Chapter 5

Why We Cheat

CHEATING

For many people, the word cheating evokes painful memories of a romantic partner who wandered into the arms of another. Virtually every popular singer poignantly has shared this heartbreak in song, from Rihanna's “Unfaithful” to Taylor Swift's “You Should Have Said No.”

In the business world, cheating has an entirely different meaning. Sometimes, cheating is petty, such as adding a few dollars to a phony expense report. At other times, it is audacious, like when Richard Hatch won $1 million on the TV show Survivor, but then failed to report this income to the IRS, even though millions of viewers had witnessed his victory. The thrill of reality TV fame faded, however, when Hatch soon faced a different reality—surviving a four-year prison sentence.

Although romantic cheating and financial cheating usually are quite distinct, James Gansman can claim the ignominious accomplishment of combining both forms of cheating in one regrettable episode. According to SEC filings, Gansman, formerly a Transaction Services partner at Ernst and Young, met stockbroker Donna Murdoch online in the hope of having an extramarital affair. Instead of sending Murdoch flowers or some other traditional token of affection, the ever-so-romantic Gansman courted her by sending insider stock tips about his clients' activities. Murdoch in turn used these tips to earn a $392,000 profit, and to make matters worse, she shared this insider information with another man with whom she also was having an extramarital affair.

Eventually, the federal government learned of Gansman's improprieties and successfully prosecuted him for insider trading. As for Murdoch, she avoided serving time in prison by testifying as the prosecution's key witness. As they say, love hurts.

This chapter will examine the various analytical, psychological, and biological factors that influence cheating. It also explores how the moral intensity of an issue affects the likelihood of cheating and other inappropriate behavior.

THE RATIONAL MODEL OF CHEATING

When people act dishonestly to obtain an undeserved benefit, they are cheating. One of life's great mysteries is why some people cheat frequently and others do so rarely, if ever. Is there some unique mixture of psychological, cultural, and social factors that leads certain people to cheat? If we can understand the root causes of cheating, after all, we might be able to reduce its frequency.

The Becker Rational Model

To economist Gary Becker, the decision to cheat is no different from any other financial decision. According to this Nobel Prize-winning economist, a potential wrongdoer rationally chooses to engage in misconduct when the expected benefits of an action exceed its expected costs. In short, Becker considers cheating, and crime in general, essentially to be a cost accounting problem in which a decision maker weighs marginal benefits against marginal costs. More formally, this approach, which can be called the Becker Rational Model, contains three variables: the Expected Value of Benefits, the Expected Probability of Detection, and the Expected Magnitude of Punishment. As shown in Figure 5-1, when the Expected Value of Benefits exceeds the Probability-Adjusted Cost of Punishment, a person makes a rational choice to cheat.1

Gary Becker, Nobel Prize winner in Economics, theorized that people cheat according to the following formula:

Expected Value of Benefits > (Expected Probability of Detection) × (Expected Magnitude of Punishment)
Do you cheat according to this formula?

Figure 5-1 Becker Rational Model.

Superficially, a cost–benefit approach to cheating seems logical. Few of us would try to hot-wire the police chief's car while he is standing a few feet away. The probability of detection and punishment simply are too high. Similarly, few would cheat on a test when the exam proctor's beady eyes are staring penetratingly at us, but we might give in to temptation when the proctor's attention is distracted.

Although the Becker Rational Model seems sensible, a careful analysis suggests that it is fraught with deficiencies and does not adequately explain many cheating decisions.

Flaws in the Becker Rational Model

Despite the apparent logic of the Becker Rational Model, numerous research experiments cast doubt on how well this model explains cheating behavior.

The Influence of Impulsive Behavior

The Becker Rational Model assumes that people perform mental calculus, literally or instinctively, before breaking the law. In reality, though, few, if any, of us ever walk into a convenience store with a calculator in hand, scoping out the easiest merchandise to shoplift. Rather, many shoplifters act impulsively, without computing the odds of being arrested or the likely severity of the punishment.

The Dead Presidents Effect

According to the Becker Rational Model, a person's likelihood of cheating depends on the Value of Expected Benefits, but it is irrelevant whether these benefits are received in the form of property or in cash. Studies show, however, that people are much more likely to cheat when expected benefits are in the form of property rather than money. Just test yourself: Are you more likely to take a $4 box of pens home from work for your personal use, or reach into the company's petty cash drawer to take four dollar bills in cash?

Las Vegas casinos recognized long ago that nonmonetary objects often have a more subdued emotional impact than dollar bills do. If gamblers had to watch a blackjack dealer mercilessly grab an actual $20 bill from them on every unsuccessful bet rather than grab red game chips of equivalent value, many gamblers would quit their losing ways much sooner.

The use of objects as a repository of value rather than straight cash has implications that extend well beyond the casino industry. Few accountants would reach into shareholders' pockets to steal their cash, for example. However, they might not be able to resist the temptation to manipulate stock option issuances, pension benefit calculations, or spreads on foreign currency swaps because the resulting financial harm is more obscure and abstract.

Because former Presidents George Washington and Abraham Lincoln appear on the most common denominations of American paper currency, the heightened emotional impact of physical money over other items of value is sometimes called the Dead Presidents' effect.

