Racial Bias, Even When We Have Good Intentions Sendhil M.docx

Racial Bias, Even When We Have Good Intentions
Sendhil Mullainathan
JAN. 3, 2015
The deaths of African-Americans at the hands of the police in
Ferguson, Mo., in Cleveland and
on Staten Island have reignited a debate about race. Some argue
that these events are isolated and
that racism is a thing of the past. Others contend that they are
merely the tip of the iceberg,
highlighting that skin color still has a huge effect on how
people are treated.
Arguments about race are often heated and anecdotal. As a
social scientist, I naturally turn to
empirical research for answers. As it turns out, an impressive
body of research spanning decades
addresses just these issues — and leads to some uncomfortable
conclusions and makes us look at
this debate from a different angle.

The central challenge of such research is isolating the effect of
race from other factors. For
example, we know African-Americans earn less income, on
average, than whites. Maybe that is
evidence that employers discriminate against them. But maybe
not. We also know African-
Americans tend to be stuck in neighborhoods with worse
schools, and perhaps that — and not
race directly — explains the wage gap. If so, perhaps policy
should focus on place rather than
race, as some argue.
But we can isolate the effect of race to some degree. A study I
conducted in 2003 with Marianne
Bertrand, an economist at the University of Chicago, illustrates
how. We mailed thousands of
résumés to employers with job openings and measured which
ones were selected for callbacks
for interviews. But before sending them, we randomly used
stereotypically African-American
names (such as “Jamal”) on some and stereotypically white
names (like “Brendan”) on others.
The same résumé was roughly 50 percent more likely to result
in callback for an interview if it

had a “white” name. Because the résumés were statistically
identical, any differences in
outcomes could be attributed only to the factor we manipulated:
the names.
Other studies have also examined race and employment. In a
2009 study, Devah Pager, Bruce
Western and Bart Bonikowski, all now sociologists at Harvard,
sent actual people to apply for
low-wage jobs. They were given identical résumés and similar
interview training. Their sobering
finding was that African-American applicants with no criminal
record were offered jobs at a rate
as low as white applicants who had criminal records.
These kinds of methods have been used in a variety of research,
especially in the last 20 years.
Here are just some of the general findings:
■ When doctors were shown patient histories and asked to make
judgments about heart disease,
they were much less likely to recommend cardiac

catheterization (a helpful procedure) to black
patients — even when their medical files were statistically
identical to those of white patients.
■ When whites and blacks were sent to bargain for a used car,
blacks were offered initial prices
roughly $700 higher, and they received far smaller concessions.
■ Several studies found that sending emails with stereotypically
black names in response to
apartment-rental ads on Craigslist elicited fewer responses than
sending ones with white names.
A regularly repeated study by the federal Department of
Housing and Urban Development sent
African-Americans and whites to look at apartments and found
that African-Americans were
shown fewer apartments to rent and houses for sale.
■ White state legislators were found to be less likely to respond
to constituents with African-
American names. This was true of legislators in both political
parties.
■ Emails sent to faculty members at universities, asking to talk
about research opportunities,

were more likely to get a reply if a stereotypically white name
was used.
■ Even eBay auctions were not immune. When iPods were
auctioned on eBay, researchers
randomly varied the skin color on the hand holding the iPod. A
white hand holding the iPod
received 21 percent more offers than a black hand.
The criminal justice system — the focus of current debates — is
harder to examine this way. One
study, though, found a clever method. The pools of people from
which jurors are chosen are
effectively random. Analyzing this natural experiment revealed
that an all-white jury was 16
percentage points more likely to convict a black defendant than
a white one, but when a jury had
one black member, it convicted both at the same rate.
I could go on, but hopefully the sheer breadth of these findings
impresses you, as it did me.
There are some counter-examples: Data show that some places,
like elite colleges, most likely do

favor minority applicants. But this evidence underlies that a
helping hand in one area does not
preclude harmful shoves in many other areas, including ignored
résumés, unhelpful faculty
members and reluctant landlords.
But this widespread discrimination is not necessarily a sign of
widespread conscious prejudice.
When our own résumé study came out, many human-resources
managers told us they were
stunned. They prized creating diversity in their companies, yet
here was evidence that they were
doing anything but. How was that possible?
To use the language of the psychologist Daniel Kahneman, we
think both fast and slow. When
deciding what iPod to buy or which résumé to pursue, we weigh
a few factors deliberately
(“slow”). But for hundreds of other factors, we must rely on
intuitive judgment — and we weigh
these unconsciously (“fast”).

Even if, in our slow thinking, we work to avoid discrimination,
it can easily creep into our fast
thinking. Our snap judgments rely on all the associations we
have — from fictional television
shows to news reports. They use stereotypes, both the accurate
and the inaccurate, both those we
would want to use and ones we find repulsive.
We can’t articulate why one seller’s iPod photograph looks
better; dozens of factors shape this
snap judgment — and we might often be distraught to realize
some of them. If we could make a
slower, deliberate judgment we would use some of these factors
(such as the quality of the
photo), but ignore others (such as the color of the hand holding
the iPod). But many factors
escape our consciousness.
This kind of discrimination — crisply articulated in a 1995
article by the psychologists Mahzarin
Banaji of Harvard and Anthony Greenwald of the University of
Washington — has been studied
by dozens of researchers who have documented implicit bias
outside of our awareness.

The key to “fast thinking” discrimination is that we all share it.
Good intentions do not guarantee
immunity. One study published in 2007 asked subjects in a
video-game simulation to shoot at
people who were holding a gun. (Some were criminals; some
were innocent bystanders.)
African-Americans were shot at a higher rate, even those who
were not holding guns.
Ugly pockets of conscious bigotry remain in this country, but
most discrimination is more
insidious. The urge to find and call out the bigot is powerful,
and doing so is satisfying. But it is
also a way to let ourselves off the hook. Rather than point
fingers outward, we should look
inward — and examine how, despite best intentions, we
discriminate in ways big and small.
BA Capstone Week 6, 7, & 8 Discussions
Week 6 Discussion: Dr. Pepper Snapple Group
Review Case Study 8: Dr. Pepper Snapple Group 2011: Fighting
to Prosper in Highly Competitive Market found in the blue case
pages (115 in paperback) in your textbook.
"Dr Pepper Snapple Group 2011: Fighting to Prosper in a
Highly Competitive Market" Please respond to the following:

The case study outlines six specific strategies that the firm has
chosen to support its strategic direction. Determine which
strategy is most likely to benefit the firm. Explain your
rationale.
Briefly outline at least one other strategy the firm could take to
support its strategic direction. Illustrate why this new strategy
would be successful.
Be sure to respond to at least one (1) other student
Week 7 Discussion: International Opportunities
rationale.
Be sure to respond to at least one (1) other student
Week 8 Discussion: Finding The Buy
rationale.

Be sure to respond to at least one (1) other student.
What BP was missing on Deepwater Horizon:
a whistleblower
The Q4000, a vessel
leased by BP Plc, center, burns off oil and gas it collected at the
site of the BP Deepwater
Horizon oil spill in the Gulf of Mexico off the coast of
Louisiana.
By Eleanor Bloxham, June 22, 2010: 4:25 AM ET
FORTUNE -- The opening letter from BP CEO Tony Hayward
to the BP Code of Conduct reads:
"If you are unsure of what to do in particular circumstances or
concerned that the code is being
broken, you have a responsibility to speak up. The code
explains the mechanisms to do this . . .
and the protections to ensure that retaliation against those who
do speak up will not be tolerated."
"BP's commitment to safety means each of us needs to be alert
to safety risks as we go about our
jobs....Always... Stop any work that becomes unsafe," reads part
of the health and safety section
of that code.
Tony Hayward, in testimony last week before the House Energy

and Commerce Subcommittee
on Oversight and Investigations, said that anyone can stop the
drilling, and so have his
underlings.
This is the gold standard of safety that any corporation should
aspire to. So why the dissonance
between what was on paper, and what actually took place on the
Deepwater Horizon, where
safety problems were known about for several weeks before the
explosion?
http://money.cnn.com/2010/05/27/news/economy/BP_oil_hearin
g/index.htm?postversion=2010052714
http://ecocentric.blogs.time.com/2010/06/21/the-worse-case-
scenario-gets-worse-for-bp-as-new-documents-come-to-
light/?xid=rss-topstories
To ensure that their rigs and refineries and their clean-up
operations are safe going forward, the
board of directors of BP (BP) will need to answer this question
and understand what needs to
happen to create a culture of responsibility and non-retaliation.
Lessons from NASA's Challenger incident are relevant here.
Then NASA Administrator Michael
Griffin sent a message to NASA employees in January 2008 in
remembrance of the Challenger
that partially read: "When we investigate [accidents], we always
find that there were people who
did see the flaw, who had concerns which, had they been heard
and heeded, could have averted
tragedy. But in each case the necessary communication --
hearing and heeding -- failed to take
place. It is this failure of communication, and maybe the failure

