Sugar Subsidies, Fraud, and Rationalization

Today in class I taught Joe Heath’s wonderful paper, “Business Ethics and Moral Motivation: A Criminological Perspective” (J. Bus Ethics, 2008. 83:4, 595-614). It’s a paper that draws on the criminology literature to debunk several ‘folk theories’ regarding what it is that motivates wrongdoing, theories too often drawn upon by scholars and other commentators in business ethics.

Coincidentally, this item in today’s news illustrates one of Heath’s key points about the role that rationalization plays in fostering wrongdoing in business.

From the NY Times: Fraud Plagues Sugar Subsidy System in Europe

It began when Belgian customs officials examined shipping records for dozens of giant tanker trucks that outlined an odd, triangular journey across Europe. The trucks, each carrying 22 tons of liquid sugar, swung through eight nations and covered a driving distance of roughly 2,500 miles from a Belgian sugar refinery to Croatia and back — instead of taking the most direct, 900-mile route.

Along the way the trucks made a brief stop in Kaliningrad, a grim and bustling Russian border checkpoint on the Baltic Sea.

Suddenly the sugar triangle made sense to them. Because Russia, and not Croatia, was listed as the intended destination, the shipments qualified for valuable special payments known as export rebates from the European Union’s farm subsidy program.

The “explanations” given by sugar industry executive quoted in this story are terrific:

Sugar companies claim their activities are misinterpreted because they are governed by a byzantine European Union system that invites confusion. “It’s very complicated” and difficult for anyone to understand, said Dominik Risser, a spokesman for the Südzucker Group, a German company…

This looks like a classic example of what Heath (citing criminology literature) calls the “denial of responsibility” method of “neutralizing” one’s wrongdoing. It’s not my fault, they say, because it’s all really complicated.

Heres another:

August Töpfer’s lawyer, Klaus Landry, maintained that the company had not mixed sugars, and said that this summer’s raids were politically motivated. He said that prosecutors did not understand the arcane sugar subsidy system.

This looks like a classic case of “condemning the condemners.” I didn’t do anything wrong; the authorities are just evil and are out to get me.

Next time you’re reading a story that quotes people accused of wrongdoing, watch for what it is they say about the reasons for what they’ve done. Most likely, if Heath (and plenty of criminologists) are right, you’ll see an attempt to “neutralize” the wrongdoing, along the lines of the rationalizations offered by the sugar execs above.

4 comments so far

  1. LethaWilliams on

    Interesting point, Chris, and so true! Wouldn’t it be refreshing if those who have been unethical in business would stand up and say, “Yes, I did it. It was dumb and unethical and stupid. And I will suffer the consequences.” Yet, human nature being what it is, this refreshing moment is merely a pipedream.

    While being human is hardly a defense, it is a reality. Thanks for reminding us to be thoughtful about why we make certain business decisions, and how they might reflect on us once they are implemented!

  2. PeteWalker274 on

    Great article. In addition to the tap-dancing executives feeling bad all way to the bank, the EU’s loopholes are beyond excuse — the EU policy writers are either lazy, unqualified, or getting kickbacks.

  3. Chris MacDonald on


    Thanks for your comment.

    There is, of course, another possibility: it could be that a establishing a system of trans-national regulations for growing & shipping commodities is actually such a complex, multi-factorial problem that it’s genuinely hard to get it right. But I honestly don’t know enough about this particular case to guess which the best diagnosis. It could, of course, be some combination.

  4. […] the auto industry, the wind industry, and the donut industry. I’ve written things that were pretty uncontroversial, as well as things that no one agreed with. And in terms of topics, I’ve covered […]

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