Organizational Misconduct Research Articles

Organizational Wrongdoing: Conceptual and Empirical Advances

Organizational misconduct (or wrongdoing) is pervasive in modern organizations and adversely affects individuals, groups, organizations, fields, and societies. This symposium builds on a rich stream of research on organizational wrongdoing by providing insight into new conceptual and empirical advances. The three papers pursue areas for future research that were proposed in a recent authoritative review of organizational wrongdoing: the relationship between individual- versus organization-level variation on misconduct or wrongdoing; the role of social networks in the pursuit of wrongdoing; and the important but often overlooked role of social-control agents and labeling in organizational wrongdoing. The authors elaborate conceptual frameworks from organization and management theory and employ a range of methods to examine wrongdoing in novel contexts. Their results have important and timely implications for research, practice, and policy. The discussant will draw on insights from his extensive research program to explore these perspectives and will conclude by facilitating an interactive question-and-answer session. Bad Apples or Bad Barrels? Individual and Organizational Heterogeneity in Professional Wrongdoing Presenter: Pooria Assadi; Simon Fraser U. Presenter: Andrew von Nordenflycht; Simon Fraser U. Using Network Analysis to Understand Economic Wrongdoing Presenter: Donald A Palmer; U. of California, Davis Wrongdoing and Wall Street: A Critical Perspective on the Boundary of Organizational Misconduct Presenter: Christopher Eaton; U. of Calgary Presenter: Laurie Milton; U. of Calgary

Why Do Firms Take Part in Cartels? A Motivation-Opportunity-Choice Approach

While considerable attention has been devoted to explain firms’ motivations to enter a partnership with another firm, we still do not know much about firms’ reasons for taking part in cartels. In this study, we draw upon the literature on organizational misconduct to develop a theoretical framework explaining the antecedents of firms’ participation in cartels. Using a sample of cartels in the European Union, our empirical analysis gives support to our main arguments: the propensity to participate to a cartel is driven by a combination of both internal and external motivation, opportunity, and choice. Implications for firms and policy makers are discussed.

Firm misconduct and rehab: Effects of corporate reintegration initiatives on sanction severity

The study examines a process model of how firms regain legitimacy after allegations of organizational misconduct. The sample is 75 public firms that were sanctioned for paying bribes under the Fore...

Competing outside the lines: Organizational misconduct as a consequence of rule codification

Competing outside the lines: Organizational misconduct as a consequence of rule codification

Known Unknowns: Uncertainty and its Implication for Antitrust Policy and Enforcement in the Standard-Setting Context

This article analyzes unilateral misconduct in standard-setting organizations, including in particular various forms of patent hold-up. The authors identify uncertainties facing agencies and courts reviewing such conduct and describe certain analytical frameworks that agencies can use to determine whether enforcement action is appropriate in a particular case. The article examines three key “unknowns”: whether a standard-setting process was abused or misused in some way; whether such misconduct, if any, had a significant adverse effect on competition; and what remedy, if any, would cure such competitive harm. The authors argue that agencies and courts should protect the reasonable expectations of other participants in the standard-setting process, should adopt a practical approach (a “substantial contribution” test) to problems of causation raised by misconduct in the standard-setting arena, and should favor compulsory licensing as a presumptive remedy in standard-setting cases, reserving others (such as disgorgement) for unusual cases in which compulsory licensing fails adequately to deter or remedy anticompetitive misconduct.

Value Orientations as Determinants of Preference for External and Anonymous Whistleblowing

Incidences of organizational wrongdoing have become wide spread throughout the whole business world. The management of organizational wrongdoings is of growing concern in organizations globally, since these types of acts can be detrimental to financial well being. Wrongdoing occurs within organizational settings and organizational members commonly have knowledge of and thus the opportunity to report the wrongdoing. An employee’s decision to report individual or organizational misconduct, i.e. blow the whistle, is a complex phenomenon that is based upon organizational, situational and personal factors. The purpose of this study is to examine the relationship between value orientations of individuals and choices for particular whistleblowing modes. Our results show that there are significant relationships between these variables. We contribute to the extant literature by choosing Turkey as context as most studies have been conducted in the US and Europe, and little has been reported about the actions taken by employees in non-Western cultures when they observe wrongdoing in their organizations.

