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8 Reasons Why Smart Leaders Sometimes Engage in Unethical Behavior at Work

In our personal and professional worlds, we are surrounded by some smart and successful individuals. This is just as true in a role like loss prevention as it is in any other professional capacity. But have you ever wondered why so many of these people can do such dumb things?

How in the world did Kenneth Lay and Bernie Madoff, to name but a couple, at the top of their games, do what they did? Why do smart leaders engage in unethical behavior at work?

Well, I happen to have the answer.

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My story isn’t much different from theirs, as I managed to turn a successful career as a financial planner, stockbroker, and entrepreneur into something far different. In fact, through a pattern of unethical behavior at work, I ended up becoming an international fugitive, was incarcerated in a Central American country, and served several years in US prisons.

As you can imagine, I paid a dear price to get that answer, including losing my family, freedom, country, and assets. But now I’m going to share it with you for free. This research helped me tremendously in my own life to recognize the thinking patterns myself and so many others have been guilty of indulging.

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Why Am I Sharing This Experience?

Upon release from prison, in addition to my obligation of serving three and a half years on probation, I had 208 hours of community service to fulfill. To satisfy that obligation, my choices were working out on the highway picking up garbage (and trying not to get run over) or giving talks. The obvious pick was giving talks.

Why should the loss prevention reader be interested in this? Because in our busy lives, we are all subjected to thousands of decisions each day, and it’s next to impossible to devote the necessary brainpower to evaluating and processing each of those decisions.

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When I went to prison, I was scared–not an uncommon feeling. I knew exactly what I did that landed me in there—32 federal felony counts of bribery, conspiracy, and money laundering—but I didn’t know why I did what I did. I didn’t need the money or the perceived power or prestige, so what on earth was I thinking?

With three out of four men released from prison today going back within three years, I knew I’d better figure out why it happened because I definitely did not want to be one of those returnees, nor did I really want to be there in the first place.

Well, what better place to do research on the subject of poor decision-making than prison? Everybody in there had at least one thing in common: we broke the law.

It became my mission to talk with as many fellow inmates as I could over the next several years, trying to discover if there were common thinking errors that we were all guilty of violating. Over the course of thousands of these conversations, the same glaring thinking errors became apparent time and again.

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From all walks of life, all types of crime–everything from wire fraud to murder–different socioeconomic backgrounds and education levels, it didn’t seem to matter; it was always the same erroneous mindsets and decision-making errors.

I have separated these thinking errors into what I now maintain are the eight critical thinking errors that underpin all unethical behavior at work.

As I unfold these eight errors, don’t be afraid if something sounds familiar. We all stick our toes in these waters. I just happened to hit all eight at once.

In fact, many times these thinking errors are “disguised” as something else and hard to detect. Or they try to seduce us by the promises of riches or easy money.

Let’s start with the queen mother of all critical thinking errors.

Critical Thinking Error #1: Entitlement

What is entitlement? It’s that sense that we are better than everybody else, or we’ve earned the right to [fill in the blank]. Why? Because we are all that and more; the world owes it to us. We calibrate at a higher level than everyone else.

Anyone with teenagers at home can appreciate the identification of this error. “Hey Dad, give me some money, my friends are waiting and I have to go.” Or, not so long ago, relating to downloading music and not paying for it. “If it’s on the Internet and accessible, then I can do whatever I want with it.”

My sense of entitlement started in college when I discovered that my fraternity brothers seemed to have more “things” than I did. They had it easier and didn’t have to work for tuition and book money.

Don’t we all consciously or subconsciously compare how we’re doing in life to our peer group? If they have more things than we do, it makes us feel uncomfortable. But if we lead the pack in material accumulations, our self-perception can be strong.

Critical Thinking Error #2: Super Optimism

What is super optimism? It’s ego. A sense that we are invulnerable, incapable of failure, faster, stronger, smarter than others. There is no downside to what we do. If we get ourselves in trouble, we can always get ourselves back out of trouble. Always have, always will.

Super optimism carried me into the financial services profession, a career I truly loved. You can help people achieve their goals and aspirations and be compensated for it. Perfect. I love helping people. It was super optimism that got me over the hurdle of not having a college degree, yet managing to get hired into a firm that required that degree.

You can combine the first two thinking errors, entitlement and super optimism, into one snappy word called “arrogance.”

I was arrogant. I enjoyed success at an early age, made great money, built a financial-planning practice, and seemed to be pulling ahead (monetarily) of my peer group. Heady stuff.

There’s an additional acronym that we can plug in here called PIG, which stands for personal instant gratification. Don’t we live in an instant gratification society? It seems like we all want it and we want it now; yesterday would be even better.

When we are programed for instant gratification, we are moving at such a rapid rate that it’s difficult to pause and actually ponder something. No way, it’s full-speed ahead, let’s go get it. Besides, I’m entitled to it.

