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Heroes or Villains?  Corruption and the Charismatic Leader

October 26, 2006 

"Corruption is not new.  Indeed, tales of the powerful and charismatic abusing their positions for organizational and personal gain are as old as recorded history.  While corporate corruption may not be a novel topic among researchers, the study of the interaction of stakeholder pressures, environmental variables, charismatic leadership, and follower attributes on organizational corruption, is.  Our framework of corruption is guided by Coleman's (1987) general theory of organizational crime; that is, crime occurs when both motive and opportunity exist.

Ashforth and Anand (2003, p. 2) define corruption as the 'misuse of authority for personal, subunit, and/or organizational gain.'   Current research on corporate corruption draws primarily from Finney and Lesieur's model of organizational crime (1982).  Throughout the last three decades, research on corporate corruption has focused on the impact of both external and internal factors on the propensity of organizations to engage in corrupt behavior.  As research in corporate corruption now stands, a model of environmental, internal, and situational variables (Baucus & Near, 1991) seems to be solidified as a prevailing paradigm.

Charismatic leadership and its powerful effects on followers and organizations have been widely studied by management scholars (Bass, 1985, Conger, 1999; House, 1997; Weber, 1978; Yukl, 1999).  As a basis for research, scholars often draw on Max Weber's definition of charisma as an individual personality quality in which the leader is considered extraordinary and treated as endowed with supernatural powers or qualities (Weber, 1978).  Researchers have developed models of charismatic leaders that are distinguished by specific behavioral characteristics and personality traits, many of which can lead to extreme positive as well as sever negative influence and power over followers.   Charismatic leadership and its existence in an organization are also dependent on certain situational factors.  Oftentimes, charismatic leaders come to power as a result of an organizational crisis (Bass, 1985; Spector, 1987). 

Followers are fundamental in examining leadership; without followers there cannot be charismatic leadership to examine (Nahavandi, 2000).  Perhaps the most widely recognized trait of followers is their level of devotion to their leader.  Followers of charismatics often admire their leader to such an extent that they would blindly follow his or her direction without question.  Charismatic leaders are frequently touted as 'heroes of management,' and research continues to focus on the positive influences of these leaders in business, largely neglecting the 'dark side' and its potential detriments to an organization (Conger, 1999, Howell & Avolio, 1992, p. 43; Pauchant, 1991).  Charismatic leaders' ability to excite followers to follow their mission, and their impression management skills in interacting with stakeholders, could also lead to increased opportunity for corruption.  Followers of 'dark' or 'villain' charismatic leaders sometimes engage in behavior that they ordinarily would never consider.  For example, followers of Charles Manson, Jim Jones, and Adolph Hitler perpetrated atrocious acts because of their unquestioning loyalty to their leader.  Followers of charismatic leaders also have an extreme desire for change, which can be exploited by a 'villain.'  Because followers crave change so badly, they will be less likely to attend to any information that may be false or unattainable (Nahavandi, 2000).

Our model of corruption focuses on four constructs - stakeholder pressures, environmental influences, charismatic leaders, and followers.  We predict a main effect of stakeholder pressures on corrupt leader behavior; that is, as pressure mount, the likelihood of corrupt practices to meet these possibly unachievable demands also increases.  This relationship is intensified by opportunities provided by environmental aspects and charisma.  Corporate corruption results from the confluence of motive and opportunity (Coleman, 1987). 

Pressures to please, or at least appease, stakeholders who have multiple and often contrasting interests can lead firms to engage in 'legally questionable' or corrupt behavior (Staw & Szwajkowski, 1975).  For the firm, stakeholders represent only customers and suppliers, but also competitors, regulators, lawmakers, the media, and society at large.  Proposition 1:  The greater the stakeholder pressures, the more likely a firm will engage in corrupt behaviors.

According to Palmer and Wiseman, complex environments consist of 'many competitors with different competencies' that behave unpredictably (1999: 1039).  Similarly, research in corporate corruption has identified complex environments as conducive to illegal activity (Baucus, 1994; Finney & Lesieur, 1982).  An example of a complex environment is the investment banking industry.  Proposition 2:  A complex environment will increase the effect of stakeholder pressures on corrupt organizational behavior.

Palmer and Wiseman (1999) defined dynamism, as characteristic of an environment that is difficult to predict, is uncertain and ambiguous, and exhibits turbulence.  A primary example of a dynamic environment is real time was seen during the rise and fall of many Internet companies during the 1990s.  Proposition 3:  A dynamic environment will increase the effect of stakeholder pressures on corrupt behavior.

A major role of the organizational leader is a symbolic one.  Leaders must outwardly personify the organization to stakeholders while attempting to manipulate the environment toward the firm's best interests (Pfeffer & Salancik, 1978; Thompson, 1967).  Leaders of organiza6ionans drive and enforce internal culture as well as external organizational image and identity.  Proposition 4: Charismatic leadership will increase the effect of stakeholder pressures on corrupt behavior, that is, due to their ability to manage facades, charismatic leaders will be more likely to engage in corrupt behaviors to manage stakeholder demands.

In addition to their keen ability to manage impressions and facades, charismatic leaders also have increased opportunity for corruption due to their strong influence over their followers.  Followers are more likely to participate in corrupt practices when asked to do so by the leader.  Proposition 5:  Charismatic leaders' effect on their followers will increase the effect of stakeholder demands on corrupt behaviors; that is, due to their ability to influence followers to be obedient and silent, charismatic leaders will be more likely to engage in corrupt behaviors themselves, as well as influence followers to do so, in order to meet increasing stakeholder pressures.

Extant research in corporate corruption has placed much emphasis on contingent models and environmental factors while failing to take credence in the ability of charismatic leaders to exacerbate an already tenuous situation.  We have shown that there are important additional factors to also consider that may substantively increase the likelihood of corrupt behavior within an organization: increased motive (i.e., stakeholder pressures), and opportunity (i.e., environmental factors and charisma).  We have built our model upon previous researchers' models of corporate corruption and charismatic leadership.  One need not look long today to discover that many heroes have fallen from grace, and that villains are indeed part of the corporate landscape.  By heeding a call from leading scholars for increased attention to the situational impact of leader-follower relationships, we believe our framework and propositions hold 'enormous potential' in research on charismatic leadership (Conger, 1999, p. 168).  Our model is merely an introduction to a rich investigation of the dark side of charismatic leadership, the potential for fruitful empirical findings appears justified (DeCelles & Pfarrer, 2004, p. 67-77)."

Reference:  DeCelles, K.A.; & Pfarrer, M.D. (2004).  Heroes or villains? Corruption and the charismatic leader.  Journal of Leadership and Organizational Studies, Vol. 11, No. 1. 

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Created: 2007-08-28, Updated: 2009-02-17