Dysfunctional Incentives and the Ethics of Control Systems

Abstract

The crisis and the scandals have shown the dubious ethics of many management control and incentive systems in organizations. The root of the problem is to believe that a control system can be based exclusively on extrinsic incentives. We argue that an ethical control system should see people as also having intrinsic motives and values. A control system must make a judicious use of formal and informal systems as the only way to achieve ethical behavior in the long run.