The recent financial crisis has triggered an intense debate about the role of banks in society, presumably changing the criteria used in the evaluation of organizations. Against this backdrop, we investigate the changing role of banks’ organizational features in shaping different dimensions of banks’ organizational reputation. Using the media as an important evaluator, we measure the reputational dimension of visibility based on the frequency of newspaper articles and the reputational dimension of favorability based on the sentiment of newspaper articles. Drawing (...) on social judgment research for developing our hypotheses, we expect that organizational features such as financial performance and familiarity become more important determinants of organizational reputation in times of crisis. Our results support this expectation, suggesting stronger effects of these organizational features on the visibility and favorability of banks during a crisis. These findings provide novel empirical evidence on how the importance of drivers of organizational reputation changes in times of crisis and highlight areas for managerial attention. (shrink)

We assess the organizational culture in the finance industry in relation to the global financial crisis and consider the potential of cultural change to improve the financial sector. To avoid biases, we build on the person–organization fit literature and develop a novel, indirect method for assessing organizational culture that revolves around relationships between employees’ personal traits and their career success in the industry or organization under study. We analyze personal values concerning the pursuit of private gain versus personal values concerning (...) caring for others and consider whether employees that value self-enhancement more and self-transcendence less enjoy more career success relative to their peers when working in finance than when working in other industries. Results do not reveal any sort of cross-industry differences that would implicate the finance industry’s culture in the financial crisis. Instead, we find the opposite, namely that strong self-enhancement values and weak self-transcendence values go together with less career success in the finance industry compared to other industries. Hence, if anything, the culture in the finance industry does not seem to resonate well with professionals that seek to pursue personal gain at the expense of clients’ welfare. Implication is that cultural change has little potential to improve the financial system. Meanwhile, the method for assessing organizational culture indirectly by analyzing relationships between employees’ traits and their career outcomes has wider applicability, particularly when relying on scores or measures obtained directly from the people concerned is likely to render biased evidence. (shrink)

In this article, we build on the stakeholder-politics literature to investigate how corporate scandals transform political contexts and give impetus to the contentious movements of fringe stakeholders against multinational corporations (MNCs). Based on Adut’s scandal theory, we flesh out three scandal-related processes that directly affect political-opportunity structures (POSs) and the generation of social movements against MNCs: convergence of contention toward a single target, publicization of deviant practices, and contagion to other organizations. These processes reduce the obstacles to collective actions by (...) fringe stakeholders by pushing corporate elites to be more sensitive to their claims, by decreasing MNCs’ capability to repress contentious movements, by forcing the targeted MNCs to formalize a policy to monitor and eradicate the controversial practices, and by helping fringe stakeholders find internal and external allies to support their claims. This conceptual model of scandals as catalysts of contentious actions contributes to a better understanding of stakeholder politics by unveiling the role of the political context in the coordination of fringe stakeholders. (shrink)

In recent years, research on morality in organizational life has begun to examine how organizational conduct comes to be socially constructed as having failed to comply with a community’s accepted morals. Researchers in this stream of research, however, have paid little attention to identifying and theorizing the key actors involved in these social construction processes and the types of accounts they construct. In this paper, we explore a set of key structural and cultural dimensions of apparent noncompliance that enable us (...) to distinguish between four categories of actors who engage in constructing the label of moral failure: dominant insiders, watchdog organizations, professional members, and publics. The analysis further clarifies which category of actor is more likely to succeed in constructing the label of moral failure under which circumstances, and what accounts they are likely to use, namely scapegoating, prototyping, shaming, and protesting. (shrink)

