On corporate scandals and why good people make bad decisions

Niina and I recently did an Ethics Talk podcast that you do not want to miss! In our most recent Ethics Talk we discuss with the business ethics guru Guido Palazzo. For those of you who are in the ethics and compliance space, Guido does not need further introduction. For those of you who have not encountered Guido previously, we can start off by saying that his work has had a great influence on both my and Niinas work professionally and academically. Guido is passionate about ‘the dark side of the force’ and has among other things, done research within the area of ‘why good people make bad decisions’ and has co-authored a paper on Ethical Blindness.

Guido is a professor of business ethics and a vice dean and director at the University of Lausanne. He is also an excellent speaker and frequent guest at various leadership and executive management events. I feel confident saying that many of you reading now have had Guido giving impactful trainings to your management. He has a dual aim with his trainings which is to assist managers in reaching two conclusions: #1 it could have been me making the bad decision and #2 it could have been me creating the pressure for my team to make the bad decision.


In the Ethics Talk we reflect upon the role business ethics in an organisation and more specifically what it means to us here and now, in the midst of a pandemic. Guido explains to us why we have all the ingredients for the next corporate scandal at our hands. It all boils down to one thing: pressure and when we are under pressure fear kicks in. We perceive that we are under exceptional circumstances which require exceptional means, which we start rationalising and a new routine forms.

When we reflect upon the big corporate scandals, they all share one element which drive people to the ‘dark side of the force’. Guido explains how this shared element simply is about a success story coming to an end and a reluctance to accept this. This is when good people start making bad decisions, this is when we become ethically blind. The good thing is that ethical blindness is a temporal thing, and we can train ourselves and others to manage the ‘human risk’. There is also a very simple cure for ethical blindness, which is to have a transparent and safe culture where leaders raise concerns and employees feel comfortable doing so as well.


Guido offers us some very practical advice on how to define business ethics and then how to advance this in our organisations. I am sure we all agree on that there has been an increased interest in the topics of business ethics, corporate social responsibility (CSR) and sustainability even to the extent that we sometimes get confused with terminology. We ask Guido how he would define business ethics and how it relates to CSR or sustainability. He provides us a very helpful definition that boils down to that business ethics is the response to ethical questions arising in a business context due to the interrelations between the individual, the team, the organisation and the society.

The traditional CSR or sustainability regime mostly focus on the relation to the society, whilst business ethics is a broader concept spanning across these four dimensions and also across time. I like to say that business ethics is about ensuring that the decisions we make here and now take into consideration multiple dimensions and stakeholders and also factor in longer-term consequences.


When it comes to ethical blindness there one critical risk factor and that is when we think we have it all covered, when we are sure of that we will act ethically and that it is just common sense. This mindset lures us into forgetting about ethical blindness, and easily leads to that we do not reflect critically upon whether we in fact are in a state of ethical blindness when making a particular decision. Doing business ethically is not always common sense and the lines between black and white easily become blurry. It is reassuring to hear that even Guido struggle with ethical dilemmas, one which he also shares with us in the Ethics Talk.


This blog post is written based on the #ethicstalk with Guido Palazzo.