Organizational Crime: Causes, Explanations and Prevention in a Comparative Perspective 3658389591, 9783658389598

Citation preview

Organization, Management and Crime – Organisation, Management und Kriminalität

Markus Pohlmann  Gerhard Dannecker · Dieter Dölling Dieter Hermann · Kristina Höly Maria Eugenia Trombini Subrata K. Mitra Editors

Organizational Crime Causes, Explanations and Prevention in a Comparative Perspective

Organization, Management and Crime - Organisation, Management und Kriminalität Series Editors Markus Pohlmann, Max-Weber-Institut für Soziologie, Universität Heidelberg, Heidelberg, Germany Stefan Bär, Max-Weber-Institut für Soziologie, Universität Heidelberg, Heidelberg, Baden-Württemberg, Germany Friederike Elias, Max-Weber-Institut für Soziologie, Universität Heidelberg, Heidelberg, Germany Julian Klinkhammer, Max-Weber-Institut für Soziologie, Universität Heidelberg, Heidelberg, Germany Elizângela Valarini, Max-Weber-Institut für Soziologie, Universität Heidelberg, Heidelberg, Germany

Die Reihe ist im Bereich der Organization Studies angesiedelt und hat ihren Schwerpunkt im Schnittfeld von Wirtschafts- und Organisationssoziologie. Sie widmet sich dem Zusammenhang von verschiedenen institutionellen Feldern (Wirtschaft, Medizin, Staat etc.) mit den Organisations- und Managementformen, die in diesen vorherrschen. Neben organisationssoziologischen Studien werden managementsoziologische Analysen sowie Studien zur organisationalen Kriminalität in die Reihe aufgenommen. Darüber hinaus beschäftigt sich die Reihe mit aktuellen Themen (z.B. Liberalisierung der Wirtschaft, Subjektivierung der Arbeitswelt, Ökonomisierung der Medizin oder der Politik) und sie hinterfragt gängige Erklärungen öffentlicher Skandale, die von Manipulation, Korruption oder Betrug in Organisationen handeln. This book series establishes itself in the field of organization studies and focuses on the intersection between economic and organizational sociology. It is dedicated to the context of various institutional fields (economy, medicine, state, etc.) with the predominant organizational and management forms therein. In addition to studies on organizational sociology, management-related sociological analyses as well as studies on organizational crimes are included in the series. Also enclosed are current developments, such as Neoliberalism in the economy, the economization of medicine as well as the state of and the explanation for current scandals of manipulation, corruption and fraud.

Markus Pohlmann · Gerhard Dannecker · Dieter Dölling · Dieter Hermann · Kristina Höly · Maria Eugenia Trombini · Subrata K.  Mitra Editors

Organizational Crime Causes, Explanations and Prevention in a Comparative Perspective

Editors Markus Pohlmann Max-Weber-Institut für Soziologie Ruprecht-Karls-Universität Heidelberg Heidelberg, Germany Dieter Dölling Institut für Kriminologie, RuprechtKarls-Universität Heidelberg Heidelberg, Germany Kristina Höly Max-Weber-Institut für Soziologie Ruprecht-Karls-Universität Heidelberg Heidelberg, Germany Subrata K. Mitra Südasien Institut, Abteilung Politikwissenschaft, Ruprecht-Karls-Universität Heidelberg Heidelberg, Germany

Gerhard Dannecker Institut für deutsches, europäisches und internationales Strafrecht und Strafprozessrecht, Ruprecht-KarlsUniversität Heidelberg Heidelberg, Germany Dieter Hermann Institut für Kriminologie, RuprechtKarls-Universität Heidelberg Heidelberg, Germany Maria Eugenia Trombini Max-Weber-Institut für Soziologie Ruprecht-Karls-Universität Heidelberg Heidelberg, Germany

ISSN 2945-9842 ISSN 2945-9850 (electronic) Organization, Management and Crime - Organisation, Management und Kriminalität ISBN 978-3-658-38959-8 ISBN 978-3-658-38960-4 (eBook) https://doi.org/10.1007/978-3-658-38960-4 © The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2023 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors, and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. Responsible Editor: Stefanie Eggert This Springer VS imprint is published by the registered company Springer Fachmedien Wiesbaden GmbH, part of Springer Nature. The registered company address is: Abraham-Lincoln-Str. 46, 65189 Wiesbaden, Germany

Preface

The present anthology grew out of a long-standing interdisciplinary cooperation of Heidelberg lawyers, criminologists, and sociologists who initially joined forces to empirically test the perspective of “useful illegality” (Luhmann 1964) using uncovered corruption cases. The decisive factor was the group’s observation that only in a minority of cases did the judiciary succeed in tracing the managers’ illegal activities to personal enrichment, sanctioning them accordingly, on the basis of individual motives. Instead, the collective benefits, to increase company profitability, appeared to be the central rationale to justify the participation of many people with organizational membership in wrongdoing. If the costs of rule deviation following the detection of the scandals did not materialize, then the risks of engaging in misconduct would be worth it for company members and professional groups. The research group set out to empirically explore this field in more detail. Thanks to start-up funding from Heidelberg University (Field of Focus 4, Main Research Area “Self-Regulation and Regulation: Individuals and Societies”), scholars falling under the umbrella of “Organizational Crime Studies” started to chart the territory to investigate the social causes, institutional constraints as well as the legal consequences of active corruption. As early as 2013, an interdisciplinary workshop with the aim of promoting exchange between experts and practitioners in this complex of topics was held. A closer look at the German transplantation scandal from 2012 quickly made it clear that such a phenomenon was not limited to the business sector, but was also prevalent in medicine. Follow-up funding from Heidelberg University’s Excellence Strategy (innovation fund “Frontier”) in 2013/2014 further contributed to the research program. Subsequently, a multi-year funding from the Volkswagen Foundation awarded to examine “The Fight against Corruption and Manipulation” (2014–2017) finally

V

VI

Preface

enabled a systematic empirical comparison between (illegal) rule deviations in business and medicine. While the sectoral comparison initially compared cases from Germany and the USA, the international perspective on the topic expanded more and more. Through a smaller, university-funded project (Frontier) titled: “When deviance becomes the norm … – Studies on corruption in Chinese enterprises,” we got the first empirical insights into the terra incognita of corruption in China. In 2017, dedicated to the subject “Bribery, Fraud, Cheating: How to Explain and to Avoid Organizational Wrongdoing,” a Herrenhäuser Symposium took place in Hannover, showcasing further examples from Germany, the USA, Brazil, and China. In addition, the conference placed deviant behavior from other sectors of society, such as politics and sports, within the scope of our research agenda. Finally, a major project analyzing corruption cases in Brazil was approved by the DFG in 2019 (“Organizational Crime and Systemic Corruption in Brazil”). In the same year, an international conference on “Corporate Crime and Illegal Party Financing in a Comparative Perspective: The Role of Regulation and Self-Regulation” was held in Heidelberg by, among others, the editors of this book. All of these pieces of the puzzle contributed to the further development of our research focus and to the fact that we can now explicitly address issues related to the prevention of deviant behavior in the context of compliance research. We are grateful to the Max Weber Institute for Sociology of Heidelberg University for the administrative infrastructure, and general institutional support. Our special thanks go to all the speakers at the workshops and conferences, the editors and authors of this anthology, as well as all other researchers in our projects. We are particularly grateful to Anne Streng-Baunemann, Christian Mayer, Lucia Schwaab, Christin Schultze, and Elena Zumbruch, who supported data collection and analysis in the early stages of the project. We dedicate this anthology to the VolkswagenStiftung, for their funding and support through the research project on “The Fight against Corruption and Manipulation” (2014–2017) with our deep appreciation. Markus Pohlmann & the editors

Contents

Introduction How to Explain and Fight Organizational Crime . . . . . . . . . . . . . . . . . . . Markus Pohlmann, Subrata K. Mitra, Gerhard Dannecker, Dieter Dölling, Dieter Hermann, Kristina Höly and Maria Eugenia Trombini How to Analyze Organizational Crime – Theory, Concepts, and Methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Markus Pohlmann

3

19

Corporate Crime, Manipulation, and Compliance: The Case of Germany a) The Corporate Sector The Development of the German Criminal Regulations Against Corruption in the Public Sector. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dieter Dölling

65

The Development of German Criminal Law Against Corruption in the Private Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gerhard Dannecker

93

German Corruption Cases Reflected in Criminal Files—Individual or Organizational Deviance? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dieter Dölling and Ludmila Hustus

123

VII

VIII

Contents

Compliance, Integrity, and Prevention in the Corporate Sector: The Collective Mindsets of Compliance Officers in Germany . . . . . . . . . Markus Pohlmann and Sebastian Starystach

133

Limits of Formal Regulation: How Informal Norms and Criminogenic Values Affect Managers’ Readiness to Corrupt . . . . . . . . . Dieter Hermann, Markus Pohlmann and Julian Klinkhammer

165

Experimental Corruption Research in Germany: The Lab Studies . . . . Alexander Fürstenberg

191

Corporate Crime, Manipulation, and Compliance: The Case of Germany b) The Medical Sector The German Organ Transplant Scandal: An Analysis of Court Records and Official Documents from the Medical Association. . . . . . . . Markus Pohlmann and Kristina Höly

207

The German Organ Transplant Scandal: The Collective Mindsets of Physicians . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Markus Pohlmann and Kristina Höly

231

Decision-Making Processes of Physicians After the Organ Donation Scandal in Germany: The Factorial Survey . . . . . . . . . . . . . . . Dieter Hermann, Gerhard Dannecker and Markus Pohlmann

251

Corruption, the FCPA, and Compliance Regulations in the U.S. In Search of Organizational Crime in the U.S.: the FCPA Court Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Alexander Fürstenberg and Julian Klinkhammer

281

Compliance, Integrity, and Prevention in the Corporate Sector: The Collective Mindsets of Compliance Officers in the USA . . . . . . . . . . Markus Pohlmann and Sebastian Starystach

319

Systemic Corruption in Brazil Formal Rules and Institutional Increments in Brazil . . . . . . . . . . . . . . . . Mário H. Jorge Jr

361

Contents

IX

Organizational Crime in Brazil: The Petrobras Case . . . . . . . . . . . . . . . . Elizângela Valarini

377

The Anti-Corruption Mindset of Brazilian Law Enforcers . . . . . . . . . . . Maria Eugenia Trombini and Elizângela Valarini

403

Corruption in China New Laws and Law Enforcement to Fight Against Bribery in China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yuan Yuan Liu

423

Detected Cases of Bribery in China: The Analysis of Court Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yuan Yuan Liu

431

Epilogue - Coping with Organizational Crime Companies as Responsible Actors and Corporate Citizens—Corporate Criminal Responsibility Under the Rule of Law as a Consequence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gerhard Dannecker and Thomas Schröder The Puzzling Resilience of Organizational Wrongdoing: Some Policy Implications for a Global Regulation Regime . . . . . . . . . . . Subrata K. Mitra

445

473

Contributors

Prof. Dr. Dr. h.c. Gerhard Dannecker is Professor of Criminal Law and Criminal Procedure and former Director of the Institute for German, European and International Criminal Law and Law of Criminal Procedure of Heidelberg University, Germany. He is a member of the Presidium of the Association of European Criminal Law and of the Editorial Board at several national and international journals. Professor Dannecker is also a Member of the Main Editorial Advisory Board of the “European Financial Services Law” in London and of the scientific committee of the internet portal disCRIME. Prof. Dr. Dieter Dölling  was Professor of Criminal Law and Criminology at the University of Göttingen from 1985 to 1987 and at the University of Erlangen/ Nürnberg from 1987 to 1990. From 1990 to 2021, he was Director of the Institute of Criminology at the University of Heidelberg. His research focuses on juvenile delinquency and juvenile criminal law, corruption, crime prevention, empirical research on criminal procedures and sentencing, sentencing law, and substantive criminal law. Alexander Fürstenberg  is a PhD student at the Max-Weber-Institute of Sociology, Faculty of Economics and Social Sciences, Heidelberg University, Germany. His research and teaching focus on the institutional and organizational cultural embedding of corruption. Using laboratory-experimental research designs, he empirically investigates the action-guiding effect of historical-path-dependent patterns on corruption in Germany, Poland, and Russia. Prof. Dr. Dieter Hermann is a Professor at the Institute of Criminology at Heidelberg University. Academic degrees include a diploma in mathematics, a doctorate in sociology, and a habilitation at the faculty of social and b­ ehavioral

XII

Contributors

sciences. Research and publications focus on the areas of criminology and cultural sociology. A central field of research consists of studies on community crime prevention, sexual abuse, corruption as well as the socialization of values, norms and religiosity and their influence on criminality. Dr. Kristina Höly is a postdoctoral researcher at the Max-Weber-Institute of Sociology at Heidelberg University, from where she holds Master of Arts (2012) and Ph.D. in Sociology (2017). She is a member of the research group HeiGOS (Heidelberg Research Group for Organization Studies). Her research interests lie in the Sociology of Organizations and Management, with a current focus on explaining wrongdoings in organizations. In doing so, she primarily applies qualitative methods of empirical social research. Ludmila Hustus  is a Lecturer in Criminal Law and Criminal Procedure at the Faculty of Law and a Fully Qualified Lawyer in the Division of Student Affairs and Teaching at Heidelberg University. She graduated in law and administrative sciences from Heidelberg University (Magistra of Law), Goethe University Frankfurt (Magistra Legum of European and International Business Law) and Speyer University (Magistra rerum publicarum). For several years, she was a Research Associate at the Institute of Criminology and the Institute for German, European and International Criminal Law and Law of Criminal Procedure at Heidelberg University. She is a Fellow of the European Law Institute, Belgium. Mário H. Jorge Jr.  is a lawyer and a researcher, member of the Organizational Crime Studies Group at the Max-Weber-Institute for Sociology of Ruprecht-KarlsUniversität Heidelberg. Ph.D. candidate at the Law Faculty of the Humboldt Universität zu Berlin, Master of Laws (LL.M.) from Augsburg Universität, Bachelor of Laws from the Faculdade de Direito de Curitiba with a post-graduate specialization in Corporate Criminal Law from Universidade Positivo. His research focus are the areas of corporate wrongdoing, compliance, and criminology. Dr. Julian Klinkhammer  received his doctorate in 2016 from the Max-WeberInstitute of Sociology at Heidelberg University, with a sociology of management study on the industrial elite in Switzerland. His research spans from change in modern capitalism, white-collar and corporate crime, to careers and labor markets. Since 2019, he has been working as a consultant for one of the leading auditing and consulting services organizations in Germany, advising clients in the area of governance, risk and compliance.

Contributors

XIII

Yuan Yuan Liu  is a Ph.D. student at the Max-Weber-Institute of Sociology of Heidelberg University with her primary focus on international management studies and organizational crime studies. Over the recent years, she has taken part in two research projects: “Top Managers in East Asia” (2011–2013) and “When Deviance Becomes the Norm: Studies on Corruption in Chinese Companies” (2016–2017). Prof. em. Subrata K. Mitra Ph.D. (Rochester), is an Emeritus Professor of Political Science at Heidelberg University, and Adjunct Professor at Dublin City University, Dublin, Ireland. He was head of department of Political Science, South Asia Institute of Heidelberg, 1994–2014, and Visiting Research Professor, National University of Singapore, 2015–2018. Comparative Politics, Foreign Policy and Middle Range Theory are the main focus of his research. He is the author of ‘Governance by Stealth: the Ministry of Home Affairs and the Making of the Indian State’ (OUP 2021), and co-editor with Markus Pohlmann and Elizangela Valarini of ‘Political Corruption and Organizational Crime: The Grey fringes of Democracy and the Private Economy’ (Springer, 2021). Prof. Dr. Markus Pohlmann is Professor for organizational sociology at the Max-Weber-Institute of Sociology at Heidelberg University. His areas of specialization include the sociology of organization and management, economic sociology, and the study of organizational crime in international comparison. His work focuses on the social significance of economic elites and on generational change and the associated change in values in top management. His current research interests include interdisciplinary corruption research, organization and management, and evidence-based compliance. Prof. Dr. Thomas Schröder  born 1979 in Kiel. Studies and further legal training in Exeter (UK), Bayreuth, Göttingen and Hamburg (fully qualified lawyer since 2009). Dr. jur. in Heidelberg 2011. Lawyer for white-collar criminal law and compliance consulting from 2010–2014 (working for a London based law firm in Frankfurt a. M. and Munich as well as Deutsche Bahn Group). Academic counsel at the University of Heidelberg 2015–2021 (chair of Prof. Dr. Dr. h.c. Gerhard Dannecker). Since 2021: professorship for criminal law and criminal procedure law at the College of Police Baden-Württemberg. Research interests: Criminal law on corruption, sociology of law, criminal procedural law.

XIV

Contributors

Dr. Sebastian Starystach studied sociology, political science and philosophy at the Universities of Heidelberg and Wrocław. After graduating in 2012, he was a research assistant at the Max Weber Institute for Sociology at the University of Heidelberg until 2020. From 2013 to 2016, he was a visiting lecturer at the Collège Universitaire de Sciences Po Campus in Nancy. In 2017 he completed his PhD on the social practice of court procedures. He is currently a postdoctoral researcher at the Institute of Medical Sociology and Rehabilitation Science at the Charité Berlin. Maria Eugenia Trombini  is a postdoctoral researcher at the Max-Weber-Institute of Heidelberg University, from where she holds a Ph.D in Sociology. She is a member of the Organizational Crime Studies group and of the Corporate Crime and Systemic Corruption in Brazil project (DFG – FAPESP). She holds a Bachelor of Law from the Faculty of Law of Curitiba, a Bachelor in Social Sciences and an M.A. in Political Science from the Federal University of Paraná (UFPR), Brazil. Dr. Elizângela Valarini is a postdoctoral researcher and Assistant Professor at Max-Weber-Institute of Heidelberg University, from where she holds a Master’s degree and Ph.D. in Sociology. She is a member of the research group HeiGOS (Heidelberg Research Group for Organization Studies) and coordinates the research project Corporate Crime and Systemic Corruption in Brazil (funded by DFG – FAPESP). She studied Psychology at the Universidade Estadual de Maringa (UEM), Brazil. Her research areas span from organizational sociology, the sociology of management, and economic sociology, and themes related to Brazilian economic and political development.

Introduction

How to Explain and Fight Organizational Crime Markus Pohlmann, Subrata K. Mitra, Gerhard Dannecker, Dieter Dölling, Dieter Hermann, Kristina Höly and Maria Eugenia Trombini Wherever one looks in the contemporary world, the shadow of scandal appears to lurk just under the surface. From Siemens to Volkswagen (VW) and Petrobras in Brazil, from German Hospitals to the Chinese Anti-Corruption campaign, it is the legal organization, the large, renowned companies, clinics, associations, and parties that come into limelight because of their illegal activities, leading, sometimes, to drastic consequences. Diverse sectors, such as the economy, politics,

M. Pohlmann · S. K. Mitra · K. Höly (*) · M. E. Trombini Max-Weber-Institute of Sociology, Heidelberg University, Heidelberg, Germany e-mail: [email protected] M. Pohlmann e-mail: [email protected] S. K. Mitra e-mail: [email protected] M. E. Trombini e-mail: [email protected] G. Dannecker Institute for German, European and International Criminal Law and Law of Criminal Procedure, Heidelberg University, Heidelberg, Germany e-mail: [email protected] D. Dölling · D. Hermann Institute of Criminology, Heidelberg University, Heidelberg, Germany e-mail: [email protected] D. Hermann e-mail: [email protected] © The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2023 M. Pohlmann et al. (eds.), Organizational Crime, Organization, Management and Crime - Organisation, Management und Kriminalität, https://doi.org/10.1007/978-3-658-38960-4_1

3

4

M. Pohlmann et al.

and medicine, are affected. Remarkably, this also happens in countries that are generally considered to be less prone to corruption. In this context, two questions emerge as salient. Firstly, is there anything in common between these cases of wrongdoing despite differences in culture, geographic, historical, and political context, and the nature of regulatory regimes? Secondly, are there specific forms of collective crime that dominate the scene, and have these gained importance?

1 The State of Play As for the rampant existence of overt and covert non-compliance, one cannot really complain about there being too few regulations, laws, and compliance measures. On the contrary, in the last three decades, one has experienced a spectacular boom in regulatory measures as part of the fight against corruption and other forms of wrongdoing. The variety and density of such rules continue to increase. Both at the national and international levels, more rules, statutes, and laws are constantly being added, compared to those that are abolished or replaced. According to analyses by Katz et al. (2020), for example, the corpus of federal laws in Germany was 1.5 times larger in 2018 than it was in 1994 and has become considerably denser with more and more “cross-references”. The repeal of laws is rare. The bureaucratic and regulatory burden on businesses and administrations has roughly quadrupled since 2011. Moreover, the EU has enacted 5211 laws and regulations in the last 3 years alone but repealed or replaced only 2395 laws and regulations in the same period. A strong growth in tax and social legislation is responsible for this, as is the further legalization and regulation of fields that were previously less regulated, such as the fight against corruption, cybercrime, and further regulation of environmental protection or policy financing (see Katz et al., 2020). Although regulatory measures have brought a lot of misconduct and corruption to light, the preventive effect of all these written rules has been manifestly insufficient to avoid the bulk of it. Measured by the recurrent scandals (for example, Siemens, MAN, Strabag, and the “Organ Transplant Scandal”), however, it does not lead to preventive effects to the extent desired. How this can be explained and how conventional forms of compliance and prevention work is the main theme of our research. The research project behind this book addressed this discrepancy between formal and informal rules by asking why the increasing regulations do not lead to the anticipated preventive effects. We examine the cultural repertoires related to combating corruption as well as to the violation of

How to Explain and Fight Organizational Crime

5

rules. For this purpose, the experiences of regulators, companies, and hospitals in Germany, the USA, China, and Brazil will be compared in order to identify the effects of different regulatory systems on organizational deviance and to generalize common inferences. Collective deviance from rules, especially those that benefit collectives, is currently a much talked about but little researched phenomenon. This is all the more surprising because it is—as we show in this book—not an insignificant but a frequently occurring form of deviance, as well as of criminality, when otherwise legally operating organizations “go astray” and use illegal means (cf. on this Pohlmann et al., 2020). The rather low level of research interest in organizational rule-breaking by otherwise legally operating organizations is also surprising in light of the fact that organizations leave individual actors, and operators, far behind the scene of action in terms of their societal reach and clout—simply through the collective pooling of resources—for better or worse (cf. classically Coleman, 1986; Wiesenthal, 1987; Offe & Wiesenthal, 2014). At the center of most societal problems are organizations as well as networks and alliances of organizations (cf. also Pohlmann, 2016; Besio et al., 2020). This great social relevance contrasts with a research landscape that only sporadically focuses on empirical studies of the role and clout of organizations and their interaction in the case of serious violation of rules. The concept of organization helps to understand established social structures such as hospitals, corporations, nonprofit groups, and public bureaucracies, which change again and again in similar ways (Bromley & Meyer, 2017), also from the perspective of rule-breaking. The existence of global standards for regulating and organizing social life does not ensure that these standards work (cf. Timmermans & Epstein, 2010), and externally set regulations—be they standards, guidelines, or norms—are confronted with unwritten rules and practices of an organization (cf. Besio, 2014; Sandholtz, 2012; Pohlmann, 2016). The book thus focuses in many of its chapters on a very specific area, namely collective misconduct by, and in, legal organizations. As a rule, it does not refer to individual misconduct but to collective misconduct by organizations and individuals who do not necessarily act illegally in the organization for personal gain but who are bound by an unwritten collective order in an organization. The focus is thus always on rule-breaking that is suggested and accepted on the basis of shared social backgrounds, or even follows informal, unwritten rules that gain validity in a social space. Often, these rule infringements are not necessarily for individual gain but for the benefit of an organization and are therefore pro-organizational in their orientation. This does not make them any less dramatic in their effects.

6

M. Pohlmann et al.

2 Our Main Conjectures The starting point of this book is the spread of the global regulatory models of “compliance” and “anti-corruption”. It is linked to the question of how organizations translate these regulatory models into internal rules in different organizational fields and stages. This point of reference in the new institutional theory of organization becomes concrete in two aspects: In what form and to what extent do global regulatory models spread in different countries, sectors, fields, and within organizations themselves? And do they change the actual structure of activities in different organizations? Two hypotheses are tested here which are derived from the new institutional theory: 1. the spread of global regulatory models leads to a global juridification by means of soft law and this is tantamount to a creeping “Americanization” with reference to the global pioneering role of the USA. The spread of global regulatory models, emerging mostly from the United States, leads to the creation of a global infrastructure of judicialization through their adoption into national laws, leading in the process to a general Americanization of compliance. 2. the spread of global models of regulation does not necessarily lead to a change in the actual structure of activities in the organization; as a rule, they only lead to “window dressing” of the organizations, i.e., an adaptation of the facades, up-front, as opposed to the backstage, as suggested by the new institutional theory. This would, in effect, mean that forms of criminogenic self-regulation of the organization are not reached. They are interrupted by external and formal regulations. However, this affects only the surface, the visible tip of the iceberg. This leads to the critical significance of our research questions: how can we explain the divergence between the facade and actual activities, and, which preventive effects do the numerous laws, measures, statutes, etc., actually achieve? So far, we still know too little about the common pattern behind this divergence and the subsequent scandals. We know that there are always organizations behind the scandals, and, in many cases, high-level personnel who represent them. But, under what conditions do organizations deviate from legal paths and how do they act—behind the formal facades of compliance measures—when facing organizational wrongdoing? This is largely unexplored territory. While many authors deal with criminal organizations that systematically pursue illegal goals, working with organizations that try to achieve their legal goals with partially illegal means remains a major research gap.

How to Explain and Fight Organizational Crime

7

It is only when one knows the conditions under which organizations tend to use illegal means that effective prevention can be pursued. While the media are very quick to target individuals as “bad apples”, the scientific contribution is meant to uncover the systematic behind these cases and to seek ways to effectively prevent it. Often there are, e.g., in the case of manipulations by VW, a history in the organization and a branch in which such cheating behavior is rather common. Thus, we have to take the organizational field and its traditions, the domain of an organization, into account. The hierarchies and incentive structures of organizations also play a role when organizations—not always on purpose—resort to illegal means. After all, these wrongdoings are often beneficial to the principals and the organizations, unless they are detected and generate harm. Thus, the collective background of the organization and its domain supports wrongdoings for the benefit of the organization, and that is a different form of crime than, e.g., fraud to the detriment of the organization. It requires other means of control and containment than occupational or individual crime.

3 The Main Objectives of This Book One of the objectives of our research project is therefore to investigate the explanatory scope of the concept of pro-organizational crime and to analyze what organizations do when they promote compliance and prevention. Against this background, the book situates itself as a contribution to the explanation of organizational patterns of crime behind recent cases of corruption and to the analysis of the pursued ways in organizations to reduce the risk of corrupt behavior. This book has the following objectives: 1. It aims to advance the scientific explanation of a particular form of crime, organizational crime. It therefore examines in different world regions under which conditions organizational crime occurs and how often we are dealing with organizational crime in detected cases. 2. It aims to examine the cultural perceptions of corruption and organizational wrongdoing as an explanatory background by comparing different world regions and by using certain methods, such as Collective Mindset Analysis (CMA). In doing so, it aims to answer the question of whether there are different culturally determined forms of pro-organizational crime and how their prevalence varies with culture. 3. It brings together different disciplines to do so, in particular law, criminology, and the sociology of organization. This seems important to us in order to relate

8

M. Pohlmann et al.

the legal and normative side of regulation through laws and measures against corruption, i.e., rule-making, to the empirical study of rule deviations. 4. The book thus aims to shed more light on what is being done to curb corruption. In this context, compliance in particular has become a major issue at the organizational level. The book aims to find out what theories-in-use and ideas are associated with compliance in the practice of organizations. 5. To this end, it brings into play not only different disciplines but also different methods. In particular, the book focuses on combining content analyses of court records with interview analyses and experimental methods. In the mix of methods, it sometimes follows a triangulation design, i.e., different approaches to the same question are matched, and sometimes an embedded design with different questions building on each other. In brief, the book systematically compares socially central sectors and fields in which private organizations predominate, such as business enterprises, with fields in which public organizations predominate, such as big hospitals. In the first case, we do have a multitude of different professions working together; in the second one, a domination by the medical profession. The underlying assumption is that both the perception and the handling of rule deviations depend on the type of organization, and the role of profession, and that this at the same time influences the preventive effects that organizational reforms and compliance measures can achieve. In addition, countries that are characterized by occasional corruption at the organizational level, such as Germany and the US, are compared with countries in which various types of systemic corruption are prevalent, such as Brazil and China. The underlying assumption here is that the institutional embeddedness of organizational wrongdoing has strong effects on the way rules are perceived and followed, moderating the effects of preventive measures. When we talk about systemic corruption, six components are being considered: 1. Petty wrongdoing, i.e., petty bribery is a natural part of everyday life. It is an expected behavior rather than the exception. Systemically corrupt societies are societies in which (almost) everybody expects (almost) everybody else to be corrupt. 2. An institutional setting with rules and governance structures enabling corruption and other criminal activities. 3. A field of organizations and networks with a historical record concerning corruption, with institutionalized bad non-compliant habits and a cultural repertoire of wrongdoings.

How to Explain and Fight Organizational Crime

9

4. A seminal criminal setting based on a cross-over of different societal sectors. Systemic corruption is the normalized resort, across different levels and sectors of society. It allows corruption to emerge when new opportunities arise, and to vanish, when not. There are always different actors, and different sectors involved, depending on the opportunity structure of wrongdoings. 5. A criminal organization or network that allows coordinated action for the time being, but must not be institutionalized like the Mafia, or in the case of drug gangs; it emerges, stays for some time, and falls apart. The next time, the organization or the network will not be the same again. 6. The criminal organization or network is a well-coordinated community that combines personal enrichment intentions with community-related interests, but always at the expense of the general public. It therefore puts the cases of corruption and cheating on the agenda in the two Western countries (Germany and the USA) with occasional corruption and two from the “Global South” with a pattern of systemic corruption (Brazil and China). In the German case, corruption in private business organizations and public hospitals is compared as well. We have chosen Germany and the USA because the USA is a role model and frontrunner in anti-corruption measures, and Germany is one of the imitators, or rather the compliance boom among large German companies has its roots there. By comparing the two cases, we follow the most similar design of case studies. By including China and Brazil, we follow the most different designs comparing occasional and systemic corruption.

4 The Main Findings Against this background, the originality of the research project is based on the fact that it does not exacerbate the personal benefit of individuals and the increase in personal costs through severe penalties. The focus is not on penalties as prevention but on the nature of informal self-regulation of organizations. The concept of organizational deviance provides us with a novel starting point in this field for the explanation of active corruption and cheating. According to our main conjecture, this deviant behavior is not primarily motivated by personal gain but by the goals of the organization. It should be considered as a pro-organizational crime. In the sociological sense, organizational deviance generally refers to the habitual deviation from formal rules, which individuals perceive as legitimate, and the occasional violation of laws. As organizations rely on useful forms of deviant behavior from their highly skilled staff to function, their informal cultures

10

M. Pohlmann et al.

suggest certain forms of organizational deviance. In this book, we examine the extent to which corrupt actors are guided by these informal norms and unwritten rules of the organization and to what extent this helps to explain bribery. According to our assumption, the “corporate identity” of an organization can promote such activities, even if the personal benefit is low and the personal risks and penalties are high. Thus, we expect that it is not the distant but the committed and loyal players who are particularly vulnerable to this type of pro-organizational wrongdoings. We assume that a significant part of active corruption and cheating by highly qualified people is not fed just by personal gains at the expense of the organization but by conformity with informal norms and rules in order to protect or promote the organization. After a brief introduction to our theories and methods in use, the book is organized into four parts, devoted to presenting the findings of our investigations in the four countries, followed by a concluding chapter to compare our findings and draw some general inferences from them. In the section that follows, we present the main findings from the individual chapters in this book. The volume opens with Markus Pohlmann’s “How to Analyze Organizational Crime? – Theory, Concepts, and Methods” where he dissects the process through which organizational crimes take place. He explains how such offenses take place in which employees have fake invoices or implement fraudulent plots to the detriment of the organization. A subset of such crimes which are analyzed in this volume was carried out for the benefit of legal organizations and according to their informal rules. Nearly half of the FCPA corruption cases in the USA follow this pattern of organizational crime. Faced with such situations, one asks how can organizational crime be theoretically classified and operationalized? How can informal rules be empirically identified and determined, and how can informality in organizations be measured? This chapter aims at engaging with these questions. It suggests that although organizational crime is often described in the literature—and corporate criminal laws have also been passed in many countries—the conceptual and empirical analysis of the phenomenon still leaves much to be desired. Dieter Dölling’s “The Development of the German Criminal Regulations against Corruption in the Public Sector” describes the development of German criminal legislation against corruption in the public sector from 1871 to the present. The article shows that the criminal law directed against corruption in the public sector has expanded considerably in recent decades. Data from German criminal statistics on the reality of the prosecution of corruption cases in the public sector are also presented. The number of cases coming to the attention of the police and the number of indictments and convictions is reported and it is shown

How to Explain and Fight Organizational Crime

11

which penalties are imposed. It is demonstrated that a significant number of cases do not result in indictments and convictions. The prosecution of corruption offenses is a complex phenomenon. Gerhard Dannecker’s “The Development of German Criminal Law against Corruption in the Private Sector” complements the previous chapter by bringing Germany back in again. He explains how public and private corruption is no longer a problem in developing and emerging countries alone but has developed into a cross-border phenomenon. The German legislator has reacted to this development by implementing the international guidelines of the European Union, the Council of Europe, the UN, and the OECD. It pursues the goal of taking legal measures against private and public corruption by means of penal and administrative sanctions and tax measures. Dieter Dölling & Ludmila Hustus complement this chapter with “German Corruption Cases Reflected in Criminal Files – Individual or Organizational Deviance?”. The article deals with corruption offenses committed by employees of business companies. It examines the question of the extent to which these offenses are individual or organizational deviance. Results of an analysis of German criminal files are presented. The findings refer to the characteristics of the offenses and the persons convicted. Corruption delinquency shows considerable intensity in the majority of cases. Most of the offenders held high-level positions in the company. It was found that individual and organizational delinquency can overlap. Markus Pohlmann & Sebastian Starystach veer off the legal approach and take the discourse back to the sociological take on the problem with their joint chapter on “Compliance, Integrity, and Prevention in the Corporate Sector: The Collective Mindsets of Compliance Officers in Germany.” They argue that due to increased enforcement of national and international anti-corruption and competition laws, large multinational companies in Germany are under pressure to develop effective compliance management systems (CMS) for preventing, identifying, and prosecuting violations. Against this background, they ask how these changes in the regulatory environment are reflected at the organizational level of compliance departments. The chapter dissects the collective mindsets in use by senior compliance officers in large German firms, reconstructing the logic of doing compliance, integrity management, and prevention. The database consists of problem-centered interviews conducted in Germany and the USA with high-ranking compliance employees of multinational companies. The chapter addresses especially the findings of the German senior compliance officers. By using the qualitative method of collective mindset analysis, they explain whether integrity and corresponding prevention measures are understood as a symbolic answer to external normative demands, or as a rational business strategy. They report that the theories-in-use at

12

M. Pohlmann et al.

compliance departments indicate that there is indeed a mission, a rational strategy behind doing compliance. The mindsets are strongly influenced by a global cultural model of compliance, which can best be described as a rational choice-based organizational behaviorism. This concept of doing compliance became especially the dominant professional mindset of lawyers in that field. As the global mainstreaming has its roots in the American way of doing compliance, against the background of the long arm of the US Sentencing Commission Guidelines and the Department of Justice’s Evaluation Guidelines of Compliance Programs, just little variances in the mindsets are to be detected within the different compliance departments in Germany as well as between compliance mindsets in Germany and the USA. The arguments of this chapter are reinforced by the next chapter on “Limits of Formal Regulation: How Informal Norms and Criminogenic Values Affect Managers’ Readiness to Corrupt” by Dieter Hermann, Markus Pohlmann & Julian Klinkhammer. The study tests hypotheses regarding the influence of norms and values on the readiness to corrupt. The data comprise online interviews with managers. Analytically, they distinguish between organizational and individual corruption as well as between informal and formal norms. Organizational corruption focuses on the expected benefits for the organization and the relevance of informal organizational norms. On the other hand, individual corruption emphasizes the benefits for the actor and the relevance of formal norms, whereas informal norms of organizational usefulness recede into the background. The study shows that the readiness for organizational corruption is quantitatively larger than the readiness for individual corruption. The rejection of conformity, tradition, benevolence, universalism, and self-direction, the preference for achievement, power, and hedonism, as well as the acceptance of informal norms in a company are the most important conditions for the readiness to corrupt. These results support the voluntaristic theory of crime and substantiate institutional theories of organizational sociology. Alexander Fürstenberg introduces an empirical dimension to the theoretical and abstract arguments that we have seen so far with his “Experimental Corruption Research in Germany: The Lab Studies.” Corrupt decisions in organizations may be influenced by the informal rules of the organizational culture. Therefore, hypotheses on influencing corrupt decisions due to competitive pressure, hierarchical pressure, the rationalizing and legitimacy of corporate social responsibility, organization-specific socialization, and gender are examined. By using laboratory experiments with students in Germany, these organizational-cultural conditions are tested for corrupt decisions either for personal or organizational advantages. The results support an analytical separation between individual and

How to Explain and Fight Organizational Crime

13

o­ rganizational corruption as well as corruption-decreasing effects of competitive pressure and the rationalizing and legitimacy of a corporate social responsibility in our population. Next, the discourse moves on to the medical sector with Markus Pohlmann & Kristina Höly’s “The German Organ Transplant Scandal: An Analysis of Court Records and Official Documents from the Medical Association.” The manipulation of organ-waiting lists by transplant physicians has caused a stir in Germany in recent years. By analyzing the institutional setting, court records, commission reports as well as publicly available structural data, this chapter addresses the question of how these manipulations can be explained. Following the conceptual framework of this anthology, the chapter takes the theoretical perspective of organizational deviance and examines the extent to which manipulations can be explained by individual and/or organizational deviance. Pohlmann and Höly come to the conclusion that the frequency and nature of the manipulations speak for systematic violations and organized deviant action. Analysis of the medical sector continues with Markus Pohlmann & Kristina Höly’s “The German Organ Transplant Scandal: The Collective Mindsets of Physicians.” They explore the question regarding which unwritten rules were supportive of guideline violations within transplant centers. This contribution follows from the previous one by complementing in the question of the causes of organizational deviance in transplant medicine. They examine the extent to which competitive pressure, hierarchical context, justification, and internalization as four typical mechanisms from organizational sociology and criminology are responsible for the emergence and spread of deviance. On the basis of a collective mindset analysis (CMA) with physicians and medical staff as well as a participant observation in a transplant center, they come to the conclusion that guideline violations are a special form of organizational deviance, namely professional deviance, which focused on the realization of a professional claim to sovereignty. Dieter Hermann, Gerhard Dannecker & Markus Pohlmann continue the analysis of the medical sector in Germany with their “Decision-making Processes of Physicians after the Organ Donation Scandal in Germany: The Factorial Survey.” A dilemma is a situation in which two or more moral principles conflict with one another. The dilemma in transplantation medicine is a conflict between professional ethics, the patient’s wishes and behavior, legal norms, and unwritten or formal rules of the organization. Such dilemma situations may lead to delinquency such as the manipulation of data and the alteration of medication to influence the ranking of allocation of a donor organ in patients. With an empirical study, they investigate conditions of delinquent actions (guideline violations) in dilemma situations. For this purpose, all 46 transplant centers in Germany have

14

M. Pohlmann et al.

been contacted. Due to the small number of cases, randomly selected nephrologists were additionally surveyed. Forty transplant physicians and 37 nephrologists participated in the survey. The results show that transplant physicians are primarily guided by legal norms in a conflict between legal norms and organizational interests. In a conflict between legal norms and professional ethics, the patient’s welfare and care are primary. Patient compliance in combination with his illegal anticipated requirements for the allocation of a donor organ is one factor that contributes to deviance. The importance of informal norms of the organization is secondary. Transplant physicians and nephrologists differ especially in this point. One can assume that before the organ donation scandal happens, both groups practiced the same pattern of action and that this occurrence led transplant physicians to change their decision-making principles. The book next shifts to the United States, with Alexander Fürstenberg & Julian Klinkhammer’s “In Search of Organizational Crime in the U.S.: The FCPA Court Records.” Due to the Foreign Corrupt Practices Act (FCPA), anticorruption enforcement has gained importance nationally and internationally—especially in corporate prosecutions. Subsequently, they ask, first, how the enforcement process has evolved since FCPA prosecutions began, second, what organizational structures support the organizational embedding of corruption, and third, what the empirical relevance of organizational corruption in the USA is. Using a full survey of FCPA cases between 1977 and 2018, they show that the number of filed cases is systematically connected with the type of procedural conclusions and its sanctioning. Using case studies, they qualitatively illustrate the embeddedness of corrupt structures in firms and descriptively demonstrate, based on the aforementioned FCPA full survey, that organizationally embedded corruption as a distinct form is similarly prevalent as corruption committed by individuals for personal gain. Markus Pohlmann & Sebastian Starystach continue the analysis of organizational crime in the USA with “Compliance, Integrity, and Prevention in the Corporate Sector: The Collective Mindsets of Compliance Officers in the US.” The chapter reconstructs which function senior compliance professionals of multinational companies based in the USA attribute conceptually to compliance. Furthermore, it critically examines the subsequent consequences of these collectively shared concepts for the prevention, identification, and prosecution of rule violations within and by companies. The database consists of problem-centered interviews conducted in Germany and the USA with high-ranking compliance employees of multinational companies. The chapter addresses especially the findings of the American compliance officers. Their study opens the black box of the theories-in-use concerning compliance as well as prevention and discusses

How to Explain and Fight Organizational Crime

15

what kind of sensemaking is established in the compliance departments of big US firms. By using the qualitative method of collective mindset analysis, it explains whether integrity and prevention have to be understood as a stronghold of a rational business strategy or merely as a mandatory form of windows dressing for the protection of the company. They show that the theories-in-use are very much dominated by a rational-choice perspective of the firm as the corporate actor, in which communication, education, and monitoring is focused on the employees, adjusting their deliberative action, and helping them to avoid wrongdoings. One side effect of this rational-choice perspective on organizational wrongdoings is that compliance professionals can label rule violations as the result of decisions attributable to individuals and not as the result of organizational structures. By this means, compliance serves the purpose of avoiding criminal prosecution of the company, especially the application of corporate criminal law. The volume next moves to South America, with “Formal Rules and Institutional Increments in Brazil” by Mário Helton Jorge. Brazil’s anticorruption scenario has gone through major shifts in the last two decades. The changes are part of the formal and institutional accountability networks. Major investigations, such as Mensalão and Car Wash, have opened up various discussion fronts, especially about the relationship between the economic and political sectors in Brazil. The means of control, investigation, and prosecution, in the form of new legislation and institutional organization, have been well developed in some areas, with others still lacking by international standards. Improved inter-institutional coordination and closer proximity among the agents that make up each of the entities in this system have also been pointed out as some of the positive factors for greater effectiveness. In the corporate landscape, compliance has an increasing rate of adoption, also due to stricter legislation. Some setbacks, however, have recently been identified in the legal and institutional anticorruption frameworks, especially regarding institutional independence. The book follows up on the case of Brazil with “Organizational Crime in Brazil: The Petrobras Case” by Elizângela Valarini. Since March 2014, one of Brazil’s most important companies, Petrobras, has become the main protagonist of the biggest corruption scandal in Brazil, revealed by the Car Wash Operation. The corrupt scheme had not only a massive impact on the companies’ economic performance but also a huge effect on Brazilian politics, changing the political landscape. The scandal showed not only the informal side of the Brazilian economic and political interaction but brought to light the dark side of the Brazilian system of political financing and business rules. Involved in the corruption scheme were essentially members of the economic and political elites: owners and top executives of the largest Brazilian construction companies, senior executives of

16

M. Pohlmann et al.

­ etrobras, and politicians from some of the most important Brazilian political P parties. Adopting a sociological perspective on corporate crime and corruption, this chapter aims to examine how mechanisms on the side of private corporations, combined with environmental factors in which companies are imbedded, contribute to political corruption. The analysis focuses on Brazilian private companies charged in the Operation Car Wash by using court records produced by the Federal Court of Curitiba. The next chapter “The Anti-corruption Mindset of Brazilian Law Enforcers” by Maria Eugenia Trombini & Elizângela Valarini further deepens our analysis of the case of Brazil. Recent studies on the fight against corruption in Brazil focus on institutional improvements, mainly through the interaction between the units that are part of a more general accountability network, seen as enablers of high-profile investigations such as the Car Wash Operation. There is much discussion on the role of legislation, means of control, investigation and processing of crimes, and changes in the design of state agencies; however, little is known about the cognitive and normative processes of the agents working in anti-corruption within the justice system. The central question in this chapter is to understand the “fight against corruption” in Brazil from the standpoint of legal professionals. Using the qualitative method of collective mindset analysis, the authors reconstruct the interpretative and normative standards of the actors of the justice system when faced with the problem of how to counter corruption in Brazil. Mapping the stocks of knowledge accessed by the investigated group, they trace the meaning they attribute to their actions to justify and explain the “solutions” chosen to deal with the phenomenon. They discuss the results based on a sample of qualitative interviews with judges, prosecutors, and defense attorneys involved in major corruption cases in recent decades and find that specialized knowledge, often acquired when “learning abroad”, is an important aspect of the reconstructed collective interpretation patterns. From South America, the book moves over to Asia. In “New Laws and Law Enforcement to Fight against Bribery in China,” Yuan Yuan Liu moves the discussion to non-compliance and organizational crime in China. The legal system in China is not only about the legislation itself but more often than not about how the relevant laws are administered. In this chapter, the author begins by describing the changes in the PRC Criminal Code and its Sixth, Eighth, and Ninth Amendments as these specifically target the act of active bribery. The author then analyzes the ways in which the threshold for filing cases for the crime of active bribery in China as laid out in the 1999 Code differs from that in 2016. The chapter concludes with a few remarks on the regulatory mechanisms in place to prevent the crime of active bribery embodied in the latest amendments to the criminal code and the case-filing thresholds.

How to Explain and Fight Organizational Crime

17

Liu follows this up with “Detected Cases of Bribery in China: The Analysis of Court Records.” In this chapter, by employing a quantitative analysis of court rulings on ten cases of unit bribery and a qualitative analysis of court rulings on four such cases, she explains the operational mechanisms and internal logic of unit bribery in China against which the validity of the theory of organizational deviance is tested. The results of the empirical studies show that unit bribery is such a widespread phenomenon in China that it manifests itself not only in companies but also in various parts of the bureaucracy. Both the unspoken rules festering China Inc. and loopholes common to the institutional designs in the public sector provide fertile grounds and ample possibilities for “useful illegality”. The book closes the multidisciplinary analysis of organizational crime by going back to law and organizational crime in “Companies as Responsible Actors and Corporate Citizens – Corporate Criminal Responsibility under the Rule of Law as a Consequence” by Gerhard Dannecker & Thomas Schröder. In the context of corporate criminal law, perpetrators seek to improve the company's performance at the expense of individual third parties and the general public. These occurrences can partly be attributed to the inadequate structure of the current economic criminal law and its imbalance between the responsibility of individual persons on the one hand and legal persons on the other. This is just one of the reasons why legal scholars as well as many people in positions of political responsibility share the view that the current German system of corporate sanctions law suffers from serious shortcomings. This essay aims at contributing to the current lively discussion in Germany on reforming and tightening criminal sanctions against legal entities. This chapter takes the position that the lawmakers ought to consult the efforts already developed in economic criminology to understand corporate wrongdoing. In particular, measures to counter the development and the maintenance of criminal corporate cultures and the predominance of “useful illegality” seem necessary. These measures, however, should not be of a draconian nature. Rather, the rule of law (“Rechtsstaatlichkeit”) requires that corporate citizens be punished. This implies not only to take corporate wrongdoing seriously but also to acknowledge fundamental procedural rights for the accused legal entities. Finally, the systematic effort of companies to adhere to law (“Compliance”) needs to be part of corporate sentencing guidelines. The current volume is the most recent and comprehensive analysis of organizational crime under the auspices of the interdisciplinary research group on “Organizational Crime Studies” of Heidelberg University, under the leadership of Markus Pohlmann. As such, in addition to reporting on the findings of the VWS project, the editors take the opportunity of showcasing the most significant contributions to the field. The concluding chapter on “The Puzzling Resilience

18

M. Pohlmann et al.

of Organizational Wrongdoing: Some Policy Implications for a Global Regulation Regime” by Subrata Mitra makes an overview of the main findings of this anthology and places them in the larger context of comparative theory and public policy. The chapter explains how the researchers connected to the group explore uncharted territory by delving into the hermeneutics of organizational wrongdoing, undertaking interviews and experiments, and analyzing new, previously unexplored primary sources. It begins with a brief recapitulation of the main objectives, model, and methodology that underpin the chapters in this volume. It then summarizes the main lessons of this book and illustrates them with empirical evidence of organizational wrongdoing in the global North and South. This is followed by a general discussion of the findings in terms of their theoretical underpinnings and (juridical) implications for public policy. The conclusion emphasizes the importance of putting the organizational sociology of wrongdoing in the context of comparative area studies and historical sociology.

References Besio, C. (2014). Strategien der Balance. Vermittlung zwischen Moral und Profit am Beispiel von Energiekonzernen. Sociologia Internationalis, 52(1), 93–118. Besio, C., du Gay, P., & Serrano Velarde, K. (2020). Disappearing organization? Reshaping the sociology of organizations. Current Sociology, 68(4), 411–418. Bromley, P., & Meyer, J. W. (2017). Hyper-organization: Global organizational expansion. Oxford University Press. Coleman, J. S. (1986). Die asymmetrische Gesellschaft. Vom Aufwachsen mit unpersönlichen Systemen. Beltz. Katz, R. L., Callorda, F. M., & Jung, J. (2020). Can digitization mitigate COVID-19 damages? Evidence from developing countries. Available at SSRN: https://ssrn.com/ abstract=3600829 Offe, C., & Wiesenthal, H. (2014). Two logics of collective action. Participations, 8(1), 147–172. Pohlmann, M. (2016). Soziologie der Organisation: Eine Einführung (2nd ed.). UVK. Pohlmann, M., Dannecker, G., & Valarini, E. (Eds.). (2020). Bribery, fraud, cheating: How to explain and to avoid organizational wrongdoing. Springer. Sandholtz, K. W. (2012). Making standards stick: A theory of coupled vs decoupled compliance. Organization Studies, 33(5–6), 655–679. Timmermans, S., & Epstein, S. (2010). A world of standards but not a standard world: Toward a sociology of standards and standardization. Annual Review of Sociology, 36, 69–89. Wiesenthal, H. (1987). Rational Choice: Ein Überblick über Grundlinien, Theoriefelder und neuere Themenakquisition eines sozialwissenschaftlichen Paradigmas. Zeitschrift Für Soziologie, 16(6), 434–449.

