Using ‘Nudges’ to Promote Ethical Behavior

June 26, 2018

A recent article in The Wall Street Journal examines the emerging trend of corporate ethics and compliance officers using “nudges” — a concept from the field of behavioral science — to promote ethical behavior among employees. First popularized by “Nudge,” a 2008 bestseller co-written by Richard Thaler, winner of the 2017 Nobel Prize in Economics, the idea is that strategic “choice architecture” can nudge people towards better decisions in a variety of areas.

To illustrate the basic concept, the article provides several examples of nudging. One company made employees opt out of its 401(k) retirement savings plan instead of opting in. While employees remained free to choose not to participate in the 401(k) plan, this simple change in “choice architecture” led to higher participation rates. Another company nudged its employees into making healthier eating choices by rearranging the food in the company’s cafeteria so that unhealthy food was removed from eye level.

The article cites Todd Haugh, an assistant professor of business law and ethics at Indiana University, who wrote an academic paper titled “Nudging Corporate Compliance” last year. According to Haugh, companies seeking to nudge employees towards more ethical behavior should begin with what he describes as “low-hanging fruit,” such as expense reports. A nudge in this case “could involve having employees attest they will be honest in reporting their expenses before they fill out the report, which has been shown to reduce fraud.” Mr. Haugh argues that such minor nudges “can set the tone for larger benefits down the road.”

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