Turning a Blind Eye to Team Members’ Unethical Behavior: The Role of Incentive Structures

Organizations increasingly rely on group-based incentive structures to increase productivity and promote collaboration. Drawing on deonance theory and appraisal theories of emotion, we build and test a model that explains how group-based incentive structures can have an insidious side effect: They increase the likelihood that employees remain silent when observing a team member engage in unethical behavior. Across four studies (N = 496) adopting different methods, measures, and samples, we found consistent evidence that people are less likely to report (i.e., speak up or provide anonymous feedback about) a team member’s unethical behavior in group-based than in individual-based incentive structures. Furthermore, moral anger explains this effect: People experience less moral anger and are therefore less likely to report a team member’s unethical behavior when the behavior yields group rather than individual benefits. Additionally, we ruled out perceived indirect benefit and envy as alternative explanations, indicating that the decision to report a team member’s unethical behavior is not a calculative response driven by selfish motives, but a deontic response driven by moral motives. Our research contributes to the literatures on business ethics and incentive systems and also provides practical implications for human resource practices.