How to Analyze Organizational Crime – Theory, Concepts, and Methods Markus Pohlmann

Introduction Wherever rule violations endanger the protection of public or collective goods, they cut deeply into the fabric of social order. This is all the more the case when collective rule violations are involved. By dealing with organizational wrongdoings, we focus in particular on collective rule deviations which are carried out for the benefit of a group or a legal organization and for which effective prevention is difficult. Robust knowledge about how collective rule violations occur, especially in and by organizations, is still rare. Although this is a much-described topic of research on an individual basis, systematic studies on organizational levels are scarce. Our research set out to identify the mechanisms that lead to organizational wrongdoings and to assess whether and how laws, regulations, and compliance measures contribute to their prevention. We applied a theoretical frame of new institutional theory and the concept of organizational crime to analyze wrongdoings carried out by organizations and their members.

1 The State of the Art Currently, most researchers in the field of misconduct in and by corporations are dealing with the behavior of individual perpetrators and the possibilities to regulate and prevent crime from happening, through formal norms. Only a few studies M. Pohlmann (*) Max-Weber-Institute of Sociology, Heidelberg University, Heidelberg, Germany e-mail: [email protected] © The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2023 M. Pohlmann et al. (eds.), Organizational Crime, Organization, Management and Crime - Organisation, Management und Kriminalität, https://doi.org/10.1007/978-3-658-38960-4_2

19

20

M. Pohlmann

have focused on the aspect of pro-organizational crime and the limits of self-regulation in legal organizations. The possibility of influencing these self-regulatory forms of the organization—apart from additional compliance rules and stricter sanctions—remains underexplored. Criminology often focuses on individual deviations from the rules (single offenders who commit individual crimes for individual reasons); collective deviations from the rules are often attributed to single acts or single offenders. Collective rule deviations, as they are the focus of organizational crime analysis, are still a “stepchild” of criminology—except for notorious gang and organized crime (see Schneider, 2008; Pohlmann et al., 2016, 2020; Rorie et al., 2018; Pogarsky et al., 2018). Other disciplines, such as the sociology of organization, political science, or economics, also struggle to take a systematic empirical look at collective rule deviance, especially forms of organizational deviance and organizational crime (but see Weaver, 2014; Kühl, 2020; Armbruster & Besio, 2021) as well as the Anglo-American work on organizational deviance (Ashforth & Anand, 2003; Ashforth et al., 2008; Pinto, 2019; Pinto et al., 2008 etc.). Recent institutional theories in these subjects have indeed produced a wealth of empirical studies of rule-making, implementation, and compliance, identifying coercive, normative, and cognitive mechanisms of rule-following (for an overview, see Scott, 1991). But even here, comparisons across organizational fields or levels of regulation are often lacking (for recent approaches to combine field and institutional theoretical perspectives, see Lim, 2021). At the same time, empirical studies in the context of political science integration research show that member states, for example, by no means always adhere to the rules of EU law (see, among others, Börzel, 2020). In contrast, supra- or international rules sometimes achieve a remarkably high degree of compliance, although they are neither characterized by a superior sanctioning power nor by a democratic procedure (in the conventional sense) (see Zürn, 2018). Empirical comparative rule of law analysis in the context of democracy research also points, for example, to the particular influence of international institutions and organizations on the enforcement and effectiveness of international human rights norms (cf. Ginsburg et al., 2008; Helmke & Rosenbluth, 2009). But even here, the organizational level remains mostly excluded from macro-comparative analyses (see, among others, Merkel et al., 2003, 2006). Legal science, on the other hand, has the phenomenon and its regulation in the individual fields under its purview (Seibert-Fohr, 2017, even if research on the rule of law has so far provided too little empirically robust evidence on our central questions and hypotheses (Seibert-Fohr & Weniger, 2021). The sociology of law also offers no robust research results on the aforementioned research questions. Collective rule deviations, especially those for the benefit of collectives, are

How to Analyze Organizational Crime …

21

currently still a much described but little researched phenomenon. This is all the more surprising because it is not an insignificant but a frequently occurring form of deviance as well as criminality when otherwise legally operating organizations “go astray” and bring illegal means to bear (cf. on this Pohlmann et al., 2021). The rather low level of research interest in organizational rule violations by otherwise legally operating organizations is also surprising in light of the fact that organizations leave individual actors and individuals far behind in terms of their social reach and assertiveness—simply through the collective pooling of resources—for better or worse (cf. classically Coleman & Flitner, 1986; Wiesenthal, 1987). Organizations as well as networks and alliances of organizations are at the center of most societal problem situations (cf. also Pohlmann, 2016; Armbruster & Besio, 2021). This great social relevance contrasts with a research landscape that only sporadically deals in empirical studies with the role and assertiveness of organizations and their interaction in the case of serious rule violations. Corrupt behavior, for example, is often attributed to individual characteristics, such as greed for personal gain, lack of self-control, and deviant personality traits. Some have argued that psychopathic traits and Machiavellianism are markers of corrupt actors (Nerdinger, 2008; Rabl & Kühlmann, 2008; Knecht, 2009; Zettler & Blickle, 2011). The basic assumption of such approaches, which are located within the psychology of corrupt actors and the broader rational choice framework, is that organizations become corrupt through individual deviance— the longing for individual benefit or personal gain (Becker, 1968; Gottfredson & Hirschi, 1990; Shover & Hochstetler, 2002, p. 13). In the case of managers, this means that the personality traits that help managers advance in the corporate hierarchy also make them more prone to individual deviance. Thus, stricter laws and consistent compliance measures would serve as viable deterrents against corruption; they raise both the likelihood of detection and the costs that the deviant actor faces if caught. ‘Good barrels’, as opposed to bad ones, are institutional and organizational settings that provide the right incentives and penalties to flag corrupt behavior as the irrational choice of a few ‘bad apples’. For the majority of this research, corruption in its current state is commonly perceived as being averse to the organization’s objectives. Structural corruption is then mostly a matter of ‘bad barrels’, the negligent or willful blindness of the principal, who either fails to provide the right incentives or to guarantee the necessary managerial control. More recently, survey studies have been created under the heading of “unethical pro-organizational behavior”. They argue that the more loyal the staff of the organization is, the higher the willingness to engage in unethical pro-organiza-

22

M. Pohlmann

tional behavior (Umphress et al., 2010; Umphress & Bingham, 2011; Matherne & Lichtenfeld, 2012; Wang & Wang, 2015). Other approaches open up the hitherto rare social science studies. They show that organizational corruption cannot be understood in isolation as opportunistic criminal behavior of individual employees (see Jansen et al., 2005), but rather as a social process that undergoes forms of normalization in the context of specific situation logics (see Höffling, 2002). As a result of its normalization, corrupt behavior can appear rational within the respective organizational culture (see Brief et al., 2001; Karstedt, 2001; Ashforth & Anand, 2003; Ashforth et al., 2008, p. 672). However, neither the question of “useful illegality” (see Luhmann, 1964; Pohlmann et al., 2016; Kühl, 2020) nor the crime-promoting effect of informal rules and their relevance for prevention has been sufficiently researched empirically (for example with an analysis of the Siemens corruption case, see Klinkhammer, 2011, 2013; Pohlmann et al., 2016). Also, the question of value orientation in the organization remains underexposed (see Hermann, 2003, 2013). The newly emerged experimental corruption research in economics (e.g., Lambsdorff & Frank, 2007; Schwieren & Weichselbaumer, 2008; Rabl, 2009, 2011) provides seminal approaches and methods, but neglects the organizational level of analysis. The organization appears here rather as an action environment of the offender and not so much as an explanatory variable for the action (often unintended) of an organizational member. The processes and structures that lead organizations to use illegal means are far too rare in the research agenda. But the findings of recent studies (Ziegleder, 2007, 2010) on companies located in European and American regions are providing additional evidence for the significance of our approach. This also has to do with the fact that Western, and especially the US, criminology has largely relinquished organization-level investigations since the 1980s, with priority being given to the secondary analysis of statistics.

2 How to Define Organizational Crime In this section, a working definition of organizational crime with four components that will be used across this collected volume will be put forward. 1. Dealing with organizational crime, researchers are interested in analyzing crimes that have a collective feature rather than focusing on individual crimes. When rules are broken not for the benefit of an organization but calculatedly to its detriment and in pursuit of illegal personal enrichment, we speak of the individual crime. Part of it can be understood as ‘occupational crime’. The

How to Analyze Organizational Crime …

23

focus then is on illegal and unethical activities committed for illegal personal gain or to avoid financial loss in the context of a legal occupation (Clinard & Quinney, 1973; Friedrichs, 2002, p. 243; Mars, 2018; Benson & Chio, 2019). Very often, the illegal activities are specifically aimed at damaging the organization, or at least this possibility is tolerated. Of course, there are individual criminals out there who use criminal plots to personally enrich themselves to the detriment of companies, e.g., by using bogus companies and/or fictitious invoices to line their own pockets. But many of the major corruption and cheating cases have people on the side of the bribe payers or the fraudsters who have come into the spotlight of the prosecution because they acted for the benefit of the companies. Money and personal enrichment are only half of the story; loyalty, recognition, custom, and seniority make up the other half. 2. Concentrating on organizational crime, a distinction also has to be introduced between organizational and organized crime. Organized crime is carried out by a network or an association of criminal actors with illegal objectives. Although using legal organizations from time to time, these associations are not legally acknowledged but prohibited by laws. They use illegal and legal means to realize illegal profits through criminal activities. The illegal collective benefits are perceived as important as the illegal personal gain realized by those engaged in the activities. Often, the actors involved are those with strong criminal intent and a previous criminal record. Violence is a regular means to protect and realize the illegal activities. By contrast, when we focus on organizational crime, we analyze the sphere of legal organizations with legal objectives, providing services, or selling goods in the realm of legally acknowledged organizations. By doing so, these organizations sometimes use illegal means to reach legal purposes. Pivotal for the use of illegal means are the benefits for the organization, and not the illegal personal gain for the individual. For some actors, illegal personal gains come as a side benefit, but for most actors involved, legal organizational incentives like benefit schemes or career advantages are sufficient. Usually, the actors lack criminal intent and do not have prior criminal records (e.g., Joh & Joo, 2015, p. 53).1 The use of violence is rare and rather the exception that confirms the rule.

1 “Even

if corporations provide complete information about their agents’ conduct, individual charges may be stymied by the fact that harmful conduct is often caused by the acts of multiple agents who lack criminal intent and are unaware of each other’s acts” (Joh & Joo, 2015, p. 53).

24

M. Pohlmann

(1) Individual, occupational crime

(4) Organizational crime

(2) Organized crime

(3) Institutional corruption

• Formal organizations • Legal purposes • Illegal means • Organizational benefits • No illegal personal gain

Fig. 1   Focus of the Research on Organizational Wrongdoings

3. Another collective background of crime and deviance is called “institutional corruption” and is specified by the work of Lawrence Lessig (2013). Institutional corruption is also related to organizations that have a legal purpose and use legal means to attain it. However, organizations and individual actors deviate from the intent of the laws with their activities, although they do not necessarily violate the formal rules/statutes textually. For Lawrence Lessig, one important application of his approach has been the activities of Congress members in the U.S. Most of their legislatures, they were busy raising funds for their election campaigns, which is legal, but not supposed to be the main focus of parliamentary work. According to Lessig, fund raising is necessary to win the election.2 However, because it takes place predominantly in the legal sphere, it is not the main focus of our research. 4. To make clear what we have been dealing with, we highlight organizational crime and contrast it with the phenomenon of organized crime (see Fig. 1),

2 “In

the 2012 election cycle, 84 percent of the House candidates and 67 percent of the Senate candidates with more money than their opponents won. On average, winning Senate candidates raised $10.4 million; losing candidates raised only $7.7 million. On average, winning House candidates raised $1.6 million; losing candidates raised just $ 0.774 million” (Lessig, 2014, p. 4).

How to Analyze Organizational Crime …

25

but also with individual crime and institutional corruption. Concentrating on organizational crime, the focus is on a very specific area, namely primarily on collective misconduct by and in legal organizations. As a rule, it does not refer to individual misconduct but to collective misconduct by organizations and individuals who do not act illegally in the organization for personal gain but who are bound by an unwritten collective order in an organization. The focus is thus always on rule-breaking that is suggested and accepted on the basis of shared social backgrounds, or even follows informal, unwritten rules that gain validity in a social space. Often, these rule-breaking events take place for the benefit of an organization and are therefore pro-organizational in their orientation—which does not make them any less dramatic in their effects.

3 How to Conceptualize Organizational Crime By putting organizational crime into the spotlight, we are interested in rule deviations with a collective background. These are deviations from rules that are carried out for the benefit of and based on the informal rules of a community or organization. Since this includes organized crime, we need to further specify that we are interested in rule deviations in the field of legal organizations, by actors who operate in a legal, professional environment. Our sociological view of these rule deviations is not limited to specific crime groups or groups of people. Even if “white-collar” crime is the introduced term, our analysis does not only refer to leaders in legal organizations but overall to rule deviations in a legal organizational environment. This is because the sociological view of white-collar crime is not oriented toward a specific legally defined group of offenses. The fuzzy definition of the term means that it has been and still is used to refer to a wide variety of violations of norms by people of high social standing and respect, but also to some extent to any kind of deviance in a legal occupational environment. Some authors consider governmental crime and organized crime to be subtypes of white-collar crime. It is common practice to separate the generic concept of white-collar crime into at least two groups of offenses: “corporate crime” that benefits a company, and the group of offenses in which an employee personally enriches himself in a professional environment, referred to as “occupational crime” (Clinard & Quinney, 1973; Friedrichs, 2002, p. 243; Mars, 2018; Benson & Chio, 2019). Concerning the theoretical framework, we are using a multilevel approach, inspired by the classic writings of Max Weber (1976; see also Pohlmann, 2006).

26

M. Pohlmann

We are relating the level of the (1) institutional order to the (2) level of organizational crime and to the (3) level of individual action.

3.1 How to Conceptualize and Analyze the Institutional Order By conceptualizing institutional order, we have further to consider whether to favor a theory of rational choice, that assumes that deviations from rules can be traced back to calculated utility-maximizing actions of individuals, or an institutional-theoretical approach that does not. According to the general approach of the new institutional theory, our basic assumption is: The greater the number of rules as well as the pressure for rule compliance, the more often only the formal facade is adapted to rule expectations while the actual activities on the backstage of organizations and states are only slightly changed (see Scott, 2008; Bromley & Powell, 2012; Tosun, 2012; Alvesson & Spicer, 2019; Hermann et al., 2019; see also Braithwaite, 1991). But conversely, rational choice theory suggests that the growing density of regulation is accompanied by a growing density of controls and sanctions, and thus, due to the increase in the probability of detection and the rising costs of serious deviations from the rules, the probability of compliance with the rules also increases (Bussmann & Niemeczek, 2019; Bussmann et al., 2016). For us, it is an empirical question as to which of the basic assumptions is true. We were particularly interested in the shared rules in companies or hospitals, but left it to the empirical analysis as to whether there have been benefitmaximizing calculi, dull habits, or unwritten values and norms at work. It was assumed, nonetheless, that there are shared rules in organizations that cannot be exclusively attributed to the intentions of individuals nor to their personal benefits. To further instruct the analysis of organizational crime, however, we first start from the theoretical framework of the new institutional theory and try to show how far its application goes. (a) Framing institutional order: the new institutional theory The starting point for the adoption of the new institutional theory is kept simple. We observe, for example, the diffusion dynamics of anti-corruption policies and compliance measures and understand them as the establishment of world cultural models related to anti-corruption and compliance. According to John Meyer’s (2005) world polity approach, we see this as the emergence of a cultural order,

How to Analyze Organizational Crime …

27

primarily of Western societies whose structural moments and general principles are diffusing more and more globally (see also Senge & Dombrowski, 2017). World polity is therefore not a territorially conceived entity but a cultural one. The cultural models of world polity define what is considered appropriate behavior by individuals, organizations, and states. Thus, culture has a reality-generating effect at the global level (ibid). Only those who play by the rules of world culture are recognized as actors. According to Meyer, actors in modern societies follow the script of world culture and are therefore considered scripted (Meyer, 2005). Still, a difference between the precepts of world culture and actual social practice exists, and therefore, decoupling remains a possibility for organizational actors. Because principles of world culture are inherently contradictory, decoupling is one way to deal with the global scripts. As we do in this book, Meyer and many authors of the new institutional theory link their approach to the grounding provided by the sociology of knowledge. Thus, culture is seen as preceding all social action and forming the background knowledge of modern society—with ontologizing effects (see Meyer, 2005; Senge & Dombrowski, 2017). The research on organizational crime has to be particularly interested in the resulting institutional logics in different organizational fields and countries. An institutional logic is understood here—according to Meyer (2005)—as a meaningful order of the production of practices and objects. The subsequent question of how individuals in organizations choose between, combine, import, support, or adapt different institutional logics shall be addressed in dealing with organizational crime as well. In the new institutional theory, the prevailing idea is not that global cultural and regulatory models spread uniformly, without variations and diversity (see Strang & Meyer, 1993; Pope & Meyer, 2016). Using the example of corporate social responsibility (CSR), Pope & Meyer demonstrate that there are always different variants which spread differently at different levels and are thereby related to local arrangements, interests, and networks. This is where, on the one hand, the structural embedding of local practices comes into play and, on the other hand, a decoupling that leaves local practice partially unchanged (Pope & Meyer, 2016). Thus, when we talk about global cultural and regulatory models, we address a set of ideas and scripts on how to deal, for example, with the problem of corruption, with the problem of organizational wrongdoings. This does not imply that these translate into the everyday practice of regulatory institutions at the nationstate level of organizations and individual actors. Rather, certain routines of interpretation and action are available worldwide, which have to be appropriated and enacted, i.e. translated into regulative, cognitive, and normative institutions. In

28

M. Pohlmann

doing so, instead of necessarily retaining their form and identity, such routines become structurally and situationally embedded and decoupled from a facade with which it is easier to comply with the mimetic and normative pressures that emanate from them. For Scott (1995), cognitive elements form the framework through which reality is perceived. Scott understands institutions as consisting of cognitive, normative, and regulative structures. Cognitive institutions offer a taken-for-granted perspective, “natural” habits, and accepted rules for understanding the world (cf. Scott, 1995, p. 40). Normative institutions introduce collectively recognized rules about what is perceived as “right” and “wrong” and what “obligations” should guide action (cf. Scott, 1995, p. 37). Regulative institutions are understood as established rules to govern behavior and review others’ conformity to them, and to reach it by sanctions, rewards, or punishments (Scott, 1995, p. 35). Collective ways of thinking are therefore important elements of cognitive and normative institutions and provide the cultural repertoire of how problems can be perceived and solved. Any institutional analysis, therefore, relies on assumptions about the underlying knowledge bases in a given culture and the collectively accepted rules. However, these bodies of knowledge and underlying cognitive and normative rules are rarely systematically analyzed or mapped. While regulative institutions are easily traced, cognitive and normative institutions are often derived from a general understanding of the culture or formal institutions without empirically elaborating them. However, research on organizational crime in our perspective shall also contribute to the empirical reconstruction of cognitive and normative institutions. Concerning the role of law enforcement, concentration is merely on the regulatory institutions and rule setting, but in addressing organizational crime, we are relying on cognitive and normative institutions to identify the set of underlying informal rules that lead to organizational crime. They become natural patterns of how to perceive, how to evaluate social facts, and how to act in a specific context of rule settings. The more they become part of the natural life worlds of the people in the social setting, the more institutionalized and stable the informal rules grow. The environment of regulative institutions is important to explain organizational crime. On the one hand, global operating companies are struggling with the challenge of playing by the law in the books because the diverse national and local regulations set the bar too high. Very often, they have to navigate contradictory laws and norms by dealing with the elevated risk of getting punished for the use of illegal means. On the other hand, by taking advantage of defective regu-

How to Analyze Organizational Crime …

29

lations and law enforcement in local or national settings, multinationals exploit regulatory differences and open up their operations for the use of illegal means in their organization. Thus, the institutional environments are generated by the interactions of the jurisdiction, political legislations, and the corporate sector in various countries companies are operating in. (b) The analysis of rule-setting Rule deviations are related to the type of rule setting. In analyzing deviations from rules, an implicit normative vote that rule-setting per se is considered as “good” and rule-breaking per se is considered as “bad” has to be avoided. Measured against the empirically valid evaluation standards in a society, rule violations can also appear to be innovative, functional, morally justified or, depending on custom and usage, appropriate. And conversely, rule-setting can appear as backward-looking, dysfunctional, morally despicable, or, depending on custom and usage, as inappropriate (from a political science perspective, see, for example, Bauer & Becker, 2020; Merkel & Croissant, 2000). It is the rule-making that finally creates the rule-breaking that is then punishable, if necessary (cf. on this also Bussmann, 2018, p. 339, see also the classic discussion Rubington & Weinberg, 2015). By implementing rules and laws, the lawmakers and agencies of law enforcement generate deviance. The legislations, guidelines, and their controls are sometimes classified as illegal conduct that had been permitted up until then, labeling behaviors that were previously accepted as prohibited, and thereby “creating” deviance. What was right before and culturally acknowledged became wrong after. We must therefore always examine collective rule deviations against the background of rule-setting and include their legitimatory and empirical validity in a given society. Only a reference to the connection between the two prevents a normative bias in favor of prioritizing collective rule-following that often remains implicit in the literature. In the various fields of organizational crimes, rule setting is concerned with prescriptive regulations (laws, statutes, etc.), in which questions of their legitimacy as well as their de facto validity3 and compliance are brought to the fore. Central questions here are: Is their claim to validity socially recognized or

3 In jurisprudence, a distinction is usually made between three dimensions of legal validity. Legal or juridical validity refers to the proper establishment of a legal norm according to the internally valid standards of effective norm setting. We do not refer to this. Factual or sociological validity means the practical effectiveness of a legal norm or legal system.

30

M. Pohlmann

negated due to superior norms, and are they followed to a sufficient extent (de facto validity) (see fundamentally Weber, 1976, p. 16; Schluchter, 2002; Stachura, 2009, pp. 15 ff.)? The fact that prescriptive rules, if known, can influence the actions of rule addressees in both directions—rule compliance and rule deviation—means that the extent of collective rule compliance cannot be calculated in advance by the rule-makers and often remains empirically indeterminate in retrospect. (c) Regulating institutions, social control agencies, and governance Since rule-making often takes place in the context of many different organizations, stakeholders, interest groups, etc., the reference to regulation or governance by social control agencies is central to the analysis of organizational crime (see e.g., Morgan & Orloff, 2017; Moschella & Pinto, 2021; for different aspects of social control agencies, see Bernasiewicz, 2020). We examine governance as a specific form of coordination by organizations and their networks to produce collectively binding decisions. In the context of organizational crime, the focus is on social control agencies, i.e. organizations that exercise social control and initiate and reinforce social norming and habitualization processes. From a rule perspective, they shape the institutional environment of organizations by, for example, setting rules, monitoring compliance, and sanctioning deviations, as well as by creating “agents” and “rule addressees” in the first place through social normalization, standardization, and by helping to shape the cultural repertoire in dealing with rules. In our context, rule-setting represents attempts of societal and organizational regulations whose success cannot be achieved by formal rule-setting itself. Only the acceptance, and perhaps internalization of the rules by the persons and organizations in the area of application of those rules, decides on their validity and on the degree of institutionalization. The degree of institutionalization is measured by the extent to which compliance with the rules is taken-for-granted by individuals, organizations, and associations. In all societies and organizations, it is unlikely that rules are followed 100%. Even in the case of capital crimes, which contradict socially established moral standards and are accompanied by draconian punishments, rule-breaking occurs regularly.

Finally, we speak of moral or ethical validity when a legal norm or legal order is not only effectively enacted or factually effective but morally or ethically justified. Here we speak of legitimatory validity with a somewhat different emphasis and refer to the belief in legitimacy that is associated with a set or legislated rule.

How to Analyze Organizational Crime …

31

(d) The organizational domain Organizations depend not only on the institutional environment but also on the field in which they are doing business, be it a corporation or a hospital. The field is “a community of organizations that partakes of a common meaning system and whose participants interact more frequently and fatefully with one another than with actors outside the field” (Scott, 1995, p. 56). It may include constituents such as the government, critical exchange partners, sources of funding, professional and trade associations, special interest groups, and the general public—any constituent that imposes a coercive, normative, or mimetic influence on the organization (DiMaggio & Powell, 1991; Scott, 1991). Applied to corruption research, our basic assumption here is: the more the organizational field is prone to deviance, the likelier it is that the organization itself gets involved in corporate crime. (e) Cognitive and normative institutions In the more recent “compliance” and “anti-corruption” trends, we see a proliferation of global “cultural models” which are translated worldwide (with major regional differences) into, for example, governmentally and organizationally or individually established forms of patterns of expectations, collective mindsets, and habits. On the one hand, there are formal expectations: that our activities conform to a given form. And on the other hand, there are substantive normative expectations: that we should, for example, know what the right thing to do is and act accordingly. Thus, we ask what expectations accompany rule-setting and attempts at regulation, and what forms of perception they encounter among the addressees. We ask in very different social contexts how, for example, organizations and individuals react to such expectations of their own “compliance”, whether they adopt and possibly internalize them, whether they remain alien to them, or whether they simply ignore or negate them. Taking cognitive and normative institutions seriously helps to understand the fact that even when the organization has set up the necessary compliance rules, deviant self-regulation can be persistent. As pointed out before, compliance rules are often myths and ceremonies in organizations (Meyer & Rowan, 1977). Organizations like to dress their windows to receive legitimacy and subsequently try to acquire impunity, generate individual liability, or just reduce the risks of severe penalties. Their cognitive and normative institutions are often very different from these formal rules, even deviating from the formal legal side of an organization. In our perspective, one of the most important characteristics of organizational crime is that the unwritten cognitive and normative rules of an organization lay the foundations for the use of illegal means, no matter how strict formal compliance rules are.

32

M. Pohlmann

3.2 The Analysis of Organizational Rule-Breaking Every organization thrives on rules being circumvented, ignored, or violated. These rule deviations are partly functional and necessary for the organization and its environment. Often, the environment encourages rule deviations or at least implicates them. By analyzing organizational crime, we are particularly interested in serious collective deviations from rules in social hotspots of regulation, i.e. those that endanger the provision and guarantee of public or collective goods. In particular, by analyzing organizational crime, we are interested in criminogenic and criminal deviations from rules that affect important public goods or collective goods. Bribery, the grant or acceptance of a benefit in violation of entrusted power, undermines the common good, i.e. the integrity of the public service, economic development, international trade and the market order. The misappropriation or misuse of public funds in key areas interferes with the enjoyment of the goods to which citizens are entitled—such as access to water and sanitation, affordable housing, or healthcare services. These goods, like the market order or the rule of law, have a special societal interest in their provision, which bribery and illegally operating statist administrations undermine. Collective rule violations in and by organizations can have positive effects, but they are also responsible for a large number of undesirable social developments. The existence of global standards for regulating and organizing social life does not ensure that these standards work (cf. Timmermans & Epstein, 2010), and externally set regulations—be they standards, guidelines, or norms—are confronted with unwritten rules and practices of an organization (Pohlmann, 2016). When states, organizations, or professions depart from legal paths, it is not uncommon for there to be unwritten rules behind doing so (1) for the benefit of the organization (pro-organizational rule deviations), or (2) for the benefit of the profession in question (pro-professional rule deviations), or (3) even the collective whole (pro-ethical rule deviations) (Pohlmann et al., 2016; Pohlmann, 2018). Pro-organizational rule violations are studied in Organizational Behaviorism, on the one hand, under the topic of “unethical pro-organizational behaviors” (cf. only Fehr et al., 2019) and, on the other hand, also with reference to the autonomy claims of strong professions (cf. Bullock, 2019; Artino et al., 2019). Only rarely, however, is this related to the forms of organization and governance, as well as to the nature of rule-making, which should be done when we analyze organizational crime.

How to Analyze Organizational Crime …

33

Therefore, analyzing organizational crime, a particular type of organizational deviance or pro-organizational rule deviance should be brought into sharper focus. Organizational crime in this respect is doubly determined by the central organizational forms as well as the type of collective rule violation. (a) Organizational deviance/crime Deviance addresses the deviations from established standards, empirically valid norms, and crucial expectations of a group or an organization prescribed in legal and moral codes. It also addresses the rule-breaking behavior against culturally acknowledged informal rules and conventions. By focusing on organizational deviance as well, our analysis is not dependent on the legal assessment of rule-breaking behavior. e.g., in the acquittal verdict of the defendant concerning breaches in the transplant waiting list in Göttingen, the judge provided evidence that the violations took place in that hospital. Only that, on the one hand, the court could not provide sufficient proof for the guilt of the defendant, and on the other hand, some of the rules set were—according to the judge—not in conformity with the constitution (Grundgesetz). These were the reasons for the acquittal of the defendant. We, therefore, use the term deviance also when there is sufficient proof for rule-breaking behavior, although—like in most FCPA-cases—a further legal assessment is missing or has been avoided as in the case of Deferred Prosecution Agreements (DPA) or Non-Prosecution Agreements (NPA). Organizational deviance is defined as the use of legitimate but illegal means inside and by organizations, which, for their part, pursue legal goals. On the one hand, there is an acknowledgement of an insider group that evaluates non-compliant behavior as legitimate and beneficial for the company. On the other hand, we find that law-abiding behavior in this respect is acknowledged as illegitimate by the in-group members. Both are defined by insiders and represent two sides of the coin of organizational deviance. Deviance can be seen as legitimate behavior, and compliance as illegitimate, and vice versa. (b) The mechanisms behind organizational crime More specifically, to explain the emergence of organizational crime, the mechanisms that previous theory on organizational deviance suggests can be referred to (Pohlmann et al., 2016): a) Competitive pressure: it is often assumed that the competitive pressure on an organization translates into interpretative and procedural rules for its staff, which foster the circumvention of obstructive or cumbersome formal rules.

34

M. Pohlmann

b) Hierarchical pressure: a central assumption regarding organizational deviance is that high-ranking actors of an organization are generally involved or have to tolerate the deviant practices, so that collective deviance can prevail over legitimate alternatives due to informal expectations and action rules. c) Rationalization and legitimacy: rationalizations and the legitimacy of deviations frequently accompany organizational deviance. They promote the toleration or recognition of deviance by providing a common interpretative framework, without questioning the validity of universal norms. d) Socialization: through socialization, the unwritten rules are also internalized in the organization. At the same time, this creates the necessary personal trust for visible deviations in the organization. Between an organization’s wrongdoing and members’ willingness to take part in it, a complementary relationship can be found that explains their engagement in organizational misconduct. But still, we have to distinguish this engagement of organizational wrongdoing from individual deviance driven by illegal personal gains. The latter refers to occasional violations, in which one or a few individual actors deviate from laws for the purpose of illegal personal enrichment (Green, 1990), causing harm to the organization. Unlike the case of organization-driven deviations, these offenses are not covered by any collectively acknowledged, unwritten rules within the organization. Thus, unlike the rational choice approach, we have been focusing not only on the calculus or the preferences of the perpetrators but are assuming that deviant practices are also based on internalized values and norms and are often practiced mindlessly (Palmer, 2012). The alternative explanation of crime assumes that wrongdoers often embark on wrongful courses of action as the result of a process. According to that explanation, we have to take into account first that people are not calculating whether the course of action is in their interest (i.e. that the benefits of the intended behavior outweigh its probable costs) and/or whether it is consistent with their internalized norms, values, and beliefs. Second, a raft of prior research demonstrates that when decisions are incompletely rational, the perception of peers, colleagues and the social context shape attitudes and behaviors (Palmer & Maher, 2006, p. 365). In the first stage of collective deviance, actors—often high ranked officers—are in a situation in which the circumvention of formal rules or laws is perceived as an alternative path of action. Depending on the history and culture of the organization as well as on the dispositions of the actor, deviating from formal rules is perceived as reasonable, beneficial, or natural. How situations, frames, roles, and motives are interacting is an empirical question. Eugene Soltes

How to Analyze Organizational Crime …

35

provided several case studies against this background on how managers lost track and engaged in criminal activities, and pointed out that there was an apparent lack of contemplation at work (Soltes, 2016, pp. 99 ff.). He quoted, for example, Scott London, senior partner at KPMG, who provided trading information about his client to a friend: “I never once thought about the costs versus rewards” (ibid.). Although decisions are loaded in our self-perception ex-post with rationales, they are very often drawn intuitively, emotionally, or habitually (Soltes, 2016, pp. 106 ff.).

4 How to Do Research on Organizational Crime From a methodological point of view, a test of the assumptions concerning organizational crime has empirically high prerequisites that are not easy to meet methodologically. First, rule deviations are always embedded in a “dark field” that can usually only be approximated empirically by proxy variables (on dark field research, see e.g., Haverkamp, 2019). The “bright field” of detected cases tells us something about detected and possibly sanctioned rule violations, but always according to the attributions and investigative activities of social control agencies, e.g., according to the manner of prosecution. Second, the actual validity of the rules is therefore not easy to measure or assess. Although surveys and experiments provide access to rule addressees’ knowledge of rules and how they deal with hypothetical case situations, the external validity of such results is controversial (see, e.g., Petzold & Wolbring, 2018). Conversely, the de facto validity is often quantitatively determined by the number of rule violations detected, but this in turn depends on the control and sanctioning activities of social control agencies (see Kersting & Erdmann, 2014, p. 17). There is no silver bullet for these methodological challenges in the research field. We are used to addressing them in several ways: 1. In most of our research projects, research is field-based, i.e. based on empirical findings in the respective field in order to keep external validity high. 2. In most of our research projects, different approaches to the fields are tested by means of methodological combinations of qualitative research and standardized survey forms. 3. This allows different projects to learn from each other and to compare fields and countries to see which method combinations are also suitable for the other fields.

36

M. Pohlmann

4. In most of the projects, “bright field” oriented approaches are combined with indicator-based measurements of the “dark field” in order to assess the factual validity of the rules. 5. Longitudinal approaches with panel studies, long-term observations, and follow-up surveys make it possible to correlate the development of the “bright and dark fields” and to determine, for example, the long-term effects of preventive measures (see, for example, Sarkar & Singh, 2010). 6. In most projects, innovative, experimental, as well as simulation and evaluation methods are also used to better deal with the problem of measuring the effects of preventive measures in organizations. Throughout the projects, the research on organizational crime follows a multimethod strategy combining quantitative and qualitative techniques. Among other things, this has the advantage that the interplay between formal and informal rules can be investigated. Moreover, the difficult data situation and access problems in the fields require flexible and creative methodological solutions. So far, we have not only compared different societal sectors like the medical and the economic sector, but also countries in a similar way. We combine subnational, national, and international levels of observation in our research. Some projects are comparative in the sense that they select their “cases” within a country, others are comparative by comparing different countries as cases (cross-country) or cases from individual countries (within country), and others do both. The selection of countries or world regions thus results primarily from the necessary comparative aspects within the individual research perspective. Nevertheless, some main points concerning our research agenda can be identified. Our research projects relate to four world regions in an international comparison: East Asia, South America, North America, and Europe. 1. In these regions, they compare countries with different degrees of rule of law, as measured by the various rule of law indices. In doing so, we take a look at five rule of law indices that we consider to be particularly informative for our purposes. These are the indices of Freedom House (“Freedom in the World”, FIW), the Bertelsmann Foundation (“Bertelsmann Transformation Index”, BTI), the World Bank (“Worldwide Governance Indicators”, WGI), the World Justice Project (“Rule of Law Index”, WJP RLI), and the EU Justice Barometer (EUJS) (see for an overview e.g., Jakab & Kirchmair, 2021). 2. Some of these countries can also be classified as having systemic rule violations (e.g., corruption), such as Brazil and China, etc., while others are more characterized by field- and organization-specific crime. By systemic rule

How to Analyze Organizational Crime …

37

violations, we address that minor criminal rule violations are a natural part of daily life and that there is an institutional environment with an intersection of different social sectors that reproduces the possibility and opportunities to act criminally. Our central assumption here is that the less developed the rule of law and the higher the level of systemic corruption, the more collective deviance from the rules.

4.1 Mapping the “Dark Field” of Organizational Crime When dealing with rule violations, there is always a confrontation with a field in which illicit behaviors are carried out in a concealed and hidden manner. The so-called “dark field” can often only be measured indirectly, through anonymous statements or with the help of experiments. We mapped that side of the phenomenon through a mixed methods approach combining three different methods: (1) Lab experiments with students in different countries: For the paper & pencil research by means of hypothetical case descriptions, so-called vignettes, we carried out laboratory experiments with students with a law or business administration/economics background for internal validity testing. The paper & pencil experiments essentially consist of a vignette (hypothetical case description) in which the influence of informal norms in the company on the propensity to cheat was tested. The operationalization of these informal norms was varied: 1) they were presented only in a general way (control group), 2) under the condition of increased competition; 3) under the condition of Corporate Social Responsibility (CSR), and 4) on the condition of a strong relationship of trust with the supervisor within the company. In these different settings defined in this way, the participants were able to decide whether they were not acting corruptly, whether they deviated from the rules with personal enrichment (“individual deviance”), or without personal enrichment (“organizational deviance”). Imagine the following case: you are the manager of a subsidiary and are therefore jointly responsible for the overall corporate results of the regional corporate unit. Even though you have always given your best to the company, the economic situation in your region has deteriorated sharply in recent years. This year will be critical for you. If you are unable to secure a large order, the site will probably have to be closed. You are largely autonomous in your decisions. You have recently learned from your team that a large potential customer has issued an RFP for a substantial industrial project. This customer is your chance to overcome

38

M. Pohlmann

the difficult financial situation of your site. When you inquire about the tender modalities, the potential client’s project procurement officer suggests that he would award the contract to your company if you share 2% of the total amount of the contract with him. You now have the option of making an offer without the required bribe (A) or an offer in which you grant the other party 1% of the order volume as a bribe, but do not collect anything yourself (B), or you give him and yourself 1% of the order volume each (C). Which alternative do you choose? If we ask students in different countries in the form of a laboratory experiment how they would proceed in this case, just under half in Germany (N = 132) and Brazil (N = 117) opt for offer A—i.e. for the offer without a bribe. In China, however, (N = 773) this is only 22%. In Germany and Brazil, therefore, more than half would bribe and in China even more than three quarters of the students. Interestingly, however, the proportion of students in Germany and China who do not take a bribe themselves is higher than the proportion who take a 1% commission themselves. In China, 47% would bribe without personally enriching themselves and 31% would do so including personal enrichment. In Germany, too, the proportions are slightly higher, with 27% for offer B and 24% for offer C. Only in Brazil do they predominate, at 30%. Only in Brazil, with 30% for offer C versus 21% for offer B, do the shares of people oriented toward personal enrichment predominate. Across all cases (even if the distribution is dominated by China), we find that 31% would not bribe, 31% would bribe and personally enrich themselves, but 40% would bribe for the good of the company but would not personally enrich themselves in the process (see table 1). If one introduces a reference to the “fierce competitive situation” as a variable, the proportions of those who bribe without personally enriching themselves increase significantly. It can be seen very clearly that the collective benefit for the company under the laboratory conditions of a university increases the willingness to corrupt and that these values are higher overall—with the exception of Brazil—than the orientation towards personal enrichment (Table 1).

Table 1   Lab experiments, 2017–19, n = 1209 students in Germany, Brazil, China

Propensity to cheat

Total

n = 1209

No cheating

For the benefit of the company

For personal gain

31% (350)

40% (485)

29% (374)

1209

How to Analyze Organizational Crime …

39

The results actually differ and showed that reaction to the social desirability of the response seems to play a subordinate role. At the same time, initial evaluations of the results have confirmed the importance of organizational deviance. In the laboratory, participants rarely chose “no corruption” in favor of “corporate corruption”. (2) Factorial Surveys: Overall, however, under laboratory conditions, the values of those who would bribe are incomparably higher than those of experts in the field of business. They deal with such decisions on a daily basis and can assess the risks accurately. So, what do we see when we move from the laboratory to the field? Let’s imagine a different case: “A global company with business activities in the field of food production is also active in Ukraine, among other countries. When these goods are produced by a subsidiary in Ukraine, an advance tax payment is initially incurred. However, this is refunded to the company on request if the goods are not sold in Ukraine but exported to the foreign market. When the country was almost insolvent, the refunds failed to materialize. This established a widespread practice of bribing officials of the Ministry of Finance, who were responsible for the refunds. This was done in order to obtain preferential treatment for refunds. In this particular case, the company was faced with the choice of either paying $22 million and receiving about $100 million in legitimate refunds—or going away empty—handed with the threat of total insolvency, which would, in any case, lead to a reduction in executive bonuses.” Department officials made it clear in the process that reimbursement would only occur if the required bribes were paid. What would we do? If we vary the presentation of the case and instead of the reduction of the managerial bonuses emphasize that it “would threaten the existence of the subsidiary” and in another variation add that “a clear majority in management is clearly in favor of paying the bribes,” we get a glimpse of how the managing directors of medium-sized and large companies in Germany that we surveyed and selected representatively react to the presented collective benefit as well as to the opinion of their peers. In each case, the willingness to engage in corruption is greater when the interests of the organization are in the foreground rather than the interests of the actor. In both cases, the differences are significant. In the first case variant with reference to the cuts in bonuses, only two percent of the respondents would recommend the company pay the bribes. The reference to the majority of managers increases the willingness to corrupt to only three percent. However, if the existence of the company is at stake, the willingness to corrupt increases to six percent. If, in addition, a clear majority in management is unambiguously in

40

M. Pohlmann

favor of paying bribes, it rises significantly to 11 percent. The willingness to corrupt is always greater when the interests of the organization are in the foreground and not the interests of the actor (Fig. 2). In short, we can see that the collective benefit of doing something for the good of the company significantly increases the willingness to corrupt and that this is much higher than in the case where it is “only” about one’s own bonuses. Contrary to what many people who believe in the theory of rational egoists and smart employees who are only concerned about their own advantage think, the collective benefit for the company is in the foreground in the case of self-organized deviation from the rules. And this is incomparably more important than mere egoistic personal gain. Factorial survey experiments are carried out also to clarify what is done by an employee when faced with corporate misconduct. In addition, information is to be obtained on whether and which measures are chosen by “confidants” and which are not. For this purpose, a case of organizational misconduct is presented to the test subjects in writing in the form of an online survey. The case is constructed in such a way that it takes place in an industry-typical grey area, namely in the industry in which the test subjects’ company is located. The test subjects in the respective company under investigation are randomly divided into three groups. Depending on the group to which they belong, the organizational setting in which the fictitious case of organizational misconduct takes place changes:

(Illegal) Personal Gain

Organizational Benefit

3%***

11%***

Propensity to act corrupt

Fig. 2   Personal gain or organizational benefit? Factorial survey with German CEOs, 2018, N = 250

How to Analyze Organizational Crime …

41

• Group 1 – The described misconduct takes place in an anonymous company in the same industry. • Group 2 – The described misconduct takes place in the company in which the test persons work. • Group 3 – The described misconduct takes place in the department/area of the company in which the test subjects work. The respective test person is asked in writing in the online survey to decide for or against an intervention, as well as for the form of the intervention (do not intervene/anonymous whistleblowing system/turn to a colleague/inform the superior/ address the person committing the misconduct, etc.). Subsequently, the subjects are asked to complete an online questionnaire. This aims to query factors that may influence decision-making, as well as the likelihood of arriving at a similar decision in real-life, similarly situated cases. Thus, we test the hypothesis that the more involved a person is in the organizational context, the more likely it is: a) that he/she will not report the behavior; b) that, in case of reporting the behavior, she will increasingly pursue informal channels; e.g., conversation with colleagues or the person committing the rule deviation. In the standardized telephone interviews, our goals were, with regard to the susceptibility to corruption in the sense of “organizational deviance”, the guiding value orientations and the understanding of the norm. The survey was confined to Germany, where we had already had a very good experience with telephone interviews with executives (in the US, as our experience in researching manager careers has shown, access to the target group is very difficult as legal issues are affected). The readiness for corruption was recorded by means of a factorial survey, using a vignette technology. Here, as in the quantitative assessment of the moral development stages in Kohlberg’s sense, conflict situations were described in fictional stories, e.g., responsibility for patients versus compliance with legal norms (see Hermann, 2003). In the stories, the action preferences and action justifications are recorded. Through a systematic variation of possible situational factors in the fictive stories, the stability of the explanatory model for the readiness for organizational “useful” corruption could be examined. In addition, scales should be used to measure standard intensity and values; these have proved to be productive for the explanation of delinquent action (see Hermann, 2003; Diekmann, 2010).

42

M. Pohlmann

(3) Labs in the field: Subsequently, role-play experiments were conducted in the context of continuing education events to measure the acceptance of rule deviations and the likelihood to report. The participants of further training events, e.g., also in the field of compliance, are to be recruited as test persons. For the implementation, we drew on the “construction test” and modified it for the purposes of the study. The “construction test” is a typical assessment center exercise in which an organizational structure of a company is simulated with the participants. A typical form of a construction task would be building a tower or a bridge. The task for the participants is to build as high as possible a tower or a bridge of a certain length out of cardboard and paper as a team. For this purpose, materials such as paper, scissors, glue, etc. are provided. At the end, the team must not only have agreed on a common approach but also present a specific result, e.g., a tower two meters high (Table 2). When performing the design test, different types of rule violations can be built in at different positions. Since we were particularly interested in rule violations in favor of companies (organizational deviance or useful illegality), which often take place with the participation of managers, we adopt the following experimental arrangement: at the level of middle management, a manager (initiated subject as part of the experimental arrangement) illegally provided additional building material in order to be able to realize the tower and bridge construction in the specified time and quality. Information about this is communicated to all experimental participants in the form of deliberate hints with the help of an initiated observer. In the initial situation, a compliance department with a whistleblower hotline was available (baseline). We then recorded whether the willingness to report increases when two additional measures are introduced: (1) personal advice from the management board (“tone from the top”); (2) anonymized 360°-feedback, conducted

Table 2   Research design role-play experiments

Top management illegal supply

N

Impact on reporting

(0) Baseline (compliance & whistleblowing)

5 tests, 100 test persons

Status quo of reporting likelihood

(1) Baseline + tone from the top 5 tests, 100 test persons

Increasing the willingness to report?

(2) Baseline + 360°-feedback

Increasing the willingness to report?

5 tests, 100 test persons

43

How to Analyze Organizational Crime …

by a trusted person. Thus, we could find out whether different measures had an impact on the likelihood to report. In total, then, we used three interrelated methods to examine the “dark field” of organizational crime. For measuring internal validity, we conducted laboratory experiments with a large number of students. They showed large variances across countries, but generally confirmed our assumption that the collective benefit of the organization significantly increases the willingness to act corruptly and that this effect is stronger than that of illegal personal gain. Following this, we could see that when we use the similar vignettes in a factorial survey in the field, the overall willingness to act corruptly decreases, but if so, they would be mainly doing it for the benefit of the company and much less for personal gain (Table 3). We then used role-playing experiments in the field to determine the acceptability of illegal activities, but more specifically to find out in more detail what factors influence the willingness to report misconduct.

4.2 Mapping Detected Corporate Crime Cases In the field of detected cases, our projects aim to examine in particular four pathways rarely used in criminological research pertinent to the organization: 1) the qualitative and quantitative analysis of detected cases: content analysis of judicial records provides the legal and political evaluation standards for corruption in terms of individual and organizational deviance. 2) Participatory observations and interviews within organizational case studies: conducting organizational case Table 3   Mapping the “dark field” of organizational crime

Objectives

Methods

Target Group

(1) Measuring the internal validPaper & pencil lab ity of collective factors that experiments increase the propensity to cheat

Students from law school, criminology, Social Science

(2) Measuring the likelihood to cheat, controlling for organizational factors

Factorial surveys, experiments

CEOs of industrial firms with more than 100 employees

(3) Increasing the external validity of factors that increase the acceptance of wrongdoings, and/or the likelihood to report

Lab in the field: roleplay experiments

White collar employees/professionals in companies

44

M. Pohlmann

studies are out of fashion in deviance and corruption research. But they do, by means of grounded theory, provide us with an already tested, efficient access to the unwritten rules and the daily deviations from formal rules and regulations in an organization. 3) The collective mindset analysis of interviews: through interviews with investigated criminals, employees close to the cases, and lawyers involved in the proceedings, the interpretative patterns that pertain to individual and organizational deviance are to be reconstructed and explained. 4) Furthermore, group discussions with experts on the prevention, detection, and prosecution of deviant self-regulation as well as the fight against defective regulation were carried out and information-technological possibilities of data-mining and secondary evaluation of anonymized primary data sources (patient files, for instance) were tested. In order to visualize the influence of institutionalized rules on informal selfregulatory structures, analyses of detected cases and organizational case studies are carried out, in which quantitative as well as qualitative methods of social research are applied. Case-specific assimilation or accommodation mechanisms of deviant self-regulation have been traced using specific examples. For the country comparison, we have selected on the one hand two leading Western industrial countries and centers in transplantation medicine. On the other hand, in order to correct a Western bias, we have chosen two emerging economies: China and Brazil. The project investigated the factual control effects of institutionalized rules (laws, compliance rules, voluntary commitments, etc.) across existing sectors and cultures on existing forms of self-regulation at the levels of the relevant organization(s) and the actors involved in this setting. To do this, we selected countries where the fight against corruption and fraud in the business sphere and the medical sector has entered a new phase, accompanied by stricter laws, administration of justice, or intensified law enforcement (Brazil, China, Germany, USA). The global activities of companies create a variety of crime-prone opportunity structures, increasing the need for effective prevention. The large companies of the two Western countries are often listed on the US stock exchange and have, due to draconian penalties—as last but not least the Siemens case showed— attached particular importance to compliance measures. Such a comparison is also interesting because the starting point for the establishment of compliance departments and measures was in the USA, and the question can be asked which of these forms were taken up by Germany, Brazil, and China. (1) Analysis of court records: According to Kersting and Erdmann, the analysis of court records refers to the crime scene which is known and registered by

How to Analyze Organizational Crime …

45

law enforcement institutions. Unrecognized acts form the so-called “dark field” (Kersting & Erdmann, 2014, p. 11). Pending or non-judicialized cases are thus not available in the analysis of detected cases. While the detected cases can be measured well, the ratio between detected and undetected cases is usually indeterminate because the “dark field” can only be determined indirectly with the aid of self-reported delinquency or other tools we used (see above, see also Köllisch & Oberwittler, 2004; Naplava & Walter, 2006; for discussion: Oberwittler & Köllisch, 2004). For example, an increase in police crime statistics does not automatically imply an increase in criminal behavior (see also Köllisch & Oberwittler, 2004, p. 709; Oberwittler & Köllisch, 2004, p. 145). An intensification of prosecution by increased sensitivity of the investigating authorities, or the employment of new prosecutors, etc. may have led to this result. According to Naplava and Walter (2006), increased sensitivity to violence by the general public may be conducive to increased judicial activity through legislative measures, for instance. These can lead to the intensification of control measures, as a result of which, for example, due to increased readiness to report, an increase in detected cases occurs, which in turn can further an increase in the sensitivity to acts of violence (see Kersting & Erdmann, 2014, p. 17). The method of court record analysis refers to data that are not scientifically produced but mediated by the practice of police, investigating authorities, courts etc. The information in the criminal records or the testing reports may differ from the actual events and provisional occurrences (see also Peter & Bogerts, 2010, p. 46; Kersting & Erdmann, 2014, p. 10). Therefore, it is important to know the conditions of data acquisition in order to assess the data of the court records given that the analysis of detected cases corresponds to a content analysis of documents that were not produced for the purpose of scientific analysis. The mechanisms of data production must be considered in the interpretation, but it was our preferred choice of method to make sense of cases because of the lack of other methods and approaches. As scientists, we were not able nor allowed to carry out investigations or examinations of patient records by ourselves. Even a randomized controlled trial is not possible in criminology because we do not know to what extent a non-detection of violations is a proxy that no violations have occurred. For an ex-post study like ours, a quantitative analysis of control deviations is not possible in retrospect, as the scandal of the disclosure has changed the probability and nature of the deviations. Although participatory observations can yield fruitful insights in a qualitative design, they are not suitable for quantifying purposes. In this respect, after detailed examination, access via a court record analysis, carried out by coding the data with a standardized questionnaire, seemed to us to be without any alternative.

