You have searched the Hacked By IDBTE4M ID blog archives for 'corporate corruption'. If you are unable to find anything in these search results, you can try one of these links.

Follow me on Twitter

Blog archive

We Participate In:

You have searched the Hacked By IDBTE4M ID blog archives for 'corporate corruption'. If you are unable to find anything in these search results, you can try one of these links.

ABA Journal Blawg 100!

Subscribe to The Jury Room via Email

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

Login

Search results

corporate-fraud-250x250Recently we shared the results of a study on gender and corruption. That study showed that both genders were capable of corruption and that corrupt behavior depended upon context. Researchers at Penn State recently released a study completed in America and looking at gender and corporate crime/fraud.

If you read the title of this post, you will not be surprised to learn that men lead the charge to corporate corruption. The researchers developed a database of 83 corporate frauds which involved a total of 436 defendants. After extensive data analysis, here is what they found:

Less than 1 out of 10 defendants was female (91% were male and 9% were female).

Whenever crimes were committed by a single person, that person was a male.

Almost 3/4 of the crimes committed by groups of people involved groups entirely composed of males. (Less than 1/3 of the groups contained both men and women. There were no all female conspiracy groups.)

All male conspiracies were concentrated in professional/scientific/technical and management services (where female employment is lower) while mixed-sex conspiracies were higher in finance/insurance, real estate and healthcare. In the latter areas, women make up more than half of the employees.

Female defendants were likely “to play minor roles in schemes”.

When you are female and involved in corporate conspiracies, you tend to profit significantly less than men (or not at all). You are often included in conspiracies because you have access to funds (through your job responsibilities) or because you are dating or partnered with a primary conspirator. You may be pressured to participate by your male significant other (who is involved in or initiating the activity). Yes. Women are marginalized even when committing corporate crimes! This is the only benefit to the ‘glass ceiling’ we have yet encountered.

The researchers say that if more women were in higher positions in American corporations we might have less corporate crime. They believe women might be more ethical decision-makers, more risk-averse, and less likely to foster a “criminogenic organization”. Alternately, say the researchers, more woman “would not make any difference because of organizational inertia and because women who move up the corporate ladder will be socialized into the ethos of commercial interests and market dominance at all costs”. In other words, “leaning in” might corrupt successful women.

From a litigation advocacy perspective, there is much to help Defense attorneys mitigate blame placed on female defendants charged with corporate fraud. Women who participate in these crimes are often pressured by men leading the effort. They are often recruited due to their “utility”–they have access to funds, they sign off on the reports or accounting statements. In short, the men directing the crimes need the woman’s access to sensitive information in order to be successful. Jurors would likely understand the pressure placed on these women to participate and would also understand the idea that the women were just being used for what they could offer.

If your female defendant was not only used but offered little to no profit for her activity (as was the case with most women defendants in this study), jurors may have additional sympathy for her. Your female defendant might be seen as a pawn in a master plan, or ensnared due to being the intimate partner of a man driving the effort. It is perhaps the only time when marginalization of a woman’s role works for her (in the larger cosmic picture).

Steffensmeier, DM, Schwartz, J, & Roche, M (2013). Gender and Twenty-First-Century corporate crime: Female involvement and the gender gap in Enron-era corporate frauds. American Sociological Review. DOI: 10.1177/0003122413484150

Image

Share

i cheatI think I was in college when Barbara Mandrell came out with this song for cheaters everywhere. A few decades later, I listened to my niece talk about tools she uses to identify plagiarism in her college freshman students. So I asked my (then) high school kids about cheating. They looked at me as though I was from another planet. “Of course we cheat. Not on the important stuff, but on homework and extra credit? All the time.”

I was taken aback. I knew they believed there was too much busy work in high school assignments but I was unaware they routinely shared answers with classmates or read synopses of books online to get extra credit points for actually reading the book in high school English classes. Then, to my surprise, they began to tell stories about how various students had cheated and gotten the highest scores in the class when they had not even opened a book. There was no rancor. Instead, they laughed and began to seem elated as they described how, as a group, their respective classmates had beaten the system repeatedly.

Now they are in college. I don’t ask what is happening there. But I was intrigued by a study that just came across my desk describing “cheater’s high”. And I recalled the oddly buoyant moods of both my kids as they talked about ways to beat the (high school) system. So I read on. In short, the research predicts a buoyant rather than remorseful mood if you get away with cheating and believe no one was hurt. It’s like a victimless crime. No one gets hurt and you walk away. You feel smug, superior, and upbeat. The researcher’s named this upbeat response to getting away with cheating, the “cheater’s high”.

