The Partial Organization of Networked Corruption

Abstract

This article uses the concept of partial organization to examine how organizing principles can facilitate the effective operation of networked forms of corruption. We analyze the case study of a corruption network in the South Korean maritime industry in terms of how it operated by selectively appropriating practices normally associated with formal bureaucratic organizations. Our findings show that organizational elements built into the corruption network enabled coordination of corruption activities and served to distort and override practices within member organizations. The network was primarily organized through the hierarchical organization of a bounded and controlled set of members and, to a lesser extent, through processes of monitoring and sanctions. Given its clandestine nature, the network avoided the use of explicit rules to govern behavior, instead relying on habituated routines to ensure consistent and predictable action from members. We find that organizational elements were rescinded when the corruption network was exposed after the sinking of a passenger ferry, the Sewol. By rolling back its hierarchical organization and reverting to core relationships, the corruption network sought to preserve its center. The article illustrates the explanatory value of studying how the activities of corruption networks are enabled and adapt to existential challenges through partial organization.

Keywords

corruption networks networked organization partial organization wrongdoing

While the conventional depiction of corruption is as a dyadic exchange between individual actors, more recent research has addressed corruption as a networked phenomenon. This development has allowed scholars to better explain the pervasiveness of corrupt activities over time as well as how reciprocal exchange in networks can elicit corruption irrespective of the moral disposition of participating actors (Rothstein, 2011). Despite progress made in recent years in our understanding of the functions, structures and operation of corruption networks (Cartier-Bresson, 1997; Jancsics, 2015; Jancsics & Jávor, 2012; Szántó, Tóth, & Varga, 2012), much remains unknown about their internal dynamics. In response, this article draws on the idea of “partial organization” (Ahrne, Aspers, & Brunsson, 2015; Ahrne & Brunsson, 2011; Ahrne, Brunsson, & Seidl, 2016) to examine the organizing elements that can operate inside a corruption network. While it is conventional to consider organizing as a set of practices found in formal bureaucratic organizations, the idea of partial organization stresses how the same practices are also variously found in other forms of social coordination such as networks. Moreover, while formal organizations are defined by the presence of hierarchy, membership, rules, monitoring and sanctions, to be partially organized only requires a subset of these elements to be exhibited (Ahrne & Brunsson, 2011).

Partial organization offers a useful way through which the dynamics of corruption networks can be understood and explained. The organizational arrangements that potentially exist in corruption networks relate not just to the intraorganizational practices of participating organizations but also to their interorganizational relationships. Examining how these arrangements interact to produce and reproduce decision-making structures and habituated practices can extend our understanding of how corruption is successfully enacted. Drawing from a case study of a corruption network in the maritime industry in South Korea, we examine the nature and operation of the network’s organizational characteristics by analyzing archival data from hearings, investigation records, and media reports related to the sinking of the passenger ferry Sewol, which killed 304 people. The calamity of Sewol exposed the maritime corruption network and drew from its members efforts for self-preservation.

The revelations made through the investigation and public scrutiny of the disaster revealed the existence of a corruption network involving government officials and agencies, the Coast Guard, and numerous private companies. What was revealed in the investigation also provided data that enabled us to undertake an analysis of the organizational dynamics of the corruption network. We use the concept of partial organization to analyze the internal workings of the corruption network and to show how hierarchical control over dependent relationships enforced trust among a diverse range of organizations. This analysis illustrates how the organizations participating in the corruption networks developed intraorganizational processes that privileged network participation over the pursuit of rational organizational goals. We also find that mutual trust quickly broke down when the network was exposed and the network shed the lowest ranking participants in favor of preserving the power center.

While the network was not itself a formal organization, its use of organizational practices enabled it to successfully engage in corruption, as well as to distort and override practices within member organizations. The network was primarily organized through the hierarchical organization of a bounded and controlled set of members and, to a lesser extent, through processes of monitoring and sanctions. Given its clandestine nature, the network avoided the use of explicit rules to govern behavior, instead relying on habituated routines to ensure consistent and predictable action from members. As exemplified by the case, the central contribution of the article is to show how organizational elements can facilitate the effective operation of networked forms of corruption. This points to a productive yet overlooked means through which corruption can be both theorized and practically addressed.

The article begins with a review of existing research on corruption networks, distinguishing them from studies of corruption on dyadic principal-agent models. We then introduce and explain the concept of partial organization and its potential value in furthering our knowledge of corruption networks. The second part of the article examines the background to the case of the Sewol ferry disaster in the context of Korea’s political and economic history and demonstrates how the case is of value for the study of corruption networks. Subsequently, we describe the methods used in the study centered on the analysis of archival materials such as official minutes of hearings, legal reports into accident investigations, and media reports.

The third part of the article presents the empirical findings that demonstrate how the maritime corruption network was able to operate effectively on account of its partial organization. We find that while membership and hierarchy were strictly enforced, other organizational elements such as formal rules, monitoring, and sanctions were much more limited in use. Importantly, we demonstrate that partiality enabled the network to be effective while still remaining clandestine, and that it provided flexibility by making it possible for organizational elements to be rescinded once the network was exposed. In the fourth section of the article, we examine the dynamic nature of partial organization in the corruption network, concentrating on how partial organization afforded the network flexibility by enabling it to rescind organizational elements. The article concludes by assessing the value of the concept of partial organization to better understanding, how corruption networks operate and how this might assist in addressing the global problem of corruption.

Organization and Corruption Networks

Conceptualizing Corruption as Networked Activity

Corruption has been defined most generally in terms of a misuse of power for private benefit (Lambsdorff, 2007, p. 1). Definitions that have focused on the public sphere have stated corruption as the behavior of public officials that deviates from accepted norms to serve private ends (De Graaf, 2007). Finally, scholars of organization studies have expanded the above definition to refer to the “misuse of an organizational position or authority for personal or organizational (or subunit) gain, where misuse in turn refers to departures from accepted societal norms” (Anand, Ashforth, & Mahendra, 2005, p. 10; emphasis added). We adopt a definition that is closest to the last definition—corruption as the misuse of organizational position or authority for personal or organizational gain—to account for connections between public and private spheres. The principal-agent model has been especially influential in developing a theory of corruption. The argument is that information asymmetry between an agent who can make decisions that affect others (the principals) in exchange relations can provide a motive for the agent to engage one of the principals in corrupt exchanges (Banfield, 1975; Lambert-Mogiliansky, Majumdar, & Radner, 2007; Shleifer & Vishny, 1993). In such a relationship, the agent can use rewards, punishments, incentives, and obligations that promote corrupt behavior in principals to fulfill his or her own interests. Much scholarship on corruption has essentially built upon the principal-agent model of dyadic exchange (Banfield, 1975; Rose–Ackerman, 2008).

