An online monthly research publication by the Ivey Business School 

Previous Issues of Impact | Register for Impact

Volume 15, Number 9: Faculty Focus
September 2009

Listen to a 5-minute interview with Professor Jeffrey Gandz on moral character and ethical organizations   Listen (4.5MB)   Subscribe

As explanations begin to emerge of what caused the financial crisis of 2008-9, there is an overwhelming emphasis on the failure of “the system.” Most people agree that there were systemic problems: the combination of low interest rates, with lots of money available, an overheated property market, huge borrowing by consumers, lax regulation of derivatives markets and the bank liquidity crisis made a recession that was inevitable just that much worse. Ashleigh Nimigan recently sat down with Professor Jeffrey Gandz to discuss why commentators on the current crisis have only blamed “the system” and not the individual people who made the bad decisions.

A.  I think to blame the system is to miss the issue. It’s the like the late great American comedian Flip Wilson said, “The devil made me do it.” Well the devil didn’t make anybody do it. These were decisions that were made by people that then get folded in to the system. People in financial institutions, in some of them, decided that they would launch these kinds of structure products that were very, very highly leveraged. It wasn’t the system that made them do it, they decided to do it because it was profitable for their business. Consumers didn’t have to get themselves into the kind of debt situation they got in, by buying things they couldn’t afford –they could have restrained their expenditure. So, it was a series of individual decision and as soon as we stop taking personal accountability, then in fact we give up the autonomy that we have, we give up our sense of responsibility. So I refuse to accept systemic explanations, without at the same time recognizing that these are personal decisions that people make [and their essential moral character affects how they make these types of decisions].

Q. What are some of the key elements of a moral character and how can managers implement these virtues?

A. The idea of a moral character dates back to the time of Aristotle, thousands of years ago. Moral characters have courage, they have temperance, they have respect for others, they have humility. They have these virtues that distinguish them from characters who just immediately respond to a stimulus, by acting a certain way. [Moral characters] think about the consequences of their actions. They think about long term and short term; they think about how others may be affected by what they do; they have some sense of connectedness to the society in which they live; and so they make their decisions accordingly. It’s not just a do-gooder, it has more depth than that.

Q. Can you share a few recommendations for designing ethical organizations?

A.  I think there are a number of things that leaders of organizations can do that will go a long way towards ensuring that organizations function in an ethical way. Firstly, they can talk about it. They can articulate what it means to act ethically. They can, through their own personal behaviour, model ethical behaviour.

I think most critically, it matters who they promote within the organization. I believe that who you promote is the single most impactful piece of communications you can give within an organization. If they promote somebody who may be a high performer but people question their ethics, when those people are promoted, it sends a message through the organization that says that is what this organization values.

[Lastly,] you can train people. What often happens in complex situations, people don’t necessarily know or understand where the problems lie. So with very good training and development you can help people understand what the right thing and the wrong thing to do is in a certain set of situations. You do it by working through situations. At the business school we work through cases that have ethical complications and consequences. And you help people realize that there is sometimes more to making a decision than just the maximization of shareholder value.

That was Jeffrey Gandz, Professor and Program Director of Executive Development, at the Richard Ivey School of Business.