Preventing from Organizational Hypocrisy

In this study, we examine how affirmative action, which refers to the organizational policy to ensure that applicants who are disadvantaged in the society are employed and treated without regard to their race, gender, or other social status, can be played a crucial role in the organization. Given that affirmative action is inherently vulnerable to agent problems, we argue that the provision of affirmative action can make firm performance detrimental unless the organization considers how employees behave in their employment contracts. Based on agent theory, we take an analytical approach to describe the market where both issues of self-selection (manager vs. employees who are disadvantaged in the society) and moral hazard (manager vs. employees who are not benefited from the affirmative action) simultaneously exist. With the analysis with the formal model, we found that affirmative action itself may lead to organizational hypocrisy unless the employees who are not benefited from the affirmative action accept those who are employed with the affirmative action. With the findings, we discuss how organizations can strategize the affirmative action in terms of diversity and inclusion.