of trust that open communication
requires, that are the true root causes we seek."
The ability to ensure individuals voice safety concerns and that
managers appropriately respond
is a complex issue -- and one that is worthy of study. If it were
simple, it would have been
solved. But as Michael Griffin's statement outlines, it is one
requiring continuing attention. It
goes beyond the engineering missteps and solving those issues.
It is a human issue all
organizations face and one all boards should examine and exert
vigilance in overseeing.
What can impact the ability of a company to instill the proper
disciplines? There are several key
principles that boards need to recognize in setting the culture
and the tone at the top:
1) Outsiders and those that view themselves as such are more
likely to speak up than those
involved in the environment and the decision making mix.
WorldCom is a great example. At WorldCom, the
whistleblower, Cynthia Cooper was an
internal auditor, an outsider, by definition, to the finance and
operating functions, an outsider to
the pressures placed on others to achieve certain earnings
results.
For individuals working on an oilrig, real physical obstacles
impede going outside the chain of
command. The individuals there spend long periods of time
together, in close quarters, far
offshore. Achieving a sense of independent thinking can be
difficult, in a risky environment,

when individuals are dependent on each other. Likewise,
independent thinking is difficult if you
fear retaliation or there is high risk of losing your job. Even if
you don't have those concerns,
however, independence can be difficult. Even with a separate
entity it can be difficult.
Independence and arms length relationships with management
are frequently cited as important
issues boards must wrestle with in adequately performing their
oversight duties.
2) The smaller the environment and the community involved in
making a decision, the less
likely there will be a whistleblower.
These issues are amplified when the individuals operate in
relative isolation. Oil rigs are an
instance of this - where workers live and work together in
isolation, in a small space and develop
a sense of camaraderie and shared experience. Boards,
themselves, are another instance of this, a
small group with a strong group identity, one in which a sense
of belonging to that group is
important to the members. Whenever people are in a small
group and know they will see each
http://money.cnn.com/quote/quote.html?symb=BP&source=story
_quote_link
other on an ongoing basis, trying to retain good relationships
for the next encounter is natural
and can inhibit making waves or raising problems.
3) Professional standards and codes of ethics are essential.

However, individuals must achieve a sense of allegiance to
those codes and professional
standards that is greater than the pressure for allegiance to the
group in which they work. For
example, as a general matter, engineering organizations have
codes of ethics. The Code of Ethics
for the members of the American Institute of Chemical
Engineers states that they shall "Hold
paramount the safety, health and welfare of the public and
protect the environment in
performance of their professional duties".
The Society of Petroleum Engineers has a similar statement in
its Guide for Professional
Conduct. The National Society of Professional Engineers has
both a Code of Ethics and Board of
Ethical Review. The Association of Safety Engineers has a
professional code of conduct and the
American Petroleum Institute has a set of Environmental
Principles. Again, to be effective,
however, individuals must feel allegiance to their professions
and the responsibilities embodied
in those codes.
4) Besides apprising workers of their responsibility to come
forward, protections against
retaliation are important to ensure they talk.
Currently, several whistleblowers have come forward on other
matters of interest related to BP
(including another Gulf well) and have said they have suffered
retaliation for doing so. Related
to Deepwater Horizon: "The rig survivors ... said it was always
understood that you could get
fired if you raised safety concerns that might delay drilling.
Some co-workers had been fired for

speaking out, they said." All boards need to take statements
such as these very seriously as they
do impact whether or not individuals will speak up.
In his testimony before Congress last week, Tony Hayward said
that why no one spoke up would
be the important question to be answered by BP's ongoing
investigations. He and Michael Griffin
would agree on that. Congressman Henry Waxman in the
hearing said operating in deep water is
like operating in space. The very nature of oil rig deepwater
drilling -- and space travel -- with
their inherent risks, make it imperative that action be taken to
ensure that in future, safety indeed
comes first.
-- Eleanor Bloxham is CEO of The Value Alliance and
Corporate Governance Alliance, a board
advisory firm.
http://www.cnn.com/2010/US/06/08/oil.rig.warning.signs/index.
html
http://thevaluealliance.com/What BP was missing on Deepwater
Horizon: a whistleblower
Business as usual: The
acceptance and perpetuation of
corruption in organizations
Vikas Anand, Blake E. Ashforth, and Mahendra Joshi
Executive Summary
Many of the recent corruption scandals at formerly venerated

organizations such as
Enron, WorldCom, and Parmalat have some noteworthy features
in common. In most
instances, the fraudulent acts involved knowing cooperation
among numerous employees
who were upstanding community members, givers to charity,
and caring parents—far
removed from the prototypical image of a criminal. The
involvement of such individuals
in corrupt acts, and the persistence of the acts over time, is both
disturbing and puzzling.
We argue that the above phenomenon can be explained in part
by the rationalization
tactics used by individuals committing unethical or fraudulent
acts. Rationalizations are
mental strategies that allow employees (and others around them)
to view their corrupt
acts as justified. Employees may collectively use
rationalizations to neutralize any regrets
or negative feelings that emanate from their participation in
unethical acts. Further,
rationalizations are often accompanied by socialization tactics
through which newcomers
entering corrupt units are induced to accept and practice the
ongoing unethical acts and
their associated rationalizations. We describe the different
forms of rationalization and
socialization tactics and the ways in which firms can prevent or
reverse their occurrence
among employees. The onset of these two tactics can establish
enduring corruption in
organizations and become institutionalized in seemingly
innocuous processes.
...............................................................................................

.........................................................................
In the past, fraud was viewed as a rare event
that happened to unlucky organizations. Now
it is commonly accepted that fraud is taking
place at virtually every organization, every
business. The only question is how big it is
and how can we catch it before it gets out of
hand and destroys a company or organization
as it has done with some companies recently,
such as Enron.” (Tony Bishop, President of the
Association of Certified Fraud Examiners)1
If we look within the organization and iden-
tify the individual who seems most closely
connected with the harm—for instance, the
foreman who orders the workers down the
dangerous mine shaft or the corporate execu-
tive who orders the marketing of an unsafe
drug—we do not find an individual whom we
recognize as evil but someone who looks
rather like us.2
The intense focus on corporate corruption started
by Enron and WorldCom has continued with more
recent discoveries of fraud in other organizations
such as Tyco, HealthSouth, and Parmalat. A nota-
ble and disturbing feature of these and many other
corruption cases is that they did not result from the
actions of single individuals; the corrupt acts typ-
ically required knowing cooperation among nu-
merous employees. Employees typically went
along with activities that were obviously unethi-
cal. Most such acts were committed by individuals
who were upstanding members of the community,
caring parents, and givers to charities— clearly

different from the image of a typical criminal. It is
unsettling that such apparently ethical individuals
engaged in patently unethical practices in the
workplace. Equally unsettling is that many of
these practices apparently prevailed for a signifi-
cant duration. New employees—who typically had
no prior history of unethical acts—adopted and
� Academy of Management Executive, 2005, Vol. 19, No. 4
Reprinted from 2004, Vol. 18, No. 3
...............................................................................................
.........................................................................
9
continued the prevalent unethical practices, per-
haps despite some initial qualms.
Taken together, rationalizations and
socialization practices allow perpetrators
of unethical activities to believe that
they are moral and ethical individuals,
thereby allowing them to continue
engaging in these practices without
feeling pangs of conscience.
We address the above phenomena in this article.
Drawing on a wide range of literature, we discuss
how employees perpetrating corrupt acts engage
in “rationalizing tactics”— describing their actions
in such a way that they do not appear to be uneth-
ical at all. We describe the different types of ratio-
nalizations that individuals use to neutralize their

negative feelings or regrets about their behavior.
We also discuss how newcomers in unethical or-
ganizations are subjected to specific socialization
processes that lead them to accept the prevalent
activities as normal. Taken together, rationaliza-
tions and socialization practices allow perpetra-
tors of unethical activities to believe that they are
moral and ethical individuals, thereby allowing
them to continue engaging in these practices with-
out feeling pangs of conscience. Figure 1 illus-
trates our model of how rationalization and social-
ization, in conjunction with certain facilitating
factors, allow for the acceptance and perpetuation
of corruption in organizations.
In this article, we use the term corruption loosely
to refer to misuse of an organizational position or
authority for personal or organizational (or sub-
unit) gain, where misuse in turn refers to depar-
tures from accepted societal norms.3 The above
definition allows for the possibility that individu-
als termed “corrupt” by societal standards may
nonetheless see themselves as ethical within the
context of their organization. Indeed, the rational-
izations and socialization tactics described in
this article mediate the tension between societal
norms and corrupt practices, creating a local re-
ality that recasts unethical acts as justifiable if not
laudable.
Rationalizing Corruption
[People who have engaged in corrupt acts]
excuse their actions to themselves, by viewing
their crimes as non-criminal, justified, or part

