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

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

Business Ethics Quarterly, 2007, vol. 17, issue 4, 633-667

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.

Date: 2007
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