Conference Insights
Picture it: You’ve reached the top of your field, you make great money, you have a great reputation, and you’re doing the work you love. Then, the chance to offer up some insider trading tips presents itself, and in return, you get two tickets to a Bruce Springsteen concert, a watch, and an envelope of cash. All told, it’s about $50,000 in value. Is it worth it?
As author and Harvard Business School professor Eugene Soltes told a National Comp audience, that’s what KPMG’s Scott London traded a lucrative position as a Senior Partner for in exchange for info he shared with one of his golf buddies. For Soltes, on the surface, it doesn’t seem to make sense, but why it happens teaches about the way people think of what’s “wrong” and “harmful.”
What is ‘Harm’?
“Why would he give it up?” Soltes said. “It’s what he was not thinking of.”
According to Soltes, white-collar crime thrives on a feeling that it really isn’t harmful.
“If we take insider trading, we can’t even say there’s a victim to identify,” Soltes said. “It’s just the market.”
Soltes raised an ethics class hypothetical, the “trolley problem” to illustrate his point.
In one case, you have the chance to choose which way an out-of-control trolley goes, so do you let it continue on its path where it will kill five people, or do you divert it so that it only kills one? Many people will take the utilitarian choice and flip the switch to sacrifice one person to benefit the five.
In another example, you can save the same five people but to do so, you have to push someone in front of the train to again sacrifice the one to save the five. Could you do it?
In the latter case, people typically have a harder time going utilitarian because there is an aversion to directly causing harm to another person. Flipping a switch? That’s just a reasoning exercise. Pushing someone to their death? That has an emotional element.
“The hard dilemma is that knowing something is wrong is insufficient to stop us,” Soltes said. “What we need is to feel that something is harmful to stop us.”
What’s the Solution?
Soltes explained that counting on human behavior to regulate itself hardly ever works in white-collar crime.
“We all have imperfect dispositions, especially when were pressed,” he said.
He also explained that it’s important to understand the “fraud triangle” of pressure, opportunity, and rationalization to build better systems at keeping people on the ethical path.
“Make harm visible,” Soltes said. “It can’t just be a faceless victim, and the government really isn’t a sympathetic victim.”
Instead, measuring outcomes and using tech appropriately can help.
“You have to design for fraud prevention because you can’t just go look for people who look like fraudsters,” Soltes said.