46

M. Pohlmann

The selection of court record studies has its focus in the field of economics because we found many more corruption procedures there than analogous activities in the field of medicine. Only industry-related cases of active corruption are selected from the industry sector which themselves were not aimed at damaging the organization. The same procedure as in the US was followed in Germany, Brazil, and China. The analysis of detected cases is supplemented by interviews with the involved defense attorneys, prosecutors, and judges. The qualitative evaluation of court judgments, compliance documents, and problem-centered expert interviews were carried out through content analysis (Mayring, 2010). Based on the research question, the analyst charts categories that result from the material itself, so that argumentation structures become clear across all cases. This is a particularly suitable method for the evaluation of larger text corpora. The content analysis was carried out with the help of MAXQDA, a software for qualitative data analysis and coding of relevant text passages—a method that has already been used several times in criminological studies. In this step, we established whether the present cases were dealing with organizational deviance, and the approach was further validated in this way. For example, if we take a closer look at the Foreign Corrupt Practices Act (FCPA) case complexes with its Non-Prosecution Agreements (NPA) and Deferred Prosecution Agreements (DPA), where there is information on organizational benefit and/or illegal personal enrichment, we see that in about half of the cases personal enrichment and in the other half organizational benefit were at the forefront of the corrupt practices. In very few cases was this mixed. Again, along with the content analyses of files, we see that organizational crime (an offense characteristic under the FCPA) is foregrounded in a significant proportion without illegal personal enrichment (Table 4). (2) Case studies and interviews: The organizational case studies also use document analyzes that refer to the formal requirements and the compliance and control systems. The subsequent interviews are similarly designed as problemcentered expert interviews (Witzel, 1985). They focus on occupational, biographical, and organizational narratives as well as central arguments of managers and

Table 4  US Foreign Corrupt Practices Act (FCPA) 1978–2018, N = 74 (214)

FCPA Files

Indications

personal gains

34 (46%)

benefits for the company

33 (45%)

mixed

7 (9%)

How to Analyze Organizational Crime …

47

physicians related to wrongdoings. On the one hand, we worked out how the careers and reward systems—in particular the bonus in managerial employment contracts, which are not seldom found among transplantation physicians—shape the respective action orientations. On the other hand, we mapped the unwritten rules, organizational cultures, informal norms, and taken-for-granted assumptions which influence the susceptibility to misconduct. The interviewees are bound by their narratives and legitimations to cultural specifications, a dialogically moving instrument, which enables the researcher to record and reconstruct (professional) biographical and organizational orientations and actions while also allowing a combination with more standardized questions. With regard to organizational case studies, a targeted selection was made according to our research design. On the one hand, we tried to attract companies and centers whose employees were facing legal action. On the other hand, our selection is based on the size and importance of the organizations (whether markets or hospitals, for the German section). In both Germany and the US, companies are selected from among the top 500 companies and are considered, in particular, when listed on the US stock exchange. Interviews were conducted with the heads of the compliance departments and selected middle managers. As transplant centers in Germany, we addressed those in Heidelberg and Berlin, where violations of the organ distribution regulations of the Transplantation Act and the guidelines of the German Medical Association have been frequently reported. In addition to participant observations, we conducted a total of 62 interviews to explore the informal rules and collective mindsets that led to the rule deviations (Table 5). Within the framework of an ex-post interview analysis, we chose the Collective Mindset Analysis (CMA) as a method that reconstructs the relatively timeconsistent, underlying collective rules of interpretation and action of physicians. As a result, these unwritten rules of interpretation and action proved to be very much shaped by the profession of medicine, with the context of the clinics carrying significance primarily in the sense of a professional organization. The rules of interpretation and action inductively derived in the qualitative analysis procedure testify to a broad cognitive institutionalization (see Scott, 2008). While the medical profession proved to be the central reference point of the collective knowledge stock in justifying and explaining rule-deviating behavior, the interviewees followed this up by opening up four additional dimensions of reasoning: aspirational, technical, positional, and ethical. This cognitive anchoring in a four-dimensional form indicates a strong institutionalization of the collectively shared solutions strategies for the collective action problem of organ shortage.

48

M. Pohlmann

Table 5   Number of interviews in the period 2014–2016, hospitals, and legal profession

Survey steps and positions

Number of interviews

(1) Full survey of the 100 major hospitals Medical Directors/board members Commercial directors (2) Case studies (dark field analysis)

17 8

Transplant physicians

14

Other transplant experts (3) Bright field analysis

3

Lawyers involved in the court proceedings

10

Informational interviews with other transplant experts

10

Total

62

Source: own data, see also Pohlmann & Höly, 2017, p. 190; Pohlmann, 2018, p. 132

The dimensions are functionally aligned with the medical profession and, in their interplay within the context of the organization, shape the cognitive framing of a professionally justified form of deviance. However, the question remains as to what led to the “rule-deviating customs” to become normal practice in the different transplant centers. The cognitive structure of the CMs are tuned with the organizational crime literature that competitive and hierarchical pressure, justifications, and socialization are enablers of misconduct at medical organizations too. Competitive pressure on or within an organization is translated by the personnel into rules of interpretation and action, which suggest circumventing debilitating or cumbersome legal rules or guidelines (see Ashforth & Anand, 2003; Ashforth et al., 2008; Pinto et al., 2008; Palmer, 2012; Campbell & Göritz, 2014). In the present study, the scenario is moderated by competition within the profession: the strive for reputation and experience is in the foreground, supported by the incentive structures of the clinics and—ultimately also due to the lack of controls—finally translates into deviant action. Hierarchical pressure thereby played a role in the willingness to act in a deviant way. Often high-ranking personnel of the organization are involved or tolerate the deviant practices. Through informal expectations structures, and action rules, organizational deviance could prevail over legitimate action alternatives (see Palmer, 2012, p. 174; Campbell & Göritz, 2014). The context of the hospital organization endowed physicians with two forms of authority at once: to decide when, how, and in what way the formal rules are obeyed or circumvented—not

How to Analyze Organizational Crime …

49

only documents the professional authority of the professional but also the superior authority of the hierarchy, which resulted in a wide, partly unquestioned recognition of the rule-deviating behavior from below. Ethically Positive Assessments or Justifications of deviations often accompany the establishment of the deviant customs. They promote the tolerance or recognition of deviations by appearing ethically justifiable or even necessary, thus creating a frame of interpretation for deviations (see Ashforth & Anand, 2003, p. 17). It has been empirically proven that the more loyal the staff towards the organization is, the higher the willingness for “unethical pro-organizational behavior” (Umphress et al., 2010; Umphress & Bingham, 2011; Matherne & Lichtfield, 2012). Against the background of the organ shortage and the tragic choice situation, physicians consider it both ethically correct to take responsibility for their patients as a physician and, if necessary, to decide against the rules of the German Medical Association so that no organs are wasted. At the same time, it is also ethically justifiable that the society interfere with objective and transparent external regulations. This inconsistency translates via professional socialization into a higher probability of professional deviance for those who rate the assigned mandate for autonomous problem solving higher than the general guidelines of the German Medical Association. The guideline violations in the view of the physicians interviewed are based on adherence to professional self-regulation in case-handling. Through socialization, these unwritten rules of the organization and profession become internalized and gain the status of a self-evident action (see Ashforth & Anand, 2003). At the same time, through long-standing collaboration, preservations of mutual trust within the organization are established (see Luhmann, 1964, p. 311). Our preferred approach emphasizes unwritten rules as institutional complexes that might have been conducive to deviance from formal guidelines. We chart our way by reconstructing the collectively developed, organizational, and professional stocks of knowledge ex-post (cf. Schütz & Luckmann, 2003, pp. 33, 44 ff.). If the limits of written rules have been long acknowledged by social scientists studying deviance—who address unwritten rules as an intervening variable—, far less research directly studies the internal properties and dynamics of a set of unwritten rules in a particular field (engulfed by crime). Existing work on cultural repertoires normally employs the qualitative paradigm such as in-depth interviews (Lamont, 1992), case studies (Ravasi & Schultz, 2006), or content analysis of communications produced by a specific community (Weber et al., 2013). The collective mindset analysis of interviews is very suitable to grasp the tacitly acknowledged rules behind existing strategies of action without talking to the physicians

50

M. Pohlmann

accused of wrongdoing. In the search for cultural repertoires in this field, neoinstitutionalism and the sociology of knowledge are joined by approaches from the sociology of the profession to explain our findings (e.g., Parsons, 1939). Inside and across organizational settings, including professions, discursive interaction forges meaning, values, commitments, and worldviews, providing individuals with shared frames of reference (Berger & Luckmann, 1967; Schütz & Luckmann, 2003; Phillips & Hardy, 2011). Against this background, we expect to find a convergence of mindsets on the organizational level among the group of people interacting in it. Since an organizational field should not be determined a priori but rather defined on the basis of empirical investigation (DiMaggio & Powell, 1983), apart from introducing the (manifest) setting of the deviant actions and the regulatory framework, we will address the (latent) structures of meaning at the collective mindset section. Problem-centered expert interviews were also used to analyze the collective cognitive and normative arguments and interpretations of the actors involved in the compliance and control systems. With this hermeneutic method, we go beyond the conventional attitude and opinion research in this field. Our analysis aimed at the collective schemes of thinking and perception. Interpretation patterns are not the opinions, self-representations, attitudes, and value statements of the actors themselves but a reconstruction of the collective rules of interpretation and action that they generate. They are related to objective action problems and enable a generalized handling of them through collective forms of knowledge (Oevermann, 2001, p. 38). In this case, our projects did not use the more elaborate method of objective hermeneutics by Oevermann, which is hardly suitable for international comparison, but rather the so-called Mannheimer method of collective mindset analysis (see Ullrich, 1999; Sachweh, 2010). This serves the systematic elaboration of subtle cognitive and normative arguments and interpretations as well as the resulting evaluations. (4) Group discussions: Similar to a Delphi survey, the group discussions present a set of questions or theses of the subject area to both groups of experts. Respondents had the opportunity to assess the theses in the first round. In the second round, they were asked to discuss the possibilities and best practices for preventing organizational deviance. The aim was to discuss the possibilities of learning from international and intersectoral comparisons of the experiences of others in dealing with crime-prone forms of self-regulation, as well as the possibilities of initiating cultural change in the organization and changing forms of self-regulation susceptible to crime. The group discussions opened up an access to collective orientations of the participating professions. The profit of the method slies in explicating the implicit everyday knowledge (“tacit knowledge”, see

51

How to Analyze Organizational Crime …

Polanyi, 1966) of persons or groups and, at the same time, staking out new ways of avoiding organizational deviance (see Bohnsack, 2000, p. 131). Thus, this method was a supplement to the individual-centered interviews. Altogether, the field of uncovered cases can only be dealt with by accounting for how the data were produced and what constraints they contain. If this is done, however, it enables him/her to make excellent use e.g., of court records as a source to determine more precisely, for example, in the cases that are uncovered, what significance organizational crime plays in comparison to individual crime. In case studies of organizations that are centrally located in a field in which crimes frequently occurred without having to be involved in them oneself, one can learn a great deal about the factors and unwritten rules that systematically lead to rule deviations by means of participant observations and interviews (Tab. 6). Especially unwritten rules can be reconstructed qualitatively by means of a Collective Mindset Analysis, as far as they come to bear in the collective thought patterns, given they are collectively valid in the respective field and in the respective organizations. Group discussions can then help to also reconstruct collective thinking patterns as well as norms and habits that answer the question of how to prevent organizational wrongdoings.

Table 6   Mapping the field of detected cases

Objective

Methods

Target Group

(1) Measuring the role of Content analysis of detected Criminal cases, settlements, organizational crime com- cases detected rule deviations in pared to individual crime the US, Germany, Brazil, China, corporate and medical sector (2) Assessing the role of Participant observations and White collar employees in explanation factors like expert interviews companies and hospitals hierarchies, socialization, competition, justification (3) Evaluating and reconstructing the unwritten rules of wrongdoings

Qualitative interview analysis, collective mindset analysis

White collar employees in companies and hospitals judges, lawyers, witnesses, defendants, prosecutors

(4) Reconstructing the collective mindsets of prevention

Group discussions

White collar employees in companies and hospitals judges, lawyers, witnesses, defendants, prosecutors

52

M. Pohlmann

4.3 Mixed Methods Approaches Each set of questions concerning organizational crime requires different methodological approaches which control each other and are connected by division of labor or can simply complement each other. Many research projects therefore apply different approaches to a topic or a question and do not limit themselves to a single approach or method. 1. The triangulation design is characterized by a simultaneous usage of qualitative and quantitative methods of data collection; provided that the data relates to the same subject and carries the same weight (see Clark & Creswell, 2008, pp. 105–118; Hussy et al., 2010, p. 303). 2. While the two types of survey and data in the triangulation design refer to the same research question and the same object of investigation, the embedded design is characterized by the fact that two different research questions are asked. Answering them requires a different form of survey and a different type of data (cf. Hussy et al., 2010, p. 303). Which side dominates depends on the question (cf. Hussy et al., 2010, p. 303). In the sub-form of correlative design, the qualitative data serves to “obtain information about the mechanisms underlying the quantitatively determined relationships” (Hussy et al., 2010, p. 304). 3. In an explanatory design, qualitative and quantitative survey methods are combined in two phases. In the first phase, a quantitative finding is recorded, which is then to be explained in a second qualitative survey phase. Suppose in a study analyzing cell phone data during a pandemic, we find that many are not following the rules of maintaining 1.5–2 m of physical distancing. In a qualitative study, the reasons for this are then clarified, and also what situations and action constellations lead to this. This can also work in reverse. As a qualitative finding, we find that distance rules are not valued. We want to examine, at the level of structural data collected through observation, whether and how this disdain actually translates into rule-deviating behavior in certain situations and action constellations. 4. In an explorative design, the qualitative survey is placed before the standardized ones in order to first explore a new field of research and to design and tailor the standardized questionnaire based on these primary experiences (cf. Hussy et al., 2010, p. 304). Concerning organizational crime, we applied a combination of methods and approaches, for example, participant observations combined with interviews in our case studies.

How to Analyze Organizational Crime …

53

1. Both forms of data collection were used simultaneously—i.e. simultaneously and not sequentially—whereby the data type was not equally weighted, but the participant observation was in the foreground. Thus, the studies appeared to be designed as hypothesis-generating and theory-developing at the same time, even if— measured by the results—the descriptive side was in the center. But both approaches to the field complemented each other, and were used in a mutually controlling manner. Explorative “triangulation” in different fields is characterized by the fact that simultaneously qualitative and quantitative methods of data collection are applied; the data refer to the same purpose of investigation. Thus, we were measuring in the “dark field” how strong the effect of collective benefits on the propensity to cheat in a given culture is compared to the effects of illegal personal gains. Switching to the detected cases, we then tried to find out how strong the impact of organizational benefits was compared to illegal personal gains by analyzing court records. In the mode of an explorative triangulation, we compared the findings, being aware of the fact that the methods as well as the samples were completely different. 2. We were also applying an explorative “explanatory design”. In a content analysis of court records, we asked to what extent organizational benefits and illegal personal gains were mentioned or could be excluded from official documents produced by judicial institutions. Having answered this question, we moved on into an ex-post interview analysis of cases that were supposed to explain how the specific type of corporate misconduct we identified took place. Consequently, we focused our analysis on explanatory factors found in the informal rules as well as in the factors cited in the theory to explain the emergence of organizational crime. What were the informal rules that justified the wrongdoings (justification) and what role did socialization factors, hierarchies, competitive pressure, and organizational cultures play?

5 Conclusions Although the topic of organizational crime has attracted a lot of attention and literature in recent years, the state of research in terms of empirical studies is still not very rich. A theory development on a larger scale has therefore not taken place so far. It was important for us to briefly outline the state of research and the theoretical discussion here. More important, however, was to conceptualize organizational crime and operationalize the factors that come into play when conducting research on the topic. As we have seen, it is a very difficult field for research in which creativity is in order to achieve reliable results. The usual

54

M. Pohlmann

recourse to international statistics on the subject is just as pointless as simply taking the data generated by the police. Ultimately, the number of rule deviations that are uncovered largely depends on the activities of the investigating authorities. So, we have to connect “dark field analysis” with “bright field analysis” in order to understand at least approximately how organizational crime occurs, to what extent it assumes and how we can explain it. Also, compliance is a key area for organizations as internal risks and external regulations grow, but robust knowledge on the preventive effects of compliance measures is still rare. In addition to legal tasks, compliance departments are increasingly being assigned responsibility for deterrence and prevention. Although many anti-corruption measures are strongly recommended as best practice (e.g., training courses), there is no sufficiently well-founded information about which of the compliance measures have preventive effects or whether preventive effects can be assumed at all. The promises associated with such measures are rarely questioned or checked using effectiveness and efficiency criteria. According to Puschke and Singelnstein (2015), from a white-collar crime perspective as well as a white-collar criminal law perspective, doubts are appropriate as to whether the introduction and expansion of compliance programs in companies can actually help to promote the legal control and prevention of white-collar crime (Puschke & Singelnstein, 2015). Despite sophisticated, extensive, and standardized compliance management systems (e.g., IDW PS 980, Swiss PS 980, UKBA, FCPA, ISO 19600, ISO 37001), corrupt behavior still occurs in companies and with regularly extensive social-economic consequences, as current scandals continue to show (Golinski, 2016). In addition, corrupt behavior occurs not only in extensively corrupt organizations but also in those companies that have not only implemented the above standards but have certified them and, for example, are mainly active in countries that are not considered particularly susceptible to corruption according to the Corruption Perception Index (Pohlmann et al., 2020). Against this background, the suspicion arises that numerous preventive compliance measures do not have any lasting effects.

References Alvesson, M., & Spicer, A. (2019). Neo-institutional theory and organization studies: A mid-life crisis? Organization Studies, 40(2), 199–218. Armbruster, A., & Besio, C. (Eds.). (2021). Organisierte Moral: Zur Ambivalenz von Gut und Böse in Organisationen. Springer Fachmedien.

How to Analyze Organizational Crime …

55

Artino, A. R., Driessen, E. W., & Maggio, L. A. (2019). Ethical shades of gray: International frequency of scientific misconduct and questionable research practices in health professions education. Academic Medicine, 94(1), 76–84. Ashforth, B. E., & Anand, V. (2003). The normalization of corruption in organizations. Research in Organizational Behavior, 25, 1–52. Ashforth, B. E., Gioia, D. A., Robinson, S. L., & Trevino, L. K. (2008). Re-viewing organizational corruption. Academy of Management Review, 33, 670–684. Bauer, M., & Becker, S. (2020). Democratic backsliding, populism, and public administration. Perspectives on Public Management and Governance, 3(1), 19–31. Becker, G. S. (1968). Crime and punishment: An economic approach. Journal of Political Economy, 76, 169–217. Benson, M. L., & Chio, H. L. (2019). Who commits occupational crimes? In M. L. Rorie (Ed.), The handbook of white-collar crime (pp. 97–112). Wiley. Berger, P. L. & Luckmann, T. (1967). The social construction of reality: A treatise in the sociology of knowledge. Anchor. Bernasiewicz, M. (2020). Family and the local community as direct and indirect control agencies in prevention of criminal behaviour. Resocjalizacja Polska, 20(1), 77–86. Bohnsack, R. (2000). Rekonstruktive Sozialforschung: Einführung in Methodologie und Praxis qualitativer Forschung. Leske + Budrich. Börzel, T. A. (2020). Why noncompliance: The politics of law in the European Union. Cornell University Press. Braithwaite, J. (1991). Poverty, power, white-collar crime and the paradoxes of criminological theory. Australian and New Zealand Journal of Criminology, 24, 40–50. Brief, A. P., Buttram, R. T., & Dukerich, J. M. (2001). Collective corruption in the corporate world: Toward a process model. In M. E. Turner (Ed.), Groups at work: Theory and research (pp. 471–499). Lawrence Erlbaum Associates. Bromley, P., & Powell, W. (2012). From smoke and mirrors to walking the talk: Decoupling in the contemporary world. The Academy of Management Annals, 6(1), 483–530. Bullock, M. L. (2019). Not playing fair: Deviant emotional intelligence, dark traits, and unethical behavior in the nursing profession, Dissertation, Northcentral University. Bussmann, K.-D. (2018). Wirtschaftskriminalität. In: Dieter Hermann & Andreas Pöge (eds.), Kriminalsoziologie: Handbuch für Wissenschaft und Praxis (S. 339–356). Nomos. Bussmann, K.-D., & Niemeczek, A. (2019). Compliance through company culture and values: An international study based on the example of corruption prevention. Journal of Business Ethics, 157(1), 797–811. Bussmann, K.-D., Niemeczek, A., & Vockrodt, M. (2016). Compliance und Unternehmenskultur – Eine empirische Untersuchung zur Wirksamkeit von Anti-Korruptionsprogrammen. Monatsschrift Für Kriminologie Und Strafrechtsreform, 99(1), 23–41. Campbell, J.-L., & Göritz, A. (2014). Culture corrupts! A qualitative study of organizational culture in corrupt organizations. Journal of Business Ethics, 120, 291–311. Clark Plano, V. L. & Creswell, J. W. (2008). The mixed methods reader. SAGE. Clinard, M. B. & Quinney, R. (1973). Criminal behavior systems: A typology. Holt, Rinehart and Winston. Coleman, J. S., & Flitner, A. (1986). Die asymmetrische Gesellschaft: Vom Aufwachsen mit unpersönlichen Systemen. Beltz.

56

M. Pohlmann

Diekmann, A. (2010). Empirische Sozialforschung: Grundlagen, Methoden, Anwendungen. Rowohlt. DiMaggio, P. J., & Powell, W. W. (1983). The iron cage revisited: Institutional isomorphism and collective rationality in organizational fields. American Sociological Review, 48(2), 147–160. DiMaggio, P. J., & Powell, W. W. (1991). The new institutionalism in organizational analysis. University of Chicago Press. Fehr, R., Welsh, D., Yam, K. C., Baer, M., Wu, W., & Vaulont, M. (2019). The role of moral decoupling in the causes and consequences of unethical pro-organizational behavior. Organizational Behavior and Human Decision Processes, 153, 27–40. Friedrichs, D. O. (2002). Occupational crime, occupational deviance, and workplace crime: Sorting out the difference. Criminal Justice, 2(3), 243–256. Ginsburg, T., Chernykh, S., & Elkins, Z. (2008). Commitment and diffusion: How and why national constitutions incorporate international law. University of Illinois Law Review, 1, 201–238. Golinski, K. (2016). Antikorruptionsprogramme auf dem Prüfstand: Möglichkeiten und Grenzen einer effektiven Korruptionsprävention durch Compliance-Programme in Unternehmen. Berliner Wissenschafts-Verlag. Gottfredson, M. R., & Hirschi, T. (1990). A general theory of crime. Stanford University Press. Green, G. S. (1990). Occupational crime. Nelson-Hall Inc. Haverkamp, R. (2019). Ein Überblick zur Dunkelfeldforschung in Deutschland: Begriff, Methoden und Entwicklung. SIAK-Journal – Zeitschrift für Polizeiwissenschaft und polizeiliche Praxis, 2, 15–30. Helmke, G., & Rosenbluth, F. (2009). Regimes and the rule of law: Judicial independence in comparative perspective. Annual Review of Political Science, 12(1), 345–366. Hermann, D. (2003). Werte und Kriminalität: Konzeption einer allgemeinen Kriminalitätstheorie. Westdeutscher Verlag. Hermann, D. (2013). Werte und Kriminalität: Konzeption der voluntaristischen Kriminalitätstheorie und Ergebnisse empirischer Studien. In D. Dölling & D. Baier (eds.), Täter, Taten, Opfer: Grundlagenfragen und aktuelle Probleme der Kriminalität und ihrer Kontrolle (S. 432–450). Forum-Verl. Godesberg. Hermann, D., Dölling, D., Collong, A., Horten, B., Dreßing, H., Salize, H. J., Kruse, A., Schmitt, E., & Bannenberg, B. (2019). Institutionelle Bedingungen des sexuellen Missbrauchs von Minderjährigen: Eine vergleichende Analyse von Strafakten. Monatsschrift Für Kriminologie Und Strafrechtsreform, 102(4), 249–261. Höffling, C. (2002). Korruption als soziale Beziehung. Leske + Budrich. Hussy, W., Schreier, M., & Echterhoff, G. (2010). Forschungsmethoden in Psychologie und Sozialwissenschaften für Bachelor. Springer. Jakab, A., & Kirchmair, L. (2021). How to develop the EU justice scoreboard into a rule of law index: Using an existing tool in the EU rule of law crisis in a more efficient way. German Law Journal, 22(6), 936–955. Jansen, J., Van Den Bosch, F., & Volberda, H. W. (2005). Managing potential and realized absorptive capacity: How do organizational antecedents matter? The Academy of Management Journal, 48(6), 999–1015.

How to Analyze Organizational Crime …

57

Joh, E. E., & Joo, T. W. (2015). The corporation as snitch: The new DOJ guidelines on prosecuting white collar crime. Virginia Law Review Online, 101, 51–59. Karstedt, S. (2001). Comparing cultures, comparing crime: Challenges, prospects and problems for a global criminology. Crime, Law and Social Change, 36, 285–308. Kersting, S., & Erdmann, J. (2014). Analyse von Hellfelddaten – Darstellung von Problemen, Besonderheiten und Fallstricken anhand ausgewählter Praxisbeispiele. In S. Eifler & D. Pollich (Eds.), Empirische Forschung über Kriminalität: Methodologische und methodische Grundlagen (pp. 9–29). Springer VS. Klinkhammer, J. (2011). Korruption powered by Siemens: Alte, korruptionsaffine Wertorientierungen in den Führungsetagen des Geschäftsbereichs Power Generation. In M. Pohlmann & G. Lämmlin (eds.), Neue Werte in den Führungsetagen? Kontinuität und Wandel in der Wirtschaftselite (Herrenalber Forum, 64, S. 136–168). Evangelische Akademie Baden. Klinkhammer, J. (2013). On the dark side of the code: Organizational challenges to an effective anti-corruption strategy. Crime, Law and Social Change, 60(2), 191–208. Knecht, T. (2009). Persönlichkeit von Wirtschaftskriminellen. Psychiatrie, 25, 25–29. Köllisch, T., & Oberwittler, D. (2004). Wie ehrlich berichten männliche Jugendliche über ihr delinquentes Verhalten? KZfSS Kölner Zeitschrift Für Soziologie Und Sozialpsychologie, 56(4), 708–735. Kühl, S. (2020). Brauchbare Illegalität: Vom Nutzen des Regelbruchs in Organisationen. Campus. Lambsdorff, J. & Frank, B. (2007). Corrupt reciprocity: An experiment. Passauer Diskussionspapiere – Volkswirtschaftliche Reihe, V-51-07. Lamont, M. (1992). Money, morals and manners: The culture of the French and the American upper-middle class. The University of Chicago Press. Lessig, L. (2013). Institutional corruptions. Edmond J. Safra Working Papers, 1. Lessig, L. (2014). The USA is lesterland: The nature of congressional corruption. CreateSpace Independent Publishing Platform. Lim, A. (2021). Global fields, institutional emergence and the regulation of transnational corporations. Social Forces, 99(3), 1060–1085. Luhmann, N. (1964). Funktionen und Folgen formaler Organisation. Duncker & Humblot. Mars, G. (Ed.). (2018). Occupational crime. Routledge. Matherne, C., & Litchfield, S. R. (2012). Investigating the relationship between affective commitment and unethical pro-organizational behaviors: The role of moral identity. Journal of Leadership, Accountability, and Ethics, 9(5), 35–46. Mayring, Philipp (2010). Qualitative Inhaltsanalyse: Grundlagen und Techniken. Weinheim/Basel: Beltz. Merkel Wolfgang & Aurel Croissant. (2000). Formale und informale Institutionen in defekten Demokratien. Politische Vierteljahresschrift, 41(1), 3–30. Merkel, W., Puhle, H.-J., & Croissant, A. (Hrsg.). (2003). Defekte Demokratie, Band 1: Theorie. VS Verlag. Merkel, W., Puhle, H.-J., & Croissant, A. (Hrsg.). (2006). Defekte Demokratie, Band 2: Regionalanalysen. VS Verlag. Meyer, J. W. (2005). Weltkultur: Wie die westlichen Prinzipien die Welt durchdringen. Suhrkamp.

58

M. Pohlmann

Meyer, J. W., & Rowan, B. (1977). Institutionalized organizations: Formal structure as myth and ceremony. American Journal of Sociology, 83(2), 340–363. Morgan, K. J., & Orloff, A. (2017). The many hands of the state: Theorizing political authority and social control. Cambridge University Press. Moschella, M., & Pinto, L. (2021). The multi-agencies dilemma of delegation: Why do policymakers choose one or multiple agencies for financial regulation? Regulation & Governance, Online First, 13(8), 2021. Naplava, T., & Walter, M. (2006). Entwicklung der Gewaltkriminalität: Reale Zunahme oder Aufhellung des Dunkelfeldes? Monatsschrift Für Kriminologie Und Strafrechtsreform, 89(5), 338–351. Nerdinger, F. W. (2008). Unternehmensschädigendes Verhalten erkennen und verhindern. Hogrefe Verlag. Oberwittler, D., & Köllisch, T. (2004). Nicht die Jugendgewalt, sondern deren polizeiliche Registrierung hat zugenommen. Neue Kriminalpolitik, 4, 144–147. Oevermann, U. (2001). Die Struktur sozialer Deutungsmuster: Versuch einer Aktualisierung. Sozialer Sinn, 2(1), 35–82. Palmer, D. (2012). Normal organizational wrongdoing: A critical analysis of theories of misconduct in and by organizations. Oxford University Press. Palmer, D., & Maher, M. W. (2006). Developing the process model of collective corruption. Journal of Management Inquiry, 15(4), 363–370. Parsons, T. (1939). The professions and social structure. Social Forces, 7(4), 457–467. Peter, E., & Bogerts, B. (2010). Sexualstraftaten an Kindern – Wer sind die Täter? Eine Hellfeld-Analyse rechtskräftig abgeschlossener Verfahren auf der Basis der TäterOpfer-Beziehungen. Neue Kriminalpolitik, 22(2), 45–51. Petzold, K., & Wolbring, T. (2018). What can we learn from factorial surveys about human behavior? A validation study comparing field and survey experiments on discrimination. Methodology, 15(1), 19–30. Phillips, N. & Hardy, C. (2011). Discourse analysis: Investigating processes of social construction. SAGE. Pinto, J. (2019): Organizational Corruption: Its characteristics, antecedents, and consequences. In P. Graeff & T. Rabl (Hrsg.), Was ist Korruption? Begriffe, Grundlagen und Perspektiven gesellschaftswissenschaftlicher Korruptionsforschung (S. 59–76). Nomos. Pinto, J., Leana, C. R., & Pil, F. K. (2008). Corrupt organizations or organizations of corrupt individuals? Two types of organization-level corruption. Academy of Management Review, 33(3), 685–709. Pogarsky, G., Roche, S. P., & Pickett, J. T. (2018). Offender decision-making in criminology: Contributions from behavioral economics. Annual Review of Criminology, 1, 379–400. Pohlmann, M. (2006). Weber, Sombart und die neuere Kapitalismustheorie. In G. Albert, A. Bienfait, S. Sigmund, & M. Stachura (Eds.), Aspekte des Weber-Paradigmas: Festschrift für Wolfgang Schluchter (pp. 169–191). VS Verlag. Pohlmann, M. (2016). Soziologie der Organisation: Eine Einführung. UVK. Pohlmann, M. (2018). Der Transplantationsskandal in Deutschland: Eine sozialwissenschaftliche Analyse der Hintergründe. Springer Fachmedien. Pohlmann, M., Valarini, E., & Mitra, S. (Eds.). (2021). Organisational wrongdoing in cross-national perspective: Culture, context and comparative theory. Springer VS.

How to Analyze Organizational Crime …

59

Pohlmann, M. (2021). Silence of organizations: The difficulties of organizations to detect and unveil capital crimes. In: S. Starystach & K. Höly (Hrsg.), The silence of organizations: How organizations cover up wrongdoings (S. 45–68). heiBOOKS. Pohlmann, M., & Höly, K. (2017). Manipulationen in der Transplantationsmedizin: Ein Fall von organisationaler Devianz? KZfSS Kölner Zeitschrift Für Soziologie Und Sozialpsychologie, 69(2), 181–207. Pohlmann, M., Bitsch, K., & Klinkhammer, J. (2016). Personal gain or organizational benefits? How to explain active corruption. German Law Journal, 17(1), 73–100. Pohlmann, M., Dannecker, G., & Valarini, E. (Eds.). (2020). Bribery, fraud, cheating: How to explain and to avoid organizational wrongdoing. Springer VS. Polanyi, M. (1966). The tacit dimension. Chicago University Press. Pope, S., & Meyer, J. W. (2016). Local variation in world society: Six characteristics of global diffusion. European Journal of Cultural and Political Sociology, 3(2/3), 280– 305. Puschke, J., & Singelnstein, T. (2015). Compliance und Whistleblowing: Neuere Formen sozialer Kontrolle in Unternehmen und Gesellschaft. Neue Kriminalpolitik, 27(4), 339– 345. Rabl, T. (2009). Korruption in Deutschland – Warum Entscheidungsträger in Unternehmen korrupt handeln. WIK – Zeitschrift für die Sicherheit der Wirtschaft, 2, 24–28. Rabl, T. (2011). The impact of situational influences on corruption in organizations. Journal of Business Ethics, 100(1), 85–101. Rabl, T., & Kühlmann, T. M. (2008). Understanding corruption in organizations – Development and empirical assessment of an action model. Journal of Business Ethics, 82(2), 477–495. Ravasi, D., & Schultz, M. (2006). Responding to organizational identity threats: Exploring the role of organizational culture. Academy of Management Journal, 49(3), 433–458. Rorie, M., Alper, M., Schell-Busey, N., & Simpson, S. S. (2018). Using meta-analysis under conditions of definitional ambiguity: The case of corporate crime. A Critical Journal of Crime, Law and Society, 31(1), 38–61. Rubington, E., & Weinberg, M. (2015). Deviance: The interactionist perspective. Routledge. Sachweh, Patrick (2010). Deutungsmuster sozialer Ungleichheit. Wahrnehmung und Legitimation gesellschaftlicher Privilegierung und Benachteiligung. Campus. Sarkar, P., & Singh, A. (2010). Law, finance and development: Further analyses of longitudinal data. Cambridge Journal of Economics, 34(2), 325–346. Schluchter, W. (2002). The sociology of law as an empirical theory of validity. Journal of Classical Sociology, 2(3), 257–280. Schneider, F. (2008). Money laundering and financial means of organized crime: Some preliminary empirical findings. Global Business and Economics Review, 10(3), 309–330. Schütz, A. & Luckmann, T. (2003). Strukturen der Lebenswelt. UVK. Schwieren, C., & Weichselbaumer, D. (2008). Does competition enhance performance or cheating? A Laboratory Experiment. Journal of Economic Psychology., 31(3), 241–253. Scott, J. (1991). Networks of corporate power: A comparative assessment. Annual Review of Sociology, 17(1), 181–203. Scott, R. W. (1995). Institutions and organizations. SAGE.

60

M. Pohlmann

Scott, R. W. (2008). Approaching adulthood: The maturing of institutional theory. Theory and Society, 37(5), 427–442. Seibert-Fohr, A. (2017). From complicity to due diligence: When do states incur responsibility for their involvement in serious international wrongdoing? German Yearbook of International Law, 60, 667–707. Seibert-Fohr, A. & Weniger, C. (2021). Compliance monitoring under the international covenant on civil and political rights. In: R. Grote, M. M. Antoniazzi, & D. Paris (Hrsg.), Research handbook on compliance in international human rights law (S. 425–447). Edward Elgar. Senge, K., & Dombrowski, S. (2017). Der Neo-Institutionalismus als Kultursoziologie. In S. Moebius, F. Nungesser, & K. Schenke (Eds.), Handbuch Kultursoziologie, Band 2: Theorien – Methoden – Felder (pp. 1–23). Springer VS. Shover, N., & Hochstetler, A. (2002). Cultural explanation and organizational crime. Crime, Law and Social Change, 37, 1–18. Soltes, E. (2016). Why they do it: Inside the mind of the white-collar criminal. Eugene Solters. Stachura, M. (2009). Einleitung: Der Standort weberianischer Institutionentheorie im Raum konkurrierender Forschungsprogramme. In M. Stachura, A. Bienfait, G. Albert, & S. Sigmund (Eds.), Der Sinn der Institutionen: Mehr-Ebenen- und Mehr-Seiten-Analyse (pp. 8–39). VS Verlag. Strang, D., & Meyer, J. W. (1993). Institutional conditions for diffusion. Theory and Society, 22, 487–511. Timmermans, S., & Epstein, S. (2010). A world of standards but not a standard world: Toward a sociology of standards and standardization. Annual Review of Sociology, 36, 69–89. Tosun, J. (2012). Environmental monitoring and enforcement in Europe: A review of empirical research. Environmental Policy and Governance, 22(6), 437–448. Ullrich, C. G. (1999). Deutungsmusteranalyse und diskursives Interview. Zeitschrift Für Soziologie, 28(6), 429–447. Umphress, E. E., & Bingham, J. B. (2011). When employees do bad things for good reasons: Examining unethical pro-organizational behaviors. Organization Science, 22(3), 621–640. Umphress, E. E., Bingham, J. B., & Mitchell, M. S. (2010). Unethical behavior in the name of the company: The moderating effect of organizational identification and positive reciprocity beliefs on unethical pro-organizational behavior. The Journal of Applied Psychology, 95(4), 769–780. Wang, Y.-D. & Wang, C.-C. (2015). Ethical leadership, moral disengagement, and unethical pro- organizational behavior. Academy of Management, 1. Weaver, L. (2014). Managing the transition to IFRS-based financial reporting: A practical guide to planning and implementing a transition to IFRS or National GAAP. Wiley. Weber, K., Patel, H., & Heinze, K. L. (2013). From cultural repertoires to institutional logics: A content-analytic method. Research in the Sociology of Organizations, 39B, 351– 382. Weber, Max (1976). Wirtschaft und Gesellschaft: Grundriß der verstehenden Soziologie. Mohr Siebeck.

How to Analyze Organizational Crime …

61

Wiesenthal, H. (1987). Rational Choice: Ein Überblick über Grundlinien, Theoriefelder und neuere Themenakquisition eines sozialwissenschaftlichen Paradigmas. Zeitschrift Für Soziologie, 16(6), 434–449. Witzel, A. (1985). Das problemzentrierte Interview. In G. Jüttemann (Ed.), Qualitative Forschung in der Psychologie: Grundfragen, Verfahrensweisen, Anwendungsfelder (pp. 227–255). Beltz. Zettler, I., & Blickle, G. (2011). Zum Zusammenspiel von „wer?“ und „wo?“: Eine psychologische Betrachtungsweise personaler und situationaler Determinanten kontra-produktiven Verhaltens am Arbeitsplatz. Zeitschrift Für Internationale Strafrechtsdogmatik, 6(3), 143–147. Ziegleder, D. (2007). Corporate governance of security: The regulation and control of economic crime in the Business World. Monatsschrift Für Kriminologie Und Strafrechtsreform, 90(2), 245–259. Ziegleder, D. (2010). Wirtschaftskriminalität im Geschäftsleben: eine empirische Untersuchung formeller und informeller Handlungsstrategien von Unternehmen am Beispiel Deutschlands. Nomos. Zürn, M. (2018). A theory of global governance: Authority, legitimacy, and contestation. Oxford University Press.

Corporate Crime, Manipulation, and Compliance: The Case of Germany a) The Corporate Sector

The Development of the German Criminal Regulations Against Corruption in the Public Sector Dieter Dölling 1 The Development of the Criminal Regulations from 1871 to Date German criminal law has contained regulations against corruption in the public sector for a long time. Which legal interest is protected by these regulations is disputed (cf. the overviews regarding the status of opinions with Sowada, 2009, p. 27 ff, and Korte, 2019, p. 2494 ff). A lot speaks in favor of seeing the objectivity of the performance of the official acts as protected and indirectly also the trust of the general public in the integrity of the public service (see Dölling, 2004, p. 685 f). The development of the German criminal regulations against corruption in the public sector since the Criminal Code of the German Empire (Reichsstrafgesetzbuch, RStGB) of 1871 is presented below (with regard to the development of the offenses of corruption prior to the RStGB, see Stock, 1932, p. 46 ff, and Hardtung, 1994, p. 17 ff). The RStGB of 05/15/1871 (German National Gazette [Reichgesetzblatt, RGBl] p. 127) regulated the punishability for corruption in the public sector in Sections 331 et seqq. In Section 331 RStGB, the simple passive bribery was liable to punishment. This offense envisaged a fine of up to 100 Taler or imprisonment not exceeding 6 months for a civil servant, who accepts, demands, or allows himself to be promised gifts or other benefits for an act that is relevant in his office, which is per se not in breach of his duties. The serious passive bribery, D. Dölling (*) Institute of Criminology, Heidelberg University, Heidelberg, Germany e-mail: [email protected] © The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2023 M. Pohlmann et al. (eds.), Organizational Crime, Organization, Management and Crime - Organisation, Management und Kriminalität, https://doi.org/10.1007/978-3-658-38960-4_3

65

66

D. Dölling

which referred to the breach of an official duty, was threatened in Section 332 RStGB with a prison sentence of not exceeding 5 years. The active bribery of a civil servant to commit a breach of duty was punished in Section 333 RStGB. This regulation envisaged imprisonment not exceeding 5 years for the person who offers, promises, or grants gifts or other benefits to a civil servant or a member of the Armed Forces in order to induce him to commit an act that includes a breach of an official duty. The active bribery of a civil servant to commit an act that was not in breach of the duties was not liable to punishment. Section 334 RStGB punished the passive and active bribery of judges, which only referred to future judicial acts, by prison not exceeding 15 years. According to the legal definition of Section 359 RStGB, defined under civil servants within the meaning of the law were all persons employed for life, for a temporary period of time or only provisionally in the service of the German Empire or in the direct or indirect service of a federal state. Sections 331 et seqq. RStGB were supplemented by the Execution Order against corruption and betrayal of secrets by persons who are not civil servants (Bestechungsverordnung) of 05/03/1917 (RGBl I p. 393) as well as by the regulations of the Military Criminal Code (Militär-Strafgesetzbuch) of 06/20/1872 (RGBl p. 174). The regulations of the German Criminal Code (Strafgesetzbuch, StGB) were hardly changed for more than 100 years apart from adjustments of the threatened punishments (Kuhlen, 2017, p. 2095; regarding the reform discussion, see Durynek, 2008). In the newly issued German Military Penal Code (Wehrstrafgesetz, WStG) of 03/30/1957 (Federal Law Gazette [Bundesgesetzblatt, BGBl] I p. 298) in Section 48 for the simple and serious passive bribery, officers and noncommissioned officers, and for serious passive bribery also teams, were deemed equal to the civil servants. Special regulations applied to the NATO troops stationed in the Federal Republic (see NATO Troop Protection Act [NATO-TruppenSchutzgesetz, NTSG] of 06/11/1957, BGBl I p. 490). By the Introductory Act to the Criminal Code (Einführungsgesetz zum Strafgesetzbuch, EGStGB) of 03/02/1974 (BGBl I p. 469), a new conception of the criminal regulations against corruption in the public sector was carried out (see in this respect Jung, 1975, p. 128 ff). According to the new version of the offenses, Section 331 StGB (Accepting benefits) and Section 332 StGB (Taking bribes) regulate the punishability of the person accepting the benefit, and Section 333 StGB (Granting benefits) and Section 334 StGB (Giving bribes) the punishability of the person granting the benefit. Sections 331 and 333 StGB relate to corruption with regard to lawful officer’s actions, and Sections 332 and 334 to corruption with regard to the unlawful performance of the office. The bribery of judges is no longer regulated in its own provision but as a qualification in Paragraph 2 of Sections 331 to 334 StGB. The previous term of civil servant under criminal law

The Development of the German Criminal Regulations …

67

was replaced by a comprehensive term of public official, the group of persons entrusted with special public service functions was included in Section 331 et seqq. StGB under the simultaneous introduction of the Law on the Formal Obligation of Non-Official Persons (Verpflichtungsgesetz) of 03/02/1974 (BGBl I pp. 469, 547), and the Bribery Executive Order was revoked. According to Section 331 Para. 1 StGB in the version created by the EGStGB, a public official or a person entrusted with special public service functions is punished by imprisonment not exceeding 2 years or a fine if he/she demands, allows himself/herself to be promised, or accepts a benefit in return for the fact that he/she has carried out, or will carry out in future, an official act. Paragraph 3 envisages exemption from punishment with the approval of the acceptance of the benefit under certain prerequisites. Pursuant to Section 332 Para. 1 StGB, the perpetrator will be punished for taking bribes by imprisonment for a term of between 6 months and 5 years (with a lesser punishment in less serious cases) if the offense refers to an official act that constitutes a breach of official duties. According to Section 333 Para. 1 StGB, a person will be punished by imprisonment not exceeding 2 years or by a fine for granting benefits, who offers, promises, or grants a public official, a person entrusted with special public service functions, or a soldier of the Federal Armed Forces, a benefit in return for the fact that he will carry out an official act which lies in his/her discretion in future. Paragraph 3 contains a punishment exemption clause that corresponds with Section 331 Para. 3 StGB. According to Section 334 Para. 1 StGB, a person will be punished for giving bribes by imprisonment for a term of between 3 months and 5 years (with lesser punishment in less serious cases), who offers, promises, or grants a public official, a person entrusted with special public service functions, or a soldier of the Federal Armed Forces a benefit in return for the fact that he/she has performed, or would in future perform an official act and hereby breached or would breach his/her official duties. Paragraphs 2 of Sections 331 to 334 StGB, respectively, envisage more serious punishments if the offense relates to a judge or an arbitrator. In Section 335 StGB, it was regulated that the omission of an act is deemed equal to the undertaking of an official act or a judicial act within the meaning of Sections 331 to 334 StGB. Legal definitions of the terms public official, judge, and person entrusted with special public service functions were stipulated in Section 11 Para. 1 No. 2 to 4 StGB. According to Section 11 Para. 1 No. 2 StGB, “public official” means any person who, under German law, a) is a civil servant or a judge, b) carries out other public official functions, or c) has otherwise been appointed to serve with an authority or other agency or has been commissioned to perform public administrative services. Pursuant to Section 11 Para. 1 No. 3 StGB, “judge” means any

68

D. Dölling

person who, under German law, is a professional or an honorary judge. A person entrusted with special public service functions according to Section 11 Para. 1 No. 4 StGB means any person who, without being a public official, is employed by or acts for a) a public authority or other agency which performs public administration services, or b) an association or other alliance, business, or enterprise which carries out public administration services for an authority or other agency and who is formally required by law to perform the duties of those functions in a conscientious manner. In Section 48 Para. 1 WStG for the offenses of accepting benefits and taking bribes, officers and non-commissioned officers were deemed equal to the public officials. Section 48 Para. 2 WStG ordered that teams are also punishable for taking bribes. The international scope of the criminal provisions against corruption in the public sector was regulated by Section 3, Section 5 No. 11 and 12, and Section 7 Para. 2 StGB. According to Section 3 StGB, the German criminal law applies to offenses committed on German territory. Pursuant to Section 5 No. 11 and 12 StGB, it will apply regardless of the law of the place of commission for offenses committed abroad, which a German public official or person entrusted with special public service functions performs while an official business or in connection with official duties, or which a foreigner commits in the capacity as a public official or a person entrusted with special public service functions. Section 7 Para. 2 StGB ordered the validity of the German criminal law for offenses committed abroad if the act is a criminal offense at the place of its commission or if that place is not subject to any criminal law jurisdiction and if the offender 1. was a German national at the time of the offense or became a German national after its commission or 2. was a foreign national at the time of the offense, was found to be staying in Germany, and, although the extradition law would permit his extradition for such an offense, is not extradited because no request for extradition is made within a reasonable period, a request is rejected, or the extradition is not feasible. The new conception of the corruption offenses by the EGStGB brought several extensions of the punishability and increases in threatened punishments. Thus, the punishability of the granting of benefits for future discretionary acts was introduced and the field of application of the giving of bribes was extended to past official acts. The maximum punishment for accepting benefits and the minimum punishment for giving bribes was increased, whereby however the minimum punishment for giving bribes in less serious cases could be fallen short of. On the other hand, several threatened punishments were reduced. Thus, the minimum punishment for taking bribes was reduced to less than 1 year, and this delict was thus reduced from a felony to a misdemeanor. The new version of Sections 331 et seqq. StGB through the EGStGB therefore did not represent any fundamental

The Development of the German Criminal Regulations …

69

tightening of criminal law regarding corruption (Dölling, 1996, C 37). Their significance lies in the creation of a refined systematic basic structure of the bribery delicts, which has been retained to date (Sowada, 2009, p. 17 et seq.). The offense of the bribery of members of parliament pursuant to Section 108e StGB was introduced through the 28th Criminal Law Amendment Act (28. Strafrechtsänderungsgesetz) of 01/13/1994 (BGBl I p. 84). Section 109 RStGB, which punished the purchase or sale of an election vote in a public matter according to the prevailing opinion, also covered elections within the parliament (Frank, 1931, p. 278). The bribery of members of parliament was, however, removed from the StGB within the scope of the re-design of the criminal offenses in case of elections and voting by the 3rd Criminal Law Amendment Act (3. Strafrechtsänderungsgesetz) of 08/04/1953 (BGBl I p. 735) and should be reserved to a later special regulation (Schulze, 1973, p. 486). This was only carried out by Section 108e StGB, which was introduced in 1994. According to this regulation, a person will be punished with imprisonment not exceeding 5 years or with a fine, who carries out a purchase or a sale of a vote for an election or voting in the European Parliament or in a representation of the people of the central state, the federal states, municipal authorities, or municipal federations. Only the purchase or sale of votes with elections and voting were covered by this offense and not corruption with regard to the other activities of members of parliament within the scope of the exercising of their mandate. A substantial tightening of criminal law regarding corruption was carried out by the Law on Combating Corruption (Gesetz zur Bekämpfung der Korruption) of 08/13/1997 (BGBl I p. 2038; in this respect Dölling, 2000). The punishability was extended and the ranges of punishment were increased by this law. According to the previous version of the factual elements of the accepting of benefits pursuant to Section 331 StGB and the granting of benefits according to Section 333 StGB, the benefit would have to be in return for a certain official act. Therefore, if a benefit is granted to a police officer for the fact that the officer should do a favor for the beneficiary by exploiting his official position, in the absence of definitiveness of the official act, court decisions saw this as not punishable according to Sections 331 and 333 StGB (German Federal Court of Justice 1984). By the Law on Combating Corruption, the term of the official act in Sections 331 and 333 StGB was replaced by that of the discharge of a duty. Owing to this extension of the “injustice agreement”, the cases are now also covered by Sections 331 and 333 StGB, in which the benefit is determined for the official activity of the public official, the official act is, however, not described in detail. The benefit in the example case is therefore punishable according to the new law.

