As my last blog indicated, the assumption behind teaching about business ethics is that it will increase the likelihood of ethical behavior in the workplace. That raises the question about how we can promote ethical behavior at work more generally.
Essentially, unethical decisions arise when the opportunity for gain and the desirability of the gain are unhindered by constraints on behavior. Let’s take each of the three separately.
An opportunity for gain exists when someone knows that certain activity will lead to a positive outcome. For example, in insider trading, someone with ties to a company learns information about it that, when it becomes public, will produce a predictable change in its stock price. He/she then buys or sells company stock before the information becomes public to profit from the information.
Desirability of a gain is the value an individual places on an outcome. It is human nature to avoid thoughts that interfere with one’s ability to obtain the expected gain. The inside trader rationalizes that the information won’t really affect the stock price or concentrates on the value obtained from the money in improving one’s life.
Unhindered constraints involve a lack of barriers to engaging in the unethical behavior, to being caught, or to being punished sufficiently to act as a deterrent. Historically, Japan illustrates all three. Insider trading laws have been so weak that they have not inhibited the activity. Regulatory agencies have not carefully monitored such trading. If caught, penalties delivered minimal adverse effects.