This paper is from the BAM2019 Conference Proceedings · Challenger Space Shuttle disaster,...
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This paper is from the BAM2019 Conference Proceedings
About BAM
The British Academy of Management (BAM) is the leading authority on the academic field of management in the UK, supporting and representing the community of scholars and engaging with international peers.
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Dr. Carol Gill, Associate Professor of Organizational Behavior, Melbourne Business School,
University of Melbourne, 200 Leicester Street, Carlton, Victoria 3053, Australia. Email;
The role of discursive leadership in follower normalization of deviant behavior in two
Australian bank scandals
Developmental Paper
Abstract
Whilst there has been a tendency to blame individuals there is a growing recognition that
organization context plays an important role in shaping individual behavior. More recently,
public documents based on post hoc investigations have blamed amorphous ‘culture’ for this
deviance. To date, the mechanisms by which such cultures emerge and are sustained have
received minimal attention. In particular, the role of leader discourse in follower
internalization and normalization of deviant behavior is a promising line of inquiry. Leaders
are able to help followers make sense of paradoxical incidents through their discursive
responses. Such discursive processes normalize paradoxical incidents and categorize in- and
out-groups. In this way, leaders defend against attempts by out-groups to monitor and
sanction deviant behavior. I conclude that discursive leadership may create and sustain a
counter culture that is impenetrable by outsiders.
Introduction
The finance industry has been plagued by deviant behavior contrary to the values
publicly espoused by regulatory bodies, organizational boards, and senior leadership (Ciro,
2016). The recent interim report of the Australian Royal Commission into Banking (2018)
shows that banks and other financial institutions have been motivated by greed, avarice, and
Discursive leadership in follower normalization of deviant behavior in two Australian bank
scandals
2
profit, and ignore “basic standards of honesty” (p. 74). Further, it proposed that “conduct
cannot be explained as ‘a few bad apples’” (p. 87) that “ignores the root causes of conduct,
which often lie with the systems, processes and culture cultivated by an entity” (p. 87). Public
documents based on post hoc investigations have blamed an ‘amorphous’ culture for this
deviance. This paper aims to provide a more substantive explanation of how organizations
may influence deviant behavior.
Similarly, the normalisation of deviant behavior literature has acknowledged the need
to move beyond a focus on an individual actor who rationally weighs the cost and benefits of
their actions, to examine the social forces that normalise deviance (MacLean, 2008). Thus, a
focus on the multi-level (individual, group, and organizational) determinants of deviant
behavior is a sensible line of inquiry. Rather than scapegoating a few deviant individuals it is
acknowledged that the social context is likely to shape and sustain individual behavior
(Spicer, 2009).
It has been proposed that context is likely to influence the way deviant behavior is
perceived through ‘framing’ events (Courtois, C., & Gendron, 2017; MacLean, 2008).
Consistent with this line of inquiry, several literatures have demonstrated that individuals
don’t passively perceive reality but actively filter, create, and apply meaning (e.g., decision
making, Pease, Bieser, & Tubbs, 1993; groupthink, Whyte, 1979). Thus, there may be
circumstances in which deviant behavior may be seen as acceptable or even desirable
particularly, when individuals’ immediate interests may lie in surviving within existing
arrangements rather than challenging the broader system (Earle, Spicer, & Peter, 2010).
Whilst there has been increasing attention on the socialization of deviance, the role of
leadership in this process has not been emphasised. Recently, the Human Resource
Discursive leadership in follower normalization of deviant behavior in two Australian bank
scandals
3
Management (HRM) strategy literature has recognised that leaders play a critical role in
interpreting organization intentions for employees. HRM strategists have been criticised for
failing to distinguish between intended and implemented practices with the latter, logically,
having more impact on employee perceptions and behavior (Khilji & Wang, 2006). To deliver
a clear line of sight from strategy and values at the top of the organization to behavior
throughout the organization, employees must be given clear messages on what an
organization requires (Bowen & Ostroff, 2004). These messages are delivered by immediate
line managers who are instrumental in translating intended practices into implemented
practices that impact on employee behavior. This literature acknowledges that the employees
are not passive recipients of practices but active perceivers (Nishii, Khattab, Shemla, &
Paluck, forthcoming).
