Journal of Financial Crime

Corporate financial crime: social diagnosis and treatment

Laura L. Hansen
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Laura L. Hansen, (2009),"Corporate financial crime: social diagnosis and treatment", Journal of Financial
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JFC
16,1 Corporate financial crime: social
diagnosis and treatment
Laura L. Hansen
28 University of Massachusetts Boston, Boston, Massachusetts, USA

Abstract
Purpose The purpose of this viewpoint paper is to assist in finding solutions for the growing moral
and social issues of financial crime plaguing corporations today.
Design/methodology/approach Methodology includes the synthesis of existing theories in
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economic sociology and criminology to diagnose and treat the existing flaws in corporate
structures that have led to malaise and malfeasance. Theories include differential association,
self-control, and control balance, taking into consideration the characteristics of individuals and
corporate structures.
Findings Findings suggest that corporate structure has to be critically scrutinized and changes
implemented, including close examination of informal and formal communication and salary
structures.
Practical implications This paper suggests concrete strategies and policy changes for regulators,
corporate decision makers, and academics.
Originality/value The synthesis of existing theories in white collar malfeasance and crime
provides a template to increase corporate social responsibility and promote policy/regulatory changes
in the current economic climate.
Keywords Crimes, Financial control, Regulation, Corporate governance
Paper type Viewpoint

Journal of Financial Crime
Vol. 16 No. 1, 2009
pp. 28-40
q Emerald Group Publishing Limited
1359-0790
DOI 10.1108/13590790910924948
Introduction
Unlike conventional or street crime, white collar crime does not strike fear in the hearts
of the American people. In the past few decades, the threat of conventional crime has
driven people behind gated communities and into the perceived sanctuary of Suburbia.
Yet white-collar crime has cost the USA several times more monetarily to each and
every one of us than all conventional and street crimes combined, not to mention the
social cost of losing faith in our corporations. This is demonstrated by the history of
financial malfeasance on Wall Street, including the insider trading scandals of the
1980s as well as more current cases in financial institutions such as the alleged
wrongdoings in the Bear Stearns debacle of this year. Financial crime globally is
rapidly more visible as exemplified by the alleged failure of Britains regulatory
agencies to control institutions like HBOS and the Bank of England (Seib, 2008).
Additionally the Royal Bank of Scotland scandal demonstrated poor internal
regulatory practices. The purpose of this paper is to offer diagnostic tools and
treatment suggestions that corporations can implement to help prevent financial
crimes from happening within their own walls.
Frequently, corporate malfeasance and social indiscretions are handled in civil
rather than criminal court, and rarely broadcasted as often for mass consumption on
television news programs as conventional crime, save the occasional magazine article
devoted to the topic (Morris, 2008). Diverting white collar crime to civil court generally
results in modest fines and little retribution, when compared to the revenue and assets
 of guilty corporations and their ability to pay. When criminal prosecution is pursued, Corporate
plea-bargaining is common (Shapiro, 1984). The larger issue is that criminality is rarely financial crime
viewed in the context of organizational structure: Common images of deviance focus
[only] on people acting individually or in small groups. (Ermann and Lundman, 1996,
p. 3). Because corporate misdeed is rarely if ever committed by all members of an
organization, we should examine individual behavior and the competitive structure of
corporate life that contributes to malfeasance. By diagnosing the root causes of 29
corporate crime, there are better opportunities for successful treatment.

