How does the fear of other people’s opinions change whether or not you do the right thing? 

How does being judged keep you from being too selfish? Sometimes, the only thing keeping us from making unethical decisions is the rules we need to follow. While we’d all like to say that we’re hard-wired to be good people, we often need to increase transparency to maintain our integrity.

To help you build and maintain high standards of behavior, we partnered with CPA Academy to bring you a webinar titled “Painless December Ethics CPE.” Caleb Newquist, Gusto’s Editor-at-Large, was joined by Greg Kyte, founder of Comedy CPE

Greg Kyte is a unique voice in the world of accounting. He’s been a stand-up comedian for over a decade and has shared the stage with many notable comedians. In merging comedy with accounting, he captures his audience’s attention and helps them to laugh and learn at the same time. Greg is known for his witty and ironic insights that provide much-needed perspective on the industry.

In this article, you’ll see how scientists measure ethical behavior, why a need for social acceptance drives altruistic acts, and how you can hold yourself accountable for being ethical.

What is the ultimatum game?

Greg began his ethics presentation by discussing the Ultimatum Game, a social science experiment that researchers first conducted in the 1980s and has been repeated in multiple settings and cultures. Scientists designed the game to study both self-seeking and altruistic human behavior. The study results support the notion that social acceptance plays a big part in how selfish or selfless we act.

Young woman leading a conference meeting.

The experiment requires two people who take on the roles of giver and receiver. First, the giver is allotted a specified amount of money. They must then decide how much they want to offer to the receiver:

“Each [person] has a specific role. One … is given a certain amount of money, let’s say $20. … They have one job to do with that $20. They need to split the $20 between them[selves] and the other person … and they can split it any way they want, except they can’t do zeros. They can’t keep $0 and give the other person the whole $20. They can’t keep all $20 and give the other person nothing. They’ve got to give them something, but that can be … down to just a penny. [Theoretically,] you can give them a penny [and keep the rest].”

– Greg Kyte

Once the giver decides on the amount, they make an offer. If the person accepts their offer, they divvy up the money. If they reject the offer, they both lose everything.

“The trick is this: If the person accepts the offer, they each get that amount of money, and they just go and live their lives as best they can after that. But if the person rejects the offer, then nobody gets any money. [The giver] doesn’t get any money, nor does [the other] guy get any money. They both get zero, and they go home angry.”

– Greg Kyte

The results of the experiment surprised many social scientists because they’d expected to see money as the primary motivator. However, when offered low amounts, people typically rejected the offer, even though having some money rather than no money would have been economically advantageous. Clearly, a sense of fairness or unfairness played a big part in decision-making.

In other cases, people would offer more than they were willing to keep for themselves. Again, money wasn’t the motivating factor—social status, pride, or demonstrating altruistic behavior likely was. Greg argued that this shows people will act in selfish or selfless ways based on how they are perceived. 

“They did the experiment in Micronesia. Apparently, in the culture of Micronesia, your status in society is determined largely based on gift-giving. So generosity is something that pays you back in terms of your status in your social group. … That was one of the places where they saw a lot of hyper-generous offers.”

– Greg Kyte

Interestingly, many of the receivers in Micronesia rejected the hyper-generous offers. So it boiled down to being a contest of who would be the most generous and giving. Greg argued that this need for social acceptance and status is what drives behavior. It’s also what can keep us in line.

How judgment keeps us from acting unethically

Businessman explaining new business ideas to peers.

Everyone has the ability to do unethical things like steal, take credit for something they didn’t do, or even commit financial fraud. When people have the opportunity to do something immoral on a regular basis, it’s often just a matter of time before they cave into temptation. However, when we know that other people are aware of what we’re doing, we are much more motivated to do the right thing.

“I know that stealing is wrong. … But as soon as I invite other people in to see what I’m doing now, I’m going ‘Well, it’s not just me just in this.’”

– Greg Kyte

In other words, transparency creates an additional level of motivation to avoid temptation and do the right thing. All of the uncomfortable judgment that goes on in society actually has an important function—to keep us morally sound. Social acceptance plays a big role in our survival. To be judged and rejected could cost us our careers and our relationships. Our desire to be perceived positively by others may play a role in whether we engage in prosocial behavior or antisocial behavior.

