Diversity May Reduce Corruption Culture 14:38, June 9, 2017

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Diversity May Reduce Corruption Culture

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Corruption is a term that is often associated with greedy CEOs and politics in third-world countries. It doesn’t have to be. In every workplace, there is a risk for corrupt activities not just by executives, but by everyday employees. We provide some common workplace corruption culture problems and how diversity may be a solution.

Culture and Herd Behavior

Culture strongly influences employee actions, behaviors, and attitudes in the workplace- for both good and bad. For the good, companies have found success in having a culture of compliance, culture of trust, and ethical culture. For the bad, a culture can contribute to widespread workplace corruption, where unethical and criminal activity happens above and below the surface.

Herd behavior influences culture. “Herd behavior refers to the tendency of people to follow what others are doing,” according to Professor Steven L. Schwarcz in his 2017 article Regulating Complacency: Human Limitations and Legal Efficacy. Research finds that herd behavior contributes to workplace corruption. Psychologist and Nobel winner Daniel Kahneman states in his book Thinking Fast and Slow that “the illusions of validity and skill are supported by a powerful professional culture. We know that people can maintain an unshakeable faith in almost any proposition, however absurd, when they are sustained by a community of like-minded believers.” It is one way in which irrational behavior impedes compliance programs.

Take the case of bribery. In a study published in the journal Psychological Science, all participants believed bribery to be wrong, but only some were primed with a “collectivist” mindset. A collectivist mindset focuses on the priorities of the group and not the individual. The study concluded that people with a collectivist mindset were more likely to pay bribes and feel less personal accountability for their actions. This contrasts with an individualist mindset, which is swayed less by group pressures.

A workplace corruption culture is bad, but it can get worse. Another study by Xiaoding Liu, Assistant Professor of Finance at the University of Oregon, showed that

individuals with high corruption attitudes are more likely to join firms with high corruption culture . . . [and the] likelihood of engaging in personal misconduct increases compared to. . . a firm with low corruption culture.

In other words, the more corrupt a culture gets, the more it attracts individuals who perpetuate that culture.

Diverse Perspectives

Creating a more diverse and inclusive environment may help mitigate the sprouting of workplace corrupt behavior. Professor Eugene Soltes explains this idea through the example of a former CEO whose newly hired CFO advised the company to backdate stock because it was done before and was “totally legal.” Unsure, the CEO discussed it with a lawyer outside the company, and outside the insulated culture of Silicon Valley, who advised him against it. A couple of years later, many companies and people, including the CFO, were criminally liable for the conduct.

Indeed, one of the most important benefits of a diverse team is that it’s a safeguard against the danger of thought conformity, as shown by a study entitled Ethical Decision-Making: Group Diversity Holds the Key. The authors continue: “one way to better manage ethical decisions is to form heterogeneous groups of individuals from different backgrounds and experiences. The result will likely be more ideas and viewpoints, which can lead to more ethical decision-making, and consequently more positive outcomes for organizations.”

While popular media gives deserved focus to race and gender diversity, particularly in technology spaces, any element of difference can challenge our world views in the real world. Diversity training is a necessary way to improve diversity and inclusion and, as a possible result, to lower corruption. But training alone is insufficient. A company’s highest leadership must make diversity and inclusion a priority, if not a long-term value, and imbue every function (recruitment is low-hanging fruit) with the credo that differences make the difference in building an ethical workplace.

LawRoom (powered by EverFi) delivers online training to help your business meet compliance requirements both dynamically and scalably. In addition to our award-winning online courses, LawRoom delivers a robust, cloud-based learning management system to help you easily deploy and track our growing library of ethics, anti-harassment, data security and employee conduct courses.

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Douglas Kelly
Douglas Kelly is EverFi's lead legal editor. He writes on corporate compliance and culture, analyzing new case law, legislation and regulations affecting US companies. Before joining EverFi, he litigated federal and state employment cases and wrote about legal trends. He earned his JD from Berkeley Law and BBA from Emory University.

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