Many start-up founders develop an overconfidence bias, believing they can manage small ethical lapses without long-term consequences, assuming future success will justify present deception.
he eFishery fraud scandal has drawn global scrutiny, exposing deep flaws in Indonesia’s corporate governance and regulatory oversight. The Jakarta Post reported Jan. 22 that eFishery inflated its 2024 revenue by nearly US$600 million and exaggerated its fish feeder operations, claiming 400,000 units instead of the verified 24,000.
With major international media covering the case, Indonesia’s reputation as a thriving start-up hub has taken a severe hit, raising urgent questions about financial accountability and regulatory enforcement. But eFishery is not an isolated case—many founders operate under extreme pressure, where ethical lines can blur in the race for funding and growth.
Fraud among start-up founders is rarely the result of deliberate malice. Instead, it emerges from cognitive biases, personal history and environmental pressures that distort ethical judgment. Under such pressures, deeply ingrained biases and past experiences shape their decisions—sometimes leading them to justify unethical behavior.
Understanding these mechanisms offers insight into both the causes and the means to prevent it.
At the core of this issue lies a series of cognitive biases that warp decision-making. Many start-up founders develop an overconfidence bias, believing they can manage small ethical lapses without long-term consequences, assuming future success will justify present deception.
The fear of financial failure triggers loss aversion, making the prospect of failing in the eyes of investors, employees or competitors feel unbearable. This pressure tempts founders to manipulate financial reports to maintain stability.
Even more concerning is how social pressures influence founders’ decisions. The start-up ecosystem, often competitive and opaque, creates an environment where social proof can justify fraud. Founders who perceive that “everyone inflates their numbers to survive” feel less moral conflict when doing the same.
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