“The current crisis is the time to reflect on the things we doin business,” said Prof.dr. David De Cremer, renowned behaviouralethicist at RSM, as he introduced the work of the ECBE. “We need tounderstand and predict business ethics,” he said. The ECBE is runby Erasmus Research Institute of Management (ERIM) and was launchedat a one-day symposium featuring five speakers from global businessand academia.
The symposium’s speakers made chilling listening for theaudience. Speaking first, Bill Bottom, Professor of OrganisationalBehaviour from Olin School of Business, Washington University in StLouis, USA, described recent events as the ‘stunning collapse offirms and the destruction of stakeholder wealth through a level ofbasic incompetence and ethical misconduct by business graduates.’It was, he said, the result of a ‘loose-tight’ personnel policy andusing financial rewards as motivation with bonuses andoutcome-based pay.
But studies have shown that people in business are more likereciprocal altruists, for whom the choice of futuretrading partners is influenced by those who have been helpful tothem in the past. Variable pay is an inefficient motivator, saidProfessor Bottom, and he supported the restoration of humanrelations in business education and practice.
Ann Tenbrunsel, Professor of Management at the Mendoza Collegeof Business, University of Notre Dame University in Indiana, USAproposed that none of us behave as well as we think we do. This’ethical mirage’ influences the business decision-making process,masking its true impact. Without the sanction of the ‘business’label, decisions are often seen as interpersonal, ethical ones andoutcomes differ.
Effective ethical decision-making, Professor Tenbrunsel said,required an abstract view ‘at forest level, not tree level’, andrecognition that recollection of the ethics involved in thedecision-making process are likely to be distorted.
Peter Kim, Associate Professor of Management and Organisation atthe Marshall School of Business, University of Southern California,added another layer to the problem and said the framing of anincident can make a difference to how it is perceived. “We viewmatters of incompetence as fixable by apology, repentance andredemption. But if the action is seen as a transgression ofintegrity, the action leaves a permanent, personal stain on thecharacter,” he said.
But apologies are not always successful. Individuals can be morelenient, but the effect of belonging to a collective group canmagnify a negative response and lead to a mob mentality. Inaddition, cultural norms may also alter responses, with apologiesare viewed differently in Eastern and Western cultures.
Drs. Annegien Blokpoel is Managing Director of PerspeXo, aconsultancy working on developing value-enhancing strategies forSMEs. She identified the thread running through the previousspeakers’ presentations when she said: “the common thread here ishuman interaction”.
We tend to be more moral in human-to-human interactions than infaceless business-to-business interactions, she said. Largercompanies and merged banks had become impersonal organisations, andthe banking system in particular was ‘hijacked by econometrics’,with measurements of past performance held as the key to futuresuccess. But in large organisations, no single person had anoversight of the whole operation and consideration of the humanelement was lost. Divisions were operating without cohesion and theresult was the financial crisis.
Drs. Blokpoel advocated a ‘back to basics’ tactic for banks.Trust could be re-established by building a reputation as efficientcurrency exchanges, as depositories for funds over a long term, andfor producing a return on investments through good and bad times.The banking industry needed professional bankers with a goodbalance between their rational and emotional sides, she said, andwho worked under the assumption that they were responsible fortheir own opinions and actions.
Dr. Sylvie Bleker, Director of the Centre of Excellence onCompliance and Integrity for Deloitte reminded the audience thathistory often repeats itself. When Nick Leeson brought down BaringsBank with losses of £827 million in 1995, it was said it couldnever happen again. But Jerôme Kerviel lost €4.9 billion for theSociété Générale in 2008. Behaviour of employees is affected byopportunity, pressure and rationalisation, she explained, andsuggested that the crisis came about because of a loss of humansenses in large organisations. “We can’t see the assets, we can’tfeel them, we don’t hear the cries of those affected, we don’tsmell the poverty and don’t taste the despair,” said Dr Bleker.’Virtual money’ had turned bankers into the equivalent of computergame players, with the ability to press the re-set button. “Butthis is not virtual money,” she told the audience. “What bankers dohas an effect on everyone.”
In summing up, Prof.dr. David De Cremer said he hoped that thefindings of the Erasmus Centre of Behavioural Ethics would prove tobe a useful resource for business, and that he and his researcherswould be happy to hear from businesses with questions or problemsrelated to business ethics.
The Erasmus Research Institute of Management(ERIM)is the research school in the field of management ofthe Erasmus University Rotterdam. The founding participants of ERIMare Rotterdam School of Management, Erasmus University and theErasmus School of Economics (ESE). ERIM organises the ErasmusDoctoral programme in Business and Management for the training ofyoung, promising scientists. Over 300 researchers are attached toERIM.
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Read the articles
The Devils in Each of Us by Peter H. Kim,
Credit Crunch Etics by Dr. Sylvie C. Bleker van Eyk,
The Ethical Mirage by Ann E. Tenbrunsul,
Restoring Human Relations in Business Education and Practice byWilliam P. Bottom,
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