More recently, researchers have expanded the scope of studying corruption, arguing that enduring corruption (as distinguished from isolated incidents of extortion or embezzlement) commonly occurs through networks in proximity to the state (Fazekas & Tóth, 2016, p. 321). A corruption network has been defined as a web of relations of dependency across economic and political spheres whose connections become reenforced over time for purposes of extracting rent (Della Porta & Vannucci, 1999; Stark & Vedres, 2012). Corruption networks contrast with dyadic conceptualizations of corruption in that while the latter is comprised of an illegal exchange between two actors, networked corruption points to a multi-player, and multi-level structure in which strangers are connected by intermediaries (Jancsics, 2015, p. 69). While utility-based models such as the principal-agent model are suited for understanding one-off actions, reciprocity and power dynamics within a network structure can explain how corruption can become systemic and remain invisible over a long term (Jancsics & Jávor, 2012, p. 67). It can also explain how actors can participate in corruption without necessarily accepting the moral legitimacy of corrupt practices (Jancsics & Jávor, 2012, p. 67). Examining corruption as a networked activity moves us away from a reliance on ethical blindness, which refers to the decision maker’s inability to be aware of the ethical dimensions of a decision, as a means of explaining individual corrupt behavior (Moore, 2008; Palazzo, Krings, & Hoffrage, 2012; Shadnam & Lawrence, 2011). Taking a network perspective compels an examination of the broader sociocultural context in which corruption is embedded and potentially normalized.

There is a growing body of knowledge that describes and theorizes the characteristics of corruption networks. As Nielsen (2003, p. 136) surmises, preestablished relationships spanning both private and public spheres enable coordination across the economy, society, and political institutions in corruption networks. This echoes Cartier-Bresson’s (1997, p. 471) argument that “a corruption network is merely the illegal extension of the legal ambiguity we see through multiple forms of lobbying and pressure being exercised on and in the state.” Networks are also said to be facilitated when contracting out of government services and the move to a distributed government model places government employees in close proximity of their clients. These developments increase the necessity for strong ties between the government and other sectors of society (Barley, 2007). Such corruption networks are embedded in the social structure (Cartier-Bresson, 1997, p. 466), yet compared to more legitimate networks, exchanges within them are likely to occur through consultation, negotiation, and tacit expectations in lieu of open transactions and explicit rules (Cartier-Bresson, 1997, p. 465).

Corruption networks bring together a range of heterogeneous parties who negotiate favors to bring about mutually and individually beneficial outcomes. Typically, efficient coordination of multiple skills and types of knowledge is required (Cartier-Bresson, 1997, p. 470). A corruption network in India’s irrigation sector, for example, brought together peasants, mayors, engineers, public works contractors, and politicians (Cartier-Bresson, 1997, p. 471). Exclusivity and secrecy have also been identified as traits of corruption networks. In another example, corruption networks in Hungary were found to almost exclusively contract among themselves (Fazekas & Tóth, 2016, p. 330). In such cases, network participants lowered their visibility by reducing interaction with outsiders and avoiding face-to-face meetings (Jancsics & Jávor, 2012, p. 68). Furthermore, corruption networks have been characterized according to whether connections are based on personal or institutional ties (Szántó et al., 2012), by the types of brokerage within their networks, as well as by the location of source of revenue within the network (Jancsics & Jávor, 2012, p. 70).

Scholars have suggested that internal workings of corruption networks is crucial to their ability to extract rent (Fazekas & Tóth, 2016, p. 323), asserting that “the internal organization of firms belonging to a network can substantially influence both their ability to develop and sustain inter-organizational relationships” (Moretti & Zirpoli, 2016, p. 611). Despite this, little research has been done that specifically considers the organizational characteristics and dynamics of networks themselves; instead, the focus has largely been on the interaction between the network nodes. The result is that “we know surprisingly little about how actual corrupt networks evolve within and among public, private, and non-profit organizations” (Jancsics & Jávor, 2012, p. 64). To better understand how corruption is enacted through networks, there is a need to examine how corrupt activities might be organized both within and between organizations involved in corruption networks. On this basis, we turn to the concept of partial organization (Ahrne & Brunsson, 2011) to understand how organizational characteristics enable corruption in cross-sectoral networks and, at the same time, how the incomplete nature of this form of organization may jeopardize the network’s ability to prevent large-scale accidents.

Partial Organization in Corruption Networks

As introduced earlier, this article seeks to contribute to theorizing the dynamic organization of corruption networks by drawing on the concept of partial organization. The idea of partial organization was introduced by Ahrne and Brunsson (2011) to address the extent to which conscious organizing can exist outside of formal and bureaucratic organizational forms such as corporations, governments, schools, and so forth. Partial organization is defined as “a decided social order” that contains some, but not all, of the elements that define a complete or formal organization (Ahrne et al., 2016, p. 297). This notion of partial organization is of value because it extends the tools of organizational analysis into domains of activity to which they have not traditionally been applied. As such, it enables an analysis and understanding of how elements of organizing are deployed to achieve particular goals in social arrangements that are not formally regarded as organizations.

The idea of partial organization has been fruitfully applied to the organization of markets (Ahrne et al., 2015), organizing for corporate social responsibility (Rasche, de Bakker, & Moon, 2013), as well as the organization of social movements (Haug, 2013), hacker collectives (Dobusch & Schoeneborn, 2015), and even illegal drug cartels (Cederström & Fleming, 2016). It has also been noted that the concept of partial organization is particularly suited for understanding those forms of human interaction and coordination most commonly understood as networks. As Ahrne and Brunsson (2011) explain, a network is commonly defined as an “informal structure of relationships linking social actors [. . .where. . .] personal relationships among people from various organizations are often decisive factors” (p. 88). Networks are thus regarded as a collection of actors engaged in repeated, enduring exchange relations with one another where ties are characterized by trust and reciprocity (Podolny & Page, 1998). In their pure form, networks represent a different form of coordination to organizations, however.

Key to this distinction is that while networks arise spontaneously, organizations are characterized by purposive decision making. A pure network can be expected to contain no organizational elements, instead being an emergent, flexible, and spontaneous means through which human actions is coordinated. In practice, however, to coordinate activities effectively and in a goal oriented manner, networks tend to adopt organizational practices, at least in a partial form (Ahrne & Brunsson, 2011, p. 92). In this sense, organizations (both partial and complete) can be distinguished from networks in their pure form, even though in practice networks can adopt some features of organizations. While pure networks represent social orders that rise organically through reciprocal interaction (Borgatti & Foster, 2003; Podolny & Page, 1998), organization adds to them elements of deliberate design and decision making.

In formal organizations, Ahrne and Brunsson (2011) explicate, coordinated decision making is achieved through the presence of five specific elements:

Membership—Membership concerns who is permitted to be a part of the organization, such that those who are members are treated differently to outsiders. Within organizations, membership is explicitly decided and confers specific rights, privileges, and expectations. This differs from pure networks, where participation is based on social connection rather than determined inclusion.

