Rule violations by SMEs: The influence of conduct within the industry, company culture and personal motives
| Author | Wim Huisman,Marlijn Peeters,Adriaan Denkers |
| Published date | 01 January 2020 |
| Date | 01 January 2020 |
| DOI | http://doi.org/10.1177/1477370819874447 |
| Subject Matter | Articles |
https://doi.org/10.1177/1477370819874447
European Journal of Criminology
2020, Vol. 17(1) 50 –69
© The Author(s) 2019
Article reuse guidelines:
sagepub.com/journals-permissions
DOI: 10.1177/1477370819874447
journals.sagepub.com/home/euc
Rule violations by SMEs:
The influence of conduct
within the industry, company
culture and personal motives
Marlijn Peeters
Leiden University, The Netherlands
Adriaan Denkers
Independent social scientist, The Netherlands
Wim Huisman
VU University Amsterdam, The Netherlands
Abstract
The literature suggests many different variables that may explain rule violations by companies. These
can be categorized into variables at the industry level, such as the degree of rule violations, at
the company level, such as the organizational culture, and at the individual level, such as personal
or social norms. From the Dutch Tax Administration’s (2009) registration data, industries were
selected with relatively low and relatively high tax correction rates. Within these industries, small
and medium-sized enterprises (SMEs) with 20–150 employees were selected that either had received
no (or negative) corrections or had received large positive corrections, resulting in a population
of 1558 companies. In 194 of these SMEs, both the director and an employee were interviewed
about violations of administrative, environmental and tax obligations, about their personal motives
and about the ethical organizational culture. The results of the study show that all three levels
of variables explain intentions to comply or to violate the rules. Ethical culture contributes to
explaining the compliance intentions of both directors and employees. However, in contrast to
previous research, about half of the SMEs cannot be characterized by a coherent ethical culture.
Keywords
Corporate crime, company culture, regulatory compliance, SMEs, white-collar crime
Corresponding author:
Marlijn Peeters, Institute of Criminal Law and Criminology, Leiden University, Steenschuur 25, 2311 ES
Leiden, The Netherlands.
Email: m.p.peeters@law.leidenuniv.nl
874447EUC0010.1177/1477370819874447European Journal of CriminologyPeeters et al.
research-article2019
Article
Peeters et al. 51
Introduction
During the past decade, societal and scientific attention to offences committed within
and by companies has taken off. A large number of cases of malpractice with huge
economic and societal consequences seem to have contributed to this growing aware-
ness. The media, politicians and law enforcement agencies call upon companies to be
more socially responsible, and businesses do seem to respond to this request. More and
more ethical codes and risk and compliance departments are arising, and employees
are trained in order to allow companies to conduct their business in a more ethical
manner, or at least to be able to market themselves as ethical, environmentally aware
or socially responsible.
All of this attention seems to focus on the conduct of large corporations, such as
banks, energy suppliers, big accountancy firms and insurance companies. However, the
majority of firms are small to medium sized. In the Netherlands, these smaller companies
employ 70 percent of the work force (CBS, 2015). Surprisingly, society and the scientific
community seem to lack attention to compliance or malpractice within or by such smaller
companies. This is particularly remarkable since relatively small companies often play a
crucial and dubious role in big scandals. For instance, Dutch companies were implicated
in both the horse meat (2013) and the Fipronil in eggs (2017) affairs. In both cases, that
is, the repacking and selling of horse meat as beef and the use of an illegal and harmful
pesticide in poultry farms, relatively small fraudulent companies caused international
outrage and concerns about public health (Van Amstel, 2014; Zaalberg, 2017).
Knowledge is needed about the drivers that either commit small and medium-sized
enterprises (SMEs) to comply or stimulate them to violate the rules. This could further
the development of measures that enable the smaller and medium-sized companies of
good will to stimulate compliance and counter rule violations within their organization
in a cost-effective manner. Also, such knowledge could aid policy makers and law
enforcers in their endeavours to stimulate compliance and mitigate rule violations.
Theories for explaining corporate crime stress the importance of a multi-level
approach of integrating explanatory variables at micro, meso and macro levels
(Braithwaite, 1989; Vaughan, 2007). Previous research shows that industry, company
and individual characteristics are related to compliance within or by companies and
interact with each other (Rorie, 2015; Trevino et al., 1998). This confirms the importance
of taking multiple levels into account when studying corporate crime.
However, empirical studies incorporating multiple levels are scarce (for example,
Petts et al., 1999). This holds especially for studies on the influence of characteristics at
multiple levels on compliance or rule violation within SMEs. Further, as the size of the
company gets smaller, the relevance of organizational characteristics in understanding
compliance may decrease. For instance, whereas ‘tone at the top’ has been found to be of
influence in large organizations (Huisman, 2016), the smaller the organization gets, the
more a culture is the reflection of the personal norms of the director of the company or
the perception of those norms by individual employees. When using existing instruments
to measure ethical company culture in SMEs, we wonder whether we are actually meas-
uring corporate characteristics or the personal perceptions of individual managers or
employees of that culture, which might be a reflection of their personal norms (see also
To continue reading
Request your trial