• the study of human social life, groups and societies …of behaviour of individuals as social beings (Giddens 1989)

• investigation of the structure of groups, organizations, and societies, and how people interact within these contexts(American Sociological Society)

• wide-ranging subject matter: – from the analysis of passing encounters between

individuals in the street

– to world-wide social processes

• behavior, trait, condition or identity that

breaches social norms and expectations

• as a consequence, is disapproved,

marginalized, or punished in society.

• WHAT then happens to FRAUD when it is,

in fact, NOT disapproved, marginalized, or

punished in society?

• WHITE-COLLAR CRIME Crime committed by a person of respectability

and high social status in the course of his

occupation.” Sutherland(1939)

- redefinition of criminality to include persons of status

- Crime in the Streets

- vs. Crime in the Suites

25.12%

23.08%

15.49%

8.76%

7.01%

4.10%

4.06%

1.83%

1.70%

1.56%

1.38%

1.37%

0.88%

0.56%

3.12%

Homicide

Murder

Rape and other sex…

Robbery

Illegal drugs

Illegal firearms possession

Theft

Kidnapping

Swindling

Carnapping

Illegal recruitment

Parricide

Arson

Malversation

Others

Crimes of Prison Inmates Prison Sentences Bureau of Corrections, Y2000 (N=23,408)

Identifiable white-collar crimes: 4%

Source: Bureau of Corrections 2001 Annual Report

“involve the use of a violator’s position of

significant power, influence, or trust in the

legitimate economic or political institutional

order for the purpose of illegal personal or

organizational gain.”(Reiss & Biderman 1980)

“economic offenses committed through the

use of some combination of fraud,

deception, or collusion” (Wheeler et al. 1982)

“illegal acts of omission or commission by a

legitimate organization in accordance with

its goals that result in a serious physical or

economic impact on employees, consumers,

or the general public.” (Schrager & Short 1978)

• anti-social behavior that violates moral,

ethical, or legal standards for the benefit of

a corporate or government entity; rooted in

the corporate and governmental search for

profit and power. (Simon, 2007)

• Situations in which the top leaders (CEO,

etc.) of an organization uses the

organization as a weapon for personal

gain. (Black 2005)

• Committed when white-collar criminals become violent toward their victims as they attempt to conceal their illegal actions (Perri and Lichtenwald 2007; Brody and Kiehl 2010)

• Assassinations, kidnappings, and harassment arising

from business rivalry, botched business deals, and imminent discovery of illegal behavior by white-collar criminals

• See-San Juan, M.J. 2010. “A Sociological Inquiry Into Credit Card Delinquency in the Philippines,” Asia-Pacific Social Sciences Review 11 (1).

• Reckless, risk-taking

• Competitive

• Appetite for wealth

/privilege

• Independent

mindedness/stubbornnes

s

• Narcissism

• Grandiosity (needs

admiration, lacks empathy

• Overconfidence

• Moral-apathy (amorality); lack

of empathy (blames the victim

• Calculating

• Skilled sociability

• Lack of empathy or

remorse

• Perceptions of unfair

treatment/under-

appreciation

• Feelings of territorial

ownership

• “Entitlement”

• Detachment from normal

relationships

• ANTI-SOCIAL

PERSONALITY

DISORDER

• Ego/power – fraud as source of

power, esteem, domination.

– Victims as inferior, stupid or “had

it coming”

– General dislike or lack of respect

for the victim

• Strong sense of relative

deprivation keeping up with the

lifestyle rather than true poverty

• Adverse financial or business

conditions (threat of losing it all)

• STRESS(financial crisis,

adverse business

conditions, relationship

breakdowns, etc.)

• Lifestyle choices

(compulsive

gambling/substance

abuse)

• Navigate within a social

environment conducive to

fraudulent conduct.

What sort of work

(social) environment

encourages fraud?

Social background of white-

collar criminals

• Educated

• Late-career/ older

• Low-integration to

conformist groups

• Dysfunctional

upbringing(?)

1. When it can not be detected

2. When it will be tolerated

3. When the rules are unclear or difficult,

if not, impossible to follow

• An opportunity is present

• The individual is tempted and inclined

• Nothing prevents it from happening

ROUTINE ACTIVITY THEORY

(Felson, 2002)

What are the conditions necessary for crime?

Applicable to a corporate or business setting, not only for street crime.

1. Offender takes cue from the culture of the organization

2. Supported by structural factors, e.g. incentives / rewards system

3. Insulation from scrutiny accountability

• Cardenas, K. 2010. “Corporate Power and the Philippine Public Sphere The Philippine Daily Inquirer and the NBN-ZTE Scandal of 2007”. Philippine Social Sciences Review, Volume 62 No.2.

• Learning and Neutralization Theories

• Criminal behavior is learned including techniques, motivations, and rationalizations

• It is learned through interaction varying by degree of frequency, intensity, and priority (importance)

• CULTURE OF COMPETITION

• “The Tone at the Top” (ACFE documentary)

• The indirect (or direct) encouragement of fraud by top executives

1. Denial of responsibility

2. Denial of injury

3. Denial of victim

4. Condemnation of condemners

5. Appeal to higher authorities

• Personalistic

• interpersonal relations

• Pakikisama, utang na

loob, hiya, etc.

• Filipino politics: typically

invoked as sources of

– Nepotism

– Clientilism

– Patronage politics

• In BUSINESS rational aspects of social capital are prized

• Is this relationship PROFITABLE?

• Will this coalition DELIVER VOTES?

• CULTURE OF COMPETITION – market relations and

rational advantages

Philippine firms - No DOMINANT, UNITARY CULTURE rather composed of

SUBCULTURES as repository of values and norms regarding ethical

practice.

Subcultural groupings:

1. dynamic and entrepreneurial culture

2. formalized and structural culture

3. production-oriented culture

4. tradition-oriented “family” culture

• subgroup within a dominant culture with its

own distinctive patterns of traits, norms

and values

• but does not totally negate the values of

the dominant culture

• Values that conflict with other deeply held

values but which are still recognized and

accepted by many

• e.g. sense of adventure, aggression and violence to prove one’s manhood;

prevalence of physical initiations among fraternities

• e.g. circumventing a highly “capricious” tax provision to save the company

or client sizeable costs.

ANOMIE: condition of normlessness

- When rules and regulation are absent, weak or

unclear (Durkheim, 1897)

Strain between GOALS AND MEANS

1. Unrealistic goals : pressures of

performance and profits

2. Obvious disparity in rewards (wealth,

power, and prestige)

3. Conflicting, unclear policies and practices

4. Lack of clear guide to address changes

COMMAND AND CONTROL (Thornton et al 2005)

• Punitive approach

• Increasing the scope of criminal law

• Certainty and severity of legal punishment

• Assumption of rational calculation: severity

of punishment outweigh benefits of

punishment

COMPLIANCE (Ayres and Braithwaite 1992)

• Persuasive Approach

• Achieving conformity without punitiveness

• Recognizes offenders as duty-bound moral actors who can be persuaded to do the right thing

• Goes beyond state control strategies – self-regulation and third-party interventions

• Encourages reputational integrity

Example: REPRISK (www.reprisk.com)

• Global business intelligence on environmental, social and governance

(ESG) risks

• analyzes negative incidents, criticism, and controversies about companies

and projects worldwide

• offers information on activities related to human rights violations, poor

working conditions, corruption, and environmental destruction.

• assess ESG issues that may present financial, reputation, and compliance

risks.

• REPUTATIONAL RISK INDEX

• Possible applications to COMPANY’S CULTURE AND SUBCULTURES.

COMPANY ASSESSMENT, AND SELF-ASSESSMENTS.

1. Place and update detection and control

mechanisms (in view of personality risks,

situational opportunities, Routine Activity

Theory) e.g. HR screening of personnel, security, and monitoring systems,

STRESS management

2. Work on the organization culture (in view of

Learning Theory and Neutralization

values). Recognition of variety of subcultures with the organization

3. Reassessment of pro-social opportunity

structures within the organization Goals-Means alignment

Reconsidering unequal reward system compensation, prestige, and

recognition

4. (Beyond the state mechanism), cultivate mechanisms

for inter-organization compliance, self-monitoring,

transparency, and industry accountability standards

5. Building reputational indicators (Reputation Index/

Trustworthiness Index) for organizations as well as

individuals

PROPENSITY TO FRAUD

Family and upbringing .9

Personal values about ethical conduct -.22

Association with fraudulent “peers” .15

Lifestyle and income agreement -.19

Personality traits

-.09

Values of immediate work setting

-.19

Company tolerance for unethical behavior .21

Stress level at

Work .18

Pressure to deliver performance .07

Stress level personal

.17

• Systematic and data-based research of white-collar crime – Offense cases

– Offenders

– Corporations /organizations

– Why does it happen?

– How they can be prevented?

– What strategies were effective or non-effective in preventing/ mitigating them?

IN THE PHILIPPINE CONTEXT