Understanding Widespread Misconduct in Organizations: An Institutional Theory of Moral Collapse

ABSTRACT:Reports of widespread misconduct in organizations have become sadly commonplace. Sexual abuse in the Catholic Church, accounting fraud in large corporations, and physical and sexual harassment in the military implicate not only the individuals involved, but the organizations and fields in which they happened. In this paper we describe such situations as instances of “moral collapse” and develop a multi-level theory of moral collapse that draws on institutional theory as its central orienting lens. We draw on institutional theory because of its explicit concern with the relationships among individual beliefs and actions, the organizations within which they occur, and the collective social structures in which norms, rules and beliefs are anchored. Our theory of moral collapse has two main elements. First, we argue that morality in organizations is embedded in nested systems of individuals, organizations and moral communities in which ideology and regulation flow “down” from moral communities through organizations to individuals, and moral ideas and influence flow “upward” from individuals through organizations to moral communities. Second, we argue that moral collapse is associated with breakdowns in these flows, and explore conditions under which such breakdowns are likely to occur.

The Public Corporation - Friend or Foe of Professional Ethics? Ownership and Ethics in Securities Brokerage

Professions have long debated the desirability of outside investment and public ownership in particular. The traditional view holds that outside investors undermine professional ethics, and this fear underpins bans on public ownership. Others argue such restrictions are a way to reduce competition and that public ownership may improve adherence to professional ethics. I address this debate both conceptually and empirically. Conceptually, I develop several arguments both “for” and “against” public ownership and its effect on professionally ethical behavior. I also identify hypotheses to distinguish among these various arguments. Empirically, I test the hypotheses by assessing the incidence of professionally unethical behavior in the US securities industry across different ownership modes. I measure unethical behavior with a database of broker-client disputes resolved through arbitration. Using models with firm fixed effects to partially mitigate endogeneity concerns, I find that transitions to public ownership are followed by higher rates of ethical violations. Additional findings suggest the adverse effect on ethical behavior arises either because of public investors’ short-term preferences or the visibility of public firms’ performance. The results suggest that the regulators of a profession might indeed want to be cautious about liberalizing ownership rules or at least design disclosure and monitoring policies that acknowledge a greater risk of ethical violations at public firms. Public ownership should also be investigated as a predictor of organizational misconduct more broadly.

Organizations Gone Wild: The Causes, Processes, and Consequences of Organizational Misconduct

AbstractAlthough research on organizational misconduct has a long history and a recent increase in popularity, important questions are still unexplored. We review and critique research on misconduct with an emphasis on organizational causes. In addition to reviewing some active areas of research, we also examine less‐trodden areas and make suggestions for their development. We find that the definition of misconduct is often implicit and the role of social‐control agents in identifying misconduct has been neglected, suggesting a need for more rigor in how researchers define the boundary of misconduct and measure the labeling of misconduct. The spread of misconduct within and among organizations has also seen relatively little attention, as has the spread of the consequences of misconduct, suggesting a need to examine diffusion of misconduct. Finally, organizational misconduct has been an effective context for testing theories on themes such as motivation, control, power, labeling, and status, and will cont...

Organizations Gone Wild: The Causes, Processes, and Consequences of Organizational Misconduct

AbstractAlthough research on organizational misconduct has a long history and a recent increase in popularity, important questions are still unexplored. We review and critique research on misconduct with an emphasis on organizational causes. In addition to reviewing some active areas of research, we also examine less‐trodden areas and make suggestions for their development. We find that the definition of misconduct is often implicit and the role of social‐control agents in identifying misconduct has been neglected, suggesting a need for more rigor in how researchers define the boundary of misconduct and measure the labeling of misconduct. The spread of misconduct within and among organizations has also seen relatively little attention, as has the spread of the consequences of misconduct, suggesting a need to examine diffusion of misconduct. Finally, organizational misconduct has been an effective context for testing theories on themes such as motivation, control, power, labeling, and status, and will cont...