70

D. Dölling

The court decisions relating to the previous version of Sections 331 et seqq. StGB only considered the offense to be fulfilled if the benefit determined as consideration for the official act should be given to the public official himself. Benefits to third parties should only be sufficient if the public official were to benefit indirectly from these (German Federal Court of Justice 1987). This legal position raised serious questions of delimitation and opened up opportunities to conceal benefits to public officials. The Law on Combating Corruption therefore inserted, into Sections 331 to 334 StGB, the formulation “a benefit for themselves or for a third party” and thus extended the factual elements to third party benefits. In addition, the offense of granting benefits (Section 333 StGB) was extended. Section 333 Para. 1 StGB in its previous version only covered benefits for future discretionary acts of the public official. The Law on Combating Corruption now also included in the factual elements the granting of benefits for the discharge of a duty in the past and future discharges of duties that are not at the discretion of the public official. Furthermore, the Law on Combating Corruption carried out a supplementation to the legal definition of the term of public official in Section 11 Para. 1 No. 2 StGB. According to Section 11 Para. 1 No. 2c) StGB in the previous version, besides civil servants, judges, and persons in any other official relationship under public law, persons were public officials who have otherwise been appointed to serve with an authority or other agency or have been commissioned to perform public administrative services. There were unclear points regarding whether, according to this regulation, the status as public official also exists if the public task is settled in a private law organization form. The German Federal Court of Justice negated the status as public official for the managing director of a stateown private limited company operating in the field of social housing construction (German Federal Court of Justice 1992). The Law on Combating Corruption inserted in Section 11 Para. 2 No. 2c) StGB the words “regardless of the organizational form chosen to perform such duties” in order to make it clear that for the question of the status as a public official also in the field of state administration organized under private law it depends on whether a task of public administration is carried out, and not on the legal form of the settlement of tasks (grounds of the draft bill of the Federal Government, Bundestag Printed Paper [BundestagsDrucksache, BT-Drs.] 13/6424, p. 4 in conjunction with BT-Drs. 13/5584, p. 12). The Law on Combating Corruption additionally increased the maximum punishments for the accepting of benefits and the granting of benefits from 2 years to 3 years (with a benefit for judges from 3 years to 5 years) and introduced in Section 335 StGB an increased penal framework (imprisonment for a term of

The Development of the German Criminal Regulations …

71

between 1 year and 10 years) for especially serious cases of the taking and giving of bribes. Since the nineties of the previous century, several legal acts of the European Union that are binding for Germany and International Conventions, which Germany has acceded to, came into force containing obligations for the creation of criminal laws against acts of corruption, which also refer to non-German public officials. To be named are the Protocol of 09/27/1996 to the Convention on the Protection of the European Communities’ Financial Interests (Official Journal [OJ] 1996, C 313, 1), the Second Protocol of 06/19/1997 to the Convention on the Protection of the European Communities’ Financial Interests (OJ 1997, C 221, 11), the Convention of 05/26/1997 on the Fight Against Corruption Involving Officials of the European Communities or Officials of Member States of the European Union (OJ 1997, C 195, 1), the Directive (EU) 2017/1371 of the European Parliament and of the Council of 07/05/2017 on the Fight Against Fraud to the Union’s Financial Interests by Means of Criminal Law (OJ 2017, L 198, 29), the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions of 12/17/1997 (37 International Legal Material 1), the Rome Statute of the International Criminal Court of 07/17/1998 (BGBl 2000 II p. 1394), the Council of Europe Criminal Law Convention on Corruption of 01/27/1999 (BT-Drs. 18/9234, 7) with its Additional Protocol of 05/15/2003 (BT-Drs. 18/9234, 25), and the United Nations Convention against Corruption of 10/31/2003 (A/RES/58/04) (cf. on these legal acts Androulakis, 2007; Möhrenschlager, 2007; Pieth, 2007; Korte, 2019, p. 2501 ff). The Federal Republic of Germany implemented the European and international stipulations with a series of laws. Through Art. 2 Section 1 Para. 1 of the Act on the Protocol dated 27 September 1996 to the Convention on the Protection of the European Communities’ Financial Interests (EU Bribery Act, EUBestechungsgesetz, EUBestG) of 09/10/1998 (BGBl II p. 2340) for the taking of bribes and the giving of bribes within the meaning of Sections 332 and 334 StGB, insofar as the offenses refer to a future judicial or official act, the following were deemed equal: 1. to a judge a) a judge of another Member State of the European Union as well as b) a member of a Court of the European Communities and 2. to any other public official: a) a public official of another Member State of the European Union, to the extent that the person’s position corresponds to a public official within the meaning of Section 11 Para. 1 No. 2 StGB, b) a Community official within the meaning of Art. 1 of the Protocol of 09/27/1996 to the Convention on the Protection of the European Communities’ Financial Interests, and c) a member of the Commission and of the Court of Auditors of the European

72

D. Dölling

Communities.1 In addition, it was ordered in Art. 2 Section 2 of the EUBestG that the criminal regulations governing the taking of bribes and the giving of bribes regardless of the law of the place of commission also apply to offenses committed abroad if 1. the perpetrator a) is a German at the time of the act or b) is a foreigner who commits the act aa) as a public official within the meaning of Section 11 Para. 1 No. 2 StGB or bb) as a Community official within the meaning of Section 1 Para. 1 No. 2 letter b, who is the member of one of the bodies set up in accordance with the Treaties establishing the European Communities which have its seat in Germany, or 2. the act is committed in respect of a judge, any other public official, or a person treated as equal pursuant to Section 1 Para. 1, provided that they are German. In Section 5 No. 14a StGB, it was regulated that German criminal law regardless of the law of the place of commission shall apply to briberies of members of the parliament committed abroad pursuant to Section 108e StGB if the offender is a German national at the time of the offense or the offense is committed in relation to a German national. Through the Act on Combating Bribery of Foreign Public Officials in International Business Transactions (Act on Combating International Bribery, Gesetz zur Bekämpfung internationaler Bestechung, IntBestG) of 09/10/1998 (BGBl II p. 2327) in Art. 2 Section 1 for giving bribes within the meaning of Section 334 StGB if this refers to a future judicial or official act which is committed in order to obtain or retain for the offender or a third party business or an unfair advantage in international business transactions, the following were deemed equal: 1. to a judge a) a judge of a foreign state as well as b) a judge at an international court, 2. to any other public official a) a public official of a foreign state, b) a person entrusted to exercise a public function with or for an authority of a foreign state, for a public enterprise with headquarters abroad, or other public functions for a foreign state, as well as c) a public official and other member of the staff of an international organization and a person entrusted with carrying out its functions; 3. to a soldier in the Federal Armed Forces a) a soldier of a foreign state and b) a soldier, who is entrusted to exercise functions of an international organization.2

1 The

translation of the EUBestG was largely made according to the unofficial translation by the German authorities dated 10 September 1998, in: OCDE: Implementing the OECD Anti-Bribery-Convention. Report on Germany, 2004, p. 66 ff. https://www.oecd-library.org/ governance/implementing-the-oecd-anti-bribery-convention_18149952. 2 The translation of the IntBestG was largely made according to the unofficial translation by the German authorities dated 10 September 1998, in: OCDE: Implementing the OECD Anti-Bribery-Convention. Report on Germany, 2004, p. 64 ff. https://www.oecd-library.org/ governance/implementing-the-oecd-anti-bribery-convention_18149952.

The Development of the German Criminal Regulations …

73

Art. 2 Section 2 IntBestG created the new offense of the bribery of foreign Members of Parliament in connection with international business transactions. According to this, a person will be punished by imprisonment not exceeding 5 years or by a fine, who offers, promises, or grants to a Member of a legislative body of a foreign state or a Member of a parliamentary assembly of an international organization an advantage for that Member or a third party in order to obtain or retain for himself/herself or a third party business or an unfair advantage in international business transactions, in return for the Member’s committing an act or omission in future in connection with his/her mandate or functions. Art. 2 Section 3 IntBestG ordered that German criminal law regardless of the law of the place of commission shall apply to the offenses of the bribery of foreign public officials and the bribery of foreign Members of Parliament in connection with international business transactions committed abroad by a German. The International Criminal Court Equal Treatment Act of 06/21/2002 (IStGHGleichstellungsgesetz, IStGHGG, BGBl I p. 2162) in Section 2 for the application of Sections 331 to 336 and 338 StGB deemed with regard to a corruptional act, which refers to a future judicial or official act, 1. a judge of the International Criminal Court equal to a judge and 2. a public official or any other employee of the International Criminal Court equal to any other public official. Through the 48th Criminal Law Amendment Act – Extension of the Offense of Bribery of Members of Parliament – (48. Strafrechtsänderungsgesetz – Erweiterung des Straftatbestandes der Abgeordnetenbestechung) of 04/23/2014 (BGBl I p. 410), the offense of the bribery of members of parliament pursuant to Section 108e StGB introduced by the 28th Criminal Law Amending Act 1994 was extended and renamed to taking of bribes by and giving of bribes to elected officials. Whereas the offense so far only referred to the purchase or sale of votes, the objects hereof are now acts upon request or instruction when exercising a mandate. According to Section 108e Para. 1 StGB, a member of a representation of the people of the central state or of the federal states will be punished by imprisonment not exceeding 5 years or by a fine if he demands, allows himself/herself to be promised, or accepts an undue advantage for himself/herself or a third party in return for performing or refraining from performing an act, upon request or instruction, in the exercise of his/her mandate. Pursuant to Section 108e Para. 2 StGB, a person shall incur the same penalty who offers, promises, or grants a member of a representation of the people of the central state or the federal states, an undue advantage for this member or a third party in return for that member performing or refraining from performing an act, upon request or instruction in the exercise of his/her mandate. According to Para. 3, the members of a representation of the people of a local authority, of a body elected by direct

74

D. Dölling

and general elections of an administrative unit formed for a sub-area of a federal state or a local authority, of the Federal Convention, of the European Parliament, of a parliamentary assembly of an international organization, and of a legislative body of a foreign state shall be considered equal to the members referred to in Para. 1 and 2. Paragraph 4 contains more detailed regulations regarding the undue advantage. Such is in particular not deemed to exist if the acceptance of the advantage is in accordance with the relevant provisions relating to the member’s legal status. A political mandate or a political function as well as a donation that is permissible under the Political Parties Act or other relevant legislation are not considered as an undue advantage. In addition, the 48th Criminal Law Amending Act in Section 48 Para. 2 WStG deemed soldiers with a team rank equal to the public officials also for the offense of accepting benefits. The Law on Combating Corruption (Gesetz zur Bekämpfung der Korruption) of 11/20/2015 (BGBl I p. 2025) extended Sections 331 et seqq. StGB to offenses with a European and international reference and revoked the equality regulations in the EUBestG, IntBestG, NATO Troop Protection Act, and the International Criminal Court Equal Treatment Act. However, the offense of the bribery of foreign Members of Parliament pursuant to Art. 2 Section 2 IntBestG continued to exist. In Sections 331 to 334 StGB, the term “public official” was supplemented by the term “European official” in Paragraph 1 and the term “member of a court of the European Union” was added to the term “judge” in Paragraph 2. The criminal regulations against accepting benefits, taking bribes, granting benefits, and giving bribes now apply uniformly both to German public officials and judges as well as to European officials and members of courts of the European Union. A legal definition for the term of the European official was included in Section 11 Para. 1 No. 2a. StGB. It states that a European public official shall be any person who: a) is a member of the European Commission, the European Central Bank, the European Court of Auditors, or of a court of the European Union, b) is a civil servant or other member of staff of the European Union or of an institution established by European Union law, or c) is tasked with carrying out the tasks of the European Union or the tasks of an institution established by European Union law. In addition, the Law on Combating Corruption of 2015 inserted a Section 335a in the StGB. According to its Paragraph 1 for the offenses of taking bribes and giving bribes, which refer to a future judicial or official act, the following are equal: 1. to a judge: a member of a foreign or an international court and 2. to any other public official: a) an official of a foreign state and a person entrusted with performing public functions for a foreign state, b) an official of an international organization and a person entrusted with performing functions

The Development of the German Criminal Regulations …

75

for an international organization, as well as c) a soldier of a foreign state and a soldier entrusted with performing functions for an international organization. Section 335a Para. 2 StGB for the offenses of accepting benefits and granting benefits, which refer to a future judicial or official act, deems equal: 1. to a judge: a member of the International Criminal Court and 2. to any other public official: a member of staff of the International Criminal Court. Finally, according to Section 335a Para. 3 StGB for the granting of benefits, which refers to a future official act, the following are equal: 1. to a soldier of the Federal Armed Forces: a soldier in the non-German troops of one of the member states of the North Atlantic Treaty Organization deployed in Germany and who are residing in Germany at the time of the unlawful act, 2. to any other public official: a member of staff of these troops and 3. to a person entrusted with special public service functions: a person who is employed by the troops or acts for them and has been formally obliged by general or specific instructions issued by a higher service unit of the troops to conscientiously discharge his or her duties. In relation to the international scope of application of German criminal law regarding corruption, the Law on Combating Corruption of 2015 regulated in Section 5 No. 15 StGB that Sections 331 to 337 StGB shall apply for offenses committed abroad regardless of the law of the place of commission if a) the offender is a German national at the time of the offense, b) the offender is a European official whose authority has its seat in Germany at the time of the offense, c) the offense is committed in relation to a public official, a person entrusted with special public service functions, or a soldier of the Federal Armed Forces, or d) the offense is committed in relation to a European official or arbitrator who is a German national at the time of the offense, or a person deemed equal under Section 335a who is a German national at the time of the offense. According to Section 5 No. 16 StGB, Section 108e StGB applies to offenses committed abroad regardless of the law of the place of commission if a) the offender is, at the time of the offense, a member of a German parliament or is a German national or b) the offense is committed against a member of a German parliament or a person who is a German national at the time of the offense. The Law on the Implementation of the Directive (EU) 2017/1371 of the European Parliament and the Council of 07/05/2017 on the Fight Against Fraud of the Union’s Financial Interests by Means of Criminal Law of 06/19/2019 (BGBl I p. 844) contains as Article 1 the Law on the Reinforcement of the Protection of the Financial Interests of the European Union (Gesetz zur Stärkung des Schutzes der finanziellen Interessen der Europäischen Union [EU-Finanzschutz-Stärkungsgesetz, EUFinSchStg]. According to Section 3 of this law for the application of Sections 332 and 334 StGB, also in conjunction with Sections 335 and 335a StGB

76

D. Dölling

respectively, for an offense that refers to a future judicial or official act deemed equal to a violation of official or judicial duties is damage to or an endangerment of the property of the European Union. Art. 2 No. 2 of the Law on the Implementation of the Directive (EU) 2017/1371 contains modifications of Section 335a StGB. On the whole, the development of German criminal law regarding corruption with regard to public officials is characterized by clear expansion in the last decades. This applies to the range of the criminal elements, the threatened punishments, and the international field of application.

2 The Current Criminal Regulations Against Corruption with Regard to Public Officials According to the described changes to the law, there are currently the following criminal regulations against corruption with regard to public officials: Section 331 StGB Accepting benefits3 (1) Public officials, European officials, or persons entrusted with special public service functions who demand, allow themselves to be promised, or accept a benefit for themselves or for a third party in return for the discharge of a duty incur a penalty of imprisonment for a term not exceeding 3 years or a fine. (2) Judges, members of a court of the European Union, or arbitrators who demand, allow themselves to be promised, or accept a benefit for themselves or a third party in return for the fact that they performed or will in the future perform a judicial act incur a penalty of imprisonment for a term not exceeding 5 years or a fine. The attempt is punishable. (3) The offense does not entail criminal liability pursuant to subsection (1) if offenders allow themselves to be promised or accept a benefit that they did not demand and the competent authority, within the scope of its powers, either previously authorized the acceptance or offenders promptly make a report to the competent authority, and it authorizes the acceptance.

3 The

translation of the StGB was made according to the translation of the German Criminal Code by Michael Bohlander, completely revised and regularly updated by Ute Reusch, published by the Bundesministerium der Justiz und für Verbraucherschutz under https:// www.gesetze-im-internet.de/englisch_stgb/.

The Development of the German Criminal Regulations …

77

Section 332 StGB Taking bribes (1) Public officials, European officials, or persons entrusted with special public service functions who demand, allow themselves to be promised, or accept a benefit for themselves or for a third party in return for the fact that they performed or will in the future perform an official act, and thereby breached or would breach their official duties, incur a penalty of imprisonment for a term of between 6 months and 5 years. In less serious cases, the penalty is imprisonment for a term not exceeding 3 years or a fine. The attempt is punishable. (2) Judges, members of a court of the European Union, or arbitrators who demand, allow themselves to be promised, or accept a benefit for themselves or for a third party in return for the fact that they performed or will in the future perform a judicial act, and thereby breached or would breach their judicial duties, incur a penalty of imprisonment for a term of between 1 year and 10 years. In less serious cases, the penalty is imprisonment for a term of between 6 months and 5 years. (3) If offenders demand, allow themselves to be promised, or accept a benefit in return for a future act, then subsections (1) and (2) already apply if they have indicated to the other person that they are willing 1. to breach their duties by doing the act or 2. to the extent that the act is within their discretion, to allow themselves to be influenced by the benefit when exercising their discretion. Section 333 StGB Granting benefits (1) Whoever offers, promises, or grants a public official, a European official, a person entrusted with special public service functions, or a soldier in the Federal Armed Forces a benefit for that person or a third party in return for the discharge of a duty incurs a penalty of imprisonment for a term not exceeding 3 years or a fine. (2) Whoever offers, promises, or grants a judge, a member of a court of the European Union, or an arbitrator a benefit for that person or a third party in return for the fact that they performed or will in the future perform a judicial act incurs a penalty of imprisonment for a term not exceeding 5 years or a fine. (3) The offense does not entail criminal liability pursuant to subsection (1) if the competent authority, within the scope of its powers, either previously authorized the recipient’s acceptance of the benefit or authorizes it upon prompt reporting by the recipient.

78

D. Dölling

Section 334 StGB Giving bribes (1) Whoever offers, promises, or grants a public official, a European official, a person entrusted with special public service functions, or a soldier in the Federal Armed Forces a benefit for that person or a third party in return for the fact that they have performed or would in future perform an official act, and thereby breached or would breach their official duties, incurs a penalty of imprisonment for a term of between 3 months and 5 years. In less serious cases, the penalty is imprisonment for a term not exceeding 2 years or a fine. (2) Whoever offers, promises, or grants a judge, a member of a court of the European Union, or an arbitrator a benefit for that person or a third party in return for the fact that they 1. performed a judicial act and thereby breached their judicial duties or 2. would perform a judicial act and would thereby breach their judicial duties incurs a penalty of imprisonment for a term of between 3 months and 5 years in the cases under no. 1, imprisonment for a term of between 6 months and 5 years in the cases under no. 2. The attempt is punishable. (3) If offenders offer, promise, or grant the benefit in return for a future act, then subsections (1) and (2) already apply if they attempt to induce others 1. to breach their duties by doing the act or 2. to the extent that the act is within their discretion, to allow themselves to be influenced by the benefit when exercising their discretion. Section 335 Especially serious cases of taking and giving bribes (1) In especially serious cases 1. of an offense under a) Section 332 (1) sentence 1, also in conjunction with (3), and b) Section 334 (1) sentence 1 and (2), in each case also in conjunction with (3), the penalty is imprisonment for a term of between 1 year and 10 years and 2. of an offense under Section 332 (2), also in conjunction with (3), the penalty is imprisonment for a term of at least 2 years. (2) An especially serious case within the meaning of subsection (1) typically occurs where 1. the act relates to a major benefit, 2. the offender accepts continued benefits which are demanded in return for the fact that the offender would perform an official act in the future or

The Development of the German Criminal Regulations …

79

3. the offender acts on a commercial basis or as a member of a gang whose purpose is the continued commission of such offenses. Section 335a StGB Foreign and international officials (1) For the purposes of applying Section 331 (2), Section 333 (2) and Sections 332 and 334, in each case also in conjunction with Section 335, to an offense relating to a future judicial act or a future official act, the following are equal to 1. a judge: a member of a foreign or an international court; 2. any other public official: a) an official of a foreign state and a person entrusted with performing public functions for a foreign state, b) an official of an international organization and a person entrusted with performing functions for an international organization, c) a soldier of a foreign state and a soldier entrusted with performing functions for an international organization. (2) For the purposes of applying Section 331 (1) and Section 333 (1) and (3) to an offense relating to a future judicial act or a future official act, the following are equal to 1. a judge: a member of the International Criminal Court; 2. any other public official: a member of staff of the International Criminal Court. (3) For the purposes of applying Section 333 (1) and (3) to an offense relating to a future official act, the following are equal to 1. a soldier in the Federal Armed Forces: a soldier in the non-German troops of one of the member states of the North Atlantic Treaty Organization deployed in Germany and who are residing in Germany at the time of the unlawful act; 2. any other public official: a member of staff of these troops; 3. a person entrusted with special public service functions: a person who is employed by the troops or acts for them and has been formally obliged by general or specific instructions issued by a higher service unit of the troops to conscientiously discharge his or her duties. Section 336 StGB Omission of an official act The omission to act is equal to the performance of an official act or of a judicial act within the meaning of Sections 331 to 335a.

80

D. Dölling

Section 11 StGB Definitions (1) For the purposes of this statute, … 2. “public official” means any person who, under German law, a) is a civil servant or judge, b) carries out other public official functions or c) has otherwise been appointed to serve with an authority or other agency or has been commissioned to perform public administrative services, regardless of the organizational form chosen to perform such duties; 2a. “European official” means any person who a) is a member of the European Commission, the European Central Bank, the European Court of Auditors, or any court of the European Union, b) is a civil servant or other members of staff of the European Union c) or of an institution established by European Union law or d) is tasked with carrying out the tasks of the European Union or the tasks of an institution established by European Union law; 3. “judge” means any person who, under German law, is either a professional or an honorary judge; 4. “person entrusted with special public service functions” means any person who, without being a public official, is employed by or acts for a) an authority or other agency which performs public administrative services or b) an association or other alliance, business, or enterprise which carries out public administrative services for an authority or other agency and who is formally required by law to perform the duties of those functions in a conscientious manner; … Section 48 Military Penal Code (1) For the application of the regulations of the German Criminal Code regarding … accepting benefits and taking bribes (Sections 331, 332, 335 Para. 1 No. 1 lit. a, Para. 2, Section 336), …

The Development of the German Criminal Regulations …

81



officers and non-commissioned officers are equal to the public officials and their military service is equal to the office. (2) For the application of the regulations of the Criminal Code regarding … accepting benefits and taking bribes (Sections 331, 332, 335 Para. 1 No. 1 lit. a, Para. 2, Section 336) … teams are also equal to the public officials and their military service is equal to the office. Section 108e StGB Taking of bribes by and giving of bribes to elected officials (1) Whoever, in the capacity as a Member of the Bundestag or as a member of one of the Länder parliaments, demands, allows themselves to be promised, or accepts an undue advantage for themselves or a third party in return for performing or refraining from performing an act, upon request or instruction, in the exercise of their mandate incurs a penalty of imprisonment for a term not exceeding 5 years or a fine. (2) Whoever offers, promises, or grants to a Member of the Bundestag or a member of one of the Länder parliaments an undue advantage for the member themselves or a third party in return for that member performing or refraining from performing an act, upon request or instruction in the exercise of their mandate, incurs the same penalty. (3) Members of 1. a local administrative body, 2. a body of an administrative unit established for a sub-area of a Land or a local authority and elected in direct and general elections, 3. the Federal Convention, 4. the European Parliament, 5. a parliamentary assembly of an international organization and 6. a legislative body of a foreign state are considered equal to the members referred to in subsections (1) and (2). (4) An undue advantage is in particular not deemed to exist if the acceptance of the advantage is in accordance with the relevant provisions relating to the member’s legal status. The following is not considered an undue advantage: 1. a political mandate or a political function or 2. a donation which is permissible under the Political Parties Act or other relevant legislation. (5) In addition to a sentence of imprisonment of at least 6 months, the court may order the loss of the ability to be elected in public elections and to vote on public matters.

82

D. Dölling

Art. 2 Section 2 Act on Combating Bribery of Foreign Public Officials in International Business Transactions4 Bribery of foreign Members of Parliament in connection with international business transactions (1) Anyone who offers, promises, or grants to a Member of a legislative body of a foreign state or to a Member of a parliamentary assembly of an international organization an advantage for that Member or for a third party in order to obtain or retain for him/herself or a third party business or an unfair advantage in international business transactions, in return for the Member’s committing an act or omission in future in connection with his/her mandate or function, shall be punished by imprisonment not exceeding 5 years of by a fine. (2) The attempt shall incur criminal liability. Article 1 Section 3 Law on the Reinforcement of the Protection of the Financial Interests of the European Union Taking bribes and giving bribes relevant to the financial interests of the European Union For the purpose of applying Sections 332 and 334 StGB, also in conjunction with Sections 335 and 335a StGB respectively, for an offense that refers to a future judicial or official act equal to a violation of official duties or judicial duties is damage to or endangerment of the property of the European Union. The international field of application of these criminal regulations can be derived from Section 3, Section 5 No. 12, 13, 15, 16, and Section 7 StGB and Art. 2 Section 3 of the Law on Combating International Bribery. These regulations read: Section 3 StGB Application to offenses committed on German territory German criminal applies to offenses committed on German territory. Section 5 StGB Offenses committed abroad with a specific domestic connection Regardless of which law is applicable at the place where the offense was committed, German criminal law applies to the following offenses committed abroad: …

4 The

translation of the Law on Combating International Bribery was made according to the unofficial translation by the German authorities dated 10 September 1998, in: OCDE: Implementing the OECD Anti-Bribery-Convention. Report on Germany, 2004, p. 65. https://www.oecd-library.org/governance/implementing-the-oecd-anti-bribery-convention_18149952.

The Development of the German Criminal Regulations …

83

12. acts committed by a German public official or a person entrusted with special public service functions while on official business or in connection with official duties; 13. acts committed by a foreigner in the capacity as a public official or a person entrusted with special public service functions; … 15. offenses under Sections 331 to 337 committed in public office if a) the offender is a German national at the time of the offense, b) the offender is a European official whose authority has its seat in Germany at the time of the offense, c) the offense is committed in relation to a public official, a person entrusted with special public service functions, or a soldier in the Federal Armed Forces, or d) the offense is committed in relation to a European official or arbitrator who is a German national at the time of the offense, or a person deemed equal under Section 335a who is a German national at the time of the offense; 16. taking of bribes by and giving of bribes to elected officials (Section 108e) if a) the offender is, at the time of the offense, a member of a German parliament or is a German national or b) the offense is committed against a member of a German parliament or a person who is a German national at the time of the offense; … Section 7 StGB Offenses committed abroad (1) German criminal law applies to offenses committed abroad against a German national if the act is a criminal offense at the place of its commission or if that place is not subject to any criminal law jurisdiction. (2) German criminal law applies to other offenses committed abroad if the act is a criminal offense at the place of its commission or if that place is not subject to any criminal law jurisdiction and if the offender 1. was a German national at the time of the offense or became a German national after its commission or 2. was a foreign national at the time of the offense, was found to be staying in Germany and, although extradition legislation would permit extradition for such an offense, is not extradited because no request for extradition is made within a reasonable period, is rejected, or the extradition is not feasible.

84

D. Dölling

Art. 2 Section 3 Law on Combating International Bribery Acts committed abroad Regardless of the law of the place of commission, German criminal law shall apply to the bribery of foreign Members of Parliament in connection with international business transactions if the offense is committed abroad by a German national. Germany thus, after the reforms of the last few decades, have a differentiated system of criminal regulations against corruption in the public sector.

3 The Prosecution and Sanctioning of Corruption in the Public Sector If the view is steered to the reality of the prosecution under criminal law of corruption in the public sector, it will initially be derived that the number of cases registered by the police in the last few years has fallen (cf. Table 1). This also holds for the number of suspects registered by the police (see Table 2). In Table 3, the number of those persons adjudged because of corruption in the public sector is presented. Adjudged persons according to the criminal prosecution statistics are accused, against whom penalty orders were issued or criminal proceedings were concluded final and binding after the opening of the main proceedings by a judgement or discontinuation court order (Federal Statistical Office [Statistisches Bundesamt] 2020, p. 13). The number of adjudged persons is substantially lower than the number of suspects investigated by the police. This shows that a substantial number of proceedings in which the police determined a suspect do not come before court because the Public Prosecutor’s Office does not file an indictment in the absence of the ability to prove the alleged offense before court or owing to lack of severity of the offense (cf. Sections 153 et seqq. German Criminal Procedure Code [Strafprozessordnung, StPO]) but discontinues the proceedings (with regard to criminal prosecution in corruption matters cf. Bannenberg, 2002, p. 254 ff; with regard to the prosecution of briberies overseas, see Hoven, 2018, p. 371 ff). If an indictment is filed owing to corruption in the public sector, this will as a rule, however not always, lead to a conviction. Table 4 shows the number of convicted persons, which is less than those of the adjudged persons, and it can be seen from Table 5 as examples for the years 2010 and 2019 that also on the level of the courts a substantial number of proceedings are discontinued, whereby the share of the discontinuations in proceedings owing to corruption in the public sector is higher than the discontinuation ratio relating to all adjudged persons by the courts.

The Development of the German Criminal Regulations …

85

Table 1   Police registered cases of corruption in the public sector 1995–2019

1995

2000

2005

2010

2015

2018

2019

Accepting benefits (Section 331 StGB)

241

3579

718

420

196

394

163

Taking bribes (Section 332 StGB)1

818

453

281

296

256

197

170

Section 331 and Section 332 StGB 1059

4038

999

716

452

591

333

Granting benefits (Section 333 StGB)

150

311

254

124

153

96

100

Giving bribes (Section 334 StGB)2

1666

750

554

509

471

255

480

Section 333 and Section 334 StGB 1816

1061

808

633

624

351

580

Sections 331 to 334 StGB

5099

1807

1349

1076

942

913

2875

Source: German Federal Criminal Police Office (Ed.): Police Crime Statistics 1995 to 2019 1Including especially severe cases of taking bribes according to Section 335 StGB 2Including especially severe cases of granting bribes according to Section 335 StGB

Table 2   Police registered suspects of corruption in the public sector 1995–20191

1995

2000

2005

2010

2015

2018

2019

Accepting benefits (Section 331 StGB)

216

3174

705

381

249

402

190

Taking bribes (Section 332 StGB)2

249

354

245

353

239

185

199

Section 331 and Section 332 StGB

465

3497

935

721

474

585

388

Granting benefits (Section 333 StGB)

140

277

225

137

107

92

118

Giving bribes (Section 334 StGB)3

1490

725

642

555

533

293

591

Section 333 and Section 334 StGB 1630 Sections 331 to 334 StGB

2095

964

853

677

633

384

706

4461

1788

1398

1107

969

1094

Source: German Federal Criminal Police Office (Ed.): Police Crime Statistics 1995 to 2019 1Due to the real counting of suspects, the numbers in the superordinate categories may be less than the total numbers stated in the sub-categories because, e.g., a suspect who committed both an offense according to Section 331 StGB as well as a delict according to Section 332 StGB is only registered once in the superordinate category “Section 331 and 332 StGB” 2Including especially severe cases of taking bribes according to Section 335 StGB 3Including especially severe cases of giving bribes according to Section 335 StGB

86

D. Dölling

Table 3   Adjudged persons of corruption in the public sector 1995–2019

1995

2000

2005

2010

2015

2018

2019

Accepting benefits (Section 331 StGB)

17

45

120

65

29

18

26

Taking bribes (Section 332 StGB)

60

111

58

53

23

32

39

Granting benefits (Section 333 StGB)

16

38

22

52

14

28

13

Giving bribes (Section 334 StGB)

307

201

148

204

140

161

184

Especially serious cases of taking bribes and giving bribes (Section 335 StGB)1

–

13

27

28

24

13

18

Sections 331 to 335 StGB

400

408

375

402

221

252

280

Source: German Federal Statistical Office: Criminal Prosecution 1995 to 2019 1The category “especially serious cases of taking bribes and giving bribes” has only existed since 1998, without a division being possible in the event of taking bribes and giving bribes. The numbers for 1995 and from 2000 on are therefore not simply comparable

Table 4   Convicted persons of corruption in the public sector 1995–2019

1995

2000

2005

2010

2015

2018

2019

Accepting benefits (Section 331 StGB)

15

30

30

33

10

4

7

Taking bribes (Section 332 StGB)

48

79

32

33

15

19

19

Granting benefits (Section 333 StGB)

13

32

17

27

11

15

10

Giving bribes (Section 334 StGB)

268

169

123

171

117

116

157

especially serious cases of taking bribes and giving bribes (Section 335 StGB)

–

12

25

21

16

12

14

Sections 331 to 335 StGB

344

322

227

285

171

166

207

Source: German Federal Statistical Office: Criminal Prosecution 1995 to 2019

The punishments imposed by the courts for corruption in the public sector are more severe than for criminal offenses, on the whole. Of the persons sentenced because of corruption in the public sector, just under half received imprisonment

The Development of the German Criminal Regulations …

87

Table 5   Court decisions in cases of corruption in the public sector without adjudgments according to Criminal Law relating to Young Offenders (as a percentage of the adjudged persons1) 2010 and 2019

Adjudged persons n

Convictions Discontinua- Acquittals Other deci% tions % sions % %

2010 Section 331 StGB

63

52.4

38.1

9.5

0.0

Section 332 StGB

53

62.3

34.0

3.8

0.0

Section 333 StGB

51

52.9

35.3

11.8

0.0

Section 334 StGB

200

84.5

11.5

4.0

0.0

Section 335 StGB

28

75.0

21.4

3.6

0.0

Sections 331 to 335 StGB

395

71.6

22.5

5.8

0.0

Total criminal 854,590 offenses 2019

82.5

14.1

3.3

0.2

Section 331 StGB

26

26.9

61.5

11.5

0.0

Section 332 StGB

39

48.7

48.7

2.6

0.0

Section 333 StGB

13

76.9

23.1

0.0

0.0

Section 334 StGB

181

86.7

11.0

2.2

0.0

Section 335 StGB

18

77.8

22.2

0.0

0.0

Sections 331 to 335 StGB

277

74.7

22.4

2.9

0.0

Total criminal 795,913 offenses

84.2

12.8

2.9

0.2

Source: German Federal Statistical Office: Criminal Prosecution 2010 and 2019 1In the criminal prosecution statistics, the persons who have received a warning with a penal reservation according to Section 59 StGB are not counted as adjudged persons. They are therefore not included in the table

88

D. Dölling

with or without a suspended sentence. This share is substantially higher than the ratio of prison sentences based on all sentenced persons (see Table 6). If fines are announced owing to corruption in the public sector, the number of per diem rates is more often more than 90 than with the entirety of the persons sentenced to fines (see Table 7). With the number of the per diem rates, the severity of the offense is expressed (Zipf & Dölling, 2014, p. 715). The amount of the per diem rate is determined pursuant to Section 40 Para. 2 p. 2 StGB according to the net income which the perpetrator has, or could have, on average on one day. The

Table 6   Penalties imposed because of corruption in the public sector without sentences according to criminal law relating to young offenders (as a percentage of the sentenced persons) 2010 and 2019

Sentenced persons n

Fine %

Prison sentence with probation %

Prison sentence without probation %

2010 Section 331 StGB

33

93.9

6.1

0.0

Section 332 StGB

33

21.2

69.7

9.1

Section 333 StGB

27

77.8

18.5

3.7

Section 334 StGB

169

73.4

21.3

5.3

Section 335 StGB

21

4.8

38.1

57.1

283

65.0

26.1

8.8

704,802

81.6

13.1

5.3

Section 331 StGB

7

71.4

28.6

0.0

Section 332 StGB

19

21.1

68.4

10.5

Section 333 StGB

10

90.0

10.0

0.0

Section 334 StGB

157

77.1

19.1

3.8

Sections 331 to 335 StGB Total criminal offenses 2019

Section 335 StGB Sections 331 to 335 StGB Total criminal offenses

14

0.0

78.6

21.4

207

67.1

27.5

5.3

669,784

84.7

10.5

4.8

Source: German Federal Statistical Office: Criminal Prosecution 2010 and 2019

The Development of the German Criminal Regulations …

89

Table 7   Number of per diem rates with fines imposed because of corruption in the public sector (as a percentage of the persons sentenced to fines)

Number of per diem rates in % Persons 5–15 16–30 31–90 91–180 181–360  > 360 sentenced to fines n 2010 Section 331 StGB

31

0.0

12.9

67.7

9.8

9.8

0.0

Section 332 StGB

7

0.0

0.0

71.4

14.3

14.3

0.0

Section 333 StGB

21

0.0

19.0

71.4

9.5

0

0.0

Section 334 StGB

124

0.0

2.4

43.5

53.2

0.8

0.0

Section 335 StGB

1

0.0

0.0

100.0

0.0

0.0

0.0

Sections 331 to 335 StGB

0

6.0

52.2

39.1

5.4

0

575,068

11.3

35.2

46.8

6.1

0.5

0.1

Section 331 StGB

5

0.0

0.0

60.0

40.0

0.0

0.0

Section 332 StGB

4

0.0

0.0

75.0

25.0

0.0

0.0

Section 333 StGB

9

0.0

0.0

88.9

11.1

0.0

0.0

Section 334 StGB

121

0.8

4.1

52.1

38.0

4.1

0.8

Total criminal offenses 2019

Section 335 StGB Sections 331 to 335 StGB Total criminal offenses

184

0.0

0.0

0.0

0.0

0.0

0.0

139

0.0

1.4

3.6

55.4

36.0

3.6

0.0

567,243

7.9

33.6

49.7

8.2

0.6

 > 0.1

Source: German Federal Statistical Office: Criminal Prosecution 2010 and 2019

multiplication of the number of per diem rates by the amount of the per diem rate results in the total of the fine that is to be paid. If a person is sentenced to imprisonment, persons sentenced because of corruption in the public sector less often receive a prison sentence of less than 6 months and more often a prison sentence of 6 months and more, than is the case with reference to all persons sentenced to imprisonment (cf. Table 8; concurring findings for the years 1998 and 2004 with Dölling, 2007, pp. 37, 38). On the whole, corruption in the public sector concerns a complex phenomenon, for the effective criminal prosecution of which strong efforts are required.

7.4 24.0

6

45

20

99

129,717

2

15

1

36

14

Section 333 StGB

Section 334 StGB

Section 335 StGB

Sections 331 to 335 StGB

Total criminal offenses 2019

Section 331 StGB

Section 332 StGB

Section 333 StGB

Section 334 StGB

Section 335 StGB

Sections 331 to 335 StGB 68

Total criminal offenses

11.1

0.0

6.7

0.0

14.3

9.1

0.0

20.0

0.0

45.8

42.6

7.1

58.3

100.0

40.0

0.0

43.2

45.5

10.0

60.0

50.0

42.3

100.0

6 months to 1 year

20.6

39.7

71.4

22.2

0.0

46.7

100.0

17.0

28.2

30.0

15.6

50.0

46.2

0.0

more than 1 year to 2 years

Source: German Federal Statistical Office: Criminal Prosecution 2010 and 2019

102,539

0.0

26

0.0

2

Section 332 StGB

0.0

Under 6 months

4.5

5.9

7.1

5.6

0.0

6.7

0.0

3.7

6.1

20.0

4.4

0.0

0.0

0.0

more than 2 years to 3 years

Duration of the prison sentence in %

Section 331 StGB

2010

Persons sentenced to imprisonment n

3.3

4.4

14.3

2.8

0.0

0.0

0.0

2.8

11.1

40.0

0.0

0.0

11.5

0.0

more than 3 years to 5 years

1.6

0.0

0.0

0.0

0.0

0.0

0.0

1.1

0.0

0.0

0.0

0.0

0.0

0.0

more than 5 years to 10 years

0.2

0.0

0.0

0.0

0.0

0.0

0.0

0.2

0.0

0.0

0.0

0.0

0.0

0.0

more than 10 years or life-long

Table 8   Duration of the prison sentences imposed because of corruption in the public sector (as a percentage of the persons sentenced to imprisonment) 2010 and 2019

90 D. Dölling

The Development of the German Criminal Regulations …

91

References Androulakis, I. N. (2007). Die Globalisierung der Korruptionsbekämpfung. Eine Untersuchung zur Entstehung, zum Inhalt und zu den Auswirkungen des internationalen Korruptionsstrafrechts unter Berücksichtigung der sozialökonomischen Hintergründe. Nomos. Bannenberg, B. (2002). Korruption in Deutschland und ihre strafrechtliche Kontrolle. Eine kriminologisch-strafrechtliche Analyse. Luchterhand. Dölling, D. (1996). Empfehlen sich Änderungen des Straf- und Strafprozeßrechts, um der Gefahr von Korruption in Staat, Wirtschaft und Gesellschaft wirksam zu begegnen? Gutachten C zum 61. Deutschen Juristentag Karlsruhe 1996. Beck. Dölling, D. (2000). Die Neuregelung der Strafvorschriften gegen Korruption. Zeitschrift für die gesamte Strafrechtswissenschaft, 112(2), 334–355. Dölling, D. (2004) Straftaten gegen Rechtsgüter der Allgemeinheit. In K. H. Gössel & D. Dölling, Strafrecht Besonderer Teil 1. Straftaten gegen Persönlichkeits- und Gemeinschaftswerte (2nd ed., pp. 427–721). Müller. Dölling, D. (2007). Grundlagen der Korruptionsprävention. In D. Dölling (Ed.), Handbuch der Korruptionsprävention für Wirtschaftsunternehmen und öffentliche Verwaltung (pp. 1–40). Beck. Durynek, J. (2008). Korruptionsdelikte (§§ 331 ff. StGB). Reformdiskussion und Gesetzgebung seit dem 19. Jahrhundert. Berliner Wissenschafts-Verlag. Federal Court of Justice [Bundesgerichtshof] (1984). Judgement from February 29, 1984 – 2 StR 650/83 – Entscheidungen des Bundesgerichtshofes in Strafsachen (Decisions of the Federal Court of Justice in Criminal Cases), edited by Members of the German Federal Court and of the Federal Prosecutor’s Department (Vol. 32, pp. 290–292). Heymanns. Federal Court of Justice [Bundesgerichtshof] (1987). Judgement from December 3, 1987 – 4 StR 554/87 – Entscheidungen des Bundesgerichtshofes in Strafsachen (Decisions of the Federal Court of Justice in Criminal Cases), edited by Members of the German Federal Court and of the Federal Prosecutor’s Department (Vol. 35, pp. 128–136). Heymanns. Federal Court of Justice [Bundesgerichshof] (1992). Judgement from January 29, 1992 – 5 StR 338/91 – Entscheidungen des Bundesgerichtshofes in Strafsachen (Decisions of the Federal Court of Justice in Criminal Cases), edited by Members of the German Federal Court and of the Federal Prosecutor’s Department (Vol. 38, pp. 199–205). Heymanns. Federal Statistical Office [Statistisches Bundesamt] (2020). Fachserie 10 Rechtspflege Reihe 3 Strafverfolgung. 2019. Statistisches Bundesamt. Frank, R. (1931). Das Strafgesetzbuch für das Deutsche Reich nebst dem Einführungsgesetz (18th ed.). Mohr. Hardtung, B. (1994). Erlaubte Vorteilsannahme – §§ 331 StGB, 70 BBG, 10 BAT – zugleich ein Beitrag zur Einheit der Rechtsordnung und zur „Rückwirkung“ behördlicher Genehmigungen im Strafrecht. Duncker & Humblot. Hoven, E. (2018). Auslandsbestechung. Eine rechtsdogmatische und rechtstatsächliche Untersuchung. Nomos. Jung, H. (1975). Strafrechtsreform im Einführungsgesetz. In C. Roxin, W. Stree, H. Zipf, & H. Jung (Eds.), Einführung in das neue Strafrecht (2nd ed., pp. 11–137). Beck.

92

D. Dölling

Korte, M. (2019). Kommentierung der §§ 331 bis 338 StGB. In W. Joecks & K. Miebach (Eds.), Münchener Kommentar zum Strafgesetzbuch (3rd ed., Vol. 5, pp. 2488–2631). Beck. Kuhlen, L. (2017). Kommentierung der §§ 331 bis 345 StGB. In U. Kindhäuser, U. Neumann, & H.-U. Paeffgen (Eds.), Strafgesetzbuch (5th ed., Vol. 3, pp. 2086–2249). Nomos. Möhrenschlager, M. (2007). Der strafrechtliche Schutz gegen Korruption. In D. Dölling (Ed.), Handbuch der Korruptionsprävention für Wirtschaftsunternehmen und öffentliche Verwaltung (pp. 337–561). Beck. Pieth, M. (2007). Das OECD-Übereinkommen über die Bekämpfung der Bestechung ausländischer Amtsträger im internationalen Geschäftsverkehr. In D. Dölling (Ed.), Handbuch der Korruptionsprävention für Wirtschaftsunternehmen und öffentliche Verwaltung (pp. 563–593). Beck. Schulze, B. (1973). Zur Frage der Strafbarkeit der Abgeordnetenbestechung. Juristische Rundschau, 485–488. Sowada, C. (2009). Kommentierung der §§ 331 bis 338 StGB. In H. W. Laufhütte, R. Rissing-van Saan, & K. Tiedemann (Eds.), Strafgesetzbuch Leipziger Kommentar (12th ed., Vol. 13, pp. 1–207). De Gruyter. Stock, U. (1932). Entwicklung und Wesen der Amtsverbrechen. Weicher. Zipf, H. & Dölling, D. (2014). Die Strafen und Nebenfolgen. In R. Maurach, K. H. Gössel, H. Zipf, D. Dölling, D. Laue, & J. Renzikowski, Strafrecht Allgemeiner Teil. Subvol. 2. Erscheinungsformen des Verbrechens und Rechtsfolgen der Tat (8th ed., pp. 705–741). Müller.

The Development of German Criminal Law Against Corruption in the Private Sector Gerhard Dannecker Introduction Today, jurisprudence no longer finds its object solely at national level but also and especially at international level. This includes the Council of Europe, which is a working forum for 47 states, whose common bond is the commitment to the rule of law in each member state and the creation and safeguarding of a minimum standard of human and procedural rights. For decades, the Council of Europe has taken a wide variety of initiatives in all areas of criminal law, constitutional law, and human rights protection. The numerous international agreements, particularly those of the OECD and the United Nations, should also be mentioned. NGOs, as representatives of a global public, are also exerting increasing influence on legal policy. The guidelines of the Conference on Security and Cooperation in Europe (CSCE) and the Organization for Security and Cooperation in Europe (OSCE), which emerged from this organization, often bind the European states. The European Union, in particular, now encompasses almost all policy and legal areas of the member states and has led to European integration that goes far beyond mere cooperation between the EU states. In the meantime, the European Union has developed to a single legal area. This development is also reflected in the fight against corruption. Today, corruption is no longer just a problem of developing and emerging countries but a global and cross-border phenomenon (Nagel, 2007, p. 23 f.). Accordingly, the fight G. Dannecker (*) Institute for German, European and International Criminal Law and Law of Criminal Procedure, Heidelberg University, Heidelberg, Germany e-mail: [email protected] © The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2023 M. Pohlmann et al. (eds.), Organizational Crime, Organization, Management and Crime - Organisation, Management und Kriminalität, https://doi.org/10.1007/978-3-658-38960-4_4

93

94

G. Dannecker

against corruption (on the concept of corruption Vahlenkamp & Knauß, 1995, p. 20; Dölling, 1996, pp. 9 et seqq.; Nagel, 2007, pp. 28 et seqq.) has become an international issue (on this subject B. Huber, 2002, pp. 95 et seqq.; Dannecker & Leitner, 2012; Dölling, 2007; Eser et al., 1997; Pieth & Eigen, 1999). This is reflected, inter alia, in the legal acts of the European Union (Convention on the protection of the European Communities’ financial interests, OJEC No C 316/1 of 27. 11.95; first and second protocol of 27.09.96 on the Convention on the protection of the European Communities’ financial interests; Convention on the fight against corruption involving officials of the European Communities or officials of Member States of the European Union, OJEC No C 195 of 25.06.97; joint action on corruption in the private sector, OJEC L 358/2 of 31.12.98, which was repealed by the COUNCIL FRAMEWORK DECISION 2003/568/JHA of 22.07.03 on combating corruption in the private sector), which have taken up legal requirements of the Council of Europe (Council of Europe—Criminal Law Convention on Corruption of 27.01.99 ETS No 173 (supplemented by Council of Europe—Additional Protocol to the Criminal Law Convention on Corruption of 15.5.2003, ETS No 191); Council of Europe— Civil Law Convention on Corruption ETS No 174; GRECO (Group of European States against Corruption)), the UN (Resolution 51/59 (A/RES/51/59 of 12.12.1996, Action against Corruption and International Code of Conduct for Public Officials, 36 I.L.M. 1997, pp. 1039 ff.); Resolution 51/191 (A/RES/51/191 of 16.12.1996, United Nations Declaration against Corruption and Bribery in International Commercial Transactions, 36 I.L.M. 1997, pp. 1043 ff.); United Nations Global Program Against Corruption, Resolution 53/176 (A/RES/53/176 of 15.12.1998, Action against corruption and bribery in international commercial transactions); Convention against transnational organized crime, Resolution 25/128 (A/RES/25/128 of 15.9.2000, UN Convention Against Transnational Organized Crime, 40 I.L.M. 2001, pp. 353 ff.); United Nations Convention against Corruption, Resolution 58/4 (A/RES/58/4 of 31.10.2003, United Nations Convention against Corruption 43 I.L.M. 2004, pp. 37 ff.) and the OECD (Convention on Combating Bribery of Foreign Public Officials in International Business Transaction of 17.12.97).