The No-Detection Case

The Becker Rational Model predicts that people would be prolific cheaters if they faced little risk of detection. However, in actuality, many people refrain from cheating even when they face no chance at all of getting caught. To prove this, researchers ran an experiment in which hundreds of participants were randomly divided into two groups. In one group, the participants were asked to perform a series of short tasks, count up the number of tasks completed, and then collect their winnings from an unmonitored cash drawer. In the other group, participants performed the same tasks, but their scores and cash withdrawals were carefully checked and monitored. As you might expect, participants in the unmonitored group claimed more aggregate winnings than those in the monitored group. However, the more important observation was that many participants in the unmonitored situation reported their scores accurately, meticulously claiming only the money they deserved.2

The No-Punishment Case

Contrary to the Becker Rational Model, many people refrain from cheating, even when there is no possibility of punishment. As an illustration, the Panera Bread restaurant chain once ran a special Pay What You Can promotion for its turkey chili bowl. Panera promoted this offer with a suggested price of about $6, but it encouraged customers to pay what they could afford. In response to this promotion, Panera was delighted that customers actually paid an average price of more than $6 for this menu item, presumably to show their support for Panera's benevolence toward needy patrons. Thus, very few affluent patrons exploited the opportunity to cheat, and the generosity of other Panera customers more than offset this modest shortfall.3

A PSYCHOLOGICAL MODEL OF CHEATING

Notwithstanding the appealing simplicity of the Becker Rational Model, cheating clearly has a psychological component. Cheating yields economic rewards and costs, but it also impairs our self-image.

After years of study, behavioral scientists have observed that a critical tension exists between the external economic gains earned by cheating and the internal psychological harm that cheating inflicts on our self-esteem.

The Importance of Self-Image

Most of us have a strong psychological desire to maintain a positive view of ourselves. When asked to rate their driving ability, for example, 88% of college students respond that they are above average, defying statistical realism.4 Men, in particular, find it nearly impossible to admit that they do not measure up in athletic ability or as lovers.5 To mock our inflated self-concepts, one satirist created a fictional town where “all children are above average.”6

The popularity of Facebook and other social media confirm the degree to which many people wish to reinforce their positive self-concept. Social media enhances our self-esteem by allowing us to display our good taste in everything from vacation hotspots to trend-setting fashion and music. Moreover, we luxuriate in our own likeability when others friend us, and an avalanche of Likes reminds us of just how awesome we truly are.7

The tendency to indulge in self-enhancement is so universal that, in a recent British study of jailed inmates, prisoners rated themselves as being more trustworthy, moral, compassionate, and self-controlled than typical members of the general public. These convicts lacked conviction, so to speak, about their superiority in only one category. When asked to calibrate the degree to which they were law-abiding, these imprisoned criminals humbly did not rank themselves as being superior to others in the general community—but they did rank themselves as being equally law-abiding!8

The results of one landmark study exemplify the importance that many place on seeing themselves in a positive light. In a research experiment, two groups of participants took an IQ test and waited to learn their scores in a room with a large mirror. Participants in each group assumed that their tests would be assessed accurately, but the researchers instead arbitrarily told every participant in one of the groups that they had scored poorly and arbitrarily told members of the other group that they had performed impressively. Participants in the group that were told that they had performed miserably left the room rapidly, apparently disgusted and unable to look at themselves in the mirror. Participants who were told that they were high achievers, in contrast, stayed far longer and were content to admire their images reflected in the mirror.9

The importance of maintaining a positive self-concept appears to set in at an early age. In another study involving a mirror, Halloween trick-or-treaters were divided into two groups. One group of children was given access to a candy bowl and told to take only one piece of candy. Despite the admonition, 34% of the children in this first group could not resist the temptation to take more than one piece. The second group of children received this same instruction and, in addition, a mirror was placed in front of them. Astonishingly, the presence of the mirror led to only 12% of the second group taking more than one candy—that is, the mirror deterred nearly two out of three children from cheating.10

The importance of self-image in motivating prosocial behavior was perhaps best summarized in the Michael Jackson hit song, “Man in the Mirror.” That song's lyrics proclaim, “I'm looking at the man in the mirror.…Take a look at yourself and then make a change.…Gonna feel real good now!”

The Influence of Self-Image on Cheating

For many, cheating is bittersweet. Cheating provides economic rewards, but it also generates feelings of remorse, which threaten cheaters' self-esteem. Because of this trade-off, some behavioral researchers contend that people cheat only up to the level at which the incremental rewards from cheating are greater than the incremental harm done to their self-perception. Thus, people who care greatly about complying with social norms and maintaining a pristine self-image rarely cheat. In contrast, others who place low importance on their self-image tend to cheat extensively.11

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Figure 5-2 The Cheating Trade-Off.

Implications of the Self-Image Maintenance Trade-Off

The hypothesis that people resist the temptation to cheat out of concern for their self-image has many implications.

The Rationalization Effect

To protect their self-respect and dignity, many wrongdoers utilize mental gymnastics to dodge the reality that they are cheaters. As one commentator wryly stated, “I believe in looking reality straight in the eye and denying it.”12 Cheating rationalizations are accomplished in several ways.

Some people rationalize that they deserve the benefits achieved from cheating. This excuse allows them to increase their cheating, while minimizing harm to their self-image. This phenomenon is observed, for instance, when employees justify cheating at work because their boss pays them less than they believe that they are worth. Accountants who add extra billable hours to a client's invoice because of the “amazing job” they did in saving the client taxes likewise engage in this type of rationalization.