White collar criminality the individual

Even though organizational and institutional theories are among the most advanced
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areas of sociology, those in the social sciences have done little to assist in policy
making or theory building in the case of unethical behavior, whether from the
standpoint of individual deviance. Collins (1975, p. 286) noted that within the discipline
of sociology, the study of organizations stands isolated from other aspects of sociology,
even though most of the other things sociologists study stratification, politics,
education, deviance, social change are based on organizations or take place in them.
Sutherland (1973) claimed that economists did not look at business from a standpoint
of criminality, while criminologists largely failed to examine crime committed during
the course of conducting business. When Sutherland coined the term white-collar
crime, he may not have anticipated the ensuing controversy and definitional quagmire
that he created. Defined by Sutherland (1973, p. 429) as crime in the upper or
white-collar class, white-collar crime was perceived as being committed by those
considered respectable members of society. In contrast, lower class and working
class are predicted to have a higher propensity for common crime such as robbery,
murder, assault and other more base offenses. What Sutherland offers to criminology is
the idea that crime is pervasive throughout economic strata, contrary to previous
theories that offer exclusivity to the lower and working classes.
Shover and Wright (2001) make the distinction that there are differences between
economic crime, business crime, and elite crime. They contend that the larger
proportions of white collar crimes are not simply committed by free-wheeling,
organizationally unattached predators. . . others are committed by individuals
employed by and in legitimate organizations. (Shover and Wright, 2001, p. 3).
Hence when financial crime is discussed here, it is perhaps best to limit the discussion
to that of occupational or elite crime, which, as Shover and Wright (2001, p. 3) assert, is
committed by individuals or groups for their own purposes or enrichment, rather
than for the enrichment of the organization on a whole, in spite of supposed corporate
loyalty.
Though economic sociological theories are helpful, the origins of elite crime can be
summarized by examining several criminology theories that offer explanation of why
this type of crime is so prevalent among seemingly respectable individuals. From a
micro level, the most salient theory is Sutherlands (1939) differential association
theory, first introduced briefly in Principles of Criminology and further developed in the
books third edition (Akers, 2000). Briefly, differential association theory (a social
learning theory) proposes that criminal behavior is learned by associating with
individuals who have deviant or unlawful mores, values, and norms.
 JFC Sutherlands later (1949) version of the theory helps to explain why workers in
16,1 organization, particularly in specific industries, possess a propensity to commit
individual and corporate crimes. Sutherland discarded the conflict and social
disorganization dimensions of his earlier versions of his theory. He proposed that
certain characteristics play a key role in placing individuals in a position to behave
unlawfully, including the proposition that criminal behavior is learned through
30 interaction with other persons, as well as interaction occurring in small intimate
personal groups (Akers, 2000).
The second applicable crime theory is that of Gottfredson and Hirschis (1990)
self-control theory. The core of this theory proposes that individuals commit crime
because of low self-control. Except in rare cases of mass fraud such as in the Lincoln
Savings and Loan debacle (1980s) or the more recent Enron scandal, not all elites
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within a given organization or industry will commit crime. Hence, though elites at the
top of their profession and corporation differentially associate with the people of equal
status in their own and other corporations, not all corporate elites commit crimes and
behave in an overtly deviant manner. Self-control theory is better suited to help explain
elite crime, as compared to Hirschis (1969) social bonding theory, because of the
absence of three key elements of belief, attachment, commitment, and involvement
(Akers, 2000). It is counterintuitive to believe that weak bonds are the cause of criminal
behavior among elites. On the contrary, it is the strength of the bonds formed between
corporate bad boys that makes differential association with a basic premise of low
self-control and use of informal social networks a viable explanation for elite misdeeds
(Hansen, 2004).
So where does the initial motivation come from to enter into illegal acts, risking
detection and the marring of ones reputation? A third theory, exchange theory, this
time borrowed from economics, supplements differential association and helps explain
why individuals are willing to enter into conspiracies, and offers rudimentary network
theory. Blaus earlier theories intimated that micro-level actors are involved in
exchange relationships that include basic processes of attraction, exchange,
competition, differentiation, integration, and opposition (Turner, 1991). The
integration of economic sociology and criminological theory is particularly beneficial
when examining the motives and mechanisms of elite crime. For example, the
reciprocity or fair exchange in insider trading is information for information or
information for monetary reward. Additionally, as many sociological theories have
their basis in economic theory, they aid in explaining the monetary motivation rather
than psychological motivation in committing financial crimes.
In examining corporate crime, it is necessary to examine more than the
macrostructure. The microstructure, formal and informal, is perhaps more crucial. It is
made up of corporate actors, some of which get caught up in the moral mazes of
conducting business in the interest of the company and still conduct business ethically
in a changing environment (Collins, 1975; Meyer and Rowan, 1977; Jackall, 1996). Social
network analysis is currently just beginning to explore how the informal
microstructure of corporations can contribute to malfeasance at the top of corporate
organizations.
Though some corporate crime is committed for the social good of the organization,
much of white collar crime is perceived to be committed for personal goals. In light of
the limited number of advancement opportunities available at the top of a corporate
 ladder, as well as the stiff competition for those positions, actors may commit any Corporate
number of indiscretions to maintain their position in the company (Ermann and financial crime
Lundman, 1996). And as actors do move up in corporations, the more likely that they
will identify with their jobs and the organization (Collins, 1975). In return, it is possible
that a percentage of corporate crime is indeed committed for the preservation of the
company. Additionally, the status of upper management positions does not only offer
greater monetary rewards; it also bestows power to those that occupy its space. 31
It should also be noted that this power is limited in the case of publicly traded
companies, where there are constraints placed on corporate elites by shareholders.

