Gender and Twenty-First-Century Corporate Crime: Female Involvement and the Gender Gap in Enron-Era Corporate Frauds

Gendered Focal Concerns and Risk Preferences

Gender differences in orientations toward crime stem largely from different focal concerns ascribed to women and men. Norms disapproving of female deviance and crime originate from two focal concerns ascribed to women: (1) nurturant role obligations encouraging the centrality of social relationships and cooperative, communalistic orientations and (2) female beauty and sexual/moral virtue. These focal concerns also contribute to a derived, or secondary, identity in which female status or identity is linked to key men in women’s lives (e.g., father or husband) and to accommodating their prerogatives. On the other hand, the lesser taboos against male crime stem largely from focal concerns ascribed to men: (1) individualistic orientations stressing autonomy and dominance/control; (2) status/achievement in the public sphere combined with provider and protector role obligations in the private sphere encouraging competitiveness, decisiveness, and risk-taking; and (3) sexual access to and success with women. These focal concerns function as overarching cognitive schemas that shape gender ideologies, identities, and action and contribute to gender differences in moral orientations, individual and collective identity, risk preferences, and femininity and masculinity imperatives. Gendered focal concerns also shape social interactions (i.e., doing gender) by guiding expectations and appraisals of others and self with regard to risk-taking and criminal behavior. Behaviors—and potential behaviors—are accountable to and assessed by sex category.

Restraining women from seriously injurious criminal behavior and shaping their involvement in it, women are socialized to an ethic of care—to be more responsive to others’ needs and to fear separation from loved ones (England 2005; Gilligan 1982). Concern for others also manifests in women’s greater reluctance to engage in behaviors that are clearly harmful to other people. Overall, feminine cooperative behavior runs counter to law-breaking. Men, on the other hand, are conditioned toward status-seeking and socialized to be more independent and competitive. The separation between what is feminine and what is criminal is sharp, whereas the dividing line between what is masculine and what is illegal is often thin. Although male sex role norms do not prescribe crime, risk-taking and defying social convention are qualities more admired in men than in women. By extension, men find it easier than women to justify illegal wrongdoing because law-violating behavior, especially for status-seeking or financial reasons, is more compatible with male focal concerns. Stereotypically masculine qualities align not only with committing business fraud, but also with actions that might precipitate fraud, such as engaging in risky financial ventures or bad business deals and gambling, drinking, or sexual affairs.

Gendered focal concerns influence motivational and contextual differences in crime by contributing to gender-specific risk preferences and risk-taking styles and gendered responses to stress. For women, the centrality of relational concerns shapes their law-violating behavior and allows the men in their lives to pull them into criminal involvement. Women are not less amenable to risk; rather, their risk-taking is less likely to violate the law and more likely to be protective of emotional commitments. Women may take greater risks to establish or sustain valued relationships, whereas men take greater risks for status, power, monetary gain, or competitive advantage. Key to the present analysis, gendered focal concerns and risk preferences are reproduced in corporate organizational settings and work networks in ways that affect female involvement and gender differences in white-collar crime.

First, research on work/occupations and business enterprise suggests women generally adhere to a different way of doing business that carries a sense of connectedness and brings a more ethical perspective to the workplace (Beutel and Marini 1995; Kodinsky et al. 2010; Loe, Ferrell, and Mansfield 2000). Corporate women, more than corporate men, use their organizational power to address issues of social responsibility and are more inclined to make people, not just profits, a priority (Jaffee and Hyde 2000; Lesch 2011; O’Fallon and Butterfield 2005). Female executives tend to score more positively on measures of socialization, self-control, empathy, social involvement, and integrity (Collins 1999). Women’s ethical orientations thus hedge against involvement in white-collar crime and act as a deterrent to corporate wrongdoing.

Second, research on entrepreneurship and management styles finds that women are more risk-averse in business ventures, whereas men are more inclined toward strategic, proactive risk-taking and aggressive implementation of bold strategies in the face of uncertainty (Byrnes, Miller, and Schafer 1999; O’Fallon and Butterfield 2005). Masculine focal concerns emphasizing competition and achievement at all costs may “propel more men than women who are in middle and managerial ranks to become involved in corporate crime” (Daly 1989:772). This is especially likely in masculine environments and criminal coalitions where men’s risk-taking propensities exacerbate one another.

