III. Explaining Organizational Crime
Rates of white-collar crime vary temporally, spatially, and across organizations. The sources of this variation are matters of considerable theoretical agreement. As an organizing framework, rational choice theory or approaches that are logically compatible with it predominate. Rational choice theory accommodates logically and integrates in a straightforward fashion a range of other theoretical approaches to organizational crime. When crime is viewed as a product of choice, crime results from a decision-making process in which actors balance diverse utilities with their respective potential risks and rewards. The latter are diverse, but where organizational personnel are concerned they include everything from increased organizational profit or market share to increased personal income, while the former includes loss of reputation or income and formal penalties imposed by the state. This in no way denies that contextually remote conditions may contribute to crime occurrence but assumes instead that they are important primarily because of their effects on situationally specific decision making. Discretion resides with the individual and group, which chooses whether or not to transgress. With its focus on decision making, rational choice theory provides a way of understanding how both the world beyond organizations and their internal conditions and dynamics shape the odds of crime.
A. Aggregate Level
Rational choice theory highlights two principal causes of variation in the aggregate rate of organizational crime: the volume of criminal opportunities, and the size of the pool of tempted individuals and predisposed organizations prepared to exploit them. Organizational criminal opportunities are objectively given situations or conditions encountered by organizational personnel that offer attractive potential for furthering organizational objectives by criminal means. Understandably, many cluster in the workplace. In geographic areas, at times, or in industries where there are abundant opportunities for organizational crime, correspondingly high rates of it can be expected. Where there is a paucity of opportunities, the rate of organizational crime contracts.
Changes in the forms and supply of organizational criminal opportunities have been pronounced in the half-century since World War II. The onset and developmental pace of the financial services revolution, new technologies for information sharing and financial transactions, the globalization of economic markets, and relationships and state provision of tax incentives and subsidies to businesses vary from one nation to another, but these changes have affected the supply of criminal opportunities around the globe. In 2002 alone, U.S. corporations received $125 billion in government subsidies.
The size of the pool of predisposed organizations in which individuals are at increased odds of crime commission is a function of (a) economic trends and the level of uncertainty in critical organizational markets; (b) competition over resources and markets; (c) cultures of noncompliance that gain acceptance and legitimacy in geographically circumscribed regions, in specific industries, or in historical eras; and (d) prevailing estimates of the certainty and severity of potential aversive consequences. Fluctuation in the business cycle has been linked repeatedly to changes in the size of the pool of white-collar offenders. Economic downturns depress both income and prospects for the future, which increases fear and competition. As larger numbers of citizens and organizations are pushed closer to insolvency, desperation escalates, which can cause respectable organizational employees to consider behavioral options they normally would find unacceptable. This may be true particularly for entrepreneurs and small businesses operating near the margin of insolvency.
Fluctuations of the business cycle are important also because they complicate and make more uncertain predictions of market trends. To acquire financing, personnel, raw materials, and other resources needed for production, organizations must participate in a variety of markets. Conditions in any combination of these markets may range from financially depressed or unsettled to strong and predictable. When the former is the case, market uncertainty increases. For officers and managers of business firms, this complicates planning, further escalates anxiety, and pushes an increasing proportion toward desperation and crime.
Organizations of all kinds compete with other organizations over the prices charged for their products and also in credit and labor markets. In competitive worlds, progress is assessed by comparison with peers, and inevitably there are winners and losers. Desire to be the former is fueled in part by fear of becoming the latter. Competition need not be economic, however. Establishing or maintaining respect from peers for exceptional achievement is a priority for many, but humans compete for attention from superiors, for plum assignments, and for possible career advancement. Competition presumably operates also in the realm of nongovernmental organizations (NGOs). Charitable organizations, for example, must compete annually for funds and other resources to meet their operating budgets and philanthropic objectives. The pervasive insecurity generated in competitive environments provides powerful motivational pushes toward misconduct. By elevating and rewarding success above all else, they provide both characteristic understandings and justifications for misconduct. In these worlds, normative restraints are transformed into challenges to be circumvented or used to advantage.
As cultures of noncompliance gain strength and acceptance, they increase the supply of potential offenders by providing to organizational personnel perspectives and justifications that conflict with ethical maxims. Cultures of noncompliance are important because they make available to individuals and groups interactionally permissible rhetorical constructions of illicit conduct. These techniques of neutralization excuse, justify, or in other ways facilitate crime by blunting the moral force of the law and neutralizing the guilt of criminal participation. Techniques of neutralization need not be a determinant of decision making in all organizations, however. Techniques of restraint are linguistic constructions of prospective behaviors that dampen the proportion of firms where crime occurs by shaping preferences, perceived options, and the odds of criminal choice. Techniques of restraint are publicly spoken admonitions of the like that “virtue is its own reward,” “honesty is the best policy,” and “protection of the environment is part of our job.” The proportionate mix of techniques of neutralization and techniques of restraint is the key determinant of the dominant culture of industries, regions, time periods, and individual organizations.