1 The Need to Combat Corruption in the Private Sector In a constitutional state, criminal law may only be used to combat socially damaging behavior. Criminal law is subject to the constitutional principle of proportionality, which is also established in the area of application of the ECHR and the EU (more detailed on this Bleckmann, 1994, p. 177; Pache, 1999, p. 1035;

The Development of German Criminal Law Against Corruption …

95

Schwarze 2005, pp. 661 ff.). The principle of proportionality sets constitutional limits to any sovereign intervention by way of punishment and leads to a limitation of state criminal power (Eser, 2019, Art. 49, marginal numbers 5, pp. 36 ff.). It is therefore necessary to ensure that punishable actions are legal infringements with a high degree of social harmfulness. In the private sector, the risk posed by corruption is the jeopardizing of the competitive system as the basis of the market economy (on the criminal law protection of free competition Dannecker, 2008, pp. 789 ff.). Competition is primarily attributed to economic policy functions, but also to socio-political functions. The economic policy functions of free competition (more detailed on this Emmerich, 2014, § 1 No 7 seq.; Mestmäcker & Schweitzer, 2014, § 3 No 1 seqq.) include above all control and regulatory functions, which are based on the fact that competition is primarily responsible for ensuring that the range of goods and services offered on the market is shaped according to the preferences of the buyers. Moreover, competition in the markets of production factors controls the distribution of income according to market performance. Competition, thus, ensures, on the one hand, the satisfaction of individual needs and, on the other hand, forces companies to adapt to changing market data. This is ultimately intended to guarantee the technical progress that enables the most demanded products or services to be produced or provided at low cost (drive and power function). The socio-political functions of competition concern the task of ensuring a reasonably even distribution of power in the economy and society (Böhm, 1961, pp. 1, 3 ff.; Mestmäcker, 1964, p. 441; Mestmäcker, 1968, p. 235). Behind this objective lies the historically repeatedly confirmed conviction that competition in particular can prevent the establishment of final positions of power that threaten the freedom and equal opportunities of all other market participants (cf. Emmerich, 2014, Section 1 marginal number 9) and jeopardize the achievement of the best possible economic prosperity. Moreover, there are fears that corruption in international business transactions may impair the functioning of economic and social systems and even democratic systems per se.

2 International Legal Instruments to Combat Private Corruption The European Union has responded to the risks outlined above by taking international conventions and other legal instruments of international organizations into account that provide for the adoption of new criminal legislation to better combat corruption.

96

G. Dannecker

2.1 Joint Action on Corruption in the Private Sector The Council of Europe adopted a Joint Action on corruption in the private sector on 22.12.1998, which entered into force on 31.12.1998 (OJEC No L 358 of 31.12.1998, p. 2). This legal act obliges Member States to make employee bribery and corruption a criminal offence. It states the requirement of an unjustified agreement and calls for the inclusion of third-party contributions within the scope of criminal law. In addition to distortions of competition, the Joint Action also addresses the possibility of economic damage to third parties and thus relates to the protection of competition, competitors, and consumers. The Framework Decision of 22.7.2003 (see below) has since repealed the Joint Action.

2.2 International Legal Acts in Line with the Content of the Joint Action The content of the community measure is in line with the Council of Europe Criminal Law Convention on Corruption of 27.1.1999 (see above, section II. 1. b). As regards bribery in the private sector, Articles 7 and 8 of the Criminal Law Convention on Corruption provide that bribery “in the course of business” and not only in competition must be criminalized if the “undue advantage” is used to obtain an act or an omission “in breach of the duties” of the person being bribed. However, the Council of Europe Convention only requires that a violation of the obligations of the recipient of the advantage be punished. An obligation to protect competitors under criminal law, as granted in Germany by Section 299 German Criminal Code (on this Dannecker, NK-StGB, Section 299 marginal number 5), is not provided in the Council of Europe Convention. As already mentioned, the United Nations Convention against Corruption of 31.10.2003 also contains in Art. 21 as do Art. 2 of the EU Framework Decision and Art. 7, 8 of the Criminal Law Convention of the Council of Europe on Corruption of 27.1.1999 corresponding—but non-binding (see above)— regulations, which are linked to the breach of duty of the employee (also the recommendations of the XVII World Congress of AIDP, RIDP 2004, pp. 765, 768).

2.3 Council Framework Decision 2003/568/JHA of 22.07.2003 on Combating Corruption in the Private Sector The Council Framework Decision 2003/568/JHA of 22.07.2003 on combating corruption in the private sector, based on an initiative by Denmark which

The Development of German Criminal Law Against Corruption …

97

entered into force on 31.07.2003, repealed the Joint Action, which was not binding on the Member States (Art. 8 of the Council Framework Decision 2003/568 /JHA) (OJEC No L 192 of 31.7.2003, pp. 54 ff.). According to the recitals, the aim is to ensure that both active and passive corruption in the private sector is a criminal offence in all Member States, and legal persons can be held liable for such offences. The penalties imposed must be effective, proportionate, and dissuasive (recital 10 of the Council Framework Decision 2003/568 /JHA, OJEC of 31. 7. 2003 No. L 192/54). Since the implementation of the framework´s content is binding (cf. Article 9(1) of Council Framework Decision 2003/568/JHA), it has also made it possible to combat corruption in the private sector more effectively by requiring harmonization of the relevant criminal laws of the Member States. The main substantive difference between Framework Decision 2003/568/JHA and Joint Action 98/742/JHA is that the latter sets out more stringent requirements as regards the level of penalties. Article 4(2) requires a maximum penalty of at least between 1- and 3-years’ imprisonment. By contrast, Joint Action 98/742/JHA left the nature of the penalty largely open, if it was effective, proportionate, and dissuasive. Only in serious cases should custodial sentences that can give rise to extradition be provided for (cf. Article 4(1) of Joint Action 98/742/JHA). A further striking difference is that Article 3 of Framework Decision 2003/568/JHA contains an obligation for Member States to make inciting and aiding and abetting to one of the conducts defined in Article 2 of Framework Decision 2003/568/JHA a criminal offence. In addition, the Framework Decision requires Member States to introduce a ban of employment where the facts of the case clearly indicate that there is a risk that the person might use his or her position or activities for the purpose of corruption (Article 4(3)). This is intended to counteract the risk of further bribery or corruption in the future, so that the preventive character of this measure prevails. The liability of legal persons and their sanctions are governed by Articles 5 and 6, which had to be transposed into national law by 22.07.2005 (Article 9(1); for the planned implementation of the above-mentioned European and international requirements, see the draft laws of the German Federal Government of 10.08.2007 BT-Drucks. 584/07 and of 21.01.2015.1 Also, more about this in the text, cf. Part 3) and by 22.07.2010 with regard to the punishment of corruption in breach of obligations arising from the employment relationship. The reason for this is the right of declaration under Article 2(3) of Framework Decision 2003/568/JHA used by Germany to limit the

1 http://www.bmjv.de/SharedDocs/Downloads/DE/pdfs/Gesetze/GE-Korruptionsbekaemp-

fung.pdf?__blob = publicationFile, retrieved on 31.03.2015.

98

G. Dannecker

scope of paragraph 1 of the Framework Decision to acts “which result or may result in a distortion of competition in connection with the procurement of goods or commercial services” (to this Gaede, 2014, pp. 281 et seqq.). If a Member State knows or introduces penal provisions that go beyond the Framework Decision, this is compatible with the Framework Decision as it does not contain a standstill obligation (Tiedemann, 2001, p. 918). Since corruption is also expressly mentioned in the list of offences in the Framework Decision on the European arrest warrant, extradition for an offence under Article 2 of the Framework Decision 2003/568/JHA is possible under simplified conditions on the basis of the principle of mutual recognition which governs the European arrest warrant.

3 New Criminal Law Regulation of Private Corruption by the German Legislator Criminal legislation against corruption in the private sector is relatively recent in Germany compared to that against corruption in the public sector. With the “Act to Combat Corruption (KorrBeKG)” of 13.08.1997 (Federal Law Gazette I, p. 2038), which came into force on 20.08.1997, the criminal offences of “collusive tendering” (Section 298 German Criminal Code) and “taking and giving bribes in commercial practice” (Section 299 German Criminal Code) were included for the first time in a new chapter “offences against competition” in the Special Part of the Criminal Code. In doing so, the legislator wanted to make it clear that the protection of competition is an important task of the state, for the enforcement of which criminal law provisions in the Criminal Code are also necessary (BT-Drucks. 13/5584, 12; Tiedemann, 2001, pp. 905 ff.). The legal policy objective was, on the one hand, to prosecute corrupt behavior more effectively, but on the other hand, above all to strengthen general prevention, in particular the legal awareness of the population that prevents corruption.

3.1 Introduction of Offences Against Competition by the “Act to Combat Corruption (KorrBeKG)” of 13.08.1997 The legal right of free/fair competition protected by Section 26 represents the guiding principle of the German economic constitution and is essential for a social market economy. The economic policy functions of free competition

The Development of German Criminal Law Against Corruption …

99

include above all control and regulatory functions which are based on the fact that it is primarily competition that ensures that the supply of goods and services on the market is shaped according to the preferences of the buyers. Moreover, competition in the markets of production factors controls the distribution of income according to market performance. Competition, thus, ensures on the one hand the satisfaction of individual needs and on the other hand forces companies to adapt to changing market data. This is ultimately intended to guarantee the technical progress that enables the most demanded products or services to be produced and provided at low cost (Dannecker, NK-StGB, before Section 298 marginal number 15). The socio-political functions of competition concern the task of ensuring a reasonably even distribution of power in economy and society. Behind this objective lies the conviction, repeatedly confirmed by historical experience, that competition in particular can prevent the establishment of final positions of power which threaten the freedom and equal opportunities of all other market participants and jeopardize the achievement of the best possible economic prosperity (Dannecker, NK-StGB, before Section 298 marginal number 15).

3.1.1 Collusive Tendering (Section 298 German Criminal Code) The facts of Section 298 German Criminal Code go back to the 1962 draft and the proposals of the Expert Commission for Combating Economic Crime and serve to “upgrade” a subset of the cartel misdemeanors to criminal offences. The criminal offence under Section 298 German Criminal Code could be enforced politically because of the connection of the tender agreements with the corruption of members of the awarding authorities under the Act to Combat Corruption. Despite the connection of the tender agreements with corruption, Section 298 German Criminal Code serves primarily to protect free competition and not predominantly to ensure fairness in decision-making by the employees of the contracting authority, which is protected by Section 299 German Criminal Code. The introduction of the new criminal offence under Section 298 German Criminal Code was accompanied by changes in the Act against Restraints of Competition (ARC). Thus, Section 82 ARC (until the 6th amendment of Section 81a ARC) provides for an exclusive competence of the cartel authorities to set fines for companies. The provision of Section 81 (2) ARC old, which continued to provide for a fine of up to three times the amount of the additional proceeds, was replaced by the 7th amendment to the ARC both in form and content (Section 81 (4) ARC). Moreover, Section 81 (3) sentence 2 ARC old, which provided for an extension of the statute of limitations for administrative offences, was based on the Act to Combat Corruption of 13.08.1997. The limitation period

100

G. Dannecker

introduced at the time was retained in the 7th amendment to the ARC and has since been found in Section 81 (8) sentence 2 ARC.

3.1.2 “Taking and Giving Bribes in Commercial Practice” (Section 299 Ff. German Criminal Code) The predecessor of the criminal offence of “taking and giving bribes in commercial practice” (Section 299 German Criminal Code) is Section 12 old of the Act against unfair Competition. This was shifted almost literally, but with the inclusion of third-party benefits, to the Criminal Code. Section 299 German Criminal Code was amended by the Act of 22.08.2002 (Federal Law Gazette I, p. 3387) to include a paragraph 3 in order to make this offence applicable to foreign facts. The Act to Combat Corruption of 20.11.2015 moved this addition to the text of paragraphs 1 and 2 and removed paragraph 3. In addition, a No. 2 has been added to both paragraphs, which makes it a punishable offence for employees or agents to breach their obligations to the company when purchasing goods or services. The provision of Section 299 (3) German Criminal Code was inserted by the EU Legal Instruments Act and extends the criminal liability to acts in foreign competition. Section 300 German Criminal Code regulates especially serious cases for Section 299 German Criminal Code, in which the penalty is increased to imprisonment from 3 months to 5 years. Sentence 2 standardizes so-called “rule examples” for the serious case. These do not have the effect of establishing criminal liability but are elements of sentencing. The rule examples indicate the existence of a serious case. Nevertheless, it may result from conflicting circumstances that, despite the realization of the rule example, there is exceptionally no particularly severe case, just as an unnamed severe case may exist without a rule example being realized. The latter is the case, for example, where competitors are objectively harmed, where there is a preferential treatment of very high value, and where advantages, in addition to their character as bribery, also fulfill the requirements of immorality (Fischer, 2020, Section 300 marginal number 7). In the conception of Section 300 German Criminal Code, the legislator, who had recognized that serious violations of competition could not be correctly covered by the framework of Section 299 German Criminal Code, was guided by the already existing provision of Section 335 German Criminal Code. Contrary to the proposal of the Bundesrat (BR-Drucks. 298/95), however, the threat of imprisonment of 1–10 years was not adopted. The background to this is that private corruption does not violate the public interest in the factual conduct of official business and specific general interests related to public office (Fischer, 2020, Section 300 marginal number 2; König, 1996, p. 363).

The Development of German Criminal Law Against Corruption …

101

3.1.3 Request to Prosecute (Section 301 German Criminal Code) For taking and giving bribes in commercial practice according to Section 299 German Criminal Code, Section 301 German Criminal Code basically provides for a request to prosecute. This was not undisputed in the legislative procedure. While the Federal Government insisted on the requirement of a criminal complaint (Drucksache 13/6424, p. 13), the Federal Council spoke out in favor of a design as an official offence because it feared that the persons concerned would not file criminal complaints in order not to have to disclose their internal business affairs (BR-Drucks. 13/5584, p. 16). As a compromise, Section 301 German Criminal Code also permits prosecution ex officio out of a special public interest.

3.1.4 Expansion of Section 299 German Criminal Code to Include the Principal-Agent Model International guidelines led to the inclusion of a breach of duty variant in Section 299 (1) No. 2 and (2) No. 2 new by the Act to Combat Corruption of 20.11.2015, which serves to protect the loyal business conduct of companies that participate in commercial transactions and can therefore be attacked by their employees and agents through corrupt conduct. This so-called principal-agent model, which prevails internationally, is intended to ensure that employees and agents in the exchange of goods and services perform their duties loyally and uninfluenced by private interests (Dannecker, NK-StGB, before Section 298 marginal number7). Now, Section 299 (1) No. 2 and (2) No. 2 German Criminal Code, also cover corrupt conduct based on a breach of duty by the employee or agent towards his principal. In view of the European requirements that have not yet been implemented, the amendment of this provision, including the implementation of the internationally prevailing so-called principal-agent model, was considered foreseeable, although the principal-agent model was not undisputed (Mölders, 2009, p. 33; see also Wollschläger, 2010, pp. 389 ff.; Zöller, 2009, p. 147): Admittedly, Articles 7 and 8 of the Council of Europe Convention and Article 2 of the EU Framework Decision contained the provision “to make acts relating to the giving or receiving of advantages in order that someone should perform or refrain from performing an act in breach of his duties punishable”, whereby a reference to competition was not considered necessary. In scientific discourses, however, there has been criticism that this is already covered by the offence of embezzlement (Brand & Wostry, 2008, p. 645) and that this creates a problem for the legal system, since Chapter 26 of the German Criminal Code covers offences against competition. In this respect, the principal-agent model was seen as a contradiction

102

G. Dannecker

to it and rejected as a questionable mixture of two regulatory models (Kahmann, 2009, p. 274 ff).

3.1.5 Bribery and Corruption in Health Care With the Act to Combat Corruption in the Health Care System of 30.05.2016, the offences of bribery and corruption in the health care system (Sections 299a and 299b German Criminal Code) were inserted into the Criminal Code in order to close the gaps in criminal liability with regard to the payment and receipt of bribes in the health care system, which arose in particular as a result of the decision of the Federal Court of Justice of 29.03.2012. In this judgment, the Court declared bribery of doctors to be not a criminal offence because doctors do not exercise a public function and are therefore not public officials, nor did they act on behalf of the insurance sickness funds even though they entered into a contract with them for the performance of health care; rather, the doctor-patient relationship was dominant and overlaid the legal structure of health law. To close this gap, as the Court of Justice stated, is the task of the legislature. According to the federal government’s draft, corruption in the health care system impairs competition, makes medical services more expensive, and undermines patients’ trust in the integrity of professional decisions. “Because of the considerable social and economic importance of the health care system, corrupt practices in this area should also be countered by means of criminal law.” According to the draft, this was only insufficiently possible under the previous legal situation, after the Federal Court of Justice (BGH) had determined in its decision of 29.03.2012 that physicians in private practice who are licensed to provide SHIaccredited medical care do not act as public officials (Section 11 (1) No. 2c German Criminal Code) or as representatives of the statutory health insurance funds (Section 299 German Criminal Code) when performing the tasks assigned to them in this context (BT-Drucks. 18/6446, p. 11 ff.). As a result, the public-law corruption offences are not applicable to doctors. The criminal offences of embezzlement (Section 266 German Criminal Code) and fraud (Section 263 German Criminal Code), which protect assets, also failed to adequately cover the giving and taking of bribes in the health care system and did not sufficiently cover the unjust content of corruption. According to the view of the legislator, there was thus a gap in protection which had to be closed by new facts (BT-Drucks. 18/6446, p. 1). An earlier draft, which initially provided for a blanket provision anchored in the Social Code (Section 307c German Criminal Code in conjunction with Section 70 Volume V Social Insurance Code), was replaced by BT-Drucks. 17/14575. A second draft, which was intended to introduce a Section 299a German Criminal Code—similar to the current provision—was also not implemented

The Development of German Criminal Law Against Corruption …

103

(principle of discontinuity). The finally implemented draft law of the Federal Government of 21.10.2015 still followed the systematics of Section 299 German Criminal Code but after considerable criticism from the legal scholars, especially from professors of law, it underwent far-reaching changes, which were partially reflected in Sections 299a and 299b German Criminal Code in the current version.

3.1.6 Criminal Liability for Sports Betting Fraud and the Manipulation of Professional Sports Competitions The criminal offences “sports betting fraud” (Section 265c German Criminal Code) and “manipulation of professional sports competitions” (Section 265d German Criminal Code) (51. Criminal Law Amendment Act of 11.04.2018, Federal Law Gazette I, p. 815), which were newly created on 19.04.2017, should also belong to the criminal law on corruption according to the explanatory memorandum (BTDrucks. 18/8831, p. 23); at least in terms of form and legal system, the provisions are similar to the criminal law on corruption (Saliger, 2016, Section 265c marginal number. 2; Rübenstahl, 2017, p. 268). In contrast to this classification, which is worthy of discussion (on the criticism of the legal interest “Integrity of sport” Krack, 2017, p. 290; Jansen, 2017, p. 609), however, it is above all the propertyrelated protection tasks—which intervene far in advance of Sections 263, 266 German Criminal Code—pursued with Sections 265c, 265d German Criminal Code, which the draft law assigns to both criminal provisions (BT-Drucks. 18/8831, p. 10 et seq.; critical with regard to the legal asset of property protection Saliger, 2016, Section 265c marginal number 7; Krack, 2016, p. 544). Sections 265c and 265d German Criminal Code do not directly implement international obligations or recommendations. However, as a precautionary measure, a state of affairs should be established in conformity with Article 15 of the Council of Europe Convention against Sports Competition Manipulation of 18.09.2014 (ETS No. 215; Germany signed the Convention on the same date; however, the Convention has not yet entered into force for lack of a sufficient number of ratifications), according to which the contracting states undertake to introduce criminal penalties for the manipulation of sports competitions if there is a connection with coercive, corrupt, or fraudulent practices (Schreiner, 2019, Section 265c marginal number 6). Since Sections 265c and 265d German Criminal Code are intended to supplement the Anti-Doping Act of 10.12.2015 (Federal Law Gazette I, p. 2210; Rübenstahl, 2020, Section 265c marginal number 1), there is at least an indirect reference to the International Convention against Doping in Sport of 19.10.2005 (Federal Law Gazette 2007 II, pp. 354 et seqq.) and the Convention against Doping of 16.11.1989 (Federal Law Gazette 1994 II, pp. 334 et seqq.), by which Germany was obliged to take measures to combat doping (BT-Drucks. 18/4898, p. 2).

104

G. Dannecker

3.1.7 Protection of Competition Through Fines The picture painted by the criminal law norms for the protection of free competition appears fragmentary: Sections 298 to 300 German Criminal Code only sanction individual manifestations of breaches of competition in the form of bid rigging, bribery, and corruption. Sanctions for serious violations of cartel law are completely absent from the German Criminal Code. However, a more comprehensive protection of competition is guaranteed by the legislator through the law on misdemeanor, which contains the essential provisions in the ARC (cf. Dannecker & Müller, 2020, Chap. 19 section C). Yet the path originally taken by the creation of Section 298 German Criminal Code to criminalize serious antitrust violations has never been continued and the level of protection in favor of competition remains low. A violation of the provisions of the ARC merely entails a fine as a sanction. It is true that the legislator is aware of the high value of free competition, as can be seen from the level of fines to be imposed under Section 81 (4) ARC (up to 10% of the annual turnover of the company, which is made up of legal entities forming an economic unit). Nevertheless, it has failed to take into account of the importance of competition as a protected good and to eliminate the classification of serious cartel violations as misdemeanor by upgrading them to criminal law. The jurisprudents have predominantly advocated criminalization (Dannecker, 2008, p. 800; Federmann, 2006, pp. 326 ff.; doubtfully, however, Lüderssen, 1996, p. 2526).

4 Flanking the Fight Against Corruption by Fiscal Measures In addition to criminal sanctions, the tax treatment of bribery is a key element in the fight against corruption (Hild & Albrecht, 2005, pp. 490 ff.; Lembeck, 2007, Chap. 5 marginal number 1 ff.; Spatscheck, 2006, pp. 641 ff.; critical of the use of tax law to combat corruption Meurer, 2019, Section 4 marginal number 756). In view of the fact that the national legal systems had treated bribery expenses differently for tax purposes—in some cases deductibility was permitted as business expenses, in others it was generally denied, or a middle course was taken in this respect, i.e., deductibility was only denied if the criminal liability was established in a court decision—there was a need for uniform cross-border treatment of such expenses. For this reason, the German legislator now also provides for the tax penalty of denying tax deduction of such grants and the related expenses if a

The Development of German Criminal Law Against Corruption …

105

grant constitutes a corruption offence. This rules out the possibility of states participating indirectly in the financing of corruption (Kuhli, 2001, p. 48).

4.1 Prohibition of Tax Deduction for Grants of Benefits and Related Expenses According to the Annual Tax Act 1996 of 11.10.1995 (Federal Law Gazette I 1995, p. 1250), grants of benefits and related expenses were non-deductible operating expenses “if a final conviction under criminal law has been handed down for the grant or receipt of the benefits or if the proceedings have been discontinued in accordance with Sections 153 to 154c German Code of Criminal Procedure or if a fine has been finally imposed for the grant or receipt of the benefit”. So there had to be a legally binding punishment in concrete terms. The consequence of this condition was that the prohibition of tax deduction was rarely applied in practice. For this reason, the legislator tightened the legal situation with the Tax Relief Act 1999/2000/2002 (Federal Law Gazette I 1999, p. 402) to the effect that the punishability of the granting of benefits is now sufficient as a prerequisite for the ban on deducting business expenses. A legally binding conviction or a legally binding fine is no longer relevant. Similarly, it is irrelevant whether a criminal complaint has been filed, whether the offender has acted culpably, or whether the act is statute-barred. Grounds for exculpation and exclusion of punishment as well as the existence of a guilt-excluding mistake of law are therefore irrelevant.

4.2 Requirement of Intentional Behavior It is disputed whether an unlawful act within the meaning of Section 4 (5) Sentence 1, No. 10 German Income Tax Act only exists if an intentional act has been committed or whether the subjective elements of the offence are irrelevant (on this Wied, 2015, Section 4 marginal number 905). One argument against a waiver of the subjective element is that the tax sanction presupposes that the conduct in question is punishable or punishable by a fine and thus illegal. In criminal law, however, unlawfulness presupposes intent or, if applicable, negligence; the injustice is decisively influenced by the subjective elements of the offence. The negligent granting or acceptance of an advantage is not a punishable offence.

106

G. Dannecker

Therefore, the refusal of tax deductibility depends on whether the conduct was intentional, since only under this condition is there a criminal offence (another view Crezelius, 2020, Section 4 marginal number 209; Hild, 2000, p. 222; Meurer, 2019, Section 4 marginal number 761; Pelz, 2000, p. 1567). The tax deduction prohibition for the grant of benefits and related expenses— e.g., consulting and defence costs (BT-Drucks. 13/1686, p. 18; Lembeck, 2007, Chap. 5 marginal number 25 et seq.), transaction costs such as travel, transport, telephone, and postage costs (Federal Ministry of Finance letter of 10.10.2002, Federal Tax Gazette 2002 I, p. 1032; Müller & Franken, 1997, p. 8; Stahl, 2003, p. 13,875; Wichterich & Glockemann, 2000, p. 2)—directly only applies to the profit income of Section 2 (1) No. 1–3 German Income Tax Act. By way of the reference in Section 9 (5) German Income Tax Act, the regulation also applies to surplus income and thus to all types of income. The prohibition of deduction also applies to legal entities, as these determine their profit in accordance with the provisions of the Income Tax Act (Section 8 (1) sentence 1 Corporation Tax Act), provided that the company’s executive bodies or authorized agents have committed the offence (Lembeck, 2007, Chap. 5 marginal number 28)—as perpetrators or participants (as well Kuhli, 2001, pp. 164 et seqq.). If an offence of corruption has been committed, in addition to the benefits, which are subject to criminal penalties and fines, the “related expenses” are not tax-deductible. Thus, if a bribe is instigated and the benefits illegally given to the public official are only subsequently reimbursed to the instigator, only the act of determining the bribe and not the subsequent reimbursement is punishable. Nevertheless, such expenses are related to the punishable benefits and are therefore subject to the tax deduction prohibition of Section 4 (5) No. 10 German Income Tax Act. There is hence a comprehensive tax deduction prohibition that also applies if intermediaries are used.

4.3 Requirements for Proof of the Offence The tax law sanction of refusing the deduction only applies if the tax authorities take into account the presumption of innocence and there is evidence of a criminal offence. In this context, the requirements of the principle “in dubio pro reo” must be complied with—in accordance with the highest court rulings on other tax sanctions which presuppose the existence of a criminal offence. This is the only way to ensure that the requirements for a taxation procedure under the rule of law are met (Randt, 2000, p. 1013). According to the highest court rulings, in cases

The Development of German Criminal Law Against Corruption …

107

in which tax consequences are linked to the existence of a criminal offence, the burden of proof for the existence of all elements of the offence lies with the tax authorities (BFHE 127, 140). These requirements must be met equally in the case of Section 4 (5) sentence 1 No. 10 German Income Tax Act.

5 Obligation to Report Acts of Corruption Section 4 (5) Sentence 1 No. 10, Sentences 2–4 German Income Tax Act provides for an exchange of information between the tax administration and the public prosecutor’s office if there is a suspicion of corruption. If a public official fails to comply with his duty to inform, he may be liable for obstruction of prosecution (in public office).

5.1 Obligations of the Tax Authorities to Notify the Law Enforcement Agencies Under Section 4 (5) sentence 1 No. 10 sentence 3 German Income Tax Act, which is directly related to the prohibition of tax deduction of bribes under Section 4 (5) sentence 1 No. 10 sentence 1 German Income Tax Act, the tax authorities are obliged to report suspected corruption offences to the public prosecutor’s office or the competent administrative authority (on this Kuhli, 2001, pp. 72 et seqq.; Lembeck, 2007, Chap. 5 marginal numbers 32 et seqq.; for practical difficulties concerning the notification obligation, see Braun, 1999, pp. 644 f). This obligation comes into effect in particular if the taxpayer wishes to deduct a punishable benefit as business expenditure, whether it is declared as commission, remuneration etc. (Klingelhöfer, 1999, pp. 311 f; Demuth & Peykan, 2003, pp. 1426 et seqq.; Randt, 2002, pp. 2252 et seqq.).

5.2 Obligations of the Public prosecutor’s Office to Report the Outcome of Criminal or Administrative Fine Proceedings The public prosecutor’s office informed by the tax authorities in turn informs the tax authorities of the outcome of the criminal or administrative fine proceedings and of the underlying facts.

108

G. Dannecker

5.3 Obligations of Law Enforcement Agencies and Administrative Authorities to Inform the Tax Authorities According to Section 4 (5) sentence 1 No. 10, sentence 2 German Income Tax Act, courts, public prosecutor's offices, and administrative authorities must already report facts of which they become aware in the course of their work, and which give rise to the suspicion of a criminal offence within the meaning of No. 10, Sentence 1, to the tax authorities for the purposes of the taxation procedure and the prosecution of tax offences and tax irregularities (on this Kuhli, 2001, pp. 71 et seqq.). This takes account of the fact that today a decision under criminal or administrative fine law is no longer a prerequisite for refusing tax deduction. According to § 4, Subsection 5, Sentence 1, No. 10, Sentence 2, EStG, courts, public prosecutor’s offices, and administrative authorities must already report facts of which they become aware in the course of their work, and which give rise to the suspicion of a criminal offence within the meaning of No. 10, Sentence 1, to the tax authorities for the purposes of the taxation procedure and the prosecution of tax offences and tax irregularities. (Kuhli, 2001, pp. 71 et seqq.) The obligation to report even in cases of suspicion takes account of the fact that today a formal decision under criminal law or administrative penalty law is no longer a precondition for refusing tax deduction.

6 The Ban on Public Procurement Section 97 (4) ARC stipulates that contracts in the award procedure may only be awarded to reliable companies. The criterion of reliability must be interpreted in relation to the bidder and the contract. Reliable is anyone who, taking into account his past and present conduct, offers a guarantee that the contract will be carried out and performed in accordance with the terms of the invitation to tender and that he will participate properly in the award procedure (Dreher, 2014, Section 97 marginal number 157). The award regulations contain more detailed provisions in this regard. An exclusion of the applicant from future award procedures that goes beyond the current procedure in the sense of a general ban on the award of contracts (on this Dreher, 2014, Section 97 marginal number 160) is regarded as permissible despite the required bidder and contract-related suitability test (OLG Schleswig, NZBau 2000, p. 263; Dreher, 2014, Section 97 marginal number 160 with further evidence; cf. also Quardt, 1997, p. 478).

The Development of German Criminal Law Against Corruption …

109

The decisive criterion for exclusion from an award procedure and subsequent blocking of the award procedure is serious misconduct by the applicant. In this context, the award regulations themselves provide for grounds for exclusion (e.g., Section 6 EC (4) No. 1 2 g German Construction Tendering and Contract Regulations Part A (VOB/A)); in this respect, a legally binding conviction of certain criminal offences is a prerequisite. Facts leading to a conviction according to Sections 298, 299 German Criminal Code cannot be found in this catalog. However, the latest draft of a nationwide Corruption Register Act as well as corresponding regulations of the federal states (e.g., Section 5 of the Act to improve the fight against corruption and to establish and maintain a public procurement register in North Rhine-Westphalia (Korruptionsbekämpfungsgesetz— KorruptionsbG) of 16.12.2004, GVBl. 2004, p. 8) show that even facts that are punishable according to Section 298 or Section 299 German Criminal Code constitute a misconduct leading to unreliability and are, therefore, to be regarded as grounds for exclusion.

7 Introduction of a Corruption Register Efforts to introduce a nationwide corruption register in order to exclude companies whose employees have committed corruption offences, particularly in connection with public tenders, from public contracts have been underway for 15 years, but so far without success. Some federal states have introduced corruption registers in various forms (cf. Transparency International Deutschland e.V. Korruptionsbekämpfung in Deutschland), such as Baden-Württemberg, Bavaria, Berlin, Bremen, Hamburg, Schleswig–Holstein, Hessen, Lower Saxony, North Rhine-Westphalia, and Rhineland-Palatinate. In contrast, Brandenburg, Mecklenburg-Western Pomerania, Saarland, Saxony, Saxony-Anhalt, and Thuringia do not yet have corruption registers. On 1 June 2017, the German Bundestag decided to introduce a nationwide competition register (Federal Law Gazette 2017-I p. 2739). The register has been operational since 2021 and the registers of the federal states have been deleted.

8 Penal Regulations The criminalization of corruption in the private sector is based on the following provisions:

110

G. Dannecker

Section 298 German Criminal Code Collusive tendering (1) Whoever, in connection with an invitation to tender relating to goods or services, makes an offer based on an unlawful agreement whose purpose is to cause the organizer to accept a specific offer incurs a penalty of imprisonment for a term not exceeding 5 years or a fine. (2) The award of a contract by direct agreement following a prior call for competition is equivalent to an invitation to tender within the meaning of subsection (1). (3) Whoever voluntarily prevents the organizer from accepting the offer or from providing a service does not incur the penalty specified in subsection (1), also in conjunction with subsection (2). If the offer is not accepted or the organizer’s service is not rendered without any action on the offender’s part, no penalty is incurred if the offender makes voluntary and earnest efforts to prevent the offer being accepted or the service being rendered. Section 299 German Criminal Code Taking and giving bribes in commercial practice (1) Whoever, in commercial practice in the capacity as an employee or agent of a business, 1. demands, allows themselves to be promised or accepts a benefit for themselves or a third party in return for giving an unfair preference to another in the competitive purchase of goods or services in Germany or abroad or 2. without the permission of the business demands, allows themselves to be promised, or accepts a benefit for themselves or a third party in return for performing or refraining from performing an act in the competitive purchase of goods or services, thereby breaching the duty incumbent on them towards the business, incurs a penalty of imprisonment for a term not exceeding 3 years or a fine. (2) Whoever, in commercial practice, 1. offers, promises, or grants a benefit to an employee or agent of a business or a third party in return for giving that person or another an unfair preference in the competitive purchase of goods or services in Germany or abroad or 2. without the permission of the business offers, promises, or grants an employee or agent of a business or a third party a benefit in return for

The Development of German Criminal Law Against Corruption …



111

performing or refraining from performing an act in the competitive purchase of goods or services, and thereby breaches the duty incumbent on them in relation to the business, incurs the same penalty.

Section 299a German Criminal Code Taking bribes in healthcare sector Whoever, as a member of a healing profession that requires state-regulated training to exercise the profession or to use the professional title, demands, allows themselves to be promised, or accepts a benefit for themselves or another in connection with the exercise of their profession in return for 1. prescribing medication, remedies or health aids or medical devices, 2. procuring medication or health aids or medical devices that are designed for direct use by the member of the profession or one of their professional assistants or 3. supplying patients or samples and diagnostic data. and thereby provides an unfair competitive advantage to another in Germany or abroad, incurs a penalty of imprisonment for a term not exceeding 3 years or a fine. Section 299b German Criminal Code Giving bribes in healthcare sector Whoever offers, promises, or grants a benefit to a member of a healing profession within the meaning of Section 299a or to a third party in connection with their professional activities in return for 1. Prescribing medication, remedies or health aids or medical devices, 2. procuring medication or health aids or medical devices that are designed for direct application by the member of the healing profession or one of their professional assistants or 3. Supplying patients or samples and diagnostic data, and thereby provides an unfair competitive advantage to that person or another in Germany or abroad, incurs a penalty of imprisonment for a term not exceeding three years or a fine.

112

G. Dannecker

Section 300 German Criminal Code Especially serious cases of taking and giving bribes in commercial practice and healthcare sector In especially serious cases, an offence under Sections 299, 299a, and 299b incurs a penalty of imprisonment for a term of between 3 months and 5 years. An especially serious case typically occurs where 1. the offence relates to a major benefit or 2. the offender acts on a commercial basis or as a member of a gang whose purpose is the continued commission of such offences. Section 301 German Criminal Code Request to prosecute (1) The offences of taking and giving bribes in commercial practice under Section 299 are prosecuted only upon request, unless the prosecuting authority deems there to be a special public interest in prosecution that calls for ex officio intervention. (2) In the cases under Section 299 (1) no. 1 and (2) no. 1, the right to file the request under subsection (1) is vested in the victim as well as in all associations and chambers referred to in Section 8 (3) nos. 2 and 4 of the Act against Unfair Competition (Gesetz gegen den unlauteren Wettbewerb). Section 3 German Criminal Code Application to offences committed on German territory German criminal law applies to offences committed on German territory. Section 7 German Criminal Code Other offences committed abroad (1) German criminal law applies to offences committed abroad against a German national if the act is a criminal offence at the place of its commission or if that place is not subject to any criminal law jurisdiction. (2) German criminal law applies to other offences committed abroad if the act is a criminal offence at the place of its commission or if that place is not subject to any criminal law jurisdiction and if the offender. 1. Was a German National at the Time of the Offence or Became a German National After Its Commission or

The Development of German Criminal Law Against Corruption …

113

2. Was a foreign national at the time of the offence, was found to be staying in Germany and, although extradition legislation would permit extradition for such an offence, is not extradited because no request for extradition is made within a reasonable period, is rejected or the extradition is not feasible.

9 Empirical Data and Corruption An empirical look at corruption in the private sector shows that the number of competition offences is rather low. Nevertheless, private corruption should by no means be dismissed as a marginal phenomenon. Of the tendering cartels covered by Section 298 German Criminal Code, a high macroeconomic risk potential is shown by the fact that the progressive division of labor can lead to the strengthening of oligopoly-like structures on the supplier side with the consequence that as a rule all potential suppliers are involved in the collusion and therefore almost unlimited price increases can be enforced (Gruhl, 2015, marginal number 1). The competition offences show a high degree of social harmfulness (Dannecker, NKStGB, Section 298 marginal number 7). This is not a quantitative problem but a qualitative one. It must also be considered that in corruption cases all parties involved cooperate collusively and, in particular, secretly to the detriment of third parties. A high number of unreported cases can therefore be assumed (Table 1, 2). Table 3 lists the convictions for offences against competition for the years 2000–2020. According to the criminal prosecution statistics, convicted persons are offenders against whom criminal orders have been issued or criminal proceedings have been finally concluded after the opening of the main proceedings by judgment or discontinuation order (Federal Statistical Office 2018, p. 13, cf. Section 260 (1) German Code of Criminal Procedure). It is striking that the number of suspects identified by the police is significantly higher than the number of convicts. A significant proportion of the proceedings, therefore, do not go beyond the intermediate proceedings because they are discontinued either because of a lack of verifiability of the accusation or because of the minor gravity of the offence (Sections 153 et seqq. German Code of Criminal Procedure). Table 4 shows the trend in the number of convicted persons, which is naturally lower than the number of convictions. Once the main proceedings are opened, in the case of an anticompetitive agreement under Section 298 German Criminal Code, a conviction occurs in about half of the cases, as Tables 4 and 5 show. In contrast, the conviction rates for taking and giving bribes in commercial practice Section 299 German Criminal Code and their especially serious cases under

114

G. Dannecker

Table 1   Police registered cases of corruption in the private sector 2000–2020

2000 2005 2010 2015 2019 2020 Collusive tendering Section 298 German Criminal Code

121

118

60

94

106

20

Taking and giving bribes in commercial practice Section 299 German Criminal Code

124

246

679

369

103

273

Taking bribes in healthcare sector Section 299a German Criminal Code*

15

11

Giving bribes in healthcare sector Section 299b German Criminal Code*

15

14

141

68

Especially serious cases of taking and giving bribes in commercial practice and healthcare sector Section 300 German Criminal Code

110

107

82

45

Source: Federal Criminal Police Office (Ed.): Police crime statistics 2000–2020 *The criminal offences were introduced on 4.6.2016. The police crime statistics will therefore record the offences for the first time in 2017.

Table 2   Police registered suspects of corruption in the private sector 2000–2020

2000 2005 2010 2015 2019 2020 Collusive tendering Section 298 German Criminal Code

237

241

120

180

166

59

Taking and giving bribes in commercial practice Section 299 German Criminal Code

122

357

853

447

205

264

Taking bribes in healthcare sector Section 299a German Criminal Code*

34

16

Giving bribes in healthcare sector Section 299b German Criminal Code*

19

52

59

32

Especially serious cases of taking and giving bribes in commercial practice and healthcare sector Section 300 German Criminal Code

10

42

124

73

Source: Federal Criminal Police Office (Ed.): Police crime statistics 2000 to 2020 *The criminal offences were introduced on 4.6.2016. The police crime statistics will therefore record the offences for the first time in 2017.

Sections 299 and 300 German Criminal Code were exceptionally high in the 2000s. However, the rates have fallen considerably in recent years, as can be seen from the exemplary comparison of the years 2010 and 2020 in Table 5.

The Development of German Criminal Law Against Corruption …

115

Table 3   Convictions of corruption in the private sector 2000–2020

2000 2005 2010 2015 2019 2020 Collusive tendering Section 298 German Criminal Code

11

29

35

26

17

13

Taking and giving bribes in commercial practice Section 299 German Criminal Code

22

46

105

59

37

40

Especially serious cases of taking and giving bribes in commercial practice and healthcare sector Section 300 German Criminal Code

11

30

40

33

23

24

Source: Federal Criminal Police Office (Ed.): Police crime statistics 2000–2020

Table 4   Convicted persons of corruption in the private sector 2000–2020

2000 2005 2010 2015 2019 2020 Collusive tendering Section 298 German Criminal Code

8

14

17

18

10

11

Taking and giving bribes in commercial practice Section 299 German Criminal Code

20

35

78

39

20

22

Especially serious cases of taking and giving bribes in commercial practice and healthcare sector Section 300 German Criminal Code

6

20

36

26

19

17

Source: Federal Criminal Police Office (Ed.): Police crime statistics 2000–2020

In the case of sentencing, there is a relatively clear difference in sanctions for the yearsw 2010 and 2017: in the case of Section 298 German Criminal Code, fines are predominantly imposed. This roughly corresponds to the ratio for all offences. By contrast, in the case of Section 299 German Criminal Code without especially serious cases (Section 300 German Criminal Code), fines are still predominantly imposed, but there is also a significant proportion of suspended prison sentences, which is larger than both the proportion for Section 298 German Criminal Code and the proportion for all offences in total. This is surprising, since the range of penalties in Section 298 German Criminal Code is higher than that of Section 299 German Criminal Code. In terms of the level of penalties, offenders convicted of corruption in the private sector are most frequently fined between 31 and 90 daily rates, which is above the overall average. The amount of a daily rate itself is based on the average daily net income of the offender, Section 40 2 sentence 2 German Criminal Code.

116

G. Dannecker

Table 5   Judicial decisions in private sector corruption cases under general criminal law

Convicted persons

Convictions

Abate- Acquitment tals

Other decisions

2010 § 298 German Criminal Code

35

17

18

0

0

§ 299 German Criminal Code

105

78

20

7

0

40

36

3

1

0

82.5%

14.1%

5.8%

0.2%

§ 300 German Criminal Code Total offences 2020

854,590

§ 298 German Criminal Code

13

11

2

0

0

§ 299 German Criminal Code

40

22

15

2

1

24

17

4

3

0

84.5%

12.6%

2.7%

0.2%

§ 300 German Criminal Code Total offences

766,310

Source: Federal Criminal Police Office (Ed.): Police crime statistics 2000–2020

The above finding regarding the type of punishment is also confirmed when it comes to the level of punishment: Despite a higher punishment frame for Section 298 German Criminal Code, convicts sentenced according to Section 299 German Criminal Code have to pay 91–180 daily rates more often and also receive the longer prison sentences—if a conviction according to Section 298 German criminal Code is imposed at all (Tables 6, 7, 8).

10 Conclusion The picture painted by the criminal law norms for the protection of free competition appears fragmentary: Sections 298 to 300 German Criminal Code only sanction individual manifestations of breaches of competition in the form of bid rigging, bribery, and corruption. In particular, the sanctioning of serious violations of antitrust law is completely absent from the German Criminal Code. A more comprehensive protection of competition is, however, guaranteed by the legislator through the law on misdemeanors, which contains the essential provisions in the ARC (cf. Dannecker & Müller, 2020, Chap. 18 Section C.). However, the path originally taken by the creation of Section 298 of the Act to criminalize serious antitrust violations has never been continued and the level of protection in favor of competition remains low. A violation of the provisions of the ARC merely entails fines as a sanction.

The Development of German Criminal Law Against Corruption …

117

Table 6   Penalties imposed for corruption in the private sector under general criminal law

Convictions

Fine

Suspended imprisonment

Imprisonment without probation

2010 § 298 German Criminal Code

17

16

1

0

§ 299 German Criminal Code

78

54

24

0

36

6

28

2

81.6%

13.1%

5.3%

§ 300 German Criminal Code Total offences 2020

704,802

§ 298 German Criminal Code

11

6

5

0

§ 299 German Criminal Code

22

14

7

1

17

6

11

0

85.6%

9.9%

4.5%

§ 300 German Criminal Code Total offences

647,794

Source: Federal Criminal Police Office (Ed.): Police crime statistics 2000–2020 Table 7   Number of daily rates for fines imposed for corruption in the private sector

Number of daily rates Sentences 5–15 16–30 31–90 91–180 181–360  > 360 to fines 2010 § 298 German Criminal Code

16

0

1

14

1

§ 299 German Criminal Code

54

0

2

36

12

4

0

§ 300 German Criminal Code

6

0

0

4

1

1

0

11.3% 35.2% 46.8% 6.1%

0.5%

0.1%

Total offences 2020

575,068

0

§ 298 German Criminal Code

6

0

1

5

0

0

0

§ 299 German Criminal Code

14

0

0

6

4

4

0

§ 300 German Criminal Code

6

0

0

1

3

2

0

0.7%

 > 0.1%

Total offences

554,614

7.4% 33.3% 49.9% 8.7%

Source: Federal Criminal Police Office (Ed.): Police crime statistics 2000–2020

0 14.3%

§ 300 German Criminal Code 30

Total offences

2 0 21.9%

§ 300 German Criminal Code 11

Total offences

46.6%

4

1

5

43.2%

15

18

0

21.3%

7

4

0

17.0%

13

5

1

Source: Federal Criminal Police Office (Ed.): Police crime statistics 2000–2020

93,178

0

§ 298 German Criminal Code 5

§ 299 German Criminal Code 8

129,717

1

§ 299 German Criminal Code 24

2020

0

§ 298 German Criminal Code 1

2010

4.6%

0

0

0

3.7%

1

0

0

3.7%

0

1

0

2.8%

1

0

0

1.7%

0

0

0

1.1%

0

0

0

0.2%

0

0

0

0.2%

0

0

0

Convictions   1  year  > 2  years  > 3  years  > 5  years to  > 10  years/ for impristo 1 year to 2 years to 3 years to 5 years 10 years life imprisonment onment

Table 8   Duration of terms of imprisonment (with and without suspended sentences on probation) imposed for corruption in the private sector

118 G. Dannecker

The Development of German Criminal Law Against Corruption …

119

It is true that the legislator is aware of the high value of free competition, as can be seen from the level of fines to be imposed under Section 81 (4) ARC. Nevertheless, it has failed to take into account of the importance of competition as a protected good and has failed to eliminate the classification of serious cartel violations as misdemeanors by upgrading them to criminal law. The literature has long pressed for an increase in the level of protection (Dannecker, 2008, p. 800; Federmann, 2006, pp. 326 et seqq.; doubtfully, however, Lüderssen, 1996, p. 2526).

References Bleckmann, A. (1994). Begründung und Anwendungsbereich des Verhältnismäßigkeitsprinzips. JuS, 1994, 177–183. Böhm, F. (1961). Kartelle und Monopole im modernen Recht. In Institut für Ausländisches und Internationales Wirtschaftsrecht an der Johann-Wolfgang-Goethe-Universität Frankfurt am Main u. Institute for International and Foreign Trade Law, Washington, DC (Hrsg.), Bd. I, 1961, pp. 1–24. Brand, C. & Wostry, T. (2008). Die Strafbarkeit des Vorstandsmitglieds einer AG gemäß § 299 Abs. 1 StGB, in Wettbewerb in Recht und Praxis 2008, pp. 637–645. Braun, M. (1999). Das Abzugsverbot für Schmiergeldzahlungen nach § 4 Abs. 5 Nr. 10 EStG, in DStZ 1999, pp. 644–645. Bundeskriminalamt (ed.), Polizeiliche Kriminalstatistik 2000 / 2005 / 2010 / 2015 / 2016 / 2017, 48./53./58./63./64./65. Ausgabe, Wiesbaden 2001–2018. Crezelius, G. (2020). Kommentierung des § 4 EStG. In P. Kirchhof, H. Söhn, R. Mellinghoff (Hrsg.) Einkommensteuergesetz Kommentar, 303. Aktualisierung. C.F. Müller Verlag. Dannecker, G. (2008). Der Strafrechtliche Schutz des Wettbewerbs: Notwendigkeit und Grenzen einer Kriminalisierung von Kartellrechtsverstößen. In U. Sieber, G. Dannecker, U. Kindhäuser, J. Vogel, & T. Walter (Eds.), Strafrecht und Wirtschaftsstrafrecht (pp. 789–816). Heymann Verlag. Dannecker, G. (2017). Kommentierung der §§ 298, 299, 300, 301 StGB. In U. Kindhäuser, U. Neumann, & H.-H. Pfaeffgen (Hrsg.): Nomos-Kommentar Strafgesetzbuch, 5. Aufl. Nomos. Dannecker, G. & Biermann, J. (2014). Kommentierung der §§ 81–86 GWB in Immenga, Ulrich/Mestmäcker, Ernst Joachim, Wettbewerbsrecht Bd. 2 GWB, 5. Auflage. Beck. Dannecker, G., & Leitner, R. (Eds.). (2012). Handbuch Korruption. Linde. Dannecker, G. & Müller, N. (2020). Kartellstraf- und -ordnungswidrigkeitenrecht, Kap. 19. In H.-B. Wabnitz & T. Janovsky (Hrsg.) Handbuch des Wirtschafts- und Steuerstrafrechts, 5. Aufl. Beck. Dannecker, G. & Schröder, T. (2017). Kommentierung der §§ 299a, 299b StGB. In U. Kindhäuser, U. Neumann, & H.-H. Pfaeffgen (Hrsg.) Nomos-Kommentar Strafgesetzbuch, 5. Aufl. Nomos. Demuth, B. & Peykan, F. (2003). Zur Reichweite des Abzugsverbots bei Zuwendungen im Ausland nach Einführung des § 299 Abs. 3 StGB, in DStR 2003, pp. 1426–1428.