The researchers did multiple studies and found evidence for the cheater’s high over and over again. Those who cheated felt good. In one study, the experimenter’s asked the participants not to cheat since that would render their responses unreliable. Those who cheated anyway were more satisfied with themselves after the study than those who did not cheat. And, to underscore the point, cheaters who were given a reminder at the end of the test how important it was not to cheat said they felt better than the cheaters who were not given the reminder. Rather than the reminder serving as a cue to more ethical behavior (as in the research where the feeling someone is watching you results in better behavior), the cheating participants felt better when reminded to not do what they then went ahead and did.

As I came to the end of the article, a single sentence reminded me again of the odd giggling I observed as my kids exchanged stories about cheating exploits.

“Quite possibly, when groups of people coordinate an effort to cheat the system, it could exacerbate the cheater’s high by diffusing responsibility for negative outcomes and building a sense of camaraderie from cheating together.”

That is exactly what I saw and heard. I began to think about instances of corporate corruption and unethical behavior that have larger consequences than my kids seemed to think cheating on “busywork” in high school had. We often do pretrial research for cases involving bad behavior of corporate employees. During deliberations, mock jurors say things like “He has no remorse” or “She’s only sorry she got caught” and I wonder if what they are seeing and hearing are adult examples of cheater’s high.

While the stereotype and repeated prediction is that people will feel bad when they make unethical choices, as these authors assert, “they actually experience a boost in positive affect”. If cheating really does make you feel good–it is powerfully reinforcing. While that isn’t an excuse (and we doubt mock jurors would support that sort of defense) it does show us that common wisdom about cheating is very similar to common wisdom about sexual harassment.

When asked to consider how they would behave in a situation involving being the victim of sexual harassment, people routinely say they would report it immediately. In reality, they rarely do report the harassment.

When asked to consider how someone would feel after behaving unethically or cheating, people routinely predict negative feelings. What this research says is the opposite–if you believe no one is really hurt by the behavior, you feel giddy.

It also occurs to me that the admonitions that jurors get from judges every day (don’t discuss the case with anyone, don’t read anything, don’t do internet research) is almost an invitation to a ‘cheater’s high’. They cheat, they are proud of what they have done, and they feel better about their jury service than those who didn’t cheat? Really? Oy.

It’s a troubling idea. If behaving badly results in a cheater’s high–does it make it more likely you will repeat the same behaviors in the future given the opportunity?

Ruedy NE, Moore C, Gino F, & Schweitzer ME (2013). The cheater’s high: The unexpected affective benefits of unethical behavior. Journal of personality and social psychology, 105 (4), 531-48 PMID: 24000799

Image

Share

It isn’t just about your case…

Monday, November 8, 2010
posted by Rita Handrich

As though it were not enough to consider facts, themes, narrative, order of proof, and what to wear to court—you also need to step back (way back) and consider how current events and the current mood of the country will play for or against your case facts.

It was obvious shortly after 9/11. Both plaintiff and defense attorneys with Muslim or Arab clients wanted to postpone because the entire country was in shock, and no one knew how it was going to affect jury behavior.  People were angry and frightened.  It was also obvious after the Enron collapse. [See our paper here.] Corporate defense was scrambling to postpone trials. Sometimes, it’s easy to see. Other times, not so much.

For a long time after 9/11 and the corporate corruption scandals that seemed never-ending—we saw uncertainty and anger at very high levels among mock jurors. We had to work hard to identify who was leaning toward plaintiff and who leaned toward defense and surprisingly, traditional roles of support reversed. Depending on case facts, white collar professionals supported the plaintiff and those traditionally low in social and economic power supported the defense. For months, we had supplemental juror questionnaire (SJQ) items that predicted plaintiff versus defense orientation. On one giddy afternoon during a large mock trial, we were able to predict all but two jurors’ verdicts based on SJQs alone. And then it stopped.

But. It’s baaaackkkk! We’re seeing the same ambivalence and anger and fear in jurors now that we were seeing ten years ago. Reactivity is high. We all heard political pundits are talking about it as influencing the electorate in illogical ways prior to the recent midterm elections. It’s not about facts. It’s not about what you say or do. It’s about what team you’re on—what jersey you are wearing. It’s about how angry we are. It’s about punishing those who have not made things better. And in our pretrial research, the questions we ask are a bit different to reflect the changed realities.

But now, as much as ever—you have to test your case. You have to see if the current ennui in the country will interact with your case facts or your client’s identity in strange and unpredictable/illogical ways. And if so, you have to find a counter argument to help jurors understand why your client is different.  We hope what we see now is not “the new normal”. But, if it is, we all have a lot of work to do to identify persuasion strategies that are effective.