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Figure 5-3 2 Out of 5 Workers Admit to Stealing Property from Work.

Others rationalize that their cheating is minor or only causes inconsequential harm to others. As an illustration, a financial advisor might inflate her expense reimbursement submission because her wealthy client is “so rich that he can afford it.” Or, a taxpayer who files a false tax return might justify it by saying that “the government would have just wasted the money collected anyway.”

Still others downplay the impropriety of their conduct by stealing services or items that have a low marginal cost to their rightful owner. Many people, for example, do not hesitate to save $2 by illegally downloading a copyrighted ballad sung by their favorite performer. These same people, though, would never consider reaching into this singer's purse to take $2 cash.

A final type of cheater dodges the self-realization of wrongdoing by cheating in circumstances where facts are somewhat uncertain or ambiguous. To illustrate, it would be extremely difficult to maintain a clear conscience after knowingly underreporting cash income to a judge who is in charge of setting your child support payments. Cash-basis income is readily measured and usually clear-cut. In contrast, if you work for a privately held corporation that gives you shares of illiquid company stock as compensation, it is much easier to bias downward the uncertain value of this stock-based compensation and still maintain a positive self-image of integrity.

The Denial of Standards Effect

Religious Reminders

Intuitively, religious commitment should have a positive impact in fostering morally desirable behavior in business decision makers. Religions establish norms that prescribe the boundaries of acceptable behavior, often expressing rules of conduct in comprehensive writings such as the Koran and the Bible.13 But do people who possess strong religious commitments demonstrably behave more ethically than others in the workplace? The evidence is inconclusive.14

Although religiosity does not clearly reveal a person's propensity to cheat, studies do show that cheating diminishes if people subliminally are reminded of religious precepts shortly before performing an act. This notion, known as priming, suggests that people who are reminded of religious principles moments before performing an act are more likely to behave ethically than those who are not exposed to moral reminders.

Consider one experiment in which two identical groups were asked to complete a brief questionnaire prior to performing a core set of tasks. Before beginning the main test, one group of participants was given a pretest in which they were asked to identify as many of the Ten Commandments as they could recall. The other group was a control group. Its participants were asked innocuous questions that were devoid of any moral or religious content. According to the study's conclusions, the group that received the religion-oriented pretest had a much lower incidence of cheating on the main test than the control group had.

These results suggest that moral reminders may help reduce cheating in the workplace, especially if the reminders are timed to occur just before employees confront an ethically challenging situation. For example, the study's authors suggest that cheating might decrease if employees are asked to acknowledge a company's Code of Ethics in a signed writing shortly before submitting expense reimbursement requests.15

After catching a student cheating on an exam essay, one frustrated professor applied this concept of using moral reminders in a rather extreme manner. Imagine how surprised his students were when they were asked to sign an exam pledge that stated, as punishment for cheating, “I will be sorry for the rest of my life and go to Hell.” Would you have signed such a pledge? Many students did!16

Nonreligious Reminders

Nonreligious moral reminders also seem to work well. In Austria, newspapers often are distributed on street corners next to a cashbox. Customers are expected to put money into the cashbox, but many customers fail to pay the full amount due. Researchers posted two signs near the newspapers. The first sign, which recited that Failing to Pay Is Illegal Stealing, had no effect. However, when researchers appealed to customers' moral decency with a sign that essentially said Thank You for Being Honest, their appeal caused customer payments to rise significantly.17

One study even observed that, by displaying a large pair of watchful eyes on the wall, people in a group kitchen area became far more likely to contribute their fair share to replenish the kitchen snack and beverage fund.18

The Loss Aversion Effect

The Nature of Loss Aversion

Which you would prefer to buy in the store: A package of cheese that proclaims that it is 80% fat-free or one that is 20% fat? Similarly, are you more likely to agree to a major surgery that has a 90% chance of saving your life, or one that has a 10% death rate?

Although these paired sets are equivalent expressions, most people select the first statement in the set because of the psychology of how facts are presented, called framing. Positive affirmations are preferred over statements of negativity or loss.

Researchers have observed that people are so averse to losses that they will expend greater effort and expense to avoid a loss than they will to obtain a gain. This is known as the loss aversion effect. Consider the following situation: People were asked to choose between two results. Choice One was to definitely suffer a loss of $750. Choice 2 was an uncertain outcome that had a 75% chance of a $1,000 loss and a 25% chance of no loss. Although both choices result in an average expected loss of $750, nearly 9 out of 10 participants selected the second choice, hoping to avoid a loss.19

The baseball coach played by actor Brad Pitt in the movie Moneyball summarized this viewpoint as follows: “I hate to lose more than I love to win.”

The Importance of Loss Aversion in Ethical Decisions

The psychological impact of loss aversion manifests itself in numerous ethical decisions. For example, taxpayers who have had too much money withheld from their paychecks cheat on their tax returns at a fairly low rate because they already anticipate the pleasurable gain sensation of soon receiving a tax refund. In contrast, taxpayers who underpaid their taxes during the year are far more likely to cheat on their tax returns to avoid the loss sensation of unexpectedly having to pay additional taxes to the government.20

This same behavior of cheating to avoid a loss has been observed in tax accountants as well as taxpayers. In one study, tax return preparers were presented with the opportunity to help a client claim exaggerated tax deductions in a questionable situation. When the accountants were told that the client relationship would end if they refused to overstate a deduction, a large fraction of the accountants willingly cheated to avoid the loss of a client. However, when accountants were told that their refusal to overstate a deduction likely would cause them to not gain a new client, far fewer accountants selected the unethical alternative.21

Not only does the loss aversion effect have a powerful influence on decisions, but the strength of its impact also intensifies when decisions have to be made under time pressure. Thus, to minimize the likelihood of unethical behavior, companies should avoid placing employees in loss-producing situations when decisions are subject to severe time constraints.

