MIT Sloan Management Review

Business Ethics and Public Policy, Leadership and Organizational Studies

 

The Hidden Costs of Organizational Dishonesty

By Robert B. Cialdini, Petia K. Petrova and Noah J. Goldstein

April 15, 2004

Companies that engage in unethical practices face consequences far more harmful than is traditionally recognized. The resulting damage can easily outweigh the short-term gains.

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A brief scanning of The Wall Street Journal — or, tellingly, almost any other newspaper in the country — reveals the alarming prevalence and far-reaching impact of organizational dishonesty. Reports of malfeasance or criminal conduct in corporate governance, accounting practices, regulatory evasions, securities transactions, advertising misrepresentations and so on have become all too commonplace. It’s no wonder that business schools across the country have been rushing to design and introduce courses that emphasize a subject traditionally given short shrift: ethics.1

This is not to say that, as a group, business people are inherently unethical. All other things being equal, most executives would unhesitatingly choose the high road. Except in hypothetical situations, however, all other things are never equal. In any organization, people are motivated by myriad factors — sales quotas, corporate economic health and survival, competitive concerns, career advancement and so forth — which can easily override their moral compasses. Indeed, in spite of the assortment of arguments contending that “ethics pays,”2 the number and extent of the recent transgressions suggest that a significant portion of the business world has yet to be persuaded.

Of course, companies should always adhere to universal ethical principles because, after all, that’s the right thing to do. But one additional reason for businesses to engage in honest practices is that the consequences of failing... To read the complete article, login or sign-up using the form below.

 
 

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