While there are serious implications and repercussions when people fail to take action, the real problem is when they are acting in the lower right quadrant, the one I refer to as corruption.
Not corruption in a moral sense. More like a pipe corroding. But, it can also lead to corruption in the moral and legal sense.
At it's most benign, when people take action without integrity they may be dysfunctional. Their actions may disrupt the company's workability, relationships, communication, teamwork, etc. They may do small things that are borderline illegal, immoral or just simply unsavory.
Maybe they are bullying a colleague in subtle ways, or seeking to undermine another person's position. They might make suggestive comments to a subordinate, gossip about the boss, come to meetings late, then sit and read text, emails or simply not pay attention.
Personally it's when you say "I shouldn't eat that piece of cake." Then do.
Do this often enough and your thinking and actions will move so far away from integrity that you are in danger of losing (or have lost) sight of what is right and wrong. People who are at this level are descending into a world of lies, cheating and deceit from which they are most likely not going to emerge without a catastrophic event. From there, bankruptcy (moral, financial, emotional, etc) is a likely future.
It's when companies fall apart like a house of cards (Enron is my favourite example), or when a person's health is so compromised from destructive behaviours such as smoking, alcohol, drugs, or overeating that they end up in the street, with a life-threatening illness or grossly overweight.
It's what we have witnessed and been at the effect of globally since 2008 (and before) and what persists on individual, company and government levels.
It is anywhere someone says "it's just this once." "It's not that big a deal." "No one will know." "It will be fine." "Someone will sort this out." or any conversation that justifies the action. We all do this at times in small ways. But, there is a major difference between eating one too many chocolates and cooking the company books.
Why do people do this? Because, the very first time they stray into this area, either they experienced a payoff, or didn't suffer any consequence large enough to deter them.
What can you do as a leader?
If you see dysfunction - cut it fast.
If a person is acting in a way that suggests they are too far down the track, lose them. They will compromise the company's integrity and if they have the power to, can even endanger your company legally.
This is the quadrant where people are unable or unwilling to be responsible for their behaviours. They are uncoachable. No matter what they say.
When corruption is present, it is in their thinking first and foremost. Your chances are slim at best if you try to get them to see they have a problem.