Humanistic management, operational risk, and

employee behaviour

Vincent Fitzsimons

To be published as Chapter 5 in Agata Stachowicz-Stanusch & Wolfgang Amann (eds.)

Integrity in organizations - Building the foundations for humanistic management, (Palgrave

Macmillan)

Management can provide leadership in terms of either poor or good

behaviour. The role of principled management in bringing out the

best performance of the individual seems to be intuitively obvious

as management influences the way in which things are done in the

organization on both formal and informal levels. One particular

area of concern is the impact of senior management’s ethical

behaviour on the risk of employee’s fraudulent behaviour.

Operational risk, resulting from procedures within the firm, is

often neglected in firms, despite the obvious costs. Enterprises,

however, have great difficulty in effectively dealing with such

issues. This chapter suggests that humanistic management is an

important element in addressing operational risk, and the risk of

fraud in particular.

1

Recent evidence on employee deviance and fraud suggests that

reduction of these risks is aided by creating a culture which

encourages fairness and transparency, enables individuals to raise

problems as they are identified, and encourages learning. This

‘transparency’ approach should help by creating a pattern of

behaviour that is honest and that is sufficiently informed to

engineer appropriate change in the organisation as challenges arise.

Although competitive pressures increasingly encourage firms to

reduce the rights of employees, fair treatment of employees may

potentially reduce fraud costs to the firm, and increase its ability

to adapt to change. This is of particular significance in times of

economic volatility where threats to global businesses can change in

nature, and in magnitude, very rapidly.

2

Humanistic management, operational risk, and

employee behaviour

Vincent Fitzsimons

‘Management is about human beings. Its task is to make people

capable of joint performance, to make their strengths effective and

their weaknesses irrelevant.’ Drucker (1990, p.221)

Introduction

Changes to both the economy and society have inevitable consequences

for organizations. The natures of both have changed significantly

in recent years. The competitive environment in which firms operate

has undergone significant globalisation, or more accurately

regionalisation with new trade increasingly occurring within

dominant regional trading blocs (WTO, 2011). Organizations’ supply

chains are increasingly likely to pass across several national and

cultural boundaries. Markets have also apparently become more

volatile, with financial crashes occurring in 1974, 1987, 1997,

2000-1,2007-8 and the ‘flash crash’ of May 2010. These crises

appear to be an increasingly common feature of the modern economy,

with significant financial consequences for businesses and the

economy in general each time one occurs, and sluggish economic

growth in their aftermath. Whilst businesses suffer from this

3

increased volatility and uncertainty, so do employees as permanent

employees face increasing risk of unemployment at the same time that

flexible and temporary employment has become more common, replacing

longer term, more secure employment (Forde & Slater, 2001; Smith &

Neuwirth, 2008). Increasingly employment is based on flexible

working groups, employment being replaced with self-employment, and

workplaces being superseded due to the ability to work via

communications technology from almost any location. These

employment relations ‘at a distance’, and on a temporary basis

massively reduce employees’ involvement with the organization. The

changing nature of our lives has observable consequences. For

instance, evidence from sources such as the World Values Survey

indicates that society, in the process of modernising, has become

progressively less trusting (Fitzsimons, 2006). In what ways does

this affect the organization?

There is a danger that a business world whose institutions are

increasingly in flux will react to these new conditions in ways that

are ultimately counterproductive. It is possible to see labour

increasingly as a resource or commodity that can be flexibly

purchased to meet the needs of the firm, but this neglects one

vitally important aspect of the modern business world. In the

events leading up to each of the recent financial crises, and to the

collapse of such monolithic companies as Enron and Parmalat, each of

4

the firms appeared to be efficiently regulated and following logical

procedures that should have guaranteed no problems ever arose. In

each case, however, businesses suffered because of the unanticipated

consequences of incompletely understood and only partially

controlled, complex risks. In many cases these were exacerbated by

the attitudes and behaviour of individual stakeholders of the

organizations affected – both employees and external stakeholders.

This demonstrates the significance of the human element in risk. So

how is the ‘human’ treated in modern corporations, and how can

management practice ensure that the human element is not dangerously

neglected in future? The quote from Drucker (1990) suggests that an

understanding of human character is essential to management, but

does this demonstrate itself in the management literature?

Management theory has often been undermined by simplistic

conceptions of the individual or the organization. Economic models

of the firm have only gradually been refined and replaced with more

representative analysis of the structure and operation of the firm.

Theories of motivation have moved away from ‘scientific management’

and the assumption of simple stimulus-response relationships, to

incorporating increasingly realistic aspects of how individuals act

within organizations. A significant part of this change has been

the growth of ‘humanistic management’ approaches. Humanistic

management examines how management techniques can be developed that

5

treat employees ‘as humans’, whose characteristics are more than

their individual skills, or simple mechanistic responses to

management. Melé (2003) examines the different traditions within

humanistic management from the initial work of Maslow (1943, 1954)

and his treatment of the complex needs of individuals. Whilst

initially focussing on motivation of individuals, later developments

have emphasised organizational culture, and the community within the

organization.

Humanistic management may be superior to standard approaches in one

of two ways. Firstly, in recognising the complexity of the

individual, it forms predictions of behaviour that will

realistically reflect the range of influences on individuals.

During periods of rapid change, simplistic management models of

employee behaviour are often undermined by their failure to include

the full range of explanatory factors. Whilst in periods of

relative stability or in the shorter term the failure of simplistic

models to include particular influences may be acceptable if they do

capture those factors that are most variable, or most significant,

changing conditions often expose weaknesses in quite different

aspects of the organization that have not been directly addressed.

In this way, ‘realistic’ theory may be superior to more

‘parsimonious’ models in times of economic upheaval or rapid

development, as at present. Secondly, in taking a more realistic

6

and inclusive view of management, humanistic models are capable of

providing insights for a wider range of scenarios, and may be more

valuable than standard theory to managements that are open to less

conservative approaches to strategic change. Again, given the

extreme economic conditions of recent years, this approach may be of

higher value to organizations than some of the more limited,

traditional alternatives.

Humanistic values form the basis of modern organizational

development theory. Margulies and Raia (1972) state that

organizational development involves treating employees as human

beings rather than as resources in the productive process; and

recognising their complex personal needs, and the importance of

these to their work. Ethical treatment of members of the

organization, and the development of ‘good’ behaviour are central to

the humanistic approach. The role of principled management in

bringing out the best performance of the individual seems to be

intuitively obvious. Management always has an opportunity to

provide leadership in terms of poor or good behaviour. As a result,

by ‘leading by example’, the behaviour of management sets a culture

of fairness, unfairness, aggression, cooperation, etc., that becomes

the culture of the business as a whole. Significant research has

been conducted into the mechanism by which organizational culture

becomes established, and it appears to be one of the consequences of

7

leadership as entrepreneurs are responsible not only for the

structure and operation of the organization, but also the ‘more

cultural and expressive components of organizational life’

(Pettigrew, 1979, p.574). They influence the way in which things

are done in the organization on both formal and informal levels.