In light of this, I explore the role of leaders in the normalization deviance in
organizations. The purpose of this paper is to examine how discursive leadership may create
and sustain an impenetrable counter-culture that is facilitated by conflicting organizational
values. To do this I draw on sensemaking theory (Weick, 1995) to build new theory on how
sub-cultures of deviant behaviour emerge and are maintained. Sensemaking theory indicates
that discursive leadership facilitates sensebreaking and sensemaking when paradoxical
incidents provide an opportunity to do so. It is likely that these paradoxical incidents manifest
when organizations communicate competing values.
The normalization of deviance has been established in a number of contexts (e.g.,
Challenger Space Shuttle disaster, Vaughan, 1999; wage arrears in Russia, Earle, Spicer, &
Peter, 2010; and the construction industry in Quebec, Courtois & Gendron, 2017). It is
anticipated that whilst theory in this paper will draw on finance industry cases it will also be
Discursive leadership in follower normalization of deviant behavior in two Australian bank
scandals
4
applicable across contexts. In this paper I draw on incidents reported in public documents
based on the National Australia Bank [NAB] (APRA report into irregular currency options
trading, 2004; article authored by Dellaportas, Cooper, & Braica, 2007; Price Waterhouse
Coopers investigation into foreign exchange losses at the National Australia Bank, 2004) and
Australia New Zealand Bank [ANZ] (court accounts & associated media reports) to inform
and illustrate theory on how leaders influence employee sensemaking of everyday
paradoxical incidents.
Theoretical Model
The role of discourse in creating culture has been alluded to in the finance industry for
the past 20 years -- for illustration consider the ‘boom-boom room suit”, named after a
basement party room, at Smith Barney’s branch office in Garden City NY which was at the
centre of systemic sexual harassment (Antilla, 2016). Further, links have been made between
discourse and deviance in the finance sector (i.e., Hargie et al., 2010; Tourish & Hargie,
2012; Whittle & Mueller, 2016).
It is already established that leaders play an important role in shaping culture (Schein,
2004). However, to date, the mechanisms by which such cultures emerge and are sustained
have focussed on what leaders pay attention to and reward. Less attention has been given to
leader discourse and its role in follower internalization of the leader’s messages. In particular,
it is not only the way leaders focus on, and respond to, critical incidents but how leaders
interpret these incidents for followers through language, metaphors, and humor. Whilst it has
been proposed that leaders use discourse to facilitate the sensemaking of others (Rouleau &
Balogun, 2011), theorization is underdeveloped (Brown, Colville, & Pye, 2015) and the role
of macro-level discourses in sensemaking requires attention (Maitlis & Christianson, 2014).
Discursive leadership in follower normalization of deviant behavior in two Australian bank
scandals
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In particular, the mechanisms by which leaders influence followers to negate or oppose the
dominant organization culture remain unexplored. Such discursive processes normalize
paradoxical incidents and categorize in- and out-groups. In this way leaders can defend
against attempts by out-groups to monitor and sanction deviant behavior that is inconsistent
with broader organizational and societal values. Thus, examining how organizations in the
banking industry initiate and tolerate deviant behavior is of significant theoretical and
practical interest.
Figure 1 presents the proposed theoretical process by which leaders influence
follower sensemaking of paradoxical events and, as a consequence, establish a sub- or
counter-culture of deviant behavior. In the following sections of this paper I will develop
theory for each of the relationships demonstrated in this figure.
Insert Figure 1 about here
Competing discourses and paradoxical incidents
NAB and ANZ bank cases indicate competing discourses: one of ethical behavior
which is demanded of banks by multiple stakeholders and another of short-term profits
demanded by shareholders, often at the expense of vulnerable employees and customers. In
this section I demonstrate that there was organizational level tension between espoused and
enacted values at both banks.
NAB investigations indicate problems with the bank’s performance management
system. The “profit is king expression” was frequently heard in interviews with banking staff
-- there was a dedication to short-term revenues at the expense of other things that were
Discursive leadership in follower normalization of deviant behavior in two Australian bank
scandals
6
overlooked. Bank senior management and other parts of the organization did not want to
upset anyone on the lucrative trading floor and risk the income stream they generated.
