Business
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Looking at business from a micro level better allows us to see the big picture.
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Getting Tough on Corporate Crime (Commentary)
During the first year of the Bush administration, legislation was signed with the intention of getting tough on corporate corruption. We are now going to get tough on those people who brought companies like Enron and WorldCom to their knees. I guess that those Harvard MBAs who plan to move up in the corporate world and eventually, through fraud and embezzlement, rob their companies of billions will now have to at least make a concurrent plan. Have I fallen into the middle of the motion picture “The Matrix” and I am one of the few who have taken the red pill?
Does anyone believe that all of those involved in these news making stories of corporate greed and deceit really believe that it was all a sick plot from the very beginning – even when these companies were doing well? Each case of corporate corruption was perpetrated by many individuals, however, there is an individual story behind each person that will lead to some understanding of how this happened. After so many individuals get involved in any activity, social psychologists can explain how dynamics such as cognitive dissonance theory and behavioral contagion played a role. There were group dynamics involved at Enron that can be explained, but first there were the individual dynamics. What causes an individual to start down that road of corruption?
During the early eighties, between undergraduate and graduate school, I taught and lectured on the topic of preventing white-collar crime through attitude change. Having worked as a manager in the retail business for five years, this was a topic of great interest to me. I had also interviewed dozens of people who had stolen from retail companies and had learned the process that had taken them into an abyss of committing more serious criminal behavior. No one that I interviewed had sought a position in retail management for the purpose of stealing. If a person decides to steal, there are more expedient and profitable ways to pursue this ambition.
We know a great deal about human behavior. As part of a final psychology exam, I required undergraduate students to explain how and why so many people could have committed suicide at Jonestown under the leadership of Jim Jones. Most of my students did quite well in their explanation. If I can require students to explain complicated social psychological dynamics, I can call for the experts to take some responsibility in resolving our corporate crisis. I, for one, plan to spend considerable time and effort in resolving this national problem.
To prime your mental pump, I will give a few common scenarios that led retail managers and sales clerks to an eventual pattern of on-going stealing. A young retail manager is closing his general merchandising store in a suburban mall. It is now 9:30 PM and he has been at work since noon. He has just locked the money in the safe and the phone rings. His wife asks if he will bring home a box of Pampers because she is out and the baby needs changing. He grabs a box of Pampers off the shelf and heads for the car. He plans to pay for the Pampers tomorrow as soon as the store opens.
A mother on a welfare-to-work program is employed at a department store as a sales clerk in the ladies shoe department. She has managed, with some agency and church assistance, to put together a nice working wardrobe. One rule is that she must wear stocking and the stockings cannot have noticeable flaws. It is the first day of a big sale and the store will open in two minutes to the onslaught of customers. As she rushes to her department, her leg hits a fixture and tears her panty hose. She runs over to the hosiery department, grabs a pair of panty hose and then quickly puts them on. She plans to pay for them at lunch.
Both people have ostensibly stolen. However, both plan to pay. However, let us look at different scenarios. The retail manager comes to work the next day and immediately gets involved with work. He remembers the Pampers as he walks past them, but he is on his way to the stockroom. At lunch, a co-worker sits with him and is stating how unfair it is that the company is using more and more part-time employees who do not receive any benefits. The manager states that he does not think this is fair and believes that the bottom-line of profits should not drive a company to avoid paying employee benefits. As the day ends, he does not pay for the Pampers out of choice. Instead, he justifies his choice with a number of rationales.
The newly hired store clerk begins to think about the lack of appreciation showed her at the job and how she was not allowed to take two hours of leave to attend the funeral of a friend. She decides to not pay for the panty hose. She reminds herself that she is paid slightly more than minimum wage and she is expected to dress like an upper-middle class person.
In both cases, the people involved had to justify his or her actions and neither had to go far to find justification. However, is this not the case with all of us? We quickly make a decision and then we have the choice of deciding whether we were right or wrong. None of us like to admit that we are wrong. However, once we decide that we are correct in our logic, we have given ourselves permission to continue. This is a fact of human behavior that many seem to forget in the discussion about corporate corruption. Small actions occur, they are then justified, the justification grows, thus justifying more similar actions. If the end product of this process is profitable, the person will escalate his or her behavior and will often, at this stage, gain support either internally within the company or externally. If the person is only intermittently successful in stealing, the behavior is even more difficult to extinguish than had they been successful every time they tried. The next stage is a dependency on the money that results from the ill-gotten gains. Initially it may pay one particular bill, but it eventually becomes a change in life-style.
There are many ways to address this problem before it begins or escalates. Management must be made aware of the process that evolves when managers and executives cross the line into unethical and illegal behavior. However, this presentation must be industry specific because the process varies. For example, the pitfalls for someone in the telecommunications business would be different from those in the management of a retail chain. A targeted presentation will address each person where they are. It will address the person who has thought about stealing, those who are beginning their downward spiral as well as those who are on their way to dependency. It must offer options of how to stop the process for those who are, to come degree, involved in criminal behavior.
Dependency on white-collar crime is not necessarily about money. It can entail power and all of the psychopathology that power can bring. We need only to look at Watergate, the Iran Contra scandal, and some of the tactics of J. Edgar Hoover to demonstrate this point. This scenario can be a bit more difficult to explain, however, I and many other social scientists can rise to the occasion.
Another issue that needs to be addressed is the person’s ability to build strong defenses that later makes it easy to accept their own criminal behavior. We all have a litany of behaviors that we strongly believe that we will not participate in. Stealing is one of then. People need to let go of telling themselves the things that will not do. For example, I recently saw a news story about a large Palestinian family living in poverty. The grandmother planned to sell one of the children so that the others could survive. I doubt if she thought that she would have ever considered such an action prior to her current circumstance. When we participate in a behavior that we once thought was taboo, we build a fortress of rationalization that is difficult to penetrate. Given the right circumstances, people will choose to do anything. Open yourself up to this reality.
In my opinion, the new legislation is a combination of political posturing and of not knowing any better - on both side of the congressional isle. In the short run, it appears that our politicians are doing something, but it does not deal with the root of the problem. The legislation may have the same effect as legislation to enact the death penalty. Most people who commit crimes that, in some jurisdictions, warrant the death penalty do not think about the consequences. Perhaps the new legislation will curb white-collar crime by five or ten percent. In the meanwhile, millions of Americans are losing money in their stocks and mutual funds. Many of those with a 401K and similar retirement funds have less money in their accounts this year than last.
Physical deterrents such as security devices and audits serve a purpose, but they only scratch the surface of preventing white-collar crime. Whenever a system is developed to prevent crime, it is only a matter of time before someone discovers a way to circumvent or beat the preventative measure. The best preventative measure is the individual’s decision not to steal or to participate in any unethical behavior. Now is the time for corporations, consulting companies, and social scientists to step to the plate and to do their part to really address the problem of corporate fraud and mismanagement. Perhaps this is the time to take a respite from playing with the scientific method to make baby steps in expanding our knowledge base. Now is the time to use all that we know and to come together in unity to resolve this problem. The problems in corporate America, in some way, affect all of us. I hope that a serious dialogue soon begins to minimize this ever increasing problem in corporate America.
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