Media Releases

Recession’s after-effects could lead to cheating and workplace theft suggests new study

October 17, 2013

TORONTO, ON – We like to think we’d stick to our eth­i­cal prin­ci­ples no mat­ter what. But when peo­ple feel finan­cial­ly deprived — as many did from loss­es suf­fered thanks to the last mar­ket and bank­ing melt­down — they are more like­ly to relax their moral stan­dards and trans­gress to improve their finan­cial sit­u­a­tion. They are also more like­ly to judge oth­er deprived moral offend­ers who do the same more lenient­ly, says a new paper to be pub­lished in Orga­ni­za­tion­al Behav­ior and Human Deci­sion Process­es.

“We found that most respon­dents did not think finan­cial depri­va­tion would lead them to behave immoral­ly,” said Nina Mažar, an asso­ciate pro­fes­sor of mar­ket­ing at the Uni­ver­si­ty of Toronto’s Rot­man School of Man­age­ment and one of the lead researchers of the study. “Yet, once they actu­al­ly expe­ri­enced finan­cial depri­va­tion, they were more like­ly to loosen their eth­i­cal prin­ci­ples.”

This could result in work­place sab­o­tage and the pil­fer­ing of sup­plies and equip­ment, the paper says. Pub­lic poli­cies that entrench finan­cial inequal­i­ties, such as through regres­sive tax­a­tion plans or tax cuts for the wealthy, could also lead to more cheat­ing inside and out­side the office.

And those who inter­pret or enforce poli­cies or reg­u­la­tions as part of their work — in cor­po­ra­tions, law enforce­ment, or the judi­cial sys­tem — need to be mind­ful of the depri­va­tion effect too. Tem­po­rary upsets in their own finan­cial posi­tion could lead them to go eas­i­er on oth­ers demon­strat­ing uneth­i­cal behav­iour while under finan­cial stress, the paper says.

There are many ways peo­ple assess their finan­cial health. But research has found one of the strongest influ­ences is com­par­ing one­self to oth­er peo­ple. A sense of finan­cial depri­va­tion can hap­pen when peo­ple sim­ply feel finan­cial­ly infe­ri­or to their peers.

The find­ings are based on a series of exper­i­ments that stud­ied peo­ple’s views about dis­hon­est behav­iour, and how they behaved once they were induced to feel finan­cial­ly-deprived them­selves. The effects were observed both in exper­i­ments where peo­ple actu­al­ly expe­ri­enced finan­cial loss and in those where they were mere­ly made to feel finan­cial­ly-deprived, rel­a­tive to oth­ers.

The effects were less­ened how­ev­er, when peo­ple saw that act­ing uneth­i­cal­ly either would be unfair, or would not improve their finan­cial sit­u­a­tion — or when they accept­ed that their finan­cial posi­tion was deserved.

Per­cep­tions of fair­ness were key to par­tic­i­pants’ deci­sions to act hon­est­ly or dis­hon­est­ly, said Prof. Mažar. That sug­gests that one rea­son why work­place theft is so com­mon is because employ­ees may see their own, and oth­er col­leagues’ finan­cial posi­tions as infe­ri­or and unfair, rel­a­tive to the com­pa­nies and exec­u­tives they work for.

Prof. Mažar’s co-authors on the study were Eesha Shar­ma of the Tuck School of Busi­ness, Dart­mouth Col­lege,  Adam L. Alter of NYU’s Stern School of Busi­ness and Dan Ariely of Duke University’s Fuqua School of Busi­ness.

For the lat­est think­ing on busi­ness, man­age­ment and eco­nom­ics from the Rot­man School of Man­age­ment, vis­it www.rotman.utoronto.ca/FacultyAndResearch/NewThinking.aspx.

The Rot­man School of Man­age­ment at the Uni­ver­si­ty of Toron­to is redesign­ing busi­ness edu­ca­tion for the 21st cen­tu­ry with a cur­ricu­lum based on Inte­gra­tive Think­ing. Locat­ed in the world’s most diverse city, the Rot­man School fos­ters a new way to think that enables the design of cre­ative busi­ness solu­tions.  The School is cur­rent­ly rais­ing $200 mil­lion to ensure Cana­da has the world-class busi­ness school it deserves. For more infor­ma­tion, vis­it www.rotman.utoronto.ca.

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Ken McGuf­fin
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Rot­man School of Man­age­ment
Uni­ver­si­ty of Toron­to
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E‑mail mcguffin@rotman.utoronto.ca
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