Under Pressure: Culture and Structure as Antecedents of Organizational Misconduct

Does a toxic organizational culture focused on performance lead to misconduct? We build on Merton’s strain theory and theorize the relationship between organizational culture, structure, and misconduct to address this question. We first theorize that organizations with cultures characterized by performance pressure are more likely to engage in misconduct. Then we consider how organizational structure moderates this relationship, which we hypothesize is weaker in more formalized organizations and stronger in more decentralized organizations. To test these hypotheses, we analyzed the regulatory and law violations of 925 publicly traded firms in the United States and measured organizational culture and structure through a natural language processing (NLP) analysis of the firms’ employee reviews on Glassdoor. The empirical results lend support to our hypotheses. Organizations with performance pressure pay more in fines for misconduct. The moderation effect of organizational structure is fully supported for decentralization but only partially supported for formalization. Introduction Virtually every analysis of corporate misconduct in the last two decades, including Enron (Kuliks, 2005; Sims & Brinkma)
Keywords: Organizational misconduct; Organizational Culture; Goal Setting; Organizational Structure

Co-authors:

• Andrea Cavicchini (acavicchini [at] iese.edu)- IESE Business School
• Samspa Samila (ssamila [at] iese.edu) - IESE Business School