Organizational Wrongdoing as the “Foundational” Grand Challenge: Definitions and Antecedents: Volume 84

Organizational wrongdoing is still very much prevalent in today’s society. Traditional and social media are full of examples of organizations engaging in unethical or illegal behavior. While it is difficult – if not impossible – to establish whether the ever-increasing number of reported cases of wrongdoing is due to an actual increase in the phenomenon (objectivist view of wrongdoing) or to more attention being paid to it (social-constructivist view of wrongdoing), the fact remains that organizational wrongdoing seems to have become the norm rather than an exception in our everyday life. This is concerning, as organizational wrongdoing tends to undermine trust in fundamental institutions, such as the Market, the State, Religion, and Law, and may lead to them being replaced by other – sometimes less desirable – institutions or create an “institutional void.” Because of its potential impact on established institutions, organizational wrongdoing deserves to be closely monitored and further examined. This volume of Research in the Sociology of Organizations is an attempt to draw attention to the theoretical and empirical relevance of the topic, consolidate and extend the knowledge accumulated in this area of research, and highlight potential direction for future research. The volume explores in particular the definitions and antecedents of organizational wrongdoing.

In this paper, we investigate the process by which social control agents define wrongdoing over time and the principles they employ in drawing the boundary between right and wrong. We empirically examine how Italian state actors sought over four decades to categorize behaviors in the so-called “gray area,” i.e., the conduct of individuals supportive of the mafia organization Cosa Nostra and its criminal aims, but not members of the organization. Based on an archival analysis of texts produced since the 1960s, we reconstruct how state actors started from a preliminary definition of wrongdoing, moved to stigmatize the behaviors in question on moral grounds, and ultimately criminalized them with legal sanctions. We conceptualize the main principles behind this evolving categorization as intentionality of conduct, freedom of choice, and scope of harm. The paper contributes to the debate on the factors and conditions shaping the definition of wrongdoing over time and the contribution that social control agents provide to this aim.

When organizations engage in misconduct, social control agents play a crucial role in sanctioning them to show the enforcement of societal norms and reduce the risk of future deviance. We study the interaction between the government and the media, two key social control agents, in the evaluation organizational misconduct. While past work has focused on the influence of the media on the government, we theorize the influence of the government on the media. The government is a social control agent with supreme formal authority to punish misconduct, and thus its actions are of particular interest to the media as they form evaluations of misbehaving organizations. However, the government, tied by conflicting demands, sometimes turns a blind eye to misconduct and supports misbehaving organizations for the greater societal good, instead of punishing them. How is the media’s perception of misbehaving organizations affected by such government actions? We explore this question by looking at the case of the 2008 government bailout of investment banks in the United States, after those were caught red-handed for their involvement in the sub-prime financial crisis. Carrying out a content analysis of newspaper reporting (2007–2011), we show that the negative perception of investment banks and their misconduct is attenuated when they receive government support. Our work contributes to the emerging literature on the social construction of organizational misconduct and illuminates the interaction between government and media in the evaluation of behavior as organizational misconduct.

An emerging stream of research has identified critical events as spikes in societal interest that increase public attention to firm behavior and can function as exogenous triggers for change. With respect to misconduct, firms vary considerably in how they respond to critical events, and for a visible change in their undesirable behavior to transpire, there needs to be ongoing accumulation of work by social-control agents. While social-control agents are often boundedly rational in their decision-making, most studies have overlooked the ability of critical events to restrict or redirect collective attention among such agents. Drawing on the case of a regulatory agency’s enforcement actions against violations of anti-money laundering regulations by three European banks, we investigate the influence of critical events on social-control agents’ enforcement behavior. This study achieves two goals: first, we identify three types of fieldwide critical events that influence social-control agents’ behavior, and second, we demonstrate that these events may shape the regulatory environment in which firms operate, thus allowing for different organizational responses to enforcement actions. Our findings contribute to the literature on critical events and organizational misconduct.

Scandals regularly sweep through organizational fields: they wreak havoc in markets, vaporize billions of dollars in firm value, bring down giant corporations, get CEOs fired, alter the evolution of technologies, and trigger major changes in society. In spite of their significance for organizational life, scandals have received remarkably limited attention in management research. I build on the social sciences’ sparse but growing stream of research on scandals to explore the concept beyond its usual representation as a discrete event. I propose that an organizational scandal may be understood as an interactional process associated with the disclosure of alleged organizational misconduct that involves: a public struggle between alleged perpetrators and social control agents over the framing of organizational misconduct; moralizing by audience members; collective effervescence at the societal level; and the potential rewriting of the moral rules applicable to organizations and their members.

Scandal is the disruptive publicity of alleged misconduct and it is important for organizations because of its severe consequences. Distinguishing between single-actor scandals, i.e., scandals that result from publicity of misconduct by a single actor, and multiple-actor scandals, i.e., scandals that result from publicity of misconduct of a similar type by multiple actors, we develop a framework for studying scandal dynamics that draws a distinction between how scandals start (single-actor or multiple-actor) and how they end (single-actor or multiple-actor). We focus specifically on spillover scandals (from single to multiple actors) and scapegoating scandals (from multiple to single actors) and identify several mechanisms that affect the likelihood of these two important types of scandals. We conclude by developing a research agenda that builds upon the central contribution of our framework: the distinction between single- and multiple-organization scandals and the transitions that result in spillovers and scapegoating.

