Favouritism in Enforcing Management Controls: An Analysis of Punishments for Perpetrators of Economic Crimes
Professor Paul Healy (Harvard Business School)
We examine the severity and consistency of punishments for the primary perpetrators of corporate economic crimes. Controlling for crime type and severity, we find a lower likelihood of dismissal and legal punishments for senior management perpetrators than for middle managers and junior staff. The negative relation between seniority and punishment severity, however, holds only for senior male perpetrators and not for senior female perpetrators. These effects are more pronounced in organizations that operate in countries with greater gender inequality, have less frequent updates to internal controls, do not report the crime to regulators, and do not disclose their identity in the survey. We interpret our findings as evidence of decision-maker bias and favouritism towards senior male colleagues in punishment decisions.