The dot-com era's accounting fraud wasn't one-sided. Professional investors and Wall Street created a symbiotic relationship with executives by demanding impossibly smooth, predictable quarterly earnings. This intense pressure incentivized widespread financial engineering and manipulation to meet unrealistic expectations.

A 'blame and shame' culture develops when all bad outcomes are punished equally, chilling employee reporting. To foster psychological safety, leaders must distinguish between unintentional mistakes (errors) and conscious violations (choices). A just response to each builds a culture where people feel safe admitting failures.

Instead of just preaching integrity, leaders must actively design systems that don't reward employees for achieving goals unethically. Character is what someone does when no one is looking, so a leader's role is to structure the environment to prevent integrity breaches before they happen, rather than just reacting to them.

Many white-collar criminals are otherwise intelligent, successful leaders who want their firms to succeed. Their misconduct stems from environmental pressures and psychological distance from consequences, rather than inherent malicious intent. This challenges the simplistic view that only bad people do bad things.

As Charlie Munger taught, incentive-caused bias is powerful because it causes people to rationalize actions they might otherwise find unethical. When compensation depends on a certain behavior, the human brain twists reality to justify that behavior, as seen in the Wells Fargo fake accounts scandal.

It is commonly assumed that fear of retaliation is the primary reason employees stay silent about misconduct. However, research reveals a significant factor is the desire not to see their colleagues get fired. This social dynamic, not just individual fear, creates integrity gaps that leaders must address to encourage reporting.

Instead of relying on passive whistleblower hotlines, companies can proactively identify high-risk areas. A simple survey asking employees if they've seen misconduct, if they reported it, and why not, acts as a powerful diagnostic tool to pinpoint where integrity gaps are emerging before they become major crises.

A company's culture isn't its mission statement; it's the worst behavior it's willing to accept. High-integrity employees will leave a toxic environment, while transactional, self-serving employees who tolerate anything for a paycheck will stay. This selection process causes a continuous erosion of culture.

Diller emphasizes that once you learn about an internal issue—be it theft, unethical behavior, or a product flaw—a clock starts ticking. From that exact moment, every action or inaction is your responsibility. This principle establishes a clear line for accountability and demands immediate, decisive leadership.