This chapter explores the evolution of the media framings of a corporate corruption scandal over time. Our analysis focuses on the evolution of media frames used by the English and French Press in the coverage of the corruption scandal involving SNC-Lavalin, a Quebec-based multinational engineering firm. We reveal how media coverage shifted from balanced and nuanced coverage of a complex phenomenon that facilitated debates on the appropriate consequences of corruption to a selective (re)construction of events to serve partisan agendas when the company’s legal plight was politicized. Our study contributes to the literature on media framings of corporate corruption by highlighting how the politicization of a corporate corruption scandal led to a dual climate of opinion across the English and French Press.

Corporate crime is prevalent and imposes enormous costs on society, yet our understanding of its antecedents remains poor, especially in relation to executive characteristics. In this study, we examine the influence of CEO childhood social class on corporate crime. Using a unique data set of CEOs at the largest US corporations, we consider CEO childhood background and develop the argument individuals raised in middle-class families have a greater disposition to commit wrongdoing within the corporations they lead. Specifically, growing up middle-class leaves a lasting status-anxiety imprint, which increases the tendency to engage in corporate crime to preserve or enhance social status. Furthermore, we show two status-anxiety-minimizing factors – Ivy League education and membership in a prominent golf club – weaken the effect of middle-class upbringing on corporate crime. Our findings suggest childhood social class has significant explanatory power for executive behavior and corporate outcomes.

Focusing on the individual unit of analysis, we explore how workplace identification can explain why individuals engage in unethical behavior that benefits an organization (unethical pro-organizational behavior; UPB). Social identity theory (SIT) stipulates that we want membership within high status organizations and, at extreme levels, may put the organization’s needs above all else. In taking a holistic approach to identification, we investigated how a strong occupational identification can mitigate this desire to unethically help an organization; occupations are a separate identity source and contain codes of conduct that guide ethical behavior. Utilizing a sample of 236 accountants and financial professionals, results indicated that organizational identification and occupational identification alone did not significantly predict UPB, however, the interaction of these identities did. More specifically, organizational identification significantly positively predicted UPB only when occupational identification was extremely low in strength. This effect was found after controlling for relevant personality and cognitive mechanisms related to unethical behavior. Implications for a multidimensional identification view of unethical behavior are discussed.

The Volkswagen (VW) emissions scandal was one of the largest examples of organizational wrongdoing in corporate history, costing the firm immense damage to its reputation and over $33 billion in fines, penalties, financial settlements, and buyback costs. In this paper, we draw on the concept of boundary work to provide insight into the causes of wrongdoing at VW. Supplementing other work on the scandal, we show how the ways in which boundaries became established in the organization resulted in an internal context that defined “in” and “out” groups, normalized certain behaviors, and limited communication across intraorganizational boundaries. This allowed wrongdoing to not only become established but also to go unchallenged. We provide contributions to broader understandings of organizational wrongdoing and to the temporal unfolding of boundary work by theorizing how a combination of cognitive, horizontal, and vertical boundaries can create an infrastructure of organizational design that permits organizational wrongdoing, prevents it being challenged, and ultimately normalizes it in everyday activities.

It has long been recognized that overwhelmed employees of bureaucratic organizations use a variety of strategies to cope with demand for their services, often at the expense of their clients. One such strategy involves discouraging clients from taking action by making references to complex bureaucratic procedures and routines. While the public management literature has a well-developed research program focusing on the mobilization of such administrative burdens, organization theory seems to be lagging behind in the analysis of that type of misconduct. In this chapter, we explain how references to the representational dimension of routines can be used to discourage clients from taking action, what are the boundary conditions of such a strategy, and its possible consequences for clients.

We study how one form of wrongdoing behavior – gender-based discrimination – evolved and steadily grew amongst longshoremen over seven decades (from 1947 to 2017), despite changes in the nature of work and technological innovations that made the occupation increasingly accessible to women. Using data collected from 72 interviews with retired and active longshoremen and their employers, supplemented with archival and observational data, we find that although women were permitted into the occupation at the beginning of the period (1947 to the 1960s), they were progressively, completely excluded by male longshore workers. We find that after experiencing imprinting (the idea that early experience exerts a crucial influence on later behavioral phenomena) (Immelmann, 1975) during early decades, longshoremen instrumentalized their fear of occupational decline and voluntarily engaged in organizational wrongdoing by discriminating against women. Men rationalized their exclusion of women through two means: first, by adapting the “Madonna vs temptress” paradigm of framing women, and second by strategically emphasizing self-serving justifications. This study contributes to the literature on gendered work and the difficulty of eliminating imprinted, entrenched behaviors in gendered occupations.

How can we explain the unresponsiveness of Internal Audit (IA) amid signs that fraud is arising and spreading within an organization? Internal auditors are entrusted with the formal responsibility of sounding the alarm about the risk of fraud and organizational wrongdoing. However, internal auditors failed to respond as the cross-sell fraud at Wells Fargo’s Community Bank (CB) Division unfolded over more than a decade, growing into a massive, full-fledged scandal. We examine IA as a profession and explore how the interpretation of three classic tenets of auditing (scope, compliance and materiality) may enable organizational wrongdoing to fester unattended until it erupts into yet another scandal. We conclude with implications for the socialization and practice of internal auditors, emphasizing the need for reflexivity and moral judgment in the interpretation and application of tenets so deeply ingrained in the IA profession.