Four steps to prevent professional misconduct

The conviction of Sam Bankman-Fried for fraud in a US court was one of the most high-profile professional' misconduct cases for years.

In March 2024, he was sentenced to 25 years in jail and ordered to pay $11 billion.

The scale of the malfeasance at his cryptocurrency exchange FTX and Alameda Research might have been unusual.

However, smaller cases of professional misconduct appear to be a widespread phenomenon spanning law, healthcare, finance, and beyond.

There are typically around 11,000 medical malpractice payment reports a year in the US healthcare industry.

Meanwhile, UK regulator the Financial Conduct Authority (FCA) typically levies fines worth more than £200m a year.

The number of known cases – in addition to those that go undetected or unreported – suggests we not dealing with the issue very well.

Those found guilty of violating the law or the rules of their profession’s governing body face fines, losing their job, and even prison. However, we should do more to address the underlying problems that fuel professional misconduct.

Is misconduct caused by bad apples or a bad barrel?

A useful first step is getting a better understanding of why people commit their infractions in the first place.

The individuals at the centre of a corporate scandal are often portrayed as bad apples. According to popular perception they act alone, incited by greed, narcissism, and personal ambition.

That can be a part of the motive, but the reality is usually far more complicated.

I explored this in a paper with my WBS colleague Dimitrios Spyrionidis, William Harvey from Melbourne Business School, and Navdeep Arora.

We interviewed 70 inmates at a US prison who were incarcerated for white collar crimes.

These inmates often blamed themselves for having deviated from the standards of acceptable behaviour. That is hardly surprising; in prison there is plenty of time for a great deal of self-reflection.

But the idea of a single bad apple is rarely an adequate explanation for events.

Misconduct often occurs in a wider environment that normalises, tolerates, and sometimes incentivises inappropriate behaviour.

What can leaders do to improve professional conduct?

In most cases, the inmates we questioned did not stand to gain personally from their actions.

Instead of greed, they tended to be motivated by other factors. This included a fear of being seen as a failure, or a desire to promote a client’s interests.

Alternatively, they may be unable to cope with compliance requirements or personal issues such as divorce or addiction. Other personal frailties can also come into play, such as ego and perceived invincibility.

In this context, an organisation which encourages employees to chase profits above almost all other considerations can encourage and enable bad behaviour. It may even do so inadvertently.

In an workplace where everyone else seems to be engaging in dubious conduct, many will feel pressured to do the same for fear of losing status and of falling behind.

And organisations can sit in a wider ecosystem in which misguided regulation and compliance regimes create a permissive environment for misbehaviour or do little to stop it.

This all suggests that bad apples sometimes go rotten in the bad barrel of a toxic organisation or in the bad cellar of a poorly-regulated industry. So, what should be done to prevent this?

1 Get the regulation right

Regulation is part of the answer, though tighter rules do not provide a full solution on their own. There is also no ‘one size fits all’ answer. If regulations are too proscriptive, organisations can work around them; if they’re too loose they can lose their meaning.

On the national and global stages, we need to think about the diffuse boundaries that can develop between regulators and those being regulated. We also need to consider the way in which professionals and companies can move across borders to avoid regulation.

Regulation needs to be combined with other, normative cultural elements which can change organisational and individual behaviour.

2 Promote employee development

Any apple can turn rotten in the wrong environment, so organisations need to ensure they promote the right sort of employee development.

Companies should reflect on their HR policies, from recruitment to their practices around performance management.

Individuals need a supportive structure. Interventions around health and wellbeing are important, particularly in high-pressure environments where stress levels can build quickly and lead to bad decisions being made.

At a practical level, companies need to look for where people may be feeling particularly pressured. They can then put interventions in place to relieve that stress.

3 Foster an ethical culture

Equally, organisations should interrogate their culture to check its toxicity, and promote a workplace culture that helps to prevent and dissuade people from engaging in misconduct.

There is a continuum from professional misconduct towards less serious, but still unethical, missteps.

People can start engaging in bad behaviour if they think it is acceptable or even expected. Perhaps it serves the client’s interest or is normalised within their working environment. This can then progress to more serious acts of misconduct.

To tackle that, managers should outline clear ethical principles, then focus on acknowledging and rewarding sound decisions and on calling out unethical actions.

Behaviour can change for good and bad, depending on how one has been socialised, the influence of role models, and the context of training.

4 Create communities of good conduct

The responsibility for all this ultimately lies at an organisation and a sub-organisation level, in the culture within individual departments. That is where you can intervene effectively.

Companies can set up peer-led, cross-team communities to encourage the desired conduct and discourage professionals from making bad decisions.

To be most effective, these groups should be empowered to review and recommend changing any incentives that are at odds with sound professional conduct.

Companies can also open multi-stakeholder conversations about right and wrong choices, what influences misconduct, and how unethical decisions can negatively impact on others.

Focusing on changing the system is not to deny the responsibility that individuals should take for their actions. But if an organisation fails to ensure the right culture is in place, it is at least partly culpable for what goes wrong. It could also find that more problems arise in the future.

Organisations need to constantly work hard to keep their reputation intact, particularly when it comes to ethical behaviour.

After all, Enron is still a well-known name in the corporate world more than two decades after it collapsed shows that. That shows once a business gets tarred with the professional misconduct brush, it can be very difficult to change perceptions.

Further reading:

How to build a more ethical team

Why the Rock trumps politicians for leadership

Three ways to keep staff engaged at work

How should managers lead in a crisis

Graeme Currie is Professor of Public Management at Warwick Business School.

Learn more about the art of ethical leadership on the four day programme Behavioural Science for Ethical Leaders and Negotiators at WBS London at The Shard.

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