Pity the psychopath. He (it’s almost always a he) has been taking a lot of heat lately, especially when it comes to corporate malfeasance. Bestselling books with titles like Snakes in Suits, movies such as Horrible Bosses and even academic papers trumpet the prevalence of people without empathy in the corner office.
But that doesn’t explain the everyday fraud Pamela Murphy witnessed over several years in the corporate sector. She once worked in marketing for a company whose business was not seasonal, yet sales would “magically” spike at year-end so as to trigger performance bonuses. Then there were the random acts of cruelty, such as an employee who went out of her way to get someone fired, she recalls. “It really got me wondering, how do people do this? How do they live with themselves?”
Bad seeds do exist: not just psychopaths but people with a “machiavellian” mindset who honestly believe the ends always justify the means, says Murphy, now a professor at the Queen’s University School of Business. But they’re too rare to account for findings like those of a survey released last month by the Certified General Accountants Association. A poll of 802 small and medium-sized Canadian businesses showed that 26% had suffered internal fraud in 2010—and that’s just what was detected.
Many of us routinely commit, participate in and enable fraud, Murphy’s research indicates. And the devil that makes us do it is rationalization. In a paper appearing in the Journal of Business Ethics, she identifies three essential factors in a “fraud triangle” that make otherwise ethical people justify stealing petty cash or inventory, expensing things for personal use or adding false credentials to their resumés: motivation, opportunity and rationalization.
Normally, when presented with the first two, our conscience resists the temptation. Neuroscience has, in fact, established a connection between the part of the brain that makes value judgments and that which experiences negative emotion. But rationalization acts like a drug to dull those bad feelings, enabling us not just to commit fraud but to feel righteous about having done so.
During hundreds of interviews with people caught committing fraud in the workplace, Murphy heard every excuse. They might say the infraction was meant to be temporary and they were going to pay back or make up for their ill-gotten gains. Yet that almost never happens. “Fraud will very rarely correct itself. Once you start a fraud, it inevitably keeps going, and it usually grows,” Murphy says. “I interviewed a lot of people who, it’s sad, they seem like perfectly good, honest people who rationalized their way over that fine line and then got caught, and now can’t get decent jobs.”
“Most fraudsters, when detected, will say, ‘I did it because Jane got a bigger raise than I did,’” CGACanada VP of research Rock Lefebvre concurs. “It goes to show how our minds work. We find our own sense of justice.” Lefebvre, co-author of the report Does Canada Have a Problem with Occupational Fraud?, says the CGA’s and others’ research suggests that 10% of the population will always defraud given the opportunity, and 10% will never knowingly commit fraud under any circumstances—leaving 80% of us who will defraud under certain conditions.
So how do you catch yourself before you set foot on fraud’s slippery slope? An early sign might be a change in behaviour—for example, you’re an easygoing person who turns sullen or snappy, Murphy says, suggesting that you might be wrestling with guilt. Another hint is secrecy—doing things without your coworkers’ knowledge. But the real giveaway is hearing yourself utter one of the six rationalizations Murphy identifies. Any of these sound familiar?
Pleading ignorance: You ignore or misconstrue the consequences of the act. “I’m not hurting anyone.”
Shifting the blame: You diffuse or displace responsibility. “Everybody does it.”
Making an advantageous comparison: You contrast the wrongful act with a much more flagrant one. “This is nothing compared to…”
Moral justification: You present the act as socially worthy or having a moral purpose. “I’m protecting the company, employees, my family…”
Euphemistic labelling: You use obfuscating language. “I’m trying to level the playing field.”
Blaming the victim: You find fault with those affected by the act. “She should have been more careful.”
The fact that most of Murphy’s subjects ended up regretting their transgressions proves even the moral majority has the potential to defraud. And that’s what separates us from psychopaths: they never feel remorse.