Organized decoupling of management control systems : an exploratory study of traders' unethical behavior

Enduring unethical behavior in trading has generated much research interest, and scholars disagree on the reasons for this situation. According to MacIntyre (2015), this has to do with the personal traits of traders, whereas Rocchi and Thunder (2019) argue this is due to permissive work environment that can potentially be changed to favoring ethical trading. We contribute to this debate by exploring how interactions between organizational culture and management control systems (MCSs) may affect the enduring unethical behaviors of traders. We conceptualize this with the concepts of organized hypocrisy (Brunsson 1986, 1989, 1993) and decoupling (Meyer and Rowan 1977). An in-depth case study of fraud (Jerome Kerviel at Societe Generale), informs the empirical inquiry. We develop the concept of organized decoupling to characterize how the MCSs are articulated with the organizational culture favoring unethical behavior, while being used as a ‘safety mechanism’ to manage the legal and reputational risk of the bank. The analysis highlights three key features of the organized decoupling of MCS: physical distance, technical distance and social distance. The study contribution lies in showing that decoupling is not only emergent but might be intended and therefore organized. The findings also raise doubts on the role of MCSs in monitoring trading activities as presented by investment banking institutions and regulators, suggesting more organized hypocrisy, and raising significant concerns regarding the creation of tolerable work environment welcoming ethical behaviors in the investment banking sector.