In particular, no disciplinary action was taken when deviant behavior was suspected
or observed. Risk management, human resource management, and senior management
maintained a ‘leave it alone attitude’ evidenced by signing off on every day occurring limit
breaches. Leaders were perceived as ‘heroes of the moment’ and the trading desk was seen as
a growth area (Dellaportas et. al., 2007).
Court documents indicated that ANZ's global markets division generated income of
$1.2 billion in 2015. As head of balance sheet trading at ANZ, dismissed trader, Alexiou was
paid a $5 million bonus in 2014, in addition to a $465,000 base salary, just seven days after
being stood down for the alleged manipulation of the bank bill swap rate. He received
approximately $11.5 million in total bonuses over three years. Further, he accumulated
$37,500 in personal expenses on a bank credit card.
According to court documents, Alexiou was tested on the ANZ bank’s code in
September 2011, shortly after he started work at ANZ. Whilst he received a score of 50/100,
he was not required to undertake any additional training. It was claimed that this test
consolidated the opinion that the ANZ Global Markets group condoned behavior that was
inconsistent with the bank’s code. Further, it was alleged that senior human resources [HR]
staff within the bank expressed their frustration with the global markets’ culture. However,
HRM staff attended a strip club ‘induction’ for Alexiou. At both NAB and ANZ there was
tension between the code of ethics and the ‘profit is king’ culture. It seems that deviant
Discursive leadership in follower normalization of deviant behavior in two Australian bank
scandals
7
behavior was rewarded and incentivised in these banks and senior leadership publicly
celebrated extravagance (see table 1 in appendix 1).
The banks competing discourses sent mixed messages (Argyris, 1986) to employees
based on a gap between espoused values, e.g., we have trading limits and a code of conduct,
and enacted values, e.g., you can ignore our trading limits and code of conduct and focus on
the ‘profit is king’ value. These competing discourses produced paradoxical incidents at the
operational group level that confused employees requiring them to work within the
requirements of both discourses. At times employees were aware of the clash in values but
appeared reluctant to speak publicly about their concerns. This collusion of public silence,
particularly by those who could be considered the custodians of organizational values i.e.,
HRM would spread further confusion throughout the organization requiring employees to
interpret organizational values at the group level of analysis. This will be explored in the next
sections.
Prop 1. The bank’s competing values produced competing organizational discourses
Prop 2. Competing organizational discourses facilitate paradoxical incidents
throughout the organization
Paradoxical incidents and leader sensegiving
Critical incidents generate discrepancies between expectations and reality and initiate
follower sensemaking, thus providing an opportunity for leader sensegiving. Such incidents
interrupt employees’ flow and disrupt their understanding of the world, thus initiating
uncertainty about how to act (Meyer, 1982). Sensemaking effort is required when the current
environment is different from what is expected, and individuals must engage in sensemaking
Discursive leadership in follower normalization of deviant behavior in two Australian bank
scandals
8
to resume and continue action by asking what this event means and what they should do.
When organizational rhetoric or societal norms clash with group level values and behavior
employees may become confused and uncertain on how to respond. The sensemaking process
is most prominent when events are novel, ambiguous, confusing, or violate expectations. The
bank incidents related above provide opportunities for sensebreaking and sensemaking.
Prop 3. Paradoxical incidents result in follower confusion
Prop 4. Followers’ confusion requires followers to make sense of paradoxical
incidents
Organizational sensemaking processes have been attributed to both individual
cognitive processes (Klein, Moon, & Hoffman, 2006; Louis, 1980; Starbuck & Milliken,
1988) and interpersonal social processes (Weick, 1969). In both mechanisms discursive
processes may play a role (Maitlis, 2005; Weick, 1995; Weick et al., 2005). Paradoxical
incidents produce cognitive dissonance (Festinger, 1962) where people reconcile their
expectations with their experienced reality (Maitlis & Christianson, 2014). People use
language (i.e., narrative and metaphor) to share perceptions and make sense of ambiguous or
confusing incidents and in doing so define or create meaning (Abolafia, 2010). The role of
language as a building block of sensemaking has been indicated by prior researchers (e.g.,
Boyce, 1995; Hill & Levenhagen, 1995) and has links to organizational outcomes, such as
culture (e.g., Drazin, Glynn, & Kazanjian, 1999).
