Table of Contents

Neuroeconomics and the Firm

Neuroeconomics and the Firm

Edited by Angela A. Stanton, Mellani Day and Isabell M. Welpe

The ideal firm has been studied over several centuries, yet little is known about what makes one successful and another fail. This pioneering book brings together leading researchers investigating the concept of the firm from a neuroscientific perspective.

Chapter 13: What Neuroeconomics Informs Us About Making Real-World Ethical Decisions in Organizations

Donald T. Wargo, Norman A. Baglini and Katherine A. Nelson

Subjects: business and management, entrepreneurship, strategic management, economics and finance, behavioural and experimental economics, economic psychology

Extract

Donald T. Wargo, Norman A. Baglini and Katherine A. Nelson The financial collapse of 2008 and 2009 shows clearly what can happen to world economic markets when trust evaporates. In general, the public perceives that ethical lapses and personal greed – in myriad institutions and firms – are the root cause of the global collapse. It is also clear that we cannot restore confidence in governments, regulatory bodies and businesses until the public trusts them. However, the public will not trust them until they see that these governing bodies are behaving ethically and making ethical decisions. It is evident that even if ethics training was provided to the individuals in these institutions at some time in the past, it failed miserably. Why did it fail? We believe that the training in vogue in institutional settings is not designed to take the entire human being into account with all of the complexity of the human brain and the situations under which most people make critical decisions. Corporate ethics training is overly rational and does not take into account the real world, its threats, coercions and risks. Recent research on how the human brain makes decisions and thinks about ethics is not only interesting, but it also provides important clues for organizational development professionals – and for many others – about how people in organizations make ethical decisions and what factors influence them. Recent neuroeconomics research has important implications for individual decision-making, and also highlights the effect that organizational culture can have on the decision-making process....

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