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. (shrink)

The Sarbanes–Oxley Act of 2002 requires audit committees of public companies’ boards of directors to install an anonymous reporting channel to assist in deterring and detecting accounting fraud and control weaknesses. While it is generally accepted that the availability of such a reporting channel may reduce the reporting cost of the observer of a questionable act, there is concern that the addition of such a channel may decrease the overall effectiveness compared to a system employing only non-anonymous reporting options. The (...) rationale underlying this concern involves the would-be reporter’s likelihood of reporting, the seriousness with which the organization treats an anonymous report, and the organization’s ability to thoroughly follow-up the report. Thus, we explore the extent to which the availability of an anonymous reporting channel influences intended use of non-anonymous reporting channels. Further, in response to Sarbanes–Oxley and the environment of financial scandals that led to its passage, many firms are strengthening their internal audit departments, and providing them with greater independence from upper management’s direct control. Accordingly, our examination tests whether the intended use of the internal audit department as an internal reporting channel is greater when the internal audit department is of “high” versus “low” quality. Finally, the study investigates intended reporting behavior across three different cases (e.g., settings). Results show that the existence of an anonymous channel does reduce the likelihood of reporting to non-anonymous channels, that generally the internal audit department quality does not affect reporting to non-anonymous channels, and that case-setting affects the type of channel to be used. Implications from the study are discussed. (shrink)

This paper analyses the ethical performance of foreign-investment enterprises operating in China in comparison to that of the indigenous state-owned enterprises, collectives and private enterprises. It uses both the deontological approach and the utilitarian approach in conceptualization, and applies quantitative and econometric techniques to ethical evaluations of empirical evidences. It shows that according to various ethical performance indicators, foreign-investment enterprises have fared well in comparison with local firms. This paper also tries to unravel the effect of a difference in business (...) culture and competitive market forces on ethical performance by comparing the behavior of foreign-investment enterprises with that of the indigenous state-owned enterprises and collectives on the one hand, and with that of the indigenous private enterprises on the other. (shrink)

Prior research on corporate misconduct pays extensive attention to single misconduct behaviors. However, little research has addressed recidivism – the repeated behaviors of corporate misconduct. Based on institutional theory and using the context of emerging economies where recidivism plays a considerable role, we propose the path dependency of corporate recidivism and suggest that three influential factors exist: internal preconditioning, inter-organizational imitation, and the prevailing external evaluation. Our event history analysis of 1,036 listed companies in China over the period 2001–2008 statistically (...) confirms our hypotheses. We conclude the paper by outlining the implications for both theory and practice. (shrink)

A survey was conducted of the perceived correlates of illegal abuses in the electronics industry. Human resource directors of thirty-one firms responded to a questionnaire which assessed their perceptions of the degree to which illegal behavior was caused by (1) deficiencies in the moral character of employees (2) the clarity of expectations and standards describing illegal behavior and (3) the presence of reinforcements and punishments contingent on these behaviors. All three variables were related to the frequency of abuses in three (...) areas of organizational crime (e.g. administrative, labor, environment) and three areas of personal crime (theft, falsifying records kickbacks) as reported by the directors and/or indicated by archival records. The implications of these findings are discussed in terms of how organizations may reduce illegal activity. (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 considers future directions of empirical research in business ethics and presents a series of recommendations. Greater emphasis should be placed on the normative basis of empirical studies, behavior (rather than attitudes) should be established as the key dependent variable, theoretical models of ethical decision making should be tested, and empirical studies need to focus on theory-building. Extensions of methodology and the unit of analysis are proposed together with recommendations concerning the need for replication and validity, and building links (...) to managerial and public policy applications. (shrink)

Drawing from the Boulding''s (1956) framework for general systems theory, the need to employ richer paradigm in the study of organizations (Pondy and Mitroff, 1979) is reiterated. It is argued that a better understanding of organizational ethical behavior is contingent upon viewing organizations as symbol processing systems of shared language and meanings. Further, it is proposed that organizations, like individuals, develop into collectivities of shared cognitions and rationale, over a period of time. The study adapts Kohlberg''s (1983) model of moral (...) development to examine if organizations can be viewed as passing through different stages of moral development depending on the type of moral reasoning employed to explain their behaviors in the face of ethical crises. Several cases raising questions about the ethics of corporate behavior were researched. An instrument entitled Organization Response Analysis was constructed using statements made by various spokespersons representing five of these organizations. The instrument was administered to 246 graduate and undergraduate students of business (N = 246). Results indicated a great degree of concurrence among respondents of differing genders, levels of education and work experience in determining the stages of moral development of organizations. Limitations of the current study and implications for future research and practice are discussed. (shrink)

This study explores whether or not a firm’s ownership status, as state-owned enterprise or private-owned enterprise, will influence its likelihood of engaging in illegality in China. We build our arguments on the institution-based view, positing that firms rationally pursue their interests in the distinct institutional context of China. Compared to SOEs, POEs have limited access to institutional resources, the lack of which threatens their development or even survival, forcing them to “break rules” to overcome institutional barriers. We thus suggest that (...) POEs demonstrate a higher propensity to engage in illegal actions than SOEs do. However, if POEs could gain access to more institutional resources, their motivation to engage in illegal actions is likely to decrease. Following this logic, we suggest that political connections and market development will mitigate the likelihood that POEs will engage in illegal actions. We find support for our predictions using evidence from Chinese listed manufacturers. Our research contributes to the literature by revealing the institutional aspects of corporate illegality in transitional economies. (shrink)