Leaders may create paradoxical incidents and/or help followers to make sense of
paradoxical incidents that emerge. It is likely that they do this through social learning
(Bandura, 1963) as the leader role models to followers the way they should think, feel, and
Discursive leadership in follower normalization of deviant behavior in two Australian bank
scandals
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behave in response to social phenomenon. In addition to drawing attention to social
phenomenon leaders may socially construct reality through providing a frame through which
followers can view and interpret phenomenon (Courtois & Gendron, 2017; MacLean, 2008).
Such discourse may draw attention to, or obfuscate, phenomenon and thus may challenge the
dominant narrative as occurred with NAB and ANZ where aberrant behavior was normalised
and celebrated. In this way actors may attempt “to influence the sensemaking and meaning
construction of others toward a preferred redefinition of organizational reality” (Gioia &
Chittipeddi, 1991, p. 442). It has been proposed that discourse can organize the everyday
conduct of actors or shape the normative climate so that socially constructed reality seems
inevitable and natural (Ball and Wilson, 2000). This discourse may be used to achieve
political ends (Fleming & Spicer, 2014) where the interests of a superordinate minority are
perceived as in the best interest of all organizational members.
Sensebreaking is a prelude to sensegiving (Pratt, 2000). Sensebreaking can motivate
people to reconsider the sense that they have already made, question their underlying
assumptions, and re-examine their courses of action (Lawrence & Maitlis, 2014). Discourse
can promote specific thinking and action, hide particular ideas (Vaara & Monin, 2010), and
marginalize other voices (Monin, Noorderhaven, Vaara, & Kroon, 2013).
Not only do leaders have position power to influence followers but they also have
personal power (Yukl & Falbe, 1991). In particular, charismatic leaders are renowned for
their rhetorical skills, powers of persuasion, and sense of drama (Harvey, 2001). Fleming &
Spicer (2014) found that leaders in the finance industry had more power because they had
“control over resources that were rare and central to the organization’s functioning” and were
able to manipulate organizational agendas through the proficient use of cultural resources i.e.,
Discursive leadership in follower normalization of deviant behavior in two Australian bank
scandals
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stories, narratives, and rituals. In this way leaders have power to shape the normative climate
of the organization that makes socially constructed reality “seem inevitable and natural” (p.
18) and “to question and challenge the power of the focal organization” (p. 13). For example,
at the ANZ bank one incident involved a white substance (possibly cocaine) found in a
bathroom next to an office birthday party. The leader joked the substance should be sprinkled
on the birthday cake in the adjacent room.
Employees may be further confused by a clash between their own values, perhaps
drawn from societal norms, and the deviant behavior that is being promoted. To reconcile this
conflict, bank leaders were able to demonstrate that normal rules did not apply in this specific
context and that the group was not subject to the rules of the rest of the organization and even
broader society. Various incidents facilitated the establishment of group norms that facilitated
deviant behavior (see tables 1 & 2 in the appendix). Leader discourse was able to establish
new norms that supported the notion that deviance was acceptable because normal rules did
not apply to their privileged sub group. Based on these arguments and illustrations I propose
the following.
Prop 5. Leaders’ behavior and discourse facilitate followers sensemaking of
paradoxical incidents
Distributed sensemaking and deviant subculture
The social processes through which sensemaking is accomplished have also been
explored (e.g., Maitlis, 2005). Distributed sensemaking is a social process that occurs
between people, as meaning is negotiated, contested, and mutually co-constructed (Weick,
1995). Maitlis (2005, p. 21) describes organizational sensemaking as “a fundamentally social
Discursive leadership in follower normalization of deviant behavior in two Australian bank
scandals
11
process” in which “organization members interpret their environment in and through
interactions with each other, constructing accounts that allow them to comprehend the world
and act collectively”. Thus, sensemaking may also occur collectively as multiple actors
construct and transmit meaning (Maitlis & Christianson, 2014).
