Archive for the ‘excuses’ Category
Madoff, Accomplices, and Complicity
Filed under: accountability, excuses, finance, fraud, investing, white collar crime |
Comments (1) It takes two to tango. How many does it take to sustain a ponzi scheme?
See this tantalizing piece by Diana B. Henriques, for the NY Times: From Prison, Madoff Says Banks ‘Had to Know’ of Fraud
In many ways…Mr. Madoff seemed unchanged. He spoke with great intensity and fluency about his dealings with various banks and hedge funds, pointing to their “willful blindness” and their failure to examine discrepancies between his regulatory filings and other information available to them.
“They had to know,” Mr. Madoff said. “But the attitude was sort of, ‘If you’re doing something wrong, we don’t want to know….’”
Of course, as Henriques notes, “Mr. Madoff’s claims must be weighed against his tenuous credibility.”
But Madoff’s claims that others, including financial institutions and sophisticated investors, “had to know” something was wrong will ring true to anyone who knows the Enron story in detail. For a wonderful, if exhausting, tour through the Enron scandal, see Bethany McLean and Peter Elkind’s Enron: The Smartest Guys in the Room. As McLean and Elkind make clear, Enron’s shenanigans only went on as long as they did because a lot of people, at a lot of financial institutions (and accounting firms and law firms) spent years and years with their eyebrows raised but kept their mouths shut.
Authentically Unethical
Filed under: character, ethics, excuses, leadership, values, virtue |
Comments (1) Authenticity is the among the favourite buzzwords of the day. (My pal Andrew Potter’s recent book, The Authenticity Hoax, is a wonderful take-down of the concept.)
There are lots of ways the feel-good word, “authenticity”, can fail us. See, for a start, this blog entry by Deborah Gruenfeld and Lauren Zander, for the Harvard Business Review: Authentic Leadership Can Be Bad Leadership.
…being who you are and saying what you think can be highly problematic if the real you is a jerk. In practice, we’ve observed that placing value on being authentic has become an excuse for bad behavior among executives….
Gruenfeld and Zander’s basic point is that while authenticity (being who you really are) is great in principle, is authenticity the right goal if “who you really are” is a jerk? And in fact, there’s a fine line between being a jerk and being unethical. For starters, although most of us have our moments of rudeness, it is unethical — a serious character flaw — to consistently act like a jerk. Consistently acting rudely demonstrates a lack of respect for other people, and that’s unethical. So aiming for authenticity might not be all it’s cracked up to be, especially when compared to the more obvious aim of being a decent human being.
(See also Andrew’s Authenticity Hoax Blog.)
Ethics and Stupidity
Filed under: complexity, corporations, decision-making, employees, ethics, excuses, values, virtue |
Comments (9) 
Why do people do bad things? It’s an ancient question. Certainly, some people do bad things simply because they are bad people. Psychopaths and sociopaths exist, though thankfully they are very few. Whether those few should be classified as “evil,” or as “mentally ill,” or both, is not clear to me. Either way, they certainly have the capacity to do evil. But sometimes, surely — maybe quite often — people do bad things stupidly, rather than out of evil intent. Sometimes, as I’ve blogged before, people do bad things because they allow themselves to use invalid excuses. It’s likely that some people know (in their heart of hearts) that they’re using lame excuses. But probably some people sincerely believe those excuses, and simply don’t understand that their reasoning is flawed.
“Hanlon’s Razor” is the name for an adage attributed to one Robert J. Hanlon. It says the following:
Never attribute to malice that which is adequately explained by stupidity.
It’s a good rule of thumb, not least because it is so often true that bad outcomes owe more to poor decision-making than they do to evil intent.
Of course, if what we’re really interested in is why bad things happen, attributing it to stupidity rather than malice just pushes the question down one level. If so many people act stupidly, why?
There are at least 3 kinds of situations in which dumb things happen:
- Some dumb moves are made by people who, well, are not that bright. The truth is that people have different levels of ability. We don’t all have equally-good judgment, and we’re not all equally good at foreseeing the consequences of our actions. In a corporate context, good hiring practices are supposed to weed out the untalented. But talent pools are always limited. And remember: screwups can in principle occur anywhere within a corporate hierarchy, so there’s no position so unimportant that a company can simply afford to fill it poorly.
- Some dumb moves are made by people — maybe even smart people — who lack the relevant skills. In some cases, that may mean they lack the relevant technical skills. If you’re not an accountant, for example, you simply may not understand the consequences of certain kinds of bookkeeping decisions. But people can also lack the skills to assess, for example, the quality of their own arguments and thought processes. I teach a course on Critical Thinking, and believe me, people are not all equally good at spotting fallacious arguments or flawed patterns of thought. But it’s a skill-set that can be taught, and learned.