White collar criminality the corporate structure

What is insidious and difficult for scholars of white collar crimes to research and
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regulators to prevent corporate financial malfeasance is that misdeed can at times

appear to be accidental. Even when an incident is formally identified as an accident, it
is often due to miscommunication between management and technical advisors
(Vaughan, 1996). In many cases, organizational elites knowingly use the hierarchy and
organizational positions to command deviance (Ermann and Lundman, 1996). The
same principles can be applied to financial institutions.
Control balance theory (Tittle, 1995) measures the potential for individuals to
commit corporate crimes. Control balance theory utilizes a ratio of control exercised
relative to degree of control experienced (Piquero and Piquero, 2006; Tittle, 1995).
Another study surveying business students on their potential for corporate
exploitation and deviance (Piquero and Piquero, 2006), using Tittles (1995) control
balance theory, found that control balance surpluses, not deficits lead to white collar
and corporate deviance. Piquero and Piquero (2006) concede that there are some
drawbacks in using hypothetical scenarios that do not measure the real world. Tittle
himself has been critical of the original theory, reformulating it more recently to
address three behaviors included in the measurement of control, including conformity,
deviance and submission (Tittle, 2004).
In reality, once students have graduated and have been removed from the confines
of B-School, the competitive environment offers motive and opportunity to commit
financial crime, as well as a coercion. In the 2005 documentary Enron: The Smartest
Guys in the Room[1], the corporate climate of Enron was not unlike Stanley Milgrams
(1960s) infamous experiment testing obedience. The book and subsequent
documentary speculates that traders at Enron were aware that they were putting
individuals at risk for health-related illness and death by instigating rolling blackouts
of electrical power in California during 100 degree weather in the summer of 2000,
and they continued to do so with the blessings of their supervisors.

Criminal justice responses to white collar crime

White collar crime is not as visible as conventional crime and detection is difficult. For
instance, in a homicide case, there is generally a body and forensic evidence. In the case
of financial crime, accounting and computer forensics are currently the investigators
best tools in detection and implemented in most white collar investigations in recent
decades (Bazley, 2008). Bazley (2008, p. 147) notes that given the popularity of
television shows and movies that have highlighted the role of forensic science in
criminal investigation, it is understandable that many would overlook the applications
 JFC of science and technology to white collar crime cases. As in conventional crime
16,1 prosecution, advances in technology have led to a greater dependence on expert
testimony in white collar crime cases, keeping in mind that expert opinion cannot be
given with absolute certainty (Bazley, 2008).
Perhaps, due to the financial resources to defend their cases available to elite
individuals and corporations who are brought to justice, plus aversion to negative
32 publicity, plea bargaining prior to charges is more intense as compared to that in
conventional criminal cases. Friedrichs (2007) notes that formal charging is more likely
to be viewed as a failure by prosecutors, because of the larger number of resources that
prosecutors have to be diverted to prosecute white collar crime cases. And due to the
greater stigma attached to jail or prison time for elites, they may be reluctant to
negotiate a plea bargain if incarceration is included in the deal, as in the case of Michael
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Milken (Friedrichs, 2007; Rosoff et al., 2007). On the other hand, it is not unusual for
convicted defendants to suddenly decide to cooperate in investigations in order to
receive leniency at sentencing (Bazley, 2008).