Corporate Responses to Claims of Environmental Misconduct: The Case of Phelps Dodge and Blackwell, Oklahoma

Drawing from fieldwork and thematic content analysis, we examine corporate responses to allegations of environmental misconduct surrounding a decommissioned zinc smelter plant in Blackwell, Oklahoma. Environmental grievances center on health effects associated with exposures to lead, cadmium, and arsenic and local activists charge the responsible company, Phelps Dodge, with pandering to local city officials and state regulatory agencies. Local citizens and their lawyers accuse the company of compromising public health and environmental safety by conducting improper soil samples and neglecting proper cleanup of resident homes and public spaces. Findings indicate that Phelps Dodge responded to charges of organizational misconduct by engaging in a strategic campaign of organizational impression management that included the development of a “good neighbor campaign,” the establishment of a community outreach program to promote their voluntary environmental remediation efforts, and the diffusion of responsibility through the identification of alternative exposure scenarios.

Risk Factors for Misconduct in a Navy Sample

Understanding antisocial behavior and organizational misconduct is an important objective, because these maladaptive behaviors are disruptive and costly to organizations and to society as a whole. The objective of this study was to identify psychosocial risk factors for misconduct and antisocial behavior in a sample of Navy personnel. A group of sailors (n = 158) who had engaged in significant misconduct were compared with a demographically similar group of sailors (n = 288) who had not engaged in misconduct and who were in good standing with the Navy. The psychosocial variables that emerged as the most important risk factors for antisocial behavior were alcohol use (odds ratio [OR] = 2.42), high impulsivity (OR = 2.20), high trait hostility (OR = 1.79), and antisocial behavior of friends (OR = 1.65). The implications of these results for the military and for research on antisocial behavior are discussed.

Freedom of Speech Denied, Dignity Assaulted

This article attempts to answer a central puzzle in the field of whistleblower research: why, with the balance of corporate power arrayed against them, with assaults on their dignity, threats to their job security and with legal enforcement that is inadequate to protect the whistleblowers, do we see a growing number of whistleblowers in US society? This article identifies relevant shifts in the US occupational structure and economy, describes societal and organizational dynamics that lure individuals into disclosure of wrongdoing and managers into retaliation, and considers the pervasive effect upon the individual whistleblower of the whole escalating event into which they have been drawn. In order to show the relationship between the abridgement of employees' `right' to dissent and subsequent assaults on workers' dignity, this article summarizes aspects of the research literature to date that indicate the prevalence of management retaliation against whistleblowers, and considers the effect retaliation may have on others who observe similar organizational misconduct but refrain from voicing their concerns. Further, this article presents discouraging new evidence of how whistleblower cases filed so far under the Sarbanes—Oxley Act of 2002 have been adjudicated.

Individual and Organizational Antecedents of Misconduct in Organizations

A heterogeneous survey sample of for-profit, non-profit and government employees revealed that organizational factors but not personal characteristics were significant antecedents of misconduct and job satisfaction. Formal organizational compliance practices and ethical climate were independent predictors of misconduct, and compliance practices also moderated the relationship between ethical climate and misconduct, as well as between pressure to compromise ethical standards and misconduct. Misconduct was not predicted by level of moral reasoning, age, sex, ethnicity, job status, or size and type of organization. Demographic variables predicted job satisfaction and organizational variables added significant incremental variance. Results suggest the importance of promoting a moral organization through the words and actions of senior managers and supervisors, independent of formal mechanisms such as codes of conduct.

Stigma and Settling Up: An Integrated Approach to the Consequences of Organizational Misconduct for Organizational Elites

In this article, I address the question of the apportionment of the consequences of organizational misconduct to individual members of the organizational elite. I argue that this process can be best understood by marrying the behavioral aspects of stigma theory to the economic mechanisms of ex post settling up. Viewed in conjunction with stigmatization, ex post settling up following organizational misconduct can be seen as the result of attempts to avoid stigma by association. Efforts at stigma avoidance on the parts of various stakeholders produce the diminished social interaction associated with ex post settling up: departure from the focal firm, and loss of seats on other boards. This also suggests that the process of stigmatization, and hence ex post settling up, can be influenced by characteristics of social interaction unrelated to the misconduct itself.

Framing and Organizational Misconduct: A Symbolic Interactionist Study

This study expands theoretical understanding of organizational misconduct through qualitative analysis of widespread deceptive sales practices at a large U.S. life insurance company. Adopting a symbolic interactionist perspective, this research describes how a set of taken-for-granted interpretive frames located in the organization’s culture created a worldview through which deceptive sales practices were seen as normal, acceptable, routine operating procedure. The findings from this study extend and modify the dominant theoretical ‘pressure/opportunity’ model of organizational misconduct by proposing that the process engine driving misconduct is not amorally rational organization members, but rather is organizational members acting on socially constructed views of the organization that normalize misconduct.

