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Personal Gain or Organizational Benefits? How to Explain Active Corruption

Published online by Cambridge University Press:  06 March 2019

Markus Pohlmann ,
Kristina Bitsch  and
Julian Klinkhammer

Abstract

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Corrupt practices in organizations are commonly explained via the rational choice of individual employees, with the benefits of deviant actors at the heart of the theoretical approach. This Article challenges the rational choice perspective with reference to cases of corruption in which the organizational benefits are crucial and personal gains negligible. The authors propose to embed the concept of “useful illegality” (Luhmann) into an institutional theory framework and develop a set of indicators for the systematic comparison of individual case studies. Exemplary analyses of two landmark cases of corporate bribery on behalf of German corporations' subsidiaries abroad (Siemens Argentina and Magyar Telekom) show that active corruption was neither simply a function of individual deviance, nor of personal gain. In contrast, institutional theory allows the modeling of organizational deviance as a function of unwritten rules that lend legitimacy to the deviant behavior of bribe payers. Despite plentiful opportunities in the periphery of these two multinational corporations, the few instances of personal gain were either in line with the organizational incentive structures (as in Telekom) or attributable to the loss of membership (as in Siemens). Mostly high-ranking employees, loyal to their organization, committed those crimes at high personal risks. The discussion of factors that explain why these “company men” nonetheless complied with the unwritten rules, in support of organizational benefits, leads the authors to conclude with likely consequences for effective regulation. They argue that it is the usefulness of the illegal behavior for the organization, its entrenchment in organizational cultures, and amplified adaptation problems with regard to changing institutional environments that explain what makes corrupt practices so hard to control and to regulate in a formal legal organization.

Type
Special Issue Ethical Challenges of Corrupt Practices
Information
German Law Journal , Volume 17 , Issue 1: Special issue - Ethical Challenges of Corrupt Practices , 2016 , pp. 73 - 99
Copyright
Copyright © 2016 by German Law Journal GbR 

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