120

G. Dannecker

Dölling, D. (1961). Gutachten C zum 61. Deutschen Juristentag, 1996. Dreher, M. (2014) Kommentierung des §§ 97 GWB. In U. Immenga & E. J. Mestmäcker. Wettbewerbsrecht Bd. 2 GWB, 5. Aufl. Beck. Emmerich, V. (2014). Kartellrecht (13th ed.). Beck. Eser, A.,Überhofen, M., & Huber, B. (1997): Korruptionsbekämpfung durch Strafrecht, in Beiträge und Materialien aus dem Max-Planck-Institut für ausländisches und internationales Strafrecht, Vol. S. 61). Eser, A. (2019). Kommentierung des Art. 49. In Meyer (Hrsg.) Kommentar zur Charta der Grundrechte der Europäischen Union, 5. Aufl. Nomos. Federmann, B. (2006). Kriminalstrafen im Kartellrecht. Nomos. Fischer, T. (2020). Strafgesetzbuch (67th ed.). Beck. Gaede, K. (2014). Die Zukunft der europäisierten Wirtschaftskorruption gemäß § 299 StGB. NZWiSt, 2014, 281–290. Gruhl, J. (2015). Ausschreibungsabsprachen § 58. In C. Müller-Gugenberger (Hrsg.), Handbuch des Wirtschaftsstraf- und -ordnungswidrigkeitenrechts, 6. Aufl. Schmidt. Hild, E. (2000). Die Gesetze zur Bekämpfung internationaler Bestechung (IntBestG) sowie das EU-Bestechungsgesetz (EUBestG). StraFo, 2000, 221–222. Hild, E. & Albrecht, P. (2005). Rechtsfragen der Korruption - Vorteilsnahme und Bestechlichkeit - steuerstrafrechtliche Konsequenzen, in JR 2005, pp. 490–496. Huber, B. (2002). Combating Corruption in the European Union. Bundesanzeiger Verlag. Jansen, S. (2017). Der Schutz der „Integrität des Sports“ durch das Strafrecht? In GA 2017, pp. 600–614. Kahmann, C. (2009). Die Bestechlichkeit und Bestechung im geschäftlichen Verkehr. Kovac. Klingelhöfer, W. (1999). Im Spannungsfeld von Steuer- und Strafrecht: Schmiergelder. StBp, 1999, 309–315. König, P. (1996). Empfehlen sich Änderungen des Straf- und Straprozeßrechts, um den Gefahren von Korruption in Staat, Wirtschaft und Gesellschaft wirksam zu begegnen? In Deutsche Richterzeitung 1996, pp. 357 ff. Krack, R. (2016). Sportwettbetrug und Manipulation von berufssportlichen Wettbewerben. ZIS, 2016, 540–551. Krack, R. (2017). Sportwettbetrug und Manipulation von berufssportlichen Wettbewerben, in wistra 2017, pp. 289–297. Kreßner, L. (2006). Die Auftragssperre im Vergaberecht. Bundesanzeigerverlag. Kuhli, A. (2001). Grenzüberschreitende Korruption: strafrechtliche und steuerrechtliche Implikationen. Zugleich ein Beitrag zu § 4 Abs. 5 S. 1 Nr. 10 EStG. Lembeck, R. (2007). Steuerrecht und Korruptionseidämmung – Inhalt, Grenzen, Spannungsfelder. In Dölling, D. (Hrsg.) Handbuch der Korruptionsprävention. Beck, Chapter 5. Lüderssen, K. (1996): Ein Prokrustes Bett für ungleiche Zwillinge, BB 1996, pp. 2525– 2530. Mestmäcker, E.-J. (1964). Über die normative Kraft privatrechtlicher Verträge, in JZ 1964, pp. 441–446. Mestmäcker, E.-J. (1968). Das Verhältnis des Rechts der Wettbewerbsbeschränkungen zum Privatrecht. AcP, 168(1968), 235–241. Mestmäcker, E.-J., & Schweitzer, H. (2014). Europäisches Wettbewerbsrecht (3rd ed.). Beck. Meurer, T. (2019) In Amatucci, A. (Ed.) International Tax Law (2nd ed.). Wolters Kluwer.

The Development of German Criminal Law Against Corruption …

121

Mölders, S. (2009). Bestechung und Bestechlichkeit. Lang. Müller-Franken, S. (1996). Das Verbot des Abzugs der „Zuwendung von Vorteilen“ nach dem Jahressteuergesetz 1996. Verfassungsprobleme einer Durchbrechung des objektiven Nettoprinzips, in StuW 1997, pp. 3–23. Müller-Gugenberger, C. (Ed.). (2015). Handbuch des Wirtschaftsstraf- und -ordnungswidrigkeitenrechts, 6. Schmidt. Nagel, S. (2007). Entwicklung und Effektivität internationaler Maßnahmen zur Korruptionsbekämpfung. Nomos. Pache, E. (1999). Der Grundsatz der Verhältnismäßigkeit in der Rechtsprechung der Gerichte der Europäischen Gemeinschaften. NVwZ, 1999, 1033–1040. Pelz, C. (2000). Steuerliche und strafrechtliche Schritte zur Bekämpfung der Korruption im Auslandsgeschäft, in WM 2000, pp. 1566–1572. Pieth, M., & Eigen, P. (Eds.). (1999). Korruption im internationalen Geschäftsverkehr. Luchterhand. Quardt, G. (1997). Die Auftragssperre im Vergaberecht, in BB 1997, pp. 477–480. Randt, K. (2000). Schmiergeldzahlungen bei Auslandssachverhalten, in BB 2000, pp. 1006–1014. Randt, K. (2002). Abermals Neues zur Korruptionsbekämpfung: Die Ausdehnung der Angestelltenbestechung des §229 StGB auf den Weltmarkt, in BB 2002, pp. 2252–2256. Recommendations of the XVII World Congress of AIDP, RIDP 2004, pp. 765 ff. Rübenstahl, M. (2017). §§ 265 c und 265 d StGB - (Para-)Korruptionstrafrecht zur Bekämpfung des Sportwettenbetrugs und der Manipulation von Berufsportwettbewerben? (Teil 1), in JR 2017, pp. 264–279. Rübenstahl, M. (2020). Kommentierung des § 265c. In B. von Heintschel-Heinegg (Hrsg.) Beck'scher Online Kommentar StGB, 45. Ed. Saliger, F. (2016) Kommentierung §§ 265 ff. StGB. In Satzger, Schluckebier, & Widmaier (Hrsg.) Kommentar StGB. Carl Heymann. Schreiner, A.-K. (2019). Kommentierung des § 265c, in R. Hefendehl & O. Heinmann (Hrsg.) Münchener Kommentar zum StGB, Bd. 5, 3. Aufl. Beck. Schwarze, J. (2005). Europäisches Verwaltungsrecht, (2nd ed., Vol. 2). Nomos Verlag. Spatscheck, R. (2006). Die Rolle des Steuer(straf)rechts bei der Korruptionsbekämpfung. NJW, 2006, 641–645. Statistisches Bundesamt (2002–2018) Fachserie 10 Reihe 3, Rechtspflege Strafverfolgung 2000 / 2005 / 2010 /2015 / 2016 / 2017. Stahl, M. (2003). „Schmiergelderlass“: Abzugsverbot und Strafverfolgungshilfe durch die Finanzbehörden. KÖSDI, 2003, 13874–13880. Tiedemann, K. (2001). Wettbewerb als Rechtsgut des Strafrechts, in Grundfragen staatlichen Strafens. In G. Britz, H. Jung, H. Koriath, & E. Müller (Hrsg.) Festschrift für Heinz Müller-Dietz (pp. 905–918). Beck. Tiedemann, K. (2003). Schmiergeldzahlungen in der Wirtschaft. Alte und neue Reformprobleme. In D. Dölling (Ed.), Ius Humanum – Festschrift für Ernst-Joachim Lampe (pp. 759–770). Duncker & Humblot. Vahlenkamp, W., & Knauß, I. (1995). Korruption – hinnehmen oder handeln? Bundeskriminalamt.

122

G. Dannecker

Wichterich, R. & Glockemann, T. (2000). Steuer- und strafrechtliche Aspekte von Schmiergeldzahlungen an Mitarbeiter von Staatsunternehmen, in INF 2000, Heft 3, pp. 1–2. Wied, G. (2015). Kommentierung des § 4 EstG. In Blümich, Einkommensteuergesetz, 125. Aufl. Vahlen. Wollschläger, S. (2010). Die Anwendbarkeit des § 299 StGB auf Auslandssachverhalte frühere, aktuelle und geplante Tatbestandsfassung. Strafverteidiger, 2010, 385–390. Zöller, M. (2009). Abschied vom Wettbewerbsmodell bei der Verfolgung der Wirtschaftskorruption? In GA 2009, pp. 137–149.

German Corruption Cases Reflected in Criminal Files—Individual or Organizational Deviance? Dieter Dölling and Ludmila Hustus 1 Introduction It is examined in this article to what extent there is individual or organizational deviance in German corruption cases. Individual deviance is carried out in personal interest, organizational deviance in the interest of an organization (with regard to the concept of organizational deviance, see Pohlmann & Höly, 2017, p. 187 ff). The examination is carried out by way of an analysis of criminal files regarding cases of active corruption by employees of business companies. Criminal proceedings and therefore criminal files only cover a part of all corruption offenses, and criminal files only partially depict the reality. However, a host of data that are relevant for the research question can be taken from criminal files so that it is useful to apply the method of the criminal file analysis (cf. for the informative value of criminal files Dölling, 1984; Hermann, 1987).

For a version of this article in German, see Dölling & Hustus, 2021.

D. Dölling (*) Institute of Criminology, Heidelberg University, Heidelberg, Germany e-mail: [email protected] L. Hustus Institute for German, European and International Criminal Law and Law of Criminal Procedure, Heidelberg University, Heidelberg, Germany e-mail: [email protected] © The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2023 M. Pohlmann et al. (eds.), Organizational Crime, Organization, Management and Crime - Organisation, Management und Kriminalität, https://doi.org/10.1007/978-3-658-38960-4_5

123

124

D. Dölling and L. Hustus

In order to receive relevant criminal files for the analysis, in July 2015, 15 German public prosecutor’s offices with a focus on economic crime were written to and requested to permit the evaluation of the respective last two final and binding completed criminal proceedings on active corruption by employees of business companies. Ten public prosecutor’s offices permitted evaluation of the files. A total of 20 criminal proceedings were analyzed. As with several public prosecutor’s offices, only one criminal proceeding could be evaluated, with two public prosecutor’s offices three and four files respectively were analyzed. The files were sent to us for evaluation, or they were analyzed by us in the rooms of the respective public prosecutor’s office. The files came from public prosecutor’s offices in ten federal states located in the north and south as well as in the west and east of Germany. The files were analyzed with a standardized questionnaire. In particular, features of the accused, the company, for which the accused acted, as well as of the course and the results of the criminal proceeding were collected. With several accused persons, reference was made to the central protagonist of the bribery processes. A sub-form was completed additionally for each corrupt relationship between this protagonist and a certain beneficiary, in which features of the corruption process (e.g., the amount of the bribe) were recorded. 123 sub-forms were created. In eight proceedings, the sanctioning of the accused was because of corruption of office holders (Sections 333 et seqq. German Criminal Code [Strafgesetzbuch—StGB], Law on Combating International Bribery) and in seven proceedings because of bribery of employees of companies (Sections 299, 300 StGB). In five cases, sanctions were imposed according to Sections 263, 266 StGB (fraud, breach of trust) or Section 370 German Tax Code [Abgabenordnung—AO] (tax fraud). These sanctions were in connection with corruptive behavior so that they were included in the examination (cf. for the punishable acts Table 1). Suspended sentences were the most frequent punishment (nine sentences). The shortest of the suspended sentences amounted to one year, the three longest

Table 1   Punishable acts owing to which sanctions were imposed

Punishable acts

n

%

Corruption of office holders (Sections 333 et seqq. StGB, Law on Combating International Bribery)

8

40.0

Bribery of employees (Sections 299, 300 StGB)

7

35.0

Sections 263, 266 StGB; Section 370 AO

5

25.0

20

100.0

Total

German Corruption Cases Reflected in Criminal Files …

125

Table 2   Sanctions

Sanction

n

%

Suspension against a condition according to Section 153a German Criminal Procedure Code

5

25.0

Warning with reservation of punishment

1

5.0

Fine

3

15.0

Suspended sentence

9

45.0

Imprisonment without probation Total

Table 3  Total number of pages of the files analyzed

Total number of pages

2

10.0

20

100.0

n

%

100 to 500

1

5.0

501 to 1000

3

15.0

1001 to 1500

2

10.0

1501 to 2000

4

20.0

2001 and more

8

40.0

No details Total

2

10.0

20

100.0

amounted to two years. Two prison sentences were imposed without probation (duration: three and five years). A fine was imposed on three sentenced persons. In another trial, a fine was imposed in addition to the imprisonment without probation. In one case, a warning with reservation of punishment was pronounced. The proceedings were suspended against a condition against five accused (see with regard to the sanctions Table 2). As these accused also received a sanction in the form of the condition, they were included in the analysis. In the interest of better legibility, all sanctioned accused are referred to as sentenced persons. The evaluated files related to extensive and complex proceedings. Fourteen proceedings were directed against five or more accused, and six proceedings against fewer than five. The total number of pages of the files analyzed in 17 proceedings was more than 500, including eight cases with more than 2000 pages (cf. Table 3). The sentenced persons worked in various branches of business, e.g., building industry, mechanical engineering, electrical engineering, energy supply, office

126 Table 4  Duration of the bribery payments between the person granting the benefit and the recipient of the benefits

D. Dölling and L. Hustus

Duration of the bribery payments

%

40

32.5

More than 2 years to 3 years

32

26.0

More than 3 years

47

38.2

No details Total

Table 5  Type of bribery (multiple naming possible)

n

Up to 2 years

Type of bribery

4

3.3

123

100.0

n

%

Monetary payment

89

62.2

Benefit in kind

29

20.3

Invitation to dinner

19

13.3

Financing of trips

5

3.5

Software purchase, Loan of personnel Total

1

0.7

143

100.0

supplies, and medical technology. The bribery of a particular beneficiary took place predominantly over a longer period of time. In about one-third of the 123 corrupt relationships, the flow of funds extended over a period of up to two years, in 26.0% of the cases it lasted more than two to three years, and in 38.2% more than three years (see Table 4). With 8.9% of the corruption cases, there was a reference to overseas. The bribes were mainly carried out with monetary payments, benefits in kind, and invitations to dinner, with monetary payments dominating (cf. Table 5). The amount of the benefits granted respectively in the individual corrupt relationships varied considerably. The value of the benefits was predominantly high. While in 13.0% of the cases the value was up to 100 Euros and in 8.9% of the cases 101 to 1000 Euros, in 2.4% of the cases it was 1001 to 10,000 Euros, and in 58.5% of the cases 10,001 to 100,000 Euros; in 12.2% of the cases it was 100,001 to 1 million Euros and in 3.3% of the cases it exceeded one million Euros (see Table 6). The value of the bribery benefits provided by the sentenced persons in total amounted with 10.0% of the sentenced persons to 10,000 Euros, with 25.0% 10,001 to 100,000 Euros, with 30.0% 100,001 to 1 million Euros and with 25.0%

German Corruption Cases Reflected in Criminal Files … Table 6  Value of the benefits granted in a corrupt relationship

Value

127

n

Up to EUR 50

4.9

EUR 51 to EUR 100

10

8.1

EUR 101 to EUR 1000

11

8.9

EUR 1001 to EUR 10,000

Table 7  Value of the benefits granted in total

% 6

3

2.4

EUR 10,001 to EUR 100,000

72

58.5

EUR 100,001 to EUR 1 million

15

12.2

More than EUR 1 million

4

3.3

No details

2

1.6

Total

123

100.0

Value

n

%

Up to EUR 10,000

2

10.0

EUR 10,001 to EUR 100,000

5

25.0

EUR 100,001 to EUR 1 million

6

30.0

More than EUR 1 million

5

25.0

No details

2

10.0

20

100.0

Total

to more than one million Euros (cf. Table 7). Thus, mainly very substantial amounts were granted as benefits. Of the 20 sentenced persons, 19 were male. Seventeen were Germans, one was Greek, and no details were available regarding the nationality for two sentenced persons. Fifteen sentenced persons were married, two divorced, and one single. The corresponding details were missing for two sentenced persons. With 80.0% of the sentenced persons, it was derived from the files that they had children. Insofar as details were available regarding the school qualification, these mainly consisted of the secondary school certificate or a higher school qualification (see Table 8). With regard to the professional training qualification, it was derived from the files that 30.0% of the sentenced persons had a university or university of applied sciences qualification. A further 30.0% had completed other vocational training, and one sentenced person did not have any professional qualification (cf. Table 9).

128

D. Dölling and L. Hustus

Table 8   Highest general education school qualification of the sentenced persons

School qualification

n

%

Abitur (high school leaving qualification) or subject-related university entrance qualification

4

20.0

University of applied sciences entrance qualification

2

10.0

Secondary school certificate

6

30.0

No details

8

40.0

20

100.0

Total

Table 9  Highest professional training qualification of the sentenced persons

Professional qualification

n

%

University qualification

4

20.0

University of applied sciences qualification

2

10.0

Other completion of vocational training

6

30.0

No professional qualification

1

5.0

No details

7

35.0

20

100.0

Total

The sentenced persons mainly held a senior position in the companies. 35.0% were company owners or shareholders. One sentenced person was chairman of the board, and 25.0% were managing directors. 15.0% held the position of an authorized signatory. One sentenced person acted as divisional manager/head of department, one as project manager and two sentenced persons as sales representatives/field representatives (see Table 10). The sentenced persons had mainly worked for the company for several years already at the time of the first offense. Merely one sentenced person was employed in the company for less than two years. With 30.0%, the period of employment amounted from two to ten years and with 55.0%, more than ten years (cf. Table 11). A burden relating to a criminal record could not be derived from the files for any of the sentenced persons. Therefore, the sentenced persons were persons integrated into society with a higher social position (with regard to similar findings about the perpetrators of corruption offenses in other examinations, see Dölling, 2007, pp. 23, 28 ff).

German Corruption Cases Reflected in Criminal Files … Table 10  Position of the sentenced person in the company

129

Position in the company

n 7

Chairman of the board

1

5.0

Managing director

5

25.0

Authorized signatory

3

15.0

Divisional manager/Head of department

1

5.0

Project manager

1

5.0

Sales representative/Field representative Total

Table 11  Time of service for the company at the time of the first corruption offense

Time of service

n

35.0

2

10.0

20

100.0

%

Under 2 years

1

5.0

2 to 5 years

3

15.0

More than 5 to 10 years

3

15.0

More than 10 to 20 years

3

15.0

More than 20 years

8

40.0

No details

2

10.0

20

100.0

Total

Table 12  Number of offenses upon which the sentences were based

%

Company owner or shareholder

Number of offenses

n

%

One offense

6

30.0

2 to under 10 offenses

4

20.0

10 to 20 offenses

3

15.0

More than 20 offenses

4

20.0

No details Total

3

15.0

20

100.0

The corruption was mainly conducted intensively by the sentenced persons. Merely six sentenced persons were only sanctioned because of one offense, one for two offenses and two for three offenses each. One sentenced person was convicted for 8 offenses. With seven sentenced persons, the verdict was based on 10 to 20 and more than 20 offenses respectively (see Table 12).

130

D. Dölling and L. Hustus

The repeat offenders committed the corruption offenses systematically. With 50.0% of the sentenced persons, it was possible to find an interim involvement of companies or natural persons for the concealment of corruptive payments. The company’s own corporate apparatus was partly used for the corruptive activities. One company had installed a computer program in which the recipients of the benefits, the granted benefits, and the obtained orders were stored. With the benefits, a differentiation was carried out according to the “value” of the recipients of the benefits. Another company kept a tabular index file of the recipients of the benefits. Based on this index file, benefit payments were initiated to a three-digit number of recipients of benefits. A substantial number of employees of the company were partly occupied with the corruption offenses. As this was initiated by the company owners and the company management respectively, one can speak of an “organizational deviance from above”. The corruption was part of the commercial style of action of the company. There was partly an established interaction of the sentenced person with a certain recipient of a benefit (cf. with regard to such “grown relationships” Bannenberg, 2002, p. 90). It is however also to be taken into consideration that with 35.0% of the sentenced persons, it could be derived from the files that the corruption delinquency emanated from the later recipient of the benefits. With regard to the question of whether with the offenses individual or organizational deviance existed, it is initially to be stated that 35.0% of the sentenced persons were company owners or shareholders. Individual and organizational interests fell together in this constellation. By the enrichment of the company, the sentenced person also enriched himself. An action aimed at anything other than the individual interest cannot be observed with these sentenced persons. 25.0% of the sentenced persons were not company owners, however they also enriched themselves personally through the corruption offenses. In these cases, individual interests thus also played a role with these accused. With the remaining 40.0% of the sentenced persons, it cannot be derived from the files that they also endeavored to achieve personal benefits with the corruption offenses. Therefore, with these sentenced persons, the action orientation could be determined by organizational deviance (see also Hoven, 2018, p. 252, according to whom, in the cases of foreign bribery investigated, the bribing company employees predominantly had the interests of their employer in mind). However, it cannot be excluded that with these sentenced persons, individual interests such as the expansion or retention of the personal status in the company by successes with the procurement of orders also played a role. The files did not provide any clarification about the precise motives of the sentenced persons. With individual and organizational deviance, it might not concern two strictly separated phenom-

German Corruption Cases Reflected in Criminal Files …

131

ena, but these forms of deviance could also over-lap. In two proceedings, it was derived from the files that superiors had approved corruptive acts. In one of these cases, there was also a personal enrichment of the grantors of the benefits.

References Bannenberg, B. (2002). Korruption in Deutschland und ihre strafrechtliche Kontrolle. Eine kriminologisch-strafrechtliche Analyse. Luchterhand. Dölling, D. (1984). Probleme der Aktenanalyse in der Kriminologie. In H. Kury (Ed.), Methodologische Probleme in der kriminologischen Forschungspraxis (pp. 265–286). Heymanns. Dölling, D. (2007). Grundlagen der Korruptionsprävention. In D. Dölling (Ed.), Handbuch der Korruptionsprävention für Wirtschaftsunternehmen und öffentliche Verwaltung (pp. 1–40). Beck. Dölling, D. & Hustus, L. (2021). Korruption in der Wirtschaft – individuelle oder organisationale Devianz? In R. Haverkamp, M. Kilchling, J. Kinzig, D. Oberwittler, & G. Wössner (Eds.), Unterwegs in Kriminologie und Strafrecht – Exploring the World of Crime and Criminology. Festschrift für Hans-Jörg Albrecht zum 70. Geburtstag (pp. 341–349). Duncker & Humblot. Hermann, D. (1987). Die Konstruktion von Realität in Justizakten. Zeitschrift für Soziologie, 16(1), 44–55. Hoven, E. (2018). Auslandsbestechung. Eine rechtsdogmatische und rechtstatsächliche Untersuchung. Nomos. Pohlmann, M. & Höly, K. (2017). Manipulationen in der Transplantationsmedizin. Ein Fall von organisationaler Devianz? Kölner Zeitschrift für Soziologie und Sozialpsychologie, 69(2), 181–207.

Compliance, Integrity, and Prevention in the Corporate Sector: The Collective Mindsets of Compliance Officers in Germany Markus Pohlmann and Sebastian Starystach Introduction During the last two decades, multinational companies have been object to a drastic change in their regulative environment towards stricter formal laws, guidelines, and rules as well as stronger enforcement of those which already exist (e.g., FCPA). This uprising of the regulatory state in the domain of international business draws legitimacy from never abating violations of law and socially accepted norms by large multinational companies, resulting in big scandals. In reaction, compliance management systems (CMS) and corresponding compliance departments became increasingly important to demonstrate the serious efforts of multinational companies to “walk the talk”. In case of disclosure, the existence of a CMS limits the firms’ liability, as long as it meets the criteria of the social control agents (e.g., the DOJ 2019). This did lead to the emergence of a vibrant compliance sector, eager to meet at least formally the new goals set by the regulatory environment. However, this environment is largely shaped by US authorities. All companies which are doing business in the US are also object to its anti-corruption, anti-trust, and corporate criminal law. This regime, with unparalleled penalties and settlements, is closely monitored by

M. Pohlmann Heidelberg University, Max-Weber-Institute of Sociology, Heidelberg, Germany e-mail: [email protected] S. Starystach (*) Institute of Medical Sociology and Rehabilitation Science, Berlin, Germany e-mail: [email protected] © The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2023 M. Pohlmann et al. (eds.), Organizational Crime, Organization, Management and Crime - Organisation, Management und Kriminalität, https://doi.org/10.1007/978-3-658-38960-4_6

133

134

M. Pohlmann and S. Starystach

the compliance profession around the world, something that has been conducive to normative isomorphism in the shape of CMS. Against this background, the combination of compliance and integrity in commercial enterprises is a success story. Compliance departments and measures have been established almost everywhere in large multinational companies around the world, and integrity management is part of good practice and good governance. Law firms that set up such departments or carry out internal audits have their craft gold-plated, as do business ethicists who sell the panacea of the “moral compass”. While the formal prerequisites are expensive, but easy to establish, the assigned task to prevent wrongdoings inside companies and within their global value chains is not so easy to accomplish but rather overwhelms the capacity of compliance departments. Although compliance can stick to the guidelines on what good compliance is made of, no one knows if they truly do get hold of rulebreaking behavior with the implementation of formal CMS. The question arises: How do these agents and departments deal with the function of social control and prevention and how do they cope with the necessity to get a grip on substantial deviations from rules, while at the same time complying with all necessary formal requirements of modern CMS to prevent liability of the respective organization in case of disclosure? Therefore, it is not the legal question of compliance that is the focus of this chapter but the everyday practice of prevention and the everyday theories that are used in compliance departments. Again, it is not about the formal side of prevention, i.e., taking measures that are prescribed or suggested by regulators to demonstrate prevention but about how compliance employees explain rule deviations and how they think they can be contained. Thus, we take our cue from theories-in-use in compliance departments and try to reconstruct them. By collective mindsets, we address the cultural repertoire applied by compliance agents. Carrying out qualitative interviews, we reconstruct the theories-in-use to cope with the basic uncertainty concerning the detection of what is going wrong in the company, and how to avoid and combat it. In our perspective, we follow neo-institutionalist theory, and, against the background of the global spread of compliance and integrity management, we ask whether a decoupling is taking place in the departments of the companies themselves, as neo-institutionalist theory assumes. Are the mindsets and action orientations behind the façade of formal compliance measures different from the window dressing? Does this already begin in the compliance departments or only in the operational units? Since we understand organizations as formative units and socialization agencies, it seems reasonable to assume that the decoupling of actual activities from the façade already begins here. However, since compliance

Compliance, Integrity, and Prevention in the Corporate …

135

departments have a non-operational cross-sectional function in the implementation of compliance and integrity, the opposite could also be true: that they are rather enforcement agencies of the external regulators and that decoupling only emerges in the operational units. Our analyses are intended to help decide which of these assumptions is true by means of a look into the black box of mindsets in compliance departments. Why is this important? Because only then can we address the question of whether the global cultural models of compliance and integrity actually translate into collective mindsets within the companies, i.e., whether they become cognitive and normative institutions that take effect in companies. If, and to what extent, this is good or functional is another matter. Of course, one would then also have to examine the collective mindsets in the operative units, something we have already begun to do as well. But here, we are initially only interested in how the global cultural models are translated into compliance departments and to what extent their mindsets are already characterized by the divergence between façade and actual activities expected in the new institutional theory. The reader may ask whether we can investigate this question via interviews, or do compliance officers just keep the window dressing up and tell us only what they are supposed to? Our answer is: with the help of qualitative interviews, we do find out. Narrative interviews in particular offer the possibility to go back behind what is said and reconstruct the collective ways of thinking and acting which are expressed in what is said. The special procedure of collective mindset analysis allows exactly this: an access to the cognitive and normative institutions that the interviewees reproduce. Following this approach—after a brief description of the regulatory context of compliance in Germany (Sect. 2) and of the method we use (Sects. 3–4)—we begin with the analysis of the interview material itself, identifying mindsets of senior compliance officers in Germany, and explaining the results with the help of theory developed from the material itself and the regulatory context (Sect. 5). In the discussion (Sect. 6), we then connect and embed our finding to the state of research. Finally, we draw our conclusions from the analysis with the aim of building hypotheses for further research (Sect. 7).

1 The Regulatory Environment of Germany The institutionalized formal regulations in Germany can be described in a similar way as in the US (see Pohlmann and Starystach in this volume). In Germany, the “Government Commission on Corporate Governance” defines the “German

136

M. Pohlmann and S. Starystach

Corporate Governance Code” (GCGC), which makes recommendations on how the executive and supervisory boards of listed companies should structure corporate compliance. The commission is appointed by the Federal Ministry of Justice and consists of representatives of the business community. The GCGC was first published in 2002. Since then, it has been revised several times and adapted to changes in the legal framework. As in the US case, the main mechanism used is corporate self-regulation. The explicit addressing of compliance appears in the GCGC (RDCGK, 2019) in five places and it is established as a responsibility for the management board: “Principle 5: The management board is responsible for ensuring compliance with legal requirements and internal guidelines and works towards ensuring that these are observed within the company (compliance)” (RDCGK, 2019: 4, translated by the authors). The supervisory board should also set up an audit committee which, among other things, deals with the effectiveness of compliance (RDCGK, 2019: 10). The management board and supervisory board of listed companies must declare annually that the recommendations of the GCGC published by the Federal Ministry of Justice in the official section of the Federal Gazette have been or are being complied with or which recommendations have not been or are not being applied. This “Declaration of Compliance” must be made permanently available to the shareholders (Section 161 AktG). Despite their official character, these recommendations, as regulatory products of a non-governmental institution, are not legal norms. In 2009, however, the Federal Court of Justice strengthened the significance of the “Declaration of Compliance” by stating that if the declaration is incorrect (here: contrary to No. 5.5.3 DCGK “unidentified conflict of interest”), resolutions can be challenged if the members of the respective boards knew or should have known of this irregularity. In Germany, we are thus dealing with a form of regulation that does not leave compliance activities as an element of corporate governance to the discretion of the individual company. Instead, corporate governance guidelines are made de facto binding for listed companies, and any deviations are subject to an obligation to explain them. The Federal Court of Justice provides both political and judicial support. The forms of regulation within companies must therefore initially be seen as an adjustment to the institutional environment, the requirements of which must be met—regardless of the extent to which these regulations are actually considered to be meaningful. At the same time, the standardization of compliance is promoted by means of ISO standards:

Compliance, Integrity, and Prevention in the Corporate …

137

“Some of the largest companies in the world have implemented the ISO 37001 standard, which was introduced by the International Standards Organization in 2016. It enables companies in 37 countries to certify their bribery and anti-corruption processes. Significantly, both Microsoft and Wal-Mart are seeking certification. Alstom SA was certified for its activities in Europe in June 2017, following a $772 million fine imposed on the company in the United States in 2014 for accusations of bribery abroad.” (Saporito, 2018, translated by the authors).

This means that the normative pressure on companies is very high and coercive isomorphism is the consequence. From an institutional theory perspective, also in Germany, the establishment of compliance departments and measures in large companies simply appears to be a form of adaptation to externally set standards.

2 Method and Analytical Framework (1) First of all, we have chosen the method of qualitative interview analysis. Especially if one wants to understand the underlying sensemaking structures of actors, whose meaning and action orientations constitute a system, interviews are the gold standards. In a qualitative survey—unlike in a standardized survey—an open interview technique is used. Only a few general questions are asked, and the aim is to create an atmosphere of trust so that the relevance systems of the interviewees can be in the foreground when producing narration. (2) Concerning the selection method, we have chosen a purposive sampling. The participants have been selected according to preselected criteria. We focused on interviews with experienced full-time senior compliance officers, mostly Chief Compliance Officers, of large multinational companies. Experience has been an important criterion since compliance is a complex field and we wanted to know more about the sedimented experiences in that field. For the same reason, we selected only full-time professionals. As we wanted to deal with professional compliance departments, we only selected from the largest 100 corporations in Germany by market capitalization which were operating on a multinational basis. They were supposed to face typical compliance problems arising, e.g., from contracts with third parties in a variety of countries. Sample size was not fixed prior to our data collection but was determined based on theoretical saturation. Theoretical saturation means that one repeatedly collects new material in a comparative manner, interprets it, formulates hypotheses, and advances the development of data-based theory until each new interview no longer yields any new insights. It is exactly then that one has reached theoretical saturation and gained a qualitative proof of validity (Glaser & Strauss, 1967, 2005).

138

M. Pohlmann and S. Starystach

(3) As far as the interview methods are concerned, we have chosen problemcentered interviews. The problem-centered interview remains qualitative in its orientation but consists of a loose sequence of topics that are addressed against the background of a problem horizon. In the problem-centered interview, one has an open concept, which on the one hand follows the production of narratives, i.e., leaves a lot of room for narrative passages, but on the other hand, also introduces external topics coming from the researcher. For this, one already needs a preunderstanding, which is modified during the research process as the understanding of the subject matter deepens. The preliminary understanding leads to the definition of topics as well as guiding questions which entail central topics and optional follow-up questions. Although the sequence of topics is determined (roughly structured), the course of the interview itself is not determined by this. The topics are addressed along the course of the relevance structure of the interviewee. The guiding questions set out the approximate wording but are not binding in a literal way. However, important keywords are included. There is no firm standardization, closed questions and answer scales are not used (Pohlmann, 2022). (4) Concerning the methods of interview analysis, we have decided to map the collective mindsets in use by carrying out a collective mindset analysis. The empirical analysis of the collective mindsets of senior compliance officers does follow the approach of the sociology of knowledge at this point. When it comes to researching societies, cultures, or organizations, collective mindsets play a central role. They tell us about the shared mental constructions of reality and the knowledge stocks of a given society, culture, or organization: how this knowledge stock is translated into action orientations, how these orientations change over time, and how different they are in various cultures and organizations. To identify, map, and compare the knowledge stocks in different cultures and organizations, it helps knowing more about how institutions and ideas of compliance travel, how globalization and the global mainstreaming of compliance take shape, and how the cultural repertoires, the theories-in-use, are socially constructed (Pohlmann et al., 2014; Pohlmann, 2022). The CMA is related to the reconstruction of social meaning and collectively acknowledged rules that cannot be stated from an “objective” perspective but must be reconstructed from the viewpoint of a member of the respective culture. In the frame of interpretive sociology, it has a particular status, not because it entails a reconstruction of the subjective individual meaning but because it aims to reconstruct the intersubjectively shared social meaning. The CMA is not interested in individual attitudes and action orientations either. Its purpose is to reconstruct the collectively acknowledged cultural sense-making, the knowledge inventory, and the normative rules behind individual attitudes and opinions (see

Compliance, Integrity, and Prevention in the Corporate …

139

Ullrich, 1999; Stachura, 2005). The CMA is not just focused on explicit statements, arguments, and ideas but additionally on the “tacit knowledge” (Polanyi, 2009) that is collectively shared and the hidden knowledge “frames” (Goffman, 1974) that are at work in a culture. Thus, the focus of the CMA is on the collectively accepted, explicit, and tacit knowledge frames that constitute social meaning in a given culture and instruct individual meaning, attitudes, and actions. To analyze the interviews, we chose the CMA (Oevermann, 2001; Ullrich, 1999; Sachweh, 2010) in the version which was developed by Pohlmann et al., 2014. We reconstructed collective ways of thinking and perception in this field, which underlie the views and opinions of compliance experts (Arnold, 1983; Ullrich, 1999: 2). The (re-)presentation of the reasons with which compliance activities have been provided opens up access to unwritten norms and rules that have significance in this field. Collective mindsets are therefore of particular interest when reconstructing the activity structure in compliance departments. Through the way in which the breaches of rules are criticized or preventative measures are understood, we learn something about the significance as well as the institutionalized normative and cognitive structures of compliance in this field (Pohlmann et al., 2014). Thus, no conclusions are drawn as to what interviewees might have meant with their statements but rather what collective horizon of interpretation is used by them and can thus be regarded as institutionalized at the cognitive and normative level.

3 Sample The database consists of 27 problem-centered interviews with senior compliance officers of US and German multinational companies from a high variety of different sectors. For this article, we are concentrating on the 15 interviews of the German sub-sample and only draw connections to the results of the analysis of the US subsample (see Pohlmann and Starystach in this volume) for comparative purposes (Table 1). Compliance officers at different career stages were interviewed, with a focus on high-ranking senior compliance officers, like Chief Compliance Officers. As expected, almost 90% of the respondents had a law degree. Approximately onethird had a degree in economics (in some cases additionally). Only six of the respondents were female. This was to be expected since compliance officers surveyed were to a significant extent occupying high positions and women are structurally disadvantaged when it comes to career advancement in companies (Morrison et al., 1992; Broadbridge et al., 2007; Faniko et al., 2017) (Table 2).

140

M. Pohlmann and S. Starystach

Table 1   Respondents by sector (n = 27)

Sub-Sample—United States

Sub-Sample—Germany (n)

(n)

Defense Industry

1

Pharmaceutical Industry

2

Garment Industry

1

Information Technology

2

Food Industry

1

Building Materials

2

Vehicle Manufacturing

1

Industrial Services

3

Health Sector

1

Chemical Industry

2

Finance Sector

4

Insurance

1

Logistic Sector

1

Finance Sector

1

B to B Services

1

Food Industry

1

Telecommunication Sector

1

Media

1

Total

12

15

Table 2   Characteristics of the respondents

Characteristic

Expression

Multinational companies (n = 27)

100%

Work experience

Range: 2–25 years  ~ 74% Senior Compliance Officers with 10 + years of experience in compliance or related fields (n = 20)

Legal training (n = 24)

 ~ 89%

Economics (n = 9)

 ~ 33%

Female (n = 6)

 ~ 22%

4 Analytical Steps In the CMA design, we start with the theories-in-use by the senior compliance officers. Therefore, we need to reconstruct the collective mindsets that lie behind their opinions and attitudes expressed in the interviews. By applying methods of qualitative content analysis, we are going to exercise eight steps of interpretation:

Compliance, Integrity, and Prevention in the Corporate …

141

1. Selection: We select sequences related to specific topics according to our research interests. 2. Reformulation: We summarize and reformulate the arguments, explanations, as well as narrations in the sequences by rephrasing them. 3. Formation of Abstract Categories: We abstract the logical and normative structure by eliminating what is not necessary to understand the basic categories of the argument, description, or narration. 4. Abstraction of Order: We abstract the logical and normative order in the flow of arguments, descriptions, or narrations; we identify what is evaluated as good or bad and trace it back to the underlying norms behind normative statements and judgments. 5. Comparison: According to our topics, we compare the chosen sequences in all interviews to identify the most common, shared, and dominant cognitive and normative pattern. 6. Identification of Rules: Related to the social conditions, we identify the typical rules of interpretation and action that are common, acknowledged, and dominant. 7. Contextualization: To identify under which social conditions they are produced, we relate these cognitive and normative patterns to the social context of actor constellations, cultures, opportunity structures, and constraints in which they appear. 8. Explanation: Taking into consideration already established explanation frames and theories, we try to explain why these rules are reproduced or changed in the social context that we analyze, and what the social consequences of these rules are. Our approach to the CMA does not work with cases but with dimensions that enable a cross-comparison of interviews with the help of encoded sequences. Our interpretation was carried out with the help of the content analysis software MAXQDA1 that supports the encoding of text sequences.

1 MAXQDA

is software designed for qualitative and mixed methods data, particularly for analyses of data from interviews, focus groups, online surveys, web pages, images, audio and video files, spreadsheets, and RIS data. The emphasis on going beyond qualitative research can be observed in the extensive attributes function and the ability of the program to deal relatively quickly with larger numbers of interviews (see Rädiker & Kuckartz, 2019).

142

M. Pohlmann and S. Starystach

The analysis was executed both by interpretational groups with a heterogeneous structure and by native speakers. Where the interviews have been carried out in English or have been translated into English, the interpretation is executed by groups composed of international team members. The reliability of encoding and interpretation is checked several times and showed satisfactory results for the focus of interest which are the main cognitive and normative patterns of argumentation and interpretation. In parallel, a linkage could be established between encoded passages at several important points in such a way that the narratives framing the patterns of interpretation became identifiable. The aim of this chapter is to showcase to what results this method was applied in analyzing interviews with senior compliance officers in Germany. We start with the interview material itself and proceed from there into the findings of other interviews and the explanation of the findings. In doing so, we present a case in detail to also illustrate our method. We could identify two dominant mindsets: The “Enforcement and Deterrence” mindset and the “Corporate Responsibility” mindset which are simultaneously at work; with both relying on the premise of rational (organizational) behaviorism. From there, we then move into cross-comparison of interviews and into further steps of generalization of the findings as detailed above.

5 The Collective Mindsets in German Compliance Departments We could identify two dominant mindsets in the Interviews with German senior compliance officers of multinational companies: the most dominant mindset focusing on enforcement and deterrence (Sect. 5.1) and the second most dominant one that focuses on corporate social responsibility (Sect. 5.2). For both dominant mindsets, we showcase our analytical steps.

5.1 The Collective Mindset of Enforcement and Deterrence An archetypical sequence of the enforcement and deterrence mindset can be found in the following quotation from an interview with a head of company compliance of a German multinational company in the software sector:

Compliance, Integrity, and Prevention in the Corporate …

143

5.1.1 Selection “Well, you always have, of course, we’re a reflection of society, right? With eighty thousand people. We always reckon with five percent who always do things like that. If we say, well, one in ten has tendencies that are perhaps, as you said earlier, deviant, but perhaps doesn’t do anything malicious, but is more like, well, sometimes does something. And of these, again, every tenth, or maybe every hundredth, only, so every thousandth F2 employee is perhaps in a position to organize a white-collar crime here. There are already 80 people. They might keep me busy for a whole year. In this respect, it is simply, in my opinion, a permanent basic noise that you always have. Even if you have the best prevention, I mean, we all know that. As a lawyer, I know it anyway. You can do the greatest prevention and build the greatest prisons and everything. At the end of the day, there’s always going to be something that happens, right? You just have to anticipate it consistently. I think the secret is consistency. That you say: I simply will not tolerate it. And someone who tolerated or did something like that cannot work here at F2. And that is what I am communicating. You cannot eliminate this level, this background noise, you cannot get it out of the organization if you do not do this. It is more likely to get worse.” (Interview F2, translation by the authors)

5.1.2 Reformulation We are relatively free in paraphrasing. We reformulate what seems important to us in respect to our research question. Since we work with several others in an interpretative community, elements of subjective arbitrariness ought to correct themselves comparatively quickly. We have come up with the following reformulation: Like in society overall, there will always be misconduct. Even the best prevention cannot help here. Especially as a lawyer you know that. The secret is anticipation and a consistent application of a zero-tolerance policy. Company members who did something wrong or tolerated wrongdoing cannot work at F2. This zerotolerance policy must be consistently communicated. Failing to do so will lead to things getting worse. Reformulation produces an information loss and is thus a first step of interpretation. In the background, there is already a phenomenological reduction, which omits certain information that is superfluous for the phenomenon against the background of the research interest.

5.1.3 Formation of Abstract Categories This step is often comparatively difficult because it requires a first abstraction. If this is too difficult, starting with “in vivo” categories is useful, i.e., categories close to the text, before going one step further into axial coding and then into selective coding (grounded theory), thus increasing step by step the level of

144

M. Pohlmann and S. Starystach

abstraction. Exactly which level of abstraction should be reached is a decision of the interpretive community. It can then be compared with decisions made by other interpretive communities. We suggest the following categories here, still close to the data: Misconduct, Prevention, Protection, Good and Evil, Zero Tolerance, Slippery Slope. This categorization starts with one interview and becomes more and more precise, clear, and abstract as we go through this and then other interviews. The corresponding codes can then be assigned on MAXQDA and further elaborated on an ongoing basis.

5.1.4 Abstraction of Order Once we have formulated the categories, we can then start to determine the statement logic of the quote more precisely and to work out how things are seen and represented (cognitive order). To do this, among other things, we emphasize the causal order of the categories, which is called axial coding. This is usually a familiar procedure for us, which we also use for scientific articles. Then we can work out what is evaluated as good or bad (evaluative dimension) and what courses of action or rules of action are suggested (how one should behave in the respective context). We are particularly interested in the norms and values that come into play (normative order). Initially, we understand norms simply and provisionally as concrete concepts of how we shall act, which are often provided with forms of sanctions (positive or negative). Values, on the other hand, are abstract and diffuse desirable concepts, e.g., how the world, society and the family should best be. While norms can be set, e.g., by laws or by rules of cooperation, etc., values can only be postulated. They have to be transformed into norms, statutes, or commandments, in order to provide everyday actions with concrete expectations of action and to be able to sanction them. The question therefore is, which values and norms are presented in the quotation and, if necessary, provided with behavioral expectations.

5.1.4.1 The Cognitive Order Concerning the objective action problem, the question of how to avoid wrongdoings is answered by relying on zero tolerance against misconduct. Mirroring the society, a large company will always have to deal with misconduct by evil employees. The distinction between compliance as “good” and rule deviations as “evil” is creating a common understanding of prevention as protection against evil people. It is understood as “natural” that one will always have a few evil people, creating a deviant background noise in every society. To deal with this noise,

Compliance, Integrity, and Prevention in the Corporate …

145

zero tolerance on a consistent basis is the only way to address this problem. “Zero tolerance” is one part of the “broken window” theory-in-use. The other part is the “slippery slope” assumption that implies that if you do not do something against deviant behavior, it is going to get worse.

5.1.4.2 The Normative Order Behind the cognitive order lies a conventional understanding of law-andorder norms. Deviance is understood as simply bad or evil, without any further differentiation. Because it is normal to have evil people in any society, the law-and-order norm must be executed without any mitigating circumstances. The standards of the regulatory environment are not questioned, they are to be enforced. We can observe a high level of internalization of these normative standards in this case. The reference to the legal profession in particular shows a high level of commitment towards upholding the law and the corresponding order against each and everyone who threatens it.

5.1.5 Comparison Following this work on a key sequence, other excerpts in the same interview and in others are now used for a cross-comparison. This is done with the help of a case-contrasting procedure on the level of the cognitive and normative orders until a theoretical saturation is reached and therefore an important step of qualitative generalization is completed. Throughout the whole interview, the cognitive and normative order elaborated can be confirmed. But there are two variations concerning the zero-tolerance assumption in the rest of the data set. On the one hand, it is stated that the company faces negative consequences when no one is willing to talk to compliance anymore because compliance is playing hardball: “But in the past, I was always in the mindset of saying: ‘Zero-tolerance, kill everyone.’ But the consequence of that is that you get problems when it comes to whistleblowers. Because people know that there can be the most nasty, immediate consequences. And sometimes that is not the right approach and, in my opinion, also leads to a culture that is not right. That is why I am no longer unreservedly in favor of the zero-tolerance policy. There are studies that show that people then have problems talking to you. Because then they simply say: ‘If I say something to him and his team, then afterwards there will only be corpses on the floor.’ And I cannot do that because then they won’t come anymore. Because then they say: ‘Maybe I’ll become a victim myself. Some of them are accomplices.’ And then of course they say: ‘Now I cannot sleep anymore, or whatever.’ And then to say: ‘Now we will hang everyone.’—I don’t think that this is the smartest approach. So that is why. Zero tolerance, you can mention that and say that the B2 believes in zero tolerance. Yes, I

146

M. Pohlmann and S. Starystach

believe in it, but I do not communicate it as intensively as I did before. It just has a stupid long-term component that I think can also be harmful. That is why I have become a little bit cautious about it.” (Interview B2, translation by the authors)

On the other hand, operations in different countries like India and China, where corruption is part of everyday life, cannot be evaluated in a zero-tolerance manner. “You cannot always be zero tolerance in India or China, where people experience corruption every day, right? You cannot say, ‘I am going to do zero-tolerance of corruption here.’ What are people supposed to do? If they need a passport in India, they have to pay 50 euros to the passport official. That is the standard there. It does not say that anywhere, does it? But they always give cash. What do you want to say to the employee then? ‘You must never be corrupt!’ Then the employee says: ‘I just experience it every day.’” (Interview B2, translation by the authors)

Analyzing the other interviews, the findings are generally the same. The most dominant, intersubjectively shared, collective mindset identified in the analysis for the understanding of deviance, which the German compliance managers use in their argumentation, is that serious misconduct is a normal behavior of renegade individuals. Although zero tolerance is only mentioned in one quarter of the interviews, in most of them zero-tolerance-like deterrence by sanctions plays a major role in the understanding of prevention. “And he must not say: ‘Is this forbidden, are there any guidelines?’ But must say: ‘What does my assessment tell me?’ Gifts, invitation, popular topic. You always hear the question: ‘What are the values and the like?’ Yes, then I say: ‘Do not accept anything.’ Then you have no problem or only very small things. Because it is already tempting, if it has a value of € 50, yes, I would have taken now nevertheless gladly. Then I also say: ‘If you have to think about it, do you do it or do you rather not do it, then, you see, then this is typically the right question to ask yourself and then you better not do it.’ Because at the end of the day, we have to meet our own target, we cannot avoid taking action.” (Interview F3, translation by the authors)

How shall we act to avoid deviation of rules and to promote compliance? According to the reconstruction of the collective mindsets and theories-inuse, the answer is given by sticking to the cognitive frame of methodological

Compliance, Integrity, and Prevention in the Corporate …

147

individualism and stage-four thinking of moral reasoning2: it is important to obey laws, dictums, and social conventions because of their importance in maintaining a functioning society or company respectively (Kohlberg, 1973). Deviations from rules are perceived as produced by rogue actors. Bad apples that spoil the barrel is a robust collective mindset in use, although the descriptions of experienced deviations are far more thick, dense, and nuanced than this stereotype. Prevention is in this collective mindset about protecting the company by deterrence and sanctions against evil employees. If we tolerate minor wrongdoings, it will lead to a slippery slope.

5.1.6 Identification of Rules Afterward, the interpretive patterns in this field are summarized and generalized again as elements of the collective knowledge stock with reference to the objective action problem. We will sum up to what extent the elements of the policy pattern of our case can be found in other cases and what variations emerge. Often—and this is an empirical observation—only a few patterns of interpretation can be identified. The cognitive order of this collective mindset is shaped like this: mirroring the society, a big company will always have to deal with misconduct by evil employees. The distinction between compliance as “good” and rule deviations as “evil” is creating the common understanding of prevention: protection against evil people. It is understood as “natural” that one will always have a few evil people, creating the background noise of any society. To deal with it, zero tolerance is the only way to contain this background noise. “Zero tolerance” is one part of the “broken window” theory in use of prevention. The other part is the “slippery slope” assumption. If you do not apply zero tolerance, things are bound to get worse. Underlying the cognitive order is a

2 According

to Kohlberg, it is important in stage four (authority and social order obedience driven) to obey laws, dicta, and social conventions because of their importance in maintaining a functioning society. Moral reasoning in stage four is thus beyond the need for individual approval exhibited in stage three. A central ideal or ideals often prescribe what is right and wrong. If one person violates a law, perhaps everyone would, thus there is an obligation and a duty to uphold laws and rules. When someone does violate the law, it is morally wrong; culpability is thus a significant factor in this stage as it separates the bad domains from the good ones. Most active members of society remain at stage four, where morality is still predominantly dictated by an outside force (Kohlberg, 1973).

