Compliance Culture

Practical insights for compliance and ethics professionals and commentary on the intersection of compliance and culture.

Insights from behavioral economics for compliance officers

This is the third in a series of four posts on insights for compliance officers from different fields of study.  The first post in the series was about lessons from psychology regarding motivation and choice, from prominent figures such as Viktor Frankl and Barry Schwartz.  Last week’s post discussed insights from self-development and coaching, including the works of people like Brene Brown and Byron Katie.  Today’s will be about insights from behavioral economics.  The fourth and final post in this series, on March 13, will focus on the application of theories of business management theories to corporate compliance programs.

Behavioral economics is a multi-disciplinary field of academic study which integrates themes from psychology, sociology, and neurology, among others, to analyze and predict economic decisions and markets behavior of individuals.  Given that behavioral economics shares so much theoretical inspiration with other areas and covers such a wide array of human behavior, it is naturally quite insightful for compliance officers.  Like compliance, behavioral economics focuses heavily on factors to decision-making and conduct.  Behavioral economics also takes great interest in risk tolerance and assessment, the management of which is also important for compliance.

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Selected TED & TEDx talks on ethical dilemmas

An ethical dilemma is a problem in decision-making between two or more possible choices which involve conflicting interests and challenging possible consequences. Often this can be understood as a scenario in which making one decision has an impact on the interests involved in the other decision(s) not made. Choosing to not make a decision is also, in its own right, a choice which implies these consequential dynamics. The below TED/TEDx talks are a sampling of some different dilemmas encountered and the ways that the speakers have thought about and attempted to resolve them.

  • The ethical dilemma of designer babies (Paul Knoepfler) – Biotechnology which was once the stuff of science fiction is now becoming an everyday reality, or at least a possibility that is easy to imagine for the not-so-distant future. For many years now there have been ethical questions about the use of gene editing technology in human embryos. This could allow scientists to mitigate the risk of certain auto-immune or congenital diseases, which would be a marvel of modern medicine. However, it could also make the way for individuals to use the technology to also alter physical appearance and pre-determine many of a person’s traits, perhaps also eventually personality characteristics. What answers does bioethics have for this dilemma? Is it worth the risks, too dangerous to justify the benefits, or somewhere in between – a technology that should be progressively and thoughtfully developed with both those risks and those benefits in careful balance?

 

  • Can we engineer the end of ageing? (Daisy Robinton) – While the prior talk considers the beginning of life, there are also bioethical considerations to scientific advancements made concerning the end of life also. Just as there can be cellular interventions on the biological makeup of embryos, therapeutic mechanisms of stem cell identity may already be useful in increasing longevity and health, such as by reversing the growth of cancerous cells or addressing other developmental diseases. However, what about the possibly to “edit” one’s DNA not for survival or to cure a sickness, but to improve capabilities or change aesthetic qualities? If some physiological differences are editable at the cellular then is it ethical to do so?

 

  • The Social Dilemma of Driverless Cars (Iyad Rahwan) – Self-driving cars have been in the news a lot recently as leading organizations such as Ford, General Motors, Tesla, and even Samsung are making major investments in developing field. In the US, the federal government has indicated that it prefers to let technological innovation take precedence over anticipatory regulation, perhaps taking lessons learned from the initial failure of the electric car industry in the 1990s and early 2000s. The artificial intelligence of self-driving cars is ethically challenging, in consideration that these driverless vehicles will share the road with pedestrians and conventional vehicles. Will they be safer than cars with human drivers, or do they bring up all kinds of new safety and privacy concerns?

 

  • Machiavelli’s Dilemma (Matt Kohut) – More to the point of typical everyday interactions than the abstractions of the limits of medicine and technology, what about character judgments? The classic question remains – do we want to be loved or feared? Liked or respected? Most people of course would say some combination of both, but in first impressions or in difficult leadership situations, sometimes the choice to be one at the expense of the other is unavoidable.

 

  • The paradox of choice (Barry Schwartz) – The thing of all these different dilemmas have in common is, of course, choices that individuals, organizations, and sometimes society as a whole must make. Facing the responsibility of making a choice indicates that there is freedom of choice in the first place. The privilege of decision-making can also be a burden. One must be able to decide in the beginning in order to feel some sense of personal dissatisfaction or insufficiency provoked by the idea that other choices, and other outcomes could have been possible.