The style of management needs to reflect the full range of

influences on stakeholders’ behaviour, and the extent to which it

does this determines whether beneficial or destructive behaviours

and organizational cultures develop.

Organizational culture

Organizations’ obvious differences are in their products, markets,

stakeholders, formal structure and processes. The culture of the

organization is less concrete, but one of the most significant

determinants of the firm’s formation and activities. Aspects of

organizational culture have been used to explain the creation of

firms, their ability to change, and their relative performance. The

term culture is interpreted in many different ways within the

academic literature. It may refer to a community and the artefacts

it creates, or it may refer to the subtle patterns of relationships

between members of a society. Culture can, in its broadest sense,

be defined as ‘that complex whole which includes knowledge, belief,

art, morals, law, custom and any other capabilities and habits

8

acquired by man as a member of society.’ (Tylor, 1871, p.1)

Organizational culture refers to the patterns and nature of

relationships within the organization, as well as the shared beliefs

and understandings between members of the organization. As culture

is often difficult to observe, Schein (1985) also indicates three

different ways in which culture displays itself: in the surface

artefacts, underlying values, and core basic assumptions of the

organization. It is in the underlying values and the core basic

assumptions of the organization that ethical culture most strongly

asserts itself.

The creation of an organization is not spontaneous but deliberate,

and is planned by entrepreneurs. The ‘vision’ of the entrepreneurs

is in seeing how ‘a number of people could accomplish something

which individual action could not.’ (Schein, 1983, p.5) The

economic explanation of firm creation depends crucially on the

concept of trust between individuals in markets and in firms (North,

1990). Firms may be seen as contract-based systems of relationships

that form in order to provide safety from the constant potential for

predatory acts in market exchange (Coase, 1937). Ethical culture is

therefore essential to the existence and operation of the firm, as

it economises on the transaction costs of exchange compared with

those of relatively anonymous market transactions. As a result of

this the role of reputation in business becomes very significant,

9

with organizations forming between those with good reputations,

promoting their business on the basis of their external reputation,

and potentially losing business due to the loss of their external

reputation. In this way, the behaviour of members of the

organization impacts massively on the firm’s performance (Rose &

Thomsen, 2004).

Organizational culture is not just a by-product of the attitudes of

the entrepreneur or senior managers, however, as it may stem from

shared values of the community from which the firm arises, or may be

a conscious or unconscious result of the recruitment process. The

experience of the organization is also a fundamental driver of

cultural change (Schein, 1985). Often the relationships within a

culture will depend on shared beliefs and understandings, built up

incrementally over time. Culture can adapt in response to problems

or challenges the organization attempts to overcome as it is:

" invented, discovered, or developed by a given group as it

learns to cope with its problems of external adaptation and

internal integration - that has worked well enough to be

considered valid and, therefore, to be taught to new members

as the correct way to perceive, think, and feel in relation to

those problems" (Schein, 1985, p.9)

10

The culture will reflect the total interactions between individuals

and groups within the organization, and with the wider range of

external stakeholders. These interactions should establish the

distinctive set of ‘rules, conduct and procedures’ (Neuberger, 1994

p.24) through which the firm co-ordinates its activity. The nature

of the conduct within the formal system of rules and procedures can

vary significantly due to differences in organizational culture and

the way in which individuals interpret rules and procedures.

If organizational culture is to be of use to managers, then it

should be susceptible both to reliable analysis, and to deliberate

change. It is not clear from the discussion above whether this is

possible. It is debatable whether cultural evolution is a conscious

process or an unconscious one. If organizational culture does

evolve as a part of a problem-solving process within the

organization, this also suggests a significant possibility that

members of the organization will resist changes to culture due to

its ‘positive’ role in previous situations. In addition the

analysis of culture is complicated by its invisibility – as Hofstede

points out “many values remain unconscious to those who hold them.

Therefore they cannot be discussed, nor can they be directly

observed by outsiders. They can only be inferred from the way

people act under various circumstances.” (Hofstede, 1994, p.8) If

culture is transmitted by the unconscious example of members of the

11

organization, then any problems arising from the organizational

culture will be difficult to remedy. This may also account for the

existence of outdated practices in many firms. As Wilkins and Ouchi

(1983) state ‘when a second generation comes on the scene, what had

been the ad hoc conceptions and social routines of the first

generation now become historic institutions, apparently objective

social facts, inherent in the situation.’ (p.473) For this reason,

it is important that the organization tolerates debate and

questioning of the assumptions of its own culture.

Good and bad cultures? Culture and performance

Having outlined what constitutes organizational culture and how it

develops, it is necessary to consider its importance for the firm.

Culture is multifaceted, and this complexity makes it difficult to

judge how beneficial a particular culture is. Barney (1986) has

suggested that types of corporate culture may have a significant

positive impact and may be responsible for the creation of

sustainable competitive advantage. Unfortunately Barney’s analysis

suggests that types of culture that give sustained advantage tend to

be inimitable, suggesting that this is an area of analysis which

might not provide easy lessons for managers to adopt. Humanistic

management would tend to encourage ethical behaviours in management

12

in order to improve performance, and these can be translated into

certain ethical ‘values’ that may form part of the organizational

culture. Attempts have been made to group some characteristics

together, such as measures of ‘Organizational Citizenship Behavior’

or OCB (Bateman & Organ, 1983) which incorporates behaviours

including helping others, volunteering, and efficient time use. As

this both develops social capital and eases the task of co-

ordination in the firm, it has been potentially linked with higher

levels of performance (Turnipseed & Rassuli, 2005).

The concept of honesty may be translated into the practice of

openness in the organization. Argyris (1977) has examined the

responses of individuals to situations in formal hierarchical

management structures where poor outcomes have needed to be

communicated. His finding suggest that underreporting or

‘underplaying’ of bad news within the firm can be prevented when

corporate culture includes a genuine transparency, or openness to

information flows and empowerment of individuals to question

decisions or policies. The resulting ‘double loop’ learning can

create an organisation that learns from mistakes and is more likely

to anticipate and react to problems. Openness and transparency may

act as checks on attempts to bypass due process. In addition the

transparency may constitute a source of increased information to

internal decision makers, increasing the quality of consultation.

13

Loyalty and a sense of community may also be associated with

improved performance. Ouchi (1981) has suggested that firms can

create long term benefits by recognising the community of the

company and encouraging pursuit of their company strategy, balanced

with commitment to developing staff, and consensus based management.

Ouchi’s (1981) theory Z goes beyond recognising the individual’s

survival needs (X) and self-actualisation needs (Y) from Maslow’s

theory. Theory Z emphasises the role of relationships for the

individual and the organization. The ‘theory Z’ worker is loyal to

the company, and so is trusted by the company. Wilkins & Ouchi

(1983) state that the stability of employment is significant for the

creation of a deeper understanding between its members (p.473).

