Are small businesses less corrupt?
I’ve had a bit of a bee in my bonnet for a while now about how we’re expected to assume that big is better when it comes to businesses. It started when I wrote this post about how women CEO’s are considered unambitious for wanting their businesses small enough to manage.
In other words, there might be some selection bias in my next few examples, so full disclosure. And yet I’ll give them to you anyhow.
First, an example of a extra corruption in a large business. I recently met HSBC whistleblower Everett Stern, profiled by Matt Taibbi here. He told me about the stuff he’d seen going on in HSBC, whereby there was rampant money laundering for terrorists (his region of interest was the Middle East). When asked why nobody’s gotten into trouble, his answer was simple: too big to jail.
Or if you’re not convinced too-big-to-jail is a real problem, just look at the state of the London Whale case: two low-level indictments and basically nothing else for lying to regulators and changing their books to pretend they had less losses.
Next, in the category of it’s-actually-good-to-be-small, you might have seen this tiny New York Times article about two email provider companies which folded rather than giving up their customers’ data. Can anyone imagine Facebook or Google doing that? The big business version of this is “hiring really fancy lawyers” I guess, but it doesn’t seem to work as well.
I’m wondering if this generalizes: in general, can we claim that small companies have less to lose and therefore have more ethics?
It’s certainly true that, at the very least, small companies live and die based on the relationship of trust that they have with their customers, so to the extent that their customers have ethics, then the companies need to consider them. Larger firms, on the other hand, can hire PR firms to fix their image after the fact if things go wrong.
What do you think? Is there research on this?
Update: First of all, sure there’s research on this, if you think accounting fraud is a good proxy for corruption. Second, now that I think about it, small companies having less to lose can also be a super bad thing, if you want to get away with bad shit. And for that matter, if you consider little subsidiaries of big companies as “small companies”, or for that matter McDonalds’ franchises, they already are.
Also, as a friend of mine pointed out over email, small companies are often inefficient (so: no unionization) and are used as a political baby seal to justify all sorts of crappy policies, as we’ve of course seen.