In Defense of Imperfect Compliance Programs

In Organizational Misconduct: Beyond the Principal-Agent Model, Professor Krawiec argues that organizations have perverse incentives to implement ineffective compliance programs, and supports this argument with a survey of empirical research. Based on her argument she urges that organizations be held strictly liable to corporate crimes (in terms of both guilt and punishment), regardless of the implementation of a compliance program by the accused organization. Assuming arguendo that criminal law's current treatment of compliance programs gives organizations an incentive to design inefficient programs, this Article posits that corporate crime may be better deterred if criminal law embraces, rather than remains agnostic to, compliance programs. First, Krawiec's policy suggestion overstates the impact of the legal sanction on corporate behavior. The legal sanction is only one of several sanctions imposed for organizational misconduct. The public relations effect of misconduct may harm organizations more than any legal sanction, giving them an incentive to implement compliance programs that assure the public of the organization's compliance with the law. Second, Krawiec does not consider utility that is derived from reducing the public's subjective perception of the likelihood of misconduct. This placebo effect that exists whether a compliance program is objectively effective or not, may increase utility by offsetting behavioral biases that cause the public to overestimate the probability of organizational misconduct.

Using accountability to create a more ethical climate

According to Jones (1991) ethics influence judgments used to make decisions that are legal or morally acceptable to the larger community [Ethical decision-making by individuals in organizations: An issue-contingent model. Academy of Management Review, vol. 16(2) (pp. 366–395).]. Poor ethical decision-making costs industry billions of dollars a year and damages the images of corporations. Thus, ethics is an organizational and managerial issue. This paper describes how ethical decision-making is a multi-dimensional process; one that includes the individual, the ethical issues and the organizational context. It then shows how organizations can use accountability mechanisms to help control organizational misconduct, such as enforced codes of ethics and the creation of a values-based organization with top management support and strong ethical social consensus.

Managerial Values and Accountability Pressures: Challenges of Crisis and Disaster

Conventional wisdom would expect government to react to disaster or crisis in order to prevent recurrence. Atrophy of vigilance theory contends that disasters in hazardous systems necessarily lead to such corrective policy. Yet policy change theory recognizes that even disaster or crisis spurs policy change only when there is a conducive political climate. When is disaster or crisis insufficient to produce a political climate favoring change aimed at preventing recurrence? What is the durability of policy change in the long term? This article uses three Israeli and two parallel American case studies to further understanding of policy reactions to disaster and crisis in environments dominated by production results pressures. Patterns of reaction do not conform completely with either atrophy of vigilance or policy change theories. Christopher Hood (1991) identifies three broad categories of administrative values: sigma values of economic and purposeful government, which we call production results values; theta values of honesty and fairness, which we call rectitude; and lambda values of security and resilience, which we call, in short, resilience. Managerialism promotes production results values and encourages entrepreneurial management to obtain desired results in innovative ways. At the heart of managerialism is the idea that managers are free to manage in accordance with their professional judgment largely unshackled by hierarchic and legal process stipulations. It has been suggested that environments in which production results values predominate are likely to be less capable of preventing breaches in values of honesty and fairness (i.e., organizational misconduct) and in values of security and resilience (i.e., accident and disaster) (Hood 1991). Considerable theoretical attention has been paid in public administration literature to the potentially negative consequences of the production results focus of managerialism on rectitude values (Bellone and Goerl 1992; Terry 1993, 1998; Kellough 1998; Box 1999). Several of these observers contend that production results dominated regimes necessarily weaken traditional hierarchic accountability and risk increases in dishonest behaviors. Scholars from a variety of disciplines have studied the influence of production results values on the advent of disaster. Public administration scholars Romzek and Dubnick (1987), for example, attribute the Challenger launch disaster largely to production

HOW STRUCTURAL DECOUPLING FACILITATES ORGANIZATIONAL MISCONDUCT.

Organizational misconduct may be the best-documented corporate phenomena of the past two years. The accounting practices of companies like Enron, WorldCom, and Tyco have transcended the finance jou...