The slippery slope of poor ethical standards in the workplace rarely starts with a giant leap over the edge. It almost always starts with a seemingly inconsequential decision that we don’t think much about. Maybe we’re rushed with kids, school, work, or relationships demanding our attention and pulling us in many directions at once. Or, it can be a seemingly urgent decision where we’re in a hurry, short on time, pressured by colleagues and friends to do it now!

In those snap decisions, sometimes our emotions hijack our logic, then it’s all hands on deck for the cleanup afterward.

Critical Thinking Error #3: Seemingly Unimportant, Urgent Decisions

So many fellow inmates told me they started looking back and going, “Wow, how in the world did I get here?” Well, we got there one decision at a time, often so subtle it didn’t register at first. Then we slowly started to shape or reshape our character, and the poor decision making became an everyday pattern of unethical behavior at work or elsewhere.

During the course of your loss prevention career, have you ever made a decision you wish you could take back? You wanted to hit the “reset” button, but it just wasn’t there? We all have, and no doubt it stemmed from a seemingly unimportant decision.

How do you prevent yourself from falling into this thinking trap? Mentors.

When we stop listening to mentors, that’s when we’re heading for disaster. Have you ever mentored someone who was heading for a major train wreck in life and quit listening to you? It’s frustrating.

Do you have people in your life who love you, know you, and can assist in guiding you in the proper direction? Share your thoughts and ideas with these mentors and listen carefully to the feedback. It’s tough to do it alone, so create your own winning team.

How do we justify a seemingly unimportant decision when we know in our heart of hearts it’s wrong?

Critical Thinking Error #4: Rationalization

We are a nation of rationalizers, aren’t we? How many of us drive the speed limit on the freeway? It is the state and federal law, but do we comply? Only when law enforcement is in the area. Can that same parallel be drawn in the business world? In loss prevention, we see and hear it on a regular basis. We sign the company code of conduct in orientation, then get pulled aside when we start our company position by the veterans who want us to know “how it really works around here” and “don’t try to rock the boat” by doing it by the rules.

The most dangerous phrase in the American lexicon is, “Everybody is doing it, so that makes it okay.” How many times have we used that rationale in our lives? When do we start? Usually very young.

The classic example in business is anyone who is responsible for filing an expense report. “I’ve been on the road for three weeks, missed my child’s birthday, picked up the two biggest accounts in company history, and I’m not even eligible for a wage review for six more months.” Enter the temptation to alter your expense report to boost your income to where you think it should be. There are several variations on expense report fraud scheme, and we’ve probably seen and heard them all at one point or another over the course of our loss prevention career.

I asked every white-collar criminal I could find in prison the same question, “What was the tipping point in your mind; the point where it all began?” Every one of them answered the same way. Their common rationalization was, “Just this one time. I’ll never do it again. I’m in control here. I can stop anytime.” I didn’t meet any inmates who figured they were going to get caught but did it anyway.

As is often experienced as part of our loss prevention investigations, every backslide down the slippery slope is greased with rationalization. Some of the most common rationalizations we hear in loss prevention would include:

  • “It’s a one-time thing.”
  • “I’ll never get caught.”
  • “I’m entitled to it.”
  • “It’s only zeroes; no one will get hurt.”
  • “I can borrow from next quarter to cover this one and then pay it back.”

And on and on. I’ve worked with over 200 business schools and occasionally sit in with the provost offices to hear students answer to a professor’s suspicion of plagiarism. The students’ most common defense: “That’s what I meant to say anyway; what’s the big deal?”

By rationalizing our behavior, we compound a small situation into something larger, requiring us to take more drastic steps.

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Critical Thinking Error #5: Affection Disconnection

Here’s where we are in our own little universe with an attitude that “It’s my world, and you all are just passing through.” Kind of like that popular radio station, you know the one—WII-FM, translated into “What’s in it for me?”

Perhaps you no longer consider the consequences of your decisions against the best interest of your loved ones. You’ve disconnected and have become emotionally unavailable.

In my case, a long-time friend approached me about the possibility of working as a broker for an entire state. She had just been appointed as the person who would decide whom would be investing the funds for the state and where. A powerful position she was not qualified for.

I thought, “What a great opportunity.” All my hard work had finally moved me up the corporate ladder of success to this role. But as you climb your corporate ladder of success in loss prevention, make sure your ladder leans against the right building. Mine leaned against a dollar bill with no solid foundation.

One thing led to another, I started making huge money, and she wanted some of it. My rationalizations intact, I began giving her money to keep her happy and sending me business. After all, I earned it and was entitled to share it with whomever I saw fit, right?

Critical Thinking Error #6: Laziness

Eighty percent of fraud is caught by something the perpetrator did not anticipate. Why? You get lazy, overconfident, want to spend money, have fun, and don’t want the tedious day-to-day job of watching your back.

In my case, eventual suspicions began on how a government employee (my friend) could lead such an opulent lifestyle on a modest income. Investigations began, accusations made, I could see the writing on the wall.