of a situation which they do not control. (Tony
Bishop, President of the Association of Certi-
fied Fraud Examiners)4
One of the most intriguing findings in the white-
collar crime literature is that corrupt individuals
tend not to view themselves as corrupt. People con-
victed of white-collar crimes tend to acknowledge
their errant behavior but deny criminal intent and
FIGURE 1
Facilitating Rationalization/Socialization in Organizations
10 NovemberAcademy of Management Executive
the label of criminal.5 They avoid the tag of being
corrupt by using a number of rationalizing tactics
that allow them to look at their corrupt acts in a
way that makes them appear to be normal and
acceptable business activities.
Rationalizations often capitalize on the inherent
complexity, ambiguity, and dynamism that per-
vade organizations. Actions that look patently cor-
rupt in the clarity of hindsight may have been
undertaken on the fly, under pressure, and with
incomplete and contradictory information. Further,
initial acts of corruption tend to gain a certain
institutional momentum as the organization comes
to count on the rewards of such acts. With the
decision already made (at least implicitly) to en-
gage in the acts, it may become easier to perpetu-
ate the acts than to stop them—particularly if they
were instigated by others.

As Daniel Chambliss cogently argues, articles
on organizational ethics tend to exaggerate the
amount of discretion that individuals actually
have in organizations to do unalloyed good. In fact,
individuals are often responding in real time to
institutional precedents, routines, pressures, and
dilemmas that allow scant room for reflective
questioning and that require messy trade-offs.6 For
the individual, then, ethical musings may at times
seem like a distant luxury and rationalizations all
too available and tempting. Indeed, given these
constraints, the line between a specious rational-
ization and a justifiable interpretation is often
quite fuzzy. Moreover, what makes rationalizations
chilling is that individuals often convince them-
selves that their rationalizations are in fact quite
justified. Our standard in this article for labeling
something an unjustified rationalization is what
we believe a reasonable, independent person
would conclude about a situation.
Rationalizations can be invoked prospectively
(before the act) to forestall guilt and resistance or
retrospectively (after the act) to ease misgivings
about one’s behavior.7 Once invoked, the rational-
izations not only facilitate future wrongdoing but
dull awareness that the act is in fact wrong. In-
deed, if the rationalizations become a shared re-
source in the organization’s (or industry’s) culture,
they may pave the way toward defining the prac-
tice as “business as usual—the way things work.”
Based on a review of research on corrupt prac-
tices, Ashforth and Anand identified several ratio-

nalization tactics used by employees to justify cor-
rupt practices.8 From their list, we identify six
tactics that we believe are most commonly used in
organizations (see Table 1).
Denial of Responsibility
Denial of responsibility is a rationalizing tactic
where individuals convince themselves that they
are participating in corrupt acts because of circum-
stances—they have no real choice. The circum-
stances may involve a coercive system, dire finan-
cial straits, peer pressure, “everyone does it”
reasoning, and so on. Researchers first used this
term in connection with juvenile delinquents who
saw themselves as “billiard balls” helplessly pro-
Table 1
Rationalizing Corruption
Strategy Description Examples
Denial of responsibility The actors engaged in corrupt behaviors
perceive that
they have no other choice than to participate in
such activities.
“What can I do? My arm is being twisted.”
“It is none of my business what the
corporation does in overseas bribery.”
Denial of injury The actors are convinced that no one is harmed
by
their actions; hence the actions are not really
corrupt.

“No one was really harmed.”
“It could have been worse.”
Denial of victim The actors counter any blame for their actions
by
arguing that the violated party deserved whatever
happened.
“They deserved it.”
“They chose to participate.”
Social weighting The actors assume two practices that moderate
the
salience of corrupt behaviors: 1. Condemn the
condemner, 2. Selective social comparison.
“You have no right to criticize us.”
“Others are worse than we are.”
Appeal to higher loyalties The actors argue that their violation
of norms is due
to their attempt to realize a higher-order value.
“We answered to a more important cause.”
“I would not report it because of my loyalty
to my boss.”
Metaphor of the ledger The actors rationalize that they are
entitled to indulge
in deviant behaviors because of their accrued
credits (time and effort) in their jobs.
“We’ve earned the right.”
“It’s all right for me to use the Internet for

personal reasons at work. After all I do
work overtime.”
2005 11Anand, Ashforth, and Joshi
pelled into deviance by their circumstances.9
When using this rationale, individuals do not re-
gard themselves as perpetrators of unethical acts;
rather they view themselves as morally responsi-
ble individuals being forced into unethical acts.
For instance, Fortune recently reviewed the ac-
counting frauds committed at Qwest. Several man-
agers who participated in fraudulent deals justi-
fied their actions by claiming helplessness. An
unnamed manager was quoted as saying: “What
can I do? My arm is being twisted. I just gotta do
what the boss says.”10
Clearly, denial of responsibility is a rationaliza-
tion that is rather easily adopted when experienc-
ing intense pressure from top management to meet
numeric targets.11 Consider the following state-
ment regarding accounting fraud at H. J. Heinz in
the 1970s:
To hear some middle managers there tell it,
the ‘pressure-cooker’ atmosphere at Pitts-
burgh’s H.J. Heinz Co. wasn’t confined to the
concern’s steamy food-processing plants.
‘When we didn’t meet our growth targets, the
top brass really came down on us,’ recalls a
former marketing official at the company’s
huge Heinz U.S.A. division. ‘And everybody

knew that if you missed the targets enough,
you were out on your ear.’ In this environment,
some harried managers apparently resorted
to deceptive bookkeeping when they couldn’t
otherwise meet profit goals set by the compa-
ny’s top executives.12
Under such circumstances, managers often see
themselves as being forced into corruption be-
cause of intense pressure from their superiors.
Denial of Injury
In this rationalizing tactic, employees convince
themselves that no one is really harmed by their
actions and therefore their actions are not really
corrupt. This rationalization is commonly em-
ployed in situations such as theft from an organi-
zation where the organization is assumed to be
well insured or can easily recover the costs, or
where the actual damage is slight. For example, in
a study of ongoing pilferage at an electronics fac-
tory, workers felt little guilt because no harm ap-
peared to be done. As one worker put it:
It’s a corporation . . . It’s not like taking from
one person . . . the people justify it that the
corporation wouldn’t be hurt by it . . . they just
jack the price up and screw the customer.
They’re not losing anything. The Company
told us that last year they lost $30,000 . . . but
that was for losses of all types. It gives them a
nice big tax write-off. I’ll bet you a goddamn
day’s pay that they jack that . . . write-off way
up too.13

Similarly, an Arthur Andersen consultant sup-
pressed her doubts about excessive billing of cli-
ents by rationalizing as follows:
. . . the client [a bank that had been required
by regulators to use this specific consulting
service] was desperate. So we billed our
brains out, charging more than one million for
what should have been about a $500,000 job.
We billed time on the subway, we billed time
rewriting notes . . . I rationalized what we
were doing by telling myself that they were
paying a premium for the short time frame
and intensity of the work . . . .14
A variant of the denial-of-injury tactic occurs
when a given act is rendered less offensive by
comparing it to more extreme forms. For instance,
a manager involved in price fixing rationalized
that since he was not making any personal profit
or significantly harming the customer, and that he
was just involved in correcting an adverse price
situation, he was not really doing anything
wrong.15 Thus, his acts were not really wrong be-
cause they could have been far worse had he been
so inclined.
Denial of Victim
In this form of rationalization, employees define
the victim of their unethical behavior as someone
deserving to be victimized. This can be done in
several ways. A very common tactic is to convince
oneself that targets deserved their fate due, for
example, to past unfairness or corruption on their

part.16 Exploitation of the victim is thus seen as a
form of revenge and the perpetrator as a modern
day Robin Hood. One study found that the most
common explanation offered by employees for
theft of company property was unfair treatment by
the employer,17 and another study found that cor-
porations may nurse grievances against the U.S.
Internal Revenue Service to justify tax evasion.18
Although some victims may indeed contribute
to— or “deserve”—their fate, it is important to note
that denial of the victim need not be based in
reality. A recent study showed that when individ-
uals were given an incentive to lie in a negotiation
experiment, they expected their opponents also to
lie.19 Once individuals start believing that the vic-
tim is deceitful, they are likely to feel less regret
about their own unethical actions. This could be a
double whammy for an organization whose em-
ployees are engaging in corrupt acts such as pil-
ferage: in addition to the physical loss, the employ-
ees might develop antagonistic attitudes toward
the organization to minimize their unease about
their own actions.
A variant of the denial-of-the-victim tactic occurs
when the victim is depersonalized, that is, con-
verted into a faceless statistic or, in extreme cases,
to subhuman status.20 By doing so, employees can
place significant “psychological distance” be-
tween themselves and their victims, making it eas-