Third, research on stress and mental health finds that men are more focused on material goals, more vulnerable to financial strain and loss of status, and more likely to use criminal coping strategies in response to strain, whereas women are more concerned with personal relationships and gender-based discrimination, more vulnerable to interpersonal and family-related strains, and more likely to use less deviant coping strategies (e.g., prescription drugs) (Broidy and Agnew 1997). Gaining and protecting privileged status, economic power, and wealth may thus motivate men more than women to use illegal means. Women who commit business-related frauds like embezzlement tend to do so (or rationalize it) to protect their families or valued relationships, whereas men tend to embezzle to protect their status as successful businessmen, rationalizing their crimes as stemming from “normal business practices” (Cressey 1953; Zeitz 1981). Despite enculturation into a male-dominated business environment, female executives, in general, feel more guilt and find it more difficult to rationalize involvement in business-related frauds than do their male counterparts.

Fourth, research on business crime and occupational deviance finds that even when similar on-the-job theft or fraud opportunities exist, women still are less likely to commit crime (Franklin 1979; Levi 1994) and, when they do, their crimes tend to yield lower gains (Daly 1989; Franklin 1979). Along with differences in moral orientations and risk-taking, men and women may also differ in how they view opportunities for corporate fraud, because women who move into top management positions may be deterred by their unique placement and sense they are watched more carefully than men in those positions (Benson and Simpson 2009).

Based on gendered focal concerns and previous crime/deviance and work/occupations research, we expect the following:

Hypothesis 1: Women’s corporate crime involvement will be much lower than men’s involvement.

Hypothesis 2: Women’s economic gains from corporate crime will be less than men’s fraudulent economic gains.

Gendered Crime Opportunities: Exclusionary Network Practices

The group nature of most corporate schemes, which involve collusion or conspiracy, is often ignored in the literature on the female employment–crime relationship. Two distinct opportunity structures exist for women’s corporate crime involvement—one element involves being suitably located or situationally available for participation in a scheme (opportunity via job access) and the second requires being suitably defined or recruited to participate in the activity by those running the scheme (opportunity via network access). Organizational sex segregation literature suggests that even when women occupy higher-level organizational positions, exclusionary practices limit their involvement in predominantly male informal networks at work (Gorman and Kmec 2009; Kanter 1977). Crime research also documents sex-segregated practices that limit and shape women’s involvement in underworld crime groups (Maher 1997; Miller 2001; Steffensmeier 1983; Steffensmeier and Terry 1986; Zhang et al. 2007). We will discuss how these two selection-exclusion processes restrict and shape women’s participation in corporate crime networks.

Opportunity via Job Incumbency

Statistics suggest women’s opportunities to commit corporate crimes as top executives remain limited; however, their opportunities for corporate crime as mid-level managers and supervisors have markedly increased (Catalyst 2011). Only basic information is available on the distribution of women in the workforce at varying levels of management or professional positions, but broad-based Census Bureau surveys indicate that women today (1) are about as likely as men to be in the paid workforce and (2) are strongly represented in corporate America in mid-level roles. Women are about three-quarters of all financial workers; occupy one-half of all managerial, administrative, and professional positions; are the majority of technical and clerical white-collar workers; and are about half of all accountants, many as corporate professionals (Huffman, Cohen, and Pearlman 2010). However, case studies of Fortune 500 companies find women comprise only about 15 percent of senior executive positions (Catalyst 2011). It seems the number of women occupying the highest corporate positions remains low, but we lack comparable data for the thousands of public and private U.S. corporations.

Available evidence also suggests that mid-level officials are as likely as top management to be involved in corporate wrongdoing and targeted for prosecution (Clinard and Yeager 2006). Mid-level officials have considerable decision-making autonomy regarding investment, pricing, marketing, and production and they direct staff to carry out top-management’s objectives. Opportunities for white-collar crime via professional and managerial position may thus be near equal for women and men.

Hypothesis 3: Women involved in corporate crime are more likely than their male counterparts to be in low-ranking corporate positions.

