In my life’s passion of being a business ethics keynote speaker, business ethics consultant and book author, I am frequently asked by attendees at my ethics keynote speeches as to how good executives go bad? Are there factors that make good people want to go bad? What are the reasons a decent and seemingly upright person is driven to committing fraud?
Even more troubling, how is it that fraud can often occur in front of co-workers and no one ever notices until it is too late?
The answers are all too clear
Not surprisingly, there are clear-cut answers to the questions. It is in the answers that as an experienced keynote speaker on ethics, I have encountered numerous times in my business ethics seminars and consultations.
- Living way beyond means. A whopping 36-percent of fraudsters wanted way too much or needed way too much. We are an aspirational society and some among us get jealous that they don’t have more. They start stealing to “supplement” income. Whether they create false invoices and pay a shell company or steal from petty cash or create scams or really, any number of reasons. Once they steal to maintain a lifestyle, they have to keep stealing to maintain the lifestyle. This frequently occurs where there is no oversite or checks and balances.
- Financial difficulties. People dig holes for themselves. Right now, research has shown about 27-percent of fraudsters commit such crimes because they are deeply in debt. As a business ethics consultant, I wish I could have personally counseled many of these people from an ethical point of view. It is impossible to overcome debt with fraud; it is the classic model of a Ponzi scheme. Trying to escape financial difficulties by committing fraud is a sure road to a prison cell.
- Improper associations. Many fraudsters begin on their downward path because of an improper relationship with a vendor or customer. In fact, 19-percent of all frauds happen in this fashion. It could be bribery, cost-cutting, improper gifts, fake invoicing or any number of activities. The end result is the same. The organization is cheated and the employee and vendor pocket the difference. In many ways, this is the most dangerous of all frauds because it has ended in faulty parts, engineering and construction flaws.
- Putting on the blinders. There are executives who are knowingly participating in fraud because they won’t allow competition, dissenting points-of-view or are showing favoritism despite the fact that company policy dictates otherwise. This can happen in about 18-percent of the cases of fraud.
Commonalities
Again, not surprising, one employee or one department can participate in all forms of fraud simultaneously. Not shocking, is despite company codes of ethics, the greater percentage of fraud occurs from the top down, where the rank-and-file employees practice ethically and upper management flagrantly abuse the policies they insisted on creating! It is arrogance to say the least, but it should not come as a shock. In recent years, we have seen this scenario played out from banking to foodservice to automotive to biotech.
As a business ethics keynote speaker and business ethics consultant, I know that many executive leaders can take on an attitude of entitlement. They feel above the ethical code and take or grab anything they can. They do irreparable damage to their organizations.
It comes down to expectation and personal responsibility and unless executive leaders are made to adhere to the same code as everyone else, abuses can and do occur. Following fraud, nothing in an organization is ever quite the same. Those who were once good executives turn bad, and to some degree, take everyone with them.
Far better to stop fraud before it starts.
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