TL;DR: Leaders often make their toughest mistakes when they’re too close to the people or problems involved. Proximity can quietly distort judgment, turning good intentions into biased decisions. Building in distance—through reflection, structure, and neutral review—helps leaders see clearly and decide fairly.
Imagine This:
A well-intentioned business leader organizes a weekend volunteer project for a local nonprofit. After the work is done, one of the helpers—who happens to be the spouse of a colleague—asks to be paid. The leader is caught off guard. They never discussed compensation, but now the request sits in a gray zone: deny it, and risk tension with a coworker; approve it, and risk setting an unfair precedent.
At first glance, this feels like a simple policy question. But psychologists would call it something else: a proximity problem.
When Closeness Clouds Uudgment
Research in organizational psychology shows that when we’re too close to a situation—emotionally, socially, or reputationally—our ethical judgment becomes predictably distorted.
We tend to see less clearly, even when we believe we’re being objective.
One of the main culprits is motivated reasoning—our brain’s tendency to unconsciously favor information that supports the outcome we want to believe is fair or harmless. As Kunda’s landmark study on motivated reasoning revealed, the more personal the stakes, the more creative our justifications become.
Add in what social psychologists call the “bias blind spot”—our ability to see bias in others but not in ourselves—and even experienced leaders can drift into self-serving interpretations without realizing it.
Bounded Ethicality: Good People, Imperfect Systems
Most ethical lapses in business aren’t the result of malice. They’re what Harvard’s Max Bazerman and Ann Tenbrunsel call bounded ethicality—the unconscious limits that prevent even good people from seeing the ethical dimension of a decision. Their research in Behavioral Ethics demonstrates how leaders “fade” moral considerations when focused on goals, relationships, or loyalty pressures.
This ethical fading explains why leaders can feel sincere in believing they acted fairly, even when proximity or relationships have clearly influenced their call. When emotion and identity are intertwined, ethics can quietly take a backseat.
Why Disclosure isn’t Enough
If we sense a potential conflict of interest, we often default to disclosure, telling others about the connection and pressing forward. But studies from George Loewenstein and Don Moore show that disclosure alone can backfire. Once we’ve “confessed” our bias, we actually feel freer to act on it, while others fail to discount our advice enough.
That’s why effective organizations treat proximity as a structural issue, not just a personal one. The best safeguard isn’t transparency—it’s distance.
The Case for Ethical Distance
According to Construal Level Theory, psychological distance changes how we think. When people view a situation from afar (literally or metaphorically) they shift from emotional, concrete reasoning to more abstract, principle-based thinking. In ethical decision-making, that distance can restore fairness and clarity.
This doesn’t mean cold detachment. It means creating space to step back—through time, process, or perspective—before acting.
Simple interventions can help:
- Recuse yourself when relationships blur judgment. Delegating a call isn't weakness—it's ethical strength.
- Delay non-urgent decisions by 24 hours. Time reduces emotional intensity and increases moral reflection.
- Diversify input. A cross-functional review group can provide the "outside view" Daniel Kahneman described, countering self-serving bias.
- Anonymize case facts when possible. Removing identifiers can expose the true principle at stake.
When Good Leaders Mean Well but Look Biased
Even when intentions are pure, perception matters. Research consistently finds that employees who perceive nepotism or favoritism report significantly lower organizational commitment, trust and belonging. In one study, the perception (rather than documented proof) of favoritism was enough to correlate with lower commitment levels.
In the earlier volunteer example, one might conclude that the decision is about a single payment, but it’s about how the process is seen. Leaders who proactively add neutral voices or create distance in close-call decisions send a powerful message: fairness isn’t assumed—it’s designed.
Building Systems that Keep Judgment Clear
Ethical clarity grows from discipline. In the moment, instinct feels certain, yet certainty can blur the edges of fairness. Organizations that earn trust do so by shaping habits and systems that keep those edges sharp.
Clear frameworks, recusal protocols, and neutral reviews give leaders room to think before they act. By setting boundaries around decision-making, these systems turn fairness into something repeatable. They help leaders navigate pressure, relationships, and emotion with steadier judgment and greater confidence.
Systems that hold leaders accountable make trust sustainable. Ethical distance invites perspective, the kind that keeps decisions from shrinking to the immediate moment. Leadership shows its strength when it makes itself vulnerable: when it welcomes structure, invites review, and steps back long enough to let fairness do its work.
When a decision feels too close for comfort, the wisest move may be to hand it over. In our companion piece, When to step back: How Ethics Panels Keep Decisions Fair, we explore how organizations create neutral spaces for hard calls, and why the ability to say "it's out of my hands" can be a mark of integrity rather than avoidance.