148

M. Pohlmann and S. Starystach

conventional reasoning of law-and-order norms. Deviance from these norms is understood as bad, without any further differentiation. Because it is normal to have evil people in any society, the law-and-order norm must be executed without any mitigating circumstances. This cognitive and normative order is not shared by all interviewees, but still can be identified as the most dominant collective mindset which fits into the rational-choice model of prevention. In this model, the normative order again is defined by conformity with externally set standards. Their validity is not questioned in principle. In this behaviorist mindset, the patterns of interpretation often move on a conventional level of moral judgment (Kohlberg, 1971, 1973). Deviations are not understood in their meaningfulness against the background of universal value horizons but in the sense of conventionalism. The norm of complete conformity is usually adopted without question. How should action be taken? In such a way that all rules are obeyed and deviations from the rules are punished no matter the underlying causes and reasoning.

5.1.7 Contextualization In the organizational field of large companies, especially stock corporations, it is not only common practice to set up compliance departments but the normative and regulatory pressure to do so leaves little room for maneuver in Germany, which is comparable to the state of compliance in the US. The pressure is exerted by state and state-appointed control agencies, which have been creating regulations for two to three decades, making it very difficult for companies to deviate from them, without risking corporate liability. The collective mindsets of deterrence and enforcement is mirroring this normative pressure exerted by the regulative environment of the companies by focusing on individual offenders who can be held accountable for wrongdoings committed within the organization. With the help of the zero-tolerance paradigm, the organization is not responsible for evil acts of wrongdoing since they applied and communicated this strategy of dealing with wrongdoing. In Germany, we are thus dealing with a form of regulation that—as shown above—does not leave compliance activities as an element of corporate governance to the individual company. Instead, corporate governance guidelines are made de facto binding for listed companies and any deviations are subject to an obligation to explain them. The forms of regulation within companies must therefore initially be seen as an adjustment to the institutional environment, the requirements of which must be met—regardless of the extent to which these regulations are actually considered to be meaningful.

Compliance, Integrity, and Prevention in the Corporate …

149

5.1.8 Explanation The question now arises as to how the dominance of the deterrence and enforcement mindset can be explained. On the one hand, we have to search in the state of the art for studies that come to similar results and take note of their findings. At the same time, our own theory-generating procedure of “grounded theory” must be compared with other theoretical explanations in order to be able to discuss field-specific and overarching sociological forms and factors of explanation. How can it be that this collective mindset became the most dominant in compliance departments? Our first explanation comes from new institutional theory. The normative isomorphism triggered by the FCPA and the Sentencing Guidelines of the US Justice Department has led to a global compliance mainstreaming that also became influential in Germany. It is interesting to note that, according to our findings, this global spread of administrative regulations into completely different legal systems has not led to a rising divergence between the façade and the activity structures in terms of the ways of thinking and acting in compliance departments. While this divergence is clearly observable in other operational departments of the companies, the compliance departments are on track not only in their formal measures but also in their rules of thinking and acting. This makes their function even more clearly identifiable. For them and others, they are a hinge between external environmental requirements and internal readiness to follow. In practice, they take the rules as such and apply them in the organization, even if they are at first only formal administrative instructions from the US Justice Department. The general ideas behind this mindset are deterrence, methodological individualism, rational choice, and regulation through negative sanctions. And this is precisely, according to our findings so far, what is proving to be a perfect fit in the compliance departments of German firms as well. Our second explanation stems from the sociology of professions. Since the field of business, in general, is not mono-professional but rather a meeting place for many professions, tendencies of “de-professionalization”, i.e., restrictions of their mandate to autonomous problem solving, are everyday threats to their professional status. Against this background, the field of compliance appears to be a genuinely legal field of discourse about rule interpretations, which extends into the field of business. In this respect, the central connection underlying the normative isomorphism is that of the field-specific discourse practices of a profession: jurisprudence. The connection, unlike in the US, lies less in the intersections in careers than in the central discourse elements as well as the strong profession

150

M. Pohlmann and S. Starystach

(Starystach, 2018, 2020; Stichweh, 2008; Wrase, 2017) in which compliance department personnel are socialized. The focus on offenders, based on a methodological individualism, is as much a part of this as the affirmative reference to rule adherence. Even if the ” to punishment is reflected, the connection between rule deviation and negative sanction appears as a central element of norm orientation. While the application of law knows much leeway, the maintenance of the claim of rule validity is central and the notion of slippage is part of the social learning theory of crime, which itself is still in the core of modern jurisprudence. Our third explanation relates to the organizational type of a profit-oriented business organization. In this type of organization, personnel and departments tend to be measured by the organization’s assessment of their contribution to the generation of profit. Internally generated attributions of profitability are related to payments, which are then also used to measure the legitimacy of departments and individuals. This also applies to compliance departments, but with three important differences: 1. Although they avoid potentially arising costs, which may even threaten the existence of the company, they are also opposed to the profit orientation of the company, insofar as this includes, for example, operating in a gray area of legality. 2. They are only exposed to the expectation of profitability to a limited extent because they simultaneously embody the normative-legal framework in which the organization operates or claims to operate. 3. Their establishment can only be traced back to a formally free but not a factually free decision of the organization, which is imposed by the normativeregulative environment of the organization. In this respect, these departments are not only different from all other departments but also different from the legal department, they represent a foreign body in the company at the same time, which is largely removed from the operational logics of the organization. The associated mutual experience of distance multiplies the perception that they are relegated to themselves and see the others in the company as clients who need to be treated: informed, educated, and sanctioned. The release of the professional mindset described above is triggered in this way that ensures that these collective mindsets are not operationally transformed but can develop far away from the operative logic of the profit-oriented business organization and close to the discourses of the expert community.

Compliance, Integrity, and Prevention in the Corporate …

151

5.2 The Corporate Responsibility Mindset The second most dominant mindset we found concerns integrity as a governance mechanism to prevent wrongdoing in organizations by changing the moral compass of the employees. Talking about integrity, in the German interviews, is mostly talking in fact about corporate responsibility and associated with the assumption of deliberate decision makers at the shop floor, who know themselves when to raise the alarm and to inform the compliance department.

5.2.1 Selection “And if the attitude is there, in the executive, then it typically reaches all the way down. And then also the employees and that’s the point at the end of the day, also with compliance, it’s just similar to occupational safety: people have to do things, not because it’s written somewhere, because they can’t read that much. That’s completely impossible, completely absurd. But they have to do it because they have a healthy understanding of it, because they always say common sense, with common sense you solve 90% of all cases. And even if it’s just to say: I don’t have a very good feeling about this, I’ll ask.” (Interview F1, translation by the authors)

5.2.2 Reformulation If the executive level develops the attitude, the employees will copy it. Employees should do things according to a healthy understanding of right and wrong. It is not because it is written down, because no one can read that much. It is common sense and, with common sense, you solve 90% of all cases. If you as an employee do not have a good feeling about certain ongoings, you have the responsibility to ask compliance.

5.2.3 Formation of Abstract Categories Tone from the Top, Awareness, Common Sense, Good Feeling.

5.2.4 Abstraction of Order 5.2.4.1 The Cognitive Order Companies are top-down worlds, where the tone from the top is important. If executives walk the talk, the employees will follow. They cannot read all the rulebooks, but they develop awareness and a common sense about what’s right and what’s wrong. If they don’t have a good feeling, they have the responsibility to ask for guidance.

152

M. Pohlmann and S. Starystach

5.2.4.2 The Normative Order All employees in a company shall take over corporate responsibility. The executives shall be normative role models and live with integrity themselves, and the employees shall follow. If they do so, they shall also take over responsibility themselves by relying on their understanding of right and wrong and common sense.

5.2.5 Comparison Throughout the whole interview, the mindset used concerning integrity and compliance is very consistent. It is always the tone from the top, the awareness, and the natural understanding of right and wrong or common sense respectively. “The issue of loyalty and integrity is always a major element in the selection process. Incidentally, this also applies to the internal promotion of staff. And I think that’s one of the main keys. How can you maintain it? By being very close to the executives. That’s what the board does. He’s out on site an incredible amount, talks to people a lot, but also all the way down to the store floor, i.e., also in the factories, to get his own impression” […] “Nevertheless, you get through the traffic without having 5 parking tickets on your car every evening. Sure, because you somehow have a feeling of what’s right, what’s wrong. You don’t have to know all that. But the right feeling—that goes a long way. There I stick to what I’ve said before.” (Interview F1, translations by the authors)

The collective mindset of education as sustainable enlightenment of rational people combined with the role model of the caring shepherd, and the compliant sheep can be found throughout almost all German compliance interviews: “The question basically is first of all, what do you understand by compliance. Or what do you mean by integrity, how do I behave properly, okay? That is maybe how I do behave, how I act when nobody is looking, stupidly speaking. Yes? So, what, how do I also act intuitively, yes? And I think that is where it is important: training, training, training. So, we have an incredible amount of e-learning and classroom training.” (Interview F4, translations by the authors) “And I say so, if one has done such a training on the question of antitrust law, for example, or behavior towards competitors, and has completed this training of ninety minutes, then one has already, actually, necessarily—well, there you have to answer questions, there you have to—otherwise you just do not get on to the next level, there you necessarily have to have a level of knowledge that enables you to know what is right and what is wrong in this respect.” (Interview F0, translations by the authors)

Compliance, Integrity, and Prevention in the Corporate …

153

The image of the caring shepherd and the sheep that are willing in principle and amenable to rational care dominates most of the interviews. There are minor deviations from this mindset in one or two cases, in which learning compliance is coined as experiential learning, through failure and pain. “And I think that it is unfortunately probably part of the human psyche, that one, as with such a child, which touches the stove, that one says, there is simply so pathological learning. People learn it only when it hurts” (Interview F2, translation by the authors)

Also relying on the tone from the top is a collectively shared mindset which is used in all interviews, without any exceptions: “As an employee, how do I feel about my boss constantly taking home blocks of F4 or pens? Simple example, but how do I find it? Is that ok? Or if he now takes the hole punch home to use at home. How is that? These are already so simple things on which I orient myself perhaps at my boss. How does he behave?” (Interview F4, translation by the authors)

Thus, the role of the caring shepherd is accompanied by reference to the borrowed authority of managers and bosses, with the idea that agents see the principal as a role model and are significantly influenced by the principal’s behavior. The caring, controlling, and punishing shepherd is dependent on the manager’s influence on the sheep, who are somehow living by the ideas their bosses are living by. However, the figure to rely on the common sense of what is right and what is wrong cannot be found throughout the German interviews. When the term “integrity” is used, it is framed as an important element of the culture. “I believe, first, that compliance, integrity is integral to business. It is part of it. It is not a secondary function. It is part of the culture. And that, at the same time, is also the challenge. Ensuring that you not only have the right organization and structures but also the right values and culture.” (Interview F5, translation by the authors)

But as a buzzword, integrity is rarely used by our interviewees. That is a major difference from the US interviewees. It is rather the basic idea of culture that is important, understood as the natural collective mindset to voluntarily take over responsibility for the good of the company. In a nutshell, it is about people learning to know two things: first, to decide for themselves in favor of corporate responsibility (understood as compliance). Second, to report to the compliance department when things get out of hand or there is uncertainty as to whether and

154

M. Pohlmann and S. Starystach

when someone no longer complies with the rules. Thus, integrity is equal to corporate responsibility, and corporate responsibility is equal to compliance.

5.2.6 The Identification of Rules Integrity is translated into corporate responsibility. Compliance agents are the guardians of overall corporate responsibility. In this world, the aim is to ensure that each and every employee complies with the rules on his or her own accord. However, neither expectation nor experience will be enough without training and education. As in democratic education, education for corporate responsibility requires caring shepherds who show the sheep where the right path lies and how to follow it. And when compliance agents do this, they make a difference. In their minds, they are dealing with rational actors who are willing and able to assume responsibility and only need to be led along the path. In doing so, they are supported by high-ranking employees who also live and exemplify compliance. If they do this, the employees will follow their example and be guided by it. The agents follow the principal and, conversely, the compliance department lives from the borrowed authority of the executives. In this top-down world, the issue of accepting responsibility is settled when superiors set an example of how to do it. To achieve the goal of acceptance of responsibility in terms of the overall organization, constant education, and training are necessary in addition to control and punishment. If you only repeat something like a prayer, it will find its way into the heads of the employees. Compliance in this aspect is therefore continuous education and instruction, which—supported by management—will eventually bear fruits. So how should compliance people act? They should educate employees to independently assume overall entrepreneurial responsibility and ensure that superiors also follow up their talk with action so that employees can follow their lead.

5.2.7 Contextualization If we have a sociological perspective at compliance in the business context, we can determine two main functions: compliance departments must ensure that companies adapt formally to changing legislation where it is necessary, which in turn leads to these departments usually recruiting mainly lawyers. Therefore, the normative and cognitive structures at work in compliance are bound to normative and cognitive structures of the legal profession. These cognitive and normative structures are confronted with the organizational expectation to limit corporate liability, avoid penalties, and take unnecessary risks. Among others, this is achieved by demonstrating that the company has taken the necessary formal-legal measures and steps to avoid breaking the law and making it clear—especially to the employees—that formal rules and regulations have to be respected. Part

Compliance, Integrity, and Prevention in the Corporate …

155

of this is—in case of a detected offense—to organize individual accountability, liability, or culpability via internal investigations and—if deemed necessary—via cooperation with public authorities. Therefore, especially when it comes to identifying and prosecuting illegal behavior, in theory, compliance cannot simply be window dressing. They must be able to produce individual liability. In this first function, compliance is not necessarily an enemy or threat for employees, but, in any case, it is not their friend. Compliance is something to worry about. It is an enforcement agency of the principal, a part of the governance structure legitimized by external forces of law. Further, compliance departments do not only have to identify and prosecute illegal behavior in the name of the principal (the organization) and for the purpose of upholding the law (the state). They also have to take preventive measures. One type of prevention is the old-fashioned way via checks, audits, and controls with the aim of controlling individual behavior. Here, compliance is also not trying to be a friend. A more modern type of prevention is to ensure proper selfregulation of employees via training and integrity-based education. The goal is to foster a culture of compliance. Compliance shows the right way as to how and why to behave properly within the boundaries of the applicable law and internal guidelines. Here, compliance tries to be a friend, allowing us to argue these efforts can be understood as window dressing.

5.2.8 Explanation The translation of integrity as corporate responsibility and its understanding as compliance is a three-step process that has its roots in the function and layout of the compliance departments. As servants of two masters, the external regulator and the CEOs on the ground, the mission statement of compliance is clearly defined: to keep the course of the company within the bounds of legality and to achieve this by asking all agents to take corporate responsibility on their own for this course. Prevention, too, is translated against this background as the promotion of individual responsibility, accompanied by the admonition to agents that they can be held accountable if they fail to do so. Integrity, in this understanding, is not about morality but about assigning responsibility. This assumes, first, that the interests of regulators and those of CEOs are congruent, and also that those of management levels and agents are congruent. The nomenclature of principal– agent theory addresses the problem of agents diverging from the interests of the principal. Culture, or the appeal to integrity, serves the purpose of having agents embrace the interests of the organization. This helps to optimize control and mitigate principal–agent problems. Thereby, against the background of rational choice theory, this narrowing of the issue by the agents is rooted in the function

156

M. Pohlmann and S. Starystach

of the departments and the profession as well as in the twofold principal–agent constellation of the compliance agents. The collectively shared mindset of the corporation as a “corporate actor” that follows from this principal–agent frame also helps to explain why the collective context is deciphered as being determined by central management. The central management provides the agents with information and negative incentives to assume self-determined responsibility in a way that corresponds to the legal interests of the principal. While even the compliance people know that there is no Nuremberg Funnel and how difficult it is to reach the operating units and their personnel, the model of the corporate agent is so firmly entrenched that it is maintained even counterfactually. In our interview experience, this is not only representation but also conviction. The legal interests of the principal translate into the interests of the agents by means of incentives, information, and education; the contractual form of membership already ensures this, and conversely, their actions translate into the strategic capacity of the organization. Although everyone knows a great deal about the gray areas, the difficult questions of norm conflicts, and the pluralization of regulatory instances and legal situations that make navigation difficult even for them, this collective pattern of thinking remains one that places convention above post-conventional moral judgment and reasoning. As agents of convention, they become representatives of laws and regulatory norms in the enterprise, formulated in a rational-choice framework of organizational behaviorism that then dominates the collective interpretive patterns. Compliance mainstreaming by regulators, as well as the orientation of the legal profession (see above), further promotes the dominance of this collective mindset. As a legal representative, integrity also serves to help the firm and the regulators to guarantee that their employees stay “in the box,” at least in legal terms. While the operative units are required to think “out of the box,” their role is understood by them as putting things out of the box “back into the box”. In essence, integrity management in this way of thinking becomes an opponent of innovation, which legally involves the risk of leading “out of the box”. In this mindset, the integrity demanded of each individual is the first line of defense in the front of temptations and aberrations in the multinational business.

6 Discussion The findings from our two “showcases” have been so far quite clear: the theoriesin-use are very much dominated by a rational-choice model of the firm. It is combining the theory of the firm as a corporate actor or legal body with the top-down

Compliance, Integrity, and Prevention in the Corporate …

157

idea of education and enlightenment, and the guided personnel, with its deliberative decisions against wrongdoings. Integrity is not about being moral. Rather, it is the extended arm of the compliance department, the desire for everyone in the firm to take responsibility for keeping the company in legal waters. This makes it the compliance departments’ “first line of defense”. The compliance department itself reflects the requirements of external regulatory bodies and represents them within the company. In doing so, it is not simply the extended arm of the judiciary but the servant of two masters in that it also assumes responsibility for the company and demands this in the same way from every other member of the organization. All in all, there are no other dominant patterns of interpretation, and the variance in these proves to be extraordinarily low. Theoretical saturation of the analysis was therefore reached early on. We can now draw the picture of the organization that underlies the patterns of interpretation of the German senior compliance officers very clearly. It is understood as a society that makes rules for itself and must follow external rules. Deviations from these rules are bad and cannot be tolerated because otherwise society then quickly loses its footing. This law-and-order model of society is combined with a contract and behavior-oriented rational choice perspective that affects each individual member of the organization. He or she is expected to assume corporate responsibility and make deliberate decisions in this regard or ask the compliance department. In this context, central management sets the tone for the corporate actor, the compliance department mediates, and education ensures that most of the sheep will follow sooner or later—except for the few rogue actors that exist in every company. Of course, compliance experts are not naïve and point out the many inbetweens and gray areas, but nevertheless, this smooth, streamlined image organizes many of their statements. It is the paradigm by which they organize their experience, mission, and self-image. Any cynicism or sarcasm is absent; instead, the mission is paramount.

6.1 Explanation of the Findings How can this be explained? In our opinion, one of the most important explanatory factors is that institutional isomorphism is very pronounced in this field. This has two effects: first, it ensures a high degree of similarity in the opinions. Second, the rational-choice and behavior-oriented organizational and personal image of the regulatory bodies is adopted. The general ideas behind them are dominated by

158

M. Pohlmann and S. Starystach

deterrence, methodological individualism, rational choice, training and enlightenment, and regulation through negative sanctions. One could also say it proves to be extraordinarily connectable to the cognitive and normative orientation of the legal profession, which dominates the compliance departments. In addition, compliance departments were brought into being out of external challenges and remained remote from the profit orientation of the other operational departments. In their remote logic, they appear to them as a foreign body that does not enable profitable business but rather prevents it. While the operating units tend to feel obligated to the principal function of upper management, compliance departments find themselves exposed to a dual principal–agent constellation that takes external regulatory bodies into account. This double agent status also increases the pressure on institutional isomorphism and the difference between the operational units. This provides a clear and unambiguous answer to the question posed at the beginning: a look inside the black box reveals that compliance is not a facade or window dressing for the compliance departments but an implementation program that is taken seriously by compliance departments.

6.2 Evaluation of the Findings For some, these findings may not seem surprising, but for us they are. When dealing with rules and the implementation of rules, a double bottom usually quickly comes to the fore between the appearance side of the organization and the informal routines. Questions also arise about the meaning of the rules, especially when they are set externally. Also, most of those who teach for a longer period of time quickly realize how little reaches the minds, let alone is permanently applied. It is also part of everyday life in organizations that general rules and values are mutually contradictory and that there is rarely one best solution for dealing with them but rather various contradictory ones. They are often also chosen depending on what the others are doing. This frustration-rich, ambiguous, and contradictory world of rules in the organizations emerged from time to time in the interviews, but almost exclusively only accentuated as deviation, not as the normal case of organizational life. This was as surprising to us as the consistent emphasis on mission even where we would have expected more frustration and cynicism.

Compliance, Integrity, and Prevention in the Corporate …

159

6.3 Weaknesses and Strengths From a quantitative perspective, the weaknesses of our study certainly include the small N and the unrepresentative selection of the sample. In this respect, our study was exploratory, and much would need to be done to quantitatively generalize the findings. However, from a qualitative perspective, theoretical saturation was quickly reached and variances were low. This suggests that any further interview would not yield any new insight in terms of interpretive patterns. In this respect, its strength is that the qualitative representativeness of the findings has been reached. However, although our strength lies in the fact that we reached valid and reliable results, the validity of such rules of interpretation and action cannot be equated with the practice of action in the daily business. Our analysis maps which rules are valid in the collective stock of knowledge, without this being a substitute for an analysis of the practice of action itself. This is still to be carried out. Also, our study has not yet been conducted in the operational units. While we have conducted exploratory interviews in a previous study, the systematic reference to compliance departments in corporate case studies is still missing. Since this may be an internal organizational boundary drawing in which the compliance departments themselves are part of the “windows dressing” and their rational choice orientation only breaks down at the actual activity structures in the operational units, this will become imperative in subsequent research steps.

6.4 Progress of Knowledge in Relation to the Current Research The discussion in the field of Organization Studies or Organizational Behavior is very much influenced by the more recent neo-institutional theory. Unsurprisingly, also in the compliance discussion, this approach has dominated the last two decades (Vit, 2017; Celis, 2018) and was applied to various problems.3 As a rule, this

3 For

example: the role of information technology and security for compliance (Appari et al., 2009; AlKalbani et al., 2017; Butler, 2011), compliance in governmental and nongovenmental organizations (Blake, 2019; Siddiki & Lupton, 2016) or the relationship of compliance to aspects of the informal economy (Williams et al., 2015).

160

M. Pohlmann and S. Starystach

stream of research put the regulatory environment into relation to corporate compliance efforts and its effectiveness in a respective organizational field. Effects of corporate compliance efforts are measured by the number of breaches of the law or other forms of deviation from the rules within the respective field. In this way, the difference between laws, guidelines, and other formal requirements on the one hand and violations on the other becomes the yardstick for the extent of decoupling (Wijen, 2014; MacLean et al., 2015; Abdurakhmonov et al., 2019; Haack et al., 2012; Bromley & Powell, 2012). However, the actual activity structure or its underlying rules of interpretation and action are usually not examined, which is problematic since decoupling addresses the difference between formal organizational structure and organizational practice. Only a few approaches, such as that of Butler (2011), make use of the reference to sensemaking within the organization to determine the activity structure and its background more precisely. Very often, newer studies also make a connection to strategic management (Celis, 2018; Zhao et al., 2017) to explain variances in corporate compliance. At this point, the institutional theory approaches merge seamlessly into the rational choice perspective. The question is how the regulatory environment influences the strategic decisions of companies. In this context, compliance is understood as a strategic decision (Bird & Park, 2017; Mendoza et al., 2016). In this line of research, less analytical perspectives such as Colemans (1991) play a role, but rather an attempt is made to prove that compliance in its empirically identifiable form is rational, i.e., can be justified by cost–benefit considerations. Among the important aspects of the benefit of compliance are the mitigation of sanctions in the case of a detected deviation from the rules, the allocation of responsibility, and the associated risk management (Bird & Park, 2017; Feeley, 1970; Lambert, 2017). The question as to what actually has an effect in the field of compliance is answered with reference to strict regulations, associated controls, and tough sanctions (Al Salman et al., 2015; Schell-Busey et al., 2016) and thus follows the classic control and deterrence paradigm of criminology. Against this background, the high costs of compliance measures and departments appear to be justified by the benefits of lower penalties for the company and reduced susceptibility of the organization to crime (Al Salman et al., 2015; Schell-Busey et al., 2016). Thus, this stream of research fits to the collective mindsets found inside the compliance departments and has become part of the institutional isomorphism at work and further stabilizes the dissemination dynamics of the identified collective mindsets and frames as a theoretical justification. Therefore, the current research landscape, the window dressing, and cost–benefit hypothesis are dominant and up

Compliance, Integrity, and Prevention in the Corporate …

161

until today the question of which hypothesis explains corporate compliance in its current form better or to which extent it is window dressing and a rational business strategy has not been answered. The reason why this question is unanswered is that current research does not penetrate the organizational black box. By doing so, we find that inside the compliance departments compliance is operated as a rational business strategy, not as window dressing at all.

7 Concluding Remarks In this article, we followed the new institutional theory and examined, in the field of compliance at large German companies, how strongly the already recognizable formal institutional isomorphism also affects the way compliance people interpret and act. We found that the cognitive and normative institutions, i.e., the collective mindsets, are also very strongly characterized by uniformity, and conformity to the regulatory model of compliance and prevention. Surprisingly, differences between German and American companies, but also between companies in completely different industries in Germany (or even in the US) could not be detected. All our assumptions in this regard were disproved. Compliance mainstreaming seems to be so strong that, at least in the case of Germany and the US, it shapes systems of thought and action across countries. At the forefront is a rational choice model of organizational behaviorism, which obviously shapes the core of the global cultural model of compliance and corporate responsibility, along with the standardized set of measures. The mechanisms behind the streamlined adoption of this paradigm in the US and Germany are different in form, but similar in effect: a strong profession that monopolizes the field and a maximum distance from the business model of the firms, and the formative everyday life of the operational units of the organization. As a professional foreign body in the organization, compliance departments follow other logics and can orient themselves more or less unbroken toward expert communities and regulatory bodies. Management fashions and concepts, like integrity management, are subordinated to the logic of corporate responsibility and made use of. Integrity is understood as the duty to take over corporate responsibility, as it is defined by the compliance people, and to offer an additional opportunity to attribute individual guilt and liability. In this mindset, integrity has nothing to do with morals and ethics but forms the first line of defense to protect the company and serve the external authorities.

162

M. Pohlmann and S. Starystach

References Abdurakhmonov, M., Bolton, J. F., & W. Ridge, J. W. (2019). “When the Cat’s Away, the Mice Will Play: A Model of Corporate Regulatory Compliance”. Journal of Managerial Issues, 31, 7–27. Al Salman, J. M., S. Hani, S., de Marcellis-Warin, N., & Isa, S., F. (2015). Effectiveness of an electronic hand hygiene monitoring system on healthcare workers’ compliance to guidelines. Journal of infection and public health, 8, 117–126. AlKalbani, A., Deng, H., Kam, B., & Zhang, X. (2017). Information security compliance in organizations: An institutional perspective. Data and Information Management, 1, 104–114. Appari, A., Johnson M. E., & Anthony, D. L. (2009). HIPAA compliance: an institutional theory perspective. AMCIS 2009 proceedings. Arnold, R. (1983). Deutungsmuster. Zu den Bedeutungselementen sowie den theoretischen und methodologischen Bezügen eines Begriffs. Zeitschrift Für Pädagogik, 29, 893–912. Bird, R. C., & Park, S. K. (2017). Turning corporate compliance into competitive advantage. University of Pennsylvania Journal of Business Law, 19, 285. Blake, J. (2019). Representative Bureaucracy Theory and Civil Rights Enforcement: Analyzing the Impact of Institutional Leadership on Title IX Compliance. Diss. Broadbridge, A. M., Gillian, A., & Maxwell und Susan M. Ogden. (2007). Experiences, perceptions and expectations of retail employment for Generation Y. Career Development International, 12, 523–544. Bromley, P., & Powell, W. W. (2012). From smoke and mirrors to walking the talk: Decoupling in the contemporary world. Academy of Management Annals, 6, 483–530. Butler, T. (2011). Compliance with institutional imperatives on environmental sustainability: Building theory on the role of Green IS. The Journal of Strategic Information Systems, 20, 6–26. Celis, N. J. (2018). Compliance theory: A case study approach in understanding organizational commitment. DLSU Business & Economics Review., 27, 88–118. Faniko, K., Ellemers, N., Derks, B., & Lorenzi-Cioldi, F. (2017). Nothing Changes, Really: Why Women Who Break Through the Glass Ceiling End Up Reinforcing It. Personality & social psychology bulletin, 43, 638–651. Feeley, M. (1970). Coercion and Compliance: A New Look at an Old Problem. Law & Society Review, 4, 505. Glaser, B., & Strauss, A. (1967). The Discovery of Grounded Theory: Strategies for Qualitative Research. Sociology Press. Glaser, B. G., & Strauss, A. L. (2005). Grounded theory: Strategien qualitativer Forschung. Huber. Goffman, E. (1974). Frame analysis: An essay on the organization of experience. Harvard University Press. Haack, P., Schoeneborn, D., & Wickert, C. (2012). Talking the Talk, Moral Entrapment, Creeping Commitment? Exploring Narrative Dynamics in Corporate Responsibility Standardization. Organization Studies, 33, 815–845. Kohlberg, L. (1971). Stages of moral development. Moral Education, 1, 23–92. Kohlberg, L. (1973). The Claim to moral adequacy of a highest stage of moral judgment. Journal of Philosophy., 70(18), 630–646.

Compliance, Integrity, and Prevention in the Corporate …

163

Rädiker, S., & Kuckartz, U. (2019). Analyse qualitativer Daten mit MAXQDA. Springer Fachmedien Wiesbaden. Lambert, R. D. (2017). ed. Routine activity and rational choice: Advances in criminological theory, vol. 5. Abingdon, Oxon, New York, NY: Routledge, 2004. In Lambert, R. D. (Hrsg.) Routine activity and rational choice: Volume 5. Advances in criminological theory. Routledge. MacLean, T., Litzky, B. E., & Holderness, D. K. (2015). When organizations don’t walk their talk: A cross-level examination of how decoupling formal ethics programs affects organizational members. Journal of Business Ethics, 128, 351–368. Mendoza, J. P., Henri, C., & Dekker und Jacco L. Wielhouwer. (2016). Firms’ compliance with complex regulations. Law and Human Behavior, 40, 721–733. Morrison, Ann M., White, R., P., & Ellen van Velsor. (1992). Breaking the glass ceiling. Can women reach the top of America’s largest corporations? Addison-Wesley. Oevermann, U. (2001). Zur Analyse der Struktur von sozialen Deutungsmustern. Sozialer Sinn, 2, 3–33. Pohlmann, M. (2022). Einführung in die Qualitative Sozialforschung. Konstanz UTB. Pohlmann, M., Bär, S., & Valarini, E. (2014). The analysis of collective mindsets. Introduction to a new method of institutional analysis in comparative research. Revista Des Sociologia e Política, 22, 7–25. Polanyi, M. (2009). The tacit dimension. University of Chicago press. Regierungskommission Deutscher Corporate Governance Kodex (RDCGK). (2019). German Corporate Governance Code, as resolved by the Commission on 16 Dezember 2019, convenience translation. Deutscher Corporate Governance Kodex 2019. https:// www.dcgk.de//files/dcgk/usercontent/en/download/code/191216_German_Corporate_ Governance_Code.pdf. Accessed 29 March 2021. Sachweh, P. (2010). Deutungsmuster sozialer Ungleichheit. Wahrnehmung und Legitimation gesellschaftlicher Privilegierung und Benachteiligung. Campus-Verlag. Saporito, S. (2018). Sechs Erkenntnisse aus den Vollstreckungsmaßnahmen des FCPA und jüngsten Weiterentwicklungen. https://www.lexisnexis.de/blog/compliance/erkenntnissevollstreckungsmassnahmen-fcpa-2017. Zugegriffen: 30. Okt. 2019. Schell-Busey, N., Simpson, S. S., Rorie, M., & Alper, M. (2016). What Works? A systematic review of corporate crime deterrence. Criminology & Public Policy, 15, 387–416. Siddiki, S., & Lupton, S. (2016). Assessing nonprofit rule interpretation and Compliance. Nonprofit and Voluntary Sector Quarterly, 45, 156S–174S. Stachura, M. (2005). Die Deutung des Politischen: ein handlungstheoretisches Konzept der politischen Kultur und seine Anwendung (Bd. 882). Campus-Verl. Starystach, S. (2018). Die soziale Praxis des Gerichtsverfahrens. Über die juristische Fallbearbeitung in Straf- und Zivilverfahren. Springer VS. Starystach, S. (2020). „Zur Funktion informeller Kommunikation in Gerichtverfahren am Beispiel des deutschen Strafverfahrens“. Soziale Systeme 2017, 22(1–2), 95–124. Stichweh, R. (2008). “Professionen in einer funktional differenzierten Gesellschaft.“ Moderne Mythen der Medizin. Studien zur organisierten Krankenbehandlung, 329–344. Ullrich, C. G. (1999). Deutungsmusteranalyse und diskursives Interview. Zeitschrift für Soziologie 1999, 28(6), 429–447. U.S. Department of Justice Criminal Division (DOJ). (2019). Evaluation of Corporate Compliance Programs Guidance. https://www.justice.gov/criminal-fraud/page/file/937501/ download.

164

M. Pohlmann and S. Starystach

Vit, Gregory B. (2017). Over-compliance and the conformity trap. In The Routledge Companion to Accounting and Risk. Routledge Companions in Business, Management and Accounting (Hrsg). Margaret Woods und Philip Linsley. Taylor and Francis, 235. Wijen, F. (2014). Means versus ends in opaque institutional fields: Trading off compliance and achievement in sustainability standard adoption. Academy of Management Review, 39, 302–323. Williams, C. C., Ioana, A., & Horodnic und Jan Windebank. (2015). Explaining participation in the informal economy: An institutional incongruence perspective. International Sociology, 30, 294–313. Wrase, M. (2017). Recht als soziale Praxis–eine Herausforderung für die juristische Profession?! Die juristische Profession und das Jurastudium. Nomos Verlagsgesellschaft mbH & Co. Zhao, E. Y., Fisher, G., Lounsbury, M., & Miller, D. (2017). Optimal distinctiveness: Broadening the interface between institutional theory and strategic management”. Strategic Management Journal, 38, 93–113.

Limits of Formal Regulation: How Informal Norms and Criminogenic Values Affect Managers’ Readiness to Corrupt Dieter Hermann, Markus Pohlmann and Julian Klinkhammer Introduction As a result of spectacular cases of corruption in the recent past involving largescale bribery, the question of which conditions favor a deviation from legality has gained relevance. In a project funded by the VW Foundation, an interdisciplinary group at the University of Heidelberg investigated this question from a comparative sectoral, and cultural perspective. Did the actors involved enrich themselves personally or did they orient themselves on the benefit of the organization? In order to clarify this, empirical studies will be used to develop and test hypotheses on social causes as well as institutional and individual factors for corruption in the industrial sector and data manipulation in transplantation medicine. The focus Translation of „Grenzen formaler Regulierung: Wie informelle Normen und kriminogene Werte die Korruptionsbereitschaft von Managern beeinflussen. Monatsschrift für Kriminologie und Strafrechtsreform 2019, 102(2): 104–118, https://doi.org/10.1515/mks2019-2012. D. Hermann (*) Institute of Criminology, Heidelberg University, Heidelberg, Germany e-mail: [email protected] M. Pohlmann · J. Klinkhammer Max-Weber-Institute of Sociology, Heidelberg University, Heidelberg, Germany e-mail: [email protected] J. Klinkhammer e-mail: [email protected] © The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2023 M. Pohlmann et al. (eds.), Organizational Crime, Organization, Management and Crime - Organisation, Management und Kriminalität, https://doi.org/10.1007/978-3-658-38960-4_7

165

166

D. Hermann et al.

is on forms of illegality that—insofar as it is useful for the organization and often committed by loyal executives within the framework of accepted informal rules— easily evade control by formal guidelines. The project includes court case analyses (Germany and the USA), qualitative interviews with experts from law and practice, and quantitative surveys of managers and transplant physicians. One subproject deals with the question of managers’ readiness to corrupt. Based on our own qualitative preliminary work and theoretical considerations, we assume that the readiness to corrupt depends less on formal regulation and more on the informal self-regulation of the organization, which is why we are dealing with a special regulatory problem (Pohlmann & Klinkhammer, 2018). Since illegal behavior often defies ordinary control through formal means, it has to be regulated in a different way. The explanatory problem is that formal organizations—in which membership is voluntary, therefore relatively easy for quitting—often enable the corrupt actions of their members to last over long periods of time (Pinto et al., 2019). The reasons will be clarified here by means of a manager survey. Corruption research has traditionally been one-sidedly focused on the demand side of political corruption (Sung, 2005) and has long ignored the “varieties of corruption” at the micro- and meso-levels (Klinkhammer, 2015). Studying corruption in a corporate context is therefore a relatively new line of research (Pinto et al., 2008). In terms of organizational theory, a formal organization is expected to conceal illegal practices. This is difficult when the illegal practices require communication. However, from the perspective of experienced practitioners, in everyday organizational life, it is sometimes necessary to deviate from formal rules in order to solve the organization’s adaptation problems. This is all the more the case the more consequently the formalization of organizational norm structures is advanced, and misconduct is sanctioned (Luhmann, 1999). The sociology of corruption focused on the question of the social embeddedness of corruption, while criminological corruption research, in the tradition of Sutherland, was of a more descriptive-phenomenological nature (Bannenberg & Schaupensteiner, 2007; Osrecki, 2017; Sutherland & Cressey, 1961). Rational choice approaches as micro-sociological explanatory models have dominated the field, and only more recently have non-utilitarian aspects been included and alternative theories of action considered (Linssen & Kammigan, 2012; Steßl, 2012, 215 f.; Pohlmann & Höly, 2017, 187–189; Klinkhammer, 2015). In this paper, the readiness of managers to act corruptly will be explained by using the voluntaristic theory of crime (Hermann, 2003, 2018a). This theory claims to be a general theory of crime; thus, it should also be able to explain the readiness for corruption of managers. We interpret managers’ readiness to bribe on the one hand based on a theory of action derived from value orientations and on the other hand based on

Limits of Formal Regulation: How Informal Norms …

167

institutional theory, i.e., as an action that depends on conditions available in the organizational framework. In German criminal law, corruption is a norm violation carried out by individuals. In social science terms, a distinction can be made between two categories of action: individual and organizational deviance (Hermann, 2018b; Klinkhammer, 2015; Pohlmann & Höly, 2017; Pohlmann et al., 2016). The difference between these forms of deviant behavior lies in the expected benefits for the organization and for the individual, as well as in the regulating power of informal norms of the organization. In the case of organizational corruption, the expected benefit for the organization is paramount, while the individual benefit is secondary. Thus, we depart from the traditional use of the term, which since Sherman (1980) has also been extended to institutional corruption and corruption that is contrary to the organizational purpose (Lessig, 2018, 32 f.). Moreover, in this type of corruption, the influence of informal organizational norms, those defining which business behavior is considered useful and which can be marked or excluded as deviant, is high. With regard to these three features, individual corruption is characterized by the opposite position. It is reasonable to assume that organizational corruption is more important in the industry than individual corruption because rule-deviation may yield benefits to organizations, at least in the short term. For example, the payment of bribes to get a contract violates norms but can be in the interest of the organization (Pohlmann, 2008, 170 f.). In this paper, the focus of the analysis is on explaining organizational corruption; the explanation of individual corruption is reserved for another publication. In order to justify this limitation, we will first test the hypothesis that the propensity for organizational corruption is greater than the propensity for individual corruption. The hypothesis is justified on the one hand by the competitive pressure to which organizations are exposed in a market economy. This creates, firstly, framework conditions that suggest circumvention of legal norms and, secondly, informal expectation structures and norms that promote collective deviance in favor of the organization. This is reinforced by hierarchical pressure, employee commitment to the organization, and the creation of an internal organizational culture of deviance. In other words, unwritten criminogenic rules emerge and are internalized through intra-organizational socialization processes, conducive to promoting organizational but not individual corruption (Ashford & Anand, 2003; Bannenberg, 2002, 2014; Bussmann & Salvenmoser, 2008; Campbell & Göritz, 2014; Klinkhammer, 2015; Pohlmann & Höly, 2017). On the other hand, companies are strong socialization agencies, especially for managers, because they strongly shape managers’ everyday life by means of work relationships without boundaries. This makes collective deviance more likely to benefit the organization than to harm it—especially since justifications for this form of deviance are sometimes provided by the organization.

168

D. Hermann et al.

1 Theoretical Foundations The study is focused on two levels of explanation, the interconnection of which it examines. The level of organizational deviance, as a form of collective deviance on the meso-level of societies, is connected to the level of value and norm orientations of the actors. In doing so, it relates a) action-theoretical assumptions of crime theory to b) institutional-theoretical assumptions of organizational sociology. a) The voluntaristic theory of crime is based on the tradition of the idealistic philosophy of Immanuel Kant and the sociological theories of action and society of Max Weber and Talcott Parsons. These foundations formulate the “Grand Theory” (Mills, 2000, 25 ff.), from which deductively testable hypotheses are derived to explain criminal behavior in particular. The central foundation of the theory of crime is Parsons’ theory of action (1967; 1972). According to this theory, norms and values are central categories for explaining human action. Values can be defined as central and abstract objectives and principles of life; norms are behavioral requirements and behavioral expectations. According to Hurrelmann (1983), the human being is seen as a productivereality-processing subject who is embedded in a complex environment. In order to reduce complexity, process information and choose what is subjectively important, norms and values are used by actors. These filters have an effect on the result of information processing as well as on the selection of action objectives and means to achieve objectives. Values can be used to distinguish important from unimportant action objectives, and norms can be used to distinguish accepted from unaccepted means of action. Accordingly, every action is the result of the perception of the situation and the selection of action objectives and means, and values and norms are important at all levels. The core of the voluntaristic theory of crime is the link between values, norms, and delinquency at the individual level. The more pronounced religious, traditional, conformational, and idealistic values are, the higher the acceptance of legal norms and the lower the likelihood of criminal behavior. Materialistic, hedonistic, subcultural, and stimulation-oriented values have the opposite effect—according to the results of relevant empirical studies (Cernkovich, 1978; Kerner et al., 2011; Stroezel, Wegel & Kerner, 2018; Boers & Pöge, 2003; Boers et al., 2002, 2010a, b; Pöge, 2007, 2016, 2017; Seddig, 2011, 2014a, b; Walburg, 2014; Pöge & Seddig, 2018; Reinecke et al., 2013; Hermann, 2003; Bilsky & Hermann, 2016; Borg & Hermann, 2017).

Limits of Formal Regulation: How Informal Norms …

169

b) If the model is applied to managers in the industry, two levels of formal norms need to be considered: the macro-level and the meso-level. The macro-level comprises the norms of society, i.e., in particular legal norms, while the mesolevel comprises the norms of the organization. The latter are likely to have greater relevance for the actions than the norms of society because of the better opportunities for control and sanctions. Thus, according to voluntaristic crime theory, it can be postulated that managers’ values affect the acceptance of norms and both characteristics affect the readiness for corruption. In this context, the organization provides a multitude of unwritten rules with legitimacy to ensure its functioning. A reliance on formal rules solely would be detrimental to organizational functioning, as the strict form of “service by the book” demonstrates. Where the organization deviates from formal rules itself, it creates a conflict of norms for its personnel, where both conformity and deviation can be justified organizationally. The more closely the personnel belong to the inner circle of the organization, as is usually the case with executives, the stronger the pressure to recognize the unwritten rules and informal norms, insofar as this can benefit the organization. Also, from the perspective of rational choice theory, deviance generates a common good for the benefit of the firm and its employees. The consequence, in terms of institutional theory, is that the difference between the facade of formal rules and the real structure of activity increases, and the organization builds up patterns of legitimacy and forms of justification in order to reduce the risk of scandalizing such difference (Pohlmann & Klinkhammer, 2018). These forms of justification were also taken into account in the design of the interview questionnaire so that we could examine the extent to which they influence or moderate the readiness for corruption.

2 State of the Art The influence of values and norms on corruption has primarily been studied experimentally so far (Banuri & Eckel, 2012). In this context, cultural differences are usually measured by nationality (DeBacker et al., 2015; Fisman & Miguel, 2007; Salmon & Serra, 2017), which is why it is not surprising that the effects diminish with the duration of residence in less corrupt countries (Barr & Serra, 2010). In addition, studies are available on the influence of these individual characteristics on unethical business practices and white-collar crime. A direct influence of cultural values and norms becomes less likely through occupational

170

D. Hermann et al.

socialization, as this process transforms individual value orientations toward distinct organizational cultures. Qualitative studies have repeatedly shown that preserving the system is a “good reason” that can justify corrupt means (Campbell & Göritz, 2014; Klinkhammer, 2013) and invalidate ethical counterarguments (Collins et al., 2009). Moreover, field studies have shown that strong identification with the organization increases the likelihood of acting in the organization’s favor. This relationship is also moderated by reciprocity expectations, which may allow individual gratification for unethical business behavior that serves the organization’s purpose to be deferred in anticipation of a future reward from the organization (Umphress et al., 2010). According to a study with managers, hedonistic values are particularly relevant for devious behavior (Blickle et al., 2006). A Europe-wide population survey demonstrated a criminogenic effect of the values of power, achievement, and stimulation, while preferences for universalism and benevolence had the opposite effect (Goossen et al., 2016). Numerous studies are available on the relationship between values, norms, and crime (Clark & Wenninger, 1963; Cernkovich, 1978; Kerner et al., 2011; Stroezel, Wegel & Kerner, 2018; Boers et al., 2002, 2010a, b; Boers & Pöge, 2003; Pöge, 2007, 2016, 2017; Seddig, 2011, 2014a, b; Walburg, 2014; Pöge & Seddig, 2018; Hermann, 2003, 2013, 2018a, 2018b; Bilsky & Hermann, 2016). None of this research falsifies the model. In this context, especially religious and achievement-related as well as idealistic values have proven to be empirically relevant crime resistant factors, whereas an amalgamation of materialistic, hedonistic, and subcultural values has the opposite effect. The former set of values are related to higher norm acceptance; the latter value complex corresponds to lower norm acceptance. The higher the acceptance of norms, the lower the level of crime.

3 Study Design Our empiric data is a survey of managers in executive positions. To design the sample, 3,643 companies were randomly selected in 2017 from all companies in Germany with at least 100 employees in the construction, logistics, and manufacturing sectors, with an equal number from each sector. The selection of these sectors is due to the comparatively high level of corruption in these industries (BKA, 2015, 11; BKA, 2016, 12). The recruitment and conduct of the survey were carried out by a commercial company for market and social research. All selected organizations received a cover letter by mail asking them to participate in the survey. Subsequently, the willingness to participate and the e-mail address of a senior manager were requested by telephone. 563 companies could not be reached, and

Limits of Formal Regulation: How Informal Norms …

171

2,376 refused to participate. Willingness to participate was expressed by 704 companies who then received the link to the online survey by e-mail. Out of those, 250 participated in the survey. The survey instrument was subjected to a pretest. The representativeness of the realized sample with regard to the number of employees can be tested for the manufacturing industry. The Federal Statistical Office provides employment figures for companies in this sector, using the same categorization as in the survey (Statistisches Bundesamt [Destatis], 2019a). In the year of the survey, 2017, 63% of companies had between 100 and 249 employees; 37% had more than 249 employees. The percentages refer to the number of companies with at least 100 employees. In the realized sample, the numbers are 61 and 39%. The differences are not significant. For the construction industry, other categories are used by the Federal Statistical Office for employment figures (Statistisches Bundesamt [Destatis], 2019b). Accordingly, 73% of the companies with at least 100 employees have between 100 and 199 employees; in the realized sample, 57% of the companies have between 100 and 249 employees. Consequently, larger companies are overrepresented. A comparison is not possible for the transport and warehousing sector.

4 Operationalizations and Studies on Measurement Quality 4.1 Readiness to Corrupt Organizational readiness to corrupt was measured following the Hanover Corruption Scale (HKS 38), with relevant items selected and extended (Litzcke et al., 2014). Responses were requested on the following statements: 1. If I could secure jobs through corruption, I would consider it. 2. Corruption is not so bad if it serves the benefit of the company. 3. If through corruption I could save the company in which I work from insolvency then I would do it. 4. If a bribe creates or secures jobs then corruption is not so bad. The degree of agreement and disagreement with these statements could be expressed by means of a five-point rating scale. A factor analysis (principal component analysis with varimax rotation) with these four items reproduced their one-dimensionality. The explained variance is 67%. The standardized factor loadings of the items are each above 0.76. The reliability of the organizational

172

D. Hermann et al.

readiness to corrupt scale is good. The value for Cronbach’s alpha is 0.82 and the distribution is skewed. The proportion of people who reject the statements listed above is 67, 91, 75, and 83% respectively. To compare the readiness to engage in organizational or individual corruption, a (fictitious) case was provided in the questionnaire. The description is largely based on criminal proceedings against a subsidiary of Archer Daniels Midland Company, a U.S. company. The company pleaded guilty to a violation of the Foreign Corrupt Practices Act for paying bribes to Ukrainian government officials to obtain VAT refunds. The company paid more than $17 million in penalties. Two randomly selected groups of respondents of roughly equal size were each given a variant of the case that differed in the focused interest of the act. In the first variant, the material interests of the (fictitious) actor were in the foreground, and in the second variant, the interests of the company. In order to record the readiness to corrupt, the respondents were asked what they would recommend to the company (pay the bribes—pay the bribes, but then report the issue to the public through a voluntary disclosure—do not pay the bribes). In addition, the respondent was asked what he or she would recommend to the company if a clear majority in management were clearly in favor of paying the bribes. For both items, the first given answer is interpreted as an indicator of readiness to corrupt, while the other answers indicate a lack of readiness to corrupt—either organizational or individual readiness to corrupt, depending on the case variant.

4.2 Norms For the measurement of norm acceptance, a distinction was made between norms of society and norms of the organization, whereby these can be formal or informal. To measure the acceptance of formal legal norms, corresponding questions from the ALLBUS 1990 were slightly modified and supplemented (Hermann, 2003). Respondents were presented with patterns of behavior to be rated using a seven-point rating scale ranging from 1—“not at all bad” to 7—“very bad.” Respondents were asked how bad the following behaviors were: 1. Accepting bribes. 2. Speeding up bureaucratic procedures by means of gratuities. 3. Not paying a fare on public transport, traveling illegally. 4. Claiming sickness benefits, unemployment benefits or other social benefits even though one is not entitled to them. 5. Illegally downloading music or movies.

