Friday, April 23, 2010

What's the SEC really watching...Pornography?

By Dr. Hari Bapuji

The news item headlined “SEC staffers watched porn as economy crashed” on CNN caught my attention this morning. I have been taking some interest in the recent financial crisis, largely due to the work (.pdf) of Suhaib. Yes, it has been the biggest crisis the world has seen in decades, but research attention to it is only gaining momentum now.

The story on CNN began with “As the country was sinking into its worst financial crisis in more than 70 years, Security and Exchange Commission employees and contractors cruised porn sites and viewed sexually explicit pictures using government computers.” I felt sick reading that the regulators supposed to be doing their job were not doing it, but the relief came in the next paragraph.

Apparently, 33 SEC employees and/or contractors watched porn and the cases took place over the past five years. The majority of employees involved (meaning 17 or more) made between $99,000 and $223,000 per year. Specific examples of misuse included an accountant who visited pornographic websites nearly 1,800 times in a two-week period and another (an attorney) who downloaded pornography up to eight hours a day.

The SEC employed 3,642 FTEs in 2009 (according to the Performance and Accountability Report of SEC). On the face of it, the 33 employees who watched porn account for less than one percent (0.91 percent to be precise). But, these 33 employees were caught over a five year period. That would make the percentage of people involved five times smaller than the one percent. Anyway, the idea here is not to find out the extent of pornography watching by SEC staff. But, I was relieved to read that more than 99 percent of the staff were not involved. The best part of the story actually came next.

The pornography watching by high-ranking SEC officials was used to “question the wisdom of moving forward with plans to give regulators like the SEC even more widespread authority” (see more here). While I have no idea of the politics behind it nor any interest in it, such assertions are examples of how institutions are created, maintained, changed and destroyed on an ongoing basis. Such actions are known as “institutional work” (see for example Lawrence, Suddaby and Leca's recent book) and underscore the power individuals have over institutions. The power individuals have over institutions is less understood and less researched, at least within the context of business institutions.

Our recent research (me, Suhaib Riaz and Sean Buchanan: contact for a preview) on the discourse on financial crisis revealed that academics lead the charge for change in regulative institutions, banks and other industry actors focused on changes in normative institutions, while the U.S. Federal Reserve was the leading proponent of status quo on regulative institutions. Our research used articles published in The Economist in the initial two years of the crisis and noted that the institutional work was subtle. However, as time passes, the actions and words of different people might become more assertive and more obvious. Or, they might become more muted as consensus emerges – only research can tell.
* Dr. Hari Bapuji is an Assistant Professor at the Asper School of Business, Winnipeg, Manitoba. Dr. Bapuji’s recent research on Toy Recalls received worldwide media attention and has been published in several prominent outlets.

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