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Why Managers Fail to do the Right Thing: An Empirical Study of Unethical and Illegal Conduct

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  • Craig Smith, N.
  • Simpson, Sally S.
  • Huang, Chun-Yao

Abstract

We combine prior research on ethical decision-making in organizations with a rational choice theory of corporate crime from criminology to develop a model of corporate offending that is tested with a sample of U.S. managers. Despite demands for increased sanctioning of corporate offenders, we find that the threat of legal action does not directly affect the likelihood of misconduct. Managers’ evaluations of the ethics of the act, measured using a multidimensional ethics scale, have a significant effect, as do outcome expectancies that result from being associated with the misconduct but not facing formal sanctions. The threat of formal sanctions appears to operate indirectly, influencing ethical evaluations and outcome expectancies. Obedience to authority also affects illegal intentions, with managers reporting higher prospective offending when they are ordered to engage in misconduct by a supervisor.

Suggested Citation

  • Craig Smith, N. & Simpson, Sally S. & Huang, Chun-Yao, 2007. "Why Managers Fail to do the Right Thing: An Empirical Study of Unethical and Illegal Conduct," Business Ethics Quarterly, Cambridge University Press, vol. 17(4), pages 633-667, October.
    • Handle: RePEc:cup:buetqu:v:17:y:2007:i:04:p:633-667_00
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    Cited by:

    1. Alfred Benedikt Brendel & Milad Mirbabaie & Tim-Benjamin Lembcke & Lennart Hofeditz, 2021. "Ethical Management of Artificial Intelligence," Sustainability, MDPI, vol. 13(4), pages 1-18, February.
    2. Bruce M. Clayton & Chris J. Staden, 2015. "The Impact of Social Influence Pressure on the Ethical Decision Making of Professional Accountants: Australian and New Zealand Evidence," Australian Accounting Review, CPA Australia, vol. 25(4), pages 372-388, December.
    3. Jana Craft, 2013. "A Review of the Empirical Ethical Decision-Making Literature: 2004–2011," Journal of Business Ethics, Springer, vol. 117(2), pages 221-259, October.
    4. Peter Mudrack & E. Mason, 2013. "Ethical Judgments: What Do We Know, Where Do We Go?," Journal of Business Ethics, Springer, vol. 115(3), pages 575-597, July.
    5. Will Drover & Jennifer Franczak & Richard Beltramini, 2012. "A 30-Year Historical Examination of Ethical Concerns Regarding Business Ethics: Who’s Concerned?," Journal of Business Ethics, Springer, vol. 111(4), pages 431-438, December.
    6. Richard Nielsen, 2009. "Varieties of Win–Win Solutions to Problems with Ethical Dimensions," Journal of Business Ethics, Springer, vol. 88(2), pages 333-349, August.
    7. Stephen V. Burks & Erin L. Krupka, 2012. "A Multimethod Approach to Identifying Norms and Normative Expectations Within a Corporate Hierarchy: Evidence from the Financial Services Industry," Management Science, INFORMS, vol. 58(1), pages 203-217, January.
    8. Gazley, Aaron & Sinha, Ashish & Rod, Michel, 2016. "Toward a theory of marketing law transgressions," Journal of Business Research, Elsevier, vol. 69(2), pages 476-483.
    9. Dirk Matten & Guido Palazzo, 2008. "Unternehmensethik als Gegenstand betriebswirtschaftlicher Forschung und Lehre–Eine Bestandsaufnahme aus internationaler Perspektive," Schmalenbach Journal of Business Research, Springer, vol. 60(58), pages 50-71, January.
    10. Razana Juhaida Johari & Nordayana Sri Ridzoan & Arumega Zarefar, 2019. "The Influence of Work Overload, Time Pressure and Social Influence Pressure on Auditors¡¯ Job Performance," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 10(3), pages 88-106, May.
    11. Bernardo de Abreu Guelber Fajardo & Ricardo Lopes Cardoso, 2014. "Does the Occasion Justify the Denunciation?: a Multilevel Approach for Brazilian Accountants," Brazilian Business Review, Fucape Business School, vol. 11(5), pages 24-48, October.
    12. Kirsten Martin, 2012. "Diminished or Just Different? A Factorial Vignette Study of Privacy as a Social Contract," Journal of Business Ethics, Springer, vol. 111(4), pages 519-539, December.
    13. Maria Kakarika & Shiva Taghavi & Helena V. González-Gómez, 2024. "Don’t Shoot the Messenger? A Morality- and Gender-Based Model of Reactions to Negative Workplace Gossip," Journal of Business Ethics, Springer, vol. 189(2), pages 329-344, January.
    14. Madelijne Gorsira & Adriaan Denkers & Wim Huisman, 2018. "Both Sides of the Coin: Motives for Corruption Among Public Officials and Business Employees," Journal of Business Ethics, Springer, vol. 151(1), pages 179-194, August.
    15. Bertrand Venard & Kezang Tshering, 2021. "Barriers to transparency in Bhutan's public administration: A new typology of opacity," Public Administration & Development, Blackwell Publishing, vol. 41(4), pages 203-216, October.
    16. Peter Mudrack & E. Mason, 2013. "Dilemmas, Conspiracies, and Sophie’s Choice: Vignette Themes and Ethical Judgments," Journal of Business Ethics, Springer, vol. 118(3), pages 639-653, December.
    17. Luca Casali, Gian & Perano, Mirko, 2021. "Forty years of research on factors influencing ethical decision making: Establishing a future research agenda," Journal of Business Research, Elsevier, vol. 132(C), pages 614-630.
    18. Pedro FrancŽs-G—mez & Lorenzo Sacconi & Marco Faillo, 2012. "Behavioral Business Ethics as a Method for Normative Business Ethics," Econometica Working Papers wp42, Econometica.

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