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A Person--Organization Discontinuity in Contract Perception: Why Corporations Can Get Away with Breaking Contracts But Individuals Cannot

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  • Uriel Haran

    (Department of Management, Ben-Gurion University of the Negev, Beer-Sheva 8410501, Israel)

Abstract

Most legal systems in the world follow the principle of corporate personhood, which grants organizations the same legal status as natural persons. Although debate over the notion of corporate personhood has been fierce, whether and how this principle is applied in people's beliefs and intuitions has yet to be empirically examined. This work addresses the gap in the literature, in the context of formal contracts. While contracts are typically seen as either morally binding promises or morally neutral business instruments, the data presented here show that contracts of individuals are associated more strongly with promises than are contracts of organizations. As a result, breach of contract by an individual is seen as a moral transgression. The same behavior by an organization, however, is viewed more as a legitimate business decision. This paper also finds that contractual obligations should be phrased in “promise” terms to eliminate this person--organization discontinuity.Data, as supplemental material, are available at http://dx.doi.org/10.1287/mnsc.2013.1745 . This paper was accepted by Yuval Rottenstreich, judgment and decision making.

Suggested Citation

  • Uriel Haran, 2013. "A Person--Organization Discontinuity in Contract Perception: Why Corporations Can Get Away with Breaking Contracts But Individuals Cannot," Management Science, INFORMS, vol. 59(12), pages 2837-2853, December.
    • Handle: RePEc:inm:ormnsc:v:59:y:2013:i:12:p:2837-2853
    DOI: 10.1287/mnsc.2013.1745
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    References listed on IDEAS

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    Cited by:

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    2. Rai, Tage S. & Diermeier, Daniel, 2015. "Corporations are Cyborgs: Organizations elicit anger but not sympathy when they can think but cannot feel," Organizational Behavior and Human Decision Processes, Elsevier, vol. 126(C), pages 18-26.
    3. Arthur S. Jago & Jeffrey Pfeffer, 2019. "Organizations Appear More Unethical than Individuals," Journal of Business Ethics, Springer, vol. 160(1), pages 71-87, November.
    4. Tikotsky, Ariel & Pe'er, Eyal & Feldman, Yuval, 2020. "Which nudges do businesses like? Managers’ attitudes towards nudges directed at their business or at their customers," Journal of Economic Behavior & Organization, Elsevier, vol. 170(C), pages 43-51.
    5. Hafenbrädl, Sebastian & Waeger, Daniel, 2021. "The business case for CSR: A trump card against hypocrisy?," Journal of Business Research, Elsevier, vol. 129(C), pages 838-848.
    6. Uriel Haran & Doron Teichman & Yuval Feldman, 2016. "Formal and Social Enforcement in Response to Individual Versus Corporate Transgressions," Journal of Empirical Legal Studies, John Wiley & Sons, vol. 13(4), pages 786-808, December.
    7. Laudenbach, Christine & Siegel, Stephan, 2024. "Personal communication in an automated world: Evidence from loan repayments," SAFE Working Paper Series 428, Leibniz Institute for Financial Research SAFE.
    8. Anika Schumacher & Robert Mai, 2024. "Organizational Top Dog (vs. Underdog) Narratives Increase the Punishment of Corporate Moral Transgressions: When Dominance is a Liability and Prestige is an Asset," Journal of Business Ethics, Springer, vol. 194(1), pages 19-36, September.
    9. Christine Laudenbach & Jenny Pirschel & Stephan Siegel, 2018. "Personal Communication in an Automated World: Evidence from Loan Repayments," CESifo Working Paper Series 7295, CESifo.
    10. Jeffrey Pfeffer, 2016. "Why the Assholes are Winning: Money Trumps All," Journal of Management Studies, Wiley Blackwell, vol. 53(4), pages 663-669, June.
    11. Alempaki, Despoina & Isoni, Andrea & Read, Daniel, 2023. "Tainted nudge," Organizational Behavior and Human Decision Processes, Elsevier, vol. 176(C).
    12. Arthur S. Jago & Nathanael Fast & Jeffrey Pfeffer, 2022. "Losing More than Money: Organizations’ Prosocial Actions Appear Less Authentic When Their Resources are Declining," Journal of Business Ethics, Springer, vol. 175(2), pages 413-425, January.

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