Culture is more deeply embedded by lengthier tenure of employment,

which is becoming less common in recent times.

If the creation of an ethical culture is going to be used to enhance

performance, then it should be deeply embedded across the

organization. If, however, an existing negative culture exists that

needs to be overturned it may be more difficult to affect cultural

change in the organization. In addition a cultural system that is

too rigid or too homogenous may in fact be less effective.

Takeuchi, Osono & Shimizu, (2008) review the organizational culture

of Toyota, a firm which is known to be effective in outperforming

its rivals in the automobile industry, and one whose management can

14

be loosely compared to Ouchi’s (1981) characterization of ‘theory

Z’. They find that the company has contradictions within its

corporate culture, but finds that the firm manages these well and

benefits from this lack of a fixed and agreed approach. This has

potential benefits when dealing with new situations and reduces the

creation of routine responses to problems. Boisnier and Chapman

(2002) emphasize the importance of the existence of subcultures in

‘agile’ organizations, due again to the need for conflicting

opinions or ‘contradiction’ for optimal ability to adapt to

circumstances and to push through change. Disagreement reduces the

danger of redundant routines and outmoded practices persisting when

change occurs. This fits with Argyris’ (1977) conclusion that a

degree of questioning or openness in the organization is essential

to the organization for it to react effectively to challenges.

In addition, whilst loyalty, stability and trust have been viewed

very positively by some authors, these can also have unanticipated

negative consequences. Problems of loyalty can stem from the desire

of employees to further the interests of the firm by pursuing

unethical behaviour that runs contrary to the interests of other

stakeholders. Hosmer (1987) reviews several corporate scandals that

have affected high profile corporations and points out the frequent

motivation being to improve the performance of the firm. The

resulting unethical behaviour, if discovered, is in fact likely to

15

have significant negative impacts due to loss of reputation, and so

loss of trust between the organisation and its investors and

customers. This also stresses how ethical principles must cut

across all business practices as Hosmer’s evidence indicates how the

imposition of over-ambitious targets, by creating pressure on the

individuals involved, creates unethical behaviour. The resulting

fear for their career or employment might neutralize the

individual’s moral constraints against unethical behaviour (Vitell &

Grove, 1987).

Deviance and Fraud Risks

Workplace deviance can take many different forms. Acts such as

bullying, violence, damage, theft, unnecessary use of sick leave,

lateness, and even inattention can all constitute deviance. In many

cases deviance is defined in terms of the mental state of the

perpetrator, and in particular with dissatisfied workers (Hollinger

& Clark, 1982; Analoui & Kakabadse, 1992). Rather than being a

particular type of individual or possessing a particular ethical

stance, deviant workers may be otherwise absolutely normal

employees. It is not easily possible to predict who will become

deviant or not. Individuals may simply not realise the unethical

nature of their behaviour, or may change their interpretation of

16

certain behaviours over time. In practice, there is a spectrum of

unethical work behaviour, and individuals vary enormously in their

own moral development.

Employee behaviour that is objectively viewed as deviant is often

not seen as so serious by members of organizations. Some issues may

be seen as only minor deviations from acceptable practice, but

problems arise when different people see the same act in different

ways. Marketers may mislead clients about specifications of

products or services, but members of the organization might not view

this as poor behaviour as its initial negative impact only affects

external stakeholders. Doctoring or lying about market research may

be seen as more serious, affecting as it does internal stakeholders,

and is similar to the unwillingness to communicate bad news to more

senior levels of management observed by Argyris (1977). Individuals

seem to make natural distinctions between actions inside and outside

the organization. For instance they have been shown to demonstrate

less ethical attitudes in employment than in their personal lives

(Bersoff, 1999) and seem able to maintain this distinction

indefinitely. So can members of the organization demonstrate

unethical behaviour in some circumstances without destroying the

ethical climate? It appears unlikely, and research has focussed in

particular on the need for senior management to constantly maintain

and emphasise an ethical stance in order to encourage ethical

17

behaviour amongst employees (COSO, 1992; Schwartz, Dunfee & Kline,

2005).

Deviance is also expensive. Gee, Button and Brooks (2009) make an

estimate based on global evidence that suggests the typical firm

will lose more than 3% of its revenue to fraud, with losses going up

to a potential 9% in many cases. American data from the ACFE (2010)

suggests an even higher average loss of 5%. They point out that, if

this is representative, this would suggest global losses from fraud

at $2.9 trillion in 2009. If the financial impact of actions to

deal with discovered cases of fraud and resulting loss of reputation

are taken into account, these figures are in fact relatively

conservative. Fraud entails a high risk of reputational losses to

the firm. Cloninger & Waller (2000) found that even ‘pro-firm’

fraud, intended to increase company value and shareholder wealth,

when detected causes more than proportionate losses to shareholder

wealth, impacting as it does very highly on stock market valuation

of the firm. As the potential damage to the firm is so large,

companies are increasingly putting in place tight systems of

internal control to minimise the impact of deviance within the firm

(COSO, 1992). Systems seeking to spot deviance and mitigate its

impacts are only part of the firms' control strategy. Firms also

need to examine how deviance is caused so that they can prevent it

occurring. This has led to increasing use of models of individual

18

behaviour from motivation theory and criminology in order to explain

and predict workplace deviance, as well as to show how it can be

prevented.

Models of individual behaviour suggest a small number of potential

causes of deviant behaviour. Economic models as well as early

scientific management models of motivation suggest that individuals

are motivated by simple self interest mechanisms. This has led to

models suggesting increasing compensation to workers and more

monitoring of their behaviour in order to make deviants’ job loss

both more likely and less attractive (Hollinger and Clark, 1983).

However criminology suggests that the incentives to commit fraud are

often non-financial, or only partly financial. This seems more

realistic, however, as individuals have to earn positions of trust

by consistent and good behaviour before they can be in a position to

commit a fraud and breach this trust. This suggests the dynamic

nature of the individual and their motivations. As Lewin (1943)

suggests, individual decisions are based both on personality, and on

the environment. The changing circumstances of individuals both

within the firm and within their personal lives will alter the

incentives to commit deviant acts.

More complex models have examined the role of disappointment as an

incentive for deviance. Expectancy models suggest that employees

have expectations about how they should be treated by the firm. If

19

their actual treatment does not meet their expectations, they may

use deviance to balance their treatment. This may lead to employees

reducing effort or stealing to improve their utility (Vroom &

MacCrimmon, 1968; Vroom & Yetton, 1973; Hollinger & Clark, 1982).