ier to deny the impact of their unethical actions on
the victims.21 The classic corporate example is the
Ford Pinto saga. Ford had discovered a design
defect that often caused the car’s gas tank to ex-
plode in rear-end collisions. Ford performed a cost-
benefit analysis in which the forecasted 180 deaths
were converted into dollars ($200,000 each).22 Thus,
the decision was no longer about human life; it
was an economic choice between the cost of a
recall versus the cost of foregoing a recall. Ulti-
mately, hundreds died or suffered severe burns.
Depersonalization is also evident in accounts of
Wall Street traders who viewed clients not as
unique individuals but as suckers asking to be
conned.23
Social Weighting
Social weighting can occur in two ways.24 In the
first form, termed condemning the condemners,25
the legitimacy of the actor/entity who labels em-
ployee acts as unethical is questioned. If the legit-
imacy of actors/entities is questionable, then so too
is their argument. For instance, individuals may
characterize the law as vague, complex, inconsis-
tent, rarely enforced, punitive, or politically moti-
vated such that enforcement is capricious or mali-
cious.26 Since the law itself is wrong, it is not
unethical to contravene it.
A second form of social weighting is selective
social comparisons, analogous to the second form
of denial of injury (i.e., extreme comparisons).
When individuals are confronted with negative im-
pressions about themselves, comparisons with
others who appear even worse serve to bolster

them against the threat.27 Because corrupt acts can
make individuals appear bad, they are motivated
to find examples of others who are even more cor-
rupt and thereby demonstrate that “we’re not so
bad.” In an article about how longshoremen collec-
tively engage in pilferage, one commented on an-
other: “He’d take anything— he’s even taken bag-
gage— he’s nothing more than a thief.”28 In the face
of a “real” thief, the commentator’s own thievery
seemed minor.
Because corrupt acts can make
individuals appear bad, they are
motivated to find examples of others who
are even more corrupt and thereby
demonstrate that “we’re not so bad.”
Appeal to Higher Loyalties
When using this form of rationalization, employees
argue that some ethical norms need to be breached
to fulfill more important goals. Unlike the other
rationalizations, this form may go beyond neutral-
izing the negativity of corruption to actually valu-
ing it. The most common higher cause appears to
be group-based loyalties. When a group becomes
highly cohesive, employees often believe that the
goals of the group are more important than those of
other groups or society. For instance, one study
found that many police officers, when forced to
choose between testifying against a colleague and
committing perjury, usually choose the latter and
experience remarkably little conflict in doing so.29
This is because they value loyalty to colleagues
above loyalty to the justice system.

A less commonly invoked higher loyalty is, iron-
ically, to moral principles. A group may act counter
to universal ethical norms if they regard those
norms as an obstacle to particular principles or
goals. For instance, another study documented the
“normal lies” told by police officers in court to per-
suade judges to convict defendants that the officers
believe are guilty: the ends justify the means.30
Balancing the Ledger
A sixth type of rationalization occurs when individ-
uals believe that good works (whether actual or
anticipated) have earned a credit that can be used
to offset corrupt acts.31 For instance, a recent study
found that individuals engaging in cyber-loafing
felt no guilt pangs because they thought that they
had accrued sufficient credit in the organization
through the time and effort they had put into com-
pleting their work. As one cyber-loafer put it: “It’s
all right for me to use the Internet for personal
reasons at work. After all, I do work overtime with-
out receiving extra pay from my employer.”32
A common variant of this form of rationalization
is when employees bask in the past glory of an
organization to justify current unethical behavior.
For instance, in her book Final Accounting, Bar-
bara Toffler describes how Arthur Andersen em-
ployees billed clients excessively as a matter of

routine. When she queried a partner who had over-
billed a client, she was told: “Relax. We’re Arthur
Andersen. They need us. They’ll pay.” As Toffler
pointed out, “The prestigious name was being used
to justify behavior that never would have been toler-
ated in the past.”33 Ethics and laws were for lesser
firms; Arthur Andersen was above the law.
The tactics described above are instrumental
in aiding individuals to commit corrupt acts
while maintaining belief in their personal moral
integrity. However, it should be noted that ratio-
nalization tactics in themselves are often useful
to the organization. Executives operating in tur-
bulent environments need to make hard choices
that often have undesirable consequences. For
example, managers laying off close associates to
ensure firm survival or relocating local manufac-
turing sites overseas for efficiency reasons often
need to use rationalization processes (e.g., de-
nial of responsibility) to help them cope with the
undesirable and visible consequences of their
actions. Individuals involved in “dirty work”
such as grave digging, trash removal, and so on
consistently use rationalizations to maintain a
positive self-image (e.g., social weighting).34
Hence, in many cases rationalization tactics are
essential for organizations and employees to op-
erate. Our point is that these tactics are simply a
tool, one that also can be used to excuse patently
unethical practices, resulting in disastrous con-
sequences for society—and, eventually, the orga-
nization itself.
Socializing Newcomers into Corrupt Practices

In any organization or subunit, corruption can con-
tinue only if newcomers also start exhibiting the
behaviors. When newcomers are first exposed to
ongoing unethical practices, they often experience
significant dissonance and apprehension. Individ-
uals may be so uncomfortable that they leave the
organization. Ironically, this helps perpetuate the
corruption by weeding out those who are most
averse to it. However, researchers examining cor-
ruption in organizations have found that there ex-
ist potent socialization tactics by which newcom-
ers are induced to accept corrupt practices. This is
often done in conjunction with the rationalizing
tactics. Based on a review of white-collar crime in
the past century, Ashforth and Anand identified
three such processes: (1) cooptation, (2) incremen-
talism, and (3) compromise.35
Co-optation
In co-optation, rewards are used to induce attitude
change toward unethical behaviors. Numerous ex-
amples exist, such as financial brokers who push
offerings with high commissions, contract re-
searchers who spin their findings to support their
sponsor’s preferences, and public officials in reg-
ulatory agencies who take pro-industry stands in
the hope of getting jobs in industry. An interesting
example of co-optation is provided in the book
Power Failure, which describes how executives at
Merrill Lynch (ML) were co-opted in Enron’s efforts
to cook the books:
Faced with an earning’s crisis in 1999, an En-
ron finance executive came up with an irreg-
ular solution. He approached Merrill Lynch

and suggested that they purchase three Enron
barges containing electricity generators that
were floating off the coast of Nigeria. Enron
would book the sale in that year’s accounts
and subsequently buy the barges back and
sell them to a real seller. There was intense
debate in ML, with one executive pointing out
that by doing this ML would be abetting En-
ron’s “income statement manipulation.” But
the fact that Enron was a large customer with
the prospect of large fees appeared to color
the judgments of Merrill executives. In an in-
ter-office memo, one of Merrill’s top bankers
argued that: “Enron is a top client to Merrill
Lynch. Enron views the ability to participate
in transactions like this as a way to differen-
tiate ML from the pack and add significant
value. I completed several financings like
this . . . and they all worked out . . . ” Ulti-
mately, ML formed a company called Ebarge
and entered the deal.36
ML’s executives were aware that what they were
doing was not completely ethical. However, the
prospect of a closer relationship with Enron (and
thus the possibility of higher fees) appears to
have softened their stance toward the corrupt
action.
Corruption via co-optation is often subtle be-
cause the individuals themselves may not realize
how the rewards have induced them to resolve the
ambiguity that often pervades business issues in a
manner that suits their self-interest. Bargh and
Alvarez37 describe how power tends to noncon-
sciously activate personal goals and biases, guid-

ing information processing and behavior—which
the individual then rationalizes in socially desir-
able terms. Thus, a broker may honestly conclude
that the offerings he is rewarded for pushing are in
fact the best investments—indeed, the broker is
likely to perceive herself as a victim when the
practice is exposed.
Incrementalism
In this form of socialization, newcomers are grad-
ually introduced to corrupt acts.38 Initially, the
newcomers are induced to perform an act that is
only slightly deviant. This act, although small, cre-
ates some cognitive dissonance. To relieve the dis-
sonance, the newcomer grasps at ready rational-
izations offered by peers. As the individual comes
to accept the act as normal, he or she is introduced
to another, more corrupt act, with its attendant
rationalizations. In this way, the individual climbs
the ladder of corruption and is eventually engag-
ing in acts that he or she would previously have
rejected outright.
For instance, Gerald Mars39 studied unethical
practices prevalent among the sales staff of spe-
cialty copiers:
The copier manufacturer had announced dis-
counts as high as 50 per cent and asked their
sales staff to pass on the savings to their cus-

