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Corruption in organizations and markets

In my seminar on Corruption and Integrity last evening, I highlighted the distinction between two forms of organizational corruption: an organization of corrupt individuals (OCI) and a corrupt organization (CO). Based on a 2008 article in the Academy of Management Review,* the distinction is really a simple but fascinating one that stresses whether collusive corruption within an organization is designed to benefit individuals or the collective body.

Immediately, the discussion turned to Congress and the current regime of campaign financing that has drawn so much attention in recent months. We have been focused on Congress for several weeks, and especially Lawrence Lessig’s argument about systemic corruption in the Republic Lost and his TED presentations on that topic. (Lessig was kind enough to offer an extended version of his argument at a lecture on the University of New Hampshire campus on March 31.) Putting aside for the moment Chief Justice John Roberts’ somewhat narrow version of corruption (i.e. as quid pro quo bribery), the question raised by the distinction is whether Congress is an organization of corrupt individuals or a corrupt organization. To say the least, an interesting question…

The distinction might also help us understand another interesting case making headlines. As more information emerges about the case of General Motors and decisions surrounding the faulty ignition switches in Chevrolet Cobalts, one has to wonder whether we are looking at an OCI or CO.

This morning I’ve been reading Michael Lewis’ Flash Boys, and it seems that the distinction can also be applied to entire markets. Accepting the premise that high-frequency trading (HFT) is a form of systemic corruption, one has to ask whether Wall Street operating under the HFT regime is a market of corrupt individuals or simply a corrupt marketplace.

Like I said, interesting.

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*Pinto, Jonathan, Carrie R. Leana and Frits K. Pil. “Corrupt Organizations or Organizations of Corrupt Individuals? Two Types of Organization-Level Corruption.” Academy of Management Review 33, no. 3 (2008): 685-709.

 

April 8th, 2014 Posted by | accountabilitybloke | no comments