Understanding Ethical Blindness and Beyond

Guido Palazzo is Professor of Business Ethics at HEC, University of Lausanne, Vice Dean for programs and student affairs and Director of the Executive Education of HEC. He is a pre-eminent scholar in the area of corporate responsibility in global supply chains, the mechanisms of (un)ethical decision making in organizations, the fight against organized crime and the impact of storytelling on behaviour.

On 26 and 27 June, 2021 Prof. Palazzo will deliver an online seminar with IACA where he will share the best of his research and experience. In this short interview for IACAlumni Magazine, we discussed  the essence of ethical blindness, impact of Covid-19 crisis, how organizations can protect themselves, and some other topics of the upcoming “Best Of” seminar.

You are one of the most cited business ethics scholars in the world; can you share with us your story – when did you decide to explore this area, and how did your journey in this direction begin?

I studied management and philosophy in parallel and then did a PhD in philosophy. For me, it was always clear that I wanted to work at the interface of these two domains. Business ethics is the natural overlap between the two. I studied in the early 1990s, it was a rather risky choice since there were no jobs in business ethics yet. I am happy that I did not do a risk analysis but simply followed my passion.

In one of your publications it is mentioned that business history is rich with examples of unethical behaviour. Do you consider the evolution of unethical behaviour to be linear or is it randomly changing through the years, or have there been consistent patterns? 

Some see human history, in particular the last 250 years of the so-called Enlightenment as one of constant progress, while others see this phase as one of decline. Most recently, a third interpretation has been added: We have deviated from the real character of Homo sapiens by creating a world of competition and fight while our natural default is supposed to be cooperation. This is, of course, what you get as interpretations if you take what historians have called the perspective of “la longue durée” – the deep historic view. If you just look into the last two or three decades, I would not see any development towards more or less ethical behaviour. Digitalization might bring more transparency; but it also brings new forms of unethical behaviour. The consistent pattern is that humans are able to do extraordinary things in both directions: towards the dark side and the bright side.

Ethical blindness is one of your key topics, and you will also discuss it during the “Best Of” seminar with IACA. What is your definition of the ethical blindness, and why is this topic important?

Ethical blindness describes the risk that over time and under the pressure of their context, individuals lose the ability to see that what they do is wrong. It is important because it is the driving force behind big scandals. We all know why bad people do bad things. However, we will never understand large scale systematic and systemic cases of immoral and illegal behaviour if we do not understand why and under what conditions good people are vulnerable to such behaviour. The fascinating question is, why you and me, under certain circumstances, would have done what managers did at Volkswagen, Boeing, Purdue or Wells Fargo.

Ethical blindness is context bound. How do you see the current pandemic situation may have contributed to ethical blindness in companies and organizations?

In any scandal that I have examined, there is a trigger point when the entire organization moves from the gray area towards the dark side. This trigger point is a crisis in which the company is stuck and cannot continue its success story. Now imagine that there is so much pressure that decision makers do not dare to speak up and see the continuation of the success story as the only possible option. Imagine they see this as a struggle for survival. They will do what it takes to survive. Covid has created such a situation. Companies formulated their objectives for 2020 in 2019. Then the virus hit, and sales teams might miss a few months of business. Many companies did not adapt their annual objectives to the situation, making it impossible for sales people to achieve them. The crisis gives the perfect rationalization for rule breaking since in a crisis we tend to believe that rules do not count, or that different rules count. First analyses of the impact of Covid show already: Corruption goes up significantly.

What are the defense strategies against ethical blindness, and how can organizations protect themselves against ethical blindness?

Three defense strategies: conduct from the top, speak-up culture, moral scripting. Leaders must show through their behaviour (that’s why I would not call it “tone from the top” but “conduct”) what the appropriate behaviour is. If they signal tolerance for rule breaking because the rule breaker is successful, then this is what is perceived as the rule of the game. Speak-up culture means that people must be trained to know how to speak up (as followers) and how to listen (as leaders). Organizations need to create a credible anti-retaliation policy to protect them. Finally, we need to learn how to analyze the ethical dimension of a decision and how to react to it, which I would define as moral scripting.

What is your favorite case in illustrating ethical blindness and why?

My favorite case is currently Volkswagen Dieselgate, because I know the company quite well since more than 15 years and I am convinced that most of us would have done what these engineers have done. A perfect case for ethical blindness, which I deconstruct in my workshops in all its different layers.

Your research also deals with impact of storytelling on behaviour. Can you give us a glimpse of how the storytelling can be used to prevent corruption in general, and how can compliance & ethics practitioners take advantage of it?

People consider ethics or compliance as something abstract and disconnected from their job. The best way to learn is to tell a story of a dilemma situation, in which we could find ourselves when doing a particular job or being confronted with a particular decision. The closer that story to the real life of a decision maker, the higher the learning impact.

Many IACA alumni know you from your research, attended your lectures at IACA, and also plan to join your “Best Of” seminar in June. To conclude this interview, how would you address our alumni and anti-corruption community in general as they continue with their anti-corruption and compliance mission in these times of uncertainty?

Times of uncertainty are times of rule breaking. The perfect time for compliance experts since each new scandal brings plenty of new jobs and new attention to the problem. In this sense: The future of compliance is bright.

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