Musings on books, technology, entrepreneurship, nonprofits and umm.. everything else …

[A version of this post was originally submitted towards an assignment in the Legal and Ethical Environment of Business class by Prof. Kevin Werbach.]

Morality, like art, means drawing a line someplace.
– Oscar Wilde

“Three graduates from Wharton class of 1983 indicted on insider trading charges.”

If you missed the color behind the coverage, that is the message that you internalized. That somehow there were a few bad apples in this scandal who went astray, leading to unethical and illegal communication between them due to which Galleon Group profited. In the recent past, the mantle of the bad apple transferred to Rajat Gupta as well, as another mighty executive fell from the perch of the infallible.

But reality is quite removed from this. One big lesson from this saga was that we need to know clearly the difference between feeling indebted to someone or having a good personal relationship with someone and violating the law. Most acts of fraud or corruption in the world are not because of a few big scandals by a few bad apples, but because of complicit participation of several people in very small amounts (Ariely, 2012). As evinced by the details of the proceedings of the Rajaratnam trial, this case brought to light the various ways in which people were made to feel indebted to him, something that he milked to the fullest extent. Fresh graduates from the top MBA programs had dinner parties thrown in their name. Friends had loans extended to them in times of need and forgiven later on.

Such an enlightened self-interest view of the world leads to a contractual view of ethics, where one feels that “ethical behavior extends only to the boundaries of our extended community” (Green, 2010). Another behavioral economics bias to understand here, especially in the rarefied world of financial instruments is that the further removed we are from real dollars, the more likely it is that we convince ourselves that it is okay to cheat. (Ariely, 2012).

As MBAs graduate and continue along their careers to become business leaders, it is critical to understand the difference between what feels right from a transactional point of view between individuals in different roles in companies, and what is right by the rule of law and broader codes of ethics.

Unfortunately most of the courses during an MBA program speak of things that we can measure such as profit maximization for shareholders, but what differentiates great leaders from those that escaped being caught is how they conduct themselves and the affairs of their company as they work towards this objective. Be it greasing the wheels in a developing country to get a favorable tax-exemption in a Special Economic Zone, or dumping dangerous pollutants in a country with lax environmental laws to minimize waste disposal costs – the slippery slope of materially increasing ethical compromises always starts with small lapses of judgment.

In summary, if you think you would find an action wrong if someone else did it, then it is probably wrong.

Ariely, D. (2012). The (Honest) Truth About Dishonesty, How we Lie to Everyone – Especially Ourselves. New York: HarperCollins.
Green, S. (2010). Good Value, Reflections on Money, Morality, and an Uncertain World. New York: Atlantic Monthly Press.

Comments on: "What can we learn from the Galleon saga?" (1)

  1. […] and the slippery slope that it takes us down. I had focused on this on a related blog post on the Galleon saga. He says how being focused on our personal rules 100% of the time is always easier than 98% of the […]

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: