Corrupt Behavior in Public Organizations: Ethics, Rationalization, and Socialization for an Integrated Reading

Abstract

Corruption has been receiving an increasing attention by scholars and practitioners, also due to the growth of corrupt behaviors in both private and public organizations worldwide. Focusing the attention on public context, discretion is an unavoidable element of administrative action, which derives from the incompleteness of contracts and the information asymmetries that characterize every agency relationship. A further element of uncertainty within agency relationship is represented by subjective elements of those who commit fraudulent behaviors (rationalization) and by contextual elements that push for socialization and, therefore, acceptance by the group of such behaviors, by going to inhibit group control able to prevent its commission. Thus, the main problem arises of monitoring possible degenerations in administrative behavior. For this purpose, a combination of institutional and organizational strategies and ethical strategies could be interesting and desirable. This conceptual study provides an innovative and integrated reading of the corruption phenomenon through the lens of agency theory (AT) and organizational behavior (OB) approaches, where codes of ethics and codes of conduct play a crucial role as tools for guiding and controlling the behavior of public officials. The codes define a system of moral and reputational incentives, in addition to criminal and administrative sanctions, aimed at increasing the ethical capital of administrations and managing “gray areas” that are not adequately regulated. This chapter aims to provide an integrated framework, combining AT and OB approaches, to discuss such strategies related to ethical and social issues.

1. Introduction

Corruption has been universally and largely conceived, especially in the Western context, as the “misuse of authority for personal, sub-unit or organizational gain” [1] recognizing mostly its negative and corrosive effect on organizations and their stakeholders [2]. Indeed, corruption represents a huge phenomenon with a negative impact in terms of damage for public sensibilities [3], disruption of trust in societal institutions [4], growth of extra economic costs [5], damage of reputation [6], and reduction of trust in esteemed industries [7]. Anyway, although there are such negative effects of corruption, many contributions in research have outlined that corruption is somehow considered to be “normal” in numerous organizations. Indeed, Ashforth and Anand [1] explain this fact and argue that this happens “when corruption is taken-for-granted, accepted, and practiced daily.” In this direction, corruption has been considered “normal” because “it is institutionalized in routines and structures, rationalized by individuals to absolve themselves of responsibility/guilt or when newcomers are socialized to accept corruption as acceptable and/or necessary” [2]. In this case, scholars identify and consider specific normalization processes which can be facilitated by several features, such as concealment and isolation, where participants are “socially cocooned” [8] from non-corrupt others, creating a “moral microcosm that likely could not survive outside the organization” [9].

Although we are intuitively aware that corruption can divert, and we know that it has often deviated, public action, altering or even overturning the implementation of a regulatory program, it is mostly considered as a marginal constant or as a residual or contingent explanatory factor and empirically neglected, reduced to the implicit cost of the pluralistic process. Rarely, in the evaluation of the processes and results of a public policy, the possibility of illegitimate pressures and transactions is taken into consideration, and it is preferred to focus instead on other more visible (and in hypothesis more controllable) aspects of the government process. However, it would be appropriate to evaluate more seriously the fact that in policymaking there are opportunities and incentives to systematically transgress established rules through the illicit use of influence; and this applies for both public and private participants. Too often, policy analysts tend to underestimate the interference of authority markets, where general interest and good administration are seen (at best) as secondary objectives, and where rent-seeking coalitions operate that distribute rents to politicians, bureaucrats, and private groups.

Corruption and, more extensively, political-administrative misbehavior can increasingly constitute, and at the level of each State/Country Government, the object and target of government reform programs and interventions, that is, the direct content of a public policy, or of a cluster of policies, which includes a specific and composite policy-community.

Even if there remains a different sensitivity toward the problems of political and administrative morality between constitutionally similar countries, it can be stated that the “ethical question,”, that is, the complex of problems linked to the deviation from legal and moral standards of both public, political and administrative officials, which has undergone a notable amplification and politicization of their social interlocutors over the years, gaining positions in the agendas of various governments to the point of becoming, in some cases and at some times, a “preeminent strategic node for public and private bodies” [10].

Therefore, corruption and administrative deviations are both hypothetically hidden components of every government intervention that can explain at least part of its outcome; it is the target of specific public policies to be formulated and implemented with the help of experts. These two sides of investigation—the actual and hypothetical roles of illegal or unethical behavior in public policies and the policies aimed at minimizing these behaviors—are analytically independent yet logically interrelated questions.

This chapter focuses on the second of these two analytical perspectives, that is, the policies for facing and reducing illegal or unethical behavior, where the intervention strategies against corruption and abuse in public administration from a particular point of view will be investigated, that is, code of ethics and code of conduct are considered, in the extended sense that the term is attributed within the tradition of studies on administrative ethics (Ethics in Government or Administrative Ethics).