tomers. However, rather than pass on the dis-
counts, the staff approached potential custom-
ers with the original price list. The customers
were informed that lower prices could be ob-
tained if the salesperson negotiated with the
manufacturer but that the process would lose
them [the sales staff] their commissions.
Hence, the low prices were available if cus-
tomers were willing to reimburse sales staff
by issuing them compensatory checks. The
customers, happy to get the “low” price, paid
the commissions to the sales staff. There also
existed an elaborate socialization process to
introduce new sales personnel into the corrupt
system: “On regular rounds with myriad cus-
tomers, suggestions about adding a penny on
here and there and advice on who to ‘watch
out for’ . . . are made jokingly, as if only half-
meant. At this stage they are only half-meant;
if the trainee objects to these suggestions,
they can always be withdrawn and no harm is
done.” The newcomers began hesitantly and
in a small way but over time became part of
the system.
Compromise
In the third avenue to corruption, compromise,
individuals essentially “back into” corruption
through attempts (often in good faith) to resolve
pressing dilemmas, role conflicts, and other intrac-
table problems. For instance, politicians accrue
power by forming networks, currying favors, and
cutting deals, often causing them to support ac-
tions and causes they would otherwise avoid.40 It

thus becomes very difficult for senior politicians to
act exclusively according to their own ethical prin-
ciples and preferences.
An interesting example of compromise is pro-
vided by Farberman in his study of used car deal-
ers in the 1970s:
Used car dealers typically purchased their in-
ventory from the trade-ins received by dealers
of new cars. There was a shortage of these
used cars, with the best being reserved for
sale in the new car dealership itself. Manag-
ers in new car dealerships, responsible for
distributing trade-ins to used car dealers, of-
ten took bribes to make good-quality cars
available to used car dealers. The used car
dealers were caught in a bind: they could
either avoid paying the bribes and sell lem-
ons to customers, or they could pay the bribes
and get good cars. Ultimately, several used
car dealers compromised and chose to pay the
bribes. In order to have cash to pay these
bribes, they often had to engage in short
sales—a system where, for instance, a $2,000
car was sold to a customer officially for $1,500.
Five hundred dollars was paid as cash—sav-
ing the customer tax on the $500 and provid-
ing the dealer with cash to bribe managers in
new car dealerships.41
The three forms of socialization are not mutu-
ally exclusive: they may exist simultaneously
and frequently reinforce each other. For in-
stance, the first incremental steps into corruption
are hastened if rewards exist to co-opt individu-

als into the process. Co-optation is much easier if
the individuals, at least initially, take baby steps
into the realm of corruption. And finally, when
individuals are forced into compromise situa-
tions, the rewards associated with an unethical
course of action may induce them to choose it
over the other. A common theme of all three
paths to corruption is perceived choice: newcom-
ers are far more likely to accept corrupt acts as
justifiable if not desirable if the newcomers per-
ceive that they chose their course of action. The
most insidious of socialization practices are
therefore those that provide only an illusion of
choice, subtly inducing behavior that the new-
comer would have otherwise avoided.
As with rationalization, socialization is an inte-
gral and often beneficial organizational process.
Newcomers learn about an organization’s culture
and ethical norms and obtain operational knowl-
edge through a variety of socialization processes
in the organization.42 However, just as rationaliza-
tion is a tool, so too is socialization, one that can be
instrumental in perpetuating unethical behavior.
Thus, while organizations need to ensure that they
have effective socialization tactics, they also need
to be conscious of how socialization can be used to
perpetuate undesirable practices.
The Facilitation of Rationalization and
Socialization

As we pointed out, rationalization and socializa-
tion are key processes that abet the infiltration and
sustenance of corruption in organizations. They
often act subtly, convincing corrupted individuals
that they do in fact have integrity and converting
newcomers into adherents of the deviant system.
While the two processes can exist to some extent
without any support from the organization’s envi-
ronment, certain factors therein can significantly
enhance the likelihood of the two processes emerg-
ing. Three factors depicted in Figure 1 that we
believe are especially important are described
below.
Group Attractiveness and a Social Cocoon
In many instances, corruption is widespread
among the employees in a subunit rather than
being limited to one or two individuals.43 Re-
searchers have pointed out that this is often facil-
itated by group dynamics working in tandem with
rationalizing and socializing practices to create a
“social cocoon.”44 A social cocoon is a micro culture
created within a group where the norms may be
very different from those valued by society or even
the wider organization. Social cocoons emerge
when groups develop idiosyncratic solutions to the
problems they face and actively seek to compart-
mentalize themselves from external influences.
When membership in a group is highly prized,
employees are more likely to accept and adopt the
norms of the group. For example, Toffler points
out why newcomers were unlikely to challenge
the ethical lapses they encountered at Arthur
Andersen. New recruits were socialized to believe

that membership was exclusive and that they were
therefore special.
Arthur Andersen offered something special: a
way of life . . . getting a job there meant mak-
ing it. They all knew that their chances of
making partner were slim, and that they were
in for a rigorous, exhausting few years as the
grunts. But there was that big fat brass ring at
the end.45
Thus, new recruits were unlikely to raise any
sticky questions that could deprive them of their
chance at the brass ring.
We are not suggesting that creating exclusive
conditions such as those at Arthur Andersen
should be avoided. Indeed, such practices may be
one of the best ways of attracting and developing
talented individuals.46 However, the downside to
building such a strong sense of identity is that it
increases the likelihood of blind acceptance of the
organization’s norms.
Once a social cocoon has formed, corruption
may be facilitated through the following steps: (1)
veterans model the corrupt behavior and easy ac-
ceptance of it, (2) newcomers are encouraged to
affiliate and bond with veterans and develop de-
sires to identify with, emulate, and please the vet-
erans, (3) newcomers are subjected to strong and
consistent information and ideological statements
such that they view corrupt acts in a positive light,
and (4) newcomers are encouraged to attribute any
misgivings they may have to their own shortcom-

ings (particularly naiveté) rather than to what is
being asked of them.
Individuals who are part of a social cocoon
appear to find the discontinuity between the
norms of the cocoon and those of society rela-
tively easy to live with. They achieve this accep-
tance through “compartmentalization”— by psy-
chologically separating life inside the cocoon
from life outside the cocoon. When the individu-
als enter the workplace, they quickly and almost
automatically slip into their work roles, along
with the local norms and rationalizing beliefs,
and respond to the pressures of the local context;
in short, the individuals tend to think and act like
typical members. When they exit the workplace,
they slip into their other roles such as parent and
good neighbor, along with the norms and beliefs
of those roles. It’s not that individuals forget their
“other” selves; it’s that they tend to defer to what-
ever identity is most salient. A manager engaged
in price-fixing is not thinking about her role as a
mother and church member.47
Mutual Support of Rationalization and
Socialization
The processes of rationalization and socializa-
tion support and reinforce each other. A new-
comer engaging in the first corrupt act is likely to
experience significant dissonance that could

prevent the process from continuing. However,
when rationalizations are available to subdue
this dissonance, the process is more likely to
continue. Similarly, rationalizations are easier to
accept if, initially at least, they are adopted for
acts that are only marginally corrupt or that offer
potent rewards or a way out of an intractable
dilemma. In many case studies of corruption, the
questionable behaviors began as isolated acts
that gained momentum.
Thomas Barker describes the various opportuni-
ties and temptations available to police officers,
from bribes to free meals, petty theft to perjury.48
The notoriously strong and insular occupational
culture of policing, complete with veteran role
models and valued peers, provides the kind of so-
cial cocoon discussed above. As part of their on-
the-job training, rookies may be quickly disabused
of their “book learning” from the police academy
and taught not only what opportunities to exploit
but how to regard their behaviors in a way that
preserves their self-image of integrity. Bribes and
free meals, for example, may be recast as fringe
benefits. Thus, one study found that police recruits
became more accepting of corrupt behavior over
time.49
Euphemistic Language
One of the most important factors that abet ratio-
nalizing and socializing is the use of euphemistic
language, which enables individuals engaging in
corruption to describe their acts in ways that make
them appear inoffensive.50 Consider, for instance,
the “Payola Scandal” of the 1950s—where disc

jockeys were bribed by music companies to air
specific records. Congressional investigations re-
vealed that the practice was pervasive. However,
disc jockeys never referred to such kickbacks as
payoffs. Rather, terms such as “auditioning fees”
were used, thus making the corrupt practice ap-
pear benign.51
One of the most extreme uses of euphemistic
language is found in Lifton’s description of the
Nazi doctors who worked at Auschwitz.52 The
doctors who selected prisoners for the gas cham-
bers never used the word death; rather, “they
called it going on a transport back to camp.”
Similarly, before the gas chambers were in-
stalled at Auschwitz, prisoners suffering from
illnesses were routinely killed by injecting them
with phenol. During this time, the killing process
was referred to as euthanasia or as “preventive
medicine”: if people were sick and unlikely to
recover in three weeks or so, they were better off
being put out of their misery. Similarly, the con-
cept of preventive medicine applied when a pris-
oner contracted an infectious disease such as
typhus. In this case, killing the patient was the
“right thing” as it prevented other inmates from
contracting the disease. In the above instances,
euphemistic language enabled the doctors to en-
gage in a denial of the victim and of responsi-
bility because gassing and death were words
that were never used; therefore the doctors could
claim unawareness of those acts and perceive
little conflict with the Hippocratic oath they had
taken when they obtained their medical degrees.

