IDEAS home Printed from https://ideas.repec.org/a/inm/ormnsc/v59y2013i12p2837-2853.html
   My bibliography  Save this article

A Person--Organization Discontinuity in Contract Perception: Why Corporations Can Get Away with Breaking Contracts But Individuals Cannot

Author

Listed:
  • Uriel Haran

    (Department of Management, Ben-Gurion University of the Negev, Beer-Sheva 8410501, Israel)

Abstract

Most legal systems in the world follow the principle of corporate personhood, which grants organizations the same legal status as natural persons. Although debate over the notion of corporate personhood has been fierce, whether and how this principle is applied in people's beliefs and intuitions has yet to be empirically examined. This work addresses the gap in the literature, in the context of formal contracts. While contracts are typically seen as either morally binding promises or morally neutral business instruments, the data presented here show that contracts of individuals are associated more strongly with promises than are contracts of organizations. As a result, breach of contract by an individual is seen as a moral transgression. The same behavior by an organization, however, is viewed more as a legitimate business decision. This paper also finds that contractual obligations should be phrased in “promise” terms to eliminate this person--organization discontinuity.Data, as supplemental material, are available at http://dx.doi.org/10.1287/mnsc.2013.1745 . This paper was accepted by Yuval Rottenstreich, judgment and decision making.

Suggested Citation

  • Uriel Haran, 2013. "A Person--Organization Discontinuity in Contract Perception: Why Corporations Can Get Away with Breaking Contracts But Individuals Cannot," Management Science, INFORMS, vol. 59(12), pages 2837-2853, December.
    • Handle: RePEc:inm:ormnsc:v:59:y:2013:i:12:p:2837-2853
    DOI: 10.1287/mnsc.2013.1745
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1287/mnsc.2013.1745
    Download Restriction: no
    File URL: https://libkey.io/10.1287/mnsc.2013.1745?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Kay, Aaron C. & Wheeler, S. Christian & Bargh, John A. & Ross, Lee, 2004. "Material priming: The influence of mundane physical objects on situational construal and competitive behavioral choice," Organizational Behavior and Human Decision Processes, Elsevier, vol. 95(1), pages 83-96, September.
    2. Maurice Schweitzer & Donald Gibson, 2008. "Fairness, Feelings, and Ethical Decision- Making: Consequences of Violating Community Standards of Fairness," Journal of Business Ethics, Springer, vol. 77(3), pages 287-301, February.
    3. Schweitzer, Maurice E. & Hershey, John C. & Bradlow, Eric T., 2006. "Promises and lies: Restoring violated trust," Organizational Behavior and Human Decision Processes, Elsevier, vol. 101(1), pages 1-19, September.
    4. Daphna Lewinsohn-Zamir, 2012. "The Questionable Efficiency of the Efficient-Breach Doctrine," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 168(1), pages 5-26, March.
    5. Friedmann, Daniel, 1989. "The Efficient Breach Fallacy," The Journal of Legal Studies, University of Chicago Press, vol. 18(1), pages 1-24, January.
    6. repec:cup:judgdm:v:5:y:2010:i:5:p:411-419 is not listed on IDEAS
    7. Michael Birnbaum, 2000. "Psychological experiments on the internet," Framed Field Experiments 00125, The Field Experiments Website.
    8. Gary Bornstein & Ilan Yaniv, 1998. "Individual and Group Behavior in the Ultimatum Game: Are Groups More “Rational” Players?," Experimental Economics, Springer;Economic Science Association, vol. 1(1), pages 101-108, June.
    9. Joachim Vosgerau & Erin Anderson & William T. Ross, Jr., 2008. "Can Inaccurate Perceptions in Business-to-Business (B2B) Relationships Be Beneficial?," Marketing Science, INFORMS, vol. 27(2), pages 205-224, 03-04.
    10. Elizabeth E. Umphress & John B. Bingham, 2011. "When Employees Do Bad Things for Good Reasons: Examining Unethical Pro-Organizational Behaviors," Organization Science, INFORMS, vol. 22(3), pages 621-640, June.
    11. Laufer, William S., 1996. "Corporate Culpability and the Limits of Law," Business Ethics Quarterly, Cambridge University Press, vol. 6(3), pages 311-324, July.
    12. Bernstein, Lisa, 1992. "Opting Out of the Legal System: Extralegal Contractual Relations in the Diamond Industry," The Journal of Legal Studies, University of Chicago Press, vol. 21(1), pages 115-157, January.
    13. Tess Wilkinson‐Ryan & Jonathan Baron, 2009. "Moral Judgment and Moral Heuristics in Breach of Contract," Journal of Empirical Legal Studies, John Wiley & Sons, vol. 6(2), pages 405-423, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jeffrey Pfeffer, 2016. "Why the Assholes are Winning: Money Trumps All," Journal of Management Studies, Wiley Blackwell, vol. 53(4), pages 663-669, June.
    2. Alempaki, Despoina & Isoni, Andrea & Read, Daniel, 2023. "Tainted nudge," Organizational Behavior and Human Decision Processes, Elsevier, vol. 176(C).
    3. Shoham Choshen‐Hillel & Ehud Guttel & Alon Harel, 2022. "Framing negligence," Journal of Empirical Legal Studies, John Wiley & Sons, vol. 19(2), pages 296-339, June.
    4. Arthur S. Jago & Nathanael Fast & Jeffrey Pfeffer, 2022. "Losing More than Money: Organizations’ Prosocial Actions Appear Less Authentic When Their Resources are Declining," Journal of Business Ethics, Springer, vol. 175(2), pages 413-425, January.
    5. Hafenbrädl, Sebastian & Waeger, Daniel, 2021. "The business case for CSR: A trump card against hypocrisy?," Journal of Business Research, Elsevier, vol. 129(C), pages 838-848.
    6. Uriel Haran & Doron Teichman & Yuval Feldman, 2016. "Formal and Social Enforcement in Response to Individual Versus Corporate Transgressions," Journal of Empirical Legal Studies, John Wiley & Sons, vol. 13(4), pages 786-808, December.
    7. Rai, Tage S. & Diermeier, Daniel, 2015. "Corporations are Cyborgs: Organizations elicit anger but not sympathy when they can think but cannot feel," Organizational Behavior and Human Decision Processes, Elsevier, vol. 126(C), pages 18-26.
    8. Arthur S. Jago & Jeffrey Pfeffer, 2019. "Organizations Appear More Unethical than Individuals," Journal of Business Ethics, Springer, vol. 160(1), pages 71-87, November.
    9. Christine Laudenbach & Jenny Pirschel & Stephan Siegel, 2018. "Personal Communication in an Automated World: Evidence from Loan Repayments," CESifo Working Paper Series 7295, CESifo.
