Religious Affiliation and Wrongdoing: Evidence from U.S. Nursing Homes

We explore the relationship between organizational religious affiliation and wrongdoing using a unique data set on inspections in 16,101 nursing homes over five years. We find that violations of standards of care are more severe in religiously affiliated homes. We track this difference to a reduction in the likelihood that organizational members file complaints rather than poorer behaving caretakers or differential treatment by enforcement agents. Fewer complaints increase the time that religiously affiliated homes operate without monitoring, which allows violations to escalate before they are detected. Our findings highlight an understudied process in the literature on organizational wrongdoing: Although much attention has been devoted to how inspector bias can lead to incorrect conclusions about the true rates of wrongdoing across organizations, religious affiliation can lead to similarly incorrect conclusions—but through an internal organizational process

Do Good Times Breed Cheats? Prosperous Times Have Immediate and Lasting Implications for CEO Misconduct

We examine whether prosperous economic times have both immediate and lasting implications for corporate misconduct among CEOs. Drawing on research suggesting that prosperous times are associated with excessive risk-taking, overconfidence, and more opportunities to cheat, we first propose that CEOs will be more likely to engage in corporate misconduct during good economic times. Next, we propose that CEOs who begin their careers in prosperous times will be more likely to engage in self-serving corporate misconduct later in their careers. We tested these hypotheses by assembling a large dataset of American CEOs and following their stock option reporting patterns between 1996 and 2005. We found that in good economic times, CEOs were more likely to backdate their stock options grants. Moreover, CEOs who began their careers in prosperous times were more likely to backdate stock option grants later in their careers. These findings suggest that the state of the economy can influence current ethical behavior and leave a lasting imprint on the moral proclivities of new workforce entrants

Corporate social counterpositioning: How attributes of social issues influence competitive response

Research Summary Whilst existing research generally assumes corporate social responsibility (CSR) is seen as universally positive, firms increasingly adopt practices, and take stands, on highly polarizing social issues (e.g., gun-control, LGBTQ rights, abortion). To better understand this phenomenon, we develop a theory about when firms will emulate, ignore, or oppose each other's CSR efforts, based on attributes of the underlying social issue (its salience and polarization), the level of market competition, and the substantiveness of CSR. Our theory predicts several distinct equilibrium outcomes, including the potential for social counter-positioning, whereby rival firms take advantage of socio-political polarization to horizontally differentiate by taking opposing stances on a polarizing issue. Counterpositioning is more likely when salience is high, but agreement is low, when markets are competitive, and when CSR is largely symbolic. Managerial Summary Firms increasingly find themselves drawn, willingly or not, to taking stances on a controversial social issue (e.g., gun rights, abortion), though doing so risks alienating (some) stakeholders. In this paper, we develop a theory of why, when, and how firms should take a stance on a polarizing issue. We argue that firms profit from doing so when (1) the issue is salient, (2) markets are competitive, and (3) the actions are mostly symbolic. We also show that taking a stance on polarizing issues creates opportunities for the firms' competitors to counter their ideological positioning, strengthening weaker rivals in the process. Thus, in competitive markets, taking clear stances on polarizing, salient issues can segment the market, increasing the profits of all firms, and, potentially, intensifying polarization

How Misconduct Spreads: Auditors’ Role in the Diffusion of Stock-option Backdating

This paper explores the role of professional experts in the diffusion of innovative practices that subvert the interests of stakeholders. I do so by studying the role of external auditors in the diffusion of stock-option backdating in the United States. Practices that are eventually accepted as misconduct may emerge as liminal practices, not categorized as misconduct until social control agents notice, scrutinize, and react to them. I examine how the role of external auditors in the diffusion of stock-option backdating changed as the practice shifted from liminality to being illegal and illegitimate. The findings suggest that professional experts involvement in the diffusion of liminal practices is highly responsive to the institutional environment. Initially, professional experts diffuse these practices via local networks. However, when the legal environment becomes more stringent, implying that the practice will become illegitimate, these offices reverse their role and extinguish the practice. The larger network remains largely uninvolved in both the diffusion, and extinguishment, of the liminal practice

Academic misconduct, misrepresentation and gaming: a reassessment

The motivation for this Special Issue is increasing concern not only with academic misconduct but also with less easily defined forms of misrepresentation and gaming. In an era of intense emphasis on measuring academic performance, there has been a proliferation of scandals, questionable behaviors and devious stratagems involving not just individuals but also organizations, including universities, editors and reviewers, journal publishers, and conference organizers. This introduction first reviews the literature on the prevalence of academic misconduct, misrepresentation and gaming (MMG). The core of the article is organized around a life-cycle model of the production and dissemination of research results. We synthesize the findings in the MMG literature at the level of the investigator or research team, emphasizing that misbehavior extends well beyond fabrication and falsification to include behaviors designed to exaggerate or to mislead readers as to the significance of research findings. MMG is next explored in the post-research review, publication, and post-publication realms. Moving from the individual researcher to the organizational level, we examine how MMG can be engaged in by either journals or organizations employing or funding the researchers. The changing institutional environment including the growth of research assessment exercises, increased quantitative output measurement and greater pressure to publish may all encourage MMG. In the final section, we summarize the main conclusions and offer suggestions both on how we might best address the problems and on topics for future research

