Organizational conformity and contrarianism: regular irregular trading at National Australia Bank

Abstract

PurposeTo provide a conceptual framework and case study of organizational conformity and contrarianism that will be of interest and utility to both corporate governance theorists and practitioners.Design/methodology/approachThe paper presents a conceptual framework that examines the risk of risk management systems. The framework is rooted in the logics of economics and sociology, and describes the interplay of eco‐logics, socio‐logics and ideo‐logics in creating organizational conformity and contrarianism. Data from a comprehensive report by the Australian Prudential Regulation Authority presented in 2004 are used to illustrate how the framework might be applied to explain the breakdown in risk management systems within a large organization, the National Australia Bank.FindingsThe framework presented helps to explain the de‐coupling of technical rationality by examining and illustrating cognitive and normative mechanisms that build legitimacy and reduce uncertainty. This leads to an illusory sense of control that can threaten the survival of an organization.Research limitations/implicationsIllustrative data are principally drawn from a comprehensive analysis by an Australian Government bank regulator. A general descriptive conceptual framework is presented.Practical implicationsThis conceptual framework and case study will be of particular interest and importance to risk managers/governors within large financial service organizations and academics. An awareness of the different logics facing risk governors and risk takers within a large organization is another step towards understanding and possibly avoiding financial service industry mismanagement.Originality/valueThe paper presents a unique synthesis of three logics within a financial services organization. It is original because it links a recent real world management meltdown with a conceptual framework that examines the social risk of risk management systems and the dialogue between organizational conformity and contrarianism. The illustrative data presented is also very rare, since the subject organization has exceptionally made a highly confidential document public.