Wirecard and Weinstein. These names often preface the word scandal, the details of which have littered our newsfeeds in recent years. These cases of ongoing “organizational” misconduct – fraud and abuse – lasted months, years, and even decades, before coming into the public eye.
We know that rumors about Weinstein’s abuse of women circulated in Hollywood for many years prior to the #MeToo movement. And before we found out about the billions of dollars embezzled by Wirecard, we knew, from Financial Times reporting, that the organization was possibly not squeaky clean. However, both cases remained in the shadows until their respective scandals broke. So, how do such organizations get away with their wrongdoing for so long, without being tainted by scandal?
Evidence from the Catholic Church
To understand the conditions that allow a scandal to break, we examined the case of one of the oldest organizations in the world: the Catholic Church.
Organizational misconduct is generally difficult to examine comprehensively – especially at scale – because it often remains undetected. But we now know that the magnitude and scope of sex abuse among Catholic clergy in the United States is such that virtually the entire country has been affected by it. Data on reported sex abuse in the Catholic Church in the 176 dioceses in the US stretches back to the 1950s. A publication known as the John Jay report* revealed that 10,000 individuals had made allegations of child sexual abuse between 1950 and 2002, targeting over 4,000 clergymen in 90% of dioceses.
The availability of this data gave us a unique opportunity to examine patterns of misconduct publicization across church communities over time. We were also able to understand how different types of community can play a role in preventing misconduct emerging as scandal. Although we used data from the Church, our findings can be generalized to apply to other types of organization too.
The social cost of speaking up
We investigated how the communities surrounding an organization are linked to the likelihood of a scandal being uncovered. From this, we evaluated the social cost of speaking up, relating it to structural features like community homogeneity and the degree of community interconnectedness. These factors together seem to shape when, and if, a scandal breaks out.
Community space
When a scandal emerges, it taints the people within the community that surrounds the action of misconduct. This is a form of contagion – and spreads like a disease. In the case of the Catholic Church, the diocese is the community. However, with the Wirecard scandal, the community was the German financial industry, and with Weinstein, the American film industry.
Our investigation into the publicization of scandal in the Church revealed that if a community is more homogeneous, more of the community is tainted by scandal. This means people are less likely to speak out. Here, homogeneity may come in the form of ethnicity. For example, in an ethnically homogeneously community, cases of abuse are less likely to be publicized. Overall, we found that when a community is homogeneous, it is less likely that misconduct is publicized.
Conversely, if a community has more distinct fractions – such as different ethnic groups – those fractions not directly involved in the misconduct may avoid being tainted if scandal breaks, therefore they are more likely to speak up against it. Our investigations showed that, in a multicultural community, scandal will break more easily.
Community embeddedness
The social cost of speaking up and divulging misconduct-relevant information may be related to the local embeddedness of the offending organization within the community. Here, we looked at how much the organization matters to the community, for example where the organization provides jobs. In the case of the Church, parishioners obviously have a strong relationship with the parish.
When the offending organization is highly embedded within a community, the social identity of the community itself may also be intertwined with the identity of the organization. Under these circumstances, we found that scandal is often held back, as the community covers up misconduct, or prevents it being discovered, to avoid bad press.
Community-wide dissemination
Once people start speaking up, the social fabric of the community is arguably crucial to shaping the diffusion of information about misconduct within the community. It provides opportunities for individuals to share unverified information and collectively attempt to make sense of it.
Some communities have high levels of social connectedness. Here, there are many opportunities for diverse social interactions. In such communities, there are more opportunities for rumors to gain legs and reach the wider public domain through reputable reporting.
In our study we looked at the density of places for socializing in the community, such as bowling alleys and community centers, and used this as a measure of social connectedness. This revealed that strong connections in a community are associated with more publicization of misconduct, both in the organization and in public.
Wide application of results
Overall, our investigation has provided evidence that the publicization of local misconduct by Catholic clergy was more likely in communities that were more socially connected, ethnically fragmented, and where the Church was relatively less embedded.
We found that the publicization of local misconduct by Catholic clergy was more likely in communities that were more socially connected, ethnically fragmented, and where the Church was relatively less embedded.
Our results suggest that the nature and structure of the social fabric of communities have great influence over the likelihood that organizational misconduct will be publicized. They can provide a valuable lesson to other organizations and can be widely applied to other cases of scandal.
For example, in the case of the Wirecard scandal, the Financial Times had published a series of articles on possible misconduct, but these were largely ignored and quashed as rumors. Wirecard was part of the relatively homogeneous German business community and highly embedded in the national economy. Accusations against Wirecard were perceived as threats to the entire fintech ecosystem. When the company became part of the DAX Index, there was an even higher cost for anyone speaking out against it – until, in time, the loss of billions of dollars was revealed.