Do Good Times Breed Cheats?: Entering the Workforce in a Boom Predicts Later Unethical Behavior

In this paper, we examine whether strong environmental circumstances at an impressionable stage of life will have lasting implications for ethical behavior. Drawing on work showing that perceptions of financial abundance increase the likelihood of ethical transgressions as well as imprinting work suggesting that early career conditions can leave a lasting mark on later career behavior, we propose that entering the workforce during an economic boom will increase the likelihood that people will engage in ethically questionable practices later in their careers. Using a large sample of American executives between 1996 and 2005, we find that those who began their careers in economically prosperous times were more likely to backdate stock options later in their careers. While past work has shown that contextual cues affect the likelihood of engaging in unethical behavior, the present findings suggest that strong environmental conditions at a formative period of life can affect ethical impulses for a long time to come

Are recessions good for morality? : evidence that ethical behavior improves when the economy falters

Recent research has shown that ethical behavior can be influenced by features of the immediate environment such as the presence of a cheater or the characteristics of a room. We suggest ethical behavior is similarly shaped by a more diffuse and enduring situational feature: the state of the economy. Building on work showing that prosperity fuels overconfidence, risk-taking, and greed, we argue that ethical behavior improves when the economy falters. Five studies spanning diverse populations and different types of misconduct find support for this hypothesis. During prosperous economic times, companies were more likely to submit regulatory filings that would later be restated for fraud (Study 1), academics were more likely to publish papers that later would be retracted (Study 2), Major League Baseball pitchers were more likely to try to harm opposing batters (Study 3), and students were more likely to steal, damage property, shoplift, and submit plagiarized work (Studies 4 and 5). While a large body of research has shown that proximal situational variables can influence ethical impulses, our findings suggest that more diffuse macroeconomic factors can similarly shape unethical behavior

Where is all the deviance? Liminal prescribing and the social networks underlying the prescription drug epidemic

The misuse of prescription drugs is a pressing public health crisis in the United States that is fueled by high-risk prescribing. We show that high-risk prescribing comprises two distinct practices: (1) routinely overprescribing to patients whose prescription-fill patterns are consistent with misuse or abuse, which conforms to the definition of deviance in sociology, and (2) routinely overprescribing to patients whose prescription-fill patterns are within possible bounds of medical use, which does not. We call the second practice “liminal prescribing,” a term that indicates it is legally and morally ambiguous. Using 213.9 million prescriptions to construct a four-year panel of the patient-sharing networks of 500,472 physicians, we find that deviant and liminal prescribers have starkly different social network structures and social influence processes; larger and more cohesive networks among prescribers are associated with more deviance but less liminality. Physicians’ ties to liminal prescribers increase liminal prescribing but do not increase deviance. Our results suggest that liminal prescribing is distinct from deviant prescribing and is not a milder form of deviant prescribing. Liminal prescribing is far more prevalent than deviance and accounts for most of the oversupplied benzodiazepines in our dataset (55.8 versus 8.7 percent, respectively). Our study highlights that the social structures supporting liminal practices differ from those that support either rule-abiding practices or deviance

Legitimized Unethicality: The Divergance of Norms and Laws in Financial Markets

Financial markets, where companies are characterized by a separation of ownership from control and interactions are opaque to a large majority of uninformed investors provide a fertile ground for executives to conduct practices that push the ethical boundaries of accepted and expected behavior. Furthermore, some practices such as tunneling of funds in business groups and backdating of executive's stock option grants exhibit remarkable proliferation among many disparate actors, ones who will argue for the merits of these practices even after they are exposed. In this dissertation I examine the antecedents of widely practiced financial frauds, processes that lead to what I call "legitimized unethicality"- unethical behavior that gains credence among perpetrators while remaining clearly illegal to outsiders. In chapter 1 I look at skewed investments of mutual funds in affiliated companies when these go public, highlighting how shared ownership over financial and non financial companies can lead mutual funds to transfer funds from savers who's portfolios they manage to the business group to which they belong. In chapter 2 I examine the diffusion pattern of stock option backdating among executives in the United States, where co-location (both spatial and temporal) creates clusters of bad behavior among clients of audit firms. I isolate a key "agent of diffusion" that gives credence to the practice of stock option backdating- the local office of the companies' auditor and show, using multiple methods, that this geographical concentration of backdating is the result of heterogeneous acceptance of backdating among local auditors and is dependent on the level of competition among the local offices of these auditors. In the third chapter I turn to look at the social characteristics that promote adoption of stock option backdating and show that this practice is adopted by those executives who experience a gap between their realized compensation and the expected compensation level when comparing to their peers. Backdating is therefore one form of catching up to perceived "fair" levels of compensation. Together these papers demonstrate that some unethical practices can gain legitimacy by perpetrators, and spread widely among them, while remaining clearly unethical to outsiders until exposed