Lecture Notes

Introduction

• Interaction with Companies

  • Daily activities involve interactions with multiple companies (e.g., showering, eating breakfast, commuting).
  • Estimated interaction with at least seven companies each day.

• Fraud in Corporations

  • Statistic: 1 out of 7 large public corporations commit fraud annually.
  • Study based on US companies, with findings potentially applicable to Europe.
  • Frauds cost shareholders and society approximately $380 billion yearly.
  • Examples include the car and financial services industries.

Honesty and Whistleblowing

• Six out of Seven Companies Remain Honest

  • Despite temptations, the majority of companies do not engage in fraud.

• Role of Whistleblowers

  • Michael Woodford (Olympus) as an example of a whistleblower.
  • Whistleblowers risk careers and friendships for truth.

• Journalists

  • Example: Anna Politkovskaya, killed for reporting human rights violations.
  • Over 100 journalists killed annually for their work.

Research on Human Behavior and Fraud

• Research Collaboration

  • Conducted with economists, ethicists, neuroscientists, and lawyers.
  • Aim: To understand human motivation and reduce corporate fraud.

• Two Views on Human Behavior

  • Adam Smith's Perspective
    • Self-interest leading to overall benefit.
    • Long-term consequences considered (e.g., reputation, code of conduct).
  • Immanuel Kant's Perspective
    • Some actions are right or wrong regardless of consequences.
    • Motivation by intrinsic values rather than incentives.

Experiments and Findings

• Experiment Design

  • Participants toss a coin four times, report outcomes for monetary reward.
  • Anonymity to observe behavior in an incentive-driven setup.

• Results

  • High percentage reported unlikely outcomes (four tails) despite anonymity.
  • Indicates intrinsic values prevent total self-interest-driven actions.

Protected Values and Intrinsic Motivation

• Concept of Protected Values

  • Willingness to uphold values even at a cost.
  • Value of money earned in line with personal values is higher.

• Survey Findings

  • People with strong protected values discount dishonest earnings.
  • No significant difference across gender, education, or age in protected values.

Implications for Organizations

• Incentives vs. Values
  • Balancing incentives with selecting individuals who align with organizational values.
  • Selecting the right people can reduce issues and save resources.

Conclusion

• Focus on Human Values
  • Emphasizing the importance of aligning personal values with organizational goals.
  • Encouragement for organizations to prioritize values in recruiting and management.
• Final Thoughts
  • Calls for future research on development and impact of intrinsic values over a lifetime.
  • Reinforces the idea that people and their values should be central to organizational success.