Bernie Madoff has to be a smart man. After all, he became chairman of a stock exchange and built an organization serving 13,000 people who collectively entrusted $65 billion dollars to him. Yet, as smart as he was, he did some really dumb things that will most likely land him in jail for a long time. Madoff recently confessed to massive fraud through a Ponzi scheme.
Why would a smart guy do something so stupid? In a recent talk, Patrick Kuhse, an Ethics Fellow with The Institute of Executive Education, Suffolk University Business School, outlined some answers. Like Madoff, Kuhse is a smart guy who did some dumb things in his life that landed him in jail for four years.
Kuhse says there are eight critical areas of thinking that underpin unethical behavior.
1. Entitlement Thinking – This is the attitude of “I deserve (fill in the blank) in exchange for doing nothing.” We have an epidemic of entitlement thinking in the United States today. This is not surprising, as it is a result of public policy influencing personal policy. The bulk of government spending goes to entitlement programs such as Social Security, welfare, Medicaid, and Medicare. Our tax code provides “refunds” to people who don’t pay taxes. Corporations on the brink of failing because of poor decisions feel entitled to be bailed out by taxpayers who have made wiser decisions.
2. Super Optimism – This isn’t positive thinking, it’s delusional thinking. This is believing you are a master of the universe, all knowing, all seeing; someone God might come to for advice.
3. Affection Disconnection – Smart people who do dumb things usually have few or no close relationships. They lack emotional intelligence and tend to be isolated.
4. Seemingly Unimportant Decisions (SUDs) – This is typically the tipping point where stinking thinking turns into an unethical or illegal action. It’s usually not well thought out or premeditated, and it’s seen as a “one time” thing.
5. Rationalization – This is what legitimizes SUDs until they become habitual. Rationalization says, “One more time won’t hurt because…,” or, “Everyone else is doing it, why not me? I need to level the playing field.” Kuhse explained what he calls the Fraud Triangle: opportunity, followed by peer pressure or motivation, and then catapulted into action by rationalization.
6. Laziness – Once the fraud builds up steam, the person becomes lazy. This is the short-term realization of the entitlement myth, getting something for nothing.
7. Victim Thinking –Rather than taking responsibility for their own poor decisions and actions, people see themselves as victims who had no control over the series of events leading them down the slippery slope of fraud.
8. Situational Ethics – This is the ability to excuse unethical behavior because of extenuating circumstances, even if it would not be acceptable under “normal” circumstances.
If the statistics Kuhse cites are correct, fraud and deceit may become increasingly acceptable in the future. When he polled college students, about 75% answered “yes” when asked, “Do you think businesses are corrupt?” My own answer to that question would be “maybe 5%.” Eighty percent of the students believed they would be asked by a future employer to do something unethical. When asked whether they would comply, 75% said they would if it enhances their career or they are sure they won’t be caught.
Kuhse says we can begin to turn the tide by asking ourselves three questions before taking an action:
• Is this legal?
• Is this a win/win?
• How will I or my loved ones feel about myself if I do this?
The bottom line is that business ethics isn’t about business. It’s about personal integrity—making smart decisions and teaching our children to do the same.