Linkages between underworld and upperworld processes of institutional sexism and homosocial reproduction exclude women from male work networks, including networks that carry out conspiracies, and restrict criminally involved women to sex-typed roles. Institutional sexism—rules, prejudices, and stereotypes associated with gender, race, or other social characteristics—helps or hinders a person’s potential enactment of various social roles. Through homosocial reproduction, or “like chooses like,” sexism and male domination in the underworld—and in the upperworld—are perpetuated, particularly in more lucrative, high-risk arenas (Steffensmeier 1983; Steffensmeier and Terry 1986). Sex shapes opportunities for developing legitimate and illegitimate social networks within organizations and alliances; this lessens women’s opportunities to form the strong networks and develop the trust among business associates that facilitate collusion to carry out and cover up complex corporate schemes.

The rich and growing literature on men’s sexism toward women in economically driven crime networks (e.g., Maher 1997; Miller 2001; Zhang et al. 2007) supports Steffensmeier and Ulmer’s (2005:221) assertion: “Sex-segregation in the underworld . . . powerful[ly] inhibits [women’s] access to illicit-business work roles and in large part . . . forecloses their participation as high-level operators.” Among men involved in illicit pursuits, women are seen as less likely to have criminal capital or valued traits and competencies, such as trustworthiness, criminal capabilities, nerve to carry out a scheme, worthwhile social connections, and the mettle or ambition to profit highly (Steffensmeier and Terry 1986). Not only are women less likely to be recruited into corporate conspiracies, they are less able to recruit others should they wish to orchestrate an illegal scheme.

However, women will not be excluded entirely and some women undoubtedly play central roles in corporate conspiracies. Many underworld operators, while professing a preference not to work with females, sometimes do so. Men are more likely to commit crimes with a woman when (1) a romantic or close personal relationship exists, (2) an exceptional woman has carved out a niche in the underworld, or (3) there is utility in deploying a woman for safety or profitability, such as when women create less suspicion, have access to helpful information or specialized skills, attract a more willing or less fearful clientele, or prevent missing out on a good opportunity when male accomplices are not available.

Hypothesis 4: In comparison to their male counterparts, women involved in corporate crime tend to play marginal rather than central roles.

Hypothesis 5: Women involved in corporate crime will demonstrate a tendency toward romantic affiliations with male co-offenders.

Hypothesis 6: Women involved in corporate crime will have high utility for carrying out a fraud due to their strategic company position processing and reporting financial data.

Consolidating key themes from our theoretical framework, we expect women’s corporate crime involvement to be much lower and more marginal than men’s involvement because women may be more averse to risky financial ventures, abusing positions of organizational power, and winning-at-all-costs in economic matters. Furthermore, women may hold fewer top-level corporate positions that are conducive to illegal collusion and they may be excluded by male colleagues from crime groups and unable to recruit suitable partners to direct a conspiracy. ³

Company and Offense Characteristics

Company size, measured as number of employees on payroll, is based on SEC reports filed by individual companies. We used the quarterly report immediately prior to an indictment’s filing. We coded industry sector of CFTF companies according to the 2002 North American Industry Classification System based on company profiles of primary business activities. We describe company size and industry because of their importance in prior research on corporate (white-collar) offending (Clinard and Yeager 2006; Simpson 1986; Wang and Holtfreter 2012).

Four categories designate the principal offense conduct that formed the legal basis for indictment charges. ⁷ Many conspiracies involved additional schemes, but we did not code secondary offenses, like insider trading that occurred as a company faced large stock losses or bankruptcy. ⁸ We distinguish between conspiracies committed mainly for business advantage to benefit the company, and schemes perpetrated primarily for personal gain. We further subdivided self-dealing for personal gain into three categories: Insider trading is trading in violation of the trust and confidence of investors and the public by using privileged (non-public) information. Ponzi scheme is an investment fraud involving payment of returns to existing investors using funds solicited from new investors, while skimming off funds for personal use. Looting the company involves stealing from a company by means such as high compensation, purchase of property or goods for personal use, diverting monies to family, and embezzlement.

We calculated duration of a scheme from the start of the evidential trail used as the legal basis for establishing probable cause to when an indictment was filed. Many frauds were likely operative prior to the earliest tangible proof, so this measure reflects minimum duration.

