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      Does Financial Misconduct Affect the Future Compensation of Alumni Managers?
      06 Dec 2017Working Paper Summaries

      Does Financial Misconduct Affect the Future Compensation of Alumni Managers?

      by Boris Groysberg, Eric Lin, and George Serafeim
      Analyzing data from an executive search firm, this paper explains how former employees who are free from wrongdoing still pay a price in stigma after incidents of corporate financial misconduct. The finding is potentially disquieting for all managers, because it suggests that one’s human capital can be impaired even long after one moves on and suggests the need for developing a human capital strategy for reacting to misconduct of past employers.
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      Author Abstract

      We explore how an organization’s financial misconduct may affect pay for former employees not implicated in wrongdoing. Drawing on stigma theory we hypothesize that although such alumni did not participate in the financial misconduct, and they had left the organization years before the misconduct, they experience a compensation penalty. Our results support this prediction. The stigma effect increases in relation to the job function proximity to the misconduct, recency of the misconduct, and an employee’s seniority. Collectively, our results suggest that the stigma of financial misconduct could reach alumni employees and need not be confined to executives and directors that oversaw the organization during the misconduct.

      Paper Information

      • Full Working Paper Text
      • Working Paper Publication Date: November 2017
      • HBS Working Paper Number: HBS Working Paper #18-041
      • Faculty Unit(s): Organizational Behavior; Accounting and Management
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      Boris Groysberg
      Boris Groysberg
      Richard P. Chapman Professor of Business Administration
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      George Serafeim
      George Serafeim
      Charles M. Williams Professor of Business Administration
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