The Depleted Resistance Effect

If you have ever tried to diet, when were you most likely to crave eating a 40-slice pizza and an entire wedding cake with the bride or groom figurines still atop it? Was it when you were feeling rested and happy, or when you were exhausted and anxious?

Anyone who has ever been on a diet knows that willpower and discipline tend to wane when we feel overworked and underappreciated. Studies have confirmed that being tired and anxious makes us more likely to stray from our diet plans, as well as stray from our ethical values.22

In a recent experiment on cheating, participants were sorted into two groups. The first group was comprised of night owls, whose energy levels peak late in the day, and the other group only included people whose natural body rhythms made them morning people. All the participants then were asked to play a game at various times of day and self-report their scores. Higher reported scores earned participants better prizes. Not surprisingly, night owls were much more likely to cheat in the early morning hours when their energy levels were low. On the other hand, morning people cheated more frequently once nighttime fatigue had set in.23

Businesses should heed the results of this experiment by having employees make ethically sensitive decisions when they are well rested, not when their willpower is depleted.

Moral Compartmentalization

Historians have painstakingly documented the heinous acts that Nazi Germany inflicted on Jews. During the same time period that Nazis were torturing Jews, however, Germany incongruously was imposing the strictest protection laws for animals of all contemporary societies. In 1933, for instance, Hermann Goring, the Prime Minister of Prussia, announced that the government would strictly enforce animal rights laws regulating boiling lobsters and shoeing horses to “show sympathy for their pain.” A few months later, Germany enacted further laws that banned the use of animals in scientific experiments and protected animals used in filmmaking and parades. In a statement that is stunning in its inverted morality, Goring also declared that, “those who still think they can continue to treat animals as inanimate property will be sent to concentration camps.”24 With this utterance, Goring warned Jews and non-Jews alike that a ruthless disregard for human dignity was just retribution for a lack of reverence toward animals.

The Nazis' use of children in horrific medical experiments, while concurrently forbidding animal experiments, is a stark example of what psychologists call moral compartmentalization. Moral compartmentalization occurs when people attempt to avoid inner conflict by isolating inconsistent moral situations into separate niches, or compartments. By placing incompatible moral decisions into mutually exclusive buckets, people are better able to cope with the emotional discomfort that results from maintaining inconsistent values or choices.

Moral compartmentalization occurs frequently in our daily lives. Some people, for instance, lie profusely in business negotiations all week long, but would never lie to at their place of worship on Sunday. Others do not hesitate to submit a phony damages claim to a large insurance company, but would never overclaim damages to their friendly local dry cleaner. This type of inconsistency was noted over 20 centuries ago when ancient Greek storyteller Aesop cynically said, “We hang the petty thieves, but appoint the great ones to public office.”

In the accounting realm, moral compartmentalization often occurs in tax reporting. As a former IRS Commissioner Lawrence Gibbs once noted, some people “compartmentalize morality…effectively separating tax cheating from other immoral actions and in the process, sparing himself or herself any guilt.”25 That is, the same people who would never cheat their friends or neighbors often do not hesitate to cheat on their taxes.

The Copycat Effect

Is cheating a solitary act, or can it spread from one cheater to others, much like a contagious virus spreads?

If you have ever watched the veritable parade of fellow pedestrians who join in after an initial jaywalker has started crossing a street, you have witnessed firsthand how one cheater stimulates others to likewise participate.

In one European study, for instance, researchers observed a clear copycat effect. In this study, participants were divided into two groups, called the control group and the test group. Both groups were asked to solve a verbal test without using dictionaries or other reference materials that were prominently situated in the room. In the control group, most participants solved the assigned problems without using the reference materials. In the test group, however, an actor posing as a participant secretly had been instructed to openly cheat using the reference materials. Following this cheater's lead, this set of participants cheated at triple the rate of the control group.26

In a somewhat similar university study, participating college students were divided into two groups, and an actor posing as a participant cheated openly in front of both groups. For one group, this actor dressed in apparel that made him appear to be a fellow classmate of the student participants. For the other group, though, this actor wore a sweatshirt emblazoned with the name and logo of a cross-town college to make participants think that he was a student at their despised archrival. According to the study results, the participants cheated far less in the second group, apparently because they considered the cheating of this intruder to be immoral and wanted to demonstrate their disapproval by refusing to emulate his conduct. Apparently, the authors concluded, the copycat contagion potentially created by peers cheating depends on whether others feel a social connection to the cheaters and their values.27

Fortuitously, the real world often mimics contrived experiments. In a recent cheating episode commonly called the Great Harvard Cheating Scandal, 125 students in one Harvard University class violated exam rules by plagiarizing one another's answers on a take-home exam. In all likelihood, these students did not have a premeditated master plan to cheat on the exam. Rather, a few students began cheating, and like a virulent virus, cheating fever began to spread. At the conclusion of this scandal, the university disciplined about half of the accused students, forcing them to withdraw from school for at least one academic term.28

Because of the copycat effect, business firms must ensure that unethical employees are removed from the workplace before they contaminate others with their inappropriate conduct.