The ANZ and NAB cases demonstrate how entire work groups engaged in
sensemaking incidents. For example, NAB traders were aware of their power over audit
functions and developed defensive routines (Argyris, 1986) to preserve this power. For
illustration, a mockery wall was used to diminish out-groups. This involved a ladder marked
with a ‘jub’ ranking (a word used to describe outsiders they thought stupid). Names were
moved up and down this ladder and derogatory remarks were placed next to them. This
ladder demonstrated power over outsiders particularly when on discovery no disciplinary
action was taken. Traders were just asked to remove the ladder. It is likely that in- and out-
group categorization (Hogg & Terry, 2000) may have facilitated group cohesiveness and
subsequent preparedness to follow deviant group norms. Based on this I present the
propositions below.
Prop 6. Followers distributed sensemaking facilitates a sub-culture
Prop 7. Subcultures generate paradoxical incidents as sub-culture values manifest in
the behavior and discourse of the group.
Discussion
This paper provides a multilevel model of how deviance may be normalised in
organizations. At the organizational level mixed messages are sent when there is a
discrepancy between espoused and enacted values that create paradoxical incidents that
Discursive leadership in follower normalization of deviant behavior in two Australian bank
scandals
12
precipitate follower confusion. Such circumstances do not provide a clear line of sight for
employees who must navigate the mixed messages that are sent and the multiple paradoxical
incidents that ensue. Consequently, alignment between organizational values and individual
behavior is less likely. In this way organizational level behavior facilitates deviant behavior at
group and individual levels. This indicates that there is an organization system that supports
the normalization of deviant behavior.
There is extant theory that supports the impact of group norms and leadership on
individual behavior (e.g., Hogg & Terry, 2000). However, the role leaders play in helping
followers make sense of paradoxical incidents through their discourse is less obvious and the
application of this to deviant behavior at the individual and group levels has not been well
considered. This mode of influence requires several ingredients, not least of which is the
paradoxical incident, which allows for sensebreaking and making.
Employees may be further confused by the clash of values resulting from their own
values drawn from societal norms and the deviant behavior that is being required of them.
However, in the case of these banks group norms around being special indicate that normal
rules don’t apply, and the group may legitimately play by the rules of a different game.
Leaders, particularly those who are charismatic, and work group norms give sense to
these incidents, helping employees to interpret what is initially confusing and make peace
with the cognitive dissonance that results from these conflicts. Eventually, new employees
are acculturated and adhering to group norms becomes, especially when these norms are
rewarded. However, these cultures may only be sustained if there is no threat of punishment,
so power is important to preventing sanction and maintaining rewards associated with the
Discursive leadership in follower normalization of deviant behavior in two Australian bank
scandals
13
deviant behavior. Defensive routines aligned with sub group norms (i.e., jub wall) prevented
challenge from those who might be able to prevent the deviant behavior i.e., HRM.
There are many practical implications that arise from this theorizing and I consider
multiple levels at which interventions may be applied. Value reflexivity at all levels of
analysis is important. Firstly, there are multiple conflicting societal pressures on
organizations. Organizations must deliver short-term outcomes and CEO’s are rewarded for
doing so. The ‘profit is king’ mantra manifesting at the organizational level reflects these
pressures. Organizations must be vigilant of the mixed messages that they send throughout
the organization and the gap between espoused and enacted values. It is these mixed
messages that manifest in group level paradoxical incidents that provide fertile ground for
sensemaking delivered by leaders. At the group level a torch needs to shine on the hereto
hidden role that leaders may play in shaping deviant sub cultures or group norms. These
group level pressures, particularly in cohesive groups, are likely to influence individual
attitudes, behaviors, and outcomes. The important role that leader discourse plays in
interpreting organizations policy and practices has largely been ignored in multiple
literatures.
Future research may test the propositions in this paper as well as explore further
questions. For instance, it is likely that some leaders are more successful than others at
influencing the sensemaking of followers based on their power and status.
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Appendix
Insert tables 1 & 2 about here
Discursive leadership in follower normalization of deviant behavior in two Australian bank
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20
Figures and Tables
Figure 1. Process by which leaders facilitate a sub culture
Table 1 Possible Interpretation of Paradoxical Incidents
Case Critical Paradoxical
Incident
Interpretation Group Norm
ANZ Attendance at strip clubs
was common
Induction in Strip Club with
HRM attending.
