflection on one’s decision
Hammond, Keeney, & Raiffa, 2006
But…
The planning and reflection doesn’t accurately
reflect the decision
Ethical Blind Spot #2
“What ethical dilemma?”
The problem of ethical fading
The Challenger “Decision”
Mason, a senior executive, turned to the Vice
President of Engineering, and “told him to take off
his engineering hat and to put on his management
hat.”
Roger Boisjoly, 2006
Former Morton Thiokol Engineer
Ethical Fading
“Ethical fading” the process by which,
consciously or subconsciously, the moral
colors of an ethical decision fade into bleached
hues that are void of moral implications.
Tenbrunsel and Messick (2004)
Ethical Fading: An Example
Implementation
of Fine
Gneezy & Rustichini, 2000
Imagine the Following:
You are a manufacturer in an industry which
produces VS-1, a toxic gas.
Environmentalists concerned; potential lobbying
for 100% scrubber utilization
Manufacturers reach “agreement” to run
scrubbers 80% of the time which is deemed to
be acceptable to environmentalists
Would you keep your promise and
run the scrubbers?
70%
60%
50%
40%
30%
20%
10%
0%
No Fine
Fine
Tenbrunsel and Messick, 1999
Impact of Ethical Fading
90%
80%
70%
60%
50%
Ethical Decision
Business Decision
40%
30%
20%
10%
0%
No Fine
Fine
Tenbrunsel and Messick, 1999
Decision Frames and the Pinto
Case
Cost:
• $11/unit cost to change the design
• $137 million total
Benefit:
•
•
•
•
180 less burn deaths @ $200,000/death
180 less serious burn injuries @ $67,000/injury
2,100 less burned vehicles @700/vehicle
Total benefit of $49.5 million.
The Ford Motor Company contended that by strictly following
a risk/benefit analysis, they were justified in not making the
production change to the Pinto model because the cost
outweighed the benefit.
These estimates were multiplied by the unit cost figured by the National Highway Traffic Safety
Administration.
Decision Frames and the Pinto
Case
“Iacocca was fond of saying, ‘Safety doesn’t
sell.’”
Birsch and Fielder
The Ford Pinto Case
“My own schematized…knowledge
influenced me to consciously overlook key
features of the Pinto case, mainly because
they did not fit into an existing [Ford]
script.”
Dennis Gioia (1992)
Ford Recall Coordinator during Pinto era
Other Contributors to Ethical
Fading
• Language Euphemisms
• Compartmentalization
Language Euphemisms
Are they clients or are they “muppets”?
Language Euphemisms in the
Middle East
Is the Barrier between Israel and Palestine a
“wall” or a “fence”?
Language Euphemisms in the
Political Debate
Are they “the filthy rich” or are they “job
creators”?
Compartmentalization
After the war, Speer admitted that by labeling
himself an “administrator” of Hitler’s plan, he
convinced himself that issues relating to human
beings were not part of his job.
Speer (1970), Inside the Third Reich,
trans. R. Winston and C. Winston (London: Weidenfeld and Nicolson).
The long-lasting effects of
ethical fading
Removal
of Fine
Implementation
of Fine
Gneezy & Rustichini, 2000
Awareness Test
Ethical Blind Spot #3
“But that’s what you wanted
me to do!”
The dark side of rewards
Inattentional Blindness
When attention to one thing
causes us to miss what to others
may seem to be blindingly
obvious
Simons, D. J., & Chabris, C. F. (1999)
Mack, A. and Rock, I. (2000)
Reward Systems Gone
Awry
• Edit a promotional brochure
• Grammar Goal: “I think you really need to pay attention to
transitions, subject-verb agreement, correct diction,
syntax…please try to achieve these goals in your revision”
• Content Goal: “I think we really need to pay attention to the
ideas….the content should accurately describe positive features
of the school…we need to achieve these goals in the revision”
• Results:
• Grammar goal:
• Content goal:
grammar edits
content edits
content edits
grammar edits
Other Reward Systems
Gone Awry: Sears
• 1990:
40% decline in earnings
• 1991: Productivity Incentive
• Mechanics, Auto Advisors: Salary + Incentive
• Mechanics Incentive = meeting hourly production
quotas
• Auto Advisor Incentive: Sell x number of brake
repairs during each shift
Santoro and Paine, 1993
Reward Systems Gone
Awry
Mechanic’s perspective:
The faster I get the work done the more money I make, and as
intended, Sears' profits increase. It is therefore obvious to increase
his earnings, a mechanic might cut corners on, or eliminate
altogether, procedures required to complete the repair correction.
…This would be especially tempting if it has been a slow day or
week. In part greed may create this less than ethical situation, but
high pressure to meet quotas by Sears' management also presents
a significant contribution.
Reward Systems Gone
Awry
1992:
• Increased number of consumer complaints
• Undercover investigation of brake repairs revealed customers
overcharged by $223 for unnecessary repairs
Settlement:
• $15 million to settle accusations in 41 states
• Customer confidence dramatically dropped
• Millions in lost revenue as customers stayed away from the auto
centers
Los Angeles Times, 9/2/1991
New York Times, 3/8/1994
Reward Systems Gone
Awry
The California investigation attributed the problems to
Sears Auto Centers' compensation system.
After the scandal was exposed, the company’s
chairman, Edward Brennan, admitted that the “goal
setting process for service advisers created an
environment where mistakes did occur.”
