The criminal actions of the top managers of corporations such as Enron, Tyco, WorldCom, and Adelphia are an example of moral hazard.

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Moral hazard occurs when a party insulated from risk behaves differently than it would behave if it were fully exposed to the risk. The criminal actions of top managers in these corporations, who engaged in fraudulent activities knowing they might not bear the full consequences of their actions due to their positions and the complex structures of their corporations, are examples of moral hazard. They took advantage of their roles and the trust placed in them for personal gain, assuming they could avoid the full repercussions of their actions.

The Criminal Actions of the Top Managers of Corporations Such