Why Do Certain Companies Routinely Have Problems With Fraud?

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The Washington Post published a recent story about a new working paper from researchers at the Harvard Business School that contained this interesting fact:

At least one previous study has found that unethical workers actually have longer tenures at companies than ethical ones.

Why? Because they tend to be “more productive” by skirting the law. The article gives this example: A firm might be tempted to look away when a rogue trader who is making millions is found to be overstepping legal boundaries. Of course, that “productivity” is not only not real, it is short term. Once the illegality is discovered, that productivity not only vanishes but becomes a huge liability.

It is not hard to think of examples of companies that are particularly susceptible to this type of short-term profit focus at the expense of long-term goals, like avoiding liability. Companies in the financial-services industry, companies looking to inflate their profits for various reasons, and publicly traded companies come to my mind.

The root of the problem is the willingness to “look past” transgressions for short-term financial gain–you know, the “greed is good” mindset. Until that culture is upended in American business, we should expect more fraud, not less.