Scandal, Associative Stigma, and Sorting in Labor Markets: Archival and Experimental Evidence

Stigma stemming from managerial scandals often spreads beyond the implicated transgressor and contaminates other actors via stigma by association. We study how associative stigma resulting from scandals involving managerial misconduct affects subordinate worker careers. We extend prior work by distinguishing between managerial misconduct in the professional domain from managerial misconduct in the personal domain and theorize that this distinction will affect the severity of associative stigma, audience evaluations, and associated workers’ labor market outcomes. Our multimethod empirical approach combines archival analysis of administrative employment records with a series of preregistered, randomized vignette experiments. Our archival analysis demonstrates that workers associated with managers who engage in misconduct sort into organizations with a history of managerial misconduct. The magnitude of this effect is amplified when associative stigma arises from managerial misconduct in the personal domain, a pattern driven by the fact that associative stigma arising from managerial misconduct in the professional domain tends to carry a relatively stronger labor market penalty and increased likelihood of worker exit from the industry. Our experimental studies, which measure employment intentions of workers and hiring intentions of employers, suggest that the psychological mechanism of stigma apprehension plays a role in facilitating the sorting that we observe, a result consistent with the interpretation that sorting emerges from greater tolerance of actors stigmatized by association rather than a taste for misconduct and thus, affirmative assortative matching. These findings contribute to the stigma literature by showing how stigma by association effects vary across audiences and linking this variation to sorting outcomes. This paper was accepted by Isabel Fernandez-Mateo, organizations. Funded: The authors thank the Blake Family Fund for Ethics, Leadership, and Governance at Purdue University for supporting this research. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2023.00075 .