The Cheater's High Effect

Many behavioral models assume that people feel remorse and shame when they commit ethical transgressions. Recent research, however, suggests that cheaters sometimes experience positive feelings of exhilaration, rather than negative feelings of guilt. Consider, for example, millionaire celebrities who shoplift, or successful executives who commit petty acts of cheating that jeopardize their careers. They do not engage in criminal behavior out of a desire for modest financial rewards. Rather, they are spurred on by the euphoric pleasure of getting away with it.

Have you ever walked briskly across a street when the pedestrian traffic signal unrelentingly flashed a warning for you not to cross? Was it really worth risking your life to get to your destination a minute or two sooner? In this situation, you too were likely experiencing momentary exhilaration from defying a minor societal rule.

The psychological impact of unethical conduct seems to depend on whether or not a cheater causes direct harm to an identifiable victim. If a person directly harms another, such as by stealing an elderly woman's purse, negative feelings of guilt and shame are likely to outweigh any pleasurable feelings. However, when the victim of ethical misconduct is a faceless bureaucracy or corporation, net positive feelings often result from beating the system. Neuroscientists suggest that cheating, like a large gambling win on a slot machine, creates a euphoric rush that excites certain regions of our brains. They call this phenomenon the cheater's high.29

HOW THE INTENSITY OF A MORAL ISSUE AFFECTS BEHAVIOR

Ethical dilemmas arise when a decision maker encounters a moral issue, such as whether to cheat. In this chapter, we thus far have focused on personality traits and situational factors that influence decision makers. Now, we will examine how characteristics of the moral issue being evaluated factor into a person's decision to engage in unethical behavior, such as cheating.

In a groundbreaking study, Professor Thomas Jones observed that certain characteristics cause some moral issues to evoke more powerful emotional responses than others.30 Using Jones's terminology, ethical issues have varying degrees of moral intensity. Issues with high moral intensity trigger heightened emotional reactions, which in turn influence a decision maker to judge an act to be unethical.

According to Jones's analysis, known as the Issue-Contingent Model, six elements of an issue influence moral judgments.

The Magnitude of Consequences

It is often said, “Don't sweat the little stuff.” This commonsense notion is reflected in people's responses to ethical issues. Issues that have a large impact tend to evoke far greater moral outrage than issues that have a minor impact, even if the ethical principle involved is identical.

Social Consensus

Social consensus is the degree to which broad agreement exists within a community that an act is right or wrong. For example, a strong social consensus exists that it is wrong to invade the privacy of ordinary citizens, but it is debatable whether it is wrong to pry into the private lives of celebrities who voluntarily have chosen to be in the limelight.

Probability of Effect

If the likelihood of an action causing harm is modest, it is not likely to evoke as strong an emotional reaction as events that are virtually certain to cause harm. For this reason, the Issue-Contingent Model posits that moral intensity increases as the probability of an adverse occurrence increases.

FACTORS THAT INFLUENCE MORAL OUTRAGE QUESTION
Magnitude of Consequences Are you more troubled by an electrician knowingly using cheap, inferior-grade wiring materials to cheat a homeowner than by a house painter knowingly using inferior-grade paint?
Social Consensus Are you more troubled by someone shoplifting a book from a bookstore than illegally photocopying a copyrighted book?
Probability of Effect Are you more upset if a key witness in a criminal trial lies than if a minor witness lies?
Temporal Immediacy Which disturbs you more: A restaurant that knowingly sells spoiled food that will severely injure one customer today, or a company that dumps toxic chemicals in the water supply that will, on average, cause a serious injury in two decades?
Proximity Are you more disturbed by a “hate crime” committed against someone of your race or ethnicity than one against someone of a different race or ethnicity?
Concentration of Effect Are you more upset when a “cyberthief” steals $10 from 800 different individuals' bank accounts or when he steals $8,000 from one person's savings account?

Figure 5-4 The Issue-Contingent Model.

Temporal Immediacy

As every accounting student knows, a dollar received today is more valuable than a dollar received in the distant future.

Much like a future sum must be discounted to equal a smaller present-value equivalent, people emotionally discount future harms. This phenomenon, known as temporal immediacy, predicts that an act causing immediate harm will evoke a stronger emotional response than one that will cause harm in the future.

Proximity

Proximity describes the degree to which a decision maker feels close to people affected by a moral act.

This feeling of closeness can be physical, or geographic, in nature. For instance, when a landlord's use of unsafe building materials causes severe burns to neighbors down the street, we feel a stronger emotional response than when a similar event happens to strangers in a distant city.

The concept of proximity, however, also encompasses feelings of closeness among people who share a common affinity for one another. This social bond may be cultural, psychological, ethnic, or religious in origin. For example, if a robber assaults an Armenian shopkeeper in Toronto, fellow Armenian shopkeepers in Toronto are likely to feel a stronger emotional response than other Toronto residents experience.

Concentration of Effect

When an act has a large effect on one person, it likely will evoke a stronger emotional response than an act of similar overall magnitude that has a small impact on numerous people. For instance, a company's unethical act of intentionally denying warranty coverage to 10 people who each have valid $700 claims has greater moral intensity than the denial of coverage to 10,000 people who each have 70-cent claims.

