1. Dishonesty and Its Impact on Business
Jennifer Sawayda
Anderson School of Management
University of New Mexico
Albuquerque, NM
Based on the documentary (Dis)Honesty: The Truth About Lies 2015, YouTube,

2. Sources
Based on the documentary (Dis)Honesty: The Truth About Lies 2015, YouTube,
Dan Ariely, The (Honest) Truth About Dishonesty, New York, NY: HarperCollins, 2012; O.C. Ferrell, Linda Ferrell, and John Fraedrich, Business Ethics: Ethical Decision Making and Cases, 10th ed., Mason, OH: Cengage, 2015

3. Key Definitions Honesty: refers to truthfulness and trustworthiness
Dishonesty: lack of integrity, incomplete disclosure, unwillingness to tell the truth
Lying: untruthful statements
Wishful blindness: failing to notice warning sides due to wishful thinking
Ethical blind spot: when a person is unaware of his or her propensity to engage in misconduct
Sources: Dan Ariely, The (Honest) Truth About Dishonesty, New York, NY: HarperCollins, 2012; O.C. Ferrell, Linda Ferrell, and John Fraedrich, Business Ethics: Ethical Decision Making and Cases, 10th ed., Mason, OH: Cengage, 2015; Max H. Bazerman and Ann E. Tenbrunsel, Blind Spots, Princeton, NJ: Princeton University Press, 2011.

4. Common Rationalizations for Cheating
I didn’t think I’d get caught
I’m doing this to benefit myself or someone I love
Everybody does it
It’s just this one time
They owe me this
This is the only way to advance

5. Truths about Dishonesty
Cheating usually starts off small
Lying once makes it easier to lie again
Dishonesty can be contagious
Conflicts of interest make dishonesty easier
Distance makes it easier to be dishonest
Some people get a power trip from being dishonest

6. A Quick Word About Decency
Most people have the need to believe they are decent, good individuals!
This is why cheating often starts off small
In situations in which the other person has a disadvantage…
People tend not to cheat any more often
Some even give up something to “assist” the other person
In Dan Ariely’s book, he and two other researchers wanted to test if people would cheat more if they could cheat more without getting caught. The catch is that this cheating would involve someone who was legally blind.
Source: Dan Ariely, The (Honest) Truth About Dishonesty, New York, NY: HarperCollins, 2012

7. Businesspeople and a Legally Blind Customer
Two people—one who could not see—performed tests at a farmer’s market and with taxis
Rationally, it makes sense for the businesspeople to cheat the blind individual because the risks of getting caught were less
The exact opposite happened
Cab drivers even took a pay cut to give the blind individual a better deal
Source: Dan Ariely, The (Honest) Truth about Dishonesty, pp

8. Cheating Usually Starts Small
A matter of conscience
Because people see themselves as decent, they often won’t start off cheating by a lot even if they have the chance
Most frauds start off small (fudge factor)
Fraudsters believe it is just one time
Weston Smith of HealthSouth
Accounting fraud started off small
Note: In Dan Ariely experiment involving matrices with numbers, students were told to find the two nun each matrix that added to 10. Each correct selection would earn them money. Out of 20 matrices, the average completion rate was four in five minutes. When the students were allowed to shred their sheets and then tell the experimenter how many matrices they solved, the amount went up about two. Although students had the option of lying and saying they filled out more without consequences (in which they would have received more compensation), most did not because a smaller lie sits better with their consciences. We see the same thing in business. While there are people who cheat by a lot, most will only cheat a little bit. However, because so many more cheat by a little, this actually ends up having a greater negative impact than those who cheat by a lot.
Weston Smith was CFO of HealthSouth who helped perpetuate a fraud. Like most fraudsters, he believed he needed to engage in cooking the numbers to save the company, and it would stop soon. The fraud continued, and eventually he blew the whistle on the company.
Sources: Dan Ariely, The (Honest) Truth About Dishonesty, New York, NY: HarperCollins, 2012; Gabriella Malespin, “Former HealthSouth whistleblower addresses ethics,” April 15, 2014, i/ (accessed October 8, 2015).

9. Walter Pavlo
Worked at MCI, committed accounting fraud, sentenced to 41 months in jail
Contributors to the fraud
Corporate culture that encouraged cheating
Started off small; just this once
Believed it could be fixed
Cockiness
Source: Neil Weinberg, “Ring of Thieves,” Forbes, June 10, 2002, (accessed October 8, 2015); (Dis)Honesty: The Truth About Lies 2015, YouTube, (accessed October 8, 2015).

