Significance The relative importance of personal traits compared with context for predicting behavior is a long-standing issue in psychology. This debate plays out in a practical way every time an employer, voter, or other decision maker has to infer expected professional conduct based on observed personal behavior. Despite its theoretical and practical importance, there is little academic consensus on this question. We fill this void with evidence connecting personal infidelity to professional behavior in 4 different settings.

Abstract We study the connection between personal and professional behavior by introducing usage of a marital infidelity website as a measure of personal conduct. Police officers and financial advisors who use the infidelity website are significantly more likely to engage in professional misconduct. Results are similar for US Securities and Exchange Commission (SEC) defendants accused of white-collar crimes, and companies with chief executive officers (CEOs) or chief financial officers (CFOs) who use the website are more than twice as likely to engage in corporate misconduct. The relation is not explained by a wide range of regional, firm, executive, and cultural variables. These findings suggest that personal and workplace behavior are closely related.

By ensnaring leaders in entertainment, politics, business, media, education, and the law, and highlighting the magnitude of workplace sexual misconduct, the #MeToo movement has generated renewed interest in personal conduct. However, there is substantial disagreement as to how personal and professional conduct relate to one another. While many argue that affairs should not affect employment, some have recently questioned whether the personal behavior and attitudes of executives contribute to corporate cultures that tolerate sexism and sexual harassment. In the language of the literature on the economics of information (1), the relevance of personal conduct to professional conduct depends on whether personal conduct is an informative signal about professional conduct. This debate plays out in a practical way every time a senior executive or candidate for a high political office is involved in a personal scandal. Public reactions vary with the situation and are informed by little, if any, empirical evidence.*

There is a long-standing debate in philosophy and psychology regarding the extent to which behavior and ethics are situational. The classical view is that character traits such as honesty and faithfulness drive personal actions. In contrast, “situationism holds that in practice what in some times and places we call right is in other times and places wrong. Norms are contingent, have no transcendent status” (2). Hence, it is common to assume that there are different standards for private relationships compared with “business ethics” (3, 4). In psychological terms, individual behavior is often thought to be highly contingent upon context and situation, thereby calling into question the existence of character traits (5⇓–7). However, others critique this view and argue that personal traits influence one’s thinking and interact with the situation across diverse contexts (8, 9). A large literature in psychology assesses the relative importance of individual, organizational, and situational factors in ethical decision making (10, 11). Potential individual influences include cognitive moral development (12), moral disengagement (13), Machiavellianism (14), relativism (15), and religion (16). This literature typically assesses the relation between survey results or experimental shocks to individual characteristics and experimental evidence of behavior. Recent economics literature analyzes the relations between personality traits and firm actions (17) and between personal legal infractions and corporate conduct (18, 19). We focus on the relation between observed personal infidelity and 4 forms of observed professional misconduct.†