One of the most important factors that
abet rationalizing and socializing is the
use of euphemistic language, which
enables individuals engaging in
corruption to describe their acts in ways
that make them appear inoffensive.
Thwarting the Use of Rationalization and
Socialization
While many forms of rationalization and socializa-
tion are beneficial for the organization, it is vital
for managers to understand how to prevent corrup-
tion-related rationalization and socialization from
gaining a foothold and how to dislodge them if
they already have. Here, we describe a set of ac-
tions that we believe can address the challenges
posed by the rationalization and socialization of
corruption.
Focus on Prevention
Rationalization and socialization are the pro-
cesses through which corruption can become
routine and carried on as a normal business
activity.53 If the two processes become embedded
in an organization, they can have a devastating
effect for several reasons. First, because ratio-
nalization and socialization are mutually rein-
forcing, the unethical practices associated with
them can become entrenched. Second, because
the two processes make the practices appear
less unethical, the organization may not be
aware that it is engaging in unethical practices,
and its ethical checks and safeguards may fail to
detect them. Finally, if external agents do expose

the unethical practices, the organization is likely
to stonewall and deny the accusations because
the practices are so entrenched and have been
rationalized away. This in turn almost always
magnifies the problems and losses associated
with corruption, as illustrated in the infamous
case of Beech-Nut’s apple juice:
Beech-Nut Corporation, the second largest
baby food manufacturer in the US, gener-
ated shock waves by admitting that it had
sold millions of jars of phony apple juice
between 1981 and 1983. Beech-Nut employ-
ees were aware of these acts and had been
purchasing sub-standard concentrate from a
supplier at a price 20 per cent below market
value. Management had been co-opted into
this practice because Beech-Nut had been
losing money, and this seemed a good way
to return to financial health. Employees jus-
tified their actions by arguing that “many
other companies were selling fake juice”
(denial of responsibility) and that their fake
juice was “safe to consume” (denial of inju-
ry).54 When Beech-Nut’s actions were finally
exposed by the New York State authorities,
rather than accept their unethical practices,
they stonewalled and moved their entire
stock to New Jersey in the dead of night.
Subsequently, this stock was sold off in for-
eign markets.55

Apart from the devastating effect that rational-
ization and socialization have on an organiza-
tion, we believe that they are extremely difficult
to reverse once established. Hence, an ounce
of prevention is worth many pounds of cure. Be-
low we highlight four key factors for preventing
corruption.
Foster awareness among employees
In many cases when employees are using psy-
chological tactics to justify inappropriate behav-
iors, awareness of the speciousness of those tac-
tics reduces the likelihood of employees using
them.56 Clearly, training employees to be famil-
iar with rationalizing and socialization tactics,
euphemistic language, and social cocoons can
go a long way toward improving the ethical cli-
mate of an organization. For example, rational-
izations often sound suspect to outsiders pre-
cisely because they are not members of the
social cocoon that sustains the rationalizations.
Thus, training employees to at least periodically
think about a prospective action or decision from
the perspective of customers, shareholders, and
other constituents might help to puncture the
ideological balloon. This has been termed the
“headline test”: what would an organization’s
constituents think about the act or decision if it
was reported in the media?
Note also that if employees have rationalized
their corrupt acts and have been performing
them for some time, those acts can become

highly routine. Such behaviors are enacted as a
matter of habit without much thought about why
the act is performed and its ethical implica-
tions.57 In such situations, awareness may not be
sufficient. Organizations need to have periodic
“introspection days” where employees look at all
the acts they perform and examine them for eth-
ical implications. The involvement of external
facilitators in this process can be especially use-
ful in questioning any rationalizations used in
the workplace.
Use performance evaluations that go beyond
numbers
When you rely heavily on management by
objectives, you feel a tendency to manage
by the numbers. Most managers that I know
have far more to do than they can get done.
They live by trade-off when it comes to per-
formance evaluation. You focus on the guys
who didn’t get it all done. The guys who are
meeting the sales quotas, you slap them on
the back and say do it again next quarter;
and next quarter, of course, has to be better
than the same quarter last year, and you
end up sending a message in a company
that management, top management, doesn’t
care how you get there, only whether you get
there . . . .58
In recent years there has been an increasing
debate about the merits of outcome-based vs.
behavior-based performance evaluations. On
one hand, evaluating performance based on pre-
determined numeric outcomes has been advo-

cated because it removes ambiguity and biases
from the appraisal process and decreases risk-
averse behavior. In addition, it may be the only
available option when the evaluators do not
thoroughly understand the business managed by
the executive.59 On the other hand, because ex-
ecutives in many industries have little control
over their organization’s competitive environ-
ment, monitoring their behavior rather than their
results can sometimes hold value.60
From an ethics standpoint, evaluations based
on numeric outcomes may significantly increase
the likelihood of unethical activity abetted by
rationalization and socialization tactics.61 Such
evaluations relieve the burden on the evaluator
of probing deeply into how outcomes have been
achieved. And any feeble efforts by the evaluator
to go beyond the numbers can easily be thwarted
because of the existence of a social cocoon or
through the use of euphemistic language. As the
quote above suggests, as long as the targets are
being met, the manager gets a pat on the back.
Consider the case of the Leslie Fay Companies,
accused of falsifying their accounts. Apparently,
the controller of Leslie Fay “made a practice of
providing divisional controllers with quarterly or
monthly figures for the profits their divisions were
expected to make.”62 Clearly, the controller sent
the message that meeting the pro formas was par-

amount and thus created a fertile environment
where subordinates would try to meet the ex-
pectations through whatever means possible.
Managers would also have little difficulty in justi-
fying their actions through a denial of responsi-
bility. And since no one is likely to challenge the
rationalization (because the means are not
probed), managers can become strongly en-
trenched in believing their own rationalizations.
Moreover, making the numbers means obtaining
the coopting balm of rewards (and avoiding
punishments).
While pointing out that outcome-based moni-
toring is undesirable from an ethical standpoint,
we do not deny its other advantages. However, it
is imperative for executives to understand the
ethical risks involved in outcome-based evalua-
tions and balance them with other means that
examine the ethical conduct of employees in
meeting their targets. A performance evaluation
approach that simultaneously explores whether
the numbers were met and how the numbers
were met is much more likely to prevent the
onset of rationalization/socialization.
Nurture an ethical environment in the
organization
The Sarbanes-Oxley Act, passed in 2002, requires
public companies to disclose in periodic reports
whether they have adopted a code of ethics for
senior financial officers; if they haven’t, they are
required to explain why not.63 Consequently, an
increasing number of companies have adopted
codes of ethics. While adopting such codes is

a positive development, it is not sufficient. Or-
ganizations can sometimes use the presence of a
code as a badge of morality. Thus, they may
practice corrupt acts and believe (and convince
others) that since they possess a code of ethics,
they must be morally sound: good companies,
after all, do good things.64 However, for a code to
influence actual behavior, it must be supported
by organizational structures and policies.
An increasing number of companies have
adopted codes of ethics. While adopting
such codes is a positive development, it
is not sufficient.
Support of an organization’s ethical environment
can come in two forms. First, when employees
have misgivings or uncertainties about the propri-
ety of an action, they should have access to mech-
anisms that allow them to discuss the issues with
an independent company representative. In large
organizations, a corporate ombudsperson or an
ethics officer could be recruited for this purpose.
For instance, several organizations have estab-
lished an Ombudsperson Office which operates
independently of the parent organization. Employ-
ees are free to discuss any perceived ethical code
violations with an ombudsperson. The Ombud-
sperson Office maintains no names in its records
and counsels the employees, vendors, and contrac-
tors and assists in identifying resolution proce-
dures for the problem.65 This process helps to cre-
ate an environment where individuals who have
any ethical concerns are free to discuss them with-
out fear of retribution.