Hierarchy—Hierarchy is a form of organizing whereby some members of an organization, by virtue of a decision or a vote, have “a right to oblige others to comply with central decisions” (p. 86). Hierarchy serves to distribute authority across an organization such that action can be coordinated based on commands from those who occupy superordinate positions.

Rules—Rules in organizations set out how members are expected to behave in given situations. These are different to norms based on socialization, in that they are formally decided upon and explicitly communicated.

Monitoring—Organizations monitor the extent to which members comply with both hierarchical commands and prescribed rules. Monitoring is formal and explicit and ensures both that prohibited actions are not taken and that the performance of prescribed actions is assessed.

Sanctions—Finally, sanctions in organizations refer to decisions taken to both reward and punish members as a means to influence their behavior in line with organizationally decided objectives.

As Ahrne and Brunsson explain, formal organizations exhibit all five of these elements. By contrast, social order that is partially organized is characterized by a subset of them. Despite this distinction, a partially organized social arrangement can still be a “decided order” (p. 84) which exhibits some of the defining elements of complete and formal organizations. The concept of partial organization thus recognizes that different organizational elements can be recombined by actors outside of formal organizations to achieve their goals (Rasche et al., 2013, p. 652). Ahrne and Brunsson (2011, pp. 90-92) elucidate that organizations exist to create order, certainty, and justification through deliberate forms of human coordination. Organizations are decision orders that attempt to assert purposive human control over social, political, and/or economic activity. However, they are often fragile as whether organizational outcomes will reflect the intentions of its human architects remains uncertain (Ahrne & Brunsson, 2011, pp. 90-91). Notably, partial organization is more likely to be questioned, to be unstable, and to be prone to change and failure compared to formal organizations that have “complete” organizational features, on account of its more limited use of the core elements of organizing (Ahrne & Brunsson, 2011, p. 92).

Are Corrupt Networks Organized?

While there has, to date, been no research that has explicitly studied corruption networks in terms of their partial organization, existing research suggests, at least implicitly, that such networks rely on organizational elements to operate. As with other networks, the governance of corruption networks has been said to rely on social capital, understood as the “goodwill that is engendered by the fabric of social relations and that can be mobilized to facilitate action” (Adler & Kwon, 2002, p. 17). Hence, the sources of social capital identified by economic sociologists, such as reciprocal transactions, solidarity among in-group members, and “enforceable trust” (Portes & Sensenbrenner, 1993), apply also to corruption networks. Commitments to group members are likely to take priority over those to out-group members (Cartier-Bresson, 1997, p. 465). All of this is suggestive of partial organization because it implies that social relations will create membership categorizations, and that collective network activity is something that can be deliberate rather than purely emergent. Moreover, this indicates that enforcement of trust in corruption networks will require influence over intraorganizational processes as well as over the behavior of the participants in the network.

As stipulated in the research literature on corrupt processes within organizations (Anand et al., 2005; Brief, Buttram, & Dukerich, 2001; Palmer, 2008), corruption often begins with select top managers using formal authority to direct subordinates to participate in wrongdoing. Commitment processes ensure that subordinates comply because the employees are likely to view these directions as legitimate (Brief et al., 2001) or to fear sanction. The role of organizational routines, defined by Feldman and Pentland (2003) as “repetitive, recognizable patterns of interdependent actions, carried out by multiple actors” (p. 95), is key to the normalization and sanction of corruption. This is so because routines are fundamental to the accomplishment of tasks and goals within an organization and to the coordination of organizational skills (Rerup & Feldman, 2011). In corrupt formal organizations, wrongdoing has thus been seen to have become embedded in routines over time as the repetitive and mundane nature of habituated activities allows them to be taken for granted (Earle, Spicer, & Peter, 2010; Pinto, Leana, & Pil, 2008).

The foregoing discussion motivates us to ask how organizational characteristics might be used by corruption networks to coordinate corrupt activities and to influence intraorganizational processes. Because corruption networks can span the boundaries of multiple individuals, corporations, markets, states, and sometimes even families, they are aptly placed to draw on norms and practices that span different spheres. But the interorganizational connections in a corruption network as well as how interorganizational connections influence intraorganizational dynamics have hitherto remained unexamined. The small but growing body of work on corruption networks has argued that reform is extremely difficult because these networks help to establish new norms where corrupt activities come to be seen as legitimate (Earle et al., 2010, p. 220), they often co-opt reformers and disrupt their efforts (Nielsen, 2003, p. 127), and resources become redistributed over time to ensure continued investment in corruption activities (Misangyi, Weaver, & Elms, 2008). We seek to examine how organizational characteristics facilitate networked corruption as well as the conditions under which they contribute to network persistence over time. In the rest of the article, we refer to members of the South Korean maritime corruption network, which themselves are formal organizations, as organizations. We refer to partial organization as the extent to which the network itself was organized or adopted organizational elements as defined by Ahrne and Brunsson (2011).

Background and Method

Research Context: Networked Corruption in Korea and the Sewol Ferry Disaster

As already canvassed, the purpose of this research was to examine the extent to which corruption networks are governed by elements of formal organizations, and to assess whether partial organizing can facilitate networked forms of corruption. To pursue this, our overall approach has been to select a specific case of a corruption network, identify the organizational elements that it was characterized by, to consider how and to what effect those elements operated, and then to use that to draw more general conclusions about the organization of corruption. The particular case we chose was a corruption network in South Korea’s maritime industry that was discovered following its involvement in a high-profile disaster involving the sinking of a passenger ferry.

To understand the details of the case, we need to consider the particular context in which it occurred. Rapid growth during the 1970s and 1980s catapulted South Korea from war-torn poverty to a level of economic development consistent with membership of the OECD within a record 40 years. A relatively new democracy, the country had its first free and competitive elections in 1987 after many years of military-backed dictatorship. State-led development was accompanied by the repression of political dissent, particularly in the form of organized labor (Frenkel & Yu, 2014). In 1992, the first civilian president was elected and since then regime changes have been peaceful, albeit contentious. At this time, the protection of private property over social protection was institutionalized in economic policies that privileged large conglomerate groups of corporations (chaebol) that received favoritism in exchange for political donations (Amsden, 2001).

Despite the rapid economic growth and OECD membership, Korea remains to this day one of several developed countries that experiences persistent problems in governance, transparency, and corruption. In 2015, it ranked 37 out of 168 countries surveyed in Transparency International’s Perceived Corruption Index, scoring 56 out of 100. Surveys also show a prevailing lack of public trust in political and judicial institutions (Kim, 2005). Investigations into large-scale industrial and public works accidents have revealed that a prevalent form of corruption in Korea occurs through networks that encompass the private and public sectors in major industries (Bello & Rosenfeld, 1990, pp. 24-25). Since 1990, there have been at least eight industrial and public works accidents that have caused a total of more than 10,000 civilian deaths (South Korea Industry’s Deadly Conditions Built on Culture of Cover-Up, 2017).