What is prosocial behavior? It’s characterized by actions that convey a sense of responsibility for the community. It’s the result of altruism, which is the sense of goodwill and care for the feelings, well-being, rights, and fair treatment of others. When someone takes voluntary actions to benefit others, they engage in prosocial behavior. Some examples include: making an anonymous donation or paying for a stranger’s coffee.

On the other hand, antisocial behavior is characterized by actions that harm others or show a lack of concern for other people’s feelings or well-being. They are the result of a lack of empathy or concern for other people. It’s not too hard to imagine what antisocial behavior looks like—theft and physical violence are some extreme examples. However, everyone can engage in antisocial behavior at times to varying degrees.

Again, it is important to understand that as humans, we all can be swayed in both directions based on circumstances. You don’t need to be a malicious person to engage in antisocial behavior, and you don’t need to be a saint to do good deeds for others. You might have an amazing day and decide to spread your good fortune by paying for the coffee of the person behind you in line. Then again, you might be having a terrible week and say something insensitive to a close friend.

Since we all have the capacity for a range of behaviors, we need to take steps to mitigate the possibility of antisocial behavior. This is the basis of what Greg teaches—how to set yourself up to do the right thing and make it hard to do the wrong thing.

What does it mean to be transparent?

Given that how we’re perceived affects our behavior, it makes sense that putting ourselves out there to be judged can be a powerful motivator to keep us ethically sound. 

“Do whatever you can before a live studio audience. Anything you can do to increase the transparency of what you do is going to increase your ethical behavior. … [Research states that transparency] increases your prosocial behavior and decreases your antisocial behavior. … You’re making better decisions for the community in which you operate. So everything you can do to be more transparent is going to help you be a more ethical person.”

– Greg Kyte
Business people standing while using a laptop.

Greg shared an example from his own life. He explained that he works not only as a CPA for one of his clients but also as the manager of their self-storage facility. It’s a small business without the ability to hire a whole team, so Greg found himself in the position of taking on all responsibilities, including taking payments, making deposits, and managing the facility. As a result, he had free reign to do what he wanted, as there was no oversight into what he was doing. Furthermore, the facility was taking cash payments, which meant there was no automatic electronic record of transactions. 

“I realized pretty quickly that I could steal all the money that came in. … Theoretically, somebody could have paid me their 50 bucks for their storage unit [and] I could have said, ‘Thank you for that money,’ and kept it. And then [I could have] just gone into the system and said that unit 53 was vacant for that month, and nobody would’ve been any wiser to it.”

– Greg Kyte

Greg acted quickly to eliminate the possibility of his caving into temptation. He reasoned that if he knew other people were aware of the potential for theft, he’d be less likely to take advantage of the situation. 

“I went to my boss, and said, ‘Hey, I just want to let you know that we’re taking cash payments and that opens us up to some risk because I could, theoretically, be swiping all the cash payments that come through.’ … That was a weird conversation for me to have because … it’s kind of weird when people say, ‘Hey, just so you know, I could steal money from you.’ But by bringing that up, by making it transparent, that automatically [nudged me] towards more ethical behavior.”

– Greg Kyte

He took it a step further by suggesting to his managers that they eliminate cash payments. While some might view his actions as extreme, he was committed to removing any opportunity for theft.

Learn more about the game theory—Ultimatum Game

The Ultimatum Game is a social experiment that demonstrates how social acceptance plays a powerful role in our lives. People desire fairness, equal treatment, and generosity as much as they desire economic resources. 

Similarly, people want to be seen as fair and generous. The way we treat other people and the judgment we get from our peers determines our social status. As a result, how others perceive us dictates our actions. If we’re transparent about any possible opportunities for theft or fraud, we’re adding a layer of accountability to keep our integrity.

If you enjoyed this article and want to learn more about honesty and ethics, you can watch the full webinar here. Alternatively, you can read other articles based on the same episode: Navigating the Space Between Honesty and Dishonesty in CPA Ethics, The Science of Moral Codes and AICPA Ethics, The Sunglass Experiment and How It Applies to CPE Fraud, What Is Ego Depletion and How to Replenish It as a CPA and How to Build an Ethical Culture at Your CPA Firm. 

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