Notes on the Origin of “The Normalization of Corruption”

[We’re pleased to welcome back J.S. Nelson, Senior Fellow at the Zicklin Center for Business Ethics Research at Wharton, and an Advisor in the Center for Entrepreneurial Studies at the Stanford Graduate School of Business. Nelson recently published an article in the Journal of Management Inquiry entitled “The Normalization of Corruption.” Notes from Nelson:]

My forthcoming article on “The Normalization of Corruption” in the November 2016 issue of the Journal of Management Inquiry started in a fairly unusual way. I am an attorney—a former prosecutor and commercial litigator—who has taught in business schools for nearly ten years. My work focuses on both entrepreneurship and business ethics.

But the differences between law and business still surprise me. At the 2016 Western Academy of Management meeting in Portland, a group of us were lingering over the end of breakfast at a conference table. As we described what we were working on, and I mentioned my articles about the incentives for wrongdoing within organizations leading to the 2007-08 financial crisis and scandals since, someone at the table stopped me mid-stream. “What are you doing sitting here? You need to be in the session happening now on corruption,” she told me. I protested that I didn’t work on corruption. For lawyers, corruption is the paying of bribes to government officials. But the management, finance, and organizational behavior people at the table envisioned corruption much more broadly—they saw corruption as the misuse of organizational resources by anyone who hijacks the proper purpose of the corporation. Yes, under this definition, the financial crisis, the VW emissions scandal, and today’s headlines about fraud at Wells Fargo are all corruption.

So I ran over to the room where the corruption symposium was mid-stride. And, lo and behold, a defense lawyer spoke to the crowd about white collar crime. Other people described the loss of positive “voice” that they had seen in corporate scandals. I was writing the Oxford University Press’s book on Business Ethics. These people were speaking my language. As the session drew to a close, I raised my hand to make a comment about the sorry state of the law and how middle management is often where the details of large scandals originate in order to protect top executives who don’t want to ask the questions that they should while on the job.

My comment and question drew Paul Hirsch’s attention. Paul is, as you know, the James L. Allen Professor of Strategy & Organizations in the Kellogg School of Management at Northwestern University. He is also passionate about new ideas and what we can do about corruption in this country. We sat down for an impromptu talk perched at a small table outside the meeting room to compare notes about how decisions in the courts are helping to fuel the patterns of corruption that we both study. We talked about the work that I was doing on the prevalence of corruption industry-by-industry, and how behavioral ethics helped explain the tipping points beyond which corruption became a norm.

Paul looked at me hard. I could tell he was coming to a decision. “Okay, do it,” he said. “Write this up for me as a guest editor of the issue—let’s put this in the Journal of Management Inquiry’s special issue on Corruption.” I protested—I came from a different discipline, the deadline was two weeks away, I had other publishing commitments, it just wasn’t possible. But Paul had seen the links between my work and his field. We cared about the same things. He knew that the management community needed to hear from additional perspectives, and he knew that the synergies would be worth pursuing.

And he was exactly right. The “Normalization of Corruption” article wrote itself.  The management material told part of the story, and the additional keys were in law and behavioral ethics. There is a pronounced cycle: the fact that misconduct is perceived by individuals to be so widespread has led to a normalization of corruption within companies and industries. The contribution of the law—and this part is particularly vicious—is that the normalization of corruption, in turn, helps to defeat attempts to prosecute the misconduct and to prevent its spread. Normalizing corruption tells individuals not only that it is acceptable to cheat, but that cheating is the behavior now expected of them and for which they will be rewarded.

So read the paper. Let me know what you think. Lawyers don’t usually talk about cultures and norms, and business professors don’t usually talk about doctrine and cases. But it’s time to put the pieces together. These synergies are shaping the world we live in, and—unless we have the conversations that we need to change that world—they are reciprocally creating the normalization of corruption.

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