One of the most well-known and tragic of these accidents concerns the Sewol ferry which sank on April 16, 2014, leading to the drowning of 304 of its 476 passengers. Among the victims, 250 were high school students on a trip to the island of Jeju. In the first few days, the focus was on the egregious acts of crew members who fled the ferry, leaving passengers to sink with it. To the dismay and fury of the relatives of the victims, the captain and crew members repeatedly told the passengers to stay where they were while they themselves fled to safety. In time, it became clear that the ferry, which was carrying twice the permitted weight and only 25% of the required volume of ballast water, had sunk due to rapid listing (National Assembly, 2014, p. 3). It was also revealed that illegal remodeling which added two extra decks had been undertaken in recent years, further contributing to the ferry’s destabilization. The Coast Guard failed to issue a rescue order and led a bungled rescue effort carried out by an illicitly favored private company whose expertise was salvaging shipwrecks rather than saving lives. Not one life was saved from among those trapped inside the vessel. Only those who had freed themselves and made it out into the sea were rescued.

The aftermath of the disaster uncovered a chain of inspection failures, botched rescue efforts, and cover-ups by participants who were part of a corruption network that included government officials, inspection agencies, the Coast Guard, professional rescue companies, and the ship owner and his employees. The corruption that was central to the Sewol disaster provides us with an empirical case study through which we can examine how corruption networks motivate and condition wrongdoing in participating organizations, as well as to examine how corruption networks respond to systemic shocks such as public scrutiny. It also provides a case through which we can consider how the organization of the network itself enabled the corruption to occur and, until the accident, remain undetected.

Methodologically, our approach is of value in light of calls for more theory building in the study of corruption that draws from contextualized cases. As De Graaf (2007) states,

[m]ore research is needed in actual corruption cases, research with special attention to the necessary and sufficient conditions of corruption in a particular case. [ . . .] Case studies offer the advantage of richer details of actual cases and their contextuality. (p. 64)

Jávor and Jancsics (2016) concur, suggesting that the dominance of survey based research in corruption studies has meant that we do not yet have an adequate “picture of how corruption works within organizations, or about who the players are, what their roles in corruption are” (p. 528). The case study method addresses such a gap, allowing for careful and in-depth observation of behavior and processes that cannot be manipulated (Eisenhardt, 1989; Yin, 1994). Moreover, qualitative case study analysis enables the unpacking of complex processes that unfold over time. The nature of our data enables us to observe organizing in a corruption network before and after the disaster that exposed its organizational features, allowing us to provide a dynamic conceptualization of organization in corruption networks.

Data and Analysis

Observing corruption in action is a difficult task because of the clandestine nature of corrupt operations (De Graaf, 2007; Jávor & Jancsics, 2016). The national outcry and momentum to investigate the sources of wrongdoing leading to the Sewol disaster provided opportune data whose collection was impelled by a government, who, despite being implicated in the disaster, desired to be seen as leading the inquiry. The main body of data analyzed for this study is archival in form, comprising of all official minutes of hearings on the disaster, reports from two investigations into the accident (one by the Prosecution and the other by an independent legal association), as well as media reports on the accident and related investigations. Specific documents examined included minutes of hearings held by the Parliamentary Committee on the Sewol disaster in June, 2014, the Prosecution Services report on criminal investigations, an inquiry into the Sewol disaster by the Lawyers for a Democratic Society (a legal association focusing on civil rights), as well as 14 investigative journalism reports on the disaster published in media sources including printed and broadcasted media. Archival sources cited directly in the article are specified via in-text citations and in the bibliography. A full list of archival sources is in the Appendix. In addition, two opportunistic interviews were conducted by the first author with a retired member of the Coast Guard and a relative of a deceased student on board Sewol. While additional interviews may have benefited the research, interviews in studies of corruption are by nature selective and can be difficult to verify (De Graaf, 2007; Jávor & Jancsics, 2016). The availability of archival data from congressional hearings and inquiries by the prosecution service, then, enabled fact checking against the many sources of investigative journalism documenting the case. Moreover, while official inquiries provided a window to the operation of the corruption network leading up to the disaster, press articles allowed us to follow network responses post exposure. We thus were able to analyze network organization before and after a major crisis.

The data were coded in sequence (Miles & Huberman, 1994). As a first step, concepts and themes emerging from the data, as well as the relationships between them, were identified and mapped. In addition, patterns in internal dynamics within the corruption network were identified through inductive coding (Gioia, Corley, & Hamilton, 2013) and refined by comparing and contrasting with extant literature on institutionalized and networked corruption (Cartier-Bresson, 1997; Jancsics & Jávor, 2012). A second coding was undertaken to identify patterns in the data as related to the organizational characteristics of the network. This specifically involved using the data to investigate the extent to which the organizational elements identified by Ahrne and Brunsson (2011; membership, hierarchy, rules, monitoring, and sanctions) were present in the network, and if so how they enabled corrupt activities to take place. We assessed which of the organizational elements were more strongly present than others, as well as the respective purposes for which each one was deployed. The third step in the coding exercise identified patterns in the data in the aftermath of exposes that revealed the corruption network. Temporal bracketing (Langley, 1999) was used to compare and contrast the organizational elements of network activities before the Sewol disaster and after the initial exposure, as well as the transition between them. Examining the actions undertaken under different levels of existential threat helped clarify the connections among participants as well as to identify the conditions under which elements of formal organization were rescinded and/or abandoned in favor of preserving connections between actors (Ahrne & Brunsson, 2011, p. 88).

Organizing the Maritime Corruption Network

In this section, we analyze the partial organization of the corruption network, presenting our findings in terms of if and how it deployed the central organizational elements identified by Ahrne and Brunsson (2011). In doing so, we focus not only on describing these elements but also on exploring how they relate to the network’s ability to coordinate its activities, elicit compliance, and purposively engage in corrupt activities without detection. This analysis enables us to assess the corruption network as being partially organized, as well as to lead into the analysis of the subsequent section where we present how the network responded to failure and the threat of potential demise in the aftermath of Sewol. It is on that basis that we both identify and reveal the dynamic nature of the partial organization of networked corruption.

Membership

To begin examining the organization of the corruption network involved in the disaster, we first consider the extent to which it set boundaries of membership that delineated insiders from outsiders, as well as determined specific expectations of members (Ahrne & Brunsson, 2011). Our analysis revealed that the network was bounded by and policed through exclusive exchange relationships between a specific and identifiable set of members. Dependencies between network participants were honored through three types of relationships: contractual, ownership, and gift exchange. Figure 1 outlines the member organizations of the maritime corruption network and specifies relationships between them. Membership in the network was organized along two lines, each accruing specific benefits for and invoking responsibilities of members. The first represented relationships that facilitated corruption in predeparture safety inspections and the second represented ties that supported rent extraction in rescue and salvage operations.

