This study examines the role of executive compensation in public governance. We collect data on corruption cases that involve top-level executives in Chinese listed state-controlled firms. We find a significant positive relationship between underpayment of executives and the likelihood of an investigation into corrupt behavior. We also show that corruption is positively associated with firm performance and that the relationship between underpayment of executives and corruption is influenced by firm performance, suggesting that top managers are more likely to engage in (...) illicit behavior if they are compensated poorly while the firms under their control perform well. Finally, we find that pay-performance sensitivity decreases when top executives are involved in corruption investigations, indicating a lack of pecuniary incentives. Our empirical findings point toward an important relationship between executive compensation and corrupt behavior, thus providing valuable input to the understanding of executive pay and its effects in China’s state sector. (shrink)

Despite a strong sensitization to the corruption problem and a large body of interdisciplinary research, scientists have only rarely investigated which motivational, volitional, emotional, and cognitive components make decision makers in companies act corruptly. Thus, we examined how their interrelation leads to corruption by proposing an action model. We tested the model using a business simulation game with students as participants. Results of the PLS structural equation modeling showed that both an attitude and subjective norm favoring corruption led to a (...) desire to act corruptly. Given high perceived behavioral control, this desire was transformed into an intention that finally resulted in corrupt action. Components related to general private and professional goals did not allow for any prediction. Based on these results, we discuss preventative measures and methods for combating intra- and inter-organizational corruption. (shrink)

Corruption poisons corporations in America and around the world, and has devastating consequences for the entire social fabric. In this article, we focus on organizational corruption, described as the abuse of authority for personal benefit, and draw on Weber’s three ideal-types of legitimate authority to develop a theoretical model to better understand the antecedents of different types of organizational corruption. Specifically, we examine the types of business misconduct that organizational leaders are likely to engage in, contingent on their legitimate authority, (...) motives, and justifications. We conclude by suggesting managerial implications of our theoretical model and propose directions for future research. (shrink)

This paper develops the concept of the ‘continuum of destructiveness’ in relation to organizational corruption. This notion captures the slippery slope of wrongdoing as actors engage in increasingly dubious practices. We identify four kinds of individuals along this continuum in corrupt organizations, who range from complete innocence to total guilt. They are innocent bystanders, innocent participants, active rationalizers and guilty perpetrators. Traditional explanations of how individuals move from bystander status to guilty perpetrators usually focus on socialization and institutional factors. In (...) addition to these factors, we propose that the very distance between an act and its ethical consequences (ethical distance) may also play a determining role – if not always in the same way – in the transition process. Having developed this conceptual argument, we conclude with a discussion of managerial and research implications. (shrink)

This article discusses the alleged anti-corruption effects of procurement reforms by presenting the European Act on Public Procurement and the increasing number of appeals filed by suppliers due to perceived misevaluations of tenders and perceived impairments of transparency. The delays and costs that arise from this right to appeal are studied in the Swedish context with the aim of contributing to the debate on corruption in two ways. First, instead of using the modern definition of corruption, the ancient definition is (...) introduced to explain anti-corruption efforts, focusing on corruption as deviations from a pristine standard as opposed to corruption as the abuse of public power for private gain. Second, it will be argued that the fight against corruption in the practical implementation of the European Act on Public Procurement jeopardizes efficiency and might devaluate competence. However, striving for the total elimination of corruption–an evil that has to be fought disregarding the consequences–is integral in the war against it. (shrink)

The literature states that both situational and individual factors contribute to corrupt behavior. This study investigates the influence of rarely empirically investigated situational factors - the size of the bribe, time pressure, and the degree of abstractness of the business code - on the Model of Corrupt Action that describes the subjective decision making process of corrupt actors. To test the effects, I used an experimental simulation design. Only few effects were found. Thus, my results show a certain robustness of (...) corrupt behavior against the examined situational influences. Based on these results, I discuss implications for the prevention of corruption in organizations. (shrink)

