The media didn’t miss much corporate scandal this year, and with many of us hoping to avoid similar wrongdoing, compliance is often the first place we turn to. Implementing an effective compliance program is both an art and a science that many of us haven’t quite yet figured out. Mind Gym business psychologists know why.
For many, a heavy investment in compliance has been the “go to” solution to solve ethical misdemeanors. Whether it’s beefing up compliance and legal teams, appointing a Chief Compliance Officer, or publishing a code of conduct, business spend in this area has increased exponentially in the last decade or so and shows no sign of slowing.
Whilst compliance is an essential starting point, there’s little evidence to suggest this investment is having a positive effect. Businesses are still being hit with huge fines, misconduct levels remain the same, and trust in organizations hasn’t increased since 2009. So, what’s going on?
Relying on compliance to get people to do the right thing is based on a key assumption – that individuals think and behave rationally when making decisions with an ethical component. But the study of behavioral economics tells us that bias, heuristics and emotions leads us away from doing what’s “right”, or logical, much of the time. As a result, we find that creating codes of conduct fails at increasing ethical behavior, and even that fines lead to individuals breaking rules more of the time. It seems that guidelines and processes alone just don’t cut it when the pressure is on to make tough decisions on how to act. And one bad judgment after the other soon spirals into scandal.
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