Figure 1.

Membership and hierarchy in the maritime corruption network.

Officials in the Ministry of Maritime Affairs (MMA), the Registry of Shipping, and Chonghaejin Marine, the owner and operator of Sewol, were involved in corruption around safety inspections. Rent extraction in rescue and salvage involved MMA officials, the Coast Guard, the Rescue and Salvage Association, and individual rescue and salvage companies. Members of the national assembly also participated in the network, offering favorable rule-making in exchange for gifts. Finally, the network was connected to financial institutions that did not directly engage in corrupt activities but were influenced by the Ministry and members of the assembly participating in the network and provided preferential financing to network members.

An example of exclusive contracting between members in the network was evident in the rescue and salvage operations for Sewol. In the aftermath of the disaster, Chonghaejin, Sewol’s operator and a participant in the corruption network, was instructed by the Coast Guard to contract exclusively with Undine, a network member and a salvage company in which the government had financial interests (Sun Jin Accounting, 2014, p. 11). Undine was contracted exclusively even though they did not specialize in rescue operations. This deal was brokered despite the presence of several salvage companies in closer proximity to Sewol, and despite offers of assistance from the navy (Lawyers for a Democratic Society, 2014, pp. 123, 135; Prosecution Service, 2014). Classified information on the unfolding disaster was also shared with Undine exclusively by the Coast Guard (Prosecution Service, 2014). In these transactions, we can clearly see how membership within the network was utilized as a conduit for corrupt activities, with outsiders being excluded from access to contracts.

Cross-ownership and preferential financing were defining benefits of membership. The government heavily subsidized and often owned shares in private companies who were members of the network, and this motivated preferential contracting of these firms in rescue and salvage operations. For example, 30% of Undine’s shares were owned by an investment consortium of government Ministries (Lawyers for a Democratic Society, 2014, p. 135; Sun Jin Accounting, 2014). Despite a low credit rating, Undine received increasingly large amounts of government subsidies and payment guarantees in the years leading up to the Sewol disaster (Sun Jin Accounting, 2014).

Relationships among members of the network were guarded with secrecy, even though they were known explicitly to the members themselves. The result was a clandestine organization whose members were able to sidestep safety measures. Similar privileges were not available to those outside of the network. The tight hold on information is evident from the fact that when the accident was first reported to high-level bureaucrats in the MMA, top officials who were not involved in the corruption network initially assumed that vessels of Sewol’s size had the capacity for self-restoring balance, leading to a delayed response time. Similarly, the Coast Guard eschewed assistance from the Korean navy and the American military base in Korea to keep their operations veiled (Lawyers for a Democratic Society, 2014, pp. 105, 122) and membership rights intact.

In addition to the secrecy and exclusivity of membership, potential scrutiny was also avoided by members adopting organizational forms that deflected attention. This enabled membership to be maintained as an organizing feature, while retaining the network’s clandestine nature. Private and not-for-profit ownership structures were commonly preferred; among private companies, family ownership was customary. Shipping companies, including Chonghaejin, the company operating Sewol, were typically family-owned, which allowed for tight control over internal management. The Register of Shipping easily qualified to be a public agency with over 90% of its revenue rising from commissioned work from the government. Nevertheless, maintaining private status exempted it from government oversight and, in turn, absolved authorities from accountability (National Assembly, 2014, p. 55). Not-for-profit status conferred relatively light reporting requirements on member organizations, and this explained how the operation of members such as the Shipping Association, an interest group for ship owners, maintained low visibility (Lawyers for a Democratic Society, 2014, p. 34).

Hierarchy

The corruption network had constructed a reciprocal but unequal system of exchange supported by dependent relations that had developed over decades. As Ahrne and Brunsson (2011) specify, an organization is a social arrangement based on decisions that are implemented through hierarchical relationships. In the case of this corruption network, a hierarchy was imposed in the exchange system with proximity to rule-making bodies (i.e., government or the national assembly) determining the level of authority in the system. In Figure 1, we depict this hierarchy in terms of levels of power and authority within the network, with network members engaged in rule-making at the top, followed by members engaged in rule enforcement, followed by two levels of rent extraction. Initially, rent was extracted at the company level—hence, Undine and Sewol extracted rent for the rescue and salvage and safety inspections membership lines, respectively. These rents were subsequently appropriated at the industry level by the Rescue and Salvage Association and ship owners such as Chonghaejin Marine (see Figure 1). While not a bureaucratic hierarchy as common in formal organizations, hierarchy within the network specified who had authority to issue organizational commands, how that authority became vested in individuals, and who was expected to follow.

In practice, member organizations lower in the hierarchy managed up by reserving key positions in their organization for individuals who “parachuted” down from organizations higher up in the network. For example, eight out of 12 former chairs of the Register of Shipping were ex-officials from the MMA (Lawyers for a Democratic Society, 2014, pp. 27-28). Among the past 12 chairs of the Shipping Association, 10 were former MMA officials. Organizations lower in the hierarchy counterbalanced the “managing up” expenses with revenue gained through routine overloading (on average, a Sewol trip was 52% overloaded; [Prosecution Service, 2014, p. 44]), and adjusted their human resource management practices to accommodate “parachutes” (see “Routines Instead of Rules” section). Reserved positions for retired government officials in lower ranking organizations illustrated the long-term nature of the transactions, which Cartier-Bresson (1997, p. 474) characterizes as a “futures market” for corruption. They served as both an investment, meant to demonstrate to current office holders the expected returns for their collaboration, as well as a deterrent for investigations, because current office holders were reluctant to inspect potential wrongdoing in organizations headed by their former peers or superiors (Lawyers for a Democratic Society, 2014, p. 28). Reflecting the terms of exchange in the network described above, organizations lower in the hierarchy were top-heavy, and their executives were paid high salaries cushioned with bonuses and benefits that were discrepant with not-for-profit organization status (National Assembly, 2014, p. 103). The Register of Shipping, for example, had a high proportion of executives (107 out of a total of 860 employees) whose perks included frequently being treated to first-class overseas trips (National Assembly, 2014, p. 86).

Finally, the ongoing provision of “entertainment,” ranging from wining and dining to direct cash bribes to members of organizations higher in the hierarchy, formed part of the exchange (National Assembly, 2014, pp. 37-38). Again, internal resource allocation in low-ranking organizations was adjusted to privilege obligations to high-ranking organizations. Hence, Chonghaejin’s “entertainment expenses” increased from 50.7 to 60.6 m won between 2012 and 2013 (D. H. Jeong, 2014). Total training expenses, on the contrary, decreased in the same period, accounting for a mere 540,000 won (US$438) in 2013 (National Assembly, 2014, p. 28). Officials in high-ranking organizations reciprocated by turning a blind eye to rule violations and providing preferential financing opportunities. Thus, falsified safety checks and voyage plans—which document a ship’s carrying capacity and weight—were the norm in the passenger ferry industry (National Assembly, 2014, pp. 54-55, 60-61).

