Leadership
CORPORATE MISCONDUCT
ROTTEN TO THE CORE
addition to those that go undetected or unreported – suggests we are not dealing with the issue very well. Those found guilty of violating the law or the rules of their profession’s governing body face fines, losing their job, and even prison. However, we should do more to address the underlying problems that fuel professional misconduct. A useful first step is to better understand why people commit their infractions in the first place. The individuals at the centre of a corporate scandal are often portrayed as bad apples. According to popular perception, they act alone, incited by greed, narcissism, and personal ambition. That can be a part of the motive, but the reality is usually far more complicated. We explored this in a paper with Will Harvey, of Melbourne Business School, and Navdeep Arora. We interviewed 70 inmates at a US prison who were incarcerated for white collar crimes. These inmates often blamed themselves for having deviated from the standards of acceptable behaviour. That is hardly surprising; in prison, there is plenty of time for a great deal of self-reflection. But the idea of a single bad apple is rarely an adequate explanation for events. Misconduct often occurs in a wider environment that normalises, tolerates and sometimes incentivises inappropriate behaviour. In most cases, the inmates we questioned did not stand to gain personally from their actions. Instead of greed, they tended to be motivated by other factors. This included a fear of being seen as a failure, or a desire to promote a client’s interests. Alternatively, they may be unable to cope with compliance requirements or personal issues,
such as divorce or addiction. Other personal frailties can also come into play, such as ego and perceived invincibility. In this context, an organisation that encourages employees to chase profits above almost all other considerations can encourage and enable bad behaviour. It may even do so inadvertently. In a workplace where everyone else seems to be engaging in dubious conduct, many will feel pressured to do the same for fear of losing status and falling behind. “The idea of a single bad apple is rarely an adequate explanation for events” And organisations can sit in a wider ecosystem in which misguided regulation and compliance regimes create a permissive environment for misbehaviour, or do little to stop it. This all suggests that bad apples sometimes go rotten in the bad barrel of a toxic organisation or in the cellar of a poorly regulated industry. So, what should be done to prevent this? 1 Get the regulation right Regulation is part of the answer, though tighter rules do not provide a full solution on their own. There is also no ‘one size fits all’ answer. If regulations are too proscriptive, organisations can work around them; if they’re too loose, they can lose their meaning. On the national and global
TO THE CORE
1. One ‘bad apple’ is rarely the solecause of misconduct. It often occurs in an environment that tolerates or even incentivises inappropriate behaviour. 2. Regulation is not sufficient to prevent misconduct by itself and can be difficult to get right. Too proscriptive and organisations can work around it. Too loose and it loses its meaning. 3. Companies should reflect on their HR policies, promote employee development and try to relieve excessive pressure on individuals that could affect their judgement. 4. Create cross-team communities that foster an ethical culture by rewarding sound decisions and calling out poor conduct.
T he conviction of Sam Bankman- profile professional misconduct cases in years. In March 2024, he was sentenced to 25 years in jail and ordered to pay $11 billion. The scale of the malfeasance at his cryptocurrency exchange FTX and Alameda Research professional misconduct appear to be a widespread phenomenon spanning law, healthcare, finance and beyond. For example, UK regulator Fried for fraud in a US court was one of the most high- might have been unusual. However, smaller cases of the Financial Conduct Authority (FCA) typically levies fines worth more than £200 million a year. The number of known cases – in
Don’t blame professional misconduct on bad apples
by Graeme Currie & Dimitrios Spyridonidis
Warwick Business School | wbs.ac.uk
wbs.ac.uk | Warwick Business School
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