 

As the above demonstrates, there are many diverse examples of ethical dilemmas which come from all areas of business and life. This effectively points out how ubiquitous these challenging situations are. From simple, everyday interactions to matters of life and death, ethical dilemmas present challenging, compelling moral questions.

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Selected TED/TEDx talks by Dan Ariely on honesty, motivation, and choice

Dan Ariely is a professor of psychology and behavioral economics. He is well-known for his books in these fields as well as for his popular and admired TED talks. Ariely is an extremely effective communicator because his observations incorporate both psychology and business, blending the internal and external motivators for behavior. In this spirit, Ariely is able to debunk assumptions about conduct and provide explanations for instincts, two powerful sets of insights for compliance and ethics.

  • Meaning in Labor: Perhaps people’s assumptions about why we work and what we value most in our work cultures are wrong. Maturing from an idea that most people would rather not work and only do so to make money helps to show that a search for meaning (much as described by Holocaust survivor and psychologist Viktor Frankl in his work on existential analysis) is the most powerful and provocative driver of human labor and achievement. Simply put, meaning gives motivation, and having a purpose to the work performed encourages people to invest in it. The idea of giving purposeful work a priority that is equal to or even sometimes greater than profitable work is novel and challenging. However, this speaks directly to the importance of a robust compliance culture and a corporate identity that promotes ethical decision-making and acting with integrity. These values drive meaningful engagement and therefore can contribute to a more positive working environment and sustainable business.

 

  • Money Changes Everything: Taking the suggestion of the importance of meaning as the true driver behind human behavior (both inside and outside of work) forward, what then is the true impact of money? Clearly the power of money is a timeless and universal notion, but perhaps its actual effect on human behavior is not so straightforward. Money changes the tone of all interactions; adding the financial element to these relationships is transformative and perhaps demotivating. Therefore how do people’s decision-making processes and motivations change between their conduct in their private life, where money is not inherently a factor, and work life, where everyone is paid to be engaged together? Interestingly, this talk was delivered at Burning Man, where exchange of money is mostly not permitted.

 

  • The Unexpected Joys and Problems with Creation: The sense of accomplishment from successfully problem-solving and completing a difficult task may actually be the key motivation behind doing challenging or unpleasant things. The harder something is to do, the prouder people feel about persisting and doing it. Further, the sense that other people will feel this pride too or that the difficult work can benefit others is also a motivating factor. Not only does the altruistic sentiment make people more motivated, it may also make them more honest, as the force of “prosocial behavior” encourages people to engage in better behavior for a common good. This has obvious implications for compliance; a corporate culture which positions integrity and ethics as a core value and rewards it visibly will speak collectively to all these motivations and therefore drive productivity and engagement.

 

  • Self Control: Another important and interesting area of Ariely’s scholarship is in the study of self control. Self control can often be the interference between our long-term goals and our short-term desires, or our internal instincts and the external factors they face. Facing the trade-offs implied by these dichotomies is challenging. This often leads to over-emphasizing present impact of the decision-making over the future consequences. Encouraging people to consider and not discount the considerations of the future is very important for directing the impulse of self control into a more balanced and sustainable influence.

 

  • Temptations and Self Control: Continuing on the theme of struggling to balance current interests with more remote future outcomes, this lecture encourages people to understand what creates the gap in their self control. With this insight in mind, the trade-off becomes more manageable to consider in a more holistic way. Motivations to value future priorities or avoid future problems could include targeted rewards and using rationality against instinct to adjust gain-loss perceptions. This is easily applicable in the corporate environment, where performance evaluations and business strategies should be designed with both short and long term effect analyses in mind. This way, growth will be sustainable and values will be maintained.

 

Ariely’s presentations on people’s choices – including whether to lie or cheat, or not to – go directly to the meaning of why people do what they do, and what factors exist that may change or impact that. Organizational and individual integrity can be sourced back to these motivations for honesty and self-control, and therefore the studied application of Ariely’s insights to a compliance and ethics program is very valuable.

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