In organisations fraud and misconduct are contagious. If not stopped it will spread throughout the entire organisation .

“In organisations fraud and misconduct are contagious”: If not stopped, it will spread throughout the entire organisation.

Consider this:
An employee in your company is clearly breaking the rules. Everyone knows it. Management knows it too. But it is swept under the carpet with excuses like “let’s not make an issue of it now” or “let’s keep it quiet”.

At that moment you are not just protecting one person;
At that moment you are giving this message to the whole organization:
“Even if you make a mistake here, it doesn’t matter; it’s not an important issue for management.”

Research indicates that it is precisely at this point that misconduct becomes contagious, with even honest employees gradually beginning to mimic the “norm” and the organisation starting to decay from within (Akkeren & Buckby, 2017; Lukmanjaya, 2019; Zahari et al., 2020; Zhang et al., 2018; Chapple et al., 2020).

1. Fraud is not an individual deviation, but a cultural virus.

Studies on corporate culture reveal that employee behaviour mirrors management’s values and tolerance threshold (Ocansey & Ganu, 2017; Lukmanjaya, 2019; Zahari et al., 2020; Chapple et al., 2020).

• Management minor misuses ignores if,
• If senior managers’ unethical behaviour goes unpunished,

Employees quickly begin to think, “So this is how things are done here” (Ocansey & Ganu, 2017; Lukmanjaya, 2019; Harjoto, 2017; Chapple et al., 2020).

It has been demonstrated that leaders’ unethical but “company-oriented” behaviours trigger similar types of unethical pro-organisational behaviours in employees, with this effect being significantly stronger among employees who feel highly committed to the leader (Zhang et al., 2018). In other words:
Whatever the leader does, the team copies it like a virus.

2. Turning a blind eye to abuse corrupts the honest too.

Qualitative studies conducted with forensic experts show that misconduct is often not limited to a single “bad apple”; rather, it spreads throughout the team and company through “normalisation” (Akkeren & Buckby, 2017; Lukmanjaya, 2019; Zahari et al., 2020).
Several typical mechanisms:

• The perception that “everyone is doing it”: As shared values deteriorate, employees begin to view misconduct not as an exception, but as standard behaviour (Lukmanjaya, 2019; Zahari et al., 2020; Harjoto, 2017).
• Moral rationalization: Both perpetrators and managers justify their behavior with excuses such as “this is the way things are” and “we are protecting the company” (Akkeren & Buckby, 2017; Shepherd & Button, 2019; Zahari et al., 2020; Serrano et al., 2025).
• Silent majority’s decay: Honest employees, when their warnings are ignored either choose to remain silent or or “since the system is like this, am I a fool then?” by saying harmony maintaining choosing (Akkeren & Buckby, 2017; Ocansey & Ganu, 2017; Lukmanjaya, 2019; Shepherd & Button, 2019).

Conclusion: What a few people do at the beginning soon becomes the shared norm. An organization that has reached this stage has already started to decay, in the language of the scientific literature, “ethical culture erosion” (Ocansey & Ganu, 2017; Lukmanjaya, 2019; Zahari et al., 2020; Harjoto, 2017; Chapple et al., 2020).

3. Covering up increases the abuse and spreads it

Organisations’ misconduct observed in such circumstances, failure to act, investigating studies, managers’ avoidance, such as reasons “reputation”, “operational disruption”, “compassion for people”, rationalisations produced, reveal (Shepherd & Button, 2019). These rationalisations:

• Protecting the person who committed the crime,
• He spreads the message throughout the organisation: “What you do here will come back to haunt you.”

At the same time, covering up misconduct leads to an erosion of trust both internally and externally, and when it is eventually exposed, it results in much more severe financial, legal and reputational consequences (Condie et al., 2022; Bloch & Kranton, 2024; Ren et al., 2021; Farooq et al., 2025; Ramos et al., 2024).

Studies modelling cover-up behaviours show that these strategies, which appear to be ‘suppressing the problem’ in the short term, increase the risk of greater scandal and internal decay in the long term (Bloch & Kranton, 2024; Shepherd & Button, 2019; Zahari et al., 2020; Chapple et al., 2020).

