Behavioral economics is a school of social science that teaches that we are not as rational as we think. The application of that learning to the realm of ethics is sometimes called “behavioral ethics,” which is a social science that teaches that we are not as ethical as we think we are. Compliance program assessments can provide a valuable opportunity to introduce the use of behavioral ethics ideas and information into corporate compliance programs. (Note: more information about the behavioral ethics experiments that form the basis for this post can be found in our sister blog – the Conflict of Interest Blog).
Broadly speaking, there are two dimensions to behavioral ethics and compliance: the general and the specific.
By the former we mean using the learning that we are not as ethical as we think to promote the understanding in a company of the need for stronger E&C generally. In our view, this is for many companies potentially the most powerful application of behavioral ethics to the realm of compliance. If properly appreciated, this learning should be valuable in ensuring that boards of directors, senior managers and other key decision makers devote more time, attention and resources to compliance than they otherwise would. Indeed, the lesson that we are not as ethical as we think we are is one that is worth teaching to everyone in a company – as it should help all employees appreciate the need for strong E&C.
The specific application of behavioral ethics to corporate compliance involves using different aspects of this learning to enhance discrete program elements. To take the example of risk assessment, various behaviorist experiments suggest that the following be taken into account when assessing risk:
• Time pressure
• “Slippery slopes”
• “Conformity bias”
• Good intentions
• “Distant victims”
• Being in a job that involves a significant amount of dealing with money.
Or, to take the example of training, one could use the results of certain behavioral ethics experiments to deploy a just-in-time/point-of-risk communication strategy. And to help encourage employees with the often-difficult decision of whether to report a suspected act of wrongdoing, behavioral ethics suggests appealing to a sense of “larger loyalty.”
We should emphasize that many (although by no means all) of the insights of behavioral ethics have long been known anecdotally to E&C professionals. But what behavioral ethics brings to the table is data to prove these things – an increasingly valued commodity in the business world. A behavioral ethics approach can help organizations more efficiently and more effectively deploy scare E&C resources, which is an important reason to include a behavioral ethics dimension in an E&C program assessment.