This study explores the micro-determinants of corruption tolerance among 1414 university students in Guatemala, a country grappling with significant corruption issues. By examining the attitudes of economics majors compared to students in other disciplines through ordered logistic regression analysis, we offer new insights into factors influencing corruption tolerance in a developing country setting. This approach, by focusing on a developing country, fills a research gap in the literature on the differences between economics students and their peers from other programs. We (...) find that economics students exhibit a greater tolerance for corruption. This result aligns with theories and research that suggest that economists show a profit-maximizing mindset, and distinctive values and fairness perceptions. Furthermore, our analysis reveals significant effects of gender and age on corruption tolerance, with women and older students reporting lower tolerance to corrupt practices. The study also uncovers the higher tolerance towards private versus public corruption. These findings provide valuable guidance for developing policies and educational initiatives to reduce corruption tolerance among future professionals in similar socio-economic environments. (shrink)

In order to shed light on the issue of crony corruption in the context of economic transition, I focus on the puzzle of China's unique experience of economic transition characterized by the duality forms and effects of crony corruption underlying local corporatism in a dual-track (i.e., market and political tracks) transition. I argue that the duality of local corporatism derives from the duality of crony corruption. First, the early form of local corporatism as state-business public alliance is embedded in informal (...) crony corruption as positive for the purpose of wealth growth in the initial phase of economic transition with public and private interests aligned as compatible. Second, the later form of local corporatism as official-manager private collusion is embedded in quasi-formal crony corruption as negative for the purpose of wealth transfer in the later phase with public and private interests in conflict as incompatible. The duality of crony corruption in the two phases of economic transition is caused by the interplay between formal and informal factors and between economic and political factors. My contribution is twofold. First, I explain China's transition in terms of crony corruption underlying local corporatism. Second, I develop an integrated framework of crony corruption concerning its content, process, antecedent and consequence. (shrink)

Making use of facilitating payments is a very widespread form of corruption. These consist of small payments or gifts made to a person – generally a public official or an employee of a private company – to obtain a favour, such as expediting an administrative process; obtaining a permit, licence or service; or avoiding an abuse of power. Unlike the worst forms of corruption, facilitating payments do not usually involve an outright injustice on the part of the payer as they (...) are entitled to what they request. This may be why public opinion tends to condone such payments; often they are assumed to be unavoidable and are excused on the grounds of low wages and lack of professionalism among public officials and disorganisation in government offices. Many companies that take the fight against “grand” corruption very seriously are inclined to overlook these “petty” transgressions, which are seen as the grease that makes the wheels of the bureaucratic machine turn more smoothly. Despite this, facilitating payments have a pernicious effect on the working of public and private administrations: all too often they are the slippery slope to more serious forms of corruption; they impose additional costs on companies and citizens; and in the long run they sap the ethical foundations of organisations. Although many articles on corruption mention facilitating payments, there have been no systematic studies from a company’s point of view. This article thus focuses on facilitating payments from the point of view of the company that makes the payment, either as the active partner (when it is the company that takes the initiative) or as the passive partner (when the official or employee is the instigator). (shrink)

Misbehaviour and malpractices of Chinese journalists in recent years have brought media corruption under the spotlight. The lack of professionalism and scarcity of fully established ethics in media organisations have made the case worse. However, while Chinese media and academics concentrate narrowly on paid-for news or gag fee by prompting the enforcement of disciplinary restraints and ‘thought education’, this hot issue has been largely ignored by western scholars and has only been occasionally reported by some western media. Based mainly on (...) prominent cases and document studies, this article classifies three major types of media corruption in the Chinese context: (1) individual red-envelope taking, (2) institutional profit seeking and (3) personal businesses benefiting from the identity of a reporter. It then explores two major endogenous causes of media corruption: media’s unique role in China’s political power structure and their monopoly in information collection and delivery. Two current countermeasures undertaken against this phenomenon in China are finally analysed. (shrink)

