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Having friends in high places is often considered necessary to achieve success. Indeed, connections with upper-class individuals has been identified as a key component of social capital. Despite th...

How do investors react to firms “picking sides” along ideological fault lines? Integrating strategic differentiation logic with work on ideological polarization, we argue that some investors will react positively to information that a firm supports a contested social issue and some to information that a firm opposes it. We conduct a financial event study of the Corporate Equality Index (2002-2018), which ranks the largest U.S. firms on LGBTQ policies and practices – naming the “best performers” and the “worst offenders”. We find that on the day the index is released, these companies experience a positive cumulative abnormal return, whereas the companies ranked in the middle do not. Our findings speak to the emerging literature in strategy on the relationship between societal values and financial valuation.

Firms and their managers are increasingly taking a stand on pivotal and often polarizing social and political issues such as gun control, immigration, LGBT rights, and climate change. Yet managemen...

One of the big questions following the enactment of new corporate legislation is whether it is effective in altering firm behavior. In this paper, we push this question further to investigate how legislation might be effective in altering firm behavior, independent of the coercive nature of legislation and enforcement. We study the impact of the Sarbanes - Oxley Act of 2002 on the behavior of publicly traded firms restating earnings. We find that Sarbanes - Oxley does generate a change in behavior, such that firms are much more likely to take costly remedial action – in the form of firing the Chief Executive Officer or Chief Financial Officer – in the wake of a restatement after the legislation was enacted than they were before. We also find that Sarbanes - Oxley redirects media attention to the problem of restatement, and that this media attention is itself associated with more costly remedial action. Finally, we find that media attention partially mediates the effects of the legislation on firm response, suggesting that it is the redirection of attention, rather than the legislation itself, that changes organizational behavior. This conclusion is further supported by a regression discontinuity analysis, which reveals a change in firm behavior even for those organizations not yet subject to the terms of the legislation.

In this paper, we examine whether strong environmental circumstances at an impressionable stage of life will have lasting implications for ethical behavior. Drawing on work showing that perceptions of financial abundance increase the likelihood of ethical transgressions as well as imprinting work suggesting that early career conditions can leave a lasting mark on later career behavior, we propose that entering the workforce during an economic boom will increase the likelihood that people will engage in ethically questionable practices later in their careers. Using a large sample of American executives between 1996 and 2005, we find that those who began their careers in economically prosperous times were more likely to backdate stock options later in their careers. While past work has shown that contextual cues affect the likelihood of engaging in unethical behavior, the present findings suggest that strong environmental conditions at a formative period of life can affect ethical impulses for a long time to come.

Recent research has shown that ethical behavior can be influenced by features of the immediate environment such as the presence of a cheater or the characteristics of a room. We suggest ethical beh...

In this symposium we present five papers focused on how the judgments of external stakeholders affect the apportionment of the consequences of misconduct. The papers included attack the question in various settings and across levels of analysis, ranging from teachers’ personal comportment to members’ of Parliament misspending to corporate fraud. Yet each paper investigates how social control agents - including the media, institutional investors, stock analysts, and other audiences - draw inferences about the seriousness and severity of infractions, and how these inferences affect the punishments that are assigned to various actors involved. This symposium will generate conversation about both theoretical and empirical questions related to misconduct and ethics, stakeholder relationships, and governance. Pragmatic or Moral Legitimacy: Effect of Director Capabilities versus Nonprofit Ties on Punishment Presenter: Daphne Teh; INSEAD Repeat Offenders: How The Consequences of Firm Misconduct Abate Across Incidents Presenter: Celia Moore; London Business School Presenter: Aharon Yehuda Cohen Mohliver; London Business School Presenter: Jo-Ellen Pozner; Santa Clara U. The Process of Scandal Formation and the Role of Social Control Agents Presenter: Timothy R. Hannigan; U. of Alberta Presenter: James B. Wade; George Washington U. Presenter: Joseph Porac; New York U. The Professional Consequences of Misconduct Presenter: Jacob Model; Stanford U. Corporate Misconduct and Heterogeneity in the Reputational Penalties to Managers and Directors Presenter: Ivana Naumovska; INSEAD Presenter: Georg Wernicke; Copenhagen Business School