The problem with 'bad apple' theories of corruption

Today on the FCPA blog https://www.fcpablog.com/blog/2016/4/27/torsello-and-taylor-dont-buy-the-rouge-employee-myth-theres.html 

TORSELLO AND TAYLOR: DON'T BUY THE ‘ROUGE EMPLOYEE’ MYTH. THERE'S MORE TO IT

By Davide Torsello and Alison Taylor | Wednesday, April 27, 2016 at 10:02AM

One of the most pervasive myths about corruption it is primarily caused by a few greedy individuals who, one day and out of the blue, decide to pay bribes to other bad guys who will accept them and grant some contracts in exchange.

Explanations that rely on an individual’s propensity to do bad things dominate both explanations for corruption and regulatory responses. They can be summarized as "bad apple" or "rogue employee" explanations.  

The problem with such explanations are that they are not borne out by reality, which strongly suggests that the environment is just as important at the individual motivation. Further, such explanations teach us very little about how and why corruption happens. Individualistic western societies tend to be very uncomfortable with the idea that people can be strongly influenced by their surroundings, but theories of organizational culture can be powerful tools in the fight against corruption.

Corruption by definition needs at least two people -- the giver and the receiver of the bribe. One of the most interesting questions about corruption is whether these two persons are really alone, inspired by evil or greed, or whether they are operating on behalf of other people or the organization as a whole, as intermediaries or scapegoats. When conducted well, investigations can uncover who initiated and conducted the transaction, the compliance team can establish a set of rules and training to address the problem, and organizations can live happily ever after. At least that is the theory.

Unfortunately, reality is often at odds with this theory. Certain companies that have produced bad apples in the past and gone through corrective processes can breed corruption again. It seems to be a bigger problem than a few bad apples. Once a whole set of executives have been fired in a scandal, and a corporation has undergone massive reputational losses, or even been blacklisted, conventional wisdom suggests that the organization won’t have a problem again. However, this is not always the case.

The chimera of personal vs. organizational corruption, in other words the bad apple vs. the rotten barrel explanation is very illusory and dangerous. Here are five reasons why personal corruption cannot be meaningfully separated from organizational corruption.

1. Leadership. Many times CEOs and Board members deny having any knowledge of bribes being paid in their company. This can, believe it or not, actually be the case, but the interesting point is that, when surveyed, most of employees would readily admit that in order to maintain integrity in the company a “tone from the top” is essential. The truth is that, as classical management theories indicated, management is responsible for, above all, integrating employees in a system, by communicating rules, norms, processes and tasks.

Hence, if a bad apple grows, there has to be something wrong in this integration mechanism. Senior management does not have to collude in the payment of bribes by middle management to be responsible for the culture in which such bribes took place.

2. Motivation. Companies work as social groups. Each member has individual motivations, but works to pursue a common goal, which is the proliferation or duration of business. But motivations are primarily psychological constructs. If a bad manager is motivated to achieve performance targets by any means necessary, is this only his fault? Who or what transmits motivation patterns to the brains of employees? What organizational culture conditions allow unethical motivations to take precedence over integrity standards? Failure to answer to some of these questions make up what some analysts call institutional blindness.

3. Socialization. A simple statistic reveals that a typical white-collar worker spends one third of his entire life at work. Socialization is the backbone on which human culture is developed, so it is very simple to assess the importance of the work environment for developing one’s personal vision of the world. This alone stresses how difficult it can be to separate business incentives from organizational integrity, when it comes to individual choices.

4. Rules and norms. Individuals learn about rules by being part of a culture, society and organizations. Rationalization (the way our psyche accepts, internalizes and makes usable rules) happens when we deal with other people. Our personal norms can conflict with those of the workplace, but there are several cognitive mechanisms through which we can accept them, and justify them. Cognitive dissonance, for instance, is one mechanism of the brain which seeks to create alignment between what we find uncomfortable and our reaction to it.

For example, I don’t like being friendly with people I don’t know very well, but if my company has a very friendly culture, if I behave as I would like I will appear different, generating a cognitive dissonance which I don’t like. Hence, I work to make sure I behave as others do.

These are imperfect mechanisms but they serve one of the most innate needs of the human being, which is building social relationships.

5. Reciprocity. One of the most established patterns of human behavior is reciprocity. If I do something for a person I am expecting something in exchange, at some point in time. Gift-giving customs are based on this simple idea. However, reciprocity functions in different ways across cultures, and across organizational cultures. If by working in an organization I learn that giving a proper importance to reciprocate a favor is one of the unspoken norms, I will try to adapt to it. Some cultures are not very comfortable with this practice, and these are cultures where corruption is less an issue.

But the contrary is also true. If I am socialized in a company where higher values such as integrity and transparency are prioritized, other norms such as reciprocity may not come to the forefront. If my sense of reciprocity is built more towards my organization and less towards single individuals, it would be much more difficult to fall into blackmailing traps.

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This post highlights some of human tendencies in group behavior that can influence corruption in an organizational environment. Organizational psychology and anthropology have much to teach us about corruption, but this learning requires us to move beyond "bad apple" theories of individual conduct and consider the contextual environment and hidden drivers that affect us all.

- See more at: https://www.fcpablog.com/blog/2016/4/27/torsello-and-taylor-dont-buy-the-rogue-employee-myth-theres.html#sthash.lq6zJvBA.dpuf

- See more at: https://www.fcpablog.com/blog/2016/4/27/torsello-and-taylor-dont-buy-the-rouge-employee-myth-theres.html#sthash.gH6DEo7N.dpuf