Featured Research

from universities, journals, and other organizations

In times of scandal, corporations are likely to use others' misconduct to justify their behavior

Date:
February 1, 2012
Source:
Rice University
Summary:
Among corporations involved in the 2006 stock-option backdating scandal, those implicated earlier were more likely to dismiss their top executives than those that surfaced later on, according to new research.

Among corporations involved in the 2006 stock-option backdating scandal, those implicated earlier were more likely to dismiss their top executives than those that surfaced later on, according to new research from Rice University and the University of California at Irvine.

Related Articles


The study, "Executive Turnover in the Stock-Option Backdating Wave: The Impact of Social Context," will be published in an upcoming edition of the Strategic Management Journal.

The researchers examined the behavior of corporate boards following the 2006 stock-option backdating scandal, in which firms illegally manipulated stock-option grant dates. Researchers reviewed the 141 companies listed as having come under scrutiny for their stock-option practices in the Wall Street Journal Options Scorecard website to understand why corporations respond to the same kind of misconduct in different ways.

"When faced with scandal, it's critical for corporations to manage their images and maintain legitimacy with stakeholders and the general public," said Anthea Zhang, professor of strategic management at Rice University's Jones Graduate School of Business. "While it seems to be a natural choice to fire the executives/directors who should be responsible for option backdating, only one-third of the 141 firms we surveyed elected to do so."

Zhang and her co-author, Margarethe Wiersema at the University of California at Irvine, theorize that the decrease in executive/director turnover over the course of the scandal can be attributed to companies using other companies' similar misconduct to justify their own misconduct.

"Our findings suggest that corporate boards 'strategize' their response by calculating the reputation damage caused by scandal," Zhang said. "If accountability were the basis for their decision-making, we should have observed a more consistent pattern of companies choosing to dismiss their executives/directors over time."

Zhang said that attention from the media, as well as investigation by the Department of Justice and/or the Securities and Exchange Commission, plays an important role in pushing companies involved in the scandal to fire their executives and directors.

"This attention serves to counterbalance corporation boards' tendency to justify their misbehavior with others' misbehavior," she said.

Zhang hopes their research can help stakeholders and the general public better understand how corporate boards respond to scandal.

The study was funded by Rice University and the University of California at Irvine.


Story Source:

The above story is based on materials provided by Rice University. Note: Materials may be edited for content and length.


Cite This Page:

Rice University. "In times of scandal, corporations are likely to use others' misconduct to justify their behavior." ScienceDaily. ScienceDaily, 1 February 2012. <www.sciencedaily.com/releases/2012/02/120201105128.htm>.
Rice University. (2012, February 1). In times of scandal, corporations are likely to use others' misconduct to justify their behavior. ScienceDaily. Retrieved October 24, 2014 from www.sciencedaily.com/releases/2012/02/120201105128.htm
Rice University. "In times of scandal, corporations are likely to use others' misconduct to justify their behavior." ScienceDaily. www.sciencedaily.com/releases/2012/02/120201105128.htm (accessed October 24, 2014).

Share This



More Science & Society News

Friday, October 24, 2014

Featured Research

from universities, journals, and other organizations


Featured Videos

from AP, Reuters, AFP, and other news services

Microsoft Riding High On Strong Surface, Cloud Performance

Microsoft Riding High On Strong Surface, Cloud Performance

Newsy (Oct. 24, 2014) Microsoft's Q3 earnings showed its tablets and cloud services are really hitting their stride. Video provided by Newsy
Powered by NewsLook.com
Doctor in NYC Quarantined With Ebola

Doctor in NYC Quarantined With Ebola

AP (Oct. 24, 2014) An emergency room doctor who recently returned to the city after treating Ebola patients in West Africa has tested positive for the virus. He's quarantined in a hospital. (Oct. 24) Video provided by AP
Powered by NewsLook.com
Police Testing New Gunfire Tracking Technology

Police Testing New Gunfire Tracking Technology

AP (Oct. 24, 2014) A California-based startup has designed new law enforcement technology that aims to automatically alert dispatch when an officer's gun is unholstered and fired. Two law enforcement agencies are currently testing the technology. (Oct. 24) Video provided by AP
Powered by NewsLook.com
E.U. Leaders Agree To 40% CO2 Emissions Cut By 2030

E.U. Leaders Agree To 40% CO2 Emissions Cut By 2030

Newsy (Oct. 23, 2014) The latest E.U. emissions deal calls for a 40 percent greenhouse gas cut, which leaders say sets Europe up to lead in climate negotiations next year. Video provided by Newsy
Powered by NewsLook.com

Search ScienceDaily

Number of stories in archives: 140,361

Find with keyword(s):
Enter a keyword or phrase to search ScienceDaily for related topics and research stories.

Save/Print:
Share:

Breaking News:

Strange & Offbeat Stories


Science & Society

Business & Industry

Education & Learning

In Other News

... from NewsDaily.com

Science News

Health News

Environment News

Technology News



Save/Print:
Share:

Free Subscriptions


Get the latest science news with ScienceDaily's free email newsletters, updated daily and weekly. Or view hourly updated newsfeeds in your RSS reader:

Get Social & Mobile


Keep up to date with the latest news from ScienceDaily via social networks and mobile apps:

Have Feedback?


Tell us what you think of ScienceDaily -- we welcome both positive and negative comments. Have any problems using the site? Questions?
Mobile: iPhone Android Web
Follow: Facebook Twitter Google+
Subscribe: RSS Feeds Email Newsletters
Latest Headlines Health & Medicine Mind & Brain Space & Time Matter & Energy Computers & Math Plants & Animals Earth & Climate Fossils & Ruins