Lance Armstrong cited hundreds of drug tests as proof he had not cheated to win the Tour de France seven times. Then he confessed to Oprah and was sued by the businesses that had paid millions for his endorsement. For decades, Bernie Madoff was able to convince not only hundreds of investors but also the Securities and Exchange Commission that his Ponzi scheme was a legitimate investment plan. Now he plans to spend the rest of his life in a federal prison.

Will it ever end?

When the rich, powerful and self-righteous are caught lying, stealing or cheating, the headlines can be huge, and the sentences can be stiff. But fear of hard time or humiliation apparently isn’t enough to discourage bad behavior by them or the rest of us.

All of us lie, steal, and cheat, at least a little. In a 2012 survey, 52 percent of employees in Fortune 500 companies reported observing misconduct in their workplace in the previous month. And a 2010 study that reviewed applications to American colleges by Chinese students found 90 percent of the recommendation letters were fake, and 70 percent of the essays with those applications were written by someone other than the applicant.

Aren’t they breaking some law?

When people lie and cheat, they ignore moral edicts such as The Ten Commandments, the lessons their parents tried to teach with switches or soap, and the laws criminalizing deceit and deception. And even when governments use “special” techniques such as water-boarding, people persist in lying.

Clearly, punishment isn’t enough to discourage bad behavior. As Professor Leslie E. Sekerka has noted, “A compliance-driven approach may help people become aware of the rules, [but] it does little to cultivate, support, and build the moral competencies necessary for ethical strength.” In fact, compliance-driven approaches may backfire, as Jonathan Macy of Yale Law School argues. Macy suggests ethical behavior has declined among the investment banks, law firms, accounting firms, and credit reporting agencies that serve the financial services industry because the intense regulation imposed on that industry. In his book The Death of Corporate Reputation, Macy explains:

Whereas these sorts of firms once depended on their reputations to attract and retain business, such firms no longer depend on maintaining their reputations as a key to survival. Instead, regulations often, either directly or indirectly, require companies that issue securities to retain various Wall Street service providers such as outside auditors, credit rating agencies, investment banks, and law firms. Because the demand for the services of these firms is driven by regulation, the firms don’t need to maintain their reputations in order to attract business. As such, reputation is no longer an asset in which it is rational to invest.

One example Macy cites is the Texas law firm Vinson & Elkins. That firm, on its website, pays homage to the Macy’s traditional economic model of reputation by saying: “We are committed to the highest ethical standards, both in our service to clients and in our personal lives,” and “[o]ur success depends on maintaining an impeccable professional reputation.” 

But lawyers at Vinson & Elkins had represented Enron, and had issued “fairness opinions” that were crucial to the transactions that defrauded investors and bankrupted the company. Vinson & Elkins was sued and ultimately settled by waiving $3.9 million in unpaid fees and paying $30 million to the Enron bankruptcy estate, which certainly seems like an admission of wrongdoing that should have tarnished the firm’s reputation. But the firm did not have to disgorge $162 million in fees it received from Enron before bankruptcy, no lawyer from the firm was charged with professional misconduct, the partner responsible for the Enron account was later promoted to managing partner, and the firm soon became the first in Texas to have average partner compensation exceed $1 million per year. As Macy says, “Vinson & Elkins’s reputation was enhanced, not tarnished, by its relentless representation of Enron….” And he offers a reason: “Clients like aggressive lawyers.”

Is honesty too much to ask?

Americans tell an average of 1.65 lies per day, according to one study. In another study of people meeting strangers, the subjects said an average of 2.92 false things during only 10 minutes of conversation. So, as John Denver sang, “truth is hard to come by.” But truth isn’t always a good thing. Deceit is actually an important social skill — a skill that is exhibited not only by humans, but also by animals, including microbes. And children who start lying by age two are more likely to be successful as adults. Why? Lucy Kellaway explains:

Offices are glued together with lies. We pretend to like people we work with. We must pretend to be satisfied with our jobs. We must pretend to think our company is better than the competition. By accepting a place in any hierarchy, you are bending yourself out of shape.

Assuming Kellaway is right, there still are times and places when businesses need to count on managers and employees to be honest. Fortunately, Daniel Ariely, author of The (Honest) Truth About Dishonesty, and others have suggested ways to encourage people to be more honest when it matters:

  • Insist managers model honest behavior consistently, even when it results in reduced sales or profits.
  • Avoid conflicts-of-interest, unreachable goals and other temptations to cheat.
  • When employees have opportunities to cheat, let them know they are being watched or their work will be checked by people they can’t influence.
  • Discourage employees from making decisions when they are tired, hungry, stressed, irritated, annoyed, or feeling self-righteous.
  • Reward honesty, regardless of the consequences.

Honesty is a lovely word. But honesty is too much to ask, at least from all of us all of the time. Fortunately, our goal can and should be more modest. The first step, of course, is to be honest with ourselves. Once we master that, we can demand more honesty from others.