Societal consequences give power to formal sanctions.
The wave of corporate scandals symbolized by Enron Corp.’s downfall spurred federal and state authorities to clamp down on white-collar criminals. There are now more investigators, stiffer penalties and greater oversight for many corporate activities. All of which leads one to ask: Do tougher laws and more aggressive enforcement deter crime?The answer, according to the authors of the December 2006 working paper, Why Managers Fail to Do the Right Thing: An Empirical Study of Unethical & Illegal Conduct, is “yes.” But not because executives fear the courts. For deterrent measures to work, they have to act through more personal mechanisms that are active even when the courts are silent.The authors — N. Craig Smith, senior fellow in marketing and business ethics at the London Business School; Sally S. Simpson, chair and professor of criminology and criminal justice at the University of Maryland; and Chun-Yao Huang, assistant professor of marketing at National Taiwan University — surveyed 78 businesspeople to determine their “intent to commit” corporate crimes given three hypothetical scenarios. The survey respondents, including managers from a U.S.-