When Accountability Backfires: Performance Shortfalls, Effort Substitution, and the Politicization of Organizational Cheating

• In Event: Performance and its Discontents: Contemporary Challenges in Public Management

Abstract

Despite the foundational intent of New Public Management (NPM) to enhance governmental transparency and efficiency through market-based accountability, high-stakes performance evaluations often engender severe organizational pathologies that undermine the public interest. Drawing on the psychological insights of prospect theory and the sociological framework of neo-institutionalism, this study investigates the precise mechanisms that drive public organizations to cross the ethical threshold from legal "performance gaming" into illicit "organizational cheating."We argue that when arbitrary evaluation cutoffs are framed as critical organizational losses, public agencies shift their behavioral profile toward extreme risk-seeking. Under the strain of potential failure, these organizations engage in profound institutional decoupling—publicly reporting sanitized, high-performing metrics while privately violating internal procedures and legal regulations. This cognitive and structural shift manifests empirically as a measurable surge in subsequent audit violations and regulatory breaches.Furthermore, we examine the volatile intersection of politicization and accountability by testing whether politically appointed leaders moderate this illicit effort substitution. We posit that political appointees, often driven by managerial myopia and shielded by significant political capital, are highly susceptible to power-induced moral hazard. This status leads them to systematically underestimate audit risks and pressure their organizations into more aggressive forms of cheating to protect their political standing.Using a Regression Discontinuity Design (RDD) applied to longitudinal panel data from South Korean State-Owned Enterprises (SOEs), we find that organizations falling just below the critical performance cutoff experience a significant and discontinuous spike in audit violations in subsequent years. Crucially, the presence of politically appointed CEOs significantly amplifies this effect. Compared to careerist, internally promoted leaders, political appointees react to performance shortfalls with heightened organizational hypocrisy, substantially increasing the rate of rule-breaking. These findings provide robust causal evidence of Campbell’s Law in action, demonstrating how high-stakes accountability structurally induces ethical fading. Ultimately, this study reveals that the convergence of stringent performance regimes and political patronage profoundly distorts bureaucratic integrity and compliance.

Author

• Jeeseun Baik, Yonsei University
  Presenting Author