OTHER INFLUENCES ON ETHICAL BEHAVIOR

Various other factors influence behavioral responses to ethical issues. These include the influences of gender, cultural values, and biological predispositions.

Gender Differences

Are women, as a group, more ethical in business than men? Although no studies are conclusive, several factors suggest that the answer is yes.31 These factors are women's greater risk aversion, absence of overconfidence, and greater adherence to social norms.

Risk Aversion

Cheating and other wrongful acts create a risk of punishment, and women tend to avoid risky behaviors.32 Few women participate in extreme sports, for example, and a quick glance at Las Vegas blackjack tables confirms that men are more likely to enjoy risky gambles.

Statistics, as well as casual observations, confirm men's propensity for risky behavior. Not only are male drivers three times more likely than female drivers to die in fatal car accidents, but males' rates of death from drowning and walking across the street are substantially higher as well.33 Furthermore, studies show that men are bigger risk-takers in nonphysical activities. For instance, according to the financial industry, women invest their retirement savings in mutual fund assets that are less risky, on average, than those chosen by men.34

Men's greater tolerance for risk begins at an early age. In one study, for example, when young girls and boys were shown a picture of a child riding a bicycle without a helmet, the girls were more likely to characterize the portrayed child's conduct as risky.35 According to biologists, men have a heightened tolerance for risk from their adolescent years until reaching about 45 years old, and women have a lower risk tolerance prior to age 30. These differences are attributed to men being more risk-tolerant during this time frame in the hope of impressing women to become a mate, whereas women are more risk-averse during their child-bearing years.36

The Overconfidence Bias

Are men smarter than women? No, but they sure think so. On average, men around the world consistently overestimate their IQs, but women underestimate theirs.37 According to studies of overconfidence bias, men have a greater tendency to overestimate their ability to succeed in uncertain situations and are more likely to ignore the downside odds of a decision backfiring. As a result, researchers have observed that men are more likely than women to indulge in activities with potentially adverse consequences, such as speculative stock trading, speeding through yellow traffic lights, and cheating.

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Figure 5-5 Are You Overconfident?38

Even some of the most justifiably confident men of our time have fallen prey to overconfidence bias, sometimes with devastating results. As one tragic example, consider the untimely death of Apple founder Steve Jobs. Despite the recommendations of world-class doctors, Jobs postponed urgent surgery in the hope of finding a holistic cure on his own for his pancreatic cancer. By the time Jobs realized that his self-designed vegetarian diet had failed, his disease could no longer be halted, hastening his death.

Lessened Adherence to Social Norms

Cheating violates social norms, and even a cursory examination of crime statistics confirms that men are far more likely than women to violate societal norms. The incarceration rate for men is nine times greater than the rate for women, for instance, and female serial killers are exceedingly rare.

Cultural Differences

Although most of us think that we know right from wrong, ethical behaviors vary widely, depending on the society in which a person lives. For instance, the unauthorized duplication of copyrighted material is viewed as a mildly unseemly, yet common, practice in some cultures. In others, unauthorized copying is strongly frowned on as a form of cheating.39

The most comprehensive study of the relationship between national culture and behavior is called the GLOBE Project.40 In this cross-cultural study, 170 researchers from around the world evaluated the ethical values of countries or regions based on nine dimensions. Of these factors, the researchers concluded that societies that encourage equality of participation in the workforce and reward citizens for generosity toward others tend to have the most advanced ethical values. These factors formally are called Gender Egalitarianism and Humane Orientation.

Cheating in the Animal Kingdom

People are not alone in their propensity to cheat. Cheating surrounds us in nature.

Even the lowly Pseudomonas bacteria are known to cheat by taking food from more productive bacteria when the opportunity arises. Scientific studies, however, have shown that cheating occurs most frequently in higher-order primates, such as chimpanzees and baboons. Juvenile female hamadryas baboons, for instance, often sneak off behind rocks with their male companions to enjoy a romantic interlude, carefully avoiding the watchful eye of the alpha male at the top of the baboon hierarchy. According to anthropologists, the frequency of deceptive behavior in a species is correlated with the size of that specie's outer brain layer, called the neocortex. And what primate has the biggest neocortex? Yep, it is us humans.41

SOLVING THE CHEATING PROBLEM

Cheating is inherent in the human experience and will never be eliminated. Nonetheless, companies can reduce the incidence of cheating by enacting strict codes of conduct, enforcing company policies, and encouraging whistleblowers to speak up. Companies, including CPA firms, also increasingly are preempting unethical behavior before it starts by hiring investigators to carefully screen prospective employees. These investigators are highly skilled in performing formal background checks, verifying transcripts, and evaluating content posted by applicants on social media websites.

EXERCISES

The Becker Rational Model of Cheating

  1. Did you ever shoplift when you were a child? If so, was your decision to shoplift consistent with the Becker Rational Model?
  2. “Moose” McMonster, a large but slow defensive football linebacker, was guarding a fast wide receiver. When “Moose” saw that the receiver was highly likely to run past him and catch a touchdown pass, “Moose” deliberately impeded the receiver's path by grabbing his arm. The referee imposed a standard 15-yard Interference penalty on the defensive team, but the quick reaction by “Moose” prevented the opposing team from scoring.
    1. Was “Moose” McMonster's move consistent with the Becker Rational Model?
    2. Was “Moose” a cheater?
  3. You recently rode a long distance in a taxi cab to a busy section of downtown. At the end of your trip, you stepped outside the taxi cab and the driver, still seated, indicated that you owed him $90. As a former high school track star, you could easily have run away from the taxi cab and not paid the fare. However, you honored your agreement and paid the fare.