Corruption within the private sector has often not been dealt with in Brazil. Organizations may find corrupt acts in its operations or practices, but specific concepts and programs to avoid them are neither concrete nor clear. Some Brazilian stockholders have become aware of the risks involved in unethical procedures and are adopting the Best Practices of Corporate Governance initiative. International agencies have intensively supported organizations and governments in an effort to define policies that inhibit illegal or corrupt cultural habits throughout (...) the world, but Brazilian practitioners show insufficient response. Skepticism may indicate a lack of understanding about how an ethical leadership can guide employees, setting high standards for the organizational culture and climate, clearly defining limits of correct behavior, and creating appropriate codes of ethics. Transparency still has to be discovered as a significant tool to encourage professionalism in performance and reporting of data in Brazilian companies. In this article, we analyze the ethical behavior of the purchasing department of a multinational company in its host country, Brazil. It focuses specifically on the supplier–buyer relationship. The results indicate that despite the negative reputation Brazilians have in business ethics, a company can still develop a positive and ethical relationship with its stakeholders. Communication, transparency, compliance with the company’s code of conduct as well as the supplier’s awareness of the buyer’s code of conduct are the factors which influence the supplier–buyer relationship. Transparency can be used as a tool to reduce corruption, thereby increasing ethical behavior and company image. Good ethical behavior can help to build up a company’s image. (shrink)

In this paper, we argue that corruption research can benefit from studying corrupt transactions as a particular form of social interaction. We showcase the usefulness of a theoretical focus on social interaction by investigating online user reports on the website Frontdesktip.com. Through this focus, we can observe users sharing experiences and tips on the best ways of bribing hotel clerks in Las Vegas for attaining room upgrades and other complimentary extras. We employ a logistic regression analysis to examine what factors (...) influence the “successful” performance of this bribery practice. Our study makes a twofold contribution to existing research on corruption. First, on the theoretical level, we show that the typified and scripted character of social interactions can help explain the occurrence of corrupt transactions. Second, on a methodological level, our study showcases online self-reports as a useful data source to study corrupt transactions in an unobtrusive way. (shrink)

Even though potential impacts of political and legal environments of business on ethical behavior of firms (EBOF) have been conceptually recognized, not much evidence (i.e., empirical work) has been produced to clarify their role. In this paper, using Bayesian causal maps (BCMs) methodology, relationships between legal and political environments of business and EBOF are investigated. The unique design of our study allows us to analyze these relationships based on the stages of development in 92 countries around the world. The EBOF (...) models structured through BCMs are used to explain how EBOF in a given country group are shaped by how managers perceive political, legislative, and protective environments of business in these countries. The results suggest that irregular payments and bribes are the most influential factors affecting managers’ perceptions of business ethics in relatively more advanced economies, whereas intellectual property protection is the most influential factor affecting managers’ perceptions of business ethics in less-advanced economies. The results also suggest that regardless of where the business is conducted in the world, judicial independence is the driving force behind managers’ perceptions of business ethics. In addition, the results of this study provide further support for scholars who argue that business ethics is likely to vary among countries based on their socio-economic factors. In addition to its managerial implications, the study provides directions for policy makers to improve the ethical conduct of businesses in their respective countries. (shrink)

This article presents the results of the longitudinal study of Addiopizzo, a successful anti-bribery organization founded in Sicily in 2004. It analyzes how this organization has used information disclosure as a strategy to fight adverse environmental conditions and the immoral activities of the Sicilian Mafia. This article extends the business ethics and corporate social responsibility literature by showing how multi-level strategic information disclosure processes can help gain organizational legitimacy in adverse social environments and successfully fight against social resistance to change, (...) low levels of moral imagination and attacks from criminal organizations. This article provides an additional contribution to the literature by linking the three research streams on corporate transparency, the fight against corruption, and organizational legitimacy. The results of this research also contribute to the special issue of the EBEN AC 2010, “Which values for which organizations”, since it provides a unique example of an organization capable of spreading the values of social justice and honesty in a difficult social environment plagued by Mafia. (shrink)

Organizational corruption has recently attracted considerable scholarly attention, especially since its devastating effects following recent major corporate scandals, the worldwide economic crisis of 2009, and the current European Union monetary crisis. This paper is based on the analysis of three distinct, yet contextually related, case studies in a European Union member state: (a) an incident of corruption by a minister in an adjudicative role, (b) widespread financial misreporting and perjury within an organization, and (c) abuse of due process and obstruction (...) of justice by civil servants within a ministry. These cases serve to illustrate, for the first time, Aguilera and Vadera’s (in J Bus Ethics 77:431–449, 2008 ) framework of organizational corruption, which relates distinct types of a corrupter’s opportunity, motivation, and justification with the type of corruption present in the organization. Furthermore, the data suggest how the framework may be extended and reveal conceptual issues that require reconciliation. This study attempts such reconciliations and offers some suggestions on how the findings may be utilized by policy reformers or corruption controllers. (shrink)

