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Thursday
Jan052017

Dr. Alexander Stein: The Psychology of Integrity and Corruption

A recent FCPA Blog post written by Bart Soenens, a tenured academic researcher at the University of Gent in the Netherlands and Jeroen Michels, a policy analyst at the Organisation for Economic Co-operation and Development in Paris, posed the question “what exactly is the nature of human morality?” They also asked “are we hardwired for corruption or for integrity?"

As a practical matter and in the rush to thwart or respond to some crisis or malicious incident, these and other related considerations are usually overlooked. It’s a fair generalization to say that most compliance and anti-corruption professionals probably don’t devote much of their work day to actively linking the psychological development of babies and the infantile roots of morality and ethics to policy and enforcement measures.

But the psychological drivers, archaic origins, and psycho-social underpinnings of ethics and moral conduct are crucially relevant. They infuse virtually every facet of human affairs and, however imperceptibly, inform the work of legal, compliance, and anti-corruption professionals, as well as, practice leaders in counter-fraud, insider threat risk management, cybersecurity, law enforcement, the judiciary, corporate governance, and social policy. In addition and however provocative this may sound to many, all of this also pertains equally to fraudsters, malicious insiders, hackers, con-men, grifters, cheaters, liars, and the rogues gallery of other corrupt individuals and bad actors. 

No one person or group has a monopoly on morality or virtuousness. Indeed, much of human history is a catalogue of conflicts, often expressed with horrifyingly unconscionable amorality, over whose system of ethics or code of behavior is more right. The reasons people manufacture to condone and rationalize their own attitudes and behaviors or to condemn others’ are nearly limitless.

Whether considering integrity or corruption, people are the central element; yet the complexities of the psychological dimensions are serially marginalized, over-simplified, and underestimated. That is as clear a statement as I can make of the nodal problem. It is in itself as pernicious and intractable as the problems of venality, malice, avarice, corruption, fraud and, perhaps worst of all, indifference. No investments or expenditures of money, time, effort, and expertise will lead to successful solutions unless and until psychologically sophisticated and accurate accountings of the stakeholders and situations are brought to bear. To continue otherwise is, by analogy, like contemporary epidemiologists hoping to cure a virulent contagion yet ignoring available technology and understanding of microscopy and imunobiology and approaching the problem as if trapped in the 18th Century.

For those working at the front line against corruption, injustice, and wrong-doing, it’s important to understand that, while every culture (indeed, every family) has established definitions and practices governing morals and ethics shaped by philosophy, theology, and social conventions, there is no unified theory of the psychology of morality. There are many, myself included, who strongly disagree with evolutionary research psychologists who suggest that people are born with some in-built genetic driver for prosocial fairness or share an intrinsic, perinatal moral intuition. In my professional view, ‘hard-wiring’ is anathema to psychology, a branch of science uniquely qualified to decode mental ideation—for example, the acquisitive frenzy propelled by an internally generated fantasy need for more in order to feel or avoid feeling something else -- as distinct from biological instinct -- an unequivocal autonomous imperative of needing more and having enough in order to survive. 

People are equally capable of corruption and integrity. Not one or the other. Malfeasance and dishonesty are neither the simple opposites of integrity and morality nor are they necessarily behavioral indicators of asocial pathology, characterological deformity, or moral failing. Human psychology is not binary or polar; a core aspect of mental functioning involves the management -- or as is often the case, mismanagement -- of multiple concurrent contradictory, conflictual, and incompatible thoughts, feelings, and impulses.

My definition of ethics is the capacity to exercise restraint irrespective of one’s capacity to act. Over-valuation of the psycho-biological origins of any individual’s ethics misunderstands (or willfully subordinates) how malfeasance typically occurs in organizations. In my experience helping corporate leaders defend against, navigate through, or recover from cases of fraud or other white-collar incidents, and forecast and mitigate malfeasance risks, one of my first orders of business is, invariably, to assess the complex matrix of dynamic human factors which unwittingly abetted or facilitated the event. Rare is the situation in which one malicious actor operating completely alone -- a true lone wolf -- will successfully defeat corporate culture, governance, compliance, ethics, and malicious incident defense policies and protocols. Bad actors' wily opportunism includes recognizing and exploiting situational blind-spots and vulnerabilities. Unintentional collaboration or collusion by both passive and active facilitators within the organizational system, irrespective of anyone's ethics and integrity, is a characteristic signature of all corporate malfeasance.

Behavior that violates established ethical principles and practices needs first to be understood as a symptom--an outburst which encodes both obvious intentionality and obscure, potentially disguised, motivational origins. To see amorality or unethical action only as actually relating to morals and ethics is to misunderstand the fractal nature of psychological distortion and displacement. In addition, nothing burns righteous moral outrage hotter than the injustice done to those fixated on honor and fairness. The truer determinant of authentic integrity is not a valorization of fairness and empathy but the ability to modulate and emotionally process lacerating disappointment, inequity, and other traumatic disturbances without succumbing to indignation or vengeance.