Expectancy models also provide some explanation of rule-following

behaviour which Tyler (2006) and Tyler and de Kremer (2009) suggest

depends on the individual's perception of the fairness and

legitimacy of the rules. As Fasin (2005) states, there are ‘three

major dimensions that may lead individuals to unethical conduct:

first, greed … secondly, the nature of competition … and thirdly the

need to insure or restore some standard of justice that may have

been violated.’ (p.271)

Cressey’s (1953) research into embezzlers revealed the use of

rationalising arguments in order to justify their criminal acts to

themselves. This suggests that deviant individuals are ethically

aware, but that they interpret facts from their situation to

downplay the unethical nature of their behaviour. The use of

ethical neutralisations may account for many cases of deviance

(Sykes & Matza, 1957). Tenbrunsel & Messick (2004) shows how

individuals can consciously or subconsciously ‘fade out’ the ethical

implications of their decision. In particular ‘ethical fading’ may

occur because all members of an organization, or possibly certain

sub-groups, may frame their decisions in a way that denies their

20

ethical nature, and instead framing the decisions as only being

business, economic, personal or legal decisions. A culture of

unethical behaviour can also determine the criminal behaviour of

individuals. Cressey and Sutherland (Sutherland, Cressey &

Luckenbill, 1992) have examine how 'differential association' of

individuals raised in communities with a lower regard for the law is

associated with higher rates of criminal deviance. Communities that

have low regard for the law may use learnt scripts that justify

their unethical behaviour to rationalize or morally neutralize the

act. Hosmer (1987) has discussed how organizational cultures can

contain similar ‘scripts’ that may act as rationalizations to

individuals, and the use of ‘fairness’ arguments analysed in

expectancy theory again seems to reflect this phenomenon.

Operational Risk Management for Deviance and Fraud

Risk management is the systematic analysis of risks, their potential

impacts, and their potential solutions. Crouhy, Galai & Mark (2006)

explain that risk management is ‘to identify risk, to measure it, to

appreciate its consequences, and then to take action accordingly,

such as transferring or mitigating the risk.’ (p.1) This does not

mean that a successful firm is one that completely eliminates risk.

Business assets possess two fundamental characteristics, their

21

potential to create returns for the firm, and the probability or

variability of these returns, which constitutes their ‘risk’. As

assets with higher returns typically have higher levels of risk

attached, firms must decide what level of risk they are willing to

accept in order to get the associated return. Obviously this choice

of ‘risk tolerance’ informs the firm’s risk management in its

analysis of which activities to pursue and how, or whether, the firm

should attempt to mitigate the risks associated them. Competent

risk management is essential to accurately evaluate the level of

risk actually being taken, and the methods of risk mitigation being

used, so that firms do not inadvertently expose themselves to more

danger than intended.

The level of risk of a business is typically dealt with by

estimating the total ‘expected losses’ of the business. The

probability of a ‘risk’ (a particular negative outcome) occurring

may vary, as may the loss predicted if that risk does occur. Firms

use the probability of loss and loss amount prediction to form an

‘expected loss’ from each risk. Unfortunately some risks that

appear relatively safe, in fact turn out to be catastrophic, or so

interconnected with other risks that the ‘systemic risk’ following

certain events is catastrophic. This was evident in the series of

high profile failures following the financial market crises in 2007

and 2008. Due to the very public failures of financial

22

institutions, their significance for the wider economy, and the

demands of regulators that they make efforts to deal with risks

within the financial institutions, financial risk is often the type

that dominates discussion. As the description of ‘systemic risk’

suggests, however, risk management needs to deal with the full range

of areas of the organization that can be subject to costly risks,

and to consider whether these may be interrelated.

Basic distinctions exist between internal and external sources of

risk, and between strategic, financial and operational risks (IRM

AIRMIC 2002 and 2010). Some types of risk are more difficult to

assess than others. Certain types of risk are uncertain in their

impact, others in their likelihood. Those elements of risk that

depend on human behaviour are the most fundamentally difficult to

deal with in practice, although this aspect may be neglected in

theory. One category of risk management, operational risk

management, relates to the processes within the business, and so

involves significant estimation of ‘human’ risks to the business.

Employees may have widely heterogeneous characteristics across the

organization, and do not only differ from each other, but may vary

in their contribution to the firm over time, for example due to the

accumulation of firm-specific human capital, but also due to the

varying levels of attention or distraction and motivation. Each

individual’s circumstances outside the organization can directly

23

impact on their productivity within it, making the task of risk

managers to accurately map the risks of employee behaviour, almost

impossible. Recent developments in risk management have also

focussed on movement from ‘segregated’ treatment of risk management

in each of its separate areas (AIRMIC, 2002) to the integration of

the different areas of risk management (COSO, 2004; AIRMIC, 2010).

Risk managers’ views of operational risk in particular need to be

extended both to appreciate the subtleties of the problems with the

organization, and identify their causes, as well as to appreciate

the complexity of many risks which depend on multiple factors across

the different categories of traditional risk management. Problems

stemming from the failures of risk management in various enterprises

such as Parmalat and Enron, as well as the neglect of 'interactions'

between types of risk and complex risks during the collapse of

financial institutions such as Lehmans and AIG have revealed the

dangers of looking at risk piecemeal. This focus on integrated or

enterprise risk management is consistent with the view that

operational risks such as fraud should be viewed as cross-cutting

issues for the firm.

Operational risk is often relatively neglected in firms, despite the

cost of failures of management (Towers Perrin, 2008). Organizational

risk management deals with risks of expropriation loss, reputation

and its negative impact on business turnover and company value, and

24

disruption to business, all of which may result from deviance on the

part of employees. As ‘corruption’ is a common cause of

reputational loss (Ernst & Young, 2008), and fraud estimated to cost

US businesses alone somewhere in excess of $600million per annum

with global estimates of up to $2.9 trillion (Fitzsimons, 2007;

ACFE, 2010) or £2.2 trillion losses per annum to fraud (Gee, Button

& Brooks, 2011), these would appear to be areas of operational risk

that demand attention. Enterprises, however, have great difficulty

in effectively dealing with such issues. The analysis in this

chapter suggests that humanistic management is an important element

in addressing operational risk, and the risk of fraud in particular.

Fraud Risk Mitigation

Crouhy et al. (2006) describe companies’ risk mitigation strategy as

a choice of whether to avoid, transfer, mitigate, or keep a

particular risk (p.2), which is often described as the ‘TARA’ risk

choice (Transfer, Avoid, Reduce, or Accept the risk). As discussed

above operational risk, and in particular the risk of deviance, is

very difficult to quantify. The potential multiple impacts from a

corrupt or fraudulent act depend on whether or not the act has

purely internal economic impacts, or becomes public knowledge and so

damages firm reputation (Roberts & Dowling, 2002). In such a case

25

public reaction to possible unethical practices is very difficult to

estimate, but would introduce an additional layer of economic losses

from the act. This complexity makes the evaluation of risk prior to

the consideration of appropriate mitigation, very difficult. In

addition, the mitigation options are not as flexible in the case of

operational risks when compared to some other risks. Whilst

financial and economic risks are the subject of significant ‘markets

for risk’ that exist outside the organization, and in which many

financial institutions are frequently involved buying or selling

risks, transfer of operational risk is more difficult, and

acceptance or inadequate attempts to mitigate may have equally

catastrophic impacts as discussed above.