Deviant and high-risk
behavior is sanctioned
1. Normal rules don’t apply to this
group
2. It is ok to break organizational
rules
3. We are invincible
ANZ On day following
suspension of traders
employees spent 1000s of
dollars in triple vodkas
Deviant and high-risk
behavior is sanctioned
1. Normal rules don’t apply to this
group
2. It is ok to break organizational
rules
3. We are invincible
ANZ Alexiou being awarded a $5
million bonus seven days
after the alleged
manipulation of the bank
bill swap rate.
Deviant and high-risk
behavior is sanctioned
1. Normal rules don’t apply to this
group
2. It is ok to break organizational
rules
3. We are invincible
ANZ Large bonuses to employees
in this group despite
counter cultural behavior
Deviant and high-risk
behavior is sanctioned
1. Our current behaviour is
valuable and rewarded
2. We are aligned with
organizational goals
3. Our contribution gives us power
and allows us to break the rules
NAB Trader accumulated
$37,500 in personal
expenses on a bank credit
card.
Deviant and high-risk
behavior is sanctioned
1. Normal rules don’t apply to this
group
2. It is ok to break organizational
rules
Discursive leadership in follower normalization of deviant behavior in two Australian bank
scandals
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Table 2 Leader Discourse and Group Norms
Case Critical
Paradoxical
Incident
Verbal
Content
Verbal Process Interpretation Group Norm
NAB Challenge by
risk managers
If the bank
had people
who knew
how to
multiply 6x2
they would
be marched
out the door
Humor
Categorization
Defensive
routine
Deviant and
high-risk
behavior is safe
Leaders are all
powerful
1. Normal rules
don’t apply to
this group
2. It is ok to break
organizational
rules
3. Local leaders
are most
powerful actors
who can
manage the
flow of
information
NAB Mockery wall
and ‘jub’
ranking. Names
moved up and
down. No
disciplinary
action – just
asked to remove
it.
Derogatory
remarks next
to rankings
Humor
Categorization
Defensive
routine
Deviant and
high-risk
behavior is
sanctioned
There is no
disciplinary
action for
deviant
behavior
1. Normal rules
don’t apply to
this group
2. It is ok to break
organizational
rules
3. We are
invincible
ANZ A white
substance
(possibly
cocaine) found
in a bathroom at
work adjacent to
an office
birthday party.
The leader
made a joke
the
substance
should be
sprinkled on
the birthday
cake.
Humor
Defensive
routine
Deviant and
high-risk
behavior is safe
1. Counter
cultural and
high-risk
behavior is safe
NAB Limit breaches signed off
every day
Deviant and high-risk
behavior is sanctioned
3. Normal rules don’t apply to this
group
4. It is ok to break organizational
rules
ANZ Chief Risk Officer hosted a
4-day wedding party on
Richard Branson’s 40,000
dollar a night island
Leadership models
extravagance and
displays of financial
success
1. It is ok to extravagant
2. Elite employees receive
resources and use these in a
public way
ANZ CEO penchant for race cars
and fine wine
Leadership models
extravagance and
displays of financial
success
1. It is ok to extravagant
2. Elite employees receive
resources and use these in a
public way
Discursive leadership in follower normalization of deviant behavior in two Australian bank
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ANZ Derogatory
comments about
women, were
commonplace
on the trading
floor. 400 uses
of obscene
language in
Bloomberg
chats over 3
years.
You should
have taken
her to the
bathroom
and sorted it
out" and "I
was your
best root?"
Categorization
Obscene and
inappropriate
language
Deviant and
high-risk
behavior is safe
1. Normal rules
don’t apply to
this group
2. It is ok to break
organizational
and societal
rules
ANZ Defensive
Routine
Alexiou said
he was told
by another
senior trader
that
"someone
that had to
be made out
to be a big
white
dildo" in
February
2014 after he
was stood
down
Obscene and
inappropriate
language
defensive
routine
Being charged
for deviant and
high-risk
behavior is an
anomaly. Such
behavior is
normally safe.
1. Counter
cultural and
high-risk
behavior is safe
ANZ Senior managers
use of
profanities
which was
particularly
notable during a
presentation at a
conference.
Profanity Categorization
Obscene and
inappropriate
language
Deviant and
high-risk
behavior is safe
1. Normal rules
don’t apply to
this group
2. It is ok to break
organizational
rules