- Some “dumb” decisions get made as a result of one or another of a bunch of well-studied cognitive biases. Those biases — the subject of an enormous body of psychological literature — go by names like “anchoring,” and “confirmation bias” and “the framing effect,”. (Confirmation bias, for example, essentially means that we have a tendency to accept new evidence when it confirms what we already believe, and to reject new data that challenges our beliefs. It’s dangerous, and we all do it.) Basically, cognitive biases are a bunch of persistent, and generally faulty, trends in the way humans think. They are ways in which we are pretty consistently subject to patterns of error in our thinking. Alarmingly, these cognitive biases tend to apply to smart people, too, as well as to people with the kind of technical training that you might hope would help them avoid such biases.
(For a bit more on why individuals do dumb things, see this Wired piece on Why Do Smart People Do Stupid Things?)
So, there are lots of reasons why people — even smart people — end up doing dumb things. And sometimes those dumb things will have evil (or just bad) consequences. It’s worth understanding the difference between bad things that happen because someone did something bad, and bad things that happen because someone did something dumb, though in some cases the line will be pretty fuzzy.
And I suspect Hanlon’s Razor holds true of organizations just as it does for individuals, and maybe more so. So really, we need to distinguish between why individuals act stupidly, and why organizations do. That’s a topic for another day.
Like this:
Deadly Crashes, “Agency Theory” & the Challenges of Management
Filed under: accountability, complexity, corporations, decision-making, employees, ethics, excuses, governance, management, product safety, quality, risk, technology |
Leave a Comment 
Sometimes for a corporation to “do the right thing” requires excellent execution of millions of tasks by thousands of employees. It thus requires not just good intentions, but good management skills, too.
For an example, consider the story of the crash of a Concorde supersonic jet a decade ago. The conditions leading up to the crash were complex, but one factor (according to the court) was negligence on the part of an aircraft mechanic. Whether (or to what extent) that mechanic’s employer is responsible for that negligence, and hence at least partly responsible for the crash, is a difficult matter.
Here’s the story Saskya Vandoorne, for CNN: Continental Airlines and mechanic guilty in deadly Concorde crash
The fiery crash that brought down a Concorde supersonic jet in 2000, killing 113 people, was caused partially by the criminal negligence of Continental Airlines and a mechanic who works for the company, a French court ruled Monday.
Continental Airlines was fined 202,000 euros ($268,400) and ordered to pay 1 million euros to Air France, which operated the doomed flight.
Mechanic John Taylor received a fine of 2,000 euros ($2,656) and a 15-month suspended prison sentence for involuntary manslaughter….
I don’t know the details of this story well enough to have any sense of whether the mechanic in this case really did act negligently. But what intrigues me, here, is the issue of corporate culpability. Note the difficulty faced by airline executives who (for the sake of argument) want desperately to achieve 100% efficiency and never, ever to risk anyone’s life. In order to achieve those goals, executives have to organize and motivate hundreds or perhaps thousands of employees. They need to design and administer a chain of command and a set of working conditions (including a system of pay) that is as likely as possible to result in all those employees diligently doing their very best, all of the time. That challenge is the subject of an entire body of political & economic theory known as “agency theory.”
Agency theory and the various mechanisms available to motivate employees in the right direction are things that every well-trained business student knows about, because those are central challenges of managing any corporation, or even any small team. What is recognized too seldom, I think, is just how central a role agency problems play in assessing and responding to ethical challenges in particular.
MBA Ethics Education: Avoiding Excuses
Filed under: accountability, education, ethics, excuses, management, MBA |
Comments (6) 
This is the second in a series of blog postings on ethics education for MBA students.
We all want MBA students to leave school with a good chance of being able to do the right thing when the going gets tough. Sometimes, doing the right thing simply requires that we avoid the temptation to do the wrong thing. Positive role models are definitely a good thing, but we also need to understand why things sometimes go wrong.
We can gain insight into that by looking at why it is that people do bad things in the first place. The best short treatment of that topic that I know of, as it applies to Business Ethics, is a paper by my pal Joseph Heath.* Business seems to be, in Heath’s words, a “criminogenic” setting (i.e., a setting that seems to generate criminal behaviour, along with other forms of wrongdoing). If we want to improve ethical conduct in business, we need to understand what characteristics of the world of business are responsible for that pattern.
Heath points out that most of the “folk” theories of wrongdoing have long since been dispensed with by the experts who have spent the most time studying the topic, namely criminologists. Those folk theories hold that wrongdoing is caused 1) by defects of character, 2) by greed, or 3) by deviant values. But the available evidence just doesn’t support any of those explanations. That’s not to say that those things never play a role; it’s just to say that none of those 3 provides anything like a general explanation for wrongdoing. Instead, the existing criminological literature points to the fact that wrongdoers exhibit patterns of “neutralization” with regards to their crimes. That is, they describe their behaviour differently than an observer would. They define words differently, in order to attempt to rationalize their behaviour. In essence, what this allows them to do is to admit that they did the thing, without admitting that it was actually wrong.
