Corporate teamwork’s impact on collective fraud participation

Teamwork, an important attribute in any organization’s culture, may facilitate innovation and encourage employee loyalty and workplace cooperation. But it may also facilitate collusive financial statement fraud and promote collective rationalization (a by-product of groupthink). For example, consider the justification offered by a fraud offender who engaged in teamwork to participate in corporate fraud: “We all believed in the company. We were part of an overall scheme of making the company successful … . There was an us versus the world mentality. We wanted to prove that we could be the biggest company in the field.” (See “The ties that bind: The decision to co-offend in fraud,” by Clinton Free and Pamela Murphy, Contemporary Accounting Research, Sept. 24, 2013.)

A study published in 2023 in the Journal of Behavioral and Experimental Finance examined the relationship of corporate teamwork as a potential risk factor for participation in financial statement misconduct. According to the authors, financial reporting requires teamwork, asserting that top executives, such as CEOs, are realistically unable to perpetrate financial misconduct without broader involvement from other professionals. Lower-level employees may be complicit in fraudulent practices in organizations that encourage teamwork and discourage speaking up against the team. (See “No rose without a thorn: Corporate teamwork culture and financial statement misconduct,” by Chenyong Liu, David Ryan, Guoyu Lin and Chunhao Xu, Journal of Behavioral and Experimental Finance, March 2023.)