The finance industry is required to respond to public criticism of perceived immoral behaviour. To create legitimacy, financial firms not only undertake corporate social responsibility activities, but also support such activities with precise justifications. In this paper, we study CSR justifications appearing in annual and sustainability reports from the Swedish finance industry. Our objective is to investigate the ethical character of CSR justifications in the finance industry. This is an interesting topic, both because CSR carries ethical meaning and because CSR (...) justifications play a role in actual business activities. A secondary aim of this article is to test whether decoupled corporate claims about CSR can be recoupled, which would potentially help companies to act responsibly. The observed CSR justifications avoided the fundamental question of whether the finance industry does in fact have responsibilities, and they did not manifest awareness of stakeholders’ demands for CSR. Seemingly value-based CSR activities often lacked ethical justifications. These characteristics do not harmonize with the responsible image that the contemporary finance industry wants to portray. Our counterintuitive finding is that amorality prevails in the justifications that banks give for undertaking CSR activities. (shrink)

High-profile failures in financial trading have led to interest in how the culture of the industry produces risky and unethical behaviours among traders. Yet, there is no established theoretical framework for studying this: we apply safety culture theory to examine ten recent high-profile trading mishaps investigated by the UK financial regulator. The results show that the dimensions of safety culture used to understand organisational accidents in domains such as aviation also explain failures in Risk Management within financial trading organisations. This (...) counters narratives focusing on traders who are unethical ‘rule breakers’, and emphasises the value of a systemic approach, whereby safety culture theory is used to explain why risky behaviours in financial trading occur. Safety culture therefore provides a conceptual basis for further research on risky and unethical behaviours in financial trading, alongside providing insights for possible intervention. (shrink)

How do social audiences negotiate and handle stigmatized organizations? What role do their heterogenous values, norms and power play in this process? Addressing these questions is important from a business ethics perspective to improve our understanding of the ethical standards against which organizations are judged as well as the involved prosecutorial incentives. Moreover, it illuminates ethical concerns about when and how power imbalances may induce inequity in the burdens imposed by such social evaluations. We address these questions building on two (...) event-based case studies involving Hells Angels Motorcycle Club Norway, and contribute to organizational stigma theory in three ways. First, social evaluations of a stigmatized organization by multiple audiences are found to interact, collide and combine in a labelling contest. Second, we show that labels employed in this contest are pushed to either negative extremes or positive extremes. Finally, we show when and how power represents a double-edged sword in social evaluation processes, which can be wielded either to the benefit or to the detriment of the actors under evaluation. (shrink)

In this study, we propose and test a model of the effects of organizational ethical culture and organizational architecture on the perceived unethical behavior of employees towards customers. This study also examines the relationship between organizational ethical culture and moral acceptability judgment, hypothesizing that moral acceptability judgment is an important stage in the ethical decision-making process. Based on a field study in one of the largest financial institutions in Europe, we found that organizational ethical culture was significantly related to the (...) perceived frequency of unethical behavior towards customers and to the moral acceptability judgment of this type of unethical behavior. No support was found for the claim that features of organizational architecture are associated with the perceived frequency of unethical behavior towards customers. This is the first study to document the differential effects of organizational architecture and organizational ethical culture on perceived unethical behavior of employees towards customers, in wholesale banking. Implications for managers and future research are discussed. (shrink)

ABSTRACT:Firms face a variety of institutional logics and one important question is how individuals within firms manage these logics. Environmental managers in particular face tensions in reconciling their firms’ commercial fortunes with demands for greater environmental responsiveness. We explore how institutional work enables environmental managers to respond to competing institutional logics. Drawing on repeated interviews with 55 firms, we find that environmental managers face competition between a market-based logic and an emerging environmental logic. We show that some environmental managers embed (...) the environmental logic alongside the market logic through variations of creation and disruption, thus over time creating institutional change, which can result in blended logics. Others, however, pursue a strategy of status quo or disengagement through maintenance or other forms of disruption, where the two logics coexist in principle but not in practice; instead the market logic retains its dominance. We discuss the implications of our findings for research. (shrink)

