Graham Leicester: When good people become bad

It is the classic “bad apples” defence. In an otherwise fine and upstanding company, a few rogue traders have risked the reputation of the whole. Marcus Agius, standing down as chairman of Barclays, stresses that any failure of integrity within the bank is “limited to a small handful of people. Was their behaviour symptomatic of the rest of the bank?” he asks himself. “No, absolutely not”.

CEO Bob Diamond, below, has decided to follow suit “to protect the franchise”, lamenting the actions of 14 people who “didn’t behave” and have now been sacked. Agius has been reappointed to steer the ship through troubled waters and to implement a new “zero tolerance” policy on wrongdoing within the bank. That should fix it.

Except that there are now suggestions Barclays may have had co-conspirators amongst officials in the previous government. And “small handfuls” of miscreant employees in other banks were up to the same game. In other words, bad apples abound – and it may take some time to root them all out.

Even when we do, it will not be enough. Whenever I hear the bad apples defence I think of Stanford psychologist Philip Zimbardo. He has thoroughly discredited it. In his view it is almost never true that bad behaviour is down to bad apples. They usually go bad because they are in bad barrels (in this case, the banks themselves) which in turn are the result of bad barrel makers (the whole culture of banking).

As Zimbardo puts it: “Bad systems create bad situations create bad behaviours, even in good people”. It is a lesson we seem reluctant to learn, as one inquiry after another seeks to address systemic problems through the identification of “human error” and the punishment of convenient scapegoats. Punishment of the wrongdoers is never enough. We also need better barrels, and a culture that sustains them.

Zimbardo knows what he is talking about. He was author of the famous Stanford Prison Experiment, subsequently written up in his bestselling The Lucifer Effect: How Good People Turn Evil. Zimbardo wanted to study the psychology of imprisonment. So, in the summer of 1971, he posted a small ad in the local newspaper and recruited 24 college students to participate in an experiment for two weeks.

He built a makeshift prison in the basement at Stanford University and then asked half of his recruits to act as prison guards for the other half – who were duly arrested by the local police, cuffed, blindfolded and brought into custody.

What happened over the next few days has lost none of its power to shock 40 years later. The guards were given no rules except to maintain order. Within 36 hours some of the prisoners had completely broken down and had to be “released”. In only a few days the “experiment” had become a frightening reality as the guards began to extend and abuse their power and the prisoners became more and more submissive and dehumanised.

The experiment was called off after six days when another researcher, brought in to conduct interviews, objected to a group of horribly submissive prisoners being taken on a toilet run with bags over their heads and their legs chained together. Out of more than 50 outsiders to visit the prison, including families of the participants, all of whom knew this was a psychological experiment not a real prison, this researcher was the only one to question the morality of what was going on. As soon as she did the experiment stopped.

It was a dreadful moment for Zimbardo himself. For he came to realise that even he had succumbed to the power of the situation. After only a few days he was acting more like a prison supervisor, trying to maintain order in his institute of correction, than a research scientist.

It merely served to reinforce his conviction that even good people will do bad things if the situation is powerful enough to replace their normal reality. He was subsequently a witness for the defence in the trials of the individuals prosecuted for the horrors of Abu Ghraib.

In his own experiment, starting with a group of healthy, educated, thoroughly normal young men, he had found – in viewing the video footage – that it was not long before the “guards”, bored in the middle of the night and when they thought no-one was watching, indulged in ever more degrading and pornographic abuse of the “prisoners” in their charge. The true villains of Abu Ghraib, he concluded, were not the hapless GIs but the architects of the situation. The barrel makers.

I am not trying to suggest any moral equivalence between manipulating inter-bank interest rates and abusing prisoners in the dead of night. Simply to say that the bad apple defence should always have us looking more deeply into the wider “situation” and the larger culture of which it is a part.

Diamond offered a partial acknowledgement of this himself in his Today Business Lecture last year – effectively an apologia for banking. He agreed we need to make sure the kinds of practices that triggered the 2008 financial crash do not happen again. “In part that comes down to culture”, he said, meaning in this case company culture.

“Culture is difficult to define,” he went on, “I think it’s even more difficult to mandate. But for me the evidence of culture is how people behave when no-one is watching”.

It is a nice phrase. But Zimbardo found what happens when nobody is watching, always in the deep of the night, is an extreme version of the daytime culture. What should worry us more is what happens in the daylight – when even those “watching” become complicit and lose the capacity to intervene as the culture turns toxic.

John Kay, soon to present his report on UK equity markets and long-term decision making to Business Secretary Vince Cable, is clear that investment and retail banking need to be separated not only to protect sensible from silly money, but because of the incompatibility of trading and banking cultures. Ring-fencing is not enough when culture can jump fences.

The culture of casino banking is not something Kay wants to encourage: “casinos attract greedy people with deficient ethics”. But banking itself sits in a wider culture we call capitalism – which is taking on some of these less desirable characteristics across the board. Nobel Prize winning economist Joseph Stiglitz’s latest book takes up the cry of the Occupy movement for a fairer system, identifying “The Price of Inequality” as a threat to our future. It is not only the bankers who are gaming the system. The rich used to be captains of industry. Now they are “CEOs who have taken advantage of deficiencies in corporate governance to extract for themselves an excessive share of corporate earnings” or who have used political connections to “benefit from government munificence” in terms of contracts or licences.

The process of cultural change is a hard one. I have written in these pages about that before. But culture workers the world over are doing it. And the likes of Stiglitz, a member of Alex Salmond’s Council of Economic Advisers, coming out will encourage them.

Ultimately the renewal will come, as it does in any system, not from technical regulation of our bad behaviours but active encouragement of our better selves. That has become Zimbardo’s focus today – not the good people who go bad, but the ordinary people who rise to acts of heroism and inspiration.

What are the enabling conditions, he asks, the “situations”, the organisational forms and cultures that will transcend those that “suspend our humanity and rob us of the qualities we humans value most: caring, kindness, co-operation and love”? That is the question. I confidently predict that no official inquiry, whether parliamentary or judicial, will address it.

l Graham Leicester is director of the International Futures Forum, www.internationalfuturesforum.com

• Graham Leicester is director of the International Futures Forum, www.internationalfuturesforum.com