10. Lies Multiply and Become Easier
From a neuroscience perspective, the brain adapts
Negative feelings begin to decrease the more lies you tell
Garrett Bauer
Sentenced to nine years for insider trading
It became easier and easier for him to trade on insider information guilt-free
Dan Ariely, “Staring Fresh.” DainAriely.com, August 5, 2012, (accessed October 8, 2015).
Walter Pavlo, “Insider Trader, Garrett Bauer, Sentenced to Nine Years in Prison,” Forbes, June 5, 2012, (accessed October 8, 2015).
(Dis)Honesty: The Truth About Lies 2015, YouTube,

11. Dishonesty Is Contagious
The more likely you are to identify with someone who cheats, the more likely you are to cheat
The more you identify with someone, the more you believe their behavior is socially acceptable
The opposite occurs when you don’t identify with that person
“Everyone is trading on this stuff. There’s not one person in my office that wasn’t.”
—Garrett Bauer on insider trading
In another version of the matrix experiment, an actor was hired to cheat in a way that was obvious to the students. When the actor wore clothing from the college the other students attended, cheating went up. When he wore clothing showing that he came from another school, cheating didn’t increase.
Source: (Dis)Honesty: The Truth About Lies 2015, YouTube,

12. Disturbing Trends Many employees look to their managers for guidance
About 27 percent of expense reimbursement fraud comes from employees that hold executive or upper management positions
Others commit misconduct to get ahead
One-quarter of bankers would commit fraud to get ahead if they knew they could get away with it
Chris Farrell, “5 Steps to Prevent Expense Fraud,” Entrepreneur, October 21, 2014, (accessed October 8, 2015).
“More bankers ok with breaking the law to get ahead,” CNN Money, May 19, 2015, (accessed October 8, 2015).

13. Conflict of Interest
When it’s in your best interest, it’s easier to turn a blind eye to misconduct (willful blindness)
Lynn Brewer, former Enron executive, described how a culture of complacency destroyed the firm
Some Countrywide Financial lenders knew that borrowers were lying on their loans, but because they got bonuses for sales they encouraged liar loans
Sources: Lynn Brewer, Robert Chandler, and O.C. Ferrell, Managing Risks for Corporate Integrity (Mason, OH: Thomson, 2006): p. 35; Dan Ariely, The (Honest) Truth About Dishonesty, New York, NY: HarperCollins, 2012

14. The Impact of Distance Token matrix experiment Golf experiment
When conducting the matrix experiment, students were paid in tokens which they then exchanged for money. Cheating doubled.
Golf experiment
Most golfers would not pick up a ball to move it, but some would move it with their foot and even more would do so with their club.
It is hard to justify blatant misconduct but much easier when the severity of the misconduct is farther removed
Dan Ariely suggests in his book and documentary that stealing cash is taboo. However, stealing when it doesn’t involve taking cash directly, such as using tokens and trading them in for cash, is different. He points out the fact that as we move to an increasingly cash-less society, this idea of “distance” may result in more misconduct.
Dan Ariely, The (Honest) Truth About Dishonesty, New York, NY: HarperCollins, 2012
(Dis)Honesty: The Truth About Lies 2015, YouTube,
Source: Dan Ariely, The (Honest) Truth About Dishonesty, New York, NY: HarperCollins, 2012

15. Bad Apples Sometimes the people themselves are bad apples or greedy
Sam Antar
I had no remorse whatsoever as a criminal.
Bernie Madoff
However, the majority of people imprisoned for fraud admit it was not worth the consequences
Sam Antar appears to be have very little remorse for what he did
Peter Carbonara, “Takes one to know one,” Fortune, December 25, 2007, (accessed October 8, 2015); Quentin Fottrell, “Sam Antar: The CFO behind the Crazy Eddie’s Fraud,” MarketWatch, July 29, 2014, (accessed October 8, 2015).

16. What Do You Get with All of These?
The financial crisis!
The financial crisis was characterized by greed, self-interest, organizational pressure, social norms, distance, and more
Many traders were trading in derivatives and other financial instruments that represented money but was not money itself; hence, the distance factor comes in
Dan Ariely, The (Honest) Truth About Dishonesty, New York, NY: HarperCollins, 2012
(Dis)Honesty: The Truth About Lies 2015, YouTube,

17. How to Curb Dishonesty
Reminding people about their moral codes beforehand seems to have an impact
The Ten Commandments Test
Even non-religious people who are asked to try to recall the Ten Commandments are less likely to cheat afterward
The Honor Code Test
Reading through an honors code before an experiment decreases cheating
Sign at the Top
Having people sign documents at the beginning rather than the end decreases the amount of false information
Dan Ariely, The (Honest) Truth About Dishonesty, New York, NY: HarperCollins, 2012
(Dis)Honesty: The Truth About Lies 2015, YouTube,