In This Article Expand or collapse the "in this article" section Organizational Corruption

  • Introduction
  • Theoretical Overviews
  • Classic Quantitative Studies
  • Classic Qualitative Studies
  • Specific Instances of Organizational Corruption
  • Culture
  • Administrative Systems
  • Situational Social Influence
  • The Consequences of Organizational Wrongdoing

Management Organizational Corruption
Donald Palmer
  • LAST REVIEWED: 26 May 2016
  • LAST MODIFIED: 26 May 2016
  • DOI: 10.1093/obo/9780199846740-0060


Corruption, narrowly defined, entails the perversion of political organizations by internal or external agents. By this definition, corruption includes public officials’ use of their office to obtain private benefit, and private-sector organizations’ use of illegal means to influence governmental decisions. Corruption of this latter sort can have many manifestations. Domestic corporations can bribe domestic governments, as when Colonial Heritage used covert payments to the city council president in Woodbridge, New Jersey, in return for expedited building permits. Domestic corporations can bribe foreign governments, as was the case when Lockheed bribed foreign officials to purchase the company’s aircraft (which ultimately led to the passage of the US Foreign Corrupt Practices Act). Foreign subsidiaries of domestic corporations may also bribe local governments, as when Walmart de México used local intermediaries to convey payments to public officials in return for expedited building permits. Defined more broadly, corporate corruption entails organizations’ use of illegal means to enhance their survival and profitability. Corruption of this sort can have many manifestations. Corporations can pollute the natural environment, as was the case when Hooker Chemical dumped toxic chemicals into the abandoned Love Canal. Corporations can infringe on the rights of their employees, as when Sears systematically discriminated against women employees. Corporations can misstate their earnings to bolster their stock price, such as when Enron manufactured bogus transactions with investment banks such as Merrill Lynch. Finally, corporate corruption, as most broadly defined, includes the use of illegal means by multiple members of corporations to advance their interests. Corruption of this sort can also have many manifestations. Individuals can misappropriate stockholder wealth, as was the case when Tyco top management provided itself with outlandish perks. Individuals can siphon off resources, as was the case when Andy Fastow and associates constructed a network of special-purpose entities at Enron to generate personal wealth. This bibliography is constructed with the broadest definition of corruption in mind, a definition that incorporates each type of corruption discussed above. For this reason, the authors of this article characterize the subject as “organizational wrongdoing.” Many scholars of organizational illegality distinguish between crime perpetrated on behalf of the firm (labeled corporate crime) and crime perpetrated on behalf of individuals within the firm, against firm interests (known as white-collar crime). The authors of this article do not embrace this distinction in this review of organizational wrongdoing because the two types of wrongdoing often are often intertwined.

Theoretical Overviews

The works cited in this section provide broad overviews of theory on organizational wrongdoing, some of which have provided a basis for future theorizations. Ermann and Lundman 1982 and later Vaughan 1999 provide well-known theoretical overviews on the subject, from a sociological perspective. Baucus 1994 laid the foundation for subsequent research on organizational wrongdoing in the field of management. Shover and Wright 2001 provides a collection of more-recent articles that together cover a wide range of alternative explanations of organizational wrongdoing. Greve, et al. 2010 and Palmer 2012 provide the most-recent overviews of theory and research on organizational wrongdoing.

  • Baucus, Melissa S. “Pressure, Opportunity and Predisposition: A Multivariate Model of Corporate Illegality.” Journal of Management 20.4 (1994): 699–721.

    DOI: 10.1177/014920639402000401

    This article presents one of the first organization theory analyses of organizational wrongdoing, which lays the foundation of much future management research on organizational wrongdoing. It relies on a three-pronged explanatory framework of wrongdoing to enumerate several hypotheses, many of which have subsequently been tested in empirical research.

  • Ermann, M. David, and Richard J. Lundman. Corporate Deviance. New York: Holt, Rinehart, and Winston, 1982.

    This book presents a sociological analysis of different types of organizational wrongdoing, distinguished by the nature of wrongdoing’s victims (owners, employees, customers, the general public). It also includes case studies of individual instances of wrongdoing, which are interwoven with theoretical analysis.

  • Greve, Henrich R., Donald Palmer, and Jo-Ellen Pozner. “Organizations Gone Wild: The Causes, Processes, and Consequences of Organizational Misconduct.” Academy of Management Annals 4.1 (2010): 53–107.

    DOI: 10.1080/19416521003654186

    This chapter presents an up-to-date review of theory and research in economics, sociology, and management on organizational wrongdoing. It devotes most of its attention to the causes of wrongdoing but also considers the impact of wrongdoing on organizations.

  • Palmer, Donald. Normal Organizational Wrongdoing: A Critical Analysis of Theories of Misconduct in and by Organizations. Oxford: Oxford University Press, 2012.

    DOI: 10.1093/acprof:oso/9780199573592.001.0001

    This book presents a critical review of theories of the causes of wrongdoing. It identifies competing and overlapping perspectives and explanations of wrongdoing, using individual-level case examples to illustrate how these theoretical perspectives may be used to understand how wrongdoing develops in practice.

  • Shover, Neal, and John Paul Wright, eds. Crimes of Privilege: Readings in White-Collar Crime. Readings in Crime and Punishment. New York: Oxford University Press, 2001.

    There are numerous edited volumes that include chapters written by important contributors to the field of organizational wrongdoing. This volume edited by Shover and Wright is among the most current and comprehensive available.

  • Vaughan, Diane. “The Dark Side of Organizations: Mistake, Misconduct, and Disaster.” Annual Review of Sociology 25 (1999): 271–305.

    DOI: 10.1146/annurev.soc.25.1.271

    Provides a comprehensive review of scholarly work on organizational deviance of as of the late 1990s and offers a conceptual framework within which work in this area can be situated. It also provides a comprehensive review of work in this area as of the late 1990s.

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