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Is there a financial reward for acting ethically?
Article by Jay L. Zagorsky.
It is almost Christmas time, and the song “Santa Claus is coming to town” keeps playing over and over. For me, the key lines of this jingle are “He knows if you’ve been bad or good so be good for goodness sake.” The implications of this are clear: Good kids will get more presents on Christmas morning.
For me, the key lines of this jingle are “He knows if you’ve been bad or good so be good for goodness sake.” The implications of this are clear: Good kids will get more presents on Christmas morning.
I have been puzzling over these lyrics for years and wondered if the lines were true. Beyond being rewarded with more of Santa’s largess, does being ethical and honest lead a person to riches? And do bad people get their comeuppance? Or is it the other way around? Put differently, are rich or poor people more likely to engage in unethical behavior?
While this debate has lasted a long time, only recently has information been gathered that can start to answer these questions. I recently analyzed the data and was surprised by the results.
Bad or Good
Despite Santa’s admonition, popular culture is full of examples of people being rewarded for being bad. People often lie, cheat or steal or think about doing these acts in an attempt to get ahead. Unethical behavior is considered a shortcut for reaching money, power, or fame.
Television is filled with shows such as “Game of Thrones,” “Mad Men,” “House of Cards” and “Boardwalk Empire” in which the main characters have reached financial success using underhanded means. While these shows are entertaining, they are fiction and cannot reveal if actually engaging in unethical behavior systematically improves a person’s financial situation.
Conversely, many religions are on Santa’s side, preaching the idea that individuals who follow ethical precepts will be richly rewarded. Understanding the connection between behavior and financial success can be tricky, however, since it’s hard to know for sure the direction of causation. Is there is a relationship between the two?
Previous research has not presented a clear finding on the relationship between personal finances and ethics. Nevertheless, understanding the relationship is important.
For example, if financial success leads to less ethical behavior, then society needs more rules and punishment for richer people than for poorer people. In Finland, the fine associated with speeding tickets is based on the driver’s income. Rich people pay a high fine, while poor people pay only a small fine.
On the other hand, if the argument is that the poor are more likely to break ethical standards, then perhaps more rules and punishment are needed for those who are unsuccessful financially.
If causation runs the other way and more ethical behavior leads to financial success, then people have a reason to do good, without needing to assume there is a heavenly reward after death or be deterred by threats of punishment on Earth. However, if less ethical behavior leads to financial success, then punishment should not only fit the crime but also the financial status of the guilty.
So what is the relationship between ethical behaviors and financial outcomes?
My recently published research investigated this relationship based on surveying about 9,000 randomly selected U.S. residents in their 20s and 30s. These people were asked detailed questions about their wealth over time. They were also asked a number of ethical questions that enabled me to create 15 different moral indicators.
Six indicators tracked unethical behaviors: stealing less than US$50, stealing $50 or more, ever being arrested, a number of times arrested, believing that you often lie or cheat, and having a parent believe you are a liar or cheater.
Nine indicators tracked ethical behaviors: donating money, volunteering time, returning extra change to a cashier, giving money or food to the homeless, believing people should help those less fortunate, believing that helping people in trouble is something to do, obeying societal rules, stating you follow religious rules and responding honestly to questions.
A surprising result
Surprisingly, I found little correlation between either set of behaviors and wealth when respondents were younger.
Small ethical breaches such as stealing less than $50 and appearing honest to the interviewer seem to have no impact on wealth accumulation. This suggests small ethical breaches do not have large financial impacts for
There also was no relationship between financial wealth and being honest with a cashier or helping the homeless. While this suggests small acts of kindness won’t lead to great material wealth, at the least there appears to be no financial penalty. If this finding is replicated in other research, it removes an excuse for not helping others.
However, larger ethical breaches and wealth do have a clear negative relationship. Breaking rules, stealing, and being arrested were associated with less wealth. Moreover, the older the respondents got the clearer the association between these unethical behaviors and having less money.
Unfortunately, the direction of causation is unknown, so it is uncertain if breaking rules causes less wealth or being poor causes people to break rules.
Are ethical people financially rewarded or penalized for their actions?
My research suggests some, but not all, ethical or unethical acts are clearly associated with financial changes.
So what should you do if you want to be rich? I would play it safe. If you want to be wealthy, then be honest and ethical. Doing small ethical acts like giving money to the homeless and giving change back to a cashier who made a mistake will not harm your wealth.
This means doing the right thing will not punish you financially, so what are you waiting for? Act the way Mom and Santa Claus expect you to act – the right way.