Whilst the reputational risk of deviance can significantly damage

the value of the firm, the impact of financial deviance, such as

fraud or corruption, is of particular relevance to investors who

ultimately determine the value of the firm, and who normally accept

the firm’s financial statements ‘in good faith’. For firms in

regulated markets or sectors, the additional risk of regulatory

penalties or prohibitions on certain types of business may further

increase this impact (EIU, 2005). Just as workplace deviance is

motivated in many cases by the firm failing to meet the expectations

of its employees, external stakeholders will also react negatively

if the conduct of the firm does not meet their implicit

26

expectations. As a result, reputational risk, regulatory risk and

human capital risk are considered the most significant risks

threatening modern organizations (EIU, 2005, p.5). They are also of

increasing importance as ‘Fully 84% of respondents [to the survey of

senior risk managers] felt that risks to their company’s reputation

had increased significantly over the past five years.’ (EIU, 2005,

p.2)

Risk mitigation strategies that may address the risk of deviance and

particularly fraud for the firm are unfortunately difficult to

distinguish based on the literature on deviance, due to the

contradictions between some of the different explanations for

deviance. In practice, a small number of elements are identified by

risk managers and consultants. These may be generally divided into

cultural approaches and ‘internal controls’. As discussed above,

the ethical climate or culture of the organization is significant in

the decision making process, and constitutes part of the decision-

maker’s ‘environment’. An ethical climate may act to reduce

deviance, and so should be actively encouraged. Ethical education

programmes may be used to address this with employees and try to

change attitudes. These may be viewed negatively by employees, as

the need for education programmes suggests that management perceive

employees as unethical. However, if organizational culture evolves

in response to challenges (Schein, 1985), ethical education

27

programmes may, by raising awareness of the negative consequences of

unethical behaviour, force conscious consideration and solution of

problems that would otherwise have only been dealt with more slowly

by ‘reactive evolution’.

In addition, individuals’ ethical preferences are not always static

over time, and a high ethical climate may reduce employees’

tolerance of unethical acts. Gorta (1998) has examined how

introducing ethical scripts into organizations also reduces the

ability of individuals to easily ‘neutralise’ unethical acts, and so

can act to deter damaging acts of deviance. In this way education

programmes may be effective in generally reducing unethical

attitudes (PWC, 2007, p.21). Evidence to date suggests that many

firms with ‘ethics policies’ do not provide any training to support

these, however, so this approach is currently under-exploited (PWC,

2007, p.11). The dynamic nature of individuals’ ethical

preferences, and the impact of ethical climate on these preferences,

may explain the tendency for reported fraud incidents to weaken

morale, and also increase tendencies to fraud in the organization

(PWC, 2009).

Some aspects of the organization and its culture seem inherent and

cannot be changed, despite their relationship to fraud risk. For

instance as ‘accounting manipulations are most common within listed

organizations and least common in family-owned organizations’ (PWC,

28

2009, p.7) then company structure may be seen as a possible fraud

factor. It is likely, however, that this observation reflects two

aspects of deviance. Firstly, family-owned organizations will

possibly have an identity that influences organizational culture and

its operation, and particularly the engagement of the workers with

the firm and its owners which does predict the likelihood of

deviance (Hollinger, 1986). In addition the clear identification of

a small group of owners rather than a larger and more anonymous

group of shareholders may make it much more difficult to rationalise

damaging behaviour, and so neutralise the moral significance of

deviance. Whilst family ownership may encourage individuals to

identify more strongly with the firm, the distance of individuals

from their senior managers may well reduce it. The behaviour of

senior managers is particularly important for ethical culture (PWC,

2007, p.22; PWC, 2009, p.13). Visibility of ethical behaviour from

management or ‘tone at the top’ may be a direct or indirect

determinant of unethical behaviour by employees as ‘senior

executives who appear unconcerned about fraud within their

organization may – through lack of attention and focus – unwittingly

foster environments where certain types of fraud are perceived to be

permissible.’ (PWC, 2009, p.13)

It is important that management do not forget the other parts of the

firm: ‘Organizations with anti-fraud policies are communicating

29

them to their own employees, but primarily in their home markets,

with less attention to management and staff in emerging markets.’

(Ernst & Young, 2006, p.14) An additional risk exists for firms

whose global operations rely on engaging agents in some countries to

facilitate their business, or those firms involved in joint

ventures. These stakeholders are least likely to be informed of

firms’ anti-fraud stance, but constitute some of the highest risks

of fraud and reputational damage (Ernst & Young, 2006, p.14).

Whilst firms do make attempts to communicate their attitude to

fraud, nearly three quarters of firms appear to provide no training

to employees on their ethical policies and very few consider

training their external agents (Ernst & Young, 2006, p.15). This

may reflect a willingness to tolerate unethical behaviour by others

and a refusal to accept responsibility for the actions of

‘independent’ agents: this is not in keeping with either the legal

treatment of bribery and corrupt acts, or with the opinion of the

public which impacts directly on the performance of the firm. It

also undermines the ethical credibility of the management of the

firm internally, and so is very damaging to ethical climate.

Just as ethics programmes may increase employees awareness of the

damage of unethical acts, and make these harder to neutralise, the

level of fairness or unfairness inside the organization may

determine the level of genuine grievances that employees might also

30

use to neutralise the unethical nature of their behaviour.

Expectancy theories show how individuals have a tendency to ‘level

up’ poor treatment from an employee by reducing commitment or

otherwise reducing their standards of performance or behaviour from

the level expected by the firm. Appropriate compensation,

promotion, budgeting, target setting and decision making may help to

prevent grievances that might otherwise have otherwise enabled

employees to ‘live with’ deviant behaviour. The ‘legitimacy’ of the

management of the firm is likely to encourage rule-following

behaviour, and this can be enhanced by the creation of a ‘procedurally

just workplace that encourage ethical values and rule-following

behavior’ (Tyler & De Cremer, 2009, p.227).

The recent economic volatility has also increased the need to deal

fairly with individuals in terms of the demands of the employer on

the employee. Some authors such as Argyris (1977) suggest that

employees should be able to question all aspects of the firm, and

this includes targets and budgets for business units and

individuals. Failure to consult on this may create ‘aspirational’

targets that may push economies as hard as possible, but research

indicates this is counterproductive in respect of economic crime.

Amongst other perceived causes of workplace fraud are ‘‘financial targets

being more difficult to achieve’ (47%), and ‘senior management wanting to report a

desired level of financial performance’ (25%).’ (PWC, 2009, p.7) This

31

suggests that employees behave more fairly towards the company when

it deals fairly with them.

