Anatomy of scandals: how organisations get derailed

Ethical codes, protocols and compliance frameworks: Organisations today have extensive ethical codes, protocols and compliance frameworks. And yet scandals keep breaking out. NEOMA researcher Branko Božič and his co-authors argue that the issue is not simply the rules, but also the ability of institutions to learn and change their practices.

A scandal is not the origin of a problem; it is a symptom. When a major organisation is embroiled in an ethical crisis, attention often turns to a handful of individuals. Who was at fault? Who knew about it but didn’t say anything? However, as with any mechanical failure, the broken part is seldom the sole cause: it is the entire system behind the failure that needs to be examined. And the same logic should apply to institutions.

It is exactly this shift in perspective – from the individual to the system – that the NEOMA researcher and his co-authors chose to adopt. Their study explores the organisational dynamics that create the conditions for scandals to emerge.

Trust: a delicate balancing act

 Major organisational scandals often involve a serious breach of trust. In theory, any trustworthy organisation relies on three core attributes: competence, benevolence in its actions and adherence to the values it espouses. But this trust cannot be imposed from above: it is demonstrated day after day in how an organisation processes information, takes decisions and fixes mistakes. Researchers refer to these patterns as an organisation’s “routines”. However, the expectations of customers, employees and citizens evolve, just as organisations themselves do. What appeared acceptable yesterday may no longer be acceptable today.

Hence, the authors' hypothesis: to remain trustworthy, an organisation must continually adapt its routines to keep pace with shifting expectations. Learning, revising and adjusting are what help keep an organisation on the right track. Conversely, scandals can result from an accumulation of failures that were not rectified in time.

Tracing a scandal back to its origins

The researchers illustrated their hypothesis by examining the sexual abuse scandal in the American Catholic Church. This affair, which was brought to public attention by The Boston Globe’s investigation in 2002 (and later dramatized in the film Spotlight), is exceptionally well documented. Decades of investigative journalism, official reports and internal documents make it possible to reconstruct the timeline of warnings and the institution's responses. The material includes a confidential report submitted to the Vatican in 1985, which had already warned about the scale of the sexual abuse and predicted a major spiritual, financial and reputational crisis.

Using these sources, the researchers illustrate how a series of breakdowns can prevent organisations from learning and correcting harmful practices.A first obstacle emerges when an organisation’s objectives begin to outweigh the values it publicly promotes. In the Church’s case, protecting the institution gradually took precedence over protecting the victims. Priests who had been accused of abuse were transferred to other parishes without the allegations being reported to the authorities.

Another obstacle is an inward-looking culture. In the Church, decision-making was concentrated almost exclusively among elderly male members of the clergy.  Women and lay people were largely excluded from the bodies responsible for addressing the crisis.

The authors identify additional barriers to learning. First, a lack of information prevents us from recognising the seriousness of problems. Secondly, warnings tend to be downplayed or dismissed as isolated incidents. Thirdly, hierarchical boundaries block the flow of information and solutions. Taken together, these mechanisms ultimately prevent organisations from adjusting their practices. As they reinforce one another, they shut down learning at every stage, from reporting information to implementing solutions.

Recurring roadblocks

The mechanisms described above are not unique to the Catholic Church. The researchers also illustrate the wider relevance of the model through several other organisational failures: the fake accounts scandal at the U.S. financial services company Wells Fargo, the corruption cases involving Siemens and the breakdowns in safety that contributed to the Boeing 737 MAX crashes.

The common thread is that rules and ethical codes are ineffective if an organisation is unable to challenge its own practices. Learning does not happen automatically: organisations need mechanisms that detect warning signs, challenge established assumptions and translate what they learn into changed practices. According to the authors, prevention requires changing organisational routines: identifying problems, questioning existing practices and correcting them before they open the door to new scandals.

Find out more

Hurley, R., Božič, B. and Dionysiou, D. How impediments to learning undermine ethical conduct and organizational trustworthiness. Journal of Business Ethics (2026)https://doi.org/10.1007/s10551-026-06335-3