Methodology The biggest challenge to understanding the connection between personal conduct and business decisions is that personal conduct is typically unobserved. We construct a proxy for personal marital infidelity using data from Ashley Madison (AM) users. Operating under the slogan “Life is short. Have an affair,” AM is an online service that advertises itself as a dating service for married people to have “discreet encounters.” AM’s website and service description as of June 2015, pictured in SI Appendix, Fig. S1 and discussed in SI Appendix, are clearly focused on marital infidelity, and we find evidence that at least 97% of the chief executive officers (CEOs) and chief financial officers (CFOs) in our sample with paid AM usage are married. Despite promises of discreetness, the data were put in the public domain through a hack in 2015 that included data on 36 million user accounts, including 1.0 million paid users in the United States. AM usage was widespread across the United States and included professionals and executives from a wide range of industries (SI Appendix, Figs. S2 and S3 and Table S1). The AM data generated widespread public attention, and AM has publicly confirmed that its data were compromised. The broad consensus is that the AM data are accurate (20, 21). However, some AM profiles may be fake, particularly for female users (22). We have discussed the use of the data with many people, including attorneys, who confirm that the data are permissible to use for research purposes because the data are now in the public domain and available for research use in the same way that they are available to and used by the press. We believe it is also ethical to use the data, and the use of hacked data has become common both by the press and in academia. We examine professional behavior in 4 settings: Chicago police officers with substantial complaints, financial advisors engaging in misconduct, US Securities and Exchange Commission (SEC) white-collar criminals, and CEOs and CFOs of firms that engage in misconduct. In all 4 settings, we measure the relation between professional misconduct and personal usage of AM by matching data on individuals in the professional setting to AM transaction data. The first 3 settings demonstrate the link between personal AM usage and professional misconduct. The fourth setting goes a step further by linking the personal conduct of CEOs and CFOs to corporate outcomes. Detailed firm-level data allow us to examine this last setting most thoroughly. First, we collect detailed data on Chicago police officers from the Citizens Police Data Project. The data include complaints from citizens and other police officers, work histories for all police officers, and identifying information. We analyze a sample of 960 male misconduct police officers, defined as officers with at least 1 sustained complaint (i.e., a complaint resulting in discipline or a reprimand) or at least 5 total complaints in 2010 to 2018. We match these police officers to a control group of police officers working in the same police district within Chicago with similar ages and years of experience who have never had a sustained complaint and had no more than 1 overall complaint in 2010 to 2018. Second, we collect detailed information on financial advisors from Financial Industry Regulatory Authority BrokerCheck data, which identify employment history and potential misconduct for all US financial advisors (23). We analyze a sample of 1,319 male financial advisors who have a record of misconduct in 2015 or 2016.‡ We compare these individuals with misconduct-free male advisors who work for the same firms in the same counties and have similar experience. Third, we identify and collect data on 613 defendants to civil litigation initiated by the SEC in federal court, which are available in the SEC’s litigation release archives. These are civil lawsuits alleging criminal activity such as insider trading (120 observations), Ponzi schemes (57 observations), pump and dump operations (44 observations), and other financial fraud (392 observations). We compare the AM usage of SEC defendants with that of the general population (controlling for gender and age) and with 2 matched samples, financial advisors working in the same county with the same gender and similar ages and a second matched sample of CEOs and CFOs working for companies headquartered within 50 miles with the same gender and similar ages. Fourth, for our largest sample, we examine 2,654 CEOs, 2,797 CFOs, and 15,360 other top executives of public companies between 2008 and 2014 based on Execucomp data. As discussed in SI Appendix, a large and growing finance literature shows that senior executives significantly affect firm decisions (24⇓⇓⇓⇓⇓⇓⇓⇓⇓⇓⇓–36). We find 47 CEOs, 48 CFOs, and 159 other top executives who were paid AM users.§ We then compare the corporate conduct of firms with and without executives who are AM users. We also analyze county-level AM usage as a potential measure of regional culture, motivated by a growing literature showing that firm misconduct is related to culture (37⇓⇓⇓⇓⇓–43). As an indicator for corporate misconduct, we use a measure of whether a firm was the subject of a securities class action lawsuit or engaged in a financial misstatement, both of which are common measures used in the accounting and finance literatures (34, 44⇓–46). We identify AM users based on name and address. To avoid possible false matches, we focus on AM users with paid transactions, which can be matched to individuals in professional settings based on both names and credit card billing addresses. To identify residential and mailing addresses that can be matched to AM, we use detailed public records searches based on names, locations, and employment information. While our methodology for finding professionals in the AM data is entirely based on publicly available data, we believe we may be the first to systematically perform this match. In particular, news searches for “Ashley Madison” and the executive names in our sample do not find any press mentions, and we find no evidence of stock return reactions when the AM data were released (SI Appendix, Fig. S4), whereas stock prices generally react negatively to news of scandals (47). Concurrent research matches AM data to geographic areas and company employees more generally as measures of firm culture (37, 38).¶ Additional details on the data sources and matching procedures are included in SI Appendix. While AM usage is a big step forward for empirically investigating marital infidelity, we recognize that, like any empirical proxy, it is imperfect. AM usage represents a subset of overall marriage infidelity and could reflect different personal traits than other types of infidelity.# On the other hand, the same thing is true for any evidence of marital infidelity and for most other empirical proxies. Inferences are made for a particular person with a particular behavior, detected by a particular means. Despite its limitations, AM usage provides us with a unique large-sample measure to empirically analyze an important question that has previously been addressed solely with speculation and anecdotes.

Interpretation The influence that AM CEOs and CFOs have on firm misconduct is consistent with the large impact that executives have on firm decisions more generally (24). Nonetheless, one potential concern is that the relation between infidelity and misconduct could be driven by omitted firm characteristics, potentially reinforced by endogenous matching of executives to firms. As an alternative empirical strategy, we perform a propensity score matching of AM firms to non-AM firms in the same industry and year, with similar results (SI Appendix, Tables S11 and S12). Our results are also robust to controlling for a wide range of firm characteristics, including local culture, executive optimism, multiple corporate governance measures, returns, return volatility, and accounting patterns potentially associated with misreporting, as well as alternative variable definitions and data samples (SI Appendix, Tables S13–S17). To assess the role of corporate culture, we analyze AM usage by top executives other than CEOs and CFOs. If firm culture is the driving force behind our results, we would expect infraction firms to attract and hire AM users throughout the executive ranks. Instead, we find that non-CEO/CFO executive AM usage is unrelated to corporate infractions (SI Appendix, Table S13). This is consistent with the interpretation that either the cheating of CEOs and CFOs is a much better measure of firm-level culture than the cheating of other firm executives or that CEOs and CFOs who cheat in their personal life are more prone to allow or promote cheating in the corporate context. The latter interpretation is supported by our finding that the AM usage of individual financial advisors, but not firms as a whole, is related to financial advisor misconduct. The relation between CEO/CFO AM usage and corporate infractions is also robust to controlling for a wide range of culture-related regional control variables that are largely uncorrelated with county-level AM usage (SI Appendix, Table S13 and Fig. S9). Additionally, AM usage has little relation to firm performance and corporate decisions that are not typically associated with misconduct (SI Appendix, Tables S18 and S19). As discussed more extensively in SI Appendix, we cannot fully rule out all reverse causality and endogenous selection of unethical CEO and CFO possibilities. Nonetheless, even if these channels drive part of the results, this still implies a strong relation between personal and professional conduct, consistent with our findings for police officers, financial advisors, and SEC defendants.