If ethical behaviour and ethical climate is essential to the control

or unethical and fraudulent behaviour within the organization, the

firm may sometimes be forced to make painful decisions that are very

costly in the short run, in order to preserve the long-term benefits

of ethical culture. The firm must be consistent in its efforts to

support ethical decision making. ‘A company suddenly facing the

financial and reputation risks associated with an allegation of

corruption may be tempted to keep its investigation as low-key as

possible. But that approach carries its own risks, because an

investigation sends a strong signal about management’s integrity’

(Ernst & Young, 2008, p.11) It is important for management to act

in a way that reinforces its ethical reputation, so it is essential

that the penalties applied to perpetrators of fraud or economic

crime are applied equally, regardless of their position in the

organization (PWC, 2007, p.20), as failure to do so would again

undermine the culture of the business and create potential

rationalization of economic crimes against the firm. The attitude

and behaviour of senior management towards the ethical and control

policies is of obvious importance for their successful

implementation. Ouchi & Wilkins (1985, p.477) suggest that

executives communicate culture, and changes in culture, by asking

32

questions, by the matters they spend their time on, and how they

interpret events. They can also affect the overall culture by their

communication of the organization’s role, as well as directly

through the process of hiring, firing and promotion. Cultural

change towards more humanistic values can be achieved by

‘confrontation, honesty, open communications, the movement toward

power equalization, and collaboration’ (Cobb Margulies 1981 p.51),

and these appear to be equally likely to prevent workplace deviance

and reduce the costs of economic crime to the firm.

Hollinger & Clark (1983) have suggested that monitoring should deter

deviance in the workplace. The increase in perceived risk of being

caught, when working under a strict monitoring system, seems

significant in deterring such behaviour, suggesting that control and

monitoring systems should be a focus of anti-fraud policies.

Studies suggest that this is one of the factors which, in

combination, determine rule-following behaviour: ’compliance … was

shaped by risk of detection; legitimacy of legal authority; and the

morality of the law’ (Tyler & De Cremer, 2009, p.222). COSO (1994),

which established many of the principles that are used in modern

risk management, made particular emphasis on the need to ensure that

effective internal controls were introduced to identify and

discourage deviance within the firm and reduce the consequent

operational risk impacts. The introduction of a compliance

33

programme (including clear procedures for dealing with situations of

ethical conflict) depends on it being well known to all members of

the organization, otherwise it cannot possibly be applied. Firms,

however, may not see any immediate benefits from their compliance

programmes. This may be because they conflict with the culture that

the organization is trying to encourage, however, so that the

overall impact of this policy may be negative. Fraud control

systems are essential but ‘can only go so far before they become

complex and unwieldy – and, importantly, before they create an

atmosphere of distrust’ (PWC, 2005, p.15). As a result of this,

companies reporting a control culture are significantly more likely

to be victims of fraud than companies that report a trust culture.

Those companies that do implement both ethics training and

compliance programmes seem to be significantly less affected by

economic crimes (PWC, 2007, p.21), suggesting that they need to be

introduced with a clear indication of their purpose for the firm,

and connecting them to the risks of fraud for the firm and the

importance of ethical behaviour. In particular, anti-fraud

programmes depend on the willingness of employees to monitor each

other through ‘whistleblower’ programmes. These require acceptance

from members of the firm in order for individuals to be motivated to

use them to report unethical behaviour, and for those who do blow

the whistle to be appropriately treated afterwards (Tompkins & Hays,

34

1989; Brown, 2008). Education appears to be an important support to

the successful creation of such programmes.

Conclusion

Whilst humanistic management implies that ethical behaviour should

be an objective of every business, it appears likely that humanistic

practices have definite benefits for the performance of the firm in

its control of risks, and risk management practice appears to

reflect this. The response of firms and professional bodies to risk

has changed significantly in recent years, progressing from a focus

on specific risks in the firm (AIRMIC, ALARM & IRM, 2002), to a

broader focus covering systemic or ‘holistic’ risk (AIRMIC, ALARM &

IRM, 2010) referred to as ‘enterprise risk management’. Enterprise

risk management concentrates on the control or avoidance of risks to

the overall business. This involves ensuring that a culture exists

which encourages transparency, enables individuals to raise problems

as they are identified, and encourages learning - sometimes from

mistakes, sometimes from successes (Institution of Civil Engineers

and Faculty and Institute of Actuaries, 2009, p.22). This

‘transparency’ approach seems to fit with Drucker’s approach to

management by creating a pattern of behaviour that is honest and as

such is sufficiently informed to engineer appropriate change in the

35

organization as challenges arise. This is of particular

significance in times of economic volatility where threats to a

global business can change in nature, and in magnitude, very

rapidly. The nature of the modern firm and its environment appears

to increase the risks of fraud. This is in part because of the

reduced employment tenure and increase of temporary employment that

may restrict the depth of organizational culture, and may reduce

individuals’ engagement with the firm. This may however facilitate

cultural change as entrenched practices and attitudes are not as

likely to have developed. In addition increased economic

uncertainty, both in terms of personal employment and also the

competitive environment of the organization, is likely to increase

pressure on decision makers and so increase the risk of fraud due to

individual pressure on those at all levels of the firm.

From the above it seems obvious that prudent risk management demands

that the risk of fraud is a central concern of operational risk

management. The organization needs robust procedures to prevent and

detect fraud, but this in turn depends upon the organization’s

culture. Culture must encourage the rigorous application of fraud

prevention procedures, as organizational cultures vary widely in the

extent to which they encourage adherence to rules. In addition, the

organizational culture can actively promote ethical behaviour, and

create a fair environment that is less likely to create grievances

36

that might be used to morally neutralise the deviant behaviour of

employees. In this way, organizational culture fundamentally

changes the ‘calculus of fraud’.

Some assumptions about the characteristics of a ‘good’

organizational culture appear to be inappropriate in relation to the

control of fraud. Trust within the firm may provide benefits in

terms of work satisfaction, but may inhibit measures such as

whistleblower programmes, as trust increases the presumption that

others will act ethically. Ethics must be a core value to the firm,

whilst other values may be more peripheral and may vary between the

firm’s sub cultures. Ethical behaviour must be embedded at all

levels of the firm, not simply bolted on to its official policies

for expediency. Whilst a variety of cultures may in fact be a

positive influence, created as they are out of reactions to

challenges such as external problems with the firm, all sub-cultures

must be fundamentally ethical. The discussion above suggests that

firms should address the significant risks of fraud by means of

ethics training programmes, fairness, and monitoring, which should

(in combination) reinforce each other and establish an ethical

organizational culture. This is reflected in evidence from risk

managers that suggests their major concerns relate to ‘strong

internal controls, anti-fraud policies, the importance of

communications and training, the risks from third-party

37

relationships.’ (Ernst & Young, 2006, p.25) Humanistic management

seems to be an essential part of the strategy to address these

concerns.