In summary, this conceptual study combines institutional and organizational strategies and ethical strategies for facing corruption phenomenon. It provides an innovative and integrated reading of the corruption phenomenon through the lens of both agency theory (AT) and organizational behavior (OB) approaches, where codes of ethics and codes of conduct play a crucial role as tools for guiding and controlling the behavior of public officials.

Therefore, the rest of the chapter is structured as follows: Section 2 briefly reviews existing literature, providing a short summary about corruption in the research going to outline the main definitions, effects, and approaches developed by scholars for examining and facing the same phenomenon, especially in the public organizations; Section 3 represents the heart of the contribution where after a short description of Agency Theory and Organizational Behavior Theory, a combination of these approaches is provided for facing and managing corruption; Section 4 describes the integrative and innovative approach, taking into account the reference context; Section 5 concludes the chapter providing insights about contributions, limitations, and future perspectives.

2. Corruption behavior: definition, antecedents, effects, and main approaches

2.1 Definition, antecedents, and effects of corruption

Corruption represents one of the most dangerous phenomena facing most of the countries of the world, although its proportions vary from country to country depending on the varying level of development and stability of political, economic, and social structures [11]. Corruption represents a phenomenon that concerns and is widespread in numerous developing and less developed countries, becoming the biggest obstacle to their developments, by going to negatively affect several aspects of people’s lives and their living standards. The existing numerous contributions in the research on corruption phenomenon focus their attention on its conceptualization, providing several definitions, on its antecedents and determinants, on its effects/consequences, and also on possible measures and strategies for preventing or managing corruption in different contexts, especially in the public organizations.

Corruption has been generally defined by Transparency International (TI) as “an abuse of entrusted power for private gain.” Numerous definitions have been developed by scholars. For instance, corruption has been defined by Treisman [12] as “the misuse of public office for private gain and summarizes the theoretical approaches to corruption and its causes showing that those include legal system, level of democracy, religion, political stability, or the level of economic development.” Another general definition of corruption largely accepted conceives it as “an abuse of power for personal gain” [13]. Also, corruption has been conceived as the misuse of a position in the public administration or its connections for having own benefits or for others [14]. Beck [15] outlined that lower levels of corruption can be observed in countries with similar economic structures. Corruption represents a very complex phenomenon because of its different dimensions, that is, economic, social, political, and cultural dimensions [16, 17]. Furthermore, corruption has been conceived with the meaning of conflicts of interest and favoritism [18]. Corruption in these forms requires in-depth structural and mental changes in public bodies and society in general, and not only through adopting legislation and formal compliance [19]. Other scholars describe corruption as “a phenomenon that appears and develops in societies and public administrations where digitalization is low, bureaucracy is high, institutional transparency is weak, and internal and external communication is problematic” [20].

In summary, corruption can also be described as “the use public resources to achieve the personal benefit of individual, which happen in virtually all countries, but for countries that have economic resources such as oil, gold and minerals, instead of using the resources to reduce poverty and develop the country’s infrastructure, this money is taken for personal gain” [11, 21]. According to Transparency International (TI) (Patricia Moreira, the former director), corruption represents one of the main causes of poverty in countries recognized as the major challenge to face. Also, the World Bank (director Paul Wolfowitz) outlines a direct link between poverty and corruption because fighting corruption and fraud also implies to fight against poverty, since corruption as an economic crime and illegal phenomenon has a negative impact in terms of weakness for the development. Corruption can occur within countries through different channels, considering businesses practice and government practice.

Scholars beyond defining corruption try to investigate its determinants and antecedents. Among the main factors that create a favorable environment for the spread and growth of corruption, we can observe weak oversight, lack of accountability, and low level of transparency [11]. Indeed, the existing weak control system represents one of the main reasons for corruption, indeed, although there are many actors responsible for the control and preservation of public funds, an effective and proper auditing process is still lacking as well as training initiatives for internal audit management staff in public institutions are still scarce [22].

Two powerful forces, that is, internal and external powers, have been identified as main encouraging factors for corruption [23]. On one side, internal power concerns the values, principles, and morals of each person created through daily life and experiences and skills affected by family, friends, environment, and society; on the other side, external power refers to anger, low income, and lack of money. In Andersson’s study (2008) on non-OECD (Organization for Economic Cooperation and Development) countries, during 1996–2006 corruption has been determined by two time-varying factors, that is, the real gross domestic product (GDP) per capita and press freedom.

Most factors investigated linked to corruption show that corruption records the highest level in postcommunist Central or Eastern European countries [24].

Some scholars and reports outline the main cost derived from corruption, tax evasion, and other illicit financial flows in developing countries with an amount of about 1.26 trillion US dollars (USDs) every year [13, 25]. “This amount is approximately ten times as great as the global official development assistance, which would be sufficient to lift 1.4 billion people out of extreme poverty and sustain them above the daily poverty line of 1.25 USD for more than 4 years” [26].

Many contributions in the empirical research confirm a positive poverty-bribery association, especially in the least developed countries (LDCs) [27, 28, 29, 30, 31, 32, 33].

Furthermore, recently, the report by Transparency International (TI) shows that some countries present increasing corruption cases, especially sub-Saharan Africa and low and low-middle income countries of Eastern Europe, Central Asia, and the Middle East and North Africa (MENA) score particularly badly in terms of TI’s Corruption Perception Index (CPI) [34]. CPI represents an indicator for petty corruption, which is defined as the “everyday abuse of entrusted power by low- and middle-level public officials in their interactions with ordinary citizens who often are trying to access basic goods or services in places like hospitals, schools, police departments and other agencies” [35]. Considering the main difference between grand and petty corruption, petty corruption, compared to grand corruption, involves only administrators and not politicians [36] and mainly increases during the phases of economic turmoil, when the supply of goods and services is limited. Increasing bureaucratic hurdles, citizens must just pay bribes for the de jure public services without having any other chances left by public officials [37]. Petty corruption, as shown by empirical studies, disproportionately affects the poor swath of the population [38, 39, 40, 41]. Likewise, especially regarding municipalities’ service provision, corruption is further promoted from petty corruption in public service delivery [42]. Thus, corruption can be considered as the crucial challenge for achieving the twin goals of extreme poverty eradication and shared prosperity among the large swath of the population in developing and transition economies [39, 43, 44, 45].

Otherwise, corruption has been largely considered as an obstacle both for economic growth and for good public administration [20]. In this case, focusing the attention on public context, the public spending with its efficiency is significantly affected by transferring resources outside the economic and social system [46]. In the European Union (EU) in the recent years, we can observe the best performance in the world in reducing corruption, but the corruption costs for the EU economy are still high, estimated at Euros (EUR) 120 billion per year [13].

The main consequences linked to corruption consist of discouraging taxpayers from paying taxes [47], and decreasing resources with negative effects on social protection and public services [48]. Also, corruption represents one relevant factor able to distort the market and negatively affect both society and public and private institutions, it impacts large investments of international companies, which in turn can have negative effects on decision-makers’ work [49].

Corruption implies unequal distribution of local income in the society and the imperfection and distortion of the performance of local governments [50]. Among the several effects of corruption, at the individual and state levels, we observe poor services provided to society, low efficiency and effectiveness of social polarization in the services provided, limited attraction of investors, and weak economic development also considering the country’s infrastructure.

During the last two decades, among the main effects of corruption, there are social inequalities, and reduction of trust in the state, institutions, and public administration [51]. Moreover, corruption can damage income distribution and lead to the neglect of environmental protection. Particularly, in the state administration the main aspect of corruption is the reduction of trust in legitimate institutions, going to reduce their ability to provide appropriate public services and to promote much more the development of private sector [52]. In extreme cases, corruption can determine the complete failure of the government going to damage the legitimacy of the state, determining political and economic instability [53, 54, 55].

Hence, the widespread corruption is highly connected to greed, poverty, unemployment, weak institutions, and poor implementation of laws and ethical rules [56]. Corruption in large public projects, which represents the main challenge to development sustainability, is one of the major causes for the loss of public funds for the development of education, social care, healthcare, improving per capita income, and combating poverty, in both developed countries and Third World countries [50]. Otherwise, problems related to corruption often in some states highlight the correlation between competitiveness and local government corruption, where corruption tends to reduce the competitiveness between private companies in competing to win contracts with public institutions. In some countries that record a high level of corruption in local government, competitive private companies lose contracts with public institutions [57, 58].

The 2022 Corruption Perception Index (CPI) outlines that most countries are failing to stop corruption. Also, it has been estimated in that more than US$2.6 trillion, or 5% of global GDP, is annually lost to corruption around the world [59]. According to different scholars, several forms of corruption have been investigated in different countries by identifying high-risk sectors and determinants [19, 20, 47, 60]. Many differences between the member states in terms of crime definition, available indicators, and data recording methodology have been highlighted by the European Parliament [61]. National and EU policies and funds can be affected by corruption [54]. The recent report by European Commission (EC) [13] provides the estimation of the annual cost of public procurement corruption in the EU member states at € 5.33 billion [13].

Research on corruption also outlines and proposes possible measures and strategies to adopt for preventing or managing corruption in any context, especially in the public organizations. For instance, the promotion of transparency and the facilitation of citizen participation through Information and Communication Technology (ICT) tools can significantly reduce the negative impact of corruption [62].

Kim [63] studied the interaction between e-government and anti-corruption in government developing four models on 200 countries.

One possible effective policy response to corruption should be based on the evidence of its spread and form within a specific country, the institutional and other incentives, which facilitate or can be used against it. Thus, corruption has been recognized to be a very critical and systemic problem in the world and European countries and, for this reason, major changes in multiple levels are required, such as “management capacity, education, monitoring and corruption control institutions” [64], legislation, clear criteria for accessing to political and public positions, digitalization, transparency, and so forth. Because of the well-known causes and determinants of corruption, possible organizational practices and actions to face and reduce corruption, especially at the local level of administration, can concern: effective accounting transparency in using the public funds, avoiding to favor some private companies and illegal activities; effective and strict control systems, also through technological solutions and rules, to prevent illicit commissions collected for awarding public contracts for some companies and to check possible abuse by municipal officials of public goods for personal purposes; defining clear and strict policies for facing the emergency without easily obtaining for sale authorizations and licenses; developing a clear and strict system of rules, procedures, and limitations to contrast irregularities in construction safety, labor protection, fire safety, or other violations and to prevent the payment of illegal amounts in the provision of public services; harsh sanctions in case of non-compliance with the provisions included in the urban planning documents of the localities or general/specific rules and norms. Public managers and elected politicians can significantly affect preventing or reducing corruption in public institutions, for instance, by developing “anti-corruption strategies, policies, and tools and making internal changes to control and reduce corruption” [20]. There are already internal and external anti-corruption measures implemented by civil servants and politicians in public institutions [20]. For instance: “establishing the core values and integrity codes for effective and honest preventive conduct; elaboration of codes of conduct for civil servants as a component of the employment contract; creating internal commissions to identify the acts of corruption of officials and to prosecute them; collaboration with specialized institutions involved in the procedure of investigating corruption in the public institution; developing strategies for both repression and prevention of corruption and others” [20]. Also, the participation of corrupt organizations in public services area can be blocked by public managers and politicians by planning training programs for officials focused on preventing acts of corruption and knowing corruption.

The success key for preventing and reducing corruption concerns the efforts of many parties, most especially, regulatory bodies. The most important of which are the higher oversight bodies, “which are reliable to contribute significantly to anti-corruption if its role is activated and has the necessary ingredients and capabilities” [11]. Otherwise, in this scenario internal auditors play a relevant role in performing important functions within public institutions able to “prevent corruption, enhancing fight against fraud and credibility and reliability, deal equally with government officials, taking care and caution against the risks of government corruption and work to stop it” [11, 65].

2.2 Approaches in the research for corruption

There are different schools of thought regarding corruption in companies, either private or public organizations, each with different approaches and perspectives [66, 67, 68]. Some of the main ones include:

• Legalist Approach: This school of thought focuses on the legal aspect of corruption. It places emphasis on compliance with anti-corruption laws and regulations both nationally and internationally. It supports the importance of clear rules and procedures to prevent corruption and punish those who commit it [69].

• Ethical Perspective: This school of thought focuses on business ethics and integrity. It highlights the importance of moral values and ethical behavior within the company. It promotes a culture of corporate ethics, encouraging transparency, accountability, and social responsibility [70].

• Economic Approach: This perspective views corruption as an economic cost to companies. It highlights the negative effect of corruption on the company’s financial performance and competitiveness. It focuses on corruption risk management as an integral part of business management [71, 72, 73].

• Organizational Behavior Theory: This approach examines corruption because of dynamics within the organization. It focuses on cultural factors, leadership, power structures, and organizational practices that can promote or combat corruption within the company [74, 75].

• Political school: This point of view analyzes corruption in relation to power relations, politics, and political interests inside and outside the company. It examines how corruption can be influenced by political ties, lobbies, and relationships with government or other external actors [76].

These different perspectives offer complementary approaches to understanding corporate corruption. Typically, an effective strategy to address corruption involves a combination of these approaches, including implementing anti-corruption policies and procedures, promoting an ethical culture, managing economic risk, and analyzing internal organizational and political dynamics.

According to the rational choice approach, corruption and deviant behavior are usually analyzed using the agency model. In this key, the relationship that a public decision-maker has with the authority, and which constitutes the source of his official power, can be metaphorically represented as a relationship between a principal and an agent, in which the former tasks the latter with carrying out its objectives (to provide the “customers” or “users,” over whom the agency has jurisdiction and with whom it interacts, with public or private goods and services) by binding it with some form of contract, implicit or explicit.

In the sphere of government, the agent is a public official who can be identified with a politician, a bureaucrat, or a magistrate, according to a cascade model that covers all levels of the political-administrative system; for its part, the principal is conventionally identifiable with the “state” or “government.” In the case of the democratic regime, parliamentarians are the agents of the sovereign people, the government is the agent of the parliament, the senior bureaucrats are agents of the government, the lower-ranking officials are agents of their own administration represented by the hierarchical superior and so on, down to at street level [77, 78, 79, 80].

3. Corruption through an integrated reading: agency perspective and organizational behavior approach

In this chapter, going beyond the numerous and different approaches developed by scholars concerning corruption within organizations, a combination of Agency theory and Organizational Behavior Theory is provided. Hence, inspired by previous studies on the phenomenon [11, 20, 68] corruption phenomenon is investigated through the definition and development of an integrated and innovative framework, where ethical and social issues with the main related strategies are considered and considering mostly the organizational dimension.

3.1 Corruption in agency theory perspective

In the metaphor of the agency, corruption (in its many form variants) constitutes an intentional deviation of the agent’s behavior from the task of protecting the interests of the principal and a violation of the trust that the latter places in him. This is not a mere deviation from the standards associated with the office, failure to comply with commitments by an agent who does not carry out his duties or carries them out in a manner that does not comply with the provisions of the contract: this is rather non-compliance or fraud, as in case of a lax, absentee, unscrupulous, or simply inefficient bureaucrat; nor is it a simple abuse of power. The idea of corruption implies something more: the interference of a (generally) private outsider, to whom the agent illicitly gives advantages and arbitrarily recognizes rights, without the knowledge and against the will of the principal, in exchange for compensations of which the agent himself appropriates privately and covertly. From a relational point of view, therefore, corruption is not a dyadic, but a triadic relationship in which a third actor intervenes between the agent and the principal, part of the audience to which the agency’s activity is aimed, who diverts the action of the former by the objectives chosen by the latter, thus codifying the interaction structure of the agency itself. The proceeds (payoff) of corruption are, for the corrupter as well as for the corrupted, of various nature, but can be conventionally included under the general category of income.

Let us stop to better consider the relationship between agent, principal, and third party, as it typically occurs in every type of corruption phenomenon, but which applies in particular to public administration. For this purpose, the following assumptions will initially apply: (a) all the actors involved are rational and self-interested; (b) the objectives of the principal, those of the agent, and those of the third-party corrupter are, at least in part, divergent from each other (i.e., there is a conflict of interest between them); and (c) their relationships are susceptible to post-contractual opportunism (i.e., there is a hypothetical willingness in each to violate the stipulated contract if this is advantageous).

In this key, the elementary structure of every corrupt political interaction is the following: a public agent covertly colludes with an outsider to achieve his own private interest rather than that of the principal as established by the agency contract. But beneath the apparent simplicity of this stylized description, corruption is a structurally and culturally complex and ambiguous phenomenon, which is susceptible to giving rise to disparate manifestations and which can be analyzed under multiple profiles; as can be seen from the multiplicity of definitions, even very different ones, that have been given over time.

The element, which is highlighted by the scheme agency, is that of the violation of an official duty by the corrupt person: the public agent deviates from the standards of exercise of authority permitted by the law and foreseen by the contract that binds him to the agency where he is “employed,” abusing the delegation and damaging the principal [81].

A second aspect, relevant for arguing on the moral aspects of corruption, is that the agent betrays the trust of the principal. It can be said that the agent secretly replaces the principal to whom he is bound by an obvious contract with a second principal to whom he is bound by a hidden contract, thus becoming the agent of two principals and obtaining from the double delegation an illegitimate surplus, a double remuneration. It must be reiterated that there is a conflict of interest between the two main ones, otherwise corruption would not be necessary: you do not pay for what you can have for free. Decisional cooperation—but in this regard it is better to certainly speak of collusion—which is established between the corrupt agent and the third corruptor involves a corresponding defection of the former toward the legitimate principal, of which the latter is not aware and in the face of which cannot react with similar defection. A betrayal which, as such, has an essential prerequisite in secrecy [82].

Finally, a further element, often not adequately underlined, which characterizes corruption in the political-administrative field, is that the corrupt agent gives up prerogatives of authority to the third corruptor, “customer” or “supplier” of the public agency, allowing him to illicitly influence decision-making and to attribute its property rights. By doing so, the agent not only deviates from the role assigned to him by the contract; not only does it betray an agreement freely entered into with the principal; but he gives up something that does not belong to him—the power to decide delegated to him—and markets an asset—authority—which, due to its intrinsic character, cannot be privatized or alienated [83, 84].

Alienation from office, betrayal of trust (felonia), and private devolution of authority (simony)—the classic metaphors of corruption—are morally stigmatizable behaviors as well as (and before) legally sanctionable, especially where they concern—as in the case of an “order secular”-like bureaucracy: the category of corruption carries implicit not only a legal and organizational value, but an ineliminable derogatory ethical significance which causes a problem and to which we will return.

3.2 Incompleteness of contracts and information asymmetry

Why can an agent fail to respect a contract and prevaricate, deceiving the principal and entering into a relationship of collusion with a third party? And when (under what conditions, based on what reasons) will you decide to do so? How can you prevent it? Here are three decisive questions, clearly related, which largely summarize, from a micro perspective, the endless ongoing debate on public misbehavior and which we could reformulate as follows: how is corruption possible; what makes it probable and facilitates it; how can you fight it and keep it under control?

The answer to the first question—why corruption? —is twofold and goes researched in the theoretical dimension of information and contracts [85]. First, the terms of the contract binding an agent to the principal are variously specified, but never completely specifiable. In other words, contracts—which in the public sector are stipulated following elections, appointments, or competitions—are always incomplete and their incompleteness is the basis of the agent’s ability to use the margins of ambiguity and indeterminacy to his advantage. Contractual incompleteness can concern both the principal’s objectives and the ways to achieve them: both programs and procedures, both results and processes. In fact, both must always be interpreted to a greater or lesser extent and in this faculty lie the agent’s “freedom” and his possibility of deviating. In the public area, the will and interest of the principal (the state) is expressed through primary (laws) and secondary regulations (regulations, executive decrees, or circulars) that specify the objectives (the will). In this regard, it often happens that not only are the rules incomplete and unclear, but that they are plethoric and contradictory, thus allowing for wide interpretative variance and multiplying the degrees of freedom of those who must implement them. Furthermore, each contract establishes only some of the acts necessary to achieve the preestablished objectives: there is therefore always a variable space of behavioral autonomy on the part of the agent, which sometimes borders on actual arbitrariness, which he can take advantage of to secretly undertake courses of opportunistic action. Let us take the case in which the agent is a public official, subordinate to a hierarchical superior—a principal, in turn agent of other principals—within an administrative system. Very often, this agent has the possibility either to assign or not to assign a public good, or to restrict or enlarge it, accelerate or delay its assignment. He is contractually committed to carrying out certain tasks but, although his duties are specified and the procedures that regulate his actions are meticulously defined, there will in any case be a role variance—a discretion—which can be exploited, either to arbitrarily assert his authority (abuse of power) or to enter into illicit transactions with the interlocutors of his office (collusion): for example, in speeding up or slowing down a practice, granting or refusing a license or provision, establishing a queue, assigning a contract, or granting permission. On the other hand, it is often impossible for the principal to define the contract more precisely from a procedural point of view and, moreover, it would not always be appropriate: the procedures cannot be preliminarily specified beyond certain limits and excessive fussiness and rigidity can reduce their efficiency, discouraging workers and creating further opportunities for rent-seeking. Second, in addition to contractual uncertainty, there is always an information asymmetry between principal and agent, in the sense that the agent, due to his organizational position, knows things that the principal cannot know, unless he assumes an additional cost for its control: that is, the agent enjoys a systematic information advantage, which can once again concern both the procedures (the way in which he carries out his tasks) and the product of the administrative action (the results obtained).

Contractual incompleteness and information imbalance essentially generate a double level of discretion which in public administration is susceptible to resulting in abuse of power and collusion.

Information problems, incidentally, also exist between agent and corruptor (second principal), especially in the case in which the performance of the first or the payment of the second is deferred. Both can deceive each other without it being possible to legally sanction (given the illegitimacy of the contract that binds them) whoever defects; both will try to protect themselves so as not to deserve the “sucker’s reward.” To maximize returns and prevent defections, the collusive game that is established between a criminal agent and a corrupting outsider will therefore have to be protected from moral risk. Solvency and stability of corrupt transactions can be ensured through the provision of endogenous guarantees of compliance with contracts: the institutionalization of networks and party “machines”—typical of Tangentopoli—will have the effect of ensuring the indefinite repetition of the game, constituting a capital of trust-omertà capable of producing self-enforcing effects, i.e., self-sustaining balances.

Alternatively (or complementary), it will be possible to resort to the threat of exogenous sanctions, through the intervention of organized crime to protect illegal contracts, as it typically happens in mafia areas. Once established, beyond certain thresholds, the game not only maintains itself but expands diffusively, produces its own incentives for collusive deviations and becomes a cumulative process that tends to generalize up to the point in which all the corruptibles become corrupted, while all the others withdraw from the “market.” Adverse selection thus determines, in the long run, what is called a system with a high density of corruption, or “environmental corruption” [86, 87, 88].

Every principal is aware of the incompleteness of the contract and the information asymmetries that undermine the agency relationship and therefore of the possibility that the agent deviates from his mandate and betrays the delegation received. To minimize the moral risk (which can never be completely eliminated), he can act in two ways: reduce the agent’s discretion through a more precise definition of the contract; assign an overseer (a second supervising agent) who, from a more favorable position than him, ensures that the preestablished tasks are correctly carried out and/or the objectives achieved.

The first way involves a more accurate definition of the procedures through the establishment of action protocols and standardized job descriptions that the official must comply with, given a certain regulatory input. This type of control concerns the processes, the how to do it, and not the results. Especially in the administrative sector, an agent is often not recruited to do something, but to do something in a certain way: it is implicitly assumed that the what is a by-product of the how, that a particular modus operandi implies in itself a controllable substantive outcome. It is typical of bureaucratic formalism to believe that meticulously predetermining the procedures for carrying out a public policy—and therefore the actions of the agent—means controlling the outcomes. But as we have seen, not only are procedural instructions not entirely predefinable and their specification costs are increasing in the face of decreasing expected returns, their ability to control the agent’s behavior is limited and always allows for deviations. They can prove to be inefficient and contradictory to the very goals of the principal and the agency, slowing down administrative action, mortifying the creativity of officials, preventing their responsiveness, and generating further opportunities for corruption. The preventive control incorporated into the procedures is therefore insufficient both to determine a good outcome of a policy and to prevent opportunistic deviations [80].

Also, the strategy aimed at reducing information asymmetries through the establishment of surveillance and control roles is full of inconveniences and constraints. The supervisory function can take on various structural configurations and operate according to different methods of intervention oriented toward legitimacy or effectiveness, process or product. The supervisors can check the conformity of the agent’s behavior with the procedures and constraints established by the agency both ex ante (formal control of legitimacy by the various accounting magistrates, auditors, and so on), and in itinere (through the control management, inspections, the institutionalized voice of users and peers, etc.); or they can try to control the outcomes of the administrative action through ex post evaluation activities of the policies.

Various means can be activated for the specific purpose of revealing the corruption or bad behavior of the agent: internal trustees, commissions of inquiry, headhunters, covert agents, whistle-blowing, hot lines, complaint boxes, customer committees, and participant diagnosis [69, 89, 90].

Regardless of the effectiveness of each of these methods, the control of the agent by the principal via supervisor faces at least three systematic difficulties:

1. it is expensive and poses efficiency problems (it may cost more than the expected damage);

2. poses problems of controllability of the supervisors from collusion with the agents; and

3. never completely eliminates, even if it usually decreases, the agent’s information advantage and therefore his possibilities of abuse and collusion.

Incompleteness of contracts and information asymmetries—with the related problems of adverse selection and moral risk—constitute the structural factors, only partially controllable, which explain the possibilities of deviations and improper transactions between agents and customers of an agency. These factors are at the root of the agent’s discretion and the possibility that he has to opportunistically and covertly use this discretion for private objectives against the interest-will of the principal. It is by virtue of this ineliminable (albeit variable) discretion that the agent can abuse his authority and choose a new hidden master, thus becoming the agent of two principals.

If these are the structural factors that explain why it is possible to corrupt and be corrupt even within an organization with standardized tasks and systematic controls, it remains to be understood—going into the heart of our topic—under what conditions a corrupt agent or an external corruptor will take advantage of the opportunities that, albeit to a different extent, each agency situation offers them by deciding to enter into a corrupt relationship. When will an agent or client choose opportunistic and illicit courses of action?

The conventional economic theory of crime response to this question is extremely simple and linear: the corrupt choice, like any other rational choice, is determined by the selfish desire, inscribed in the naturalness of the human being, to maximize one’s utility and improve one’s well-being. An actor will engage in a dishonest undertaking, giving rise to behavior that does not conform to the will of the principal, when the benefits expected from this course of action are presumably greater than the costs he could incur and greater than those obtainable, with the same inputs, in any alternative course of action.

In this key, the decision to bribe or be bribed, or in any case to act improperly to one’s own advantage and to the detriment of the principal, follows from the relationship that, in the calculation of the potential transgressor, is established between two groups of independent variables: the entity of earnings and the extent of the expected costs linked to the illicit choice.

Let us take the case that an official of a public agency is offered, by a user or a supplier, a bribe in exchange for obtaining an improper advantage of some kind. As a first approximation, it can be assumed that the agent will accept the bribe if and only if the bribe (T) minus the risk he estimates he will run in terms of criminal or disciplinary sanctions (P) is greater than his remuneration (R). That is, if (T–P) > R. Given a certain structure of opportunities (discretion and monopoly of office), the probability that corrupt transactions are established between agents and customers is negatively correlated with the size of the official’s salary and with the subjective probability of legal sanctions. From what has been said, it emerges that a strategy aimed at combating corruption should focus on R (i.e., on salary levels high enough to dissuade officials from jeopardizing them) or on P (i.e., on a system of negative incentives and organizational mechanisms capable of keeping the chances of detecting and sanctioning deviant behavior are high), or on a mix of both.

The problem of information asymmetry does not seem definitively solvable, but it seems possible to improve the quality of the information available from the principal. On a theoretical level, it means integrating the economic perspective with elements of behavioral theories. In other words, it means asking yourself a simple question: what information should the principal have available to reduce the risk of deviant behavior?

As Gorsira et al. [91] suggest, corruption ultimately results from decisions made by individuals. Various disciplines have postulated explanations for why some individuals are more prone to corruption than others, specifically economics, criminology, and social psychology [92]. The most prominently explanations include incentives [88, 93], opportunities [75, 94], and norms [95]. A recent study demonstrated that all of these factors were, indeed, related to proneness to corruption [92].

The study showed that public officials and business employees who perceived higher benefits of corruption and perceived lower costs of corruption and a less severe punishment were more prone to engage in corruption [92]. Similarly, employees who perceived more opportunities to engage in, and less opportunities to refrain from corruption reported to be more prone to it. Employees who reported weaker personal norms, i.e., who felt less morally obliged to refrain from corruption, and who reported weaker social norms, i.e., those who thought their close colleagues approved of and engaged in corruption, also reported to be more prone to corruption. The outcomes of this study further suggest that the motives that contribute uniquely to employees’ proneness to corruption, when other motives were controlled for, were the perceived opportunity to refrain from corruption and personal and social norms on corruption.

3.3 Corruption in organizational behavior theory perspective

We have previously argued that corruption was an intentional deviation from expected behavior resulting from a decision-making process. The agency theoretical perspective explains that the potential for opportunism is a function of a condition of information asymmetry that is established between principal and agent.

If this condition cannot be resolved permanently, it seems possible to improve the quality of the information available from the principal. On a theoretical level, it means integrating the economic perspective with elements of behavioral theories.

The work environment is made up of individuals who operate interdependently. It is reassuring to think that corruption is the result of the actions of small groups of colluding individuals, as this approach allows us to imagine simple and quick solutions to solving the problem. In other words, we associate corruption with individual pathological characteristics.

In addition to the individual level, the organizational level is also relevant as organizations influence the actions of their members. The organizational culture, in fact, creates internal rules of behavior, often unwritten, which guide the actions of employees. If such norms and practices operate primarily to serve the competitive interests of a company and prevail over others that protect the interests of other stakeholders, including those of society as a whole, such an organizational culture may be appropriately labeled as unethical, as can the organization itself.

Some relevant information is directly detectable from the reference context or from the complex system of working relationships that make up the work environment.

Taken together, rationalization and socialization practices allow perpetrators of unethical activities to believe that they are moral and ethical individuals, thereby allowing them to continue engaging in these practices without feeling pangs of conscience [96].

One of the most intriguing findings in the white-collar crime literature is that corrupt individuals tend not to view themselves as corrupt. People convicted of white-collar crimes tend to acknowledge their errant behavior but deny criminal intent and the label of criminal [97]. They avoid the tag of being corrupt by using a number of rationalizing tactics that allow them to look at their corrupt acts in a way that makes them appear to be normal and acceptable business activities. Rationalizations often capitalize on the inherent complexity, ambiguity, and dynamism that pervade organizations. Actions that look patently corrupt in the clarity of hindsight may have been undertaken on the fly, under pressure, and with incomplete and contradictory information.

In any organization or subunit, corruption can continue only if newcomers also start exhibiting the behaviors. When newcomers are first exposed to ongoing unethical practices, they often experience significant dissonance and apprehension. Individuals may be so uncomfortable that they leave the organization. Ironically, this helps perpetuate the corruption by weeding out those who are most averse to it. However, researchers examining corruption in organizations have found that there exist potent socialization tactics by which newcomers are induced to accept corrupt practices. This is often done in conjunction with the rationalizing tactics. Based on a review of white-collar crime in the past century, Ashforth and Anand [1] identified three such processes: (1) co-optation, (2) incrementalism, and (3) compromise.

The three forms of socialization are not mutually exclusive: they may exist simultaneously and frequently reinforce each other. For instance, the first incremental steps into corruption are hastened if rewards exist to co-opt individuals into the process. Co-optation is much easier if the individuals, at least initially, take baby steps into the realm of corruption. And finally, when individuals are forced into compromise situations, the rewards associated with an unethical course of action may induce them to choose it over the other.

In an organization where corrupt acts have long been supported by rationalization and socialization, corruption can become entrenched in organizational structures and processes. Reversing corruption can therefore be a challenge.

Since the employees involved do not consider themselves corrupt, a strong shock, such as public exposure, is often necessary to stimulate recognition of the need for change. Once ongoing rationalization and socialization have been discovered, organizations must make reversal a top priority.

When unethical actions are exposed within organizations, there is often a significant reluctance to acknowledge the truth, regardless of the strength of the evidence. This resistance is not unexpected because rationalization, inherently, leads people to believe that no wrongdoing has occurred.

4. Conclusions

This conceptual study provides an innovative and integrated reading of corruption phenomenon, mostly within public organizations, through the lens of both agency theory and organizational behavior approach.

Agency theory typically examines the relationships and conflicts between principals (like shareholders) and agents (like managers), which could provide insights into how corrupt practices emerge and are sustained in organizations.

Meanwhile, the organizational behavior approach would likely focus on the human aspects, such as attitudes, behaviors, and group dynamics, contributing to corruption. This combination offers a multifaceted view of corruption, encompassing both structural and human elements.

The central element that characterizes the theory of agency is represented by the condition of information asymmetry which qualifies the relationship between principal and agent.

It has been highlighted that this condition cannot be eliminated and therefore together with the incompleteness of the contracts, it can generate conditions favorable to potential fraudulent behavior. The reduction of information asymmetries in the agency relationship can be determined not only by the availability of information but above all by the quality of this information which can be deduced from the reference context and therefore from the organizational context in which the principal and agent operate.

Understanding the rationalization tactics and the socialization dynamics of fraudulent behavior in organizations represents a powerful tool capable of reducing the risks of unethical behavior to design adequate codes of conduct or implement control tools.