Ethics, Money and Power – Wink, Wink

So much of recent focus has been on political leaders in the United States governed by a very separate set of rules, even statutes, than the rest of us. Also at the core of so many claims of racial and ethnic discrimination is the rather dramatically statistically substantiated claim that White, especially those in the middle class and above, are governed by a very different legal system that is applied, for example, to Black Americans. Black teens learning to drive often are given what is referred to as “the talk” – a parental lesson of how to deal with a White police officer pulling them over on a purported traffic stop. “First, always keep your hands on the top of the steering wheel where they are plainly visible.” There a too many stories of Black drivers being shot by a cop thinking that those hands are about to pull a gun.

Supreme Court Associate Justices Alito and Thomas, recipients of lavish travel benefits and even purported direct financial accommodations, correctly claim that they are exempt from “financial restrictions” applied to every other federal judge. But the greatest claimant of “those laws do not apply to me” is Donald Trump whose behavior has drawn two impeachments, four separate criminal indictments and a litany of civil suits and criminal suits against those who worked for him and followed his lead.

But this notion of “we’re not subject to the same rules as everyone else” is hardly relegated to government power. The United States has a general ethos that tends to allow obvious major value generators in the private sector to find an ability to take ethical shortcuts that directly contradict company policies without facing any internal consequences. If the company profits sufficiently, supervisors and even the board of directors are often quite prone to look the other way. If we call the miscreant to account, the reasoning goes, he or she would probably defect to our competitor.

In many nations, corruption is just the way business is done. The US Foreign Corrupt Practices Act requires those subject to American law, no matter where they operate, to adhere to a strict code of permitted anti-bribery restrictions when dealing with foreign governmental officials and their vendors. The UK Bribery Act extends those restrictions to those subject to UK law not just in dealing with governments but also in dealing with foreign businesses. But, as they say, “everybody does it.” With very few prosecutions under these statutes, there is a lot of fudging to all those “benefits” to grease the wheel of business.

But as I have witnessed firsthand, rainmakers, across US businesses, are fairly exempt from strict adherence to internal ethical mandates. My experience in law firms, where ethical rules are embodied both at a state governance level (enforced by the relevant state bar association) and in private internal codes of ethics and responsibilities, simply affirms this practice. In the entertainment industry, the decades of sexual predation and abusive bosses were simply the way the business worked… until the explosion of MeToo# litigation and prosecution. But as Richard Bistrong, Ron Carucci, and Dina Smith, writing for the August 31st FastCompany.com, point out, when you make enough money for the company and cross a few ethical lines, it is often standard procedure for those in charge simply to look the other way and perhaps even help cover up the missteps. And sometimes that looking the other way backfires… badly.

“According to research, when top performers transgress ethical expectations, ‘the ‘preferred’ moral conclusion is to tolerate high-performing employees’ unethical behaviors because of the overall value they bring to the organization and to the workgroup.’…

“There is considerable research to suggest that high performers are more susceptible to ethical risk than others. One reason is that high performers’ ambitions, power, and popularity can increase their sense of impunity. Another reason is that high performers’ may think they have a moral license to rewards. Plus some individuals have cognitive biases such as loss aversion and the status quo bias which can lead to protecting your success at all cost, even if unethical.

“For instance, EY’s 2022 Global Integrity Report found that ‘42% of board members agreed that unethical behavior in senior or high performers is tolerated in their organizations,’ which is up four percent from two years prior. Another report found that 34% of fraud is committed by executives and upper management level personnel, who we typically consider to be among our high performers.

“What’s more, when high performers commit an act of ethical misconduct, the financial losses are estimated to be almost six times as large as when the unethical conduct occurs among less prominent team members. In addition, violations from front-facing high performers are more likely to make front-page news, potentially causing significant reputational damage.

“There are also numerous anecdotal examples which demonstrate what happens when high achievement and high ethics decouple. Take Tim Leissner, the Chairman of the Goldman Sachs Southeast Asia division from 1998 to 2016. He described himself as wanting to be a ‘corporate hero,’ generated roughly $600 million in fees to the bank, and also conspired with others to loot the Government of Malaysia’s 1Malaysia Development Berhad sovereign wealth fund of 4.5 billion dollars. Of course high-performing misconduct isn’t often or always on this large of a scale. For example, James D. Falkowski, a high-performing director at QVC for five years, was sentenced to thirty months in prison for embezzling over a million dollars from his employer, including more than $200,000 in luxury chauffeur rides for himself, friends, and colleagues.”

As this “wink, wink” ethos becomes business as usual, as those at the highest level in business are actually rewarded for success at the expense of ethics – unless they get caught by some powerful extrinsic source (e.g., the SEC, the DOJ or state equivalents… or just plain business litigation) – this tolerance for success at any cost begins to define society as a whole. It justifies, in the minds of many, different tiers of rules for the success or privileged versus the rest of us. I’m Peter Dekom, and until this “tolerance for ethical lapses among the successful” is challenged at a grassroots level, what you see in government is what you get.

I’m Peter Dekom, and until this “tolerance for ethical lapses among the successful” is challenged at a grassroots level, what you see in government is what you get.