Regulation and prevention of white collar financial crime

Regulation and prevention of elite corporate crime tends to be reactive rather than
prophylactic in nature. Additionally, opportunities for crime appear to rise as
regulation declines (Hansen, 2004). After the 1980s insider trading scandals, the
Securities and Exchange Commission (SEC) adopted Rule 14e-3, prohibiting insiders of
bidder and target companies from divulging information or trading based on mergers
and acquisitions or arbitrage negotiations (Bainbridge, 1999). Likewise, the
Sarbane-Oxley Law of 2002 came into being after the Enron and WorldCom debacles.
In more recent years when executives have been seen arrested and handcuffed for
the purposes of public humiliation, it sets in motion a deterrence model of crime
prevention or at the very least, a shaming policy in the vein of Braithwaites (1989)
work. However, Geis (2007) argues that the purpose of these public arrests are
symbolic and say more about the regulatory agencies need to appear to be legitimately
prosecuting corporate wrong doers. As such, with regulation so closely tied to the
political climate, there has been no consistency in the prosecution of corporate
criminals, as compared with drug war policies of the past couple of decades.
Regulation played a major role in the waves of white collar crime that have struck
Corporate America throughout the history of this country. During the 1980s,
deregulation led to creative financial schemes, some legitimate, but others clearly
criminal as in the cases of Ivan Boesky, Michael Milken, and Charles H. Keating, Jr[2]
Until the Boesky insider trading case, insider trading was rarely investigated or
prosecuted by regulatory agencies, even though it is illegal (Geis, 2007). De-regulation
is viewed as a culprit in allowing bad accounting practices, including the practice of
hiding losses or debts, as in the case of Enron, as well as overstating profits and assets
(Geis, 2007). By re-regulating in response to major corporate crimes, it is like closing
the barn door after the cows have all escaped. It is a difficult task to rein in
malfeasance, particularly if the monetary reward continues to outweigh sanctions.
Self-regulation does not appear to be a solution alone either. Meyer and Rowan
(1977) noted that much of evaluation, either by external groups or internally, is
ceremonial. For example, managers at a technology company may only have a
rudimentary knowledge of chemistry, biology or computers, but employ technological
 experts to do the core work of the company. The assumption, based on credentials, is Corporate
that the experts are good to go. In some cases, there is a conflict of interest, as in the financial crime
case of Arthur Andersen who served as both auditor and paid consultant to Enron.
Additionally, certifiable standards have not proven to be successful. Christmann and
Taylor (2006) note that there is disconnect between certification and consistent
compliance.
Prevention of corporate crime should not be only the concern of regulatory and law 33
enforcement agencies. Corporations stand to lose more than reputation when financial
scandals occur. Even when white collar crime does not reach Royal Bank of Scotland,
Enron or WorldCom proportions, corporations are damaged. It is estimated that white
collar crime can cost companies on average one to six percent of annual sales
(Schnatterley, 2003).
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From a standpoint of prevention, Shapiro (2001) argues that the focus should be on
the criminal environment rather than the individual. The problem with occupational
crime is that it is committed within the confines of positions of trust and in
organizations, which prohibits surveillance and accountability. More importantly,
work performance is evaluated by non-performance criteria and evaluations are
ceremonially executed, particularly, as previously stated in the case of professionals
who are technically trained beyond the education and practical knowledge of
management (Collins, 1975; Meyer and Rowan, 1977). As such, the explanations for
occupational crimes are structural rather than social-psychological, as the
organizational apparatus creates an atmosphere conducive to occupational crime.
One theory that supports a structural model is that of Billingham (1990), who proposed
that criminality among elites may be part of doing business as usual. And as
previously noted, potential for the deviant behavior of insider trading has been found
to have its roots in business schools, where students are more materialistically minded,
particularly in American universities (Billingham, 1990). A code of ethics does not
necessarily prevent unethical behavior within organizations, but rather as Cressey and
Moore (1980) concluded, . . . [a] demonstration of deeds, not nice words, is necessary to
