Scapegoating a Nonfamily Member after Organizational Misconduct in Family Firms

Abstract

Who is blamed for organizational misconduct in family firms? While extant studies assume that dismissing executives/directors is a corrective action to avoid future misconduct, doing so may operate as a defensive action to placate stakeholders without organizational change by scapegoating less responsible executives/directors. Nonetheless, several theories suggest a mixed role of family members in scapegoating (the likelihood that nonfamily members will exit a firm, as opposed to family members). For example, agency theory argues that less agency conflict will lead to less scapegoating, but behavioral theory posits that high socioemotional wealth will result in scapegoating. By combining agency and behavioral theories, this paper theorizes that scapegoating occurs in family firms. These family firms may scapegoat nonfamily members after organizational misconduct as the number of family member executives/directors increases. This scapegoating is based on several reasons; in this case, the board emphasizes the preservation of socioemotional wealth, less attribution to family member executives given their family-based emotional ties, family members’ low motivation to abandon their family-firm specific resources, and their strong power from the top hierarchy and family identity. Additionally, family member executives’ power from sitting on board can strengthen the scapegoating of nonfamily members. This study further explores the consequence of nonfamily member departure in family firms: not significant evidence for reducing future violations. Overall, this study contributes to the literature on organizational misconduct by suggesting that scapegoating serves as a firm’s defensive response.