Is “Ethical Fading” the Reason Your Best Employees Are Breaking the Law?
We tend to tell ourselves a comforting story about corporate scandal. In this story, the world is divided into two groups: the “Good Guys” (the vast majority of employees) and the “Bad Apples” (the sociopaths and fraudsters). When a scandal breaks—whether it’s falsified emissions data, a bribery scheme, or a fake account opening frenzy—we assume a Bad Apple infiltrated the barrel.
But behavioral science tells a more disturbing story. Often, the people committing the fraud are the model employees. They are the high performers. They are the ones who stay late, mentor juniors, and genuinely believe they are helping the company.
They haven’t lost their moral compass; they simply stopped looking at it. This phenomenon is known as “Ethical Fading.” It is the process by which the ethical colors of a decision fade into the background, leaving only the business colors—revenue, efficiency, and stock price—visible.
Understanding this psychological blind spot is critical because you cannot fix a human nature problem with a legal solution.
The Mechanics of the Fade
Ethical fading occurs when self-deception allows us to behave unethically while maintaining a positive self-image. It usually starts with a re-framing of the problem.
Imagine a sales manager is pressured to hit a quarterly target. They are $50,000 short. They decide to ship product to a customer early, booking the revenue now even though the customer hasn’t technically agreed to receive it until next week.
In their mind, they aren’t thinking, “I am going to commit securities fraud.” They are thinking, “I am solving a logistics problem. The customer wants the product anyway; I’m just tweaking the timing to help the team hit the bonus.”
They have successfully scrubbed the ethics out of the equation. It becomes a business decision, a math problem to be solved.
This is often exacerbated by “euphemisms.” We use language to sanitize our actions. We don’t “bribe” officials; we pay “facilitation fees.” We don’t “cook the books”; we engage in “aggressive accounting” or “financial engineering.” This linguistic camouflage allows the brain to bypass its internal guilt mechanism.
The Role of “Goal Fixation”
The primary driver of ethical fading is almost always goal fixation. When a target is set—”Open 8 accounts per customer” or “Drive costs down by 20%”—and attached to survival or significant reward, the brain develops tunnel vision.
This focus is evolutionarily useful for hunting or escaping predators, but in a complex corporate environment, it is dangerous. The brain filters out any information that contradicts the goal. Ethical constraints are viewed not as guardrails, but as obstacles to be navigated.
Consider the Ford Pinto case. The engineers weren’t evil; they were fixated on a specific goal: “Build a car under 2,000 pounds for under $2,000.” The safety of the gas tank was a variable in that equation, not a moral absolute. The goal crowded out the humanity.
The Failure of “Compliance Training”
This is why traditional compliance training often fails. Most training is designed to teach people the rules. It assumes that people break the law because they don’t know the law.
But in cases of ethical fading, the employee knows the rules. If you stopped that sales manager in a cool, calm moment and asked, “Is it okay to book revenue before a sale is final?”, they would say, “Of course not.”
But in the heat of the moment, under the pressure of the deadline, they aren’t accessing that part of their brain. They are operating on “System 1” thinking—fast, intuitive, and goal-oriented. Showing them another PowerPoint slide about the Foreign Corrupt Practices Act won’t stop them because they don’t believe they are engaging in corruption; they believe they are doing their job.
Designing for Humans, Not Robots
To combat ethical fading, organizations need to move beyond “policing” and toward “architecture.” We need to design environments that keep the ethical dimension of decisions bright and visible.
- Interrupt the Flow: Build “friction” into high-risk processes. Instead of a mindless “I Agree” checkbox, force employees to answer a specific ethical question before finalizing a deal: “Does this transaction include any side agreements not listed in the contract?”
- Audit the Goals, Not Just the Results: Leaders need to stress-test their incentive structures. If you demand a 20% growth rate in a flat market, you are practically mandating fraud. You are creating the pressure cooker that causes ethics to fade.
- Change the Language: Stop using sterilized business speak. Call things what they are. If a fee looks suspicious, ask, “Is this a bribe?” The shock of the word can snap the brain out of its business trance.
Conclusion
The uncomfortable truth is that we are all capable of ethical fading. We all want to be team players. We all want to win.
The job of the modern organization isn’t just to weed out the sociopaths; it is to protect the good people from their own psychology. It is to create a culture where “how we get there” matters just as much as “getting there.”
This requires a new type of leadership. It requires a corporate compliance officer who acts not just as a legal watchdog, but as a behavioral scientist—someone who understands that the biggest risk to the company isn’t the rulebook, but the way the human mind processes pressure. When we stop treating compliance as a legal box to check and start treating it as a human design challenge, we finally have a chance to keep the colors from fading.
