Do the Right Thing
Corporate Ethics, Governance, and Risk

Here in the Executive Education division, we’ve been thinking an awful lot about risk, ethics, and governance. More specifically, we’re fascinated by the decision making process that can lead to major crises, and the ensuing cover ups. What goes through the executive mind as they look back and wonder: “How did we get here?”

A recent Around the Nation talk on NPR covers a very similar topic: From Enron to Penn State, How Cover-Ups Happen. From the sex-abuse case at Penn State and in the Catholic Church to the unethical accounting practices at Enron, top officials sometimes opt to hide and obscure instead of telling the truth. Cover-ups often start small, and grow into scandals that tarnish the reputations of entire institutions. The process is reminiscent of Professor Thomas Beamish’s recent blog on crescive risk, where he explains how troubles can develop gradually and incrementally over time, building toward catastrophic proportions.

Our goal is always to provide executives and leaders with the tools to successfully navigate management of their companies. When it comes to ethics and governance, the main question is: how do you prevent your company from falling into just such a trap? Did these situations happen because these companies and managers are “evil”—or is wrongdoing more normal than is commonly thought?

Donald Palmer, Professor of Management and expert on organizational behavior, recently published a book: Normal Organizational Wrongdoing: A Critical Analysis of Theories of Misconduct in and by Organizations. In the Summer 2012 Issue of the UC Davis Graduate School of Management Innovator Magazine, he wrote an article to provide readers with a high-level overview of some of the principles described in the publication.

“Normal” Organizational Wrongdoing

When people such as Bernard Madoff or firms such as Enron are found to have engaged in shady dealings, news commentators, social critics and even scholars loudly condemn the offenders. For the most part, they have framed wrongdoing as an abnormal phenomenon.

Recently though, theorists and researchers have begun to view wrongdoing as a normal phenomenon with a range of explanations. This turn has important implications for those interested in finding ways to curb wrongdoing.

Wrongdoing is normal in at least four respects:

  1. It is prevalent. As Don Palmer began this article in April, three major instances of misconduct made the news over two days: Wal-mart de Mexico’s bribery case; fraud perpetrated by top managers of the U.S. Immigration and Customs Enforcement agency; and Rupert Murdoch’s testimony regarding his newspaper’s illegal phone hacking.
  2. Wrongdoing is often not much different than right doing. This is particularly true of bribery, where lines are blurred between legal and illegal exchange, or at least officially tolerated gifts.
  3. Even though wrongdoers are often cast as malevolent, for the most part they are ordinary and even morally upstanding people and firms.
  4. Most important, wrong-doing is generated by organizational structures and processes that are pervasive in organizations and that are also responsible for right doing.

Implications for Managers and Employees

The view of wrongdoing as a normal phenomenon suggests managers and employees are often confronted with choices that place them in a gray area separating right from wrong, with pervasive forces that push them into the wrong.

Managers and employees need to become sensitized to the decidedly grey area in which they operate, and they must become familiar with the forces shaping their investigation of this terrain. If they can do this, they have a fighting chance of staying on the right side of the line.