Group size is the number of defendants named in an indictment as participating in the conspiracy. ⁹ Because a substantial number of indictments identify additional unnamed participants (“others known and unknown”) who were not indicted (e.g., due to manpower restrictions preventing investigation or because they provided evidence against top conspirators), this measure reflects the minimum number of co-conspirators.

Offender Characteristics

We coded gender using an indicted defendant’s name. For androgynous or unfamiliar names, we used textual clues (e.g., gender pronouns) or other sources (e.g., Federal Bureau of Prisons).

We measured age at the time of indictment. Although not recorded in indictments, we obtained defendant age for most cases from online searches or other sources (e.g., Federal Bureau of Prisons).

We categorized position in company into four levels according to decision-making responsibility and corporate hierarchy, based on descriptions in the indictments and supplemented by secondary sources (e.g., press reports of court testimony). Because one’s position in a company may change during a scheme, we coded defendants’ positions when they became most involved. ¹⁰ Top management includes the highest level executives (e.g., president/chairman, chief executive officer, CEO; chief financial officer, CFO; chief operating officer, COO; and secretary/treasurer). Upper-level officials are upper-management positions with vice president in the title or others directly responsible for implementing top-management’s priorities. Middle-level officials comprise all other lower-level positions within a company. Associates refer to any other defendant who was neither employed nor affiliated with the company charged in the indictment or a colluding company.

Role in the scheme refers to a defendant’s involvement in instigating, fostering, and executing the scheme and is indicative of institutionalized sexism to the extent that women play marginal roles, controlling for structural opportunities (corporate position). Key markers for assignment into one of four levels include number and range of charges, whether a defendant gave or followed orders, and whether a defendant instigated or proactively developed procedures to implement the scheme or cover it up versus reactively followed policy directives from superiors. Levels of involvement are the following: ringleaders initiated or orchestrated a scheme or played a primary leadership role; major players proactively furthered a scheme but did not initiate or orchestrate it; in-between players executed part of a scheme or its cover-up as directed or encouraged by a superior but with some diligence or inventiveness once involved; and minor participants were mostly reactive, acting at the behest of a superior or in some minor capacity, such as following orders or acting in other complicit ways.

Based on our in-depth electronic information search on women, we categorized four attributes reflecting important dimensions of the gendered paradigm and institutionalized sexism: utility for the scheme, male affiliation, self-profit relative to co-conspirators, and culpability. We assessed utility for the conspiracy based on whether a woman’s involvement was strategic or instrumental for carrying out the conspiracy because of her duties within the company, such as serving as a conduit or gateway for processing information (e.g., recording financial transactions or submitting revenue or compliance reports), implementing or administering payroll, or communicating with external organizations or agencies (e.g., auditors, regulatory agencies, or rating agencies). Key here is the ease versus difficulty with which a conspiracy’s chief operatives can bypass this defendant because of her position or expertise in the company. ¹¹ Male affiliation records whether a woman was personally connected to a male co-conspirator, such as being a spouse or through a close boss-employee relationship (e.g., a longtime assistant). Self-profit relative to same-company co-conspirators indicates whether a woman’s personal profit was greater, the same as, or less than that of her male co-conspirators. Culpability codes female involvement as falling on a continuum from strongly reactive to strongly proactive in response to inducements or pressures to engage in a scheme.

Like any data source, ours has some strengths and some caveats. Strengths include a database that represents twenty-first-century cases of corporate illegality, contains a sizable number of upper-level white-collar offenders, and yields considerable information about key dimensions of corporate offending and female involvement. One important caveat is that we do not know the extent of corporate fraud underreporting or how CFTF cases differ from cases in which no legal action was taken (Simpson 1986). CFTF cases likely represent more harmful or longer-running schemes and the most centrally involved defendants. Caution is also advised in generalizing beyond the kinds of fraudulent accounting schemes represented in the CFTF. More central to our analysis, however, are between-sex differences in the production of official data. Available research generally shows that sex distributions in official data (e.g., arrests, indictments, and convictions) generally match comparable unofficial estimates, particularly for more serious offenses (see review in Schwartz, Steffensmeier, and Feldmeyer 2009). Although obviously problematic for estimating absolute levels of corporate crime (whether for females or males), CFTF indictment data likely provide reasonably robust indicators of relative differences between the sexes in involvement in serious corporate financial fraud.

