Strengthening the Ties that Bind: Preventing Corruption in the Executive Suite

35 Pages Posted: 10 Aug 2009

See all articles by Norman Bishara

Norman Bishara

The Stephen M. Ross School of Business at the University of Michigan

Cindy A. Schipani

University of Michigan, Stephen M. Ross School of Business

Date Written: July 1, 2009

Abstract

High-profile corporate scandals earlier in this decade provoked outrage and legislative action, however corporate executive-level ethical lapses continue to come to light. This article examines the work of Professor Dunfee and his co-authors on corruption, ethical leadership, and social contracts theory, and relates that literature to corrupt activities by corporate executives. Corruption is defined broadly to encompass executive self-dealing, which harms their firms. The specific example of stock options backdating is used to show the harmful impact on shareholders and the lack of managerial integrity though consequentialist, deontological, and legal analysis, as well as a critique of the practice using social contracts principles. Ultimately, the article utilizes the insights of Dunfee and his co-authors, and the lessons from the backdating example, to propose a framework aimed at improving corporate governance and preventing future executive corruption. The framework includes a strategy of identification and prevention, employing detection and eradication mechanisms, and institutional learning from past instances of corporate corruption.

Keywords: corruption, corporate governance, stock options backdating, executive and management ethics, private corruption, fiduciary duty

JEL Classification: G3, G34, G38, K2, K22, K4, K42, M1, M14, M52

Suggested Citation

Bishara, Norman D and Schipani, Cindy A., Strengthening the Ties that Bind: Preventing Corruption in the Executive Suite (July 1, 2009). Ross School of Business Paper No. 1130, Available at SSRN: https://ssrn.com/abstract=1444817 or http://dx.doi.org/10.2139/ssrn.1444817

Norman D Bishara (Contact Author)

The Stephen M. Ross School of Business at the University of Michigan ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States
734-647-6823 (Phone)

Cindy A. Schipani

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI 48109
United States
(734) 763-2257 (Phone)
(734) 763-2257 (Fax)

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