correct unethical corporate behavior (Clinard and Yeager, 1980, p. 302). Corporations
rarely make apologies for their bad behavior, except when pushed to do so for public
relations purposes.
Though there have been several attempts at preventing corporate crime by
re-regulation, the Sarbanes-Oxley Law of 2002 has been one innovative attempt to
rectify some of the corporate governance issues that came to light with Enron. The law
requires more stringent accounting to the SEC, as well as preventing top management
(CEOs, presidents, etc.) to claim plausible deniability due to ignorance of accounting
practices within their firms. This, however, does not prevent fraudulent reporting to
the SEC or to shareholders, but holds managers directly responsible for the misdeeds of
their accounting staff if caught.
Additionally, the prevention of corporate and elite crime is doomed to fail if
regulation is the only applied solution. Business practices do not happen in an
environment of strict regulation. Rather they are largely messy and unregulated with
less than predictable outcomes. Yet industries complain of being over-regulated, with
the government intervening (abet with limited resources and support) only when the
financial well being and safety of workers, consumers and the public are brought into
question (Clinard and Yeager, 1980). Additionally, when examining the deviance of
 JFC organizations themselves, rather than individuals, there is a fine line between what is
16,1 criminal and what is not:
The late Senator Hart of Michigan once said: Its not uncommon to find some corporation that
appears to be determinably breaking the law, only to discover when you get up close that,
technically, the firm has merely succeeded in being unethical (Clinard and Yeager, 1980,
p. 213).
34
Even with increased regulation/prosecution of corporate offenses such as income tax
evasion and false inventory values, as well as stiff penalties for the violation of
employee rights and safety, is it any wonder that individuals within organizations find
it difficult to discern between the unethical and the illegal? And many individual and
corporate offenses take years to be discovered, as demonstrated by the insider trading
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scandals on Wall Street in the 1980s, as well as the more recent Enron scandal. When
whistle-blowers do come forward, it is many times well after the fact, when they have
left the organization and have established themselves in other corporations or careers
(Glazer, 1996).
There is some debate as to whether corporate governance (self-regulation) alone can
prevent white collar crime. Schnatterly (2003) proposes that operational governance in
the form of clear policies and procedure, formalized cross-company communication,
along with performance-based salary for board members and employees reduces
incidences of white collar crime within corporations. This seems to be an interesting
solution, but presents the ethical issue of material reward for not committing a crime.
This policy is like paying drug dealers to not sell drugs, if the same strategy were to be
applied to ordinary criminals. Plus it insinuates that board members and corporate
employees are not well compensated already, which is not the case in many industries
that are plagued with white collar crime, including the financial sector.
Another solution suggested is a greater emphasis on business ethics in business
schools. However, there is some disagreement as to whether this is a viable solution.
As Friedrichs (2007) claims, it is not clear whether incorporating business ethics into
curriculum will improve behavior in individuals for the long run. He speculates that
ethical character is fully developed by the time that students reach business or
professional school.
Corporate crimes are additionally difficult to detect, due to elaborate conspiracies in
the form of social networks. Individuals within organizations do not necessarily
operate solo in their commission of crimes. Just as criminal activities such as drug
trafficking, racketeering, prostitution, and gambling operate within crime networks,
elite economic crime occurs within the confines of complex social relations. These elite
networks are not restricted to members of the business community, but extend
themselves to include politicians and law enforcement officials:
One feature of criminality that is almost always overlooked is the extent to which business
men who operate a presumably legitimate and wholly legal enterprise are involved either
overtly or covertly in criminal activities. More often than is ever acknowledged by law
enforcement or investigators, businessmen are the financiers behind criminal operations
(Chambliss, 1988, p. 72).
Enforcement and sanction then become problematic, when politicians and regulatory
agencies are either actively co-conspiring or turning a blind eye to illegal activity.