Case, Company, and Offender Characteristics

Position in Company

Gender differences in organizational positions held by conspirators are sizeable. In both all-male and mixed-sex groups, the majority of male offenders held a top executive (52 and 41 percent, respectively) or upper-level corporate position (26 percent, 22 percent), whereas a much smaller portion of female conspirators were high-ranking officials—only 8 percent of women were in top management and 30 percent were in upper-level positions (Table 2, Panel B). Instead, most female offenders held mid-level positions (62 percent).

Comparing female to male co-conspirators in mixed-sex groups, as anticipated in Hypothesis 3, the gender gap is substantial across all corporate levels, but sex differences are largest for top- and upper-level positions. Only 4 percent of top executives in mixed-sex corporate schemes were women. Women’s presence in mixed-sex conspiracies was somewhat greater among mid-level positions (25 percent), where opportunities for corporate crime may be greatest, but it was still only 8 percent when including all co-conspirators. Criminal opportunity due to job incumbency thus does not seem to be a sufficient condition for female fraud involvement: these figures are well under national benchmarks showing that women are about half of mid-level managers and around 15 percent of top executives. ¹² Women are greatly underrepresented in fraud involvement across all corporate positions; moreover, their underrepresentation is notably enhanced when all-male conspiracies are included in comparisons.

Role in a Scheme

Broken out by gender, differences in extent of involvement in a scheme are sizeable. Within-sex comparisons show the large majority of male conspirators played ringleader or major roles (80 percent of all-male conspirators and over 60 percent of men in mixed-sex groups); the pattern is opposite for female conspirators, who mostly played minor roles (73 percent). Only three female defendants (8 percent) were principal initiators of a conspiracy (two in collusion with a spouse), compared to 55 male defendants (30 percent) in mixed-sex groups.

The gender gap among co-conspirators was very large for ringleaders (5 percent female) and major players (11 percent female) but trivial for defendants playing minor roles (about half female). Consistent with Hypothesis 4 on marginal involvement, on a continuum from ringleader to minor player, women were more heavily concentrated at the accessory end of the role spectrum and men were strongly concentrated at the upper end.

Illicit Profit

A useful marker of involvement is whether and how much offenders profited from a scheme (Steffensmeier and Terry 1986). We see substantial sex differences in who gained from fraud. The majority of male offenders personally gained a half-million dollars or more. Some women did reap sizeable financial gains, but in sharp contrast to men, more than half the women did not self-profit at all (56 percent) or benefited very little (8 percent). Between-sex comparisons show female representation was sparse among top illicit-earners. Fewer than 10 percent of defendants with very high illicit profits were female. In contrast, the gender gap was absent among the lowest earners and non-earners. Women involved in corporate fraud tend to reap far fewer financial benefits than do men.

Table 2 shows the much lower presence or near absence of women in these corporate schemes, the relatively minor roles they played in conspiracies, and their much smaller financial gains. This suggests a fair amount of institutional sexism in corporate criminal conspiracies. Our findings so far are consistent with hypotheses derived from the gendered focal concerns, risk preferences, and opportunities perspective.

Multivariate Results

A multivariate framework more stringently evaluates and quantifies gender’s part in producing differences in financial gain and role in a fraud, two indicators of sex segregation. We tested whether sex continues to exert an independent effect on role and illicit profits, net corporate rank, and also the extent to which women’s more marginal roles account for their lesser profits. Comparing women to men in mixed-sex conspiracies yields more conservative sex-effects estimates than judging women against men in all-male groups. Simple models minimize missing data and maximize the power of our analysis because the small n makes identifying significant relationships more challenging. We employed ordinal logistic regression (OLR) because the outcomes of interest are ordered categories, but the distance between categories is unknown (e.g., ringleader, major, in-between, and minor). ¹³ Significance tests relied on robust standard errors that account for clustering of defendants within conspiracy groups (i.e., correlated error terms among individuals). Table 3 displays odds ratios of a man (versus a woman) playing a more central role in a conspiracy and profiting more from the scheme.