Share

ill gotten gainsWe’ve been busy in pretrial research over the past few months–including several corporate defense cases. It’s been intriguing to watch mock jurors repeatedly assuming the worst when it comes to potential corporate malfeasance. While, oddly, the controversies over McDonald’s wages and Wal-Mart (and others) opening for early bargain shopping on Thanksgiving Day were never voiced, there was a definite tone of negativity toward business ethics, as well as assumptions of trickery and corruption. It didn’t even matter if the corporation was a non-profit to our jurors. They simply made negative assumptions and based on their imaginations alone (and certainly not on facts in evidence) came up with observations like the following:

“Well, they’re probably not a real non-profit. They’re probably going to expensive hotels, throwing $3,000 parties every week, having catered lunches, paying themselves huge salaries, and lining their pockets with ill-gotten gains. I want to know what their personal lifestyles are like.”

There was consistent concern with the “real people” who were potentially being harmed (or who would potentially be harmed) by corporate misbehavior.

“You know who’s really going to end up paying? Us. The taxpayers. Especially homeowners in these small towns. Poor people. It’s just not right.”

And in one case, involving fraudulent backdating of tax-related documents, jurors were appalled.

“Well, isn’t that also defrauding the US government? This man has no shame and he is just disgusting.”

There was also an abundance of question about conspiracy or at least collusion where the mock jurors made cognitive (aka conspiracy) leaps to fill gaps in the case narrative.

“I knew it! I told you so. Now I understand what happened here. This wasn’t those two’s first rodeo.” [Yes, this one was in Texas.]

The frustration and distrust was palpable, no matter what the case themes were and no matter what venue they were in–from one side of the country to the other. The resistance among some jurors to the prospect that the corporate Defendant was not the cause of the alleged harm was so strong for some that they admitted to difficulty in acknowledging some of the evidence. So it was intriguing to come home to a new working paper out of the University of Tennessee on just why corporate cultures go bad. They hypothesize, consistent with our mock jurors’ assumptions, that unethical CEOs are an important cause of unethical corporate behavior.

The researchers discuss the difficulty in measuring the character of top executives and propose a “novel way to identify an unethical pattern of behavior”. In short, they look at whether the CEO engaged in “systematic participation in options backdating”. This was a common practice in the late 1990s but still occurs (less frequently and less openly) today. Using data from 1992 until 2009, the researchers identified 249 suspect CEOs and then added 12 additional CEOs to their list who were identified (and disciplined) for backdating offenses.

They found a high correlation between their list of CEOs and others forms of corporate bad behavior:

Firms with backdating CEOs were about 15% more likely to narrowly “meet or beat analysts’ quarterly earning forecasts”. (This is a tendency researchers have identified as evidence of accounting hijinks meant to raise stock prices.)

Firms with backdating CEOs also make more acquisitions that have a lower market response. (This is often called “empire building” and is a practice that provides financial benefit to the executive but at the cost of the shareholder.)

And, very intriguingly,

These findings were more likely to happen in organizations that hired their suspect CEO from outside the organization rather than promoting from within.

In other words, those organizations bringing in a new external CEO hire, were more likely to hire an ethical lemon AND that CEO would engage in bad behavior that would ultimately have negative impact on the organization’s reputation (and proclivity for shady or unethical business practices).

So what does this mean for litigation advocacy? It means what it’s always meant. Character matters. In addition to the ongoing frustration and disapproval we heard from mock jurors over the past few months, we also heard another consistent theme: character matters. All it took was a witness or party seen by the jurors as ethically solid, credible, believable, knowledgeable and honest– for them to find for that party. In one case, the jurors chose an older woman witness who many of them “recognized” as like someone they knew–salty and feisty, but honest as can be. They liked her and, more importantly, they believed in her and in her recollections of events (which were disputed by the other party).

Her testimony was enough to tip the balance in a case where neither organization was viewed very positively by the mock jurors. In other words, the more ways we can tell a story to highlight signs of good character, honesty, integrity, and concern for the downstream impact on the public, the more mock jurors supported that party. They still groused about not wanting to support either party (especially in cases of one corporation pitted against another corporation) but their desire for a fair resolution and to see hope in the character of those involved would guide their decision-making.

As we have said many times, whether the lawsuit is about physical injury, a contract, or a patent– winning and losing at trial is always about the people involved.

Biggerstaff, L.,, Cicero, D., & Puckett, A. (2013). Unethical culture, suspect CEOs and corporate misbehavior. SSRN Electronic Journal. DOI: 10.3386/w19261

For the fourth year in a row we have been honored with recognition from the ABA via inclusion in their 2013 list of the Top 100 legal blogs in the country. We work hard to blog consistently even when inundated with work and would appreciate your vote for us at the Blawg 100 site under the LITIGATION category. You will have to register your email just so you can’t vote 47 times. There are many worthwhile law blogs on this list so take some time to peruse. Thanks! Doug and Rita

Image

Share