Backstages and the Spread of Organizational Misconduct

We examine the spread of stock option backdating, an organizational misconduct about which public information was virtually absent until 2005. Drawing on Goffman’s backstage theory, we emphasize local upper-class clubs as a backstage of interactions for the diffusion of backdating. We find that backdating is likely to spread via executive interactions at local upper-class golf clubs but not board interlocks or other clubs. We further examine boundary conditions of local golf clubs as a backstage: The impact of local golf club interactions on the diffusion of backdating is enhanced by the visibility of firms at the frontstage, the unavailability of alternative backstages in the community, and small communities. Together these findings extend the backstage theory by suggesting that invisible organizational misconduct could follow some unique diffusion patterns via the backstage of interactions.