    10. Tikotsky, Ariel & Pe'er, Eyal & Feldman, Yuval, 2020. "Which nudges do businesses like? Managers’ attitudes towards nudges directed at their business or at their customers," Journal of Economic Behavior & Organization, Elsevier, vol. 170(C), pages 43-51.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hal R. Arkes & John H. Kagel & Dimitry Mezhvinsky, 2017. "Effects of a Management–Labor Context and Team Play on Ultimatum Game Outcomes," Southern Economic Journal, John Wiley & Sons, vol. 83(4), pages 993-1011, April.
    2. Levine, Emma E. & Schweitzer, Maurice E., 2015. "Prosocial lies: When deception breeds trust," Organizational Behavior and Human Decision Processes, Elsevier, vol. 126(C), pages 88-106.
    3. Oren Bar-Gill & Christoph Engel, 2018. "How to Protect Entitlements: An Experiment," Journal of Law and Economics, University of Chicago Press, vol. 61(3), pages 525-553.
    4. Majid Ghorbani & Yuan Liao & Sinan Çayköylü & Masud Chand, 2013. "Guilt, Shame, and Reparative Behavior: The Effect of Psychological Proximity," Journal of Business Ethics, Springer, vol. 114(2), pages 311-323, May.
    5. Christoph Engel & Lars Freund, 2017. "Behaviorally Efficient Remedies – An Experiment," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2017_17, Max Planck Institute for Research on Collective Goods.
    6. Chen, Yunong & Belmonte, Andrew & Griffin, Christopher, 2021. "Imitation of success leads to cost of living mediated fairness in the Ultimatum Game," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 583(C).
    7. Morone, A. & Morone, P. & Germani, A.R., 2014. "Individual and group behaviour in the traveler's dilemma: An experimental study," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 49(C), pages 1-7.
    8. Daron Acemoglu & Matthew O. Jackson, 2017. "Social Norms and the Enforcement of Laws," Journal of the European Economic Association, European Economic Association, vol. 15(2), pages 245-295.
    9. Marselli, Riccardo & McCannon, Bryan C. & Vannini, Marco, 2015. "Bargaining in the shadow of arbitration," Journal of Economic Behavior & Organization, Elsevier, vol. 117(C), pages 356-368.
    10. Lamar Pierce & Jason Snyder, 2015. "Unethical Demand and Employee Turnover," Journal of Business Ethics, Springer, vol. 131(4), pages 853-869, November.
    11. Gary M. Fleischman & Eric N. Johnson & Kenton B. Walker & Sean R. Valentine, 2019. "Ethics Versus Outcomes: Managerial Responses to Incentive-Driven and Goal-Induced Employee Behavior," Journal of Business Ethics, Springer, vol. 158(4), pages 951-967, September.
    12. Faralla, Valeria & Borà, Guido & Innocenti, Alessandro & Novarese, Marco, 2020. "Promises in group decision making," Research in Economics, Elsevier, vol. 74(1), pages 1-11.
    13. Peter T. Leeson, 2009. "The Laws of Lawlessness," The Journal of Legal Studies, University of Chicago Press, vol. 38(2), pages 471-503, June.
    14. Ming Kong & Jie Xin & Wenxiao Xu & Haonan Li & Dandan Xu, 2022. "The moral licensing effect between work effort and unethical pro-organizational behavior: The moderating influence of Confucian value," Asia Pacific Journal of Management, Springer, vol. 39(2), pages 515-537, June.
    15. Besedes, Tibor & Deck, Cary & Quintanar, Sarah & Sarangi, Sudipta & Shor, Mikhael, 2011. "Free-Riding and Performance in Collaborative and Non-Collaborative Groups," MPRA Paper 33948, University Library of Munich, Germany.
    16. Sanchez-Pages Santiago & Straub Stéphane, 2010. "The Emergence of Institutions," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 10(1), pages 1-38, September.
    17. Jeremy Kepner & Vijay Gadepally & Pete Michaleas, 2015. "Percolation Model of insider threats to assess the optimum number of rules," Environment Systems and Decisions, Springer, vol. 35(4), pages 504-510, December.
    18. Jean-Marc Bourgeon & José de Sousa & Alexis Noir-Luhalwe, 2022. "Social Distancing and Risk Taking: Evidence from a Team Game Show [Distanciation sociale et prise de risque : Les résultats d'un jeu d'équipe]," SciencePo Working papers Main hal-03792423, HAL.
    19. Atul Gupta & Kristina Minnick, 2022. "Social capital and managerial opportunism: Evidence from option backdating," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 45(3), pages 579-605, September.
    20. Erin O’Hara O’Connor, 2012. "The limits of contract law harmonization," European Journal of Law and Economics, Springer, vol. 33(3), pages 505-519, June.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:ormnsc:v:59:y:2013:i:12:p:2837-2853. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Asher (email available below). General contact details of provider: https://edirc.repec.org/data/inforea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.