Cheating, Ethics and Psychological Contracts: The fascinating debate around Moonlighting

Cheating, Ethics and Psychological Contracts: The fascinating debate around Moonlighting

Most of us have been following the recent debate around moonlighting.

Let’s examine the emerging ethical questions.

Q1. Almost the entire start up industry, was conceived by the founders while working in another company. Subroto Bagchi, if I am not mistaken, proudly wrote almost 20 years back, that he had started discussing with N Krishna Kumar, about a new company while at Wipro. Is that moonlighting of some kind? Does it only become unethical when there is an immediate financial consideration and is ethical when consideration for effort put is delayed?  Were all these founders unethical? When does the unethical behavior start in this discussion? When I start thinking of an alternative business idea, gig opportunity or when I actually make a contract (verbally or in written form) with a financial consideration in place?

Q2. Does the idea of ethic change with age? Anecdotal data suggests that the younger folks are broadly more supportive of moonlighting. Are the younger people more unethical?

Q3. The organizations that seem to have come out strongly against moonlighting are those headed by second generation promoters and professional CEOs. The new age CEOs, founders do not seem to be coming out explicitly. Does the nature of evolution of a company influence ethics? Does the world view of the leadership impact the understanding of ethics? Is it unethical or immoral? Is there a difference between the two constructs?

Q4. A new age founder recently talked about the virtues of 18-hour days in a patronizing tone. I would be very worried about the team dynamics playing out in his direct reports team. Should a CEO be explicitly articulating his expectations on expected behavior knowing that many would find it unreasonable or rather is his transparency to be appreciated?

Q5. Who gets to define or decide what is ethical or unethical or what constitutes cheating. Very strong and judgmental comments on behavior. How are we so sure that our reading of the ethics of a situation is correct?

Q7. Why is spending free time on music, arts and sports considered okay but gig work seen as unethical or cheating? I am getting a gratification of a different type, albeit not money. One of the CEOs that I have interacted with would be uncomfortable with employees pursuing an academic degree feeling that it implied that they were not engaged with their work at his workplace or in their free time.

The word ‘cheating’ used by some employers is more useful to understand the nature of change. In essence, the psychological contract is changing between the employer and employee. And this change is working to the disadvantage of the employer. This is fairly rare. Employee rights and labor movements have weakened over the past few decades. Most changes in the past, have given greater freedom to the top leadership to set the tone of the psychological contract. Examine some of the changes-the soaring top management salaries as compared to employees or expectation of a life-long employment changing to a hire and fire culture (couched as Bell curve, etc.). These were changes in the psychological contract that never got called cheating-a term that has immorality associated with it. These changes got justified as Business Imperatives.

Interestingly, the current wave of change, though not fully new, is being driven by employees for various reasons-the need for higher income, poor engagement in large soulless companies and the extra time suddenly available, nature of gig working, etc.

When employers use the word cheating, they are really saying -You are breaking the psychological contract. You cannot take financial consideration for anything unless I approve. Then framing this argument as cheating, calling out the employee’s ethical principles while moonlighting.

Is changing the psychological contract unethical and cheating?

An insightful paper written on ethics and psychological contract (Donahue and Nelson, 2009)[i] observes that mutual reciprocal obligations in a psychological contract between the employer and employee are both transactional and relational. The transactional focuses on the material and social terms while the relational aspect is non material emphasizing socio-economic value. Both parties constantly evaluate the contribution of the other according to the contract. If there is more than a minor gap in expectations, it becomes a breach and then a violation. The response to this breach is often emotional, an affective reaction that is influenced by many factors and may not be conscious. Our mental models, influenced by personal beliefs and collective knowledge, dictate the responses.

By framing the argument as an ethics and cheating question, the mental model that shapes the interpretation comes into question. In this view, it was expected that the employee would not take financial gratification from another while working in one organization.  That’s a minimum expectation that is being defined and underlined though it was not always explicitly mentioned.

Change in psychological contracts is not new. In the pre-1960s period, the psychological contract could be said to favor the employer. Life long employment was the norm as the employees did not have many alternatives. It suited the employer to have loyal employees and yet have the power to hire and fire. This contract changed subsequently with unions becoming more powerful and the political and judicial views changing to have greater protection for the employee.

Post liberalization, economic growth provided employees with opportunities leading to employers having to seriously improve efforts on engagement. A short period ensued when there was a fair balance.

Then came the fad of Bell curves and the pendulum swung the way of the employer with almost unbridled rights of hire and fire and the right to change the pace of compensation growth between levels. Today, a Lay off for structural reasons does not carry the stigma of the past and has become normalized. The employee has become increasingly insecure. The nature of the gig relationship, not always negative, has brought newer dimensions to the employee and employer relationship. Employees want both the freedom of gig but the security of permanent employment. The employees are simply responding to management by becoming increasingly transaction and mercenary. In my conversations with corporate employees, outlook to life has changed perceptibly through the pandemic years. The employee is starting to make the choice. We are going through a period of re-working of the psychological nature of the relationship. A churn is happening.

There is one interesting dimension that seems to be different from the past trends. When trends change, the community that seems to be favored is broadly united. Employees were united in their sympathy for unions amongst employees for example and there was broad consensus amongst employers on the merits of Bell curve or the right to hire and fire. This time however, there seems to be a difference. The employers are not as united as before. Many large companies today have been started by professional managers nurturing their dreams and being inspired by their erstwhile employers in many ways. There is a strong cognitive dissonance in calling an employee’s action unethical when you have traversed the same route in some way or the other in becoming successful. 

The employer response in turn will be both predictable and unique. We are bound to see companies explicitly mention this in employment contracts as a natural corollary. Many already have this in their Code of Conduct.

I suspect that the strengthening of the legal contracts will only lead to employees finding more surreptitious methods. However, the fundamental reasons of engagement and compensation exacerbated by the increased available time, will not go away unless we are willing to change the prism and reframe the discussion away from cheating to the changed employee needs. Some more listening is required. We cannot have a situation where entry level software salaries remain stagnant but top management compensation grows exponentially, where the employee and employer have no relationship beyond the transactional. The redrawing of the psychological contract is due.

This current change is terrifying for the employer; realizing that the past methods of management and nature of work is no longer working or that we are not in control of employee behavior. Many are not even able to mandate the return to offices completely, that the old order is changing. The helplessness against the rebellion seems to have no solution. Using morality to buttress your position is an old game.

Wipro has taken a firm position. By calling it cheating, the argument is being framed from the ethics perspective. Swiggy on the other hand, is attempting to acknowledge the reality. My point is that unless we understand the lowest paid employee far more than we currently do, we are not going to find the optimum solution. Understanding the ‘why’ of the emerging practice is more critical than the ‘How’ of the solution.

[i] O’Donohue, Wayne and Nelson, Lindsay, The role of Ethical Values in an expanded Psychological Contract, Journal of Business Ethics (2009) 90:251–263 Springer 2009 DOI 10.1007/s10551-009-0040