One of the well-established concepts in social psychology and behavioral economics is loss aversion: i.e., “the idea that losses generally have a much larger psychological impact than gains of the same size.” Though usually discussed in the context of tangible gains and losses, loss aversion has some bearing on our response when a person who has made significant contributions in life passes away. Our immediate sadness at the loss of the person can distract us from thinking about and appreciating the gains that he or she provided to society or to specific people. For that reason, this post is devoted to a brief appreciation of Professor John Darley, focusing on aspects of his work that have applications to corporate compliance.
Professor Darley, who died several months ago at age 80, was not merely a distinguished Professor of Psychology and Public Affairs at Princeton University for many years, but “one of the foremost figures of social psychology.” He strongly influenced the growth and development of that field, in areas such as “morality and the law, the function of punishment, and the way organizations inadvertently promote evil.”
Much of Professor Darley’s work is highly relevant to corporate-compliance professionals who are incorporating behavioral-science scholarship into their compliance programs. Two of his numerous papers and articles deserve special mention. The first was a pathbreaking paper on what became known as “the bystander effect.” From a series of experiments that explored why some bystanders do not intervene when present at the site of an emergency, Professor Darley concluded that
more people present at the scene of an emergency could reduce the chances that anyone would help, either due to pluralistic ignorance (the assumption that because no one is helping, everything must be all right) or diffusion of responsibility (a diminished sense of personal responsibility when others are present).
Corporate compliance officers should recognize that the “bystander effect” can also arise in certain corporate settings, even in a company that has asserted that it supports a “speak up” culture. When multiple corporate employees are gathered in a meeting (whether face-to-face or virtual), and some authority figure proposes a course of action that may lead to unethical or illegal conduct, some employees may be troubled, but the existence of a “speak up” policy or a confidential hotline may be less salient at that moment than the influence of both pluralistic ignorance and diffusion of responsibility in causing those employees not to speak up.
The second of Professor Darley’s works relevant to corporate compliance is his article, “The Cognitive and Social Psychology of the Contagious Organizational Corruption.” In that article, he synthesized a substantial body of cognitive and social psychology research in rejecting the theory of “a few bad apples” who are responsible for corporate corruption. In his view, “some of the people who launch these corruption-initiating acts do not scrutinize these contemplated acts from an ethical perspective. Strange as it may seem, they do not see them as unethical.”
Professor Darley also posed the question, “What causes the organization to turn itself into one that works together to produce full-blown ethical transgressions?,” and posed a three-part answer:
First, because these others often accept the implied definition that the first actions were ethical in nature, the distance between that first act and the next one that amplifies it are not easily recognizable. Second, these follow on acts are perhaps seen as ethically grey and further are produced out of considerations of group loyalty and commitment. Third, when one is a committed member of an organization, social identity theory points out that we experience an alteration in personality. We “become” the prototypic member of the group, and the cues around us are that the prototypic group members are engaging in the corrupt actions. Thus we do so also. Finally, it is a little noticed truth that our society offers alternate identities to citizens, and some of them allow for acting in ways that, from the perspective of another identity the person could assume, are unethical. (Footnote omitted)
In elaborating on these answers, Professor Darley made a number of key observations about how human beings actually behave:
Many of the actions that begin cycles of corruption are the products of the intuitive judgment system, which means that they are rapidly arrived at, less than consciously considered, and unintentional in their ethical dubiousness. Further, they are often the product of pressure to make fast decisions. And under this condition, they are not subject to the monitoring of the decision, which is done by the reasoning system. As [Professor Daniel] Kahneman comments, “the monitoring is normally quite lax and allows many intuitive judgments to be expressed, including some that are erroneous.” The suggestion that emerges is that the “natural” intuitive decision is likely to be a self interested one. . . . This decision may be overridden by the more deliberate thinking of the reasoning system, but only if something triggers that system into action. Thus, in sum, corrupt actions are often committed by people who are not themselves corrupt.
Corporate-compliance officers need to incorporate each of these points into their programs if they are to move their compliance programs away from a “bad apples” theory of employee behavior, and toward a more dynamic view of how people actually behave in uncertain situations. One excellent starting point is compliance training. For example, compliance courses can explicitly discuss common behaviors — such as overreliance on mental shortcuts and “ethical fading” – and explain how they can be problematic when critical decisions are being made, so that executives and employees can better recognize the potential for those behaviors and take actions to reduce their frequency.
Corporate-compliance professionals who have heard generally about applying cognitive and social psychology in corporate compliance, but are unsure where to begin, should read both of Professor Darley’s articles, then tap into the larger wellspring of behavioral-science writing. Those who take time to do will find that they have much for which they can thank Professor Darley.
 John Darley, supra note 3.
 Id. 1178.
 Id. 1179 (footnote omitted).
 See, e.g., Ann E. Tenbrunsel and David M. Messick, Ethical Fading: The Role of Self-Deception in Unethical Behavior, 17 Social Justice Research 223 (2004); McCombs School of Business, University of Texas, Ethical Fading, Ethics Unwrapped (accessed December 16, 2018).
 Two outstanding examples of behavioral-science writing, by two Nobel Prize-winning professors, are Daniel Kahneman, Thinking, Fast and Slow (2011) and Richard H. Thaler, Misbehaving (2015).
Jonathan J. Rusch is Principal of DTG Risk & Compliance, a consulting firm specializing in corporate-compliance issues, and Senior Fellow in the Program on Corporate Compliance and Enforcement at New York University Law School.
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