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The Ethics “Fix”: When Formal Systems Make a Difference

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Abstract

This paper investigates the effect of the countervailing forces within organizations of formal systems that direct employees toward ethical acts and informal systems that direct employees toward fraudulent behavior. We study the effect of these forces on deception, a key component of fraud. The results provide support for an interactive effect of these formal and informal systems. The effectiveness of formal systems is greater when there is a strong informal “push” to do wrong; conversely, in the absence of a strong push to do wrong, the strength of formal systems has little impact on fraudulent behavior. These results help to explain why the implementation of formal systems within organizations has been met with mixed results and identifies when formal systems designed to promote ethical behavior will be most efficacious.

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Notes

  1. For instance, based on dialogical theories of learning, Burke et al. (2007) have argued that leaning is a social activity that is facilitated by social interaction. Specifically, in the context of safety training, Burke et al. (2006) demonstrated that more learning takes place when trainees have opportunities to interact with each other and the trainers (getting feedback from trainers, etc.) compared to more passive forms of training like watching a video. The selection of training and “hot lines” as two aspects of formal systems are interactive and thus consistent with this definition.

  2. As Scott (1987) notes, formal systems may also be transformed, or changed by informal systems. As this paper focuses on a single point in time, this possibility is not investigated.

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Authors and Affiliations

  1. Eccles School of Business, University of Utah, Salt Lake City, UT, USA

    Kristin Smith-Crowe & Arthur P. Brief

  2. Mendoza College of Business, University of Notre Dame, Notre Dame, IN, USA

    Ann E. Tenbrunsel

  3. Australian School of Business, University of New South Wales, Sydney, NSW, Australia

    Suzanne Chan-Serafin

  4. Foster School of Business, University of Washington, Seattle, WA, USA

    Elizabeth E. Umphress

  5. Partnership for Public Service, Washington, DC, USA

    Joshua Joseph

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  1. Kristin Smith-Crowe
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  2. Ann E. Tenbrunsel
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  3. Suzanne Chan-Serafin
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  4. Arthur P. Brief
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  5. Elizabeth E. Umphress
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  6. Joshua Joseph
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Correspondence to Kristin Smith-Crowe.

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Smith-Crowe, K., Tenbrunsel, A.E., Chan-Serafin, S. et al. The Ethics “Fix”: When Formal Systems Make a Difference. J Bus Ethics 131, 791–801 (2015). https://doi.org/10.1007/s10551-013-2022-6

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