Normalization of Questionable Behavior: An Ethical Root of the Financial Crisis in Iceland

Øyvind Kvalnes*, Salvör Nordal

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

4 Citations (Scopus)


In this paper, we explore the 2008 financial crisis in Iceland through the lens of Donaldson’s concept of normalization of questionable behavior. We study the report published by the Special Investigation Commission, an investigation initiated by the Icelandic Parliament near the end of 2008. The report provides a detailed and systematic account of the processes leading up to the crisis. Our aim is to determine the extent to which the behaviors of professionals in the Icelandic financial sector can be explained as a gradual fading of moral concerns to the point that they perceived the sale of high-risk products to unassuming customers for their own short-term benefit to be morally unproblematic. In doing so, we consider both character and circumstance explanations of moral misbehavior. We expand on Donaldson’s initial description of normalization of questionable behavior by applying the concept of moral neutralization, which is defined by criminologists Sykes and Matza as the process of convincing oneself that an option that initially conflicted with one’s own moral beliefs is actually morally acceptable. We find indications that individuals in the Icelandic financial sector did engage in moral neutralization in their attempts to frame their own actions in an acceptable light. In our study, we identify one way of neutralizing away moral dissonance not captured in the original theoretical framework. Icelandic bankers justified their behavior by claiming that they did not break any relevant rules or regulations when they engaged in what were later labeled questionable activities. Our name for this kind of justification is claim of having breached no rule.

Original languageEnglish
Pages (from-to)761-775
Number of pages15
JournalJournal of Business Ethics
Issue number3
Publication statusPublished - 1 Oct 2019

Bibliographical note

Publisher Copyright:
© 2018, Springer Science+Business Media B.V., part of Springer Nature.

Other keywords

  • Business ethics
  • Financial crisis
  • Moral neutralization


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