Attention must be paid when any individual, perhaps especially but not exclusively a person of influence, responsibility, and reputational and economic power, acts in malicious self-interest, however self-justified, with apparent disregard or indifference to broader ramifications. These might be the generating elements for the commission of a fraud, corrupt act, or to willfully harm. Everyone is fallible and entitled to their human responses; wealth and power are certainly no inoculation against being furious, cruel, or self-serving. But leaders have special responsibilities to understand themselves so as to recognize and exercise options which encompass and align with both their humanity and their position in the world.

From a pragmatic perspective, compliance, risk management, and other affiliated professionals will be measurably better equipped to deter or resolve ethical lapses through deeper, more sophisticated awareness and understanding of the multidimensional psychodynamic forces and potential vulnerabilities at play in the organization, not by proposing policies and programs intended to reinforce or incentivize individual moral inclinations.

___

Dr Alexander Stein is the founder of Dolus Advisors, a NY-based consultancy that employs expertise in human risk forecasting -- actionable insight in human behavior and its drivers -- and the psychodynamics of fraud, corporate ethics, compliance, and organizational culture to help companies proactively mitigate and defend against white-collar and cyber malfeasance risks.

Reader Comments (5)

So doctor Stein, basically you are saying: "we're all human, with our own nature and our own upbringing and experience influencing who we are."
And I totally agree with that!

I believe there is no one factor leading a person to act less morally correct than the other. Sometimes it's just time, dictating a new moral highground to which people need to adjust while other times it might be self preservation that leads a person to questionable actions or even inaction.

I do believe that, in business, it is the task of the C-suite to guide the individuals working for the company in the morals the company holds high, with an HR policy that can attract people who endorse those morals, and managers who can explain why those morals are important to the business. Most of all they need to lead by example.
If done right, people will feel emotionally involved with the company and its morals, making it so much harder to transgress those shared values. Too many C-suites have forgotten that their workforce are individual people, not departments or numbers....
January 5, 2017 | Unregistered CommenterWendy Bouman
Great article that probes angles of the anti-corruption equation that we don't often see. I'd like more of these kinds of articles.
January 5, 2017 | Unregistered CommenterRooberto Berry
A very thought provoking article, we are all a complex tangle of upbringing, social norms, rules, experience, and in the moment factors that influence our actions. Sometimes those actions can be blinkered and lack wider awareness of the impact they will have on the company, colleagues, friends and family. If the company's policies, procedures and culture support and guide individuals to the preferred path then that is indeed a good foundation.
January 6, 2017 | Unregistered CommenterRebecca Godfrey
Fascinating article. Thanks. I wonder where we go from here? You say "until psychologically sophisticated and accurate accountings of the stakeholders and situations are brought to bear." How does one go about getting 'accurate accountings'? I am an accountant and it saddens me to say that there is rarely much accuracy in financial accounts.

Except for small companies where it is possible to be both accurate and precise about most items in a balance sheet and revenue account, most such figures are derived from estimates, models meaning that the bottom lines may express revenue and net assets to four figure precision but may not be accurate to with +- 10%. This is particularly the case with financial institutions.
January 6, 2017 | Unregistered CommenterProf. Paul Moxey
My thanks to the individuals who read my article and took the time to offer such thoughtful comments. I hope to continue contributing to the FCPA Blog, and welcome the opportunity to share my expertise. But for the moment, here, I will focus only on a brief response to Professor Moxey’s terrific question regarding ‘accurate accountings’ and his call for clarity about possible next steps.

First, my apology for the confusion caused by using an economics term but intending a different meaning. I’m not referring to financial accountings but to diagnosis, as in ‘taking account of.’ Getting such accountings involves dialogistic tools and techniques for harvesting and interpreting soft data, what I call ‘shadow data’ and ‘psychodynamic intelligence,’ to form and inform 3-D understandings of the stakeholders and situations—the people in the institution.

In connection to the main thrust of my article, for brevity, I’ll just emphasize here that, at core, ‘psychologically sophisticated and accurate accountings’ entails cataloging and assessing the complex matrix of psychodynamic factors, individually and in groups, which generates behavior, not just prospectively scanning for, or trying to legislate against, certain behaviors; and which also seeks to determine root causes: why, not just how and what, in order to implement effective, sustainable enhancements to culture, governance, and operations, not just isolated pseudo-fixes.

I’ve published more detailed pieces about all of this in other posts to the FCPA Blog, as well as in this article on human risk http://www.corporatelivewire.com/guide.html?id=fraud-white-collar-crime-2016​ [p/w= fraudWC2016], this one on understanding human factors in fraud forecasting https://www.financierworldwide.com/with-a-smile-not-a-gun-understanding-human-factors-in-fraud-forecasting/ , and elsewhere.

If there’s sufficient interest, I could prepare and post an article to the FCPA Blog that’s less deep concept-oriented and more specifically focused on practical procedures and benefits for senior leaders, boards, and risk, compliance, and ethics professionals.
January 6, 2017 | Unregistered CommenterAlexander Stein
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