I begin this week in my role as CEO of Ethical Systems. Joining this fantastic team and meeting colleagues in NYU Stern’s Business and Society Program strengthens my belief that ethics and business can operate hand-in-hand to create lasting value in society.
Ethical Systems is a timely and important organization in response to a convergence of factors. First, the increasing cost to society (as well as shareholders) of corporate misbehavior and litigation has reached an exorbitant level – a December 2014 article in The Wall Street Journal quotes fines and litigation costs for the largest US and EU banks at $80B, an approximately $70B increase from 2009. A more recent G30 report puts the figure closer to $300B for fines amassed by the largest global banks. [see page 20]
These are astronomical figures representing only one segment of the economy (financial institutions) and a relatively short period of time (6-7 years) illustrating what some see as the pervasiveness of ethical lapses and others view as a testament to enhanced enforcement and regulation. Business leaders have recognized that this is an unsustainable way to do business. The increase in corporate compliance costs and the professionalization of compliance reinforces the need for systemic ways to address these failures.
Concurrently, there is growing body of research and knowledge about behavioral ethics, much of it available on our site, and it’s time we apply these learnings to organizations. We know that ethical blind spots can prevent people from seeing clearly their own ethical transgressions. We also know that people consistently misjudge their own ethical standards, often rating them higher than their performance. Research shows that even “good” people can make bad choices if their environment primes them towards unethical behavior. These lessons can be used to promote a systems approach in organizations to drive ethical behavior at all levels.
Businesses that make a commitment to a sustainable, ethical culture can find the necessary resources and tools on the Ethical Systems website. There is no one size fits all solution to business ethics, though behavioral sciences can make it easier for companies of all sizes to motivate the behaviors they desire, rather than continuing to focus on punishment as their solution to cultural woes.
We look forward to working with you towards our shared mission.