When high-profile cases of fraud make the news, we often focus our attention on the CEO or other C-suite executives, asking what signs were missed and how we might better anticipate who might commit fraud. Academics have researched the characteristics of those who commit fraud, including such exemplars as Bernie Ebbers.[1] Recent research has focused on narcissism, the trait that includes self-aggrandizement, the need for admiration, dominance over others, and other signs of grandiosity, as a significant indicator of a leader whose personal ethics will allow him or her to pursue personal gain and glory at the expense of the organization and its stakeholders. However, Thoroughgood et al (2016) noted that certain followers are more susceptible to unethical leaders, and that the challenge of preventing fraud must therefore consider the role of followers.[2]

We set out to discover what personal characteristics of followers might make them more susceptible to unethical leaders or, conversely, more resistant. We focused on two personality traits that we believed might play a role. First, we considered Self-Sacrificing Self-Enhancement (SSSE). This form of narcissism captures people who engage in apparently altruistic behavior, not for the genuine pleasure in helping others, but with the express purpose of being recognized for their sacrifice.[3] Self-sacrifice for the perceived benefit of the organization not only allows narcissistic followers to enhance their fragile self-esteem, but also provides a built-in rationalization for their unethical acts. If sacrificing their integrity by engaging in fraud or other unethical acts can be interpreted as being good for the organization as a whole, or at least for the leader, then it makes it easier for the followers to justify their willingness to go along.

The second personality characteristic we studied was Proactivity. Proactive people seek positive change in their environment and have the courage to speak out when they perceive a way in which things can be better for themselves and others, even when their input is unwelcome.[4] Therefore we expected proactive followers to resist unethical directives to assist in committing fraud, whereas less proactive, or passive, people would be more likely to go along with the boss.  Finally, we expected that these two personality factors, SSSE narcissism and Proactivity, might interact, so that the perceived need for a follower high in SSSE to go “above and beyond” would amplify the influence of Proactivity on the follower’s intentions to comply with (low Proactivity) or resist (high Proactivity) the unethical leader’s directives.

We conducted an experimental study with 140 MBA students at two large U.S. universities. These students averaged 33 years of age and over seven years of work experience, thus most had some managerial experience. We measured their SSSE and Proactivity using instruments from the psychology literature.[5]^, [6]

We asked our participants to assume the role of a division manager working for a new CEO hired to turn the company around. The CEO was described as dominant, cleaning out the old management, and doing whatever it took, mirroring the characteristics of executives involved in recent high-profile fraud cases. We then developed four scenarios of differing severity, in which the CEO was asking the division manager to go along with an unethical demand to “cook the books” to enhance the company’s reported financial performance. Finally, we asked whether, if they were in the shoes of the manager, the participants would intend to comply with the demand.

As expected, participants scoring higher in Self Sacrificing Self-Enhancement narcissism reported significantly higher intentions to comply with the unethical demands than did those with low SSSE levels. In contrast, participants scoring higher in Proactivity reported lower intentions to comply with unethical acts, and here the difference between the intentions of high and low Proactivity participants was even more significant. However the most compelling results came from testing the interactions of these two characteristics on participants’ intentions to comply. Those who were high in both SSSE and Proactivity reported the lowest intentions to comply with the CEO’s fraudulent directives, while those with high SSSE but low Proactivity were most likely to go along with the schemes.

If high SSSE narcissism, suggesting the tendency to self-sacrifice for the sake of recognition, combines with high Proactivity, indicating the courage to resist the unethical CEO, then essentially a manager with high scores on both personality measures seeks recognition for risking it all to save the organization. By resisting, such a manager will have improved the organizational environment and engaged in self-sacrifice to do so, with the hidden objective of being recognized for his or her courage. As noted, this type of person was least likely to comply. By contrast, the SSSE narcissist with low Proactivity is not concerned with improving the environment, so his or her self-sacrifice may be directed at the leader instead of the organization. Such a follower would be expected to go along with the unethical leader, so that the leader knows the follower has sacrificed personal integrity for the leader’s benefit. The follower, meanwhile, hopes to get recognition for the sacrifice from the leader, and perhaps an enhanced sense of importance for being a key member of the leader’s inner circle. These followers reported the highest intention of complying with unethical directives.  But what about followers who scored lower on the SSSE narcissism scale? Low-SSSE, high-Proactive followers still intended to resist the CEO’s unethical directives, while low-SSSE, low-Proactive followers still intended to comply. However, the difference between reported intentions to comply was less pronounced for followers lower in SSSE, and both groups fell in between the scores of followers reporting higher SSSE scores.

We believe that our research can be informative for those charged with corporate governance. Those who ascend to positions of leadership are often narcissistic, because the same characteristics that make them dominant and self-aggrandizing can make them effective leaders.[7] However, because narcissistic leaders can have harmful influence, it is important to consider the characteristics of their subordinates in the organization. If those followers are Proactive, the organization may be less susceptible to unethical leaders. Likewise, if followers demonstrate a tendency to draw attention to their acts of sacrifice, then they may be particularly helpful in resisting fraud if they are Proactive or, conversely, particularly dangerous to the organization for their willingness to collude with an unethical leader if it will garner them recognition from the boss.

ENDNOTES

[1]   Scharff, M. M. (2005). Understanding WorldCom’s accounting fraud: Did groupthink play a role? Journal of Leadership and Organizational Studies 11 (3): 109–188.

[2]   Thoroughgood, C. N., Sawyer, K. B., Padilla, A., and Lunsford, L. (2016). Destructive leadership: A critique of leader-centric perspectives and toward a more holistic definition. Journal of Business Ethics. DOI: 10.1007/s10551-016-3257-9.

[3]   Pincus, A. L., Ansell, E. B., Pimentel, C. A., Cain, N. M., Wright, A. G., and Levy, K. N. (2009). Initial construction and validation of the Pathological Narcissism Inventory. Psychological Assessment, 21(3): 365–379.

[4]   Miceli, M. P., Near, J. P., Rehg, M. T., and Van Scotter, J. R. (2012). Predicting employee reactions to perceived organizational wrongdoing: Demoralization, justice, proactive personality, and whistle-blowing. Human Relations 65 (8): 923–954.

[5]   Pincus et al. (2009).

[6]   Seibert, S. E., Crant, J. M. and Kraimer, M. L. (1999). Proactive personality and career success. Journal of Applied Psychology 84 (3): 416–427.

[7] Kets de Vries, M.F.R. (1994). The leadership mystique. Academy of Management Executive, 8 (3): 73 – 89.

This post comes to us from Professor Eric N. Johnson at the University of Wyoming, Professor Linda Kidwell at Nova Southeastern University, and professors D. Jordan Lowe and Philip Reckers at Arizona State University. It is based on their recent article, “Who Follows the Unethical Leader? The Association between Followers’ Personal Characteristics and Intentions to Comply in Committing Organizational Fraud,” available here.