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There is a cultural moment in the world of corporate compliance. Following recent major corporate scandals, there is now growing recognition among corporate boards and beyond that truly changing corporate misconduct means addressing the toxic elements within cultures.
The central question for companies and regulators is how to assess toxic cultural elements.
Toxic corporate culture exists when organizations, whose chief business and business means are legal, develop structural violations of rules over a period of time.
Our recent paper (PDF: 1.06 MB), published in Administrative Science, offers an in-depth analysis of what toxic cultural elements played a role in three major corporate scandals: BP’s polluting and unsafe oil exploration practices, VW’s diesel emission cheating practices, and Wells Fargo’s fake and unauthorized accounts schemes. In all three cases, the illegal behavior spanned over a decade and investigators concluded that corporate culture was to blame. Yet in all three cases, no one had yet systematically sought to understand what toxic cultural elements sustained the illegal conduct. We developed an analytical framework to examine toxicity in organizational cultures on three levels: structures, values, and practices (see Table 1 below). Continue reading