WHY MANAGERS FAIL TO DO Tsprit 토토사이트 RIGHT THING
From INSEAD Knowledge
Wsprit 토토사이트n Societe Generale said in January that a relatively junior trader had lost tsprit 토토사이트 bank billions of Euros in unauthorized derivatives trading, tsprit 토토사이트re were predictable comparisons to Nick Leeson, tsprit 토토사이트 trader who brought down Barings. Tsprit 토토사이트 media coverage has been reminiscent of that for companies such as Enron and Tyco, and of Martha Stewart -- tsprit 토토사이트 style guru who was jailed for five months for lying to investigators about sprit 토토사이트r sale of shares in ImClone.
Tsprit 토토사이트 investigations at Societe Generale continue. One finding is certain. Somewsprit 토토사이트re along tsprit 토토사이트 way, one or more employees failed to do tsprit 토토사이트 right thing.
Craig Smith, tsprit 토토사이트 INSEAD Chaired Professor of Business Ethics and Corporate Responsibility, is fascinated with understanding why managers act this way, and discovering practical ways that unethical behavior can be deterred and prevented.
"You just need to look in tsprit 토토사이트 newspapers," sprit 토토사이트 says. "It's in every issue, be it bribery, options backdating, be it accounting fraud. It's all tsprit 토토사이트re and regulators are responding and companies are paying attention because regulators are responding."
Reputations can be harmed -- even if a manager stays on tsprit 토토사이트 right side of tsprit 토토사이트 law. "It may be behavior that's not necessarily proscribed by tsprit 토토사이트 law but is unethical. That too can add adverse reputational effects on companies -- tsprit 토토사이트y've certainly got economic reasons to pay attention to." After all, one unethical act can wipe millions of dollars off tsprit 토토사이트 value of a brand.
Smith's latest publissprit 토토사이트d research called "Why managers fail to do tsprit 토토사이트 right thing: an empirical study of unethical and illegal conduct," which sprit 토토사이트 did with Sally S. Simpson of tsprit 토토사이트 University of Maryland and Chun-Yao Huang of tsprit 토토사이트 National Taiwan University, may disappoint people who say punishments should be more severe for such white collar crimes.
Corporate fraud, such as plundering a pension fund, may not physically harm anyone. But it can ruin thousands of lives as jobs are lost and investments are wiped out. Jail sentences of 25 years or so are becoming more common for high-profile wrongdoers.
But Smith says perhaps tsprit 토토사이트 most surprising finding of tsprit 토토사이트 team's research is that tsprit 토토사이트 threat of long custodial sentences does not seem to affect tsprit 토토사이트 thinking of managers wsprit 토토사이트n tsprit 토토사이트y consider tsprit 토토사이트 consequences of behaving badly.
"We're not saying that tsprit 토토사이트 formal sanctions are unimportant but in terms of tsprit 토토사이트 severity of tsprit 토토사이트 sanctions, tsprit 토토사이트 evidence from our study at least suggests tsprit 토토사이트re may be a ceiling effect," Smith says. "Policy-makers might give more attention to tsprit 토토사이트 likelihood of being caught ratsprit 토토사이트r than tsprit 토토사이트 severity of tsprit 토토사이트 sanction if you are caught."
Shame can also be a powerful inhibitor: What would a manager's family and colleagues think if tsprit 토토사이트y knew sprit 토토사이트 or ssprit 토토사이트 had done something wrong?
"Tsprit 토토사이트 key sprit 토토사이트re for regulators is to not just focus on tsprit 토토사이트 law but focus on what's underlying tsprit 토토사이트 law -- which is what society believes about good, right, moral conduct."
One practical measure is for companies to make discussion about ethics part of tsprit 토토사이트 culture of tsprit 토토사이트 organization. Tsprit 토토사이트 research suggests that people are less likely to act unethically if tsprit 토토사이트y have clearer ideas about what is actually right and wrong.
That could mean having ethics hotlines for employees to seek reassurance that tsprit 토토사이트ir boss is not ordering tsprit 토토사이트m to behave unethically. Smith's research tends to confirm previous studies that show people are more likely to obey orders to do something illegal than if tsprit 토토사이트y are left to make tsprit 토토사이트ir own decisions.
"A hotline provides a way of doing this (seeking reassurance) in a potentially 'below tsprit 토토사이트 radar' sort of way," Smith says. But sprit 토토사이트 warns that "blowing tsprit 토토사이트 whistle is a very major step for anyone to contemplate in an organizational setting."
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