High-profile cases of corporate malfeasance, from the Enron scandal of 2001 to the BP oil spill of 2010, have pushed business ethics to the forefront of public debate in the last decade. Observers in many disciplines continue to explore the roots of ethical behavior, and recent evidence suggests that morality is largely tied to psychology, self-image and the wiring of the human brain.
Professor Robert Prentice, founding chair of the newly created Business, Government and Society Department at the McCombs School of Business, outlined some of these investigations Nov. 3 at the inaugural luncheon as part of the Texas Enterprise Speaker Series, held at the AT&T Executive Education and Conference Center.
Prentice, a lawyer who specializes in corporate governance, regulatory oversight and ethical decision making, said the study of ethical behavior applies to the business community as well as in everyday life.
Recent studies suggest that most people innately believe they are more skilled, ethical and generous than their colleagues—a tendency Prentice said can cause some people to venture into murky moral territory. In a business context, ethical dilemmas may emerge when a person’s self-image is inflated to a point that he or she feels entitled to cut corners.
“Under certain circumstances, we give ourselves license to play a little faster and looser than we normally would,” Prentice said. “And we don’t realize how much the last decision we made can affect the next decisions we make.”
One example of this principle is explored in a study involving two groups of stock brokers. The first group was asked simply to give investment advice to clients. The second was also asked to give advice, but also to disclose potential conflicts of interest that could influence their recommendations. Researchers found that the second group was more likely to recommend poorly performing stocks than the first, perhaps suggesting that the moral boost from the disclosure made the brokers less motivated to act in their clients’ best interest.
The brain can also shift perspectives of right and wrong, Prentice said, because it has a vested interest in self preservation. Because the mind deflects self-doubt in favor of a more optimistic outlook, people have a natural tendency to be overconfident.
“We know we haven’t been perfect, but we still want to tell a positive story to ourselves about ourselves,” Prentice said.
Established in September 2010, the Business, Government and Society Department addresses the legal, regulatory, ethical and political aspects of the business world, with a goal of identifying more effective practices and behaviors. Prentice said research will be a central component of the program, positioning McCombs to contribute to policy debates involving business and government.