Model 1 (Table 3) quantifies the sex difference in conspirator roles. Men have over six times greater odds than women of playing each successively greater role in a conspiracy. Model 2 shows women’s less powerful organizational positions account for some of the sex difference in role centrality, but sex still exerts a strong, significant effect on role. Successively higher corporate position increases the odds of playing a more central role in a scheme by 2.82. Controlling for defendant’s corporate position (Model 2), the sex effect is reduced from seven to four, suggesting about two-fifths of the sex effect on role marginality is due to female offenders’ lower corporate positions. However, ample sex differences remain: men’s odds of playing a more central role are quadruple those of women in the same corporation position. Such sizeable sex differences in roles, net corporate rank, suggest that women’s less powerful legitimate positions are not the primary driver of marginalization to less central illegitimate roles.

Examining sex differences in illicit gain from corporate schemes, being male is associated with considerably higher profits, by a factor of six (Model 3). Model 4 shows that each step up the corporate ladder doubles the odds of being in the next higher category of individual profit, from none to a million dollars or more. Accounting for the different corporate positions of women and men involved in corporate frauds, the sex effect on illicit profits is reduced by 33 percent (from a factor of six to about four). The sex difference in profits is reduced further—by half—when accounting for the roles men and women played in perpetrating these schemes (Model 5).

In summary, we find persistent sex differences: women played more marginal roles in corporate fraud schemes and profited less from their involvement than did similarly situated male co-conspirators, net the different corporate positions of women and men involved in these frauds.

Male affiliation

One-third of female defendants had a close affiliation with a male ringleader or major player in a network’s conspiracy. Spouses made up the majority of these relationships. Three female co-conspirators had close personal relationships with male co-conspirators, based on statements in indictments or other archival sources construing the defendant as a “close,” “loyal,” or “longtime” secretary, office manager, or assistant.

Utility

The majority of female co-conspirators (68 percent) occupied a strategic position in a company where, if manipulation about financial data was to occur, she would be the conduit or instrument for that manipulation. Depending on company size, just a few or many people may have the opportunity to make false statements about financial data via positions in accounting and compliance or other roles in which financial information is collected, recorded, and transmitted.

Culpability

We sought to establish whether female co-conspirators might have faced restricted agency in their involvement pathways. Women’s involvement was predominantly in response to directives or pressures from supervisors (about three-fourths); or, they were co-signers with a spouse of fraudulent tax returns. Only four female co-conspirators were strongly proactive in terms of initiating or executing a scheme, half with a spouse as co-ringleader. The other two we discuss later as unique examples of women in roles central to a conspiracy.

Self-profit

Research shows underworld mixed-sex partnerships are male-dominated and women receive an unequal share of the score (Steffensmeier and Terry 1986; Steffensmeier and Ulmer 2005). An analogous pattern prevails among our upperworld mixed-sex conspiracies. About three-fourths of female co-conspirators received less remuneration than their male counterparts who participated in the conspiracy (Table 4). Only five female corporate offenders profited more than most in a scheme. When women received unusually high profit, it was usually due to being a spouse and, consequently, being involved as a co-ringleader or major player.

Characteristics reflecting marginalization likely overlap, indicating the extent to which women were accomplices versus fully participating operatives. Figure 1 shows the percent of female indictees exhibiting each combination of characteristics signifying marginal involvement: (1) followed directives or strong suggestions (acted reactively) versus altered financial records or executed the scheme (acted proactively); (2) received financial remuneration less than rather than equal to or greater than her male co-conspirators; and either (3a) occupied a utility position, such that she was of strategic importance to the scheme; or (3b) was a spouse of a main co-conspirator. (Note, however, two spouses played central co-ringleader roles and profited equally; see discussion below of Rebecca Parrett.)

OPEN IN VIEWER

Figure 1.

