The subject of corporate misconduct has become a topic of particular interest for scholars in accounting, finance, and organizational studies. Corporate misconduct is broadly defined as “the organizational pursuit of any action considered illegitimate from an ethical, regulatory, or legal standpoint” (Harris and Bromiley 2007: 351). Scholars have investigated the antecedents of misconduct (e.g., Larkin and Pierce, this volume; Palmer and Moore, this volume; Ashforth and Lange, this volume), and to a lesser degree, its immediate consequences for guilty organizations and other firms to which they are linked (e.g., Greve and Teh, this Volume). Significant gaps in this literature are still ripe for exploration, particularly as concerns the longer-lasting effects that organizational wrongdoing can have on individuals employed by those organizations, to whom consequences might adhere, and the consequences of illegitimate behavior for employees below the level of the top management team. That is, although scholars have demonstrated that revelations of financial misconduct lead to immediate consequences for organizational elites, we have scant theory explaining the mechanisms through which the taint of fraud is transferred from organizations to individuals – especially the non-elite – or what the lasting impact for any of those individuals might be.
The link between misconduct at the macro-level and consequences for the individuals who are implicated, either directly or indirectly, seems like an area ripe with opportunity for meso-level theorizing. Furthermore, extending this line of inquiry to employees of organizations who have no plausible connection to wrongdoing save the source of their paycheck – for example, entry-level employees, those at satellite offices, those in completely unconnected business units or operating divisions – remains unexplored. How can what we know about individual psychology, biases, and behavior inform the process through which organizational misconduct leeches into individuals’ lives? What can our knowledge of organizational learning, routines, roles, norms, and culture tell us about the ways in which individuals are likely to react to wrongdoing within the organizations they inhabit? Despite the abundance of fertile ground for theorizing, almost none of this research has been published.
Indeed, what we know about the consequences of organizational wrongdoing on individuals is limited to a narrow set of about three dozen studies, roughly evenly distributed among the fields of organizational theory, finance, and accounting, with very little input from researchers in social psychology or organizational behavior.