Most ethics and compliance programs are built like fortresses: thick walls of policies, codes of conduct, training modules, and reams of controls designed to keep misconduct out. When something goes wrong, the first response is to reinforce the structure—add another rule, tighten enforcement, remind people of the consequences. The assumption is that if misconduct occurs, the defenses were insufficient, so let’s add another brick to the wall.
Nobel laureate Daniel Kahneman famously observed that an “organization is a factory that manufactures judgments and decisions.” If that’s true, then ethical failures aren’t necessarily breaches of the walls; they could be defects in a production process that’s occurring within those walls. The real question for ethics and compliance professionals, then, is not whether the rules are clear and the consequences high enough to stop unethical behavior, but how to ensure that employees are reliably producing sound ethical decisions in their day-to-day—especially when under pressure. Decision making, not rule breaking, should be the focus.
Failing to appreciate this dynamic may help explain why after decades of investment in compliance infrastructure, ethical failures remain stubbornly familiar.
Enter the field of behavioral ethics, a subfield of behavioral science that studies why good people make bad ethical choices.
Behavioral ethics research shows that ethical decision making is constrained by predictable psychological limits, what is known as “bounded ethicality.” This means that unethical behavior is rarely the work of true villains—those intentionally trying to break the rules to do harm. Far more often, it’s the work of people who genuinely believe they are good, principled, and honest, but nevertheless engage in unethical acts. The uncomfortable truth is that much of what we focus on in ethics and compliance is aimed at the villains, not at those who are responsible for most of the damage—all of us “good” people.
Research by leading behavioral ethics scholars shows that people cheat, lie, and bend rules, but usually only up to a point. We cheat just enough to benefit while still preserving our self-image as ethical individuals. This is not calculated wrongdoing; it’s moral self-licensing. We want the personal gain without the guilt that comes with cutting corners to get it.
Rationalizations are the mental scripts that allow ethical discomfort to dissolve, often in real time. “I had no choice.” “This is basically harmless.” “It’s what the business expects.” “I’m doing this for the team.” “This is just how we do things here.” These phrases are not after-the-fact excuses; they are ethical decision-making workarounds. They neutralize guilt before it has a chance to intervene and stop ethical (or even illegal) behavior from continuing.
Particularly when employees are under pressure, rationalizations can act like oil on the gears of decision making. They lubricate moral awareness just long enough for the bad decision to be made—and once that happens, behavior is hard to reverse, often getting worse over time.
Ethicist Iain King offers a deceptively simple answer. He says that ethical decisions require two things: time and the absence of rationalization. Remove either and ethics collapses. Preserve both, and we all have a much better chance of acting with integrity.
This insight suggests reorienting our work around concepts of behavioral compliance—the design of ethics and compliance programs grounded in how people actually think and decide, not how we wish they would.
For ethics and compliance leaders, this reframes our roles. We are not just rule enforcers; we are decision architects.
Decision architects do two things particularly well. First, they design ways to slow things down when necessary. High-speed workflows, aggressive targets, and constant urgency push employees toward automatic, self-protective thinking to manage pressure. Strategic friction—pause points, checklists, second looks, and escalation triggers—creates space for reflection and moral awareness. The more ethical risk a decision carries, the more thoughtfulness and outside input business leaders (those who actually create and should own the risk) require. If done right, certain decisions can be slowed down strategically, allowing the larger organization to move faster and more profitably in the long run.
Second, decision architects relentlessly surface and stifle rationalizations. They do this by helping employees identify the euphemisms and excuses embedded in organizational culture and strip them of legitimacy. “Just this once” is exposed as rarely just once. “Everyone does it” becomes a warning sign, not a justification. Often this means ethics and compliance leaders are hypocrisy hunters; they are looking in the dark places where organizational values and mission aren’t being followed, not because people want to violate those ideals, but because it’s harder than it should be to live up to them. This is where rationalizations live, and they should glow bright red for everyone to see—so long as they’re looking.
When we give employees time to think and deny them the comfort of rationalization, we fundamentally change the output of our decision factories. We move from ethics and compliance as enforcement to ethics and compliance as decision making architecture—and from hoping for ethical behavior to actively designing for it.
At True North 2026, I will expand on these ideas in my keynote, “The Science of Doing the Right Thing,” exploring how behavioral ethics can help compliance leaders move from rule enforcement to decision architecture.
Join ethics & compliance leaders for a live, practitioner-focused retreat examining how AI, data, culture, and human behavior are reshaping the function.
📅 February 11, 2026
🎟️ Register here
Todd Haugh is an Associate Professor of Business Law and Ethics and the Arthur M. Weimer Faculty Fellow in Business Law at Indiana University’s Kelley School of Business, where he also serves as the Director of the Institute for Corporate Governance + Ethics. Professor Haugh teaches and writes on white collar crime, business and behavioral ethics, and judgment and decision making. He is a former Supreme Court Fellow, federal law clerk, and white collar criminal defense attorney.