What do events such as scandals, industrial accidents, activist threats, and mass shootings have in common? They can all trigger an audience’s stigma judgment about the organization involved in the event. Despite the prevalence of these stigma-triggering events, management research has provided little conceptual work to characterize the dimensions and processes of organizational event stigma. This article takes the perspective of the evaluating audience to unpack the stigma judgment process, identify critical dimensions for categorizing types of event stigma, and explore (...) the role of the stigmatizers’ aesthetic, emotional, and cognitive reactions as well as their practical considerations in producing what we call “sticky stigmas.” Our event stigma typology provides clarity regarding how stigmas differ based on the types of events and audiences’ reactions and why some event stigmas are stronger and more long-lasting than others. We highlight the role of emotions and aesthetics in stigma formation and the various ethical dilemmas that influence stigma stickiness. (shrink)

Public comments criticizing the honesty and trustworthiness of Professionals in Finance (PIFs) are commonly seen as a way to motivate them towards engaging in more socially responsible business practices. However, the link between public views of this professional group, the self-views of individual group members, and their motivation to engage in Corporate Social Responsibility (CSR) activities has not been empirically examined. In this research, we draw on Social Identity Theory (SIT) and the Behavioral Regulation Model for social evaluation (BRM) to (...) examine how the self-views of individual group members relate to perceived characteristics of their professional group, indicating Competence and Morality. In two studies (N = 123, 191) we examined whether the self-views of high-profile and general PIFs are affected by other people's perceptions of the honesty and trustworthiness of this professional group. The results offer support for our reasoning derived from SIT and the BRM. In both studies, we first demonstrate that public concerns about the group's lack of honesty and trustworthiness impact on the moral self-views of financial professionals. Subsequently, we employ an experimental design to reveal that reinforcing moral criticism leveled at the group only reduces the motivation of individual group members to engage in CSR activities, while group-level moral affirmation enhances this motivation. The results of both studies converge to demonstrate how public critique on the moral behavior of their professional group relates to the self-views and behavioral motives of PIFs. We consider the theoretical and practical implications of these findings. (shrink)

Drawing from Goffman’s original observations on stigma and the consequences of interactions between the stigmatized and supportive or stigmatizing audiences, we conduct a 20-year review of the diverse literature on stigma to revisit the collective nature of stigmatization processes. We find that studies on stigma’s origins, responses, processes, and outcomes have diverged from Goffman’s relational view of stigma as they have overlooked important relational mechanisms explaining the processes of (de)stigmatization. We draw from those conclusions to justify the need to study (...) stigma as a collective phenomenon. We develop a relational perspective on stigma based on understanding how attributes are stigmatized (or not) by audiences in their interactions. We argue that to advance stigma research, it is necessary to build on Goffman’s theory to include the stigmatizers (i.e., the normal) and supporters (i.e., the wise); how they create, sustain, or remove stigma; and how they relate to the stigmatized (i.e., the targets). Accordingly, we provide a research agenda on stigma as a collective phenomenon that theorizes a relational perspective, proposes a typology of how audiences relate to stigmatization, and identifies patterns of relations between audiences. We thus offer a missing piece to existing accounts of stigma by focusing on the key role of audiences (i.e., stigmatizers or supporters of the stigmatized) rather than on the targets of stigma (i.e., the own). (shrink)

In contrast to the conventional fund management industry with a profit-oriented logic based on risk and return, ethical and faith-based funds should follow the religious principles of their investment-style philosophy. Islamic funds should obey the theological teachings of the primary sources of Islam, the Quran and Sunnah, as stakeholders expect these religious teachings to influence the investment decisions of fund managers. In practice, Islamic fund managers use Accounting and Auditing Organization for Islamic Financial Institutions ’s screening criteria, based on secondary (...) sources of Islam, which allow investments that are only partially halal to be included in their portfolios. This study finds that a more religious logic in screening practices, although impairing diversification, does not necessarily harm performance. Thus, Islamic investment funds, and the wider ethical fund management industry, should, and could, adopt stricter screening criteria that match their investment mandates and bring more ethical business practices to the industry. (shrink)