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Technology & Innovation

Are You as Ethical as Bernie Madoff?

Many expensive “ethics interventions” are doomed to failure because they are predicated on the faulty assumption that individuals always recognize an ethical dilemma when it is presented to them.

What’s the Big Idea?

Max Bazerman’s concept of bounded ethicality focuses on the psychological processes that lead even good people to engage in ethically questionable behavior that contradicts their own preferred ethics. In other words, instead of focusing on a bad apple–like Bernie Madoff–Bazerman argues that the majority of unethical events occur as the result of ordinary and predictable psychological processes, meaning good people often engage in unethical behavior without their own awareness on a regular basis.

In this video, Bazerman avoids an examination of Bernie Madoff’s ethics–which is best discussed elsewhere–in order to focus instead on the managers of feeder funds that aided Madoff. While they weren’t out to hurt investors, they got rich off of handing other people’s investments over to Madoff. Despite being warned about Madoff and receiving ample evidence that his returns were not possible, what caused these intermediaries to be blinded to their own unethical conduct?

Watch the video here:

What’s the Significance?

Max Bazerman is an expert on why good people do bad things in business. In other words, how do all of us avoid the ethical pitfalls, as well as develop effective strategies for individuals, organizations and governments? Bazerman argues in his book Blind Spot that when ethics is removed from the decision-making process it leads to tragedies and catastrophes such as the Bernie Madoff scandal, the Challenger space shuttle disaster, the crash in the financial markets, and numerous problems in government policy-making. Bazerman aims to apply the principles of behavioral ethics in order to enable groups and individuals to see the ethical implications of their actions more clearly, and how leaders can understand how the decisions they make affect the ethicality of their colleagues, and how governments can improve their citizens’ ethical behavior.


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