Can we find our way back or is the moral compass lost?

Finkelstein's work at Tuck examining the failure of CEOs is very clear that an open culture that allows honest discussion of problems is both essential and uncommon. It is usually lacking in an organization that fails. A couple of arenas in which Finkelstein is not expert are social psychology and ethics, but there is research in the intersection of these two fields that has an important bearing on this matter. I'd like to draw on this research to make a few points here.

The intersection of social psychology and ethics seeks to ask how it is and under what circumstances social structures (such as business, political, academic, and military organizations) induce individuals to act against their consciences. That is, when are people most inclined to fail to do what they believe to be the right thing to do or fail to tell the truth? There are alarming conclusions to this research -- going back more than half a century.

Some of you know about the Milgrom and Zimbardo studies, I hope. Milgrom's were the Yale studies in which research subjects were induced to painfully shock* others under the guise of a scientific research experiment. A shocking proportion of people, despite showing great discomfort, induced pain, suffering, and even unconsciousness in others, merely because a man in a white lab coat stood by and said it was okay. A few complained, fewer still abandoned the project before the end -- refusing to go on. NONE sought to stop the scientist from continuing to hurt the victim; NONE sought to rescue the victim directlly or indirectly. NONE morally reproached the scientist.

Zimbardo ran the famous prison experiments at Stanford in which perfectly ordinary, randomly selected students, quickly became monstrous when merely assigned the role of corrections officer in a fake prison in the basement of the building. The students assigned the prisoner roles were abused badly within a matter of days. Even the lead scientist, Zimbardo himself, got so caught up in his role as Warden that he became abusive and out of control. (He describes the whole descent into hell -- which is really everyday organizational life in significant ways -- in his large volume The Lucifer Effect.)

Hundreds, perhaps thousands, of subsequent studies have corroborated and refined these results. Consistently, people placed in Milgrom/Zimbardo-like situations FAIL to do the right thing. They fail to confront an abusive, dishonest authority. They fail to make any attempt to rescue the victim. They fail to morally reproach the man in charge.

However, there are other wrinkles. For example, if the victim is dehumanized (no name, no visible face, identified by a number, or as an "other" in a discriminatory culture) they are treated even worse. Sometimes worse than the scientist even asks of the subject.

On the other hand, if the scientist is not present -- but calls or emails his instructions to the subject -- the subject is much more likely to stop the abuse before the scientist tells him or her to do so. The subject is much more likely to call it quits if the scientist is not there, in person. When I say much more likely, I am not being casual -- compliance in torture drops from 90%+ to 30% in some studies.

Of course, all of this has great bearing on and has been applied to the Holocaust, Abu Ghraib, and other circumstances of great shame and evil. But one significant lesson, drawn out by Ravven, an ethicist, is relevant to organizational life. And that is the point about moral reproach.

Ravven shows that moral reproach is unidirectional, in almost all societies. That is, the parent reproaches the child, not the other way around; the colonel reproaches the enlisted man, and not the other way around. And to my point, the boss reproaches the subordinate, and not the other way around. In fact, Ravven shows, moral reproach from subject to scientist is non-existent because moral reproach from subordinate to superior is so severely circumscribed in most societies.

But of course this is not just an Achilles heel that can lead to the Holocaust of Jews in Europe, Armenians in Turkey, the slaughter of ethnic Tutsis and moderate Hutus in Rwanda, or the torture of Islamic fundamentalists in the Guantanamo Camp or extradited to black sites by the CIA. (I feel a drone headed my way now.) It is also a major problem for most organizations. After all, when things are going wrong with the plan from above, it is the middle or front line manager, or even the guy on the shop floor who sees the flaws first. When sales are not hitting targets, the salesmen are feeling it first. When the bank is lending illegally or unethically with false documents, or when it is foreclosing illegally and immorally with insufficient process and protection of consumer rights, it is the originator or other bank underling who sees the problem before the CEO.

