Why Do Idealistic People Sometimes Act Unethically?

 I often tell people that, for purposes of the discussion I’ll agree to presume, whether true or not, that regulators, academics, and non-profit people are generally more ethical than businesspeople.  (I am inclined to believe that it is true that idealistic ethical young adults are more likely to choose regulator, academic and non-profit careers than young adults who are less idealistic and ethical.)

Nonetheless, regulators, academics, and non-profit people often perform unethically in ways that businesspeople might not do (examples below).  Why is that?

Most businesspeople govern their behavior, questioning themselves to assure that they are acting ethically.  They do so because:

1. They are aware of their potential conflicts of interest.
2. They are fundamentally ethical as are most people.
3. They want to avoid legal, regulatory, etc. problems.
4. They want to avoid customer backlash.

Unfortunately, it is less common for regulators, academics, and non-profit people to apply such governors to their behavior.  They view themselves as “the good guys” who are trying only to help people.  People with that mindset are less likely to question their actions, as they “know” they’re acting ethically.

Furthermore, most people in our society are quick to justify actions based on “the ends justify the means”.  If my end is “to help people”, then how can it matter what steps I take to achieve my goal?

Lord Acton is typically credited with the following quote, which I have found to be predictive: “Power corrupts; absolute power corrupts absolutely.”  I believe that a benevolent dictatorship can be the most effective government in the short-term.  For example, in a crisis (e.g., on the battlefield), someone must take charge and others must cooperate to avoid disaster, if there is not enough time to discuss alternatives.  The problem is that the longer a benevolent dictatorship lasts, the more likely it is to get corrupted (due to his/her corruption or to the corruption of her/his associates and certainly after the benevolent dictator is gone).

It is important to stress that I am not maligning regulators, academics and non-profit people.  Au contraire, I’m crediting them with being more ethical than the typical person.  I’m simply saying that even idealistic, well-meaning people are human.

When the government runs a program, we lose oversight.  Regulators in charge of a program want the program to succeed.  That’s generally their job description and certainly is beneficial for their career.  Consider state long-term care insurance programs.  The impetus is to help people plan effectively for LTC needs in their family.  If they can do a better job with private LTCi, that should be fine.  However, if people use private LTCi, the public program gets smaller.  Focusing on the success of the public program, rather than on how best to achieve the broad goal, can reduce success in achieving the broad goal. 

I believe “checks and balances” (separation of powers) is the primary reason for the historic success of the USA.  It is important for government to create rules and to monitor performance, in order to maintain a fair market; that is, to provide such a check and balance.  When the government runs the program, we lose the independent check and balance.

 

Examples

Note: In examples #2 and #4, I use quotation marks to make it easier to read.  The commentary does not exactly quote the participants but conveys my understanding of the conversation faithfully.

The Affordable Care Act (ACA) included a long-term care insurance (LTCi) program: the CLASS Act.

Example #1: Secretary of Health and Human Services Kathleen Sebelius declared repeatedly that the CLASS Act was fundamentally sound despite her staff (as well as industry experts) telling her that it was not feasible.  I defended Sebelius at the time, saying that it was her responsibility to state her belief, even if it differs from her staff’s advice.  However, I was shocked when, about a week after the ACA passed, Sebelius matter-of-factly stated that it wouldn’t work.  I concluded that she had been deceiving the public, legislators and other regulators, in order to help get the ACA passed.

Example #2: At an industry conference, I participated in a private meeting with about a dozen people in the LTCi industry and two federal employees working on implementing the Class Act.  It is important to stress that I admire both of these people who worked on implementing the Class Act.  I’ve known them for decades and they are bright people with integrity.  However, they kept defining the law in ways that were absolutely contrary to what the law said.  Getting annoyed, I asked an admittedly rude question: “I’ve read the law multiple times and have been able to understand every paragraph based on my assumption that it was written in English.  But you’re describing provisions that are incompatible with English interpretation of the law.  It seems to be the most amazing document ever written!  Its entire long text is intelligible based on the assumption that it is written in English, but you seem to be telling me it is actually written in a different language which results in significantly different meaning.  Is that right?  How can you do that?”

The actuary responded first.  He said: “You’re right, but I’m comfortable doing it because we’re making it better.”  (Those are common regulator attitudes: “We know best” and “the ends justify the means”.)

The long-term public servant then said “You’re right.  We might not get away with it.”

“Group think” is a problem in all arenas, not just in government.  That’s another reason why we need broad involvement and checks and balances.

Other examples:

Example #3: I can provide a separate document in which I’ve identified some of the myriad inaccurate communications by proponents (mostly regulators and legislators) of the State of Washington’s “WA Cares Fund”, which is a state-run LTCi program.  It is mind-boggling.

Example #4: The #2 person in the California Partnership for Long-Term Care was trying to convince me to use their marketing materials (I was running an insurer’s LTCi program at the time).  Although that would have saved my company significant time and expense, I explained I could not do so because California’s materials did not satisfy my compliance standards.

He asked for an example, so I noted that their materials said that the Partnership policy would cover your LTC need for the rest of your life.

·        He: “What’s wrong with that?”

·        Me: “The longest benefit period is 5 years.”

·        He: “So what?  After that you can go on Medi-Cal.”  (Medi-Cal is California’s version of Medicaid.)

·        I was stunned that he would represent that going on Medi-Cal would mean that the Partnership policy provided benefits for the rest of your life.  I’ve never heard anybody in private industry make such a claim and we’d be rightfully called on the carpet by the state if we did so.  However, I chose not to question that unethical explanation.

·        Me: “But what if you have countable assets and the Partnership asset disregard does not cover all of them?  You could have to spend down hundreds of thousands of dollars after your 5-year benefit period expires and before you could qualify for Medi-Cal.”

·        He: “That does not matter.”  (This quote is exactly what he said.  According to him, it did not matter that the statement is blatantly false!)

Capable regulatory oversight blocks misleading private industry materials, but nothing blocked the California Partnership from distributing misleading materials.

Of course, some regulators are quite careful with the materials they develop.  Later, Sandra Pierce Miller became the #1 person in the California Partnership.  Very shortly after she assumed that position, we met at a conference.  She asked me what I thought of their marketing materials.  When I said I do not use them because they don’t meet my compliance standards, she was greatly concerned and interested.  Ms. Miller made appropriate changes to the materials.

This happens with elected politicians as well.  Consider all the “mandates” they conjure up that they’ve been given by voters in close elections.

I sometimes select Hillary Clinton as an example.  Most people seem to either adore her or hate her.  My position is different.  I respect Hillary because she is smart, hard-working and I believe means well.  However, over the years she seems, in my opinion, to have developed the viewpoint that she and her close friends can solve all our problems and that if she is not in control, we’ll all suffer.  Therefore, she believes that anything that helps her accomplish her goals is necessarily good for the country.  I think if Hillary and I had known each other in college, we could have been close friends and in great agreement.  But over time, I’ve become disenchanted with central control and Hillary has conflated her success and what’s good for the country.