Overlap in Markers of Involvement for Spousal and Utility Pathways of Women in Corporate Conspiracies

Almost all the women (68 percent) in the conspiracy schemes prosecuted by CFTF had marginal involvement as accomplices, exhibiting all three markers of marginalization. Over half the women (54 percent) were in positions of strategic utility to a scheme, took rather than gave directives, and profited less than their co-conspirators; an additional 14 percent of women gained entry through spousal affiliation, reactively took orders, and profited less (n = 5) (Figure 1). No other pattern is predominant. Some women profited less than co-conspirators despite playing proactive roles (n = 3), whereas some reactive spouses and women of utility profited as much or more than co-conspirators (n = 4). An equally small group of women was proactive and shared equally in the profit (n = 4). In short, many women were minor accomplices and few women possessed the constellation of full-partnership characteristics. Women’s involvement resulted largely from opportunities as instruments in the scheme or via relational ties. Only the rare female offender ascended past the glass ceiling of upper-level corporate crime.

Women’s Minor Roles

Women’s In-Between Roles

Women’s Major Roles

Unique Female Ringleader

Outlier: IMClone and Martha Stewart

Some portray Martha Stewart as the new or quintessential female corporate offender (Dodge 2009). Others perceive her prosecution as a DOJ publicity stunt or rooted in gender bias: a powerful businesswoman was pursued for trivial offenses while male executives at Enron and WorldCom were indicted but never jailed (e.g., Brickey 2006). Despite which view one favors, we know the following about her involvement.

Samuel Waksal, founder and CEO of pharmaceutical company ImClone Systems, gave advance notice based on an inside tip to family and friends that the Food and Drug Administration (FDA) would not approve the company’s anti-cancer drug (Erbitux). Following Waksal’s arrest, media mogul and homemaking icon Martha Stewart was investigated for insider trading for selling IMClone stock just prior to the company’s FDA announcement.

Stewart played no role in the insider trading conspiracy orchestrated by Waksal. Rather, Stewart learned through her stockbroker that Waksal was selling all of his stock. Stewart ultimately was charged with making the false statement that her stockbroker had not informed her about Waksal’s sudden stock sale. Had Stewart admitted receiving this information, she could have averted prosecution. Instead, after her refusal to accept a plea and a highly publicized trial, Stewart was found guilty and sentenced to a five-month prison term. James Stewart (2011:119) writes, “Given that Stewart saved just $46,000 on the trade, the sale of ImClone stock and subsequent cover-up surely ranks as one of the most ill-fated white-collar crimes ever.”

Personal gain/profits

Female conspirators profited far less than their male co-conspirators, a disparity that persisted even when controlling for corporate rank and whether one played a major role in a scheme. Other than perhaps some added job security, most female conspirators did not benefit financially from their involvement, as anticipated in Hypothesis 2.

Different roles played

Whereas the majority of male conspirators played ringleader or major roles in conspiracies, the majority of female conspirators played minor roles. Few women were ringleaders, those that were often shared the role with their spouse. Gender differences in roles partly reflect women’s greater representation at subordinate positions in companies. Nonetheless, as our multivariate analysis showed, female co-conspirators were more likely to play minor roles in schemes, controlling for company position, confirming Hypotheses 3 and 4.

Pathways

Women’s involvement in a company’s conspiracy came about through two main pathways: a relational pathway entailing a close personal or romantic relationship with a main co-conspirator; and a utility pathway in which a defendant occupied a strategic or gateway position in a company, such as in compliance or accounting, upholding Hypotheses 5 and 6. Together, these two pathways accounted for almost all female fraud cases.

Reactive/proactive involvement

Female co-conspirators were more reactive than proactive in their decisions to participate. A sizable portion were reluctant participants who drifted or were prodded into conspiracies because of exigencies of the positions they occupied in the company as employees responsible for financial record-keeping and reporting.

Recruiting potential

We tentatively conclude that female executives wishing to orchestrate a corporate conspiracy find it harder to network and recruit co-conspirators, especially highly capable and proactive co-conspirators. Although more in-depth research is needed, supportive evidence from our study includes the nonexistence of all-female conspiracy groups, the extremely low number of female ringleaders who executed large- scale fraud operations, and the recruiting difficulties faced by the only independent female ringleader, as revealed in the qualitative analysis.

Finally, we point out a fundamental irony elucidated by the qualitative findings. It seems a sizable portion of the indicted females in our database were unduly vulnerable to indictment and prosecution not so much because of their culpability or real contributions to the conspiracy, but instead because of their utility: they were in mid-level, easily-monitored positions in which they collected and reported financial data that, in turn, made them useful tools for the prosecution to gain evidence and to turn state’s witness against co-conspirators.