Corruption is a serious economic, social, political, and moral blight, especially in many emerging countries. It is a problem that affects companies in particular, especially in international commerce, finance, and technology transfer. And it is becoming an international phenomenon in scope, substance, and consequences. That is why, in recent years, there has been a proliferation of international efforts to tackle the problem of corruption. One such international cooperative initiative is the United Nations Convention against Corruption, signed in 2003, which came (...) into force in December 2005. This is the first truly global instrument to prevent and combat corruption, built on a broad international consensus. The purpose of this article is to explain the origin and content of the Convention, what it adds to existing international instruments for combating corruption, and its strengths and weaknesses, mainly from the point of view of companies. (shrink)

Recent research suggests that collectivism breeds corruption in bank lending. This finding, together with the stickiness of culture, poses a direct challenge to economic growth in collectivist societies. In this paper, we address this grim outlook by examining the types of firms that are susceptible to the detrimental effect of collectivism on lending integrity and the formal institutions that can help alleviate such effect. We find that the adverse effect of collectivism on bank corruption is more severe in small and (...) medium-sized firms, privately owned firms, and non-exporting firms, while it is considerably weaker in countries with more effective private monitoring, a higher fraction of foreign-owned banks, a more competitive banking sector, better information sharing, and stronger legal and political institutions. Our findings are robust to using alternative measures of collectivism and alternative dependent variables. These results highlight how firm-level characteristics and formal institutions interact with collectivism in affecting firms’ access to bank credit. (shrink)

This paper extends the discussion of business ethics by examining the issue of corruption, its definition, the solutions being proposed for dealing with it, and the ethical perspectives underpinning these proposals. The paper’s findings are based on a review of association, think-tank, and academic reports, books, and papers dealing with the topic of corruption, as well as the pronouncements, websites, and position papers of a number of important global organizations active in the fight. These organizations include the World Bank, the (...) International Monetary Fund, the Organization for Economic Co-operation and Development, Transparency International, USAID, the United Nations, the International Chamber of Commerce, the Organization of American States, and the Council of Europe. Our discussion departs from prior analyses by adopting a Foucaultian theoretical framing and by incorporating insights found in the virtue ethics literature. Implications are provided for international business organizations. (shrink)

This article considers what policy reforms may help catalyze corporate commitment to combating corruption. The starting point for this discussion is a voluntary, corporate principles approach to self-regulation. Such an approach should seek to encourage corporations to implement effective compliance and ethics programs and to disclose information related to their anti-corruption activities to relevant stakeholders. Although a corporate principles approach is a private initiative, there is a significant role for the public sector. This article discusses some of the ways that (...) the public sector can support and further the goals of a corporate principles approach to combating corruption. The reforms discussed in this article include amnesty programs for corporations that self-disclose corrupt payments, the use of corporate monitors in the enforcement of anti-corruption laws, expanding the definition of corruption in criminal laws, sustainability reporting indicators related to bribery, and the implementation of multi-stakeholder initiatives to support a corporate principles approach. (shrink)

High-profile corporate scandals earlier in this decade provoked outrage and legislative action; however, corporate executive-level ethical lapses continue to come to light. This article examines the work of Professor Dunfee and his coauthors on corruption, ethical leadership, and social contracts theory, and relates that literature to corrupt activities by corporate executives. Corruption is defined broadly to encompass executive self-dealing, which harms their firms. The specific example of stock options backdating is used to show the harmful impact on shareholders and the (...) lack of managerial integrity though consequentialist, deontological, and legal analysis, as well as a critique of the practice using social contracts principles. Ultimately, this article utilizes the insights of Dunfee and his coauthors, and the lessons from the backdating example, to propose a framework aimed at improving corporate governance and preventing future executive corruption. The framework includes a strategy of identification and prevention, employing detection and eradication mechanisms, and institutional learning from past instances of corporate corruption. (shrink)

