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Behavioural Ethics in Business

Moral Reasoning

by Ivan
Behavioural Ethics in Business

In this article Ivan Ocampo discusses how psychological biases impact our moral sensitivity. In this story I aim to discover ways in which we can be blinded to ethical dilemmas, thus inhibiting our moral reasoning. These are through some well known psychological biases involving the self, the need to conform, how we think about the different roles we play and the general tendency to be overconfident. The good news is that the first step to combating these biases is to be aware of them.

Moral Reasoning

Your moral reasoning can be derailed by a range of factors. Psychological biases are common ways in which human reasoning goes wrong.
Psychological biases are a natural part of being human (even the smartest among us are prone to them). Nevertheless, humans aren’t slaves to their nature. We are sophisticated enough to make meaningful and good decisions, especially if we aware of the natural biases that can cloud our moral vision and are able to apply some control over them.
The following content introduces some of the more common psychological biases that can affect business decisions.Moral reasoning refers to your ability, when faced with an ethical situation, to:

  1. Think through the options open to you
  2. Consider the consequences of each option
  3. Arrive at the best decision

Kohlberg (1971) identified three broad levels of moral reasoning:

  • Preconventional
  • Conventional
  • Postconventional

In preconventional thinking, the impact on you, the actor, is of the most concern to you. ‘If I don’t report my colleague for over-charging, they’ll owe me a favour’. ‘I won’t point out that my colleague is overcharging because I might get in trouble with our manager.’

In conventional thinking, your action is guided by what you think is acceptable to your company. ‘I won’t blow the whistle on my company because I’m a loyal employee.’ ‘My colleagues never report these kinds of problems so I won’t either.’

Postconventional thinking is anchored in ethical principles. ‘Reporting my colleague’s overcharging is the right thing to do’. ‘My personal code of conduct dictates that I report this problem (even though I might get in trouble and none of my colleagues ever reports this kind of problem).’

These levels of moral reasoning are grounded in three cognitive bias: (1) the self serving bias, (2) conformity bias, and (3) overconvidence bias.

Self-Serving Bias

I feel good about myself.

Self-serving bias is the tendency to see situations, make judgements and remember events in a way that supports our own interests or our own beliefs. For example, if I receive a good performance review, I attribute it to my skill and hard work. If I receive a poor performance review, I say my supervisor was too harsh or the criteria they used were flawed.
Either way, I feel good about myself.

How to mitigate it?

Familiarising ourselves with professional ethics and industry’s code of conduct can help us become aware of and minimise the impact of biases. When an ethical issue appears, talk about it! Make the most of your mentors, your supervisors, your friends or your family to look into these issues.

Conformity bias

It's my job, so I have to do it.

Conformity bias is known as the pressure to follow what others are doing. It is also closely related to ‘groupthink’, where we agree with people just to keep the peace. This can be very dangerous when facing ethical dilemmas, as people can suspend their own independent ethical judgement and defer to the crowd. A great example of the power of this bias is Solomon Asch’s famous experiment about identifying the length of lines on a page.

The pull to be part of the group is very strong, for being ostracised tends to make people feel like they lack purpose and have less control over their lives.

The carrot of belonging and the stick of exclusion are powerful enough to blind us of the consequences of our actions.

Heffernan, M, 2011

Overconfidence Bias

I am a good person, so I will do good things.

We think we’re better than we are, across the board. A series of successes can make us think we’re invulnerable to chance so we underplay its role. We also don’t believe we will be affected by other biases.


WATCH: Years after the Enron scandal, this documentary was made — The Smartest Guys in the Room. The film examines the 2001 collapse of the Enron Corporation, which resulted in criminal trials for several of the company’s top executives during the ensuing Enron scandal.

The film also shows the involvement of the Enron traders in the California electricity crisis. The film features interviews with McLean and Elkind, as well as former Enron executives and employees, stock analysts, reporters and the former Governor of California, Gray Davis.

READ: Brewer’s (2007) Is There a Little Bit of Enron in all of us?
The author, a former Enron executive, reflects on factors leading up to the collapse of Enron, and considers whether these factors aren’t present in all of us. Fraud often starts with good people trying to create business solutions to satisfy the demands set by external forces. Enron’s demise was caused by two equally destructive forces: contribution to corruption and complacency.

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