Under Pressure: Culture and Structure As Antecedents of Organizational Misconduct

Abstract: Does a toxic organizational culture focused on performance lead to misconduct? To address this question, we build on Merton's strain theory and theorize the relationship between organizational culture, structure and misconduct. We first theorize that organizations with cultures characterized by strong performance pressure are more likely to engage in misconduct. Then we consider how organizational structure moderates this relationship, which we hypothesize is weaker in more formalized organizations and stronger in more decentralized organizations. To test these hypotheses, we analyzed the regulatory and law violations of 880 publicly traded firms in the United States and measured organizational culture and structure through a natural language processing (NLP) analysis of the firms’ employee reviews on Glassdoor. The empirical results lend support to our hypotheses. Organizations with high performance pressure are 68 percent more likely to be fined for misconduct than organizations with low performance pressure. The moderation effect of organizational structure is fully supported for decentralization, but only partially supported for formalization.