 When corporations and individuals are caught in the act and must account for Corporate
their criminal behavior, they have greater financial means to fight charges of financial crime
misconduct and criminality than the common criminal offender. Punishment does not
follow a predictable pattern of retribution or rehabilitation. Even civil settlements fall
far short of true reimbursement. This is largely due to the inequalities that exist within
society itself, where, as Yeager (1993, p. 141) proposed, social regulation both reflects
and reproduces inequalities in the political economy, certainly within the social 35
structure of business organization . . . it suggests that business defendants generally
experience advantages at law not available to conventional criminal defendants.
Bertram Gross noted that this is the dirty secret of crime: what worries the average
citizen the most are violent street crimes that are products of poverty, unemployment,
etc. while corporations with entourages of lawyers, accountants and public relations
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experts negotiate around regulations and law because law enforcement officials,
investigators, judges and prosecutors are soft on crimes committed by the elite (Simon
and Hagan, 1999).
Clinard and Yeager (1980) offered three solutions for controlling corporate and
white-collar crime. These can be applied to the control of financial crime. They
proposed (1980, pp. 299-300) that there needs to be voluntary change in both corporate
attitudes and structure; the strong intervention of the political state to force changes in
corporate structure; along with legal measures to deter or to punish; or consumer
actions. In a capitalist economy, there is little optimism for voluntary regulation.
Intervention by government is as variable as which political party is in power, as well
as the limited resources available to such regulatory agencies as the SEC (Shapiro,
1984). The most promising solution (though perhaps too optimistic and Ralph
Nadarish) is that of consumer action, as hurting corporations in the pocketbook may
be the only way to get their attention. They may escape criminal prosecution, but as we
are witnessing with the accounting firm of Arthur Andersen, there can be monetary
justice in the form of lost revenue or corporate demise.
One option offered is that professionals should be held accountable to their various
professional groups, such as doctors, lawyers, and other professions (Coleman, 1985).
The problem lies in the clannish environment of professional organizations that
discourage public scrutiny. Coleman (1985, p. 152) posed that Although at first glance
such a normal communal spirit hardly seems dangerous, it has contributed to the
professionals reticence to report abuses by their colleagues or give legal testimony
against them. (Coleman, 1985, p. 152)
Another deterrent to corporate crime is the social, rather than legal consequences of
criminal activities. Because elite criminals are just that elite their social identity is
institutionalized in the social strata they occupy and the impact of the prison term is
intensified (Weisburd et al., 2001).
In other words, the bigger they are, the harder they fall. There is some belief that
informal sanctions (i.e. expulsion from professional community), in conjunction with
fear of formal punishment prevents most individuals from committing crimes (Zimring
and Hawkins, 1973; Akers, 1999). However, unlike their street crime counterparts,
white-collar criminals rarely receive long prison sentences (Weisburd et al., 2001). If the
threat of substantial prison sentences strike fear in the hearts of elite criminals, if the
fear of white collar crime does not mobilize ordinary citizens, then this is perhaps
the best solution for prevention, using a deterrence model of justice.
 JFC Conclusions
16,1 Regulatory agencies alone cannot be depended on to provide prophylactic measures to
prevent elite corporate crimes. As Clinard and Yeager (1980) proposed as one solution,
there needs to be voluntary corporate change. Corporations need to identify the
potential problems within their own organizations and seek solutions that decrease the
likelihood of crime and malfeasance. This cannot be accomplished without a basic
36 understanding of the underlying causes of elite corporate crime by individuals and
organizations, which this paper provides.
Additionally, this paper provides several diagnostic tools[3] that policy makers and
corporate governance officers can use to diagnose whether there is the potential for
white collar financial malfeasance in their organizations:
.
Identification of the informal structure of the corporation. Are rules and
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regulations of the corporation being closely adhered to, or do concerns of profit