    Assume that you have very little money, and there was virtually no risk that you would get caught or harmed in any way if you ran away from the taxi cab. Were your actions in paying the taxi cab driver consistent with the Becker Rational Model?

  4. Before exiting a restaurant, it is customary to leave a tip equal to about 15% of the price of your meal. Although patrons are not legally required to leave a tip, virtually all customers do so. A traveler was driving through a town and never intended to visit a particular restaurant again. Nonetheless, she left an 18% tip for her food server. Was her decision to tip consistent with the Becker Rational Model?
  5. After finding a lost purse, you kept a small portion of the money in the purse, but not all of it, before returning the purse to its rightful owner. No one noticed you finding the purse, so no one would have ever discovered that you had possession of this lost purse. Was your behavior consistent with the Becker Rational Model?
  6. When you found a lost purse, several of your work colleagues noticed that you found it. You took the purse to your office, closed the door, and took a small portion of the money in the purse, but not all of it. Then, you returned the purse to its rightful owner. Is this behavior consistent with the Becker Rational Model?
  7. For many years, the IRS would select 50,000 tax returns at random for audit and demand that taxpayers meticulously substantiate every line item on their tax returns. This program was called the Taxpayer Compliance Measurement Program, but it currently is not in use. Would you expect this program to be cost-effective for the IRS from the standpoint of tax collection?

    The Consequences of Cheating

  8. Professional athletes who use performance-enhancing drugs often are punished by the sports leagues that govern their conduct. A commentator stated, “People should stop ranting about players using performance-enhancing drugs. The fans get to see players hit balls farther, run faster, and jump higher than they otherwise could. Fans love it, and no one is hurt.”

    Is an athlete's use of performance-enhancing drugs really an act of cheating? If so, who is being cheated?

  9. Have you ever knowingly worn a counterfeit version of a famous brand-name item? If so, did your action cause any harm to the company that produces goods bearing that brand name? Did it cause any harm to you?

    Cheating versus Fair Competition

  10. A well-known brand of home insulation materials is pink in color. This company spends millions of dollars each year on advertising that depicts the Pink Panther cartoon character and emphasizes the pink color of its product.

    You recently started manufacturing a similar home insulation product. When installed inside the walls of a building, it has the same insulating properties and characteristics of the well-known brand. When your product is manufactured, it emerges from the production process as dull gray in color. However, you have decided to add pink dye to your product for marketing purposes. Your product clearly displays your company name and contains your company's logo, which looks entirely different from the well-known brand's logo.

    Was it cheating for you to make your product pink in color?

  11. All products for cleaning windows use a slightly acidic solution that contains ammonia. One of the well-known brands of glass cleaning products uses this same solution. To make it more appealing, it also contains a lemon scent and is yellow.

    You have decided to manufacture a glass cleaning product as well, which you call Citrus Sunshine. The product, when manufactured, is clear and odorless. Your product uses the standard acidic solution containing ammonia, and you have decided to add a lemon scent and yellow color.

    Was it ethical for you to make your product yellow with a lemon scent?

  12. Active Telecom, a major cell phone manufacturer, recently released a new model of its highly successful brand of cell phones. Your client, a competing cell phone maker, immediately broke open one of these new models to see how the components are arranged and integrated together.
    1. Your client hopes to use this information to make a competing cell phone, without having to incur substantial research and development costs. Is this ethical?
    2. Assume instead that your client is a hedge fund rather than a competing cell phone manufacturer. It broke open one of these models to identify the suppliers of the components used in this phone, so it can buy the stock of these supplier companies before others in the stock market realize that these suppliers' stock price will be increasing as a result of them generating substantial increases in sales due to this new phone's expected popularity. Is this ethical?

    The Psychology of Cheating

  13. In Las Vegas casinos, people ordinarily convert their money into chips before placing bets at the gaming tables. Of course, chips have certain advantages over money, from the casinos' perspective, because they are easily stacked up, and their vivid colors make them more readily identifiable than cash. Does behavioral psychology, though, give you any insight into another reason why casinos like their customers to bet using chips rather than cash?
  14. Two taxpayers each have had $6,000 of income taxes withheld from their wages during the year. After preparing draft versions of their tax returns, the first taxpayer tentatively has a tax liability of $5,900, and the second taxpayer tentatively has a tax liability of $6,100. Taxpayers receive a refund, or must make an additional tax payment, equal to the difference between their tax liability and the tax amounts previously withheld.

    Each of these taxpayers is subject to a marginal tax rate of 25%. Also, each of these taxpayers donated clothing worth about $400 to charity during the year, but failed to get detailed receipts that satisfy the Tax Code's substantiation requirements. Therefore, although the taxpayers actually did donate $400 of goods to charity, it is inappropriate for them to claim a charitable contribution deduction. Which of these taxpayers is most likely to cheat by nonetheless claiming a charitable deduction?

