The Antecedents and Consequences of Top Management Fraud

Abstract

Fraud by top management is a topic that has stirred public interest, concern, and controversy. In this article, the authors analyze fraud by senior executives in terms of its nature, scope, antecedents, and consequences. They draw on the fields of psychology, sociology, economics, and criminology to identify societal-, industry, and firm-level antecedents of management fraud and the individual differences that enhance or neutralize the likelihood and degree of such fraud. The authors also review the consequences of management fraud on various stakeholder groups such as shareholders, debtholders, managers, local communities, and society.

Love, Hate, Ambivalence, or Indifference? A Conceptual Examination of Workplace Crimes and Organizational Identification

“…Consequently, we feel that intentionality provides a common comparison point for all types of workplace crime. Other researchers (Greve et al 2010, Zahra et al 2005, while reviewing extant literatures on crime at the top management level and/or organizational level, have also recently made similar claims and proposed that to fully understand the precursors of organizational crime, it is important to consider the varied intentions of the perpetrators. Therefore, in this paper, we draw from the extant research on workplace crimes and develop a typology based on the intention, or more specifically, the intended outcomes, of the crimes.…”

“…Following Treviño et al (2006) and others (see Zahra et al 2005), we view crime as deliberate and thus intentional-i.e., with the motivated objective to con, cheat, or swindle internal and external stakeholders. Consequently, we feel that intentionality provides a common comparison point for all types of workplace crime.…”

“…Most of the prior research focusing on the individual-level factors influencing workplace crimes has examined the role of demographic variables such as age, experience, education, and gender Schminke 1999, Gottfredson andHirschi 1990), as well as other individual difference factors such as cognitive moral development (Ashkanasy et al 2006, Treviño andYoungblood 1990), moral identity (Aquino and Reed 2002), individual propensity for risk (Junger et al 2001), locus of control (Forte 2005), and the value placed on money (Leap 2007). For instance, youth, a lack of experience and education, high tolerance for risk, and greed are sometimes positively associated with involvement in workplace crimes (Gottfredson and Hirschi 1990, Junger et al 2001, Leap 2007, Levine 2000, Zahra et al 2005. However, such treatments do not differentiate how and when such individual differences may lead someone to commit different types of workplace crimes.…”

“…Moreover, although under-identification in and of itself may not lead to workplace crimes (i.e., because it provides no direct motivation for crime), it may explain why some individual differences sometimes lead to such crimes. To illustrate, reviews by Daboub et al (1995) and Zahra et al (2005) point to the importance of certain demographic traits, such as age, tenure, and education, as moderating the influence of organizational structures on committing workplace crimes. Specifically, they argue that individual differences (e.g., low education and youth) that are associated with characteristics that are highly self-centered-such as recklessness, immediate gratification, or low moral development (see also the role of narcissism in Levine 2005)-are likely to increase the propensity toward criminal activity.…”

“…Although the research of Daboub et al (1995) does not specify the type of workplace crime that are associated with these self-centered characteristics, Zahra et al (2005) suggest that certain demographic variables may be tied to a wide range of workplace crimes. Building on our logic above, we believe that these characteristics, when possessed by an individual who does not have any strong feelings toward the organization, are most likely to lead to nonaligned-organizational workplace crimes.…”