Research tidbits: Preventing corruption

Our selection of articles this week looks at the issues that can undermine anti-corruption initiatives and the success thereof.

Corruption in top global companies 
It is widely acknowledged that corruption by any firm is problematic. More importantly, its negative effects are compounded when (a) corruption is present in large firms with global reach and (b) corruption ceases to be a single instance but becomes a reoccurring or perpetuating phenomenon over time.

Though the magnification of corruption over both time and size of operations creates scale effects that amplify its detrimental consequences, this context remains largely unexamined empirically. Thus, the research question is: What are the factors that contribute to corruption by large global firms?

Drawing on institutional theory, the authors examine the normative pressures that interact to create a vortex of corporate corruption that persisted over several years. The authors analyse a 9-year longitudinal dataset of 469 unique FT Global 500 companies representing 31 primary industries and 33 countries with over 3700 company year observations.

Results help disentangle a complex interaction of firm-level and headquarters country-level factors that drive corruption and impact performance among top global firms.

Leyla Orudzheva, Manjula S. Salimath & Robert Pavur. 2020. Vortex of Corruption: Longitudinal Analysis of Normative Pressures in Top Global Companies.
Journal of Business Ethics, 163(3),  529–551.

 

Is a uniform approach to whistle-blowing regulation effective?
The purpose of this study is to examine whether United States (U.S.)-style regulatory intervention to encourage whistle-blowing can be immediately effective if transplanted into another country with a distinctly different historical cultural background and institutional system.

A total of 98 U.S. and 84 German accountants participated in a laboratory experiment relating to a case of financial statement fraud. The provision of anti-retaliation protection and monetary rewards for whistle-blowing were manipulated and participants were asked to assume the role of an internal auditor.

The authors hypothesise and find that the provision of anti-retaliation protection and monetary rewards encourage U.S. accountants to blow the whistle. In contrast, among German accountants, where their country features a historical fear and distrust of whistle-blowers, U.S.-style regulatory interventions are less effective.

Together, the findings provide strong support for the theory of path-dependence, suggesting that whistle-blowing regulation should not be uniformly transplanted without due consideration of the unique history and culture of a country.

Gladys Lee, Esther Pittroff & Michael J. Turner. 2020. Is a Uniform Approach to Whistle-Blowing Regulation Effective? Evidence from the United States and Germany. 
Journal of Business Ethics, 163(3),  553–576.

 

Lack of trust undermines anti-corruption initiatives
This study explores the ways in which trust deficit undermines anti-corruption initiatives in a context with systemic corruption. Anti-corruption measures as panacea to systemic corruption are not new, but their effectiveness is debatable.

Whilst understanding the causal relationship between corruption and trust remains germane to fighting corruption, a growing number of recent studies advocate better context sensitivity in developing anti-corruption initiatives. Consistent with this, the authors unpack the perceptions of a significant section of the population in which corruption is rampant to identify factors that could enhance trust in the effectiveness of anti-corruption measures.

Using commentaries from Nigerian Netizens on two critical corruption incidents that are significant to corporations, the authors uncover poignant narratives of perception of incompetence, dishonesty and confusion that undermine the anti-corruption measures in the context. The authors argue that donors, international organisations and businesses must encourage and support beneficiaries’ governments to secure and sustain trust in the anti-corruption initiatives as a condition for better results.

Ismail Adelopo & Ibrahim Rufai. 2020. Trust Deficit and Anti-corruption Initiatives.
Journal of Business Ethics, 163(3),  429–449.

 

Secrecy and ethics 
Secrecy and ethics are often seen as opposing forces within organisations. Secret work is viewed as unethical, as it excludes others from knowing and is associated with self-interested behaviour. The authors contend that this view does not account for the dynamic inherent to secrecy and to the fact that ethics is embedded in social relations.

This paper suggests an alternative view. The authors  consider secrecy as a social process which allows employees to maintain their ethics when faced with managerial policies that affect the quality of their work. Building on an in-depth case study of a team of journalists who worked in secret after their managers decided to prioritise the interests of shareholders and advertising firms, the authors show how these journalists managed to maintain collective ethics through secrecy and to do their work according to their own moral principles.

This paper offers two primary contributions. First, the authors show a mutually beneficial relationship between ethics and secrecy in organisations, wherein secrecy  helps maintaining ethics in everyday work. Second, the paper shows how secrecy can lead to ethical resistance, via a transformation of the  power relationship with managers.

Dima Younes, David Courpasson & Marie-Rachel Jacob. 2020. Ethics from Below: Secrecy and the Maintenance of Ethics. 
Journal of Business Ethics, 163(3), 451–466.

 

Internal auditing of risk culture in the financial sector 
This exploratory study investigates the manifold conceptions of the internal auditing (IA) of risk culture prevalent among four influential actors of the financial sector—regulators, normalisers, consultants, and implementers.

By inductive analysis of 20 interviews and 295 documents, the authors illustrate a two-step interpretive scheme utilised by the four actors in their IA approaches of risk culture: defining broad goals and designing visibility schemes. The visibility schemes were tied to the demarcation, measurement, as well as the IA data collection techniques of risk culture.

The results indicate two dichotomous interpretations among the four actors concerning the IA of risk culture. The first interpretation, prevalent among regulators and implementers, promotes the control of risk culture primarily through verification. The second interpretation, adopted by consultants and normalisers, promotes the control of risk culture by IA along with the empowerment of employees through training programs.

The results not only contribute to understanding IA expansions, specifically to non-tangible domains such as risk culture but also enrich the literature exploring the mechanisms different stakeholders utilise to shape weakly professionalised IA practices.