Preferential financing was extended to organizations lower in the hierarchy from public financial institutions in response to influencing from high-ranking participants in the maritime corruption network. In fact, Chonghaejin used one of the loans it received from government banks to build two additional decks on Sewol, raising its carrying capacity and the number of permitted passengers and precariously altering the center of gravity (H. M. Jeong, 2014). Parliamentary inquiries revealed that, as a result of organized corruption, passenger ferry accidents owing to faulty vessels increased from 6.6% to 12.1% between 2011 and 2012, despite 99.9% of vessels having passed safety inspections during this period (National Assembly, 2014, p. 54; Lawyers for a Democratic Society, 2014, pp. 29-30).

Routines Instead of Rules

Ahrne and Brunsson (2011) articulate that the existence of explicit rules for conduct and action are necessarily a part of formal organization. While, as we have seen above, this corruption network showed clear evidence of organizational elements of membership and hierarchy, explicit rules were not present. The avoidance of explicit rules reinforces our conclusion that the network can be characterized by partial organization but also indicates why that partiality was necessary. In theorizing the importance of organization for networks, Ahrne and Brunsson (2011) state that ensuring transparency was a primary concern. As we have already seen, this is an assumption that does not hold for networks engaged in illegal activities given that, in the “shadow economy,” effective organizing relies on secrecy and illicit transactions (Cederström & Fleming, 2016). As such, we can expect the partial organization of corrupt networks to take on its own unique set of characteristics, and, as our analysis revealed, this includes the absence of rules.

To operate in an organized manner and for the corrupt practices to occur, the network still required consistent and predictable behavior from its members. To achieve this, specific organizational routines were present that served to define expectations (albeit tacitly and informally) as well as to normalize and authorize wrongdoing (Earle et al., 2010). For example, overloading ferries with passengers and cargo to cover costs of managing up had become an organizational routine at Sewol, even though there was no “rule” per se indicating that this should be done. In another example, a pilot trainee testified that his induction training at Sewol included manoeuvers designed to prevent the ferry from listing due to overloading (Lawyers for a Democratic Society, 2014, p. 53).

Human resource management systems in participating organizations were designed to support participation in illicit activities; again, this was not rule-based but routinized. Workforce management was characterized by command and control, poor working conditions, and lack of voice and discretion for employees. Front-line workers were typically hired on contingent contracts. Of the 29 crew members on Sewol, 15 were contract workers and interns who were ineligible for death and accident benefits (National Assembly, 2014, p. 85; Lawyers for a Democratic Society, 2014, p. 88). As seen in Table 1, which compares expenditure levels at Chonghaejin to other companies in the ferry business, salary levels of Chonghaejin employees were approximately 60% to 70% of those of other shipping companies, and those working on Sewol were even lower (Lawyers for a Democratic Society, 2014, p. 88; Kang, 2014). Recruitment was often based on personal ties and loyalties. Records show that concerns regarding Sewol’s safety had been raised internally at Chonghaejin in 2012 and again in 2013, when many executives were in favor of selling the aging ferry overseas (Jang, 2014). As well as attesting to the presence of established routines, this incident also shows how routines privileged continued participation in the network over the following of explicit rules in member organizations.

Table 1.

Comparison of Expenditures in Nine Largest Shipping Companies, 1,000 won, 2013.

Expenditure	Goryeo	Namhae	Daea	Dongyang	Bugwan	Sea World	Chonghaejin	Panstar	Hanil
Sales (billion won)	6.69	17.2	45.6	0.33	19.9	53.3	32.0	46.5	49.2
Training	569	0	11,139	280	0	1,596	541	13,771	0
Average pay	43,123	30,856	70,532	39,376	126,881	43,585	36,331	49,337	38,334
Benefits per employee	5,715	3,139	15,242	6,360	17,395	5,145	1,410	12,455	5,249
Donation	18,438	10,000	43,780	12,500	0	153,890	300	53,592	10,000
Entertainment	33,034	44,907	201,688	17,777	208,932	115,943	60,574	401,265	82,070

Note. The data of Sewol Ferry’s Owner Company, Chonghaejin, are indicated bold.

Source. Shipping companies’ audit reports (H. M. Jeong, 2014).

Finally, member organizations were noted for their aversion to experts, and this was routinized as unquestioned practice. Professionals adhere to standards and norms that come to define their work identity (Abbott, 1988; Covaleski, Dirsmith, Heian, & Samuel, 1998) and are prone to challenge managerial decisions that breach these standards (Dozier & Miceli, 1985). A marked deprofessionalization occurred over time in related businesses and auditing sectors. It was repeatedly pointed out in parliamentary hearings, for example, that the MMA lacked technical experts to audit the Register of Shipping (National Assembly, 2014, p. 60), that the lack of rescue experts in the Coast Guard severely jeopardized their ability to save lives (p. 65), and that the Register of Shipping had a 30:70 ratio of technical to administrative personnel when the international norm was 70:30 (p. 86).

Monitoring and Sanctions

While not an overt feature of the corruption network, our analysis also revealed how, in some cases, obligations were reenforced through direct orders and control from the hierarchy. While monitoring and sanctions supported hierarchical control in the corruption network, secrecy and the use of implicit routines in lieu of explicit rules restricted the extent of surveillance, marking a key distinction between the partially organized network and a formal organization. While sanctions and monitoring were not prevalent, we found indications of their informal presence. For example, it was evident in staff testimonies attesting that they were instructed to always record “all normal” in inspection reports, and that the chairman of the company himself directed staff to engage in overloading ferries (National Assembly, 2014, p. 44). Two possible explanations can be posed for why we observed limited evidence for the use of monitoring and sanctions. First, the clandestine nature of the corruption network may have restricted the ability of participants to establish methods for monitoring and for administering rewards and sanctions. Second, there may have been a higher level of monitoring and sanctions that nevertheless remained hidden, and therefore not visible to researchers.

Formal processes developed for accident prevention became meaningless rituals in the face of the urgency to comply with orders from and obligations to the hierarchical network. The fear of sanctions as well as poor working conditions bred mistrust and lack of commitment, which were partly blamed for the seemingly inexplicable behavior of the crew in the aftermath of the Sewol disaster. These included the Sewol crew instructing passengers to stay in their cabins, failing to press the emergency lever which would have sent disaster signals to all relevant vessel traffic service centers, and escaping before others (Lawyers for a Democratic Society, 2014, p. 87).

The Dynamic Nature of Organization in the Corruption Network

The analysis presented above confirms that the corruption network involved in the Sewol disaster can be correctly assessed as containing the features of partial organization, and that its organizational character was a central enabler of its corrupt activities. The organizational elements present in the network were all directed toward controlling exchange, governance, and practices within and among member organizations. The organizational elements most prevalent in the network were management through hierarchical relationships and strict control over membership, member benefits, and member expectations. Rewards that accrued from corrupt activities enabled the hierarchy to operate effectively, even though monitoring and sanctions (although present) were not used extensively. The incomplete nature of organization in the corruption network was most notable in that, unlike in formal organizations, explicit rules were avoided to maintain the clandestine nature of the network, while established routines ensured predictable behavior from members.

