Robin Hood Under the Hood: Wealth-Based Discrimination in Illicit Customer Help

This paper investigates whether an employee's perception of customer wealth affects their likelihood of engaging in illegal behavior. We propose that envy and empathy lead employees to discriminate in illicitly helping customers based on customer wealth. We test for this hypothesis in the vehicle emissions testing market, where employees have the opportunity to illegally help customers by passing vehicles that would otherwise fail emissions tests. We find that for a significant number of inspectors, leniency is much higher for those customers with standard vehicles than for those with luxury cars, while a smaller group appears to favor wealthy drivers. We also investigate the psychological mechanisms explaining this wealth-based discriminatory behavior using a laboratory study. Our experiment shows that individuals are more willing to illegally help peers when those peers drive standard rather than luxury cars and that envy and empathy mediate this effect. Collectively, our results suggest the presence of wealth-based discrimination in employee-customer relations, and that envy toward wealthy customers and empathy toward those of similar economic status drive much of this illegal behavior. Implications for both theory and practice are discussed. Both the popular press and academic research highlight the prevalence of fraud and other unethical behaviors in organizations (e.g., Herman 2005, Speights and Hilinski 2005). These sources show that employees violate company rules, consumers shoplift, accountants misreport financial information, students cheat on exams, workers evade taxes, and managers overstate performance to superiors. Such unethical behaviors are costly to organizations. According to a recent estimate, employee theft on its own causes U.S. companies to lose approximately $52 billion per year (Weber, Kurke and Pentico 2003). An epidemic of corporate fraud by organizations such as Enron, Worldcom, and Parmalat in one year accounted for an estimated $37-$42 billion loss to the U.S. gross domestic product (Graham, Litan and Sukhtankar 2002). Fraudulent narcotic prescriptions, which often involve complicity by healthcare workers and pharmacists, cost health insurers up to $72.5 billion per year. 1 The economic importance of these illegal activities has generated considerable interest among academics. Yet, to date, researchers have primarily focused on the motives and characteristics of the perpetrators or on the organizational and environmental pressures that influenced their actions. This body of work has overlooked an important factor that may explain and predict employees' likelihood to cross legal boundaries: the victims and beneficiaries of illicit actions. Recent studies in both the psychology and economics literatures show that …