Journal of Business Ethics

, Volume 131, Issue 4, pp 791-801

First online:

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

  • Kristin Smith-CroweAffiliated withEccles School of Business, University of Utah Email author 
  • , Ann E. TenbrunselAffiliated withMendoza College of Business, University of Notre Dame
  • , Suzanne Chan-SerafinAffiliated withAustralian School of Business, University of New South Wales
  • , Arthur P. BriefAffiliated withEccles School of Business, University of Utah
  • , Elizabeth E. UmphressAffiliated withFoster School of Business, University of Washington
  • , Joshua JosephAffiliated withPartnership for Public Service

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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.


Ethics Formal systems Fraud Informal systems Unethical behavior