How the interplay of top management with corporate and societal governance structures explains corporate wrongdoing

Corporate wrongdoing (CW) is highly relevant for management researchers and practitioners because it harms both firms and their stakeholders. CW refers to corporate behaviour that is labelled as wrongful by social-control agents, such as the state, because it is deemed to be illegal, unethical, or socially irresponsible (Greve, Palmer, & Pozner, 2010; Palmer, 2012).CW refers to a firm engaging in activities that negatively affect stakeholders and are considered a violation of ethical norms. This might include, for example, financial fraud, human rights violations, corruption, or environmental pollution. CW comes at a serious cost to all parties attached. First, it harms a firm's stakeholders. Second, though often conducted with the intention of benefitting the firm, CW can lead to a variety of negative firm outcomes, such as increased financial risk or loss of legitimacy. Third, CW can lead to serious financial and legal consequences for those individuals engaged in it. In light of these harmful consequences, the question of what determines whether a firm engages in CW is of paramount importance.
Most research on CW in the management literature focuses on the macro and meso levels, explaining CW through different influences in the firm environment (e.g., competitive dynamics) and through attributes of the firm (e.g., ownership and board composition). The micro level of analysis is still a "blind spot" of current research. As a result, most explanations of CW are universalistic regarding the role of managers: they implicitly assume that managers will react homogeneously to macro and meso influences, engaging in wrongdoing when certain conditions are present. Therefore, as of now, we know little about how the individual differences between the people at the top of the organizations influence whether firms commit CW. To address this, the project will examine the relationship between top management psychological characteristics, such as values and moral identity, and CW. In doing so, it aims to explore the microfoundations of CW, thus shifting the current conversation towards an important but neglected direction.
In my dissertation I study the overarching question of when and CW happens. Hereby, I advance the perspective of wrongdoing as a normal - instead of an abnormal - phenomenon. Most common explanations of wrongdoing focus on wrongdoing as an "abnormal" phenomenon caused by the presence of extreme factors or distorted processes (Palmer, 2012). They explain wrongdoing as a rational choice based on aberrant preferences ("bad apples") or as a result of organizational cultures contaminated by perverse norms ("bad barrels"). However, managers navigating the line between right and wrong in an organizational context face such "significant behavioural and cognitive challenges", that it is important to consider the normal side of corporate wrongdoing (Palmer, 2012, p. 8). That means studying when and how wrongdoing happens as a result of the actions of normal, boundedly rational and boundedly ethical, people embedded in common organizational structures.
Following this direction, my dissertation poses the research question of: How does corporate wrongdoing arise from the interplay of the human side of top managers with the corporate and societal governance structures that they operate in? Hereby, the human side of top managers includes personality, cognition, and the social dynamics of decision making in the upper echelons. Corporate governance structures refers to those structures that are typical in modern corporations, such as boards, compensation, and others. Societal governance structures refers to social control agents - that is, those organizations in the environment of corporations that have varying degrees of legitimacy and authority to label corporate behaviour as wrongful, such as the state, professional societies, interest groups, and the media.