Santoro and Paine, 1993
Reward Systems in the
Financial Services industry
30% of financial services professionals
reported that their bonus or compensation
plans created pressure to engage in
unethical or illegal behavior.
“How Wall Street creates criminals “
USA Today
9/4/2012
Inattentional Blindness:
What makes it worse?
What do you see?
How about now?
And now?
J. Kevin O'Regan
http://nivea.psycho.univ-paris5.fr
Inattentional Blindness:
What makes it worse?
• Distracting environment
• “Not central”
• Repetition  Numbing
http://www.apa.org/monitor/apr01/blindness.aspx
Inattentional Blindness:
What makes it worse?
NASA conducted an experiment in a flight
simulator in which commercial pilots were tested
to see if they would notice distractions on a
runway during simulated landings. Those who
were trained pilots did not notice and landed
directly on top of the distraction 1/4 of the time,
while untrained pilots didn’t know what to
expect of a typical landing and thus saw the
distraction.
http://blogs.howstuffworks.com/brainstuff/how-change-blindness-workssimple-tests-show-that-humans-tend-to-be-clueless-about-very-largechanges/
Inattentional Blindness
“My bet is that most of the time
people are really focused on one goal
at a time.“
(Mack, 2001)
http://www.apa.org/monitor/apr01/blindness.aspx
Ethical Blind Spot #4
“I didn’t see anything….”
The case of motivated blindness
Motivated Blindness
“The
tendency for people to overlook the
unethical behavior of others when it is not in
their best interest to notice the infraction.”
Bazerman and Tenbrunsel
Blind Spots
2011
What Steroid Use?
80
70
60
50
#1 Homerun Hitter
#2 Homerun Hitter
#3 Homerun Hitter
40
30
20
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
56
COI2
What Unusually Consistent
Returns?
57
COI2
Motivated Blindness in the Madoff
Scandal: Tragic Consequences
• Rene-Thierry Magon de la Villehuchet (descendent of
European nobility)
• CEO of Access International Advisors and Marketers
• Invested his own money, his family’s money, and money
from his wealthy European clients.
• Repeated warnings about Madoff; ample evidence
• Two weeks after Madoff surrendered to authorities, de la
Villehuchet killed himself in his New York office.
58
Motivated Blindness in Auditing
“Do Financial Reports Comply with Accounting Principles?”
139 auditors (all employed by a major US Accounting Firm)
Incentivized to be accurate
“Auditors of the Firm” vs. “Independent Auditors”
“Auditors of the Firm” 30% more likely to report that financial reports
complied with generally agreed upon accounting principles
Moore et al., 2005
Motivated Blindness in Auditing
“Estimate the Value of the Company”
“Auditors of Seller” versus “Auditors of
Buyer”
“Auditors of Sellers” valued company
30% higher than “Auditors of Buyers”
Moore et al., 2005
"All this evidence was
available right at the
beginning in 2006. Nobody
wanted to open up the bags
of evidence, nobody wanted
to do an investigation. “
Lord Prescott
The Telegraph
7/15/2010
“Scotland
Yard also had a
symbiotic relationship with News
of the World. The police
sometimes built high-profile
cases out of the paper’s
exclusives, and News of the
World reciprocated with fawning
stories of arrests. “
New York Times 9/5/2010
Motivated Blindness at
United Way
Former leader, Ralph Dickerson Jr., diverted $227,000 of charitable
assets for personal use in 2002 and 2003.
Office Expenditures:
Persian rug
Floor-to-ceiling fountain of cavorting dolphins
Tiffany Lamp
Sub-Zero refrigerator in kitchen
"I had always heard rumors of inappropriate expenditures, but I
never had any proof“ (Former Senior Vice-President)
United Way Says Ex-Leader Took Assets
New York Times, 4/14/2006
Motivated Blindness at the
Top
“The bankruptcy of Lehman
Brothers..was exacerbated
by Fuld’s failure to go below
the executive suite to
investigate what was going
on the trading floor.“
Werhane et al., (2012)
Cohan, Bloomberg, 5/12/2012
Disclosure: The Solution to
Conflicts of Interest?
• Medical journals - Research funding
• Financial media sources (CNBC and CNN) stock analysts COI
• Sarbanes-Oxley (Title IV) - corporations and
their auditors
• Campaign finance reform legislation - political
contributions
Cain et al., 2005
Disclosing Conflicts of
Interest
Estimator
Advisor’s Incentive
Disclosure
Advisor
Advisor’s Estimate
Accurate Estimate
yes
$16.48
High Estimate
no
$20.16
High Estimate
yes
$24.16
Cain et al., 2005
Recognize your ethical
illusions
Illusions of Ethicality
If individuals could rid themselves of
self-deceit, then they would be more
capable of making moral decisions and
leading nobler lives.
Bok, 1978
How do you encourage
ethical fading?
Ethical Dilemma
What Dilemma?
Ethical Decision
Management Decision
Firing
Right sizing
Cooking the Books
Creative Accounting/
Earnings Management
Dead civilians
Collateral Damage
Nuclear Waste
Sunshine units
Pollution
Runoff
Chemical Waste
By-product
Unethical Decision
Judgment Call
What are you
rewarding?
Do you see the moon-walking bear?
What conflicts of
interest exist?
Whose behavior are you motivated not to see?