Human Resources



Handcuffed businessman facing building

Would you hire someone who worked for a fraudulent company?

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Working for a boss who is a fraud is bad enough, but looks like working for an ex-boss who was a fraud is no better either.

According to researchers from Stanford University, job seekers who once worked in scandal-hit companies encounter significant difficulties in getting over the stigmatisation and cloud of suspicion surrounding them as they look for new jobs elsewhere.

This is true even when candidates had nothing to do with the actions of their previous, questionable bosses.

ALSO READ: Bosses more likely to commit expense fraud

“We became interested in the plight of people whose career trajectories were derailed because of someone else’s unethical behavior – these were people who did nothing wrong themselves but suffered reputational damage merely by being associated with a fraudulent employer or company,” Takuya Sawaoka of Stanford University, said, after publishing a paper on the “moral spillover” effect in Social Psychological and Personality Science.

Sawaoka and his co-author Benoît Monin noticed people seemed to suffer more reputational damage when they were associated with an unethical supervisor than with an unethical subordinate. They set out to test the phenomenon with a series of experiments, using vignettes modelled after real-life ethical scandals.

In the experiment about hireability, the researchers asked participants to read a mock article about a scandal, in which an organisation’s member had committed fraud.

“Crucially, half of participants read that this individual was a high-ranking executive, and the other half read that this individual was merely an entry-level employee,” Sawaoka explains. The participants then had to make a hiring recommendation for someone who was a former employee of the organisation, and there was no indication that the person worked directly with the moral transgressor.

The participants who read about the unethical behavior of a high-ranking executive, rather than an entry-level employee, made significantly more negative hiring recommendations for the job applicant.

The fact that the job applicant simply worked for a tainted organisation, without any direct influence from, or even relationship with, the transgressor “suggests that the implication of direct supervisory control is not necessary for these effects to occur,” Sawaoka said.

To reduce this spillover effect, he advised that when a scandal occurs, the affected organisation should emphasise the ways in which the moral transgressors are not representative of the organisation, but rather the result of personal flaws or values. Another way would be to downplay the status of the perpetrator(s) in the organisation.

Worried that you may have hired a fraudster? Keep calm and read our report on how you can identify one.

Image: Shutterstock

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