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The Capacity to be Dishonest

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The Capacity to be Dishonest
The Capacity to be Dishonest

The answer is simple according to Dan Ariely, professor of psychology and behavioural economics at Duke University, US, author of The (Honest) Truth About Dishonesty and founding member of the Centre for Advanced Hindsight: 1% of all people are totally dishonest, 1% are totally honest and 98% have the capacity to be dishonest.

 

In an article in the Wall Street Journal in May 2012 he said that we like to believe that a few bad apples spoil the virtuous bunch. Accordingly, the dishonest chartered accountants, financial advisers or corrupt individuals in any arena would be quickly flagged and shunned, but, as he explained, that is not how dishonesty works. The reality is that everyone cheats a little, always have, always will, and consequently there is always the danger that this can accumulate to the point where some people lose all sense of integrity.

 

Applying the 1%, 98%,1% rule to the South African Institute of Chartered Accountants (SAICA), then if 1% of its approximately 46 000 members are dishonest, that is no less than 460 members giving the whole profession a bad name. A further 460 are totally honest, and the other 98%, as in any profession, are good people who regard themselves as honourable and honest, but the potential to be tempted to do wrong is always there, and has the capacity to germinate when good governance and ethical leadership is lacking.

 

Offering the analogy of a locksmith, Ariely tells the story of (based on an observation from one of his students) how quickly a locksmith can open a door when you lock yourself out of your home. The locksmith explains it very simply: “Locks are on doors only to keep honest people honest. One percent of people will always be honest and never steal. Another 1% will always be dishonest and always try to pick your lock and steal your television; locks won’t do much to protect you from the hardened thieves, who can get into your house if they really want to. The purpose of locks, the locksmith said, is to protect you from the 98% of mostly honest people who might be tempted to try your door if it had no lock.”

 

Ariely’s approach unblurs the distinction between clear issues of right of wrong, but also between the less clear issues of immoral, amoral and moral management. Moral management is the 1%, immoral management is the other 1%, but amoral management, which infiltrates the 98%, has become a serious organisational problem worldwide.

 

In the tenth edition of Business & Society – Ethics, Sustainability, and Stakeholder Management, authors Archie B. Carroll, University of Georgia, Jill A. Brown, Bentley University and Ann K. Buchholtz, Rutgers University, explains that amoral managers are not necessarily bad people; rather, they inhabit a world view where profit outplays all other factors, disregarding the impact on society and the environment,, ethics and stakeholder inclusiveness. Moral management, on the other hand, requires stakeholder inclusiveness in decision-making, as the King Code has done, and South Africa has adopted a stakeholder inclusive model.

 

What Ariely and decades of good governance and ethical business research emphasises is that we need mechanisms in place to regulate the 98% of us and continuously keep us in the lane of good governance and ethical leadership. There are clear mechanisms to achieve this, such as ensuring the majority of board members are non-executive, and that there is a clear separation between managers and auditors. Where we are seeing the corporate scandals is where the lines become blurred.

 

King IV and the Company Code are very clear about this, and it is up to us to ensure they achieve impact. For this to happen, we have to acknowledge that 98% of us need good codes of conduct or ‘locks’ in place in order to make sure that we do not cross the line. It is not something that we should fight against, it is something that we should embrace because in the absence of good regulations with which we willingly (but not blindingly) comply, the alternative is the imposition of an autocratic environment that stifles creativity and treats everyone as if they are part of the 1% totally dishonest category.

 

“Calls for defined standards of good corporate conduct have issued from many corners of the globe. Sparked by corruption and excess of various types – from garden-variety deception and bribery to labour abuses and elaborate schemes of market manipulation – dozens of industry, government, investor, and multisector groups worldwide have proposed codes and guidelines to govern corporate behaviour”, write the authors of a feature in the December 2005 issue of the Harvard Business Review titled: Up to Code: Does Your Company’s Conduct Meet World-Class Standards (by Lynn S, Paine, Rohit Deshpande, Joshua D. Margolis, and Kim Eric Bettcher.

 

Thirteen years later the need has intensified in an environment where our chartered accountants have shown themselves up to be every bit part of the 1% dishonest and 98% potentially dishonest categories. These are the very people who are supposed to make sure that companies are reporting and behaving honestly. Should we be surprised about this? I think not. Ariely and others don’t make exceptions; they don’t say their research applies to everyone except chartered accountants. They are as human as everyone else, and they too, need to be regulated by well entrenched ethics and company codes of good governance that are upheld across the organisation and transparently practised by the leadership.

 

“In so doing, a company, can clarify for all parties, internal and external, the standards that govern its conduct and thereby convey its commitment to responsible practice wherever it operates”, write the Up to Code authors. They go on to say that      

company codes serve a myriad of other practical purposes: “A code can help employees from diverse backgrounds work more effectively across geographical and cultural boundaries. It can also serve as a reference point for decision making, enabling companies to operate with fewer layers of supervision and to respond quickly in times of crisis.”

 

They add: “Like any tool, a code of conduct can be used well or poorly – or left on the shelf to be admired or to rust. But the better it is made, the greater the chance it will fulfil its intended purpose”. They undertook a systemic analysis of codes from leading corporations globally, and came up with a set of overarching, widely endorsed principles and standards that they called the Global Business Standards Codex. These include eight underlying ethical principles, namely: fiduciary, property, reliability, transparency, dignity, fairness, citizenship and responsiveness.

 

They concede that a world-class code is no guarantee of world-class conduct but what emerges is a universal, timeless commitment to ethics in leadership. In Is Leadership History? by André van Heerden, founder of the corporate leadership programme, The Power of Integrity, he writes: “Ethics is central to leadership, and amidst all the moral confusion, at the root of the leadership crisis, it’s good to know that the evidence for a higher law that transcends the often discriminatory laws of man remains compelling.”

 

As with wisdom, the development of ethics is a lifelong pursuit with several stages along the way, described by the late Lawrence Kohlberg who conducted 20 years of research into moral development. Professor in the Psychology Department at the University of Chicago and at the Graduate School of Education at Harvard University, his stages of moral conduct have been widely debated.

 

Level 1 is the infant and child level where the focus is on the self. At Level 2 social relationships form and a sense of “rightness” and “wrongness” and what it means to be a good citizen according to society and convention develops. Kohlberg says many adults never get beyond Level 2. Level 3 is the “postconventional, autonomous or principled level”, where the individual develops a mature concept of ethics, not because society insists on them but because the individual internally embraces them as “right”. Stage 6 is the “universal-ethical-principle orientation” where the individual’s ethical principles are focused on justice and the good of all.

 

Ariely supports a strong commitment to ethical development but adds that this has to happen alongside regulations, well applied checks and balances, and good governance. Together, they strengthen the lines of defence that deter the 98% from dishonesty and encourage a better outcome for all of us where we don’t have to live in fear that our homes, livelihoods, businesses and country are there for the picking.