The following are the “techniques of neutralization” that Heath gleans from the criminological literature:
- Denial of responsibility — e.g., “I had no choice!”;
- Denial of injury — e.g., “No one really got hurt anyway”;
- Denial of the victim — e.g., “They just got what they deserved.”;
- Condemning the condemners — e.g., “Those who accuse me are just out to get me.”;
- Appeal to higher loyalties — e.g., “I have a family to support!”;
- “Everyone else is doing it;”
- Claim to entitlement — e.g., “I built this company, I can do what I want!”
The final section of Heath’s paper deals briefly with business ethics education. He argues that what we know about the genesis of wrongdoing has clear implications for what we teach in business ethics classes. The techniques of neutralization are psychologically attractive, but in most cases they are logically faulty. So we need to teach business students to recognize them, and to recognize why they are faulty. (I’ve got lots to say on how to do that, but I’ll leave it for another time.)
Even more important, perhaps, Heath nods to the role of managers as designers. (See also yesterday’s blog entry, “MBA Ethics Education: Designing the Designers”.) The fact that managers are involved in the design of the work environments they manage implies that they need to be taught how to incorporate an understanding of the significance of techniques of neutralization into their design choices. They need the tools with which to build work environments in which certain kinds of excuses, in other words, are psychologically unattractive and socially unacceptable.
_______
*See Joseph Heath’s “Business Ethics and Moral Motivation: A Criminological Perspective,” Journal of Business Ethics 83:4, 2008. Here’s the abstract.
Bailouts, Corporate Jets, and Moral Outrage
Filed under: accountability, ethics, excuses, government, taxpayers |
Comments (5) 
Last year I saw a talk by economist Robert Frank, on “Moral Outrage.” His overarching theme was that moral outrage is a useful thing, and that we therefore ought not to squander it by aiming it at undeserving targets.
That talk came to mind when I read about how the CEO’s of the big 3 automakers got raked over the coals for showing up in Washington to plead for a government bailout — and arriving in 3 sleek corporate jets.
For a glimpse, see this story from Business Week: Auto Bailout: Seeking Signs of Sacrifice
Maybe it would have been a good idea for the chief executives of the U.S. Big Three auto companies and the president of the United Auto Workers to save a few dollars and share a ride to their appearance before Congress, where they are asking for at least $25 billion to keep from going bankrupt.Three different members of the House of Representatives pointed out on Nov. 19 that the three CEOs and the union chief were flown to Washington in separate, private planes. The representatives used that example to express skepticism that the executives are prepared to make the needed changes in their operations, accountability, and culture to turn around their sinking industry.
(See also: Big Three auto CEOs flew private jets to ask for taxpayer money, from CNN.)
For some people, the initial flash of moral outrage comes from the apparent contradiction involved in showing up in an expensive jet to ask for a handout. But (using rough numbers here) a single CEO to spending $20,000 to fly to Washington to ask for $20billion is spending 1 one millionth of the proposed bailout of his company. For a company the size of GM or Ford or Chrysler, $20 grand just isn’t a lot of money. Pocket change. (Or look at it this way: a CEO who makes $20 million a year is making about $10,000 an hour. Waste 2 hours of time waiting for a commercial flight and you’ve “paid” for your flight on a corporate jet.)
Some people will realize the above — surely the angry members of congress did — and still express moral outrage at the symbolic aspect of the flights. How could these execs each spend, on a single flight, the equivalent of a few months’ salary for one of their workers? Why such a visible show of wealth? Isn’t that unseemly? Perhaps. But at least a partial response to that lies in the surprising fact that these CEOs may not have had much choice. As is the case at many large companies, the Boards of the Big Three actually require their CEOs to fly by corporate jet, for reasons of security and efficiency. See this story from the Chicago Tribune: For many CEOs, private jets the only way to fly.
So, is moral outrage totally misplaced here? The money is a drop in the bucket, and the CEOs were simply following what are arguably reasonable corporate policies. Probably. Outrage is likely better reserved for other aspects of their performance as CEOs, or perhaps for having the gall to ask for public money in the first place.
Still, it’s hard not to find something unseemly here. These CEOs apparently didn’t even see the irony, superficial as it might be. They didn’t even think ahead enough to apologize for their lavish trips, or to make some symbolic act of contrition. Now that’s not reason for outrage. Being out of touch with the sensitivities of regular people on a particular day isn’t necessarily a grave sin. But it’s not exactly great, either. I was once asked if it’s unethical to be rude. The answer to that question seems relevant here: we might not want to label a single lapse in manners as unethical, but we’re quite justified in calling it unethical when we see a pattern of rude — or insensitive — behaviour.
—–
Thanks to Laura, Lori, Jared, and Ralph on the SBE list for their thoughtful discussion & helpful links. Inadequacies in the stuff above are all mine.
