In the last two decades we have witnessed many large-scale corporate scandals –think Worldcom’s accounting fraud, Citibank’s near-collapse, Enron’s bankruptcy – in which pervasive rule violations by both managers and lower-level employees led to massive ethical meltdowns. These and other scandals have sounded the alarm on the need to monitor corporate corruption.
The typical response from policy makers is to propose a patchwork of reforms to address various corporate transgressions. These proposals have established requirements for more accurate reporting, criminalized financial misreporting, created independent monitoring bodies, and improved corporate governance practices. But by and large, they focus on preventing gross and blatant violations of the law – and they ignore the more banal, ordinary acts of unethicality that are far more common in organizations.
Numerous studies have documented the prevalence of practices such as stealing office supplies, inflating business expenditures reports, and engaging in behaviors that raise conflicts of interest. While these may sound negligible, these violations reduce trust over time and alter prevailing business and legal norms. Their aggregated effect can be quite harmful.
Read more at HBR.