Corporate Malfeasance: Definition & Examples

Instructor: Jessica Mercado

I completed my BA in Criminal Justice in 2015. Currently working on my MS in Homeland Security Management.

In this lesson, corporate malfeasance will be defined in understandable terms. What it means for a corporation when malfeasance occurs, five different types of corporate malfeasance, and examples of malfeasance in global corporations will be explored.

When Bending the Rules Becomes the Norm

Being a CEO of a large company can be extremely challenging. Suppose there was a community oriented man, named Bob, who had been the CEO of a toy corporation for 10 years. He has always been active in his community doing; family fun events, raising money for charity, cleaning up the side of the streets every Saturday, and donating money to his church every Sunday. On the outside Bob looked like the perfect picture of morality, but in fact, operations of the Toy corporation, was another story.

See, Bob wanted to provide for his family in the best way possible, but felt his income was not enough. Bob began embezzling small amounts here and there, thinking the company won't miss it. Bob got greedy and began taking noticeably larger amounts of money, until one day he got caught. The corporation was not profiting like it used to. A look into the corporation's finances, found a money trail that led back to Bob.

This is just an example of what corporate crime could look like in a real life scenario.

So What is Corporate Malfeasance?

Corporate malfeasance is when an employee of high regard such as, an officer or executive member, commit a wrongful or unlawful act. The act can be anywhere from unethical to illegal. These acts are committed with the knowledge their acts are wrong, but they intentionally carry them out anyway, regardless of the consequences, not only to themselves, but to the corporation, the community, and their families.

Bob knew his actions were wrong, but continued carrying out his wrongful and illegal acts because he did not think he would be caught and because he thought he was providing a better life for his family.

What Types of Corporate Malfeasance Are Typically Seen?

Since there are many types of corporate crimes, this lesson will cover the top five corporate malfeasance crimes.

  • Bribery- The intent to take something of value such as: money, services, or information. This is then used to influence: actions, decisions, or opinions, of the person the bribery is intended for. Bribery of any form, is an illegal act. The person committing the bribery and the person who takes the bribery, do so intentionally.
  • Embezzlement- Occurs when an individual, who is entrusted with money or property of a corporation, uses it for their own benefit. In the example provided earlier in the lesson, Bob committed an act of embezzlement when he took funds from the corporation he was a CEO for, and he used it for his own benefit.
  • Money Laundering-Occurs when money is transferred or invested, in order to prevent the money from being traced back to its origin, which was an illegal transaction or scheme. Typically through drug transactions, or embezzlement schemes.
  • Insider Trading- Occurs when an individual uses information that is confidential, or not known to the public, and utilizes that information to conduct trade deals in publicly held companies. An easier explanation would be someone gaining a head start in trading, in order to make successful deals that no one else saw coming.
  • Extortion- Occurs when an individual uses the threat of: force, fear, or violence, in order to illegally obtain property from someone else, under the pretense of official right.

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