Can you teach businessmen to be ethical?

January 13

Business has gotten a bad rap for thousands of years. “The more men value money-making, the less they value virtue,” Socrates wrote. The Bible warned that a camel would sooner pass through the eye of a needle than a rich man through the gates of heaven.

illustration by MARCO GORAN ROMANO
(Illustration by Marco Goran Romano)

Americans have traditionally had a more positive view of commerce, but two waves of scandals—Enron in 2001 and the global financial crisis in 2008—have decimated that trust. As a result, Americans are more ambivalent about business than they were in the 1990s, and many students entering business school today are eager to revive the focus on virtue.

A survey by the Aspen Institute showed an increase between 2002 and 2007 in MBA students’ desires to have their careers make a contribution to society. The survey also found a decline in the belief that a company's primary responsibility is to maximize shareholder value.

Yet business schools—the major pipeline for future leaders of banks and large corporations—don’t really know what to do to turn out ethical leaders.

So far, many schools have responded by offering more courses in business ethics and corporate social responsibility. But after much searching, I have yet to find any evidence that a single ethics class, on its own, can improve ethical behavior after the course has ended. So what more can be done?

It’s time for business schools to get more sophisticated about moral psychology. We need to understand why people behave unethically, even when they think of themselves as virtuous.

metaphor I developed for this purpose is that the mind is divided into two parts that sometimes conflict, like a small rider sitting on the back of a very large elephant. The rider is our conscious reasoning. It’s the part of us that learns facts and formulates arguments. The elephant, in contrast, is the other 99 percent of what goes on in our minds. It’s the automatic and unconscious processes like intuition, emotion and habit.

In a mature person, the rider and the elephant work together harmoniously, but sometimes—as in the case of many ethical transgressions—our rational sense of right and wrong isn’t enough to steer the unconscious beast. As goes Medea’s lament, from Ovid’s poem Metamorphoses: “I see the right way and approve it, but alas! I follow the wrong.”

When the rider and elephant disagree, the elephant is a lot stronger.

Ethics classes are aimed at the rider. You can teach a student all you want about utilitarianism, Immanuel Kant or stakeholder theory, but five years later, when her colleagues are competing to sell worthless securities to unsuspecting retirees, her conscious reasoning is unlikely to be strong enough to stop her from running with the herd.

Actually, it’s even worse than that because the rider tends to be a willing accomplice, rather than a weak but upright voice of conscience. Research by Dan Ariely, Francesca Gino and Nina Mazar shows that most people cheat when cheating can earn them more money in a lab game, but they rarely cheat by the maximum amount they can get away with. They only cheat up to the point at which they can find excuses and justifications that maintain their belief in their own virtue. In an interesting twist, creative people cheat more than others, because they are better at finding self-serving justifications.

Moreover, research on “motivated cognition” increasingly suggests that our reasoning abilities evolved not to help us find the truth but to help us influence other people. That’s why people can be so bad at solving simple logic problems, yet resourceful and eloquent when they argue for a self-serving position.

What do these studies tell us? It’s the elephant that first decides which way to go. The rider then dutifully prepares the appropriate arguments, in case anyone raises questions.

For business schools, this means there is no point in trying to change the rider unless you also change the elephant. You’ve got to make ethical behavior automatic and habitual, and you can’t do that with a series of lectures, as every parent knows.

Immigrant children don’t take on their parents’ accents; they copy their peers. It’s the same with norms and values. Students want to fit in with and be attractive to their fellow students. So business schools—just like businesses—should strive to create cultures of ethics, professionalism and trust. To do this, they could weight evidence of character more heavily when they admit new students, and they could more consistently expel students caught cheating.

Business schools could also work with student leaders to define school-wide norms of professional behavior, which would apply to faculty as well as to students. For example, MBA programs could ditch their heavy reliance on class participation when assigning grades—a standard that unfairly rewards extroverts and fosters competition among students to impress the professor. Instead, students could be asked to grade each other on their level of professionalism in class. A few of us at NYU-Stern have begun doing this, and we find that it discourages grandstanding and encourages students to build on each other’s comments. Anything we do to foster a culture of collaboration, rather than a culture of competition for scarce resources, is a way of training the elephant.

But even if business schools adopt the most effective methods to train ethical leaders, does that mean their graduates will stay on the right path when faced with temptations on the job?

No, because one of the central findings of social psychology is that social forces can easily outweigh personal integrity. Think of the famous Milgram experiment, in which ordinary men continued to administer what they believed to be electric shocks to a screaming victim just because an authority figure said “the experiment requires that you continue.” (Some companies are more like the Milgram experiment than others, and we should help our students steer clear of them.)

To really improve ethical behavior in business, we’ve got to change the paths on which elephants travel. We’ve got to teach our students how to harness social psychology research as they become leaders, so they can put up guardrails and re-route paths away from slippery ethical slopes.

A group of us who teach in business schools have come together to help graduates and corporate leaders do that. We created a site, EthicalSystems.org, which collects research findings about how to reduce the risk of ethical failures. For example, there is now a great deal of research on what makes individuals less likely to cut ethical corners. Some of the more interesting findings: people cheat less when the lighting is brighter, when they are asked to recall the Ten Commandments just before making a choice (even if they are atheists), when it’s morning as opposed to afternoon, or when they have the feeling that somebody is watching them, even if the somebody is just a line-drawing of a pair of eyes.

But designing an ethical organization isn’t just about “nudging” individuals. You also have to think about the culture that emerges, how you as a leader can shape that culture, and how your organization can hire and fire to protect that culture. These are topics we already touch on in management classes. By drawing on a wider set of recent research findings, we can take the next step—we can create a course specifically devoted to the design of ethical systems.

A set of best practices for business schools might therefore be the following: update courses on business ethics to include a more realistic portrayal of human psychology, taking seriously the limits of reasoning. Add a course on ethical systems design. Initiate a school-wide effort to strengthen the culture of professionalism and integrity within the MBA program itself. This combination would train both rider and elephant, and it would teach students how to create better paths when they go forth after graduation.

Jonathan Haidt is a professor at New York University Stern School of Business. He is the author of The Righteous Mind: Why Good People are Divided by Politics and Religion, and he is a collaborator at EthicalSystems.org.

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