Prevailing estimates of the credibility of oversight occupy a prominent place in rational choice theory as partial explanation for variation in the aggregate rate of crime. Just as uncertainty rooted in economic conditions, market fluctuations, and cultural support for criminal actions increase the supply of predisposed offenders, weak or inconsistent oversight does the same. This is because the level of commitment to and resources invested in rule enforcement by the state shapes collectively held notions about the legitimacy and credibility of oversight. Oversight by the state and other organizations can take the form of direct observation or impersonal monitoring via periodic audits, television cameras, or computer programs. It can also include policies and programs supported by professional associations and trade groups. When it is widely believed that oversight is unwarranted or too costly, when the odds of detection and sanctioning for criminal conduct are thought to be minimal, or when penalties threatened by the law or by others are dismissed as inconsequential, the pool of individuals and organizations predisposed to offend grows.
B. Organization Level
There is little doubt that the incidence of crime and illegalities varies across organizations or that some transgress repeatedly while others do so infrequently or never. Their variable structure, culture, and dynamics are major reasons for this variation. Four aspects of their internal worlds are significant for their potential effects on the odds of crime by executives, managers, or employees of legitimate organizations: performance pressure, doubt about the credibility of oversight, organizational cultures that excuse or permit commission of infraction, and signaling behavior by executives and managers that law obeisance is not an organizational priority. These as well as other organizational conditions present individuals with different understandings and beliefs about the likely consequences of their decisions. By constraining the calculus of decision making in organizational context, variation in these conditions can cause decision makers to believe alternatively that one runs grave risks in choosing crime or that the risks are improbable.
No cause of variation in organizational compliance is asserted with more confidence than belief that pressure and strain produced by the need to meet acceptable levels of performance increase the probability of crime. When the organizational employer is not doing well, and pressure is on to do better, it can embolden or make desperate decision makers and cause them to make choices recklessly. In market-based economies, the need for firms to maintain profitability is of paramount importance; declining income and falling profits are a source of pressure for improved performance. For-profit nursing homes, for example, are significantly more likely than nonprofit ones to deliver substandard care and break the law. Apparently, top-down pressure to meet the bottom line creates incentive to cut corners in patient treatment, to leave necessary maintenance unfinished, and to look the other way in the face of potentially hazardous working conditions. For employees, the source of performance pressure is a combination of organizational and personal determination to succeed.
Largely because of their effects on organizational performance, the dynamics of economic markets and relationships are among the strongest constraints on criminal choice. The relationship between economic conditions and performance pressure, and the supply of potential organizational criminals may be curvilinear, however; severe economic upturns and downturns alike may increase the number of individuals and organizations weighing criminal options. Crime is stimulated during boom times by widespread belief that “everyone is getting rich.” When everyone seems to be doing well, belief that it is foolish to hold back and not engage in the games of the moment finds broad appeal. Many come to believe that to pass up any opportunity is to miss the boat. Those who choose crime may be emboldened by an assumption that a rising economic tide hides their activities and increases their chances of criminal success. Strong and sustained economic growth can also create both a sense of entitlement to the fruits of a thriving economy and belief that “now is the time to strike.”
Performance pressure is not a condition that occurs only in profit-seeking organizations. All organizations must acquire resources sufficient in quality and price to remain viable if not enhance their level of success. University faculty and researchers, for example, are not immune from performance pressure, and scientific misconduct, some of it criminal, is the result. Faced with pressures to produce new knowledge, publish, and gain promotion and tenure, scientists may tread carelessly or injudiciously along the boundary demarcating the unacceptable. The rapid corporatization of universities in recent decades presumably has increased the prevalence of scientific misconduct by administrators and faculty and possibly the prevalence of crime as well.
Nearly as important as performance pressure as a source of crime in organizations are organizational cultures that cause decision makers to emphasize the importance of goal achievement with less emphasis paid to how this is accomplished. The culture of an organization can make social outcasts of those who behave criminally or welcome them as close colleagues and suitable candidates for increased administrative responsibilities. More than two decades of research are the basis of striking agreement on culture as a “social force that controls patterns of organizational behavior by shaping members’ cognitions and perceptions of meanings and realities” (Ott, 1989, p. 69). Variation in organizational culture has been linked to an array of variables, including financial performance, adaptability, and goal effectiveness.
For the specific and narrow purpose of understanding how it affects the odds of criminal choice, organizational culture is the normative beliefs and shared expectations in an organization or organizational unit. It is well established that some organizational arrangements and cultures are more conducive to compliance than others. Just as the dominant culture of industries, regions, or time periods is determined by the proportionate mix of techniques of neutralization and techniques of restraint, the same is true of organizational cultures. An imbalance in the approved use of either constrains the odds of criminal conduct; where techniques of neutralization dominate, the odds of crime increase, and where techniques of restraint dominate, the odds are reduced.
Another cause of organizational variation in crime commission is the stance on criminal conduct communicated by executives and managers. Differentials of authority are inherent in work organizations; superiors and subordinates are unavoidable aspects of their structure and dynamics. Policies and decisions by executives and managers are meant to influence subordinates’ actions in ways that contribute to organizational success. Evidence is clear that in doing so they function also as moral exemplars for peers and subordinates. This signaling behavior by executives, managers, and team leaders communicates to all the degree to which lawful behavior is valued and expected. When they signal to colleagues and employees that misconduct will not be tolerated, the message is not lost. When they fail to insist upon obeisance to law, it signals that compliance is not a priority. The result can be a steady if imperceptible growth of laxness and even indifference about ethics and compliance. If superiors treat in a cavalier fashion the standards of ethical conduct, subordinates will be quick to realize that the risks of misconduct for them are reduced as well. In these circumstances, the proportion of managers and employees who are criminally predisposed or tempted grows.