References

AIRMIC, ALARM & IRM (2010) A Structured Approach to Enterprise Risk Management

(ERM) and the requirements of ISO 31000. (London: Institute of Risk

Management) Available at

http://www.theirm.org/documents/SARM_FINAL.pdf accessed 20th

November 2011.

AIRMIC, ALARM, & IRM (2002) A Risk Management Standard. (London:

Institute of Risk Management) Available at:

http://www.theirm.org/publications/documents/Risk_Management_S

tandard_030820.pdf accessed 20th November 2011.

Analoui, F. and A. Kakabadse (1992) ‘Unconventional Practices at

Work: Insight and Analysis Through Participant Observation,’

Journal of Managerial Psychology. Vol.7, pp.1-31.

Argyris, C. (1977) ‘Double loop learning in organizations,’ Harvard

Business Review. (Sept/Oct 1977) pp.115-125.

Ashforth, B.E. & Anand, V. (2003) ‘The normalization of corruption

in organizations,’ Research in Organizational Behavior. Vol.25, pp.1-

52.

38

Association of Certified Fraud Examiners (ACFE) (2010) Report to the

Nations on Occupational Fraud and Abuse. (Austin: Association of

Certified Fraud Examiners)

Barney, J.B. (1986) Organizational culture: Can it be a source of

sustained competitive advantage?’ Academy of Management Review.

Vol.11, no.3, pp.656-665.

Bateman, T.S. & Organ, D.W. (1983) ‘Job satisfaction and the good

soldier: the relationship between affect and citizenship,’

Academy of Management Journal. Vol.26, pp.587-595.

Berggren, E. & Bernshteyn, R. (2007) ‘Organizational transparency

drives company performance,’ Journal of Management Development.

Vol.26, no.5, pp.411-417.

Bersoff, D. M. (1999) ‘Why Good People Sometimes do Bad Things:

Motivated Reasoning and Unethical Behavior,’ Personality & Social

Psychology Bulletin. Vol.25, no.1, pp.28–39. Cited in Tsahuridu

(2006) p.163

Brenner, S. N.,& Molander, E.A. (1977) ‘Is the ethics of business

changing?’ Harvard Business Review, Vol.55, no.1, pp.57–71.

Brown, A. J. (ed) (2008) Whistleblowing in the Australian Public Sector:

Enhancing the theory and practice of internal witness management in public sector

organisations. (Canberra: Australian National University E

Press)

39

Bussmann, K-D. & Werle, M. (2006) ‘Addressing crime in companies,’

British Journal of Criminology. Vol.46, pp.1128-44.

Cloninger, D. O. & Waller, E.R. (2000) ‘Corporate fraud, systematic

risk and shareholder enrichment,’ Journal of Socio-Economics.

Vol.29, pp.189-201.

Coase, R.H. (1937) ‘The nature of the firm,’ Economica. (New Series)

Vol.4, no.16, pp.386-405.

Cobb, A.T. and Margulies, N. (1981) ‘Organization development: A

political perspective,’ Academy of Management Review. Vol.6,

no.1, pp.49-59.

Committee of Sponsoring Organizations of the Treadway Commission

(COSO). 1992. Executive summary: Internal control: Integrated framework.

(New York: AICPA) Available at:

http://www.coso.org/documents/Internal%20Control-Integrated

%20Framework.pdf accessed 18th March 2012.

Committee of Sponsoring Organizations of the Treadway Commission

(COSO) (2004) Enterprise Risk Management – Integrated Framework: Executive

Summary. (New York: AICPA) Available at:

http://www.coso.org/documents/coso_erm_executivesummary.pdf

accessed 18th March 2012.

Cressey, Donald R. (1953) Other People’s Money: a study in the social psychology of

embezzlement. (Glencoe: Free Press)

40

Crouhy, M., Galai, D. & Mark, R. (2006) The Essentials of Risk Management.

(New York: McGraw-Hill)

Dalton, M (1992) ‘Men who manage,’ ch.13 in Granovetter, M., &

Swedberg, R. (eds.) The Sociology of Economic Life. (Westview)

pp.315-344.

De Cremer, D. (ed.) (2009) Psychological Perspectives on Ethical Behavior and

Decision Making. (Charlotte: Information Age Publishing)

Drucker, P.F. (1990) The New Realities. (London: Mandarin) cited in

Melé, D. (2009).

EIU (2005) ‘Reputation: risk of risks.’ (London: Economist

Intelligence Unit)

EIU (2009) ‘Managing risk in perilous times: practical steps to

accelerate recovery’ (London: Economist Intelligence Unit)

Available at: http://www.eiu.com/site_info.asp?

info_name=eiu_Global_Risk_Briefing&page=noads&rf=0 accessed

20th November 2011

Ernst & Young (2008) Corruption or compliance: weighing the costs. 10th

Global Fraud Survey (NY: Ernst & Young)

Fassin, Y. (2005) ‘The reasons behind non-ethical behaviour in

business and entrepreneurship,’ Journal of Business Ethics. Vol.60,

pp.265–279.

41

Fitzsimons, V. G. (2006) ‘Information Society: Networks, collective

action and the role of institutions,’ International Journal of the

Humanities. Vol.3, no.6, pp.19-32

Fitzsimons, V. G. (2007) ‘Economic models of corruption’ Chapter

3: in Bracking, S (ed.) Corruption and Development: the anti-corruption

campaigns. (London: Palgrave)

Forde, C., & Slater, G. (2001) ‘Just a Temporary Phenomenon: The

Rise and Fall of Temporary Work,’ Paper presented at the Eastern

Economic Association Conference, Manhattan, New York, 23rd –25th

February.

Gee, J., Button, M., & Brooks, G. (2011) ‘The Financial Cost of

Fraud: what data from around the world shows.’ (London:

PKF) available at

http://www.pkf.co.uk/web/pkf.nsf/0/F459DDCCE5269C818025792D002

A830E/$FILE/The%20Financial%20Cost%20of%20Fraud_WEB.pdf

accessed 20/11/11

Gorta, A. (1998) ‘Minimising corruption: applying lessons from the

crime prevention literature,’ Crime, Law and Social Change. Vol.30,

pp.67-87.

Hofstede, G. (1994) Cultures and Organizations. (London: Harper Collins

Business)

Hollinger, R.C. (1986) ‘Acts against the workplace: social bonding

and employee deviance,’ Deviant Behavior. Vol.7, no.1, pp.53-75.

42

Hollinger, R. & Clark, J. (1982) ‘Employee Deviance: A response to

perceived quality of the work experience,’ Work and Occupations.

Vol.9, no.1, pp.97-114.

Hollinger, R.C., Clark, J.P. (1983) ‘Deterrence in the workplace:

Perceived certainty, perceived severity and employee theft,’

Social Forces. Vol.62, no.2, pp.398-418.

Hosmer, L. T. (1987) ‘The institutionalization of unethical

behaviour,’ Journal of Business Ethics. Vol.6, no.6, pp.439-447.