Conclusion It is increasingly clear that corporate fraud is both widespread and costly (44). However, because it is difficult to measure personal conduct, we know little about the extent to which intimate personal behavior is relevant to professional misconduct and fraud. We introduce a measure of personal conduct by examining marital infidelity, which is intimately connected to personal trust and honesty. Our analysis spans 4 settings, including police misconduct, financial advisor misconduct, white-collar prosecutions, and corporate infractions, and explores a dimension of personal behavior that is of widespread interest and practical importance. While AM usage predicts professional conduct across multiple settings, we recognize that it is an imperfect proxy. AM usage represents a subset of overall marriage infidelity and excludes many other forms of unethical personal behavior. Most people make serious mistakes at some point in their life in various forms, and personal character attributes, judgment, and values can change significantly over time. Given these data limitations, the strong empirical findings are even more compelling evidence that personal conduct is closely related to workplace actions. More broadly, our findings suggest that personal and professional lives are connected and cut against the common view that ethics are predominantly situational. This supports the classical view that virtues such as honesty and integrity influence a person’s thoughts and actions across diverse contexts and has potentially important implications for corporate recruiting and codes of conduct. A possible implication of our findings is that the recent focus on eliminating sexual misconduct in the workplace may have the auxiliary effect of reducing fraudulent workplace activity.

Acknowledgments We thank Paul Gendreau, Shane Johnson, Stefan Lewellen, Joseph Stover, Ivo Welch, and Luigi Zingales; as well as seminar participants at the American Finance Association Annual Meeting, the Catholic University of Chile, the Lone Star Finance Conference, the Wake Forest Corporate Social Responsibility Conference, the Center for Accounting Research and Education Conference, the Midwest Finance Association Annual Meeting, the SEC, and the University of Texas at Austin for helpful comments. Mark Albin, Vedant Batra, Esha Dewan, Akshat Gautam, Melissa Hall, Ziqian Ju, Cliffe Kim, Jangwoo Lee, Murray Lee, Marc Luettecke, Felix Olazaran, Kush Patel, Nicolas Savignon, Surya Raviillu, and Daniel Smarda provided excellent research assistance. We are grateful for research support from the McCombs Research Excellence Grant and to Integra FEC LLC for providing LexisNexis access and research support. A previous version of this paper was circulated under the title “Do Personal Ethics Influence Corporate Ethics?”

Footnotes Author contributions: J.M.G., S.K., and G.M. designed research, performed research, analyzed data, and wrote the paper.

The authors declare no conflict of interest.

This article is a PNAS Direct Submission.

↵*For example, alleged affairs derailed the careers of John Edwards, Mark Sanford, Eliot Spitzer, Herman Cain, Anthony Weiner, and others but did seemingly little to affect the political careers of Bill Clinton and Donald Trump.

↵ † This approach differs from the previous literature both by considering 4 different professional settings and by exploring a dimension of personal behavior that is of widespread interest and practical importance, and that is intimately connected to personal trust and honesty. In contrast to previous research (18, 19), our measure of personal misconduct captures behavior that violates trust but is not illegal. Analyzing police officers, financial advisors, and SEC defendants allows us to observe the connection between personal and professional conduct beyond the managerial settings previously analyzed.

↵ ‡ Misconduct is defined as customer disputes that result in a settlement or award, employment separation after allegations, final regulatory judgments, final criminal actions, or final civil actions.

↵ § Including matches to unpaid AM usage (i.e., matches to AM user data based on zip code and personal email addresses found in public records in addition to transaction matches), we find 68 CEOs, 65 CFOs, and 185 other executives in the AM data.

↵ ¶ Our paper and a working paper by Grieser et al. (38) are the first users of the AM data in finance and economics applications, but the papers have different focuses and use different data. The working paper by Grieser et al. (38) analyzes company culture through the number of email addresses in AM’s user data with a company’s domain name. In contrast, we match executives to AM transaction data based on names and addresses from detailed public records searches. Of the 214 executives we match to AM transaction data, only 4 use their corporate email addresses for AM. Parsons et al. (37) consider regional geographic differences in AM usage.

↵ # Studies suggest that 20 to 40% of men and 20 to 25% of women have an extramarital affair at some point in their lives (48).

This article contains supporting information online at www.pnas.org/lookup/suppl/doi:10.1073/pnas.1905329116/-/DCSupplemental.