Corporate Crime and Corruption

The Dominant Approach to Explaining Corporate Wrongdoing

The dominant approach to explaining corporate wrongdoing is based on two interrelated assumptions: (1) that people make discrete decisions to embark on wrongful courses of action, and (2) that people develop positive dispositions toward wrongful courses of action before embarking on them. Researchers identify two types of positive dispositions. Some assume that people engage in conscious or unconscious rational cost-benefit calculations with respect to wrongful courses of action and embark on wrongful behavior if they conclude that the rewards associated with the behavior exceed the risks of punishment. Others assume that people engage in conscious or unconscious normative assessments with respect to wrongful courses of action and embark on wrongful behavior if they conclude that it is consistent with their internalized norms, values, and beliefs.

The cost-benefit analysis and normative assessment approaches have been elaborated primarily at the firm level of analysis. For example, Staw and Szwajkowski used the cost-benefit analysis approach to argue that firms situated in competitive environments are more likely to engage in wrongdoing than those operating in munificent ones. In addition, Geis used the normative assessment perspective to contend that firms immersed in cultures that place firm interests above (or equate firm interests with) societal interests are more likely to engage in wrongdoing than those that do not. These approaches have also, however, been elaborated at the individual, industrial, societal sector, and societal levels. For example, the normative assessment approach has been used to inform experiments showing that college students who have taken economics courses, and thus have been exposed to the belief that the singular pursuit of self-interest is socially responsible, are more likely to endorse or engage in unethical behavior. This perspective has also provided the foundation for studies showing that firms in heavily regulated industries tend to view government agencies as competitors and thus are more likely to unlawfully evade their regulations. Finally, the normative assessment approach forms the basis of the contention that firms in capitalist economies tend to pursue profit maximization over all other goals, viewing legal penalties as a cost of doing business, and thus are more likely to violate the law in general. This outlook and its associated tendencies are believed to be particularly prevalent in economies dominated by the shareholder, as opposed to the stakeholder, model of the firm.

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