Ethical Fading and why

Ethical fading is a condition in a culture that allows people to act in unethical ways in order to advance their interest often at the expense of others, while falsely believing that they have not compromised their own moral principles. Ethical fading often starts with small seemingly innocuous transgressions that when left unchecked continue to grow and compound

It’s the flawed incentive structure which drives good people to do bad things. Balance sheet i.e. turnover, profitability, growth, salary increments, bonuses etc. drives executives to do thing which otherwise would not have been done. Some are plain unethical. We would expect that people who engage in such behavior would be consumed by guilt and struggle to sleep at night, but they are more relaxed about their choices. How else you would justify 74000 percent price rise overnight. The drug, called Daraprim, was acquired in August by Turing Pharmaceuticals, a start-up run by a former hedge fund manager. Turing immediately raised the price to $750 a tablet from $13.50, bringing the annual cost of treatment for some patients to hundreds of thousands of dollars. According to social scientist who study the phenomenon of ethical fading, such people are not evil they suffer from self-deception.

We have all sorts of clever ways to rationalize our behaviour and deceive ourselves into thinking that the ethically questionable decisions we make are fair and justified, which is actually quite the opposite. We are able to engage in unethical behaviour without perceiving it has unethical. Importantly we often remove from the chain of causation that we actually lay all the responsibility for how our product effects to the consumer . “If they don’t like they don’t have to buy it” the thinking goes. In my opinion companies cannot distance away from their responsibilities, Companies like Instagram, snap chat, Facebook and gaming companies will have to take ownership thus cannot deny their role in an addictive technology. Particularly when they knowingly add features such as infinite scroll, "like" buttons, and automatic content play with the intent of keeping us peeled for longer.

The flawed incentive structure has corrupted the system, Capitalism as per Adam Smith was supposed to benefit the most to the end consumer, but not to a specific class of people which are not end consumers.

Incentives which drives these companies is the problem. Companies are too fixated on profits, returns etc., even at the cost of long term health of the company and society. Companies do not exist only to earn profits they are there to serve the society keeping the society interest at the fore front. But if you ask yourself is this happening the answer would be resounding NO.

Companies can be responsible and take high moral stand and yet be a market leader. In 2014, CVS Caremark announced that it would stop selling tobacco related products in all of their 2800 stores. This was in line with the company vision “helping people on the path of to better health”.?It was a decision which would cost them more than $ 2 billion per year. General public overwhelmingly supported but the wall street was not happy. The share price fell by 1 percent day after the announcement. Interestingly decision taken by CVS not to sell tobacco products did not mean that the forgone sales added up in the sales of competitor sto res. In-fact total sales of the cigarette fell down in these markets which translated to 95 million fewer pack in 8 month and nicotine patches sold increased by 4 percent. CVS help people to quit smoking. A popular belief among customer was “You know what? I am going to buy from CVS because they are good citizen”. After 18 months’ post announcement the share price had doubled. The stock has hit $ 113 from $ 65 per share.

Ethical fading is not an event it doesn't happen suddenly it’s more like a tooth decay that fester overtime. Decade before the scandal broke in Wells Fargo, revealed that the organisation toxic condition's and unethical behaviour had already been identified, original review concluded that there was incentive to cheat based on fear of job loss. To explain this further, in a social experiment, volunteers inserted Pamphlets in the wind screen of the car, in places where the volunteers had littered the street with pamphlets the subject threw the pamphlet on the ground and when the street were not littered the subject refrained from throwing the pamphlet on the street.

This is also true with ethical fading, with each ethical transgression that is tolerated, we pave the road for more and bigger ethical transgressions. Little by little, we change the norms inside a culture of what is acceptable behavior. "If everyone else is doing it, then it must be okay.".

In a 2019 opinion piece in The Washingion Post, Mark Zuckerberg, the founder and CEO of Facebook, responded to some of the criticism against his company by asking government for more legislation. "I believe we need a more active role for governments and regulators," he wrote.

"By updating the rules for the Internet, we can preserve whats best about it." There is a case for Zuckerberg being guilty of passing the bug or mess which he created during Cambridge analytica on lack of regulation. I feel governance cannot tackle ethical fading , if that was so, look at highly regulated markets like financial services we have not been able to prevent scams, money laundering etc. Its sad that we have reached a point in where we probably do have to legislate ethics.

It wont be wrong if is say that ?we do right things for a reason and not because it is a right thing to do. Emanuel Kant?gives the?example?of a?shopkeeper?who passes up the chance to shortchange a customer only because his business might suffer if other customers found out. According to?Kant, the?shopkeepers?action has no moral worth, because he did the right thing for the wrong reason. This is how we are corrupting ourselves reason are dictating our actions.

References

www.nytimes.com/2015/09/21/business/a-huge-overnight-increase-in-a-drugs-price-raises-protests.html

The Infinite Game By Simon Sinek

Disclaimer: Ideas, views and opinions expressed in the article represent my own views in my private capacity and not those of any of my current or previous employer, any institutions.?The article is a research work?based only the limited, dated and open source information. For the sources the statements have been quoted with the authors name.?This article is only for the reading pleasure and while I invite the feedback and comments on the article, I will not be responsible or liable to any such comments as the same belong to the responder.