Organizational change, decision premises, and persistent misconduct: the Danske Bank money laundering scandal

Abstract

Purpose Although the drivers of corporate misconduct are widely discussed in the literature, the organizational conditions that enable misconduct to persist are rarely analyzed. This article addresses this gap by using Luhmann's organizational theory to explore how inadequate responses to money laundering warnings are connected to organizational decision premises. Design/methodology/approach We use Luhmann's concept of decision premises, which includes three key elements – communication channels, programs and persons – to analyze the Danske Bank money laundering scandal from 2007 to 2015. Specifically, we examine the bank's inadequate responses to repeated warnings about suspicious activities and deficiencies in its internal control and compliance setup. Findings We show how frequent organizational changes and high personnel turnover weakened the organization's internal complexity and its capacity to respond to information about money laundering risk. Practical implications The article emphasizes the importance of establishing and maintaining stable and sufficiently differentiated decision premises despite organizational change and personnel turnover to support organizational responses to information about potential misconduct. Originality/value This study highlights the organizational conditions for persistent misconduct. Furthermore, it shows the relevance of Luhmann's organizational theory – particularly the concept of decision premises – in understanding how organizational misconduct can emerge and persist.