margin, competition supersede formal rules of the organization?
.
Identification of environmental pressures and competition. Does management
spend an inordinate amount of time focused on external factors and not enough
time monitoring employees?
.
Review of the formal structure of the corporation. What is the span of control of
managers? Is there clarity of formal communication channels including the
hierarchical structure?
.
Review of employee compensation structure. Do employees feel that they are
being adequately compensated for the work they do?

It is going to become increasingly more difficult to detect or deter corporate crime as

our world now operates in a global economy. Transnational corporations become
problematic to control, as there is an absence of powerful international regulations and
inconsistent national legislation (Gerber and Jensen, 2000). All the more reason to focus
on what individual corporations can do to prevent malfeasance. Additionally, the costs
to prosecute transnational corporations are astronomical, further inhibiting the ability
to secure criminal conviction, as it would require bringing witnesses from all over the
country and all over the world to testify (Hagan, 1988).
It would be ideal if the elites within the culture of the corporation would concede
that change is needed, save the emphasis on ethics in the face of the Sarbane-Oxley
Law in the US regulatory system. There is little chance of that happening as long as
corporate focus is on profit, even in a post-Enron environment. Research, including
Schnatterlys (2003) study indicates that change has to happen at the corporate level
rather than by state or federal regulation. And would change manifest itself in
corporate good behavior in the face of a capitalist society?
Because there is a risk that performance-based pay may also provide an opportunity
for employees to appear productive at any cost, including bad behavior, In addition to
Schnatterlys remedies, the following strategies should also be considered:
.
New employee training and ongoing in-service to include formal discussion of
the ethical expectations of the organization.
.
Zero tolerance policy: unethical behavior should not be rewarded even if that
behavior results in profitability for the corporation.
 On final issue should be noted. The examination of corporate crime cannot be localized. Corporate
With the rise of globalization and multi-national corporations, corporate social financial crime
responsibility (CSR) has not been equally addressed in every country. Matten and
Moon (2008) concluded that research on corporations either side of the Atlantic and
Pacific have found stark contrasts on how much attention is given to CSR. So far
American corporations are leading the trend towards increase awareness, with foreign
corporations just entering the debate (Matten and Moon). It is not enough to change 37
corporate environments that contribute to financial crime locally.
Whether change is desirable or not, policy makers and corporate decision makers
should be aware of these diagnostics and consider using these treatment tools. It is far
more cost effective to invest capital in diagnostics and treatment than to risk losing the
reputation, profit margin and the future of a corporation. Free market economy aside,
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change is mandatory, in order to avoid future scandals similar to those witnessed in

recent decades.

Notes
1. Based on the 2003 book, Bethany McLean and Peter Elkind, authors.
2. Ivan Boesky plead guilty to insider trading in 1987, Michael Milken plead guilty to securities
and reporting violations in 1989, and Charles H. Keating, Jr was convicted of in the Lincoln
Savings and Loan Scandal.
3. Schatterly (2003) suggests:
.
Clear, formal cross-company communication.
.
Clearly written policy and procedures.
.
Performance-based pay for employees, which have been incorporated in the diagnostic
tools here.

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Corresponding author
Laura L. Hansen can be contacted at: laura.hansen@umb.edu

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