Critical Thinking Error #7: Situational Ethics

Instead of looking through the same ethical goggles at every dilemma, maybe we pick and choose our spots, evaluating the dilemma first and then deciding which set of ethics we are going to apply. It’s easiest to pick the set of ethics that cost us the least amount of time and money. Ethical decisions are easy until they cost you something.

Most of us speed on the freeway, yet I doubt if any of us speed through a school zone with children present. Both are state and federal laws, yet we will comply wholeheartedly with one and not the other. That’s situational thinking; it’s a common error that we see in retail loss prevention.

I considered myself an ethical guy and had this huge disconnect that this chain of events was happening to me, of all people. Situationally, I just wasn’t seeing the unethical behavior at work and wanted to separate myself from the confusion.

What was driving this disconnect?

Critical Thinking Error #8: Victimitis

What is victimitis? It’s playing the blame game. Have you ever known anyone who had a long list of people or things they blamed every malady in their life on? It’s never their fault, so they don’t take personal accountability. It’s so much easier to blame someone else instead. Yet people playing the blame game seem to continue to wallow in self-pity and misfortune because, until you take accountability for your own actions, it’s the easy way out.

By the way, you’ll never find more victims than you will in prison. What are they victims of? Someone told on them. That’s why they are incarcerated. It has nothing to do with their crime; it’s all about someone else being responsible for their containment.

Instead of facing potential federal felony charges, I moved my family out of the country to Costa Rica. From there, I knew I could figure out how to get out of this mess (super optimism).

Charges were eventually filed and warrants issued. Law enforcement began chasing me across Central America. After a couple years of insanity, my family moved back to the States. After four years of running, I surrendered in Costa Rica and was thrown in prison there.

I was returned to the United States, pled guilty, and sentenced to 71 months, $3.89 million in restitution, banned from securities, given 3.5 years of probation after eventual release, and 208 hours of community service.

My Climb Back Out

Prison is many things, but it all boils down to one concept—missed opportunities. As an inmate, you are removed from society socially, professionally, and personally. Life marches on outside, but inside it’s a terrible lack of participation.

Prison visitation is probably the most depressing place in America. All these kids want their daddies to go home with them. When they return home from a visit, they face the harshest peer group in America: their friends. God forbid if their friends find out their daddy’s in prison. It’s never the inmates who do the time; it’s all their loved ones.

I served my time as best I could, actually finishing my college degree through the mail. I got my college degree and divorced within a week in 2000.

On March 21, 2001, I was released from prison and sent to a halfway house in Arizona to begin my supervised release period. I was allowed to move in with my parents in the Phoenix area under home confinement shortly after arriving in Arizona. Thankfully my parents were supportive, which went a long way in my reorientation to society.

I got a job driving a delivery truck for a firm based at the Phoenix Airport. My pay was $8.50 an hour. I loved that job. It was hard but satisfying work, and it gave me a chance to readjust to the world after being “elsewhere” for eight years.

To satisfy my community service, I started giving talks. This led me to realize my true passion in life, sharing what I had learned in my life with others. I gave hundreds of talks to any group that would listen, honing my professional development skills, and building a reputation as a speaker.

As my audiences continued to expand into different areas of life and professions, it once again became clear that even though so many of us are in diverse fields, the same common thinking errors continue to appear.

In fact, I had the opportunity in 2010 to speak in both Europe and South America. What I found most interesting in both locations was what was on the peoples’ minds—concern for their kids and how to address entitlement issues with them. Sound familiar? There’s a universal theme today to the thinking errors I’ve shared in this article.

Because I exhibited unethical behavior at work on so many levels, it’s important to me to give my audiences a heads-up on not only the detection but also the prevention of these dilemmas.

Avoiding Unethical Behavior at Work

Now that I’ve identified these thinking errors, let’s talk about thinking skills that can help assure us of making the right call when faced with an ethical quagmire. There are any number of systems for decision processing, but the most effective and easiest one for me to remember and use was developed by my favorite author, Dr. Norman Vincent Peale.

Dr. Peale outlined three basic decision-making steps:

1. Is this decision I’m considering legal?

Obviously for me, if I’d implemented this system in the first place, I would not have gone on to do the things I did.

2. Is the decision I’m considering going to be a win-win for all parties concerned?

There should not be “winners and losers.” Everyone is treated evenly and fairly.

3. How will I feel about myself in making this decision?

In my own life, I equate it to asking myself how my two sons would perceive me after this decision. Will they be proud or ashamed? Basically, this is thinking outside our own universe and taking into consideration the impact on our loved ones.

Hopefully these ideas will resonate with you, your loved ones, your friends, and your loss prevention coworkers and give you a common ground to discuss your own individual challenges with each other and how to avoid falling into these traps.

Remember, we are exactly where we are in life today due to every decision we’ve ever made. Hone your personal decision-making skills and, just as important, teach these skills to your children.

This article was first published in 2011 and updated December 10, 2018. 

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