Second, the organization should have strong ver-
ification procedures in place for code-compliance
during key activities. For instance, Shell managers
are required to certify that “neither the company
nor its authorized representatives has been party
to the offering, paying, or receiving of bribes” and
that “no payments have been made that knowingly
violate the law of the country.”66
Top management serves as ethical role models
Clearly, rationalization and socialization are facil-
itated if top management is perceived as being
unethical. Rationalization tactics receive a tremen-
dous boost if they are also being used by top man-
agement. It is not sufficient that top management
be ethical: they should be seen to be ethical.67
Clear choices made by top managers to take the
ethical high road in spite of conventional practices
or obvious temptations should be disseminated
widely, and ethical lapses should be swiftly pun-
ished. Such actions can serve as the stuff of or-
ganizational stories and legends that can act as
foils to rationalization tactics and provide new-
comers who are being socialized into corruption
with alternate perspectives. For example, the man-
ager of a used car dealership informed us that he
tries to personify—for employees and customers
alike—the dealership’s ethical commitment by be-
having directly contrary to the shady practices for

which dealerships are stereotypically known.
In addition, given that all organizations are sus-
ceptible to corruption, it is extremely important for
top managers to assess the risk factors associated
with their particular organization and industry
that may facilitate rationalization and socializa-
tion. For instance, industries in ill-defined or dy-
namic environments tend to have fewer clear and
stable precedents for what constitutes ethical acts,
thus allowing greater leeway for managers. Simi-
larly, organizational subunits whose performance
is difficult to gauge because of the uniqueness of
their tasks are also high-risk centers because per-
formance monitors may not be aware of the stan-
dards and procedures associated with these tasks.
Conversely, industries in stable environments
tend to have entrenched modes of operating and
sense-making that can institutionalize unethical
practices.
Reversing Rationalization and Socialization
In an organization where corrupt acts have been
supported by rationalization and socialization for
some time, the corruption can become embedded
in organizational structures and processes. Re-
versing the corruption can therefore be a chal-
lenge. Because involved employees do not see
themselves as corrupt, it often takes a strong
shock—such as public exposure—to spur recogni-
tion of the need for change. Once ongoing rational-
ization and socialization have been uncovered, or-
ganizations need to make reversal a top priority. In
this context, we believe that quick action and the
involvement of credible external change agents

become critical, as described below.
Avoid denial and move quickly
Recent events have shown that when unethical
acts are uncovered in organizations, there is often
strong resistance to accepting the facts, no matter
how strong the evidence. This is not necessarily
surprising because rationalization, by its very def-
inition, fosters a belief that there has been no
wrongdoing. For instance, when the pervasive sex-
ual harassment environment at Mitsubishi was
first exposed, Mitsubishi employees staged dem-
onstrations and petitioned the government to call
off the investigations.68 Mitsubishi even launched
PR efforts to convince outsiders that nothing was
amiss. Ultimately, such denials and unwillingness
to act hurt the company’s reputation, led to high
court-assessed damages, and delayed the needed
changes. In some cases such denials may lead to
such a loss of stakeholder confidence that a firm
may well dive into a death spiral.
When unethical acts are uncovered in
organizations, there is often strong
resistance to accepting the facts, no
matter how strong the evidence.
Further, even when wrongdoing is acknowl-
edged, senior executives tend to blame rogue indi-
viduals or isolated groups, arguing that they do
not represent the otherwise pristine organization.
In cases of collective corruption, such scapegoat-
ing misses the point that individuals and systems
are mutually reinforcing. As our discussion of ra-

tionalization and socialization suggests, bad ap-
ples can be the product of bad barrels. Indeed, one
of the chilling lessons of the many sordid sagas of
corporate corruption is that otherwise good people
can be induced to do very bad things.
Accepting wrongdoing and moving quickly to
address it is critical if a company is to overcome
enduring fraud of the kind supported by rational-
ization and socialization. For instance, in 1998,
Waste Management had been involved in a mas-
sive accounting fraud. Its regulators had accused
it of dressing up earnings and disbursing almost
$30 million in illegal bonuses to top management.
Maurice Myers, who was hired to take over the firm
in the wake of the scandal, acted quickly. He ac-
knowledged the dubious practices prevalent in the
system and launched an in-house newspaper that
discussed and described questionable actions and
the resulting fallout for the company. He also cre-
ated an anonymous hotline to enable employees to
report any unethical practices that they came
across.69 Acceptance of wrongdoing, coupled with
quick action, resulted in a significant turnaround:
Waste Management has to a large extent moved
out of the shadow of its dubious past.
Involve external change agents
When socialization and rationalization underlie
corruption, insiders are often so embedded in the
organization that they may lack the ability, will,
and credibility to effect the needed changes. Hav-
ing been part of the system, they continue to be
susceptible to the rationalizations associated with

corrupt actions and are a visible reminder to stake-
holders of the old regime. In many cases, calling in
an outsider to clean house is the only viable op-
tion. For instance, in the Mitsubishi case described
above, once the prevalence of unethical practices
was accepted as a fact, the company recruited
former Secretary of Labor Lynn Martin to help re-
organize its labor practices.70 Similarly, in the
Waste Management example above, Maurice My-
ers had not worked in Waste Management’s indus-
try prior to becoming CEO of the firm.
External change agents are more likely to be
successful at reversing corruption for a variety of
reasons. First, their appointment signals a break
from the past and sends an unequivocal message
to employees and other stakeholders of the or-
ganization’s intention to make the necessary
changes. Consequently, employees and stakehold-
ers are more likely to cooperate with the change
efforts and provide needed resources. Second, out-
siders come to the organization with a fresh and
different perspective. They are much more likely to
question tenets and practices long held to be sa-
cred in the organization.71 Third, while outsiders
may know the business less intimately than insid-
ers, they are also likely to possess social networks
diverse from those held by employees within the
firm. This allows them to seek advice from individ-
uals and entities that are not linked to the organi-
zation, further accentuating their ability to ques-
tion existing organizational practices.72

Remaining Aware and Vigilant
Today’s executives must pursue ambitious and at
times contradictory goals and make difficult deci-
sions in real time based on necessarily incomplete
information. The pressures and temptations to cut
ethical corners and to continue questionable prac-
tices instigated by others are strong indeed. And
given the ambiguity, complexity, and dynamism
that pervade contemporary environments, there is
often ample room to rationalize such transgres-
sions as unavoidable, commonplace, and even
laudable. In this context, organizations need to be
especially conscious in guarding against the onset
of such tactics within the organization. Employee
education and the establishment of independent
ethics ombudspersons could go a long way toward
protecting against the onset of rationalization/so-
cialization tactics. Executives who find themselves
in units where corrupt activities are being justified
by rationalizations need to question these prac-
tices rather than meekly acquiesce. Past precedent
and “accepted practice” should not guide execu-
tives in their judgments about the appropriateness
of such activities—rationalizations can endure
over a long period of time and can be collectively
practiced in organizations and industries. Indeed,
if in doubt, it may make sense to get an opinion
from an independent person. Awareness and vigi-
lance can prevent organizations from falling prey
to the debilitating consequences of corruption
abetted by rationalization and socialization.
Acknowledgments

The authors thank Ken Bingham, Carrie Jackson, Akshay Ku-
mar, Vonelle Vanzant, editors Robert Ford and John Veiga, and
two anonymous reviewers for their helpful comments on earlier
drafts of the manuscript.
This paper draws extensively on “The normalization of cor-
ruption in organizations,” by B. E. Ashforth & V. Anand, in R.
M.
Kramer & B. M. Staw (Eds.), Research in organizational behav-
ior, 2003, 25: 1–52. Amsterdam: Elsevier.
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72 Ibid.
Vikas Anand received his Ph.D. from Arizona State University
and is an assistant professor at the Sam Walton College of
Business Administration at the Univ. of Arkansas. His major
areas of research include knowledge management in organiza-
tions, the future of hi-tech work, and in organizational memory.
Prior to his academic career, he was a manager in two large
multi-national corporations and worked extensively on
marketing
and strategic projects in Africa and Asia. Contact:
[email protected]
walton.uark.edu.
Blake Ashforth is the Jerry and Mary Ann Chapman Professor
of
Business at Arizona State University. He received his PhD from
the University of Toronto. His research focuses on identity and
identification in organizational settings, socialization and new-
comer work adjustments, and the dysfunctions of organiza-
tional structures and processes. He wrote Role Transitions in
Organizational Life: An Identity-Based Perspective (2001).
Contact:
[email protected]

