Catching The Big Fish: The Role Of Scandals In Making Status A Liability

This study focuses on how scandal shapes the effect of social status in labeling of an alleged violation of rules and norms as misconduct by social control agents. It suggests that organizational status is more likely to be a liability than an asset when alleged violation is part of a multiple-actor scandal. Specifically, an alleged violation by a highstatus organization is more likely to be labeled as misconduct when that violation is part of a multiple-actor scandal compared to when it is a standalone violation. This is because multiple-actor scandal triggers sociopolitical mechanisms that decrease the protective benefits of status and augment the potential hazards of status, making status a liability during a multiple-actor scandal. Focusing empirically on the Securities and Exchange Commission (SEC) as the focal social control agent and on the SEC enforcement action as labeling of misconduct, we find that status in itself neither protects nor exposes organizations to the enforcement action, but that status increases the likelihood of the enforcement action when misconduct is part of a multiple-actor scandal.