Corporate Social Performance, Stakeholder Orientation, and Organizational Moral Development

This article begins with an explanation of how moral development for organizations has parallels to Kohlberg's categorization of the levels of individual moral development. Then the levels of organizational moral development are integrated into the literature on corporate social performance by relating them to different stakeholder orientations. Finally, the authors propose a model of organizational moral development that emphasizes the role of top management in creating organizational processes that shape the organizational and institutional components of corporate social performance. This article represents one approach to linking the distinct streams of business ethics and business-and-society research into a more complete understanding of how managers and firms address complex ethical and social issues.     

An investigation of cultural cohesion in a community bank

This study examines the culture of a medium-sized community bank based in the Western United States. The study aims to identify the organization's culture and then measure the level of cultural cohesion that exists three years after a major cultural campaign was launched. The cultural characteristics the organization valued most highly were integrity, willingness to serve the customer and teamwork - all components of the official bank document on culture. Interestingly, the analysis uncovered some significant value differences among different employee groups and also employees and management; differences which can affect firm performance levels. The analysis also revealed that changing the culture in an organization does not necessarily lead to cultural cohesion.     

Moral Discourse and Corporate Social Responsibility Reporting

This paper examines voluntary corporate social responsibility (CSR) reporting as a form of moral discourse. It explores how alternative stakeholder perspectives lead to differing perceptions of the process and content of responsible reporting. We contrast traditional stakeholder theory, which views stakeholders as external parties having a social contract with corporations, with an emerging perspective, which views interaction among corporations and constituents as relational in nature. This moves the stakeholder from an external entity to one that is integral to corporate activity. We explore how these alternative stakeholder perspectives give rise to different normative demands for stakeholder engagement, managerial processes, and communication. We discuss models of CSR reporting and accountability: EMAS, the ISO 14000 series, SA8000, AA1000, the Global Reporting Initiative, and the Copenhagen Charter. We explore how these models relate to the stakeholder philosophies and find that they are largely consistent with the traditional atomistic view but fall far short of the demands for moral engagement prescribed by a relational stakeholder perspective. Adopting a relational view requires stakeholder engagement not only in prescribing reporting requirements, but also in discourse relating to core aspects of the corporation such as mission, values, and management systems. Habermas’ theory of communicative action provides guidelines for engaging stakeholders in this moral discourse. MaryAnn Reynolds is an Associate Professor of Accounting in the College of Business and Economics at Western Washington University. Dr. Reynolds teaches intermediate financial accounting and is published in the areas of corporate social, environmental and ethical reporting. Kristi Yuthas is the Swigert Endowed Information Systems Professor in the School of Business Administration at Portland State University. Dr. Yuthas teaches accounting and information systems and is published in the areas of social and ethical impacts of management information systems.     

Contents of Volume 36

Volume Contents

Contents of Volume 36     

Ethical Development of Advanced Technology: A Postmodern Stakeholder Perspective

Zygmunt Bauman is arguably the most well-known theorist in postmodern ethics. He argues that to develop and enforce universal ethical laws or codes leads to an abdication of individual moral responsibility. Actors rely on external rules and a rational consideration of costs and benefits rather than on moral impulse. In order to recognize and act upon moral impulse, the moral agent must both recognize and understand the Other. We operationalize these ideas, applying them to the development of advanced information technology (AIT) in organizations. We propose that a stakeholder theory of enabling can be used to formulate processes that will give form and voice to the Other by providing mechanisms for face-to-face interactions and dialogue. Applying the principles of affirmative postmodern ethics through an enabling stakeholder oriented system development process explicitly allows for the examination of moral concerns which might otherwise be overlooked, ignored, or silenced.     

The Accounting Profession: Substantive Change and/or Image Management

The accounting profession’s image and reputation is built upon the members of the profession acting with the “highest sense of integrity” in “the public interest” (AICPA, 2003, www.aicpa.org/about). The Enron debacle initiated the latest crisis facing the profession regarding its image and reputation. The American Institute of Certified Public Accountants (AICPA) is the largest professional body representing the accounting profession and the one to which regulators have looked in establishing and upholding professional standards relating to the public practice of accounting and auditing. One of the AICPA’s responsibilities is to “promote public awareness and confidence in the integrity, objectivity, competence and professionalism of CPAs ....” (AICPA, 2003, www.aicpa.org/about). We analyze the public statements issued by the AICPA (i.e., press releases, speeches of officers, testimony, published articles) during this ethical and identity crisis beginning with the AICPA’s first public statement on the Enron debacle (AIPCA 2001) and concluding with the AICPA recognizing the need for a “new accounting culture” (Melancon 2002). In order to better understand the public discourse, we use image restoration theory (Benoit, 1995), because it provides a typology of strategies for dealing with the public face of crises. We identify the three most common strategies the AICPA employs during this period. Proposals for taking corrective action represent the most commonly employed strategy, but the analysis also indicates an attempt to evade responsibility by claiming defeasibility and to reduce the offensiveness of the situation by employing a bolstering strategy. A second analysis using DICTION, a software package useful in revealing latent dimensions in a text, indicates that early statements tend to use language related to accomplishing specific action while the later statements tend more toward general language that relates to peoples’ everyday lives. The findings raise questions as to substantive nature of the changes proposed by the AICPA, and thus, the extent to which the public interest is being served by them.     