4. Transmissibility accelerating three key factors

The studies clarify three areas that accelerate the spread of abuse:

1. Weak or distorted corporate culture
   • Where ethical values are pushed aside by the pressure to make a profit,
   • Fraud and corruption are shown to be more frequent and widespread in environments where management behavior does not conform to “so-called policies” (Ocansey & Ganu, 2017; Lukmanjaya, 2019; Zahari et al., 2020; Harjoto, 2017; Chapple et al., 2020).
2. High performance / profitability pressure
   • Missing targets, falling short of analyst expectations, or poor performance signals increase both employee misconduct and financial reporting fraud at the company level (Kim, 2024; Ren et al., 2021; Kagias et al., 2021).
3. Lack of ethical culture and oversight
   • Not only technical controls, but also ethical culture and the awareness of ‘doing the right thing’ are critical in preventing abuse;
   • Anti-fraud investments have been shown to make employees less prone to misconduct when they strengthen the ethical culture (Ocansey & Ganu, 2017; Suh et al., 2018; Serrano et al., 2025).

5. Emergency action plan for a company that has reached this stage

Research is clear: Organisations that turn a blind eye to misconduct and attempt to keep minor crises “under wraps” are programmed to amplify the crisis (Bloch & Kranton, 2024; Ren et al., 2021; Shepherd & Button, 2019; Farooq et al., 2025; Ramos et al., 2024). If your company:

• “Oh dear now don’t let it happen” if there are cases that have been closed,
• Senior management, open violations “strategic” or “commercial reality” if justified,
• Honest people are increasingly keeping quiet, harmony is being maintained or if they are leaving the company then,

This is no longer an isolated incident, it is a system failure.

Leaders for immediately to be taken necessary steps:

• Zero Tolerance Stance should be applied not only on paper, but in real cases.
• “The arm breaks and remains inside” its culture is reversed by turning it around,
  • Abuse,
  • To cover up,
  • Failure to report violations and remaining silent is unacceptable (Ocansey & Ganu, 2017; Lukmanjaya, 2019; Shepherd & Button, 2019; Suh et al., 2018; Chapple et al., 2020; Serrano et al., 2025).
• Strengthening ethical culture through employee training and internal communication; ensuring employees develop an internal barrier against abuse (Ocansey & Ganu, 2017; Suh et al., 2018; Harjoto, 2017; Serrano et al., 2025).

6. The message must be clear: Abuse is contagious, closing one’s eyes is also a crime.

Corporate ethics and fraud literature converge at the same point:

• Misuse is not merely an accounting item, but a cultural epidemic (Akkeren & Buckby, 2017; Ocansey & Ganu, 2017; Lukmanjaya, 2019; Zahari et al., 2020; Harjoto, 2017; Chapple et al., 2020; Serrano et al., 2025).
• Every “turning a blind eye” decision made by the administration adds a new dose to this pandemic.
• Honest employees either adapt or flee; either way, the company loses (Akkeren & Buckby, 2017; Ocansey & Ganu, 2017; Lukmanjaya, 2019; Shepherd & Button, 2019; Chapple et al., 2020; Wang et al., 2025).

What you consider “minor” today, what you dismiss with “let’s not dwell on it,” could become tomorrow’s headlines, lawsuits, or a reputation graveyard (Condie et al., 2022; Bloch & Kranton, 2024; Ren et al., 2021; Farooq et al., 2025; Ramos et al., 2024).

Fraud is contagious within organisations.
If an organisation turns a blind eye to misconduct, that organisation has already begun to decay.
The question is: Are you prepared to be the first person to stop this decay, or will you remain silent and become part of it?

Brief Summary: Why and How Does Fraud Spread?

Table: Fraud’s culture through spread mechanisms’ summary

References

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Kim, T. (2024). Impact of low‐performance signals on employee fraud in public organizations: Evidence from a pay‐for‐performance context. Public Administration Review, 85, 681 – 697. https://doi.org/10.1111/puar.13873

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