We now go on to explore the organizational elements of corruption networks especially in relation to their adaptability to change. Partial organization, while a feature of the corruption network prior to the disaster, proved not to be a stable characteristic. This became apparent when the illegal activities came under scrutiny in the aftermath of the disaster. Indeed, as we now move on to show, our research illustrates how partial organization can both develop and recede over the lifespan of a corruption network, and that this adaptability is central to the perpetuation of corruption.

The Failure of Organization

The “fragility” of partial organization (Ahrne & Brunsson, 2011, p. 91) became visible in the aftermath of the disaster. Despite power being concentrated in the upper ranks of the network, the Sewol accident demonstrates that it was most vulnerable at the lowest ranks due to routinized behaviors that made actors impervious to the consequence of their actions. We find that when faced with existential threat the hierarchy of the corruption network folded in, seeking to preserve and protect the network’s most powerful members. In the lower ranks of the network’s hierarchy workers were remunerated for following orders rather than for avoiding accidents. The behavior of front-line employees in Sewol and inspection agencies indicates overconfidence (Aven, 2015, p. 982) from normalized and undeterred wrongdoing. Sewol’s voyage plan reported an incorrect vessel weight, did not include a passenger list, and had the wrong date on record, yet it passed predeparture inspections (Lawyers for a Democratic Society, 2014, pp. 34, 41). Anticipating the usual impunity and lacking incentives to ensure a minimum safety standard that would protect the network from public scrutiny, crew members acted recklessly. For instance, the crew started the ferry within 3 min of the last piece of cargo being loaded on deck, which meant there was insufficient time to securely fasten the cargo (Lawyers for a Democratic Society, 2014, p. 58). In part this was due to the inadequacy of the partial organization and its failure to have developed routines and monitoring activities that could ensure that accidents were avoided.

Once discovered, individual member organizations focused on self-preservation instead of acting to protect the network and its organization as a whole. This brought about a receding of the organizational features of the corruption network, specifically of its well-guarded membership and hierarchical dependency relationships. In the immediate aftermath of the accident, network members’ focus was on covering up incriminating evidence instead of on rescuing stranded passengers. For example, Chonghaejin staff met on the day after the accident to forge reports on the permitted and actual weights as well as the number of passengers carried by the ferry (Lawyers for a Democratic Society, 2014, p. 85). MMA officials deleted parts of an emergency response report that revealed the Minister’s whereabouts at the time of the accident as well as a planned press release that excused the relevant agencies involved by stating that due process in vessel inspections had been followed (Lawyers for a Democratic Society, 2014, p. 147; National Assembly, 2014, p. 70). A regional vessel traffic service center which failed to detect Sewol’s distress signals erased records of communication with Sewol as well as closed-circuit television (CCTV) footage that would reveal staff absenteeism (Prosecution Service, 2014).

Actors in mid-to-high ranking organizations at first denied their engagement in corruption altogether, and later sought to distance themselves from the accident by imputing ignorance or powerlessness. Thus, contrary to Ahrne and Brunsson’s (2011) conceptualization of organization as a hierarchy in which control is exercised by those at the top of the organization assuming responsibility for organizational decisions, we found that the organization of corruption networks provided impunity to those at the top. Specifically, the Register of Shipping presented itself as a victim of fabricated information, insisting that organizational members had acted “professionally and morally” (National Assembly, 2014, pp. 37-38), and the National Security Council denied that they were the control tower for national disasters (Lawyers for a Democratic Society, 2014, pp. 118-119). Powerlessness was often invoked as an explanation for inaction by government officials. As a retired member of the Coast Guard attested, “Government authority submits to powerful ship owners like the owner of the Sewol ferry in many cases. I felt ashamed at the reality in which we could not exercise power even after seeing overloaded or illegal cargo” (Personal Interview).

Blaming other participants in the corruption network and even victims’ families was commonplace and provided further evidence of the breakdown of the partially organized dimensions of the network. For example, officials at the Disaster Response Unit argued that they were not consulted by the Coast Guard in the latter’s decision to issue a salvage order instead of a rescue order; the latter would have prioritized rescuing victims (Lawyers for a Democratic Society, 2014, p. 139). The Coast Guard in turn suggested that rescue efforts stalled because they sought to incorporate the opinions of victims’ relatives in selecting the appropriate equipment (National Assembly, 2014, p. 32). It was also suggested by those in positions of authority that the relatives of the deceased and other sympathizers sought to benefit from the accident by making excessive claims for reparations, and that their “obsession” prevented the nation from moving on (Han, 2014).

Preserving the Network

While the disaster saw the organizational elements of the network disintegrate, over time this gave way to cautious attempts to undermine the attack on the corruption network and regain lost territory. Although it was clearly diminished in both size and power, the network sought to persist, for example, by deflecting the public attacks against its members by accusing victims’ families and community activists of “scaremongering” and manufacturing a semblance of reformation by scapegoating the lowest in the hierarchy of the network. While membership, as a partially organized feature of the network, was impossible to police under threat from public scrutiny, we could discern continued activities that indicated former members were still colluding to preserve the network. For example, participants in the corruption network continued to draw on accepted elements of Korean culture concerning free enterprise and private property and that had once facilitated their wrongdoing to protect what remained of their vested interests. Hence, it was argued that protests sparked by Sewol were hurting businesses in the region where the accident took place (National Assembly, 2014, p. 73).

The MMA argued that to allow for businesses to adjust, a gradual strengthening of regulations in the industry was preferable to drastic changes (National Assembly, 2014, p. 73). Furthermore, the government invoked the importance of national security to contain protests and public outrage. Within months of the accident, the prosecution announced that it would be doing everything to contain “false rumors,” promising severe punishment if it were not heeded (M. Y. Jeong, 2014c). Dozens of protesters were arrested, including family members of the deceased, and protest organizers were placed under surveillance (Lawyers for a Democratic Society, 2014, pp. 153, 154). At the same time, officials tried to repress reporting on the extent of corruption. The MMA, for example, dedicated large sections of their disaster response plan to “communication strategy” (Lawyers for a Democratic Society, 2014, p. 118). Similarly, the President’s press secretary implored reporters to “help us out this one time” by toning down the reporting on the disaster. The President’s office also rescinded access for reporters who documented his plea (Lawyers for a Democratic Society, 2014, p. 142).