Financial Statement Audits,a Game of Chicken?

This paper uses the intuition from the game of chickento model client-auditor financial reporting and audit effort strategies. Within an ethical context, our model is concerned with the client misreporting and its detection by the auditor. The paper uses a welfare game(similar to the game of chicken) to more formally model client-auditor strategies. The welfare game is then extended to provide additional insight into ethical and audit effort issues.Such a welfare gameprovides equilibrium in mixed strategies. This mixed strategy solution makes possible four outcomes from the game: 1) Financial Statements are fairly presented by client and the auditor performs a normal audit, 2) Financial Statements are fairly presented by client and the auditor performs an extended audit (over auditing), 3) Financial State-ments are misstated by client and detected by the auditor, and 4) Financial Statements are misstated by client and not detected by the auditor (audit failure despite no intended unethical action on the part of the auditor).The first extension of the welfare gameallows clients to be ethical or unethical clients. Unethical clients are rewarded for misreporting because the auditor wishes to minimize audit effort for ethical clients. The second extension allows the client to unknowingly misstate the financial statements; the client "strategy" then becomes random (a play of nature). The auditor must distinguish between this random play and the strategic play of the welfare game. Finally auditor ethics are considered and the influence of auditor ethics on reducing failed audits.     

Ethical Audit Decisions: A Structuration Perspective

The public accounting profession has long relied on its reputation for integrity and veracity as justification for its professional status and monopoly privilege predicated on claims of acting in the public interest. If such status and privilege are to be justified and sustained, serious consideration of what constitutes ethical behavior, how such behavior is motivated as well as an explicit recognition of the rights and interests of affected parties constitutes an ethical imperative for the profession. Traditionally, work on ethics and auditing is quite narrow, failing to recognize the social context of individual actions, failing to identify the relevant constituencies of the profession, and failing to articulate processes through which the constituencies interests can be identified. Generally, the accounting literature has taken a cognitive perspective on ethical decision making which views the resolution of ethical dilemmas as primarily a function of the moral makeup of the actor responding within the context of the Code of Professional Conduct. The purpose of this paper is to broaden the theoretical base of ethical research, specifically within the area of professional accounting and more generally in the area of business. We propose the application of structuration theory in conjunction with stakeholder theory and a responsibility ethic. The application of stakeholder theory is a means for identifying affected constituencies. A responsibility ethic recognizes the situatedness of an individual within an ongoing professional community. Structuration theory provides a theoretical framework for articulating and investigating both the structures within which action is carried out as well as the interaction between the social structures and the actors. Taken together, the theories allow for an enhanced ability to define ethical behavior within a business context and to understand the contextual antecedents and consequences of ethical acts.     

Land change variability and human-environment dynamics in the United States Great Plains

Land use and land cover changes have complex linkages to climate variability and change, biophysical resources, and socioeconomic driving forces. To assess these land change dynamics and their causes in the Great Plains, we compare and contrast contemporary changes across 16 ecoregions using Landsat satellite data and statistical analysis. Large-area change analysis of agricultural regions is often hampered by change detection error and the tendency for land conversions to occur at the local-scale. To facilitate a regional-scale analysis, a statistical sampling design of randomly selected 10 km × 10 km blocks is used to efficiently identify the types and rates of land conversions for four time intervals between 1973 and 2000, stratified by relatively homogenous ecoregions. Nearly 8% of the overall Great Plains region underwent land-use and land-cover change during the study period, with a substantial amount of ecoregion variability that ranged from less than 2% to greater than 13%. Agricultural land cover declined by more than 2% overall, with variability contingent on the differential characteristics of regional human-environment systems. A large part of the Great Plains is in relatively stable land cover. However, other land systems with significant biophysical and climate limitations for agriculture have high rates of land change when pushed by economic, policy, technology, or climate forcing factors. The results indicate the regionally based potential for land cover to persist or fluctuate as land uses are adapted to spatially and temporally variable forcing factