This paper investigates the effect of enacted ethical and instrumental values on corporate governance effectiveness. It further considers whether and how compliance with formal corporate governance codes influences the effect of these organizational values on governance effectiveness. Empirical evidence based on a sample of firms listed in the Athens Stock Exchange shows that strong ethical values are the key element for effective corporate governance, while instrumental values play a significant role only in the presence of compliance. Compliance, although not sufficient (...) by itself, serves as a complementary mechanism strengthening the effects of ethical values and creating the conditions by which instrumental values can act in favor of corporate governance. The results highlight that governance benefits can emanate from maintaining high ethical standards as well as from synergies between compliance and a focus on organizational values. Overall, our findings provide important implications for managers regarding how to utilize behavioral along with structural governance mechanisms to enhance corporate governance. The findings add to the behavioral perspective of corporate governance bringing aspects of the social fabric into the corporate governance puzzle. (shrink)

Secrecy and “social cocooning” are critical mechanisms allowing the normalization of corruption within organizations. Less studied are processes of normalization that occur when corruption is an “open secret.” Drawing on an empirical study of Greek public-sector organizations, we suggest that a second-order normalization process ensues among non-corrupt onlookers both inside and beyond the organization. What is normalized at this level is not corruption, but its tolerance, which we disaggregate into agent-focused tolerance and structure-focused tolerance. Emphasizing the importance of non-corrupt bystanders, (...) we claim that second-order normalization helps corruption persist in situations where its presence is openly acknowledged. This adds an important new dimension to normalization theory and we unpack its implications for both future research and practice in this area. (shrink)