As a result of self-preservation efforts by higher ranking actors in the corruption network, arrests and charges associated with the Sewol disaster mostly involved organizations in the lower echelons of the network. The dynamics at play here showed how the network was able to modify its operation and reduce its use of organizational elements as a means through which to ensure network continuity at a time of crisis. Indeed, while surviving crew members of Sewol, executives of Chonghaejin, and front-line managers of the Shipping Registry and the Shipping Association were charged and sentenced (Prosecution Service, 2014); participants closest to the power center in the network, as well as their relationships, were left intact. Equally revealing, national assembly members who were connected to the corruption network were not even investigated (Lawyers for a Democratic Society, 2014, p. 15). Finally, the Special Act on Sewol passed by the assembly, which was legislated to facilitate investigations and administer disaster funds, fell short of expectations. The Special Committee on Sewol, a body established by the aforementioned Act, had neither investigative powers nor the authority to put forth criminal charges (Prosecution Service, 2014). It can thus be surmised that despite the removal of many front-line staff involved in corruption, actors close to rule-making will continue to seek opportunities to benefit from dependent relationships. Minor changes in rules and the preservation of actors in the higher echelons of the corruption network suggest that a corruption network can survive by altering its operations and receding organizational features to avoid destruction. It is thus reasonable to assume that the dynamic nature of organizational properties in corruption networks, while exposing the fragility of organization, may paradoxically add to their resilience. Specifically, corruption networks may rescind partial organization temporarily in times of crisis as they await latent activation.

Conclusion

The case of the Sewol disaster helps us better comprehend how corruption networks both operate and endure in relation to the organizational elements they deploy. While our understanding of persistent and widespread corruption has been deepened by the existing research on its networked operation, this case is valuable in allowing us to consider specifically, and for the first time, how corruption networks operate through partial organization (Ahrne & Brunsson, 2011), and how this form of organizing facilitates the long-term efficacy of corrupt activities. Accordingly, a principal contribution of this article has been to show how understanding the phenomena of partial organization is key to developing deeper knowledge of how corruption networks manage exchange relationships and enforce trust.

Through this study, we have demonstrated that corruption networks can take on some features of decision-driven, centralized and purposive features that are normally considered to characterize formal organizations. We have shown how the organizational elements of hierarchy, membership, rules/norms, monitoring, and sanctions (Ahrne & Brunsson, 2011) can be deliberately and selectively used to facilitate widespread corrupt activities that are both clandestine and sustained. This is an important finding that builds on our knowledge of how corruption is both practiced and how it can be mitigated. Findings from this study are especially pertinent given that to date there has been little research or analysis into the interorganizational structures within corruption networks (Jancsics & Jávor, 2012), even though the configuration of activities within these networks has been identified as central to enabling the undetected undertaking of illegal activities (Hudon & Garzón, 2016).

Our findings demonstrate not just that corruption networks are partially organized but also how participation in these networks shapes the routines, practices, and authority relationships of the formal organizations that they comprise. While we have an understanding of routinized wrongdoing within organizations (Anand et al., 2005; Brief et al., 2001), extant literature has not examined the connection between intraorganizational practices and participation in corruption networks. Our findings suggest that such participation distorts routines and practices within member organizations in favor of the interests of the network. In the Sewol case, to meet network obligations participating organizations installed centralized command systems with top-heavy governance structures. They implemented extreme cost controls to enable managing up the network hierarchy and deprofessionalized their workforce to reduce potential dissent and resistance. What this indicates more generally is that participation in organized corruption networks can distort intraorganizational practices in member organizations in favor of a command and control approach to network organization. Moreover, this distortion is a central reason for the efficacy of corruption networks.

Our findings also point to structures that support material exchange among participants in a corruption network. It has been shown how exchange systems set up by corruption networks can be supported by the use of elements normally associated with formal organization to induce, instruct, and sanction the actions of participants. This explains how dominant elements of organization, such as coordinated exchange and lobbying activities, can be deployed by corruption networks to maintain second-order corruption (i.e., influencing rule-making) while avoiding more obvious and detectable forms of first-order corruption (i.e., explicit rule breaking; Zyglidopoulos, 2016). Second-order corruption is less visible, less structured, operates across time and space, and is one of the key ways in which corruption networks operate, as our case has shown. We have shown that organizational routines, and not explicit rules, are crucial to the operation of corruption networks and in second-order corruption. The conclusion that can be drawn from this is that corruption networks are not only sustained by material exchange among participating organizations but also by the use of prevalent organizational norms to influence rule-making.

The Sewol case also sheds light on the dynamic evolution of corruption networks, including conditions under which network exposure can be triggered through accidents and efforts to preserve their existence even after discovery by the public. Our findings suggest that the members of the corruption network developed shared organizational routines that, once normalized, blinded individuals to public safety in favor of a focus on rent extraction, and hence increased the risk of accidents. While we found that network participants showed a likelihood to turn against each other in the event of network exposure, incrimination focused on front-line operatives rather than the center of power; the latter was shown as prone to survive due to distancing from the accident. We can therefore surmise that public exposure of a corruption network can result in a rescinding of its organizational elements of membership and hierarchical control, even though key nodes of network power and the relationship between them may remain intact in this process. Further research is needed to assess how corruption networks survive public scrutiny over accidents, as well as whether organizational features are eventually revived.

Corruption is a global problem and its prevalence is detrimental to the legal and effective operation of government and business, as well as to the proper functioning of democracy. Exposed as a networked phenomenon, if corruption is to be identified and addressed it is imperative that we understand its internal operations. Moreover, an appreciation of the organizational features and dynamics of corruption networks is central to such an understanding. It is to developing such an appreciation that the present article has sought to contribute.

Footnotes

Appendix

Declaration of Conflicting Interests

The authors declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding

The authors received no financial support for the research, authorship, and/or publication of this article.

ORCID iD

Kyoung-Hee Yu

Author Biographies

Kyoung-Hee Yu (PhD, MIT Sloan School of Management) is an associate professor at UTS Business School, University of Technology Sydney, Australia. Her research has focused on institutional and organizational change processes affecting work and employment. Her recent work has examined collective action and politics in institutional change, the international mobility of workers and issues of inclusion, and comparative employment relations in Asia. Her work has been published in the British Journal of Industrial Relations, Work, Employment & Society, Human Relations, and Organization Studies.

Su-Dol Kang (PhD, Bremen University, Germany) is a professor at Korea University (Sejong). His research has focused on labor relations, addictive organization, and work addiction. His recent work has examined the quality of democracy in Korea from the perspective of working people. His work has been published in Asia & Pacific Migration Journal, Inter-Asia Cultural Studies, and Social Behavior & Personality.

Carl Rhodes (DLitt, University of Technology Sydney, Australia) is a professor of organization studies at UTS Business School, University of Technology Sydney. His research critically investigates ethico-political dimensions of organizations and working life, with a special focus on justice, equality, resistance, dissent, and democracy. His recent work can be found in journals such as Business Ethics Quarterly, Human Relations, Journal of Business Ethics, and Organization Studies.

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