Institution of Civil Engineers and Faculty and Institute of

Actuaries (2009) ‘ERM – a guide to implementation.’

Discussion paper. Available at:

http://www.actuaries.org.uk/sites/all/files/documents/pdf/ERMG

uideJuly09.pdf accessed 20th November 2011.

Jos, P.H., Tompkins, M.E. & Hays S.W. (1989) ‘In praise of difficult

people: A portrait of the committed whistleblower,’ Public

Administration Review. Vol.49, no.6, pp.552-561.

Lee, K. & Allen, N.J. (2002) ‘Organizational citizenship behavior

and workplace deviance: The role of affect and cognitions,’

Journal of Applied Psychology. Vol.87, no.1, pp.131-142.

Lewin, K. (1943) ‘Defining the "Field at a Given Time",’ Psychological

Review. Vol.50, pp.292-310.

Litzky, B.E., Eddleston, K.A., & Kidder, D.L. (2006) ‘The good, the

bad, and the misguided: how managers inadvertently encourage

43

deviant behaviours,’ Academy of Management Perspectives. Vol.20

(February 2006) pp.91-103.

Margulies, N. and Raia, A.P. (1972) Organizational development: Values,

process, and technology. (London: McGraw-Hill)

Maslow, A.H. (1943) ‘A theory of human motivation,’ Psychological

Review. Vol.50, pp.370-396.

Maslow, A.H. (1954) Motivation and personality. New York: Harper

and Row

Melé, D. (2009) ‘Editorial introduction: towards a more humanistic

management,’ Journal of Business Ethics. Vol. 88, pp.413-416.

Neuberger, E. (1994) ‘Classifying economic systems’ in Bornstein, M

(ed) Comparative Economics Systems: Studies and Cases. (7th ed.,

Homewood Ill: Irwin) pp.19-27.

North, D.C. (1990) Institutions, Institutional Change and Economic Performance.

(Cambridge: Cambridge University Press)

Ouchi, W.G. (1981) Theory Z: How American business can meet the Japanese

challenge. (Boston: Addison Wesley)

Ouchi, W.G. & Wilkins, A.L. (1985) ‘Organizational culture,’ Annual

Review of Sociology. Vol.11, pp.457-483.

Pettigrew, A.M. (1979) ‘On studying organizational cultures,’

Adminstrative Science Quarterly. Vol.25, pp.570-581.

44

Price Waterhouse Coopers (PWC) (2005) Global Economic Crime Survey 2005.

(NY: Price Waterhouse Coopers / Martin-Luther University

Economy and Crime Research Center)

Price Waterhouse Coopers (PWC) (2007) Economic Crime: culture and controls.

The 4th Biennial Global Economic Crime Survey. (NY: Price Waterhouse

Coopers/ Martin-Luther University Economy and Crime Research

Center)

Price Waterhouse Coopers (PWC) (2009) The Global Economic Crime Survey:

Economic crime in a downturn. (NY: Price Waterhouse Coopers)

Roberts, P.W., & Dowling, G.R. (2002) ‘Corporate reputation and

sustained superior financial performance,’ Strategic Management

Journal. Vol.23, pp.1077-1093.

Rose, C. & Thomsen, S. (2004) ‘The impact of Corporate Reputation on

performance Some Danish evidence,’ European Management Journal.

Vol.22, no.2, pp.201-210.

Schein, E.H. (1983) ‘The Role of the founder in creating

organizational culture,’ Organizational Dynamics. Vol. 12, no.1,

pp. 13-28. Available at SSRN: http://ssrn.com/abstract=1505254

Schein, E.H. (1985) Organizational Culture and Leadership: A

dynamic view. (San Francisco: Jossey-Bass)

Schwartz M.S., Dunfee, T.W., & Kline, T.W. (2005) ‘Tone at the top:

an ethics code for directors?,’ Journal of Business Ethics. Vol.58,

pp.79-100

45

Smith, V. & Neuwirth, E.B. (2008) The Good Temp. (Ithaca: Cornell

University Press)

Sutherland, E.H., Cressey, D.R. & Luckenbill, D.F. (1992) Principles of

Criminology. (NY: General Hall Inc.)

Sykes, G.M. & Matza, D. (1957) ‘Techniques of Neutralization: A

theory of delinquency,’ American Sociological Review. Vol.22, no.6,

pp.664-670.

Takeuchi, H., Osono, E., & Shimizu, N. (2008) ‘Contradictions that

drive Toyota’s success,’ Harvard Business Review. Vol.86 (June)

pp.96-108.

Tenbrunsel, A. E. & Messick, D. M. (2004) ‘Ethical fading: The role

of self deception in unethical behavior,’ Social Justice Research.

Vol.17, no.2, pp.223-236.

Tsahuridu, E.E. (2006) ‘Anomie and ethics at work,’ Journal of Business

Ethics. Vol.69, pp.163-174.

Turnipseed, D.L. & Rassuli, A. (2005) ‘Performance perceptions of

Organizational Citizenship Behavior at work: a bi-level study

among managers and employees,’ British Journal of Management. Vol.16,

pp.231-244.

Tyler, T. R. (2006) Why people obey the law. (Princeton: Princeton

University Press)

Tyler, T.R. & De Cremer, D. (2009) ‘Ethics and rule adherence in

groups,’ pp.215-232 in De Cremer (ed.) (2009)

46

Tylor , E.B. (1871) Primitive Culture (vol.1) (London: John Murray)

Vardi, Y., & Wiener, Y. (1996) ‘Misbehavior in organizations: a

motivational framework,’ Organization Science. Vol.7, no.2,

pp.151-165

Vitell, S. J. & Grove, S. J. (1987) ‘Marketing ethics and the

techniques of neutralization,’ Journal of Business Ethics. Vol.6,

no.6, pp.433-438.

Vroom, V.H., & MacCrimmon, K.R. (1968) ‘Towards a stochastic model

of managerial careers,’ Administrative Science Quarterly. Vol.13,

no.1, pp.26-46.

Vroom, V.H., & Yetton, P.W. (1973). Leadership and Decision-Making.

(Pittsburgh: University of Pittsburgh Press)

Weber, J. (2009) ‘Assessing tone at the top: the moral reasoning of

CEOs in the automobile industry,’ Journal of Business Ethics. Vol.92,

pp.167-182.

Wilkins, A.L. & Ouchi, W.G. (1983) ‘Efficient cultures: exploring

the relationship between culture and organizational

performance,’ Administrative Science Quarterly. Vol.28, No.3, pp.

468-481

Wines, W.A. & Hamilton, J.B. (2008) On changing organizational

cultures by injecting new ideologies The power of stories,’

Journal of Business Ethics. Vol.89, pp.433-447.

47

World Trade Organization (2011) International Trade Statistics 2011.

(Geneva: World Trade Organization)

48