Institutions do not just host leadership decisions. They train leaders in what counts as acceptable, rewarded, and ignored, often strengthening or distorting moral judgment regardless of personal conviction, as work on the ethical organisational environment shows. Targets, bonuses, traditions, and the stories people tell in corridors add up to an informal curriculum in what a “good leader” does here, whatever the official values on the wall may say. This is a pattern highlighted in scholarly research on unethical behaviour in the workplace.
When the system makes the choice
Picture a senior manager in charge of a regional team. Revenues are lagging, and a new incentive plan promises generous rewards to those who “do what it takes” to hit the quarterly target. This is a concern echoed in studies on the impact of incentives on ethics. One of the manager’s direct reports secretly inflates numbers to close the gap and hints that “everyone else is finding creative ways to make this work.”
The manager sees the manipulation, feels uneasy, but looks at the calendar, the pressure from above, and the bonus structure. The numbers are approved. The region is praised for its turnaround. The manager earns a performance award and is described as “results-focused.” Research on ethical organisational climate and unit‑level ethical environments shows that when behaviour like this is rewarded, employees quickly learn what really matters in that setting. In this kind of scenario, one can safely say the system did not merely host the decision; it trained the decision maker.
What institutions really teach
Most organisations publicly promote integrity, transparency, or respect. The question is what people learn from daily practice. Work contrasting “rotten apples” with “bad barrels” finds that unethical behaviour in the workplace often flourishes where systems are poorly designed or incentives are misaligned.
In studies of ethical climate and leadership, teams develop shared expectations about what is normal and expected based on what leaders reward, punish, and notice. When people see colleagues praised for cutting ethical corners to meet targets, or watch whistleblowers sidelined while offenders are protected, they draw the obvious conclusion about what the institution values most.
How moral judgment gets dulled
Personal values matter, but they operate inside real systems. Moral psychology describes moral disengagement as a process where people gradually learn to justify or minimise harm so they can continue to see themselves as decent while doing questionable things. In organisations that emphasise results at any cost, employees hear and repeat phrases such as “no one really gets hurt” or “this is how the industry works,” which help them disengage their own self‑sanctions, a pattern documented in work on the culture of moral disengagement.
The literature on institutional corruption and corrosion shows how repeated small compromises, supported by incentives and muted oversight, can produce a culture in which rule‑bending and favour trading feel ordinary rather than shocking. Over time, people stop asking whether a practice is right and start asking only whether it is common or technically allowed, which aligns with broader analyses of corruption as a normalised system.
Incentives: what you pay for, you teach
Incentive systems are one of the clearest ways institutions train moral judgment. Experimental and field studies on the impact of incentives on ethics show that narrowly designed rewards can encourage risk taking and rule breaking, especially when they focus on short‑term metrics. Work on reward systems and peer reporting suggests that certain bonuses can even discourage employees from reporting misconduct by teammates.
By contrast, leadership scholars argue that ethical use of power means building systems where both results and the way they are achieved matter, as outlined in studies on leadership and the use of power for ethics. When organisations embed ethical criteria into performance reviews, promotions, and recognition, they send a clear message about what they value and the behaviours that truly count.
Norms and social sanctions
Yes, formal rules matter, but informal norms often matter more. Research on social sanctions and reputation in organisations shows how teams quickly teach members what is acceptable through approval, silence, or exclusion. In some contexts, speaking up about a safety risk or a discriminatory practice is treated as disloyal. Colleagues roll their eyes, leaders go quiet, and over time, people learn to look away. In other settings, silence in the face of harm is what damages reputation, and those who ignore clear risks find themselves marginalised.
Studies on ethical leadership and moral identity and integrative reviews of how leaders restrict deviance show that leaders who talk about values, model them, and respond consistently to violations help set norms that discourage misconduct. Followers notice whether leaders ignore small violations or respond consistently, and they adjust their own moral judgments in line with those patterns.
Power, leadership and sanctions
Work on managerial ethical leadership and ethical climate emphasises that leaders influence not only decisions, but also the moral learning that flows from outcomes. When supervisors punish only those whose misconduct becomes public, while shielding high performers, they teach that risk management, not ethics, is the real issue. When they instead apply sanctions transparently and give reasons framed in established organisational values, they reinforce a shared understanding of what genuinely matters, thereby affirming findings from ethical climate and performance studies.
A growing body of work on ethical organisational environments links consistent sanctions, fair procedures, and clear communication to employees’ willingness to self‑regulate and to intervene when others cross the line. Here, people come to believe that ethical standards are more than slogans.
Three practices leaders can adjust
Even within inherited systems, leaders at every level control some levers that influence what their institution rewards.
1. Metrics and incentives
o Review what is measured and compensated. Questions about misaligned rewards echo concerns raised in evaluations of incentives and ethical risk.
o Build in explicit criteria related to values and behaviour, thus reflecting recommendations from work on using power to shape ethical cultures.
2. Norms and modelling
o Pay attention to the stories leaders tell in meetings and town halls, in line with insights from ethical leadership research about how role‑modelling shapes climate.
o Make space in routine communication for naming ethical tensions and describing how decisions were reached, practices associated with stronger ethical organisational climates.
3. Protection and sanctions
o Ensure that people who raise concerns are protected from retaliation and, where possible, publicly acknowledged. This reinforces healthy social sanctions and reputation dynamics.
o Apply sanctions consistently, even when high performers are involved, and explain decisions in language linked to the institution’s stated values, as recommended in work on ethical climate and leadership.
Questions for leaders: What does your system reward?
If you are in a leadership role, it is worth asking not only what you personally believe, but what your institution is teaching every day through its incentives and norms. These questions can help:
- Looking at our last round of promotions and awards, what behaviours were actually rewarded, and what story do those decisions tell about what we value most?
- Where have we subtly tolerated behaviour that contradicts our stated values because the person involved delivers impressive results? What pattern are we reinforcing when we do that?
- If a junior colleague spotted a serious ethical problem tomorrow, how confident are we that they would feel safe to raise it, given what our people have seen happen in the past?
- Which metrics drive our most important decisions, and do any of them unintentionally encourage cutting corners, shifting blame, or ignoring long‑term harm, as highlighted in research on incentives and misconduct?
Research on ethical organisational environments, moral disengagement, and institutional corruption makes one thing clear: incentives, norms, and sanctions shape how people reason about right and wrong at work. If personal values are the compass leaders bring with them, institutional design is the terrain that either guides that compass toward true north or pulls it off course. Leaders who pay attention to what their systems actually reward are not only protecting their organisations; they are also protecting their own moral judgment from slow distortion.
Babatunde Oladele is a doctoral researcher in Leadership focused on values‑based leadership, institutional trust, and moral authority in public and organizational life. His work examines how leaders form values over time and how those values influence decision‑making, legitimacy, and accountability under pressure. He writes Leadership & Values, a weekly column on leadership across political, civic, educational, and organizational contexts.
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