What makes good people go bad?

On November 25, I read a New York Times DealBook article by Peter J. Henning that inspired me to address the topic of why good people commit bad acts in their jobs. Henning described how Judge Alvin Hellerstein of the U.S. Federal District Court in Manhattan asked this question at the sentencing hearing for Kareem Serageldin, a former senior executive at Credit Suisse.

Judge Hellerstein’s decision raised the issue of why successful people act in ways that put their careers at risk, or in other words, what makes good people go bad?

As human beings, we want to be liked, and we know that for people to like us, they must believe that we trust them and believe that they are good at what they do. This applies to companies, which really are a collection of human beings acting in concert for a common goal.

Given that everyone from senior management to the shop floor are working at being liked by their peers, subordinates and juniors, it stands to reason that they will continue to place emphasis on the people they work with being honest and following the rules.

Secondly, human nature dictates that we do not like confrontation and try to avoid it at all costs. This is why many of us remain silent when a superior comes up with an idea we don’t agree with, since most of us would prefer just to get along with everyone and not “rock the boat.”

When management or employees come across behavior that might suggest a person is involved in fraudulent or corrupt acts, they are often loathe to tell anybody about their suspicions, particularly if there isn’t a whistleblower process that would allow them to remain anonymous.

The key ways to counter the influence of human nature is through inculcating an organization-wide culture in which management and staff are:

• Made aware of how fraud can occur and what they can do to prevent fraud and corruption with their organization;

• Supported by senior management — the c-suite — who not only support the relevant fraud and corruption policies but act in accordance with those polices;

• Confident that their concerns will be followed up and that those employees who are found to have engaged in fraudulent or corrupt conduct will be dealt with in accordance to the law and the policies of the organization; and

• Applying a zero-tolerance for fraud and corruption for all employees, regardless of position, title or length of tenure.

Failing to have a fraud and corruption resistant culture — or worse, having a culture that tolerates or condones unethical behavior in the pursuit of profits and market share — will negate the effectiveness of any organization’s control environment.

If the controls and policies are there but nobody follows them, or if management and staff breaching these policies are allowed to continue their behavior as long as they make the company money, then a company can expect nothing else than to be the victim of fraud and corruption. No one is exempt from compliance controls, no matter the individual’s title, profit-making success or reputation as a good person.

Guy Underwood is the executive chairman and founder of the RISQ Group, one of APAC’s leading providers of risk management and employment screening services. He can be reached here.