Overcoming socialized moral hazard: toward a theory of moralized value creation

Odek, Wilson Odhiambo and Chowdhury, Rashedur R. (2024) Overcoming socialized moral hazard: toward a theory of moralized value creation. Academy of Management Proceedings, 2024 (1). (doi:10.5465/AMPROC.2024.19030abstract).

Record type: Article

Abstract

The dark side of moral hazard shows itself when agents hamper the interests of principal. This is a well-established phenomenon in management literature. However, the element of morality is often ignored in moral hazard problems. Such omission of morality may explain the inadequacy of the assumptions underpinning agency theory. The assumptions of agency theory justify, but do not explain, why agents act go rogue by acting against the interests of principals, society and the natural environment. Remedies attempting to correct actions of rogue agents have subsequently lacked a morality element in their recommendations. We conceptualize the absence of morality in moral hazard as socialized moral hazard and show its significance in hampering the pursuit for organizational consciousness for morality and sustainability. Furthermore, we propose a model of moralized value creation that operationalizes morality through incorporating a morality perspective in the day to day running of organizations. Moralized value creation results in tri-dimensional outcomes along social, environmental, and organizational lines that offset socialized moral hazard consequences.

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Odek_Overcoming Socialized Moral Hazard - Toward a Theory of Moralized Value Creation - Accepted Manuscript

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