We have confidence in these findings because of their consistency with our theoretical expectations and with extant accounts and other empirical research. First, recent accounts by journalists and Wall Street analysts about the major financial scandals, including some in our database, identify few female offenders and even fewer who played central roles (see, e.g., Ajamie and Kelly 2010; Lewis 2010; McLean and Elkin 2003; Stewart 2011). Second, theory (Steffensmeier 1983) and research on underworld crime organizations show that women are excluded from or marginalized in criminal enterprises. Parallel to underworld sex segregation, gendered labor market segmentation is strongly influenced by informal exclusionary practices that limit women’s entry into some roles in the economy (Gorman and Kmec 2009; Kanter 1977). As a result, women are likely either excluded entirely from lucrative criminal conspiracies or are utilized in sex-typed ways deemed most effective for the enterprise. In our study, sex-typing was seen in the high number of women occupying strategic financial-reporting positions and women’s greater difficulty in recruiting co-offenders. In this sense, too, prospective female ringleaders face constraints should they be inclined to pursue more organized and lucrative forms of corporate or white-collar crime.

With this article, our goals were to develop a theory of gender differences in corporate crime and to empirically establish features of female involvement and the gender gap. Although results demonstrate robust gender differences consistent with our hypotheses, they do not reveal how the explanatory factors in our conceptual framework actually influence gendered outcomes. Importantly, we do not have direct measures of focal concerns or criminal opportunities theorized to shape female involvement and gender differences. An essential priority for future research, then, is to develop better measures of these underlying theoretical constructs for incorporation into large-scale statistical analyses, including information on moral orientations, risk preferences, and extent of perceived or actual opportunities. Absent such measures, scholarly interpretation of gender differences in corporate and upper-level white-collar crime necessarily remains somewhat speculative.

Future studies might (1) extend our conceptual framework to other corporate or white-collar illegalities, such as insurance or medical fraud where female workforce representation is higher; (2) study variation in corporate offending and extent of female involvement by type of company or industry, by organizational characteristics such as variation in sex composition of employees in managerial or professional positions, and by organizational culture, such as whether corporate malfeasance is more or less normative; and (3) compare and interrogate gendered patterns of corporate crime, where the gender gap is quite large, with those for occupational fraud, where the gender gap is small for some categories, like embezzlement or misappropriation of funds or assets (Daly 1989; Holtfreter 2005). Finally, researchers might pursue whether the gendered focal concerns and opportunities framework applies more broadly to understanding gender differences in other areas of crime and deviance and also, perhaps, to conventional pursuits where gendered self/other expectations and selection processes are prominent underlying factors, as in career and educational choices.

In light of concerns raised by some economists and sociologists about corporate corruption as an important cause of recent economic recessions and other societal harms, our findings raise an intriguing question: Would more women in positions of corporate leadership and power reduce corporate fraud? There are good reasons for believing so: female executives might be more ethical in their decision-making, more likely to honor the fundamental laws of financial risk and avoid risk-taking excesses both within and outside the corporate setting, and less likely to create or foster a criminogenic organizational culture. Organizational sociologists have long noted the importance of corporate leadership in establishing a corporation’s moral climate and providing credible oversight to restrain the lure of naked self-interest and short-sighted greed (Barnard 1938). Besides providing more credible oversight (more likely to monitor, establish directives, and accept regulatory oversight), more female leaders and high-level officials would also mean fewer tempted individuals—the two main ingredients organizational scholars highlight as crucial for deterring corporate or organizational wrongdoing (Shover and Grabosky 2010). Alternatively, it is plausible that more women would not make any difference because of organizational inertia and because women who move up the corporate ladder will be socialized into the ethos of commercial interests and market dominance at all costs.

Testing these alternative hypotheses awaits growth in the number of women in corporate leadership positions. For now, paralleling gendered labor market segmentation processes that limit and shape entry into economic roles, and consistent with gendered opportunity structures in underworld crime networks, the same informal exclusionary practices operate among criminal co-conspirator networks in organizations, suggesting minimal changes have occurred in at least some fundamental forms of gender stratification.