It is in fact the CEO who can best be counted on to see and promote the financial well being of the organization and the rank and file who can best observe deviations in behavior from ethical norms. It is true that there are times when only senior leadership knows that the chemical formulation is far more toxic than they are letting on, but most ethical deviations are at the interface of the organization with the environment. It is my contention that if deviations from explicit and implicit moral values cannot be reported up the hierarchy, the organization is much more likely to do harm. And, of course, such upward reporting -- whistle blowing, in general -- is neither the social norm nor formal organizational policy in 99% of the places we work.

In fact, it has also been shown, so-called corporate "ethics" policies, including training programs, have been studied and it has been revealed that they NEVER treat actual ethical breaches of the company broadly or those of their senior leadership. In fact, ALL corporate ethics programs studied have diverted attention from the actual ethical issues of the company (are we profiting by deviating from moral principles) to CONTROL OF THE BEHAVIOR OF THEIR EMPLOYEES. Civility training with respect to customers and employees might prevent a lousy boss from yelling at a subordinate now and then, but by and large it controls the behavior of subordinates to advance the interests of the company's leadership. Further, a lot of effort in these programs goes into making sure the employee does not shirk (used company email or supplies for personal use, talked on the phone during the work day about their kid's softball game, etc.)

The bottom line is that AN ORGANIZATION THAT WANTS TO BE ETHICAL MUST FIGHT AGAINST SUBSTANTIAL SOCIAL FORCES AND BUSINESS PRACTICE TO ENCOURAGE AND PROTECT WHISTLE BLOWING. It must CREATE AN ATMOSPHERE IN WHICH MORAL REPROACH CAN BE SAFELY DIRECTED UP THE HIERARCHY.

As you can see upon reflection, this is much more demanding than the creation of an "open" culture that allows constructive criticism. Bank of America employees needed the power to do more than make suggestions about how to make BoA more profitable at the expense of innocent victims. They needed to be able to say THIS IS MY JOB AND THIS UNETHICAL BEHAVIOR THAT IS DESTROYING THE LIVES OF THOUSANDS OF FAMILIES MUST STOP NOW. And they need to be rewarded for saying it.

Not easy!

The NY AG was recently interviewed by Hayes on MSNBC and asked how the likes of Bank of America could ever be reigned in. They are prosecuted, the lose, they are enjoined by law to behave better, and they keep on breaking the law. They pay their penalties and they consider them a cost of doing business.

Well, I have a few suggestions.

One, we need to adopt the concept of treble damages here. In antitrust cases, if you are charged and convicted in a civil proceeding with a violation of the law you are liable for TREBLE damages. We need that here. When a homeowner has lost his home through malfeasance, he is now often awarded $300! He should be receiving THREE TIMES THE VALUE OF HIS DAMAGES. Watch how fast that rule would change BoA.

Two, we need prison terms for senior executives of big banks, Wall Street firms, and manufacturing concerns that are doing us harm. Under federal statutes, it is per se illegal to fix prices. Per se illegal, so no defense. And executives can go (and have gone) to jail for it. We need to extend both per se illegality and prison sentences into much of corporate criminality. (It is currently too hard to prosecute.)

Three, we need federal protections for whistle blowing of all kinds. We need to make whistle blowers heroes. Many of you are in the minority who honor those who take grave personal risks to tell the truth and let us know what is really going on. But most people are socialized to believe that rule breakers are to be punished and condemned (if they have even gotten to stage 4 in Kohlberg's moral development). OUR ONLY CHANCE TO BECOME AN ETHICAL SOCIETY IS TO FORMALIZE THE CELEBRATION OF WHISTLE BLOWING AND TRUTH TELLING.

Moral reproach up the organizational hierarchy must be carefully nurtured, supported, encouraged and rewarded. Or all is lost.

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*The "victims" were actors, what scientists call "confederates," so they did not actually suffer. But the subjects did not know this.