Mahendra Joshi is a doctoral student at the University of Ar-
kansas, Sam Walton College of Business. His research interests
include identity and identification relationships at the organi-
zational level, managerial cognition, strategic groups, and en-
trepreneurial firms. Contact: [email protected]
Section 1
Being a financial planner of Ajax Inc, Marcus has to make the
decisions to recommend a proposal that could help the firm
raise enough funds to fulfill the temporarily increased demand
on working capital. He has two options, one is that he quietly
delays the payment of Ajax’s account payable by four additional
days on average, this option has no effect on Ajax’s financial
statements but may hurt its suppliers. The other one is to raise
funds in a common manner like borrowing from its banks or
other financial institutions, or collateralizing any of its assets,
but this will make its financial statement look worse.
Stakeholder Analysis
Stockholders of Ajax: They may prefer delaying the payment
because it has no effect on Ajax’s financial statements and they
would not take any risk on losing in the public equity market.
Suppliers of Ajax: They may prefer borrowing money because
delaying payment may lead them to face the same situation as
Ajax especially this action is quiet.
Marcus Brown: He is employed by Ajax, so if the stockholders
of Ajax are happy with his proposal, he can get good prospect in
his career. Thereby, he would prefer delaying the payments.
Decision
Delaying Payment Borrowing money
Stakeholders

Stockholders + -
Suppliers - +
Marcus Brown + -
Section 2
Utilitarianism
Utilitarianism is an ethical theory which determines the right
and the wrong by focusing on the consequences. It is primarily
a consequentialism. Based on the outcomes it chooses one
course of action over others. It moves beyond one’s own
interest and considers the interests of others. According to
utilitarianism, the actions are right if they promote happiness
overall, and wrong if they reverse the happiness and become the
cause of unhappiness. We have analysis the influence on each
stakeholder for each option. According to the stakeholder
analysis table, we find that the first option which is delaying
payment has 3 plusses and 2 minuses, for a net of plus 1, and
the second option which is borrowing money has 1 plus and 2
minuses, for a net of minus 1. So, from a utilitarian perspective,
delaying payment is more ethical because it promotes happiness
both for stockholders of Ajax and Marcus Brown, generate more
happiness than borrowing money.
Profit Maximization
The ultimate goal of a company is to increase profits, because
company is always belonging to stockholders, it has the primary
obligation to maximize stockholders’ interest. In a real world,
we can grow profit in different manners, it is imperative to
grow profits ethically. According to the stakeholder analysis,
delaying the payment is good for Ajax and bad for Ajax’s
suppliers, and the second option is good for Ajax’s suppliers
and bad for Ajax. From a traditional profit maximization
perspective, we may easily conclude that the delaying payment
is better than borrowing money. However, some theories
indicate that in the long run, only a company with good
reputation and social responsibility can make profit
maximization. If Ajax choose to delay payments, it may lose its
reputations among suppliers and cannot take any advantage of

its trade credit in the future. Therefore, borrowing money is
better than delaying payments in the long run.
Universalism
Universalism is another philosophical concept based on the
notions with universal applicability. They believe in universal
principles of religion, conceding others in universal manners. It
is basically a Christian theology. From a universal point of view
delaying the payment of the suppliers beyond the deadline is not
good and ethically wrong. Because we universally believe that
hurting others is not ethical, especially we are the decision
maker. On the other hand, borrowing money is a common
manner to handle this scenario for a company. Hence, from a
universal perspective, borrowing money is more ethical.
Section 3
Both options have their own pros and cons. If we delve into
them, we will see that delaying payment is not an ethical course
of action compare to borrowing money, it is violating both
perspectives of profit maximization and universalism and only
utilitarianism perspective support it. Conversely, borrowing
money is ethical in perspective of universalism and beneficial
for the company in the long run apply to perspective of profit
maximization. Although from perspective of utilitarianism, it is
not a good choice, I believe the main reason that lead to this
conclusion is the consideration of Marcus. For him, he has no
interest on the suppliers of Ajax, so he will get benefit from
suggesting a proposal that good for his company. If I was
Marcus, I would decide to suggest borrowing money because I
believe my personal interest should not be against the society’s
interest, and an ethical company plays an important role in the
society, I would choose the option that apply to the
universalism.

The Insufficiency of Honesty
From a book
by
Stephen L. Carter
A couple of years ago I began a university commencement
address by telling the
audience that I was going to talk about integrity .The crowd
broke into applause.
Applause! Just because they had heard the word "integrity":
that's how starved for
it they were. They had no idea how I was using the word, or
what I was going to
say about integrity, or, indeed, whether I was for it or against it.
But they knew
they liked the idea of talking about it.
Very well, let us consider this word "integrity." Integrity is like
the weather:
everybody talks about it but nobody knows what to do about it.
Integrity is that
stuff that we always want more of. Some say that we need to
return to the good old
days when we had a lot more of it. Others say that we as a

nation have never really
had enough of it. Hardly anybody stops to explain exactly what
we mean by it, or
how we know it is a good thing, or why everybody needs to
have the same amount
of it. Indeed, the only trouble with integrity is that everybody
who uses the word
seems to mean something slightly different.
For instance, when I refer to integrity, do I mean simply
"honesty"? the answer is
no; although honesty is a virtue of importance, it is a different
virtue from integrity
.Let us, for simplicity, think of honesty as not lying; and let us
further accept
Sissela Bok's definition of a lie: "any intentionally deceptive
message which is
stated." Plainly, one cannot have integrity without being honest
(although we shall
see, the matter gets complicated), but one can certainly be
honest and yet have
little integrity.
When I refer to integrity, I have something very specific in
mind. Integrity, as I
will use the term requires three steps: discerning what is right
and what is wrong;
acting on what you have discerned, even at personal cost; and
saying openly that
you are acting on your understanding of right and wrong. The
first criterion
captures the idea that integrity requires a degree of moral
reflectiveness. The
second brings in the ideal of a person of integrity as steadfast, a
quality that
includes keeping one's commitments. The third reminds us that

a person of
integrity can be trusted.
The first point to understand about the difference between
honesty and integrity is
that a person may be entirely honest without ever engaging in
the hard work of
discernment that integrity requires.; she may tell us quite
truthfully what she
believes without ever taking the time to figure out whether what
she believes is
good and right and true. The problem may be as simple as
someone's foolishly
saying something that hurts a friend's feelings; a few moments
of thought would
have revealed the1ikelihood of the hurt and the lack of
necessity for the comment.
Or the problem may be more complex, as when a man who was
raised from birth
in a society that preaches racism states his belief in one race's
inferiority as a fact,
without ever really considering that perhaps this deeply held
view is wrong.
Certainly the racist is being honest-he is telling us what he
actually thinks- but his
honesty does not add up to integrity.
TELLING EVERYTHING YOU KNOW
A wonderful epigram sometimes attributed to the filmmaker
Sam Goldwyn goes
like this: "The most important thing in acting is honesty; once
you learn to fake
that, you're in." The point is that honesty can be something one
seems to have.

Without integrity, what passes for honesty often is nothing of
the kind; it is fake
honesty-- or it is honest but irrelevant and perhaps even
immoral.
Consider an example. A man who has been married for fifty
years confesses to his
wife on his deathbed that he was unfaithful thirty-five years
earlier. The
dishonesty was killing his spirit, he says. Now he has cleared
his conscience and is
able to die in peace.
The husband has been honest-sort of. He has certainly
unburdened himself. And
he has probably made his wife (soon to be his widow) quite
miserable in the
process, because even if she forgives him, she will not be able
to remember him
with quite the vivid image of love and loyalty that she had
hoped for. Arranging
his own emotional affairs to ease his transition to death, he has
shifted to his wife
the burden of confusion and pain, perhaps for the rest of her
life. Moreover, he has
attempted his honesty at the one time in his life when it carries
no risk; acting in
accordance with what you think is right and risking no loss in
the process is a
rather thin and unadmirable form of honesty.
Besides, even though the husband has been honest in a sense, he
has now twice
been unfaithful to his wife: once thirty-five years ago, when he
had his affair and
again when, nearing death, he decided that his own (peace of

mind as more
important an hers. In trying to be honest he has violated his
marriage vow by
acting tow d his wife not with love but with naked and perhaps
even cruel self-
interest.
As my mother used to say, you don't have to tell people
everything you know.
Lying and nondisclosure, as the law often recognizes, are not
the same thing.
Sometimes it is actually illegal to tell what you know, as, for
example, in the
disclosure of certain financial information by market insiders.
Or it may be
unethical, as when a lawyer reveals a confidence entrusted to
her by a client. It
may be simple bad manners, as in the case of a gratuitous
comment to a colleague
on his or her attire. And it may be subject to religious
punishment, as when a
Roman Catholic priest breaks the seal of the confessional-an
offense that carries
automatic ex- communication.
In all the cases just mentioned, the problem with telling
everything you know is
that somebody else is harmed. Harm may not be the intention,
but it is certainly
the effect. Honesty is most laudable when we risk ourselves; it
becomes a good
deal less so if we instead risk harm to others when there is no
gain to anyone other
than ourselves. Integrity may counsel keeping our secrets in
order to spare the
feelings of others. Sometimes, as in the example of the wayward

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