  15. For each of the following, you must select from the following two choices:
    1. Choice 1: Definitely lose $400
    2. Choice 2: Have a 20% chance of losing nothing and an 80% chance of losing $500
    1. Which of these choices do you prefer?
    2. Was your answer to the preceding question consistent with the choice that most people would make?
  16. The IRS usually announces its biggest criminal indictment for the year during the month of March. Why do you think that this occurs?
  17. Rank the following in order of the degree to which they are likely to dissuade you from cheating on a test:
    • You are issued a copy of your school's Honor Code during Fall Orientation for your college entering class.
    • On Monday of final exam week, you read in the student newspaper about a student being expelled from school for cheating.
    • You hear about a recent classmate who had her job offer canceled because she did not pass a background check for her new job due to cheating that was detected on her resume.
    • You signed an agreement to abide by the student Honor Code as you turned a completed midterm exam in to the exam proctor.
    • You signed an agreement to abide by the student Honor Code on the front of the exam before you had even begun to see just how difficult the questions presented on the exam were.

    Rationalization and Self-Image

  18. During 2014, investigations discovered that managers of hospitals serving military veterans, called VA Hospitals, were maintaining secret waiting lists of patients trying to get appointments. These lists were kept secret because managers were rewarded with bonuses if the official waiting list was short, which suggested that veterans were receiving prompt attention. The reality was that many veterans waited inordinately long times to get appointments to see a doctor. Reportedly, this led to many veterans dying from a lack of rapid medical care and detection.
    1. Do you think that any of these hospital managers would have directly killed a patient to collect bonus money?
    2. If your answer to the preceding question is “probably no,” why do you think that these hospital managers engaged in this practice?

    Moral Intensity

  19. Does an act have less moral intensity if you cheat a vendor out of a service that has no marginal cost than if the vendor has an out-of-pocket cost? What is the moral intensity of each of the following?
    • Sneaking into a sporting event and sitting in a seat that would have remained unoccupied. Admission normally would have cost $80.
    • Failing to pay $4 for a can of orange juice from the sporting event's snack bar when the clerk was not watching.
    • Taking a “free refill” of a beverage after purchasing the beverage at a snack bar, even though the posted sign clearly says, “no refills.”
  20. Few who have seen the vivid video images of the 9/11 attack on the World Trade Center can forget these images. Images of the two planes crashing into the World Trade Center still permeate many Americans' memories. In addition, images of people jumping to their certain deaths out of the windows of the attacked buildings to spare themselves from being burned alive generally were too graphic and disturbing for public broadcast. What is your assessment of that immoral act's moral intensity?

    Comprehensive Problems

  21. Rank the moral intensity of each of the following as Low, Medium, or High:
    • Plagiarizing Wikipedia in writing a paper for a university course
    • Secretly dating a client, in violation of company policy
    • Submitting a false expense report to your employer
    • Overstating your hours worked in a time sheet submitted to your employer
    • Understating your hours worked in a time sheet submitted to your employer so you would not look inefficient and slow
    • Shopping online during the workday, when you have idle time
    • Shopping online during the workday when you have to meet a work deadline
    • Filing a false workers' compensation claim to obtain undeserved money from the government
    • Filing a false damage claim with a local carpet cleaning company for a defect that was present before they performed their services
    • Filing a false tax return
    • Driving your car without an up-to-date car registration
    • “Crashing” someone else's wedding because you are hungry and the band sounds great
    • Lying to your company's auditor because you want to cover up an accounting error that you made
    • Lying to your company's auditor because your supervisor threatened to fire you if you did not do so
    • Lying to your company's auditor so you can earn a bonus based on the company's reported earnings
    • Lying to your company's auditor because you wanted to see if you could “get away with it”
    • Secretly adding to your bet in a casino blackjack game after being dealt an excellent set of cards
    • Destroying company documents to “get even” with your boss
    • Destroying company documents that might assist a customer who is suing your company
    • Destroying company documents, in violation of a court-imposed injunction
  22. Which of the items in question 21, if any, would be exhilarating for you, creating a cheater's high?
  23. A criminal has taken five of your neighbors as hostages and has threatened to kill them unless five of his compatriots serving time for murder are released from prison. He has already shot one of the hostages in the leg. If the five compatriots are let free, authorities estimate that they will return to their home country of Mongolia, spend time with their families, and then begin murdering others next year. Statistically speaking, they are likely to kill a total of between 10 and 30 people in Mongolia.
    1. Should the authorities release these prisoners?
    2. Applying the Issue-Contingent Model, what elements of moral intensity are especially important to you in formulating your opinion?
    3. What factors should a utilitarian take into account in evaluating this trade? What conclusion would a utilitarian likely reach?
  24. Have you ever cheated on an exam, course project, or course assignment in college?
    1. In hindsight, did the benefits exceed the risk of detection and punishment? Were you able to apply the Becker Rational Model at the time you made the decision to cheat?
    2. Are you more likely, less likely, or equally likely to cheat on an exam in a course in which grades are “curved” or a course in which they are not “curved”? Why?
    3. If you successfully cheat on an exam and the class is not curved, you will get a higher grade, and no one else in the class will get a lower grade. Is anyone harmed in this situation? How would a utilitarian view your conduct? What stakeholders are affected?
    4. Does cheating on an uncurved exam have high moral intensity or low moral intensity?
  25. According to the IRS, about 17% of income goes unreported each year for tax purposes. Does the Issue-Contingent Model of moral intensity give you any insights into why cheating on income taxes is so commonplace?

Notes

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