The literature on organizational ethicality to date has focused primarily on elements of the cultural, social, and political factors that enhance positive behaviors, interspersed with isolated accounts of malfeasance and wrongdoing. This treatise defines the anatomy of organizational dysfunction as a matter of ethicality, reframing the relationship from individual transgression to the organization itself. It is argued that the structure of an organization predisposes in large part whether it is itself conducive or prohibitive to unethical acts. Our approach allows for (...) a new stream of ethics research whose focus is how an organization functions rather than on the specific acts of those within it. (shrink)

While public (or government) corruption has attracted a lot of attention, private (or business) corruption has been relatively under-addressed. A specific form of corruption, namely, paying a bribe to a public official, is easily identifiable as unethical and possibly illegal, but this is not clear in a private business context. Yet private bribery also has serious organizational consequences. This exploratory study suggests that individuals have difficulty in recognizing the ethical connotations of potential bribery, and draws attention to the need to (...) build skills in this regard. (shrink)

Corporate anti-corruption initiatives can make a substantial contribution towards curtailing corruption and advancing efforts to achieve the United Nations’ Sustainable Development Goals. However, researchers have observed that underdeveloped assumptions with respect to the conceptualization of corruption and how firms respond to corruption risk impeding the efficacy of anti-corruption programs. We investigate the relationship between the perceived level of corruption in foreign host countries and the organizational structure of subsidiary operations established by multinational corporations. Foreign host market corruption is disaggregated into (...) two components—private and public corruption. We employ an uncertainty-based perspective grounded in transaction cost theory to focus upon the distinct mechanisms through which private and public corruption can each be expected to impact a foreign subsidiary’s organizational structure [wholly-owned subsidiary or a joint venture with a local partner]. We expect that each type of corruption fosters a different type of uncertainty which predominates in shaping the MNC’s choice of foreign subsidiary investment structure. Hypotheses are developed and tested with a sample of 187 entries into 19 foreign host markets. Each type of corruption was found to exert a distinct effect upon the organizational structure of foreign subsidiaries. More precisely, while heightened perceived levels of public corruption were found to motivate MNCs to invest through a JV with a local partner rather than a WOS, more pronounced private corruption precipitated the opposite outcome. (shrink)

Despite universal agreement that corruption is norm-deviant, the criteria required to ascertain deviance remain elusive. The problem is even more pronounced for organizational corruption, not least because the construct remains somewhat ambiguous and is often conflated with proximate management constructs like antisocial or unethical organizational behavior. In this article, I identify the suitable criteria for the determination of deviance in organizational corruption and determine whether it is, indeed, antisocial or unethical. In order to minimize ambiguity, I first limit the scope (...) of organizational corruption to corruption within, rather than by, organizations, which is most conceptually challenging insofar as the aforementioned questions are concerned. I then conclude that organizational corruption should be specified solely with respect to the focal organization’s normative framework; it is anti-organizational rather than antisocial. Higher level normative prescriptions that arise from the organization’s embedding within its social context remain relevant, but only insofar as they are incorporated within the organization’s normative framework. Moreover, I argue that organizational corruption is not necessarily unethical, since the moral evaluation of an organizational act is, in principle, distinct from the determination of its deviance to organizational norms. (shrink)

B2B online reverse auctions technology (ORAs) emerged as a popular tool for large buying firms in the late 1990s. However, its growing use has been accompanied by a corresponding increase in unethical behaviors to a point that it has been described as the technology that has triggered more ethical concerns in the e-commerce arena than in any other segment of activity. Our findings first indicate that the establishment of formal ethical criteria based on the restrictive interpretation of ethics as honesty (...) is not enough to resolve the ethical issues that surround the introduction of a technology because it ignores the ethical values shared by most acton in the sector in terms of fairness. We show the extent to which lobbying, rumor, technical problems, and public discourse can impact on the interpretations of the technology regarding ethics. Highlighting the importance of incorporating ORAs into the broader context of relationship management that integrates ethics as fairness and not only ethics as honesty serves to illustrate why the future of ORAs might not be as bright as predicted by a theoretical interpretation of the technology that is sometimes disconnected from the realities of the field. (shrink)