Limits of Formal Regulation: How Informal Norms …

173

A factor analysis (principal component analysis with varimax rotation) results in a single dimension with 78% explained variance. The standardized factor loadings of the items are each above 0.82. The reliability of the scale is good. The value for Cronbach’s alpha is 0.93. The proportion of persons with the highest norm acceptance is 75% with regard to accepting bribes, 57% with regard to speeding up bureaucratic processes by means of benefits, 44% with regard to fare evasion, 72% with regard to benefit fraud, and 29% with regard to illegal downloading. To measure informal norms in an organization that regulates the gray area of corruption, the question “In every company, there are unwritten laws. How about in the institution where you work?” was asked. Items given for that question included the following: 1. Decisions in the gray area of legality are acceptable if the risk for the company is low. 2. Decisions in the gray area of legality are acceptable if they eliminate major difficulties for the company. 3. Decisions in the gray area of legality are acceptable if no one is harmed in the process. A five-point rating scale was again used to record the degree of agreement and disagreement with these statements: 1—“completely disagree” to 5—“completely agree.” All items in a factor analysis were loaded on a single factor and explained 83% of the variance. The standardized factor loadings are all above 0.88. Cronbach’s alpha is 0.90. The proportions of individuals who largely agree with the claim about the existence of unwritten laws (response categories 4 and 5) are 17, 10, and 14% respectively. Formal organizational norms for disapproval of corruption have the function of clarifying the significance of anti-corruption in a company. This was covered by the question: “How important is anti-corruption in the company where you work?” (1—“completely unimportant,” …, 5—“very important”). The average score is 4.1; this shows a high priority for fighting corruption in companies. In addition, the relevance of anti-corruption in a company is reflected in the related measures practiced by it. For this purpose, a list of preventive measures was provided. Respondents could indicate whether the measure was practiced in their company or not: 1. Whistleblowing, i.e., anonymous whistleblowing systems. 2. Risk management systems for the early detection of corruption risks.

174

D. Hermann et al.

3. Controls. 4. Internal anti-corruption guidelines. 5. Disclosure of relevant legal provisions. 6. Anti-corruption training. 7. Commitment of management to corruption-free behavior. 8. Corporate guiding values. 9. Business ethics as an instrument of corruption prevention. 10. Compliance management system. The number of prevention measures in practice was determined for operationalization. The average value is 5.4. Both variables, the perceived importance of anticorruption in the company and the number of prevention measures in practice, were taken as indicators of formal organizational norms for the disapproval of corruption. In a factor analysis, both variables explained 74% of the variance; the factor loadings were 0.84. Cronbach’s alpha was 0.53—an acceptable value given the small number of items.

4.3 Values Values are understood to be central and abstract concepts of goals that have the status of philosophies of life (Hermann, 2003; Rokeach, 1973). The concept of values considered here originates from Shalom Schwartz (1992). In the early 1990s, the latter developed the theory of a comprehensive individual value system, which differs from other value concepts in particular by the assumption that values can be ordered according to similarities. His claim is that this value concept is universal and thus valid in all cultures—this has been proven by numerous international studies (Schwartz, 1992; Schwartz & Bilsky, 1987). If one orders values according to similarities, one automatically obtains a symmetrical arrangement—in a two-dimensional value space, this is a circle. In this context, similar values lie next to each other and opposing values take up opposite positions. On the basis of numerous, mostly international surveys, Schwartz distinguishes 10 value dimensions. In Table. 1, these are characterized and the items for operationalization are specified. These are taken from the “Individual Reflective Values” scale (Hermann, 2014). Respondents can indicate the degree of importance of the items for their life goals using a seven-point rating scale: 1—“quite unimportant”, …, 7—“quite important”. The assignment of these items to the Schwartz values has already been examined (Bilsky & Hermann, 2016; Borg & Hermann, 2017).

Limits of Formal Regulation: How Informal Norms …

175

Table 1   Operationalization of values Value

Characterization

Operationalization

Universalism

Understanding, appreciation, toler- 06 Helping the socially disadvanance, and protection for the welfare taged groups of all people and for nature 09 Tolerating opinions that one really can’t agree with 19 Maintaining many contacts with other people 23 Behaving ecologically aware 27 To live in such a way that the fellow human being is not harmed

Benevolence

Preserving and enhancing the welfare of those with whom one is in frequent personal contact (the ‘in-group’)

17 Having a partner that can be trusted 18 Having good friends that acknowledge and accept you

Tradition

Respect, commitment, and acceptance of the customs and ideas that traditional culture or religion provide the self

14 Adhering to time-honored traditions 16 Being proud of German history 24 Believing in God 26 Adjusting my life according to Christian norms and values

Conformity

Restraint of actions, inclinations, and impulses likely to upset or harm others and violate social expectations or norms

01 Respecting law and order

Security

Safety, harmony, and stability of 05 Striving for security society, of relationships, and of self 20 Living health-consciously

Power

Social status and prestige, control or dominance over people and resources

03 Having power and influence

Achievement

Personal success through demonstrating competence according to social standards

08 Being hardworking and ambitious 33 Succeeding quickly 34 Being clever and more cunning than others

Hedonism

Pleasure and sensuous gratification 11 Enjoying the good things in life for oneself to the full 30 A life full of enjoyment

Stimulation

Excitement, novelty, and challenge 28 An exciting life in life (continued)

176

D. Hermann et al.

Table 1   (continued) Self-direction

Independent thought and action; choosing, creating, exploring

04 Developing one’s own imagination and creativity 12 Living and acting on one’s own responsibility

For operationalization, the respective items were added to the dimensions with equal weighting. If the values are arranged according to their average preferences, the following order is obtained, with the numbers in parentheses being the arithmetic means: tradition (3.4), power (3.5), achievement (4.1), stimulation (4.2), hedonism (4.6), security (5.2), universalism (5.3), self-direction (5.7), conformity (6.0), and benevolence (6.2).

4.4 Control Variables As control variables in multivariate analyses to explain the propensity to corrupt, demographic characteristics and social desirability orientation were considered. Demographic characteristics were surveyed using the questions from the ZUMA Standard Demographics (Beckmann et al., 2016). The question on occupational activity was already used in the research project “Crime prevention effect of anticorruption programs” by Bussmann (n.d.). The following distributions emerged for the sample: 42% of respondents were between 50 and 59 years old, 41% were younger, and 17% were older. The majority, 82%, were men. 62% had an academic degree. The average working week was 49 h, and the average company tenure was 15½ years. 39% of respondents each belonged to the board of directors or executive management and 23% to middle management. To measure social desirability, the short scale of Lück and Timaeus (1969, 2014) was used as in the ALLBUS 1980. The four items are: 1. I always say what I think. 2. I am sometimes angry when I don’t get my way. 3. I am always willing to admit a mistake I make. 4. I have occasionally said something on purpose that might hurt the other person’s feelings.

Limits of Formal Regulation: How Informal Norms …

177

To construct an index, items were linked to determine the number of responses indicating social desirability. The highest level of social desirability is when items 1 and 3 were answered “correctly” and items 2 and 4 were answered “incorrectly”; this was achieved by 15% of respondents.

5 Results 5.1 Description In each case, 34% of respondents are active in the construction and manufacturing sectors, and 32% in the transport and storage sectors. 22% of companies had at least 500 employees at the end of 2016, 21% between 250 and 499, and 57% between 100 and 249. In most companies, anti-corruption prevention measures are standard practice. Only 29% of respondents stated that no prevention measures are practiced in the company in which they work. Corporate guiding values were named most frequently (66%), followed by managers’ commitment to corruption-free behavior (65%), control measures (62%), internal company guidelines on combating corruption (62%), disclosure of the relevant legal provisions (56%), corporate ethics as an instrument of corruption prevention (54%), compliance management systems (51%), risk management systems for early detection of corruption risks (47%), anti-corruption training (43%), and whistleblowing (28%). Multiple responses were possible to the question on the methods used to prevent corruption. In each case, 39% of the respondents belonged to the board or executive management and 23% to middle management. On average, they have been with the company for 16 years. Almost all of them are men (82%), have full-time jobs (96%) and work an average of 49 h per week.

5.2 The Readiness to Engage in Organizational and Individual Corruption To test the hypothesis that readiness to engage in organizational corruption is greater than readiness to engage in individual corruption, a fictitious case was given in the questionnaire:

178

D. Hermann et al.

“A global company with business activities in the field of food production also operates in Ukraine, among other countries. When these goods are produced by a subsidiary in Ukraine, an advance tax payment is initially incurred. However, this is refunded to the company on the application if the goods are not sold in Ukraine but exported to the foreign market. When the country was nearly insolvent, reimbursements stopped. This had established a widespread practice of bribing officials in the Ministry of Finance who were responsible for the refunds. In this way, preferential treatment for refunds was to be achieved. In the specific case, the company had the choice of paying $22 million and receiving about $100 million in legitimate refunds —or going away empty-handed when faced with the threat of outright insolvency, which would, in any case, result in a cut of executive bonuses. Department officials made it clear that refunds would only be made if the required bribes were paid.”

The italicized sentence was replaced in the case variant by “would threaten the existence of the subsidiary”. In the first variant, as already stated, the material interests of the actor and in the second variant the interests of the company were in the foreground. Table. 2 shows the percentage of people who would recommend that the company pays the bribes. In the first case variant, 2% of respondents would recommend that the company pays the bribes, while in case variant two it is 6%. When asked about the personal recommendation if, on top of that, a clear majority in management were clearly in favor of paying the bribes, the figures are 3 and 11%. For both operationalizations, the readiness to corrupt is greater when the interests of the organization are in the foreground and not the interests of the actor. In both cases, the differences are significant. Thus, the hypothesis cannot be rejected.

Table 2   The readiness to engage in organizational and individual corruption Operationalization Focus of readiness to interest corrupt

Number of cases Readiness to corrupt (%)

Significant differences (p)

Question 1*

Actor

124

2

Yes (0.05)

Organization

124

6

Total

248

4

Actor

124

3

Organization

124

11

Total

248

7

Question 2**

*

Yes (0.01)

What would you recommend to the company? What would you recommend to the company if a clear majority in management were clearly in favor of paying the bribes? **

Limits of Formal Regulation: How Informal Norms …

179

5.3 Norms and Organizational Readiness to Corrupt The influence of the three norm areas—acceptance of formal legal norms, informal organizational norms on the gray area of corruption, and formal organizational norms on disapproval of corruption—on organizational readiness to corrupt is tested through a structural equation model. The results of the analysis are presented in Table 3. Effect estimates are standardized partial regression coefficients (beta values). The norm variables in Table 3 as well as organizational corruption propensity are latent variables. The indicators, i.e., the manifest variables measuring the latent variables, corresponding to the items listed in the operationalization. The loading values range from 0.64 to 0.93. The fit of the data to the model is good: the CFI value is 0.92. To detect spurious correlations, the structural equation model was extended to include the control variables listed above, postulating that each control variable influences organizational readiness to corrupt, acceptance of formal legal norms, and formal organizational norms disapproving corruption and informal organizational norms on the gray area of corruption. Extending the structural equation model changes the effect estimates only minimally: the effect of acceptance of formal legal norms on readiness to corrupt remains unchanged, the effect of formal organizational norms decreases to −0.14, and the estimate for the effect of informal organizational norms decreases to + 0.53. The results do not support the existence of spurious correlations by demographic characteristics and by social desirability. The readiness to corrupt decreases with an increasing acceptance of formal legal norms and in the presence of formal organizational norms disapproving corruption. Informal organizational norms on the gray area of corruption, in which corruption is legitimized under certain circumstances, as long as this is in the company’s interest and the risk to the company is low, have the opposite effect— they increase the readiness to act corruptly quite considerably. The influence of informal norms is significantly greater than the influence of formal norms. Table 3   The influence of norms on the readiness to corrupt Norm

Beta

Acceptance of formal legal norms

−0,15

Formal organizational norms for disapproval of corruption Informal organizational norms on the gray area of corruption

−0,16

 + 0,54

180

D. Hermann et al.

5.4 Values and Organizational Readiness to Corrupt According to Schwartz’s (1992) concept of values, values can be arranged in a circumplex according to similarities, as in Fig. 1. In this figure, the correlation coefficients between values and organizational readiness to corrupt are entered. A positive sign means that the more important a value is, the greater the readiness to corrupt. Values with a negative correlation coefficient, on the other hand, have a preventive effect. According to this, managers’ readiness for corrupt behavior is comparatively high if they are achievement- and power-oriented and also have hedonistic preferences. Conformity in the sense of respect for laws and order as well as an orientation toward the values of tradition, benevolence, universalism, and self-direction, on the other hand, have the opposite effect. The criminogenic values lie side by side in the circumplex model, as do the crime resistant values; thus, they can each be assigned to a higher-level value dimension. Achievement, power, and hedonism are the indicators of a criminogenic value dimension, while conformity, tradition, benevolence, universalism, and self-direction stand for a crime resistant value dimension. The effects for stimulation and security are comparatively low, so that they cannot be assigned to any of these higher-level value dimensions. This assignment makes it possible to estimate the influence of values on organizational readiness to corrupt using a structural equation model. This not only compensates for the effects of random

Fig. 1   Correlations between values and organizational readiness to corrupt. (SE Security, CO Conformity, TR Tradition, BE Benevolence, UN Universalism, SD Selfdirection, ST Stimulation, HE Hedonism, AC Achievement, PO Power.)

AC: r=+0,15 PO: r=+0,11

SE: r=–0,09

HE: r=+0,11

TR: r=–0,06 CO: r=–0,34

ST: r=+0,07

SD: r=–0,19 UN: r=–0,11

BE: r=–0,13

Limits of Formal Regulation: How Informal Norms …

181

measurement errors but also allows control variables to be taken into account (Reinecke, 2014; Urban & Mayerl, 2014). Figure 2 documents the results of the analysis. The effect estimates are standardized. The first number on the arrow represents the path coefficient for the model shown in the figure; the second number refers to a model in which the control variables described above were also computed. The fit of the model with the data is good, the CFI value of the model without control variables is 0.91, and the explained variance for corruption propensity is 29%. In the model with control variables, the CFI value is unchanged, and the explained variance is 34%. The more important crime resistant values are the lower the propensity to corrupt; the more important criminogenic values are the greater the propensity to corrupt. This does not change when control variables are inserted. In fact, the effects are even larger in the model with control variables than in the model without control variables. This is due in particular to age and gender. Women and older persons tend to exhibit crime resistant values and reject criminogenic values more than men and younger persons. This is consistent with the findings of other studies (Hermann, 2003). However, in contrast to expectations, the result is that the readiness to corrupt is comparatively high among women and older persons. Thus, there is an indirect causal effect between values and organizational readiness to corrupt, which is due to age and gender. These two indirect effects differ in sign from the direct effects, so that not taking these control variables into account underestimates the influence of values on the readiness to corrupt.

Crime resistant values

-0,54 / -0,56

Organizational readiness to corrupt

0,27 / 0,36

Criminogenic values

+0,31 / +0,39

Fig. 2   The influence of values on organizational readiness to corrupt. (“Indicators of crime resistant values: conformity, tradition, benevolence, universalism, and self-direction. Indicators of criminogenic values: hedonism, achievement, and power. Indicators of organizational readiness to corrupt: “If I could secure jobs through corruption, I would consider it”, “Corruption is not so bad if it serves the good of the company”, “If I can save the company I work for from insolvency through corruption, I would do it”, and “If a corruption creates or secures jobs then corruption is not so bad”.)

182

D. Hermann et al.

5.5 Norms, Values, and Organizational Readiness to Corrupt The result of an analysis on the simultaneous influence of norms and values on organizational corruption propensity is shown in Fig. 3. The effect estimates of the structural equation models are standardized. The first number on the arrow represents the path coefficient for the model shown in the figure; the second number refers to a model in which the control variables were also inserted. The covariances between the independent variables have not been graphed for the sake of clarity. The dashed arrows represent non-significant effects estimates in both models; therefore, path coefficients were not provided. The strength of the arrows symbolizes differences in effect sizes. Indicators of acceptance of formal legal norms: accepting bribes; speeding up bureaucratic procedures by means of gratuities; not paying a fare on public transport, traveling illegally; claiming sickness benefits, unemployment benefits, or

Fig. 3   The influence of norms and values on organizational readiness to corrupt. (For indicators of crime resistant and criminogenic values and indicators of organizational readiness to corrupt, see Fig. 2)

Limits of Formal Regulation: How Informal Norms …

183

other social benefits even though one is not entitled to them; and illegally downloading music or movies. Indicators of informal organizational norms on the gray area of corruption: decisions in the gray area of legality are acceptable if the risk for the company is low; decisions in the gray area of legality are acceptable if they eliminate major difficulties for the company; decisions in the gray area of legality are acceptable if no one is harmed in the process. Indicators of formal organizational norms disapproving corruption: number of preventive measures practiced and the perceived importance of fighting corruption in the company. The data fit of the model is good, the CFI value of the model without control variables is 0.90, the explained variance for corruption propensity is 47%. In the model with control variables, the CFI value is 0.88, and the explained variance is 49%. The readiness to corrupt is dependent on norms and values, with crime resistant values and informal norms of the organization being particularly important. The more important conformity, tradition, benevolence, universalism, and selfdirection are for a person, the lower the approval of informal norms in a company that regulates the gray area of decisions associated with corruption. These circumstances are: no one is harmed, the risk to the company is low, and the measure eliminates major difficulties for the company. A high acceptance of these informal corporate norms generates a high readiness to corrupt. In addition, these values have a direct effect on the readiness to corrupt: the more important crime resistant values are the lower the readiness to corrupt. The preference for criminogenic values, i.e., hedonism, achievement, and power, has the opposite effect. Compared to the informal norms of an organization, formal norms have a significantly weaker significance on the readiness to corrupt: The influence of the acceptance of legal norms is not significant, and the influence of formal organizational norms on the disapproval of corruption, i.e., the number of preventive measures practiced and the perceived importance of fighting corruption in the company, has only a weak influence on the readiness to corrupt, but one that is in line with expectations.

6 Summary and Conclusion In contrast to individual deviance, organizational deviance focuses on the expected benefit for the organization. These two forms of deviant behavior can be distinguished not only analytically but also empirically—as shown by the

184

D. Hermann et al.

example of corruption offenses (Hermann, 2018b; Klinkhammer, 2015; Pohlmann & Höly, 2017; Pohlmann et al., 2016). A survey of 250 managers shows that the readiness to engage in organizational corruption is significantly greater than the readiness to engage in individual corruption. The explanation of organizational corruption is therefore the focus of this paper. According to the voluntaristic theory of crime, norms and values should be central conditions for this form of delinquency. From an institutional theory perspective, informal norms are likely to limit the effectiveness of formal norms. This is supported by the analysis of the above-mentioned survey data. Readiness to engage in organizational corruption depends on three factors in particular: 1) the rejection of the values of conformity, tradition, benevolence, universalism, and self-direction, 2) a high preference for the values of achievement, power, and hedonism, and 3) agreement with informal corporate norms that formulate conditions for the legitimacy of corrupt actions. Overall, the results of the analysis confirm, first, the hypotheses of voluntaristic crime theory on the relevance of individual value orientations. Second, they support the institutional theory assumptions of organizational sociology, as the explanatory contribution of informal norms was ultimately proven to be independent of formal corporate anti-corruption efforts and the acceptance of informal norms is a key intervening variable between values and readiness to corrupt. Formal norms do have a weak negative effect on organizational corruption propensity. But where informal norms apply, this readiness is significantly stronger. The emergence of subcultures constituted by informal norms thus ensures the persistence of organizational readiness to corrupt even in prevention-active companies. The effect estimates in the analyses on the influence of norms and values on readiness to corrupt are comparatively high. However, when interpreting them, it should be considered that the response rate is low, so that the sample can only be seen as a random sample to a limited extent. Thus, the results of the significance tests may be biased. Some of the responses turned out to be socially desirable; this is shown by the analyses with the social desirability measurement scale. However, socially desirable response behavior does not affect the effect estimates related to the propensity to corrupt. Moreover, the effects could be weaker in industries that are less prone to corruption. Limits to formal regulation do not exist solely in the sense of dysfunctional laws and deficient law enforcement, which Wolf (2016) discusses. They also exist less in the form of criminogenic values of the individual than in the form of organizational cultures that make corrupt business practices appear legitimate. Our research findings therefore provide some evidence on the effectiveness of prevention approaches used to avoid corruption. These are mostly based on the

Limits of Formal Regulation: How Informal Norms …

185

principle of deterrence, in particular by increasing the risk of detection. Such concepts take economic-rational and self-interest-maximizing actors as their starting points. In the case of organizational corruption, however, self-interest is secondary—deterrent measures are therefore probably only effective to a limited extent. Concepts that focus on the organization rather than the individual are likely to be more promising. This is also the result of another study based on survey data from managers. According to this, a certain corporate culture that promotes integrity was reported to have a very strong influence on the rejection of corruption (Bussmann et al., 2016; Bussmann & Niemeczek, 2017). However, the aspect of economic rationality in corruption prevention could become more important in the case of corporate criminal liability. Organizational corruption is, at least in large part, system-produced—on the one hand by the emergence of informal norms, and on the other hand by corporate career systems. Orientation to achievement and power is a selection criterion for the recruitment of managers (Hartmann, 1997; Zimmermann, 2009)—and these values have a criminogenic effect. Thus, addressing informal norms in companies and incorporating crime resistant values to a greater extent could be helpful starting points for human resources development in order to develop measures to reduce the likelihood of corruption. In particular, the promotion of self-directed employees who take Kant’s categorical imperative to heart, as well as the detabooing of adaptation problems in the gray zone, are recommended without reservation. Although neither simple solutions nor sufficient management concepts are formulated in this way, these elements at least increase the probability that the organization will operate without corruption even beyond the limits of formal regulation.

References Ashforth, B. E., & Anand, V. (2003). The normalization of corruption in organizations. In R. M. Kramer & B. M. Staw (Eds.), Research in Organizational Behavior (Vol. 25, pp. 1–52). Elsevier Ltd. Bannenberg, B. (2002). Korruption in Deutschland und ihre strafrechtliche Kontrolle. Eine kriminologisch-strafrechtliche Analyse. Luchterhand. Bannenberg, B. (2014). Korruption. In H.-B. Wabnitz & T. Janovsky (Eds.), Handbuch des Wirtschafts- und Steuerstrafrechts (4th ed., pp. 695–773). Beck. Bannenberg, B., & Schaupensteiner, W. (2007). Korruption in Deutschland. Portrait einer Wachstumsbranche (3rd ed.). Beck. Banuri, S., & Eckel, C. (2012). Experiments in culture and corruption: A review. In D. Serra & L. Wantchekon (Eds.), New advances in experimental research on corruption (pp. 51–76). Bingley.

186

D. Hermann et al.

Barr, A., & Serra, D. (2010). Corruption and culture: An experimental analysis. Journal of Public Economics, 94, 862–869. Beckmann, K., Hoffmeyer-Zlotnik, J.H.P., & Hanefeld, U. (2016). Demographische Standards. Ausgabe 2016: Eine gemeinsame Empfehlung des ADM Arbeitskreis Deutscher Markt- und Sozialforschungsinstitute e. V. der Arbeitsgemeinschaft Sozialwissenschaftlicher Institute e.V. (ASI) und des Statistischen Bundesamtes (6. Aufl.). Statistisches Bundesamt. Bilsky, W., & Hermann, D. (2016). Individual values and delinquency: On considering universals in the content and structure of values. Psychology, Crime & Law, 22(10), 921– 944. BKA. (2015). Korruption. Internetpublikation. https://www.bka.de/DE/AktuelleInformationen/StatistikenLagebilder/Lagebilder/Korruption/korruption_node.html. Zugegriffen: Jan. 2018. BKA. (2016). Korruption. Internetpublikation. https://www.bka.de/DE/AktuelleInformationen/StatistikenLagebilder/Lagebilder/Korruption/korruption_node.html. Zugegriffen: Jan. 2018. Blickle, G., Schlegel, A., Fassbender, P., & Klein, U. (2006). Some personality correlates of business white-collar crime. Applied Psychology: An International Review, 55(2), 220–233. Borg, I., & Hermann, D. (2017). A closer look at personal values and delinquency. Personality and Individual Differences, 116(1), 171–178. Boers, K., & Pöge, A. (2003). Wertorientierungen und Jugenddelinquenz. In S. Lamnek & M.Boatca (Hrsg.), Geschlecht, Gewalt, Gesellschaft (S. 246–269). Leske und Budrich. Boers, K., Reinecke, J., Motzke, K., & Wittenberg, J. (2002). Wertorientierungen. Freizeitstile Und Jugenddelinquenz. Neue Kriminalpolitik, 14(4), 141–146. Boers, K., Reinecke, J., Bentrup, C., Kanz, K., Kunadt, S., Mariotti, L., Pöge, A., Pollich, D., Seddig, D., Walburg, C., & Wittenberg, J. (2010a). Jugendkriminalität – Altersverlauf und Erklärungszusammenhänge. Ergebnisse der Duisburger Verlaufsstudie Kriminalität in der modernen Stadt. Neue Kriminalpolitik 22/2, 58–66. Boers, K., Reinecke, J., Seddig, D., & Mariotti, L. (2010b). Explaining the development of adolescent violent delinquency. European Journal of Criminology, 7(6), 499–520. Bussmann, K. (n. d.). Kriminalpräventive Wirkung von Anti-Korruptionsprogrammen. Ein Forschungsprojekt. http://bussmann.jura.uni-halle.de/antikorruption/. Zugegriffen: Jan. 2018. Bussmann, K-D., & Niemeczek, A. (2017). Compliance through Company Culture and Values: An International Study Based on the Example of Corruption Prevention, Journal of Business Ethics, Online Review Paper, 1–15. Bussmann, K.-D., Niemeczek, A., & Vockrodt, M. (2016). Compliance und Unternehmenskultur − Eine empirische Untersuchung zur Wirksamkeit von Anti-Korruptionsprogrammen. Monatsschrift Für Kriminologie Und Strafrechtsreform, 99(1), 23–41. Bussmann, K.-D., & Salvenmoser, S. (2008). Der Wert von Compliance und Unternehmenskultur. Ergebnisse der aktuellen Studie von PricewaterhouseCoopers zur Wirtschaftskriminalität. Corporate-Compliance-Zeitschrift: CCZ; Zeitschrift zur Haftungsvermeidung im Unternehmen 1/5, 192–196. Campbell, J.-L., & Göritz, A. S. (2014). Culture corrupts! A qualitative study of organizational culture in corrupt organizations. Journal of Business Ethics, 120(3), 1–21.

Limits of Formal Regulation: How Informal Norms …

187

Cernkovich, S. A. (1978). Value orientations and delinquency involvement. Criminology, 15(4), 443–458. Clark, J. P., & Wenninger, E. P. (1963). Goal orientations and illegal behavior among Juveniles. Social Forces, 42(1), 49–59. Collins, J. D., Uhlenbruck, K., & Rodriguez, P. (2009). Why firms engage in corruption: A top management perspective. Journal of Business Ethics, 87, 89–108. DeBacker, J., Heim, B. T., & Tran, A. (2015). Importing corruption culture from overseas: Evidence from corporate tax evasion in the United States. Journal of Financial Economics, 117, 122–138. Fisman, R., & Miguel, E. (2007). Corruption, norms, and legal enforcement: Evidence from diplomatic parking tickets. Journal of Political Economy, 115, 1020–1048. Goossen, M., Johansson Sevä, I., & Larsson, D. (2016). Basic human values and whitecollar crime: Findings from Europe. European Journal of Criminology, 13(4), 434–452. Hartmann, M. (1997). Die Rekrutierung von Topmanagern in Europa: Nationale Bildungssysteme und die Reproduktion der Eliten in Deutschland, Frankreich und Großbritannien. Europäisches Archiv Für Soziologie, 38(1), 3–37. Hermann, D. (2003). Werte und Kriminalität. Konzeption einer allgemeinen Kriminalitätstheorie. Westdeutscher Verlag. Hermann, D. (2013). Werte und Kriminalität. Konzeption der voluntaristischen Kriminalitätstheorie und Ergebnisse empirischer Studien. In D. Dölling & J.-M. Jehle (Hrsg.), Täter, Taten, Opfer: Grundlagenfragen und aktuelle Probleme der Kriminalität und ihrer Kontrolle (432–450). Forum-Verl. Godesberg. Hermann, D. (2014). Individuelle reflexive Werte. Zusammenstellung sozialwissenschaftlicher Items und Skalen. Internetpublikation: https://zis.gesis.org/skala/Hermann-Individuelle-reflexive-Werte. Zugriff 11/2018. Hermann, D. (2018a). Die voluntaristische Kriminalitätstheorie. In D. Hermann & A. Pöge (Hrsg.), Kriminalsoziologie. Handbuch für Wissenschaft und Praxis (S. 39–57). Nomos. Hermann, D. (2018b). Die Korruptionsbereitschaft von Managern – organisationale oder individuelle Devianz? In K. Boers (Ed.), Kriminologische Welt in Bewegung (S. 255– 264). Forum Verlag Godesberg. Hurrelmann, K. (1983). Das Modell des produktiv realitätsverarbeitenden Subjekts in der Sozialisationsforschung. Zeitschrift Für Sozialisationsforschung Und Erziehungssoziologie, 3(1), 91–103. Kerner, H.-J., Stroezel, H., & Wegel, M. (2011). Gewaltdelinquenz und Gewaltaffinität bei jungen Menschen in verschiedenen sozialen Milieus – Analyse von amtlichen Daten und von Befunden aus Selbstberichten. Trauma Und Gewalt, 5(1), 20–35. Klinkhammer, J. (2013). On the dark side of the code: Organizational challenges to an effective anti-corruption strategy. Crime, Law and Social Change, 60, 191–208. Klinkhammer, J. (2015). Varieties of corruption in the shadow of Siemens. A modus-operandi study of corporate crime on the supply side of corrupt transactions. In J. van Erp, W. Huisman, & G. Vande Walle (eds.), The Routledge Handbook of White-Collar and Corporate Crime in Europe (318–335). Routledge Taylor & Francis Group. Lessig, L. (2018). America, compromised. University of Chicago Press. Linssen, R., & Kammigan, I. (2012). Korruption als „Situational Action“. Eine theoretischintegrative Erklärung korrupten Verhaltens auf Basis der „Situational Action Theory“. Monatsschrift für Kriminologie und Strafrechtsreform 95/5, 331–347.

188

D. Hermann et al.

Litzcke, S., Linssen, R. & Hermanutz, M. (2014). Hannoversche Korruptionsskala (HKS 38). Hannover: Hochschule Hannover (Personalpsychologie; Band 1). Lück, H., & Timaeus, E. (1969). Skalen zur Messung manifester Angst (MAS) und sozialer Wünschbarkeit (SDS-E und SDS-CM). Diagnostica, 15, 134–141. Lück, H., & Timaeus, E. (2014). Soziale Erwünschtheit (SDS-CM). Zusammenstellung sozialwissenschaftlicher Items und Skalen. ZIS Version 15.00. Luhmann, N. (1999). Funktionen und Folgen formaler Organisation (5th ed.). Duncker & Humblot. Mills, C. W. (2000). The sociological imagination (14th ed.). Oxford Univ. Press. Osrecki, F. (2017). A short history of the sociology of corruption. The demise of counterintuitivity and the rise of numerical comparisons. The American Sociologist, 48/1, 103– 125. Parsons, T. (1967). The structure of social action (5. Aufl., 1. Aufl 1937). Free Press. Parsons, T. (1972). Das System moderner Gesellschaften. Juventa (Original: The System of Modern Societies, Prentice-Hall: Englewood Cliffs, 1971). Pinto, J., Leana, C. R., & Pil, F. K. (2008). Corrupt organizations or organizations of corrupt individuals? Two types of organization-level corruption. The Academy of Management Review, 33, 685–709. Pinto, J., Pohlmann, M., & Klinkhammer, J. (2019). Bringing organizational corruption theory to life through 3 case studies: Volkswagen, The United Kingdom Parliament, and Siemens. International Journal of Law, Crime and Justice. Pöge, A. (2007). Soziale Milieus und Delinquenz im Jugendalter. Eine Untersuchung von Werte- und Musiktypologien in Münster und Duisburg. Waxmann. Pöge, A. (2016). Wertetypen und abweichendes Verhalten. In J. Reinecke, M. Stemmler, & J. Wittenberg (Hrsg.), Devianz und Delinquenz im Kindes- und Jugendalter. Ungleichheitsdimensionen und Risikofaktoren (S. 167–187). Springer VS. Pöge, A. (2017). Werte im Jugendalter. Stabilität – Wandel – Synthese. Springer VS. Pöge, A., & Seddig, D. (2018). Werte und abweichendes Verhalten. In D. Hermann & A. Pöge (Hrsg.), Kriminalsoziologie. Handbuch für Wissenschaft und Praxis (S. 149–169). Nomos. Pohlmann, M. (2008). Management und Moral. In T. Blank, T. Münch, S. Schanne, & C. Staffhorst (Hrsg.), Integrierte Soziologie: Perspektiven zwischen Ökonomie und Soziologie, Praxis und Wissenschaft. Festschrift zum 70. Geburtstag von Hansjörg Weitbrecht (S. 161–176). Rainer Hampp. Pohlmann, M., & Höly, K. (2017). Manipulationen in der Transplantationsmedizin. Ein Fall von organisationaler Devianz? Kölner Zeitschrift für Soziologie und Sozialpsychologie 69/2, 181–207. Pohlmann, M., & Klinkhammer, J. (2018). Corruption, organizational deviance and corporate compliance. In A. Nölke & C. May (Eds.), Handbook of the international political economy of the corporation (pp. 120–136). Edward Elgar Publishing. Pohlmann, M., Bitsch, K., & Klinkhammer, J. (2016). Personal gain or organizational benefits – How to explain active corruption. German Law Journal, 17(1), 73–100. Reinecke, J. (2014). Strukturgleichungsmodelle in den Sozialwissenschaften (2. Aufl). De Gruyter Oldenbourg. Reinecke, J., Stemmler, M., Arnis, M., et al. (2013). Entstehung und Entwicklung von Kinder- und Jugenddelinquenz: Erste Ergebnisse einer Längsschnittstudie. Neue Kriminalpolitik, 25(3), 207–228.

Limits of Formal Regulation: How Informal Norms …

189

Rokeach, M. (1973). The Nature of Human Values. Free Press. Salmon, T. C., & Serra, D. (2017). Corruption, social judgment and culture: An experiment. Journal of Economic Behavior & Organization, 142, 64–78. Schwartz, S. H. (1992). Universals in the content and structure of values: Theoretical advances and empirical tests in 20 countries. Advances in Experimental Social Psychology, 25(1), 1–65. Schwartz, S. H., & Bilsky, W. (1987). Toward a universal psychological structure of human values. Journal of Personality and Social Psychology, 53(3), 550–562. Seddig, D. (2011). Jugendliche Gewaltdelinquenz: Ein ätiologisches Erklärungsmodell. In B. Bannenberg & J.-M. Jehle (Hrsg.), Gewaltdelinquenz. Lange Freiheitsentziehung. Delinquenzverläufe (71–84). Neue Kriminologische Schriftenreihe, Bd. 113. Verlag Godesberg. Seddig, D. (2014a). Peer group association, the acceptance of norms and violent behaviour: A longitudinal analysis of reciprocal effects. European Journal of Criminology, 11(3), 319–339. Seddig, D. (2014b). Soziale Wertorientierungen, Bindung, Normakzeptanz und Jugenddelinquenz. Ein soziologisch-integratives Erklärungsmodell. Waxmann. Sherman, L. W. (1980). Three models of organizational corruption in agencies of social control. Social Problems, 27, 478–491. Statistisches Bundesamt (Destatis). (2019a). Produzierendes Gewerbe. Tätige Personen und Umsatz der Betriebe im Baugewerbe. 2018. Fachserie 4, Reihe 5.1. Internetpublikation: https://www.destatis.de/DE/Themen/Branchen-Unternehmen/Bauen/Publikationen/ Downloads-Baugewerbe-Struktur/personen-umsatz-baugewerbe-2040510187004. pdf?__blob=publicationFile&v=2. Zugegriffen: Mai. 2019. Statistisches Bundesamt (Destatis). (2019b). Genesis Online Datenbank. Beschäftigte und Umsatz der Betriebe im Verarbeitenden Gewerbe: Deutschland, Jahre, Beschäftigtengrößenklassen, Wirtschaftszweige. Internetpublikation: https://wwwgenesis.destatis.de/genesis/online/logon?sequenz=tabelleErgebnis&selectionn ame=42271-0005&zeitscheiben=3. Zugegriffen: Mai. 2019. Steßl, A. (2012). Effektives Compliance Management in Unternehmen. Springer VS. Stroezel, H., Wegel, M., & Kerner, H.-J. (2018). Wertorientierungen bei Jugendlichen. Ein Prädiktor für Problemverhalten? In D. Hermann & A. Pöge (Hrsg.), Kriminalsoziologie. Handbuch für Wissenschaft und Praxis (185–199). Nomos. Sung, H.-E. (2005). Between demand and supply: Bribery in international trade. Crime, Law and Social Change, 44, 111–132. Sutherland, E. H., & Cressey, D. R. (1961). White collar crime. Holt Rinehart Winston. Umphress, E. E., Bingham, J. B., & Mitchell, M. S. (2010). Unethical behavior in the name of the company. Journal of Applied Psychology, 95, 769–780. Urban, D., & Mayerl, J. (2014). Strukturgleichungsmodellierung. Ein Ratgeber für die Praxis. Springer VS. Walburg, C. (2014). Migration und Jugenddelinquenz. Eine Analyse anhand eines sozialstrukturellen Delinquenzmodells. Waxmann. Wolf, S. (2016). Dark sides of anti-corruption law: A typology and recent developments in German anti-bribery legislation. German Law Journal, 17, 7–18. Zimmermann, S. (2009). Rekrutierungsvorgehen deutscher Unternehmen im Bereich des Topmanagements. Rainer Hampp Verlag.

Experimental Corruption Research in Germany: The Lab Studies Alexander Fürstenberg

1 Introduction Empirical research on corruption in an organizational context mainly focuses on formal organizational structures and their influence on corrupt decisions by the staff, while empirical studies on organizational-cultural effects on corruption are rare (Campbell & Göritz, 2014; Grieger, 2005). In complex organizational contexts, informal, organizational-cultural mechanisms play a decisive role in explaining corrupt practices—especially when the corrupt decisions are made for the benefit of the company (see the introductory chapter of Pohlmann in this volume). The aim of this article is to test the influence of informal, organizationalcultural ideas on corrupt decision-making in business situations and to present empirical results on the basis of experimental data in Germany. Hypotheses on the influence of organizational culture on organizational and individual corruption will be developed on the basis of institutional theory. These hypotheses are operationalized for testing in a laboratory experimental design, and its empirical results are presented. Finally, the empirical findings are theoretically and methodologically reflected.

A. Fürstenberg (*) Max-Weber-Institute of Sociology, Heidelberg University, Heidelberg, Germany e-mail: [email protected] © The Author(s), under exclusive license to Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2023 M. Pohlmann et al. (eds.), Organizational Crime, Organization, Management and Crime - Organisation, Management und Kriminalität, https://doi.org/10.1007/978-3-658-38960-4_8

191

192

A. Fürstenberg

2 Hypotheses on Organizational Culture and Corruption In an organizational context, staff not only face its cultural background and the formal requirements of the organization but are embedded in organizationalcultural patterns in their daily decisions. These patterns structure the common paths of work through informal instructions and unwritten rules (Ashfort & Anand, 2003). To analyze the unwritten rules in an organization and their impact on the engagement of the staff in corruption, we are referring to institutional mechanisms that previous theorizing on organizational wrongdoing suggests: Competitive pressure, hierarchical pressure, rationalizing, and legitimacy and socialization (Pohlmann & Höly, 2017; Pohlmann et al., 2016). Following Zucker (1977), the degree of institutionalization of norms and rules is reinforced by organizational embedding. Therefore, unwritten rules reflecting the above mechanisms can have a greater impact on corruption when they are embedded in the day-to-day business of an organization compared to their mere implementation in the formal structure of the organization due to isomorphic processes (Meyer & Rowan, 1977). Therefore, we distinguish conceptually between individual corruption, which is primarily located on the recipient side for personal profit prospects, and organizational corruption, which is oriented toward organizational criteria (Ashfort & Anand, 2003; Pohlmann et al., 2016). While the separation of individual and organizational corruption as distinct phenomena explained by different theoretical approaches seems problematic, we re-include individual corruption as a possible outcome of an inner organizational institutionalization process. Consequently, we rearrange the aforementioned mechanisms in order to concretize hypotheses to test empirically for individual and organizational corruption. Also, we included a hypothesis of the influence of gender on corruption to examine the institutionalization process leading to gender-specific decisions in organizational wrongdoing. A. Competitive pressure Competitive pressure can, on the one hand, be related to the organizational environment, where competition forces the organization to act more efficiently in order to secure its own survival. On the other hand, even under low, factual competitive pressure of the organizational environment, an organizational culture can be established in which the idea of competition becomes an unwritten rule for the staff. The orientation of the organizational culture of a company toward a sharp competitive thought makes the justification of illegal means for the purpose of

Experimental Corruption Research in Germany: The Lab Studies

193

economic profit prospects plausible in everyday decisions (Alexeev & Song, 2013; Schwieren & Weichselbaumer, 2010; Shleifer, 2004; Shleifer & Vishny, 1993). Profit and risk calculations are considered as unwritten rules in the decision-making behavior of the staff, and the chance of individual corruption increases. Hypothesis 1: Under expected competitive pressure, the unquestioned rules of cost–benefit calculations leads to a stronger expression of individual corruption. B. Hierarchical pressure Aguilera and Vadera (2008) describe the interplay between authority, their underlying motives, and the evaluation strategies of the decisions made by actors at the top of the company hierarchy as an explanatory mechanism for the establishment of organizational forms of corruption (Aguilera & Vadera, 2008; Pinto et al., 2008). Hierarchical pressure is therefore understood as the participation in—or tolerance of—informal practices by superiors. On the one hand, the normative pressure from high-ranking members on the decisions of the staff increases (Campbell & Göritz, 2014). On the other hand, hierarchical pressure can be supported by assigning autonomy to personnel, provided that organizational goals are the focus of the decision (Katz, 1979). An organizational culture based on the attribution of decision-making autonomy for the staff in line with the organizational goals increases the willingness to deviate from formal organizational rules and the commitment of the staff involved to these informal practices (Ashforth & Anand, 2003). This increases the chance that corrupt practices will establish and perpetuate themselves in an organization (Palmer, 2012). Organizational goals take precedence over personal profit, and organizational corruption becomes more likely. Hypothesis 2: In an organizational culture with high hierarchical pressure due to rule deviations, there is a higher probability of decisions for organizational corruption. C. Rationalization and legitimacy The rationalization and legitimacy of deviations from social norms leads to an increased acceptance and perpetuation of these deviations in the organizational context (Ashforth & Anand, 2003). Therefore, organizations try to increase the binding of their employees to shared social norms due to corporate social responsibility (CSR) strategies. To do so, “corporate strategists and board-level decision makers have made conscious efforts to incorporate corporate social responsibility (CSR) into their organizations’ mission and operations in a systematic and more far-reaching way than in the past” (Akbar & Vujic, 2014, p. 191f). Despite CSR strategies often being artificially implemented in the organizations’ formal structure, they unfold their impact on decision-making processes by the staff if

194

A. Fürstenberg

embedded as unwritten rules in the organizational culture. An organizational-cultural orientation toward the acceptance of socially shared norms and legal rules points to a higher chance that those organizational rules are adhered to. Hypothesis 3: In an organizational culture with rationalized and legitimized corporate social responsibility, there is a lower expression of individual and organizational corruption. D. Socialization Staff is socialized in the cultural rules of the organization throughout their employment. Two mechanisms of socialization are supporting the probability of deviant decisions by the staff. Firstly, the learning and internalization of the unwritten rules leads to an increased probability of the unquestioned application on everyday decision-making processes—whether the process is along or against legal requirements. Due to a mutually reinforcing process via the socialization of new employees, the persistence of corrupt practices becomes more likely (Anand et al., 2004; Ashforth & Anand, 2003). Secondly, a longer term embedding in the organization generally results in a stronger orientation toward organizational interests. Thus, even without the existence of corrupt structures, the weighting of organizational goals in potentially corrupt decisions increases. Hypothesis 4: The longer the organizational specific socialization of the staff, the higher the probability of organizational corruption. E. Gender Previous research results point to a generally lower propensity for corruption among women compared to men (Dollar et al., 2001; Rivas, 2013; Swamy et al., 2001). In contrast, there are some studies that identify gender as an intervening factor for the propensity of corruption: firstly, the stronger reactance of women to a higher probability of detection reduces their tendency to act corrupt (Schulze & Frank, 2003). Secondly, there is a country culture-specific influence of the effect of gender on the propensity of corruption (Alatas et al., 2009). Thirdly, women tend to be less prone to corruption in an overall less corrupt environment. In a corrupt environment, however, no significant gender differences are evident (Esarey & Chirillo, 2013). Overall, the results point to a stronger socialized adaptation of women to the respective normative environment. Accordingly, it is to be expected that corruption for personal enrichment as a double breach of norms— contrary to legal requirements and contrary to organizational goals—is less frequently committed by women. In the case of corruption to achieve organizational goals by adhering to unwritten rules, a stronger inclination among women can be expected because of the socialized commitment to the immediate environment.

Experimental Corruption Research in Germany: The Lab Studies

195

Hypothesis 5: If an organizational decision is made by female staff, it is less probable that individual corruption appears, and more probable that organizational corruption arises.

3 The Experimental Design A laboratory experiment was developed to test the initial hypotheses and the interrelationships of organizational-cultural settings and the choice between legally compliant and corrupt decisions in favor of individual or organizational advantages.1 The experiment is designed in pen-and-paper form, describing a hypothetical—but potentially realistic—case. Due to the reading and cognitive understanding process, the test person should identify more strongly with the setup of the case compared to an abstract setup containing minimal information. This was intended to create a stronger binding to the informal norms presented and to generate external validity by the more detailed description of the empirical reality. The laboratory experiments are flanked by one-page questionnaires that generate control variables for later evaluation. Participation was voluntary and not subject to monetary compensation. The case description contains three levels of information: Firstly, a description of the fictitious role and its embedding in the structural organizational context into which the test subject is to put him- or herself. The subject is to take on the role of a regional manager with strategic decisions for the foreign branch of a large, globally operating company. The management position is hierarchically located directly below the CEO position of the regional business unit and is entrusted with the main responsibility for project acquisition. Secondly, in this framework, a concrete decision situation is presented to the respondent of the fictitious role. For the manager, there is the possibility of winning a lucrative contract, which is offered by an employee of a potential customer. The employee proposes to divide a percentage (2% of the contract volume) between him and the fictitious manager role in order to be sure of awarding the potential contract. In the role of the manager, the respondent is then faced with a decision situation and has to choose between the following three options:

1 The

experimental setup was developed in cooperation with Yuanyuan Liu and Dr. Elizangela Valarina at the University of Heidelberg.

196

A. Fürstenberg

1. Submitting an offer without responding to the proposal of the project awarding officer. 2. Submitting an offer and paying a share of the project amount to the project awarding staff member, without keeping a share. 3. Submitting an offer and sharing the two percent of the contract volume between the project awarding employee and the fictitious manager role. The situation of decision-making operationalizes the dependent variable. The first option does not involve bribery and reflects a compliant decision with regulatory expectations in the organizational environment. As an operationalization of organizational corruption, the second option involves a bribe payment to a third party in exchange for the secure acquisition of the contract without keeping a part of the bid. By using illegal means, the company thus pursues its legal goals at the manager’s own risk without realizing any personal monetary gain. The division of a part of the project sum between the manager and the project employee is interpreted as individual corruption, since a personal monetary profit prospect, on the one hand, reduces the company's turnover and, on the other hand, would not be necessary to ensure the winning of the contract. The description of the decisionmaking situation is kept constant throughout all experimental settings. Thirdly, information is provided about the prevailing organizational culture. This complements the description of the framing that the manager faces and serves as the space for the operationalization of the independent variables. The abstract framing of the control experiment is contrasted with three comparative experiments with respective descriptions of organizational culture: In order to operationalize the H1-hypothesis (competitive pressure), an organizational culture with high performance and competitive orientation was described. A comparative experiment with decision-making autonomy integrated into the organizational culture and supported by superiors served to operationalize the H2-hypothesis (hierarchical pressure). The H3-hypothesis (rationalization and legitimacy) is tested with corporate social responsibility oriented toward common social norms within the described understanding of organizational culture. To operationalize the H4-hypothesis (socialization), the variable of work experience before or during studies contained in the questionnaire was used. To control the H5-hypothesis (gender), this variable is also contained in the questionnaire. The experiment was performed under laboratory conditions with students in seminar or lecture rooms. After a previous instruction by the experiment supervisors, the vignettes were distributed to the test persons manually in paper form. Each participant was randomly assigned either the control group or one of the

Experimental Corruption Research in Germany: The Lab Studies

197

three experimental groups. This has the advantage that the experiments can be carried out in groups of any size, and the results can later be combined into a complete data set. Therefore, the randomization allows a conclusive interpretation, which refers to the variation of decisions between the experimental groups and the control group. During the experiment, no participant communication was allowed. Including the instructions for the procedure and the completion of the questionnaire, the experiments did not exceed a duration of twenty minutes. After all participants had finished their decisions in the experimental setting and answered the questionnaire, all sheets were collected undercover and evaluated later in order not to allow any conclusions of the experimenters to test subjects.

4 Results The experiment was conducted at Heidelberg University (Germany) with a total of 108 students born in Germany. Among the participants, 42% (45) were male and 58% (63) female. On average, the subjects were 23 years old and were in their 4th subject semester and 7th university semester. In the decision-making situation, 52% (56) decided to act without paying a bribe (compliant decision). This is the most frequent response. The option of organizational corruption made up 26% (28), and that of bribery for personal enrichment (individual corruption) 22% (24). This points to an empirical diversity in the response behavior of the students and thus to the limitation of a strictly rational-choice theoretical perspective, which systematically ignores the side of organizational corruption. To test the preceding hypotheses, the experimental data were evaluated by the use of a multinomial logistic regression (Table 1). Under the conditions of competitive pressure embedded in an organizational culture, the chance that organizational corruption is chosen over a compliant decision decreases non-significantly by a factor of 2.6. In contrast, the chance of individual corruption being chosen decreases highly significantly by 23.3 times compared to a compliant decision. Therefore, the experimental results are contrary to the assumption in the initial hypothesis. In contrast to organizations facing harsh competition in their institutional environment, the idea of competition per se embedded as an unwritten rule in the organizational culture does not intensify rule deviations but rather the compliance with the rule of fair competition in markets by winning contracts with the best offer. In the experimental setting with hierarchical pressure, the chance of choosing organizational corruption is 2.2 times lower than a compliant decision and the chance of choosing individual corruption decreases by 2.3 times compared

198

A. Fürstenberg

Table 1   Organizational cultural influences on corrupt decisions in organizations in Germany. Multinomial logistic regression (Basic category: compliant decision) Organizational corruption

Individual corruption

Predictor variables

Exp(B)a

B

Exp(B)

B

Intercept

–

‒.466

–

,769

Competitive pressure

2.584 (–)

‒.950

23.256** (–)

‒3.151

Hierarchical pressure

2.232 (–)

‒.803

2.273 (−)

‒.821

Rationalization and legitimacy

1.282 (–)

‒.249

4.032° (–)

‒1.392

Socialization

1.091

.087

1.277 (–)

‒.245

Gender (ref. male)

1.533

.426

2.188 (–)

‒.782

Control

0b

0b

n = 108, −lnL = 83.866; pseudo-R2: McFadden  = 0.086; Cox&Snell = 0.162; Nagelkerke = 0.186 Significance: 0.001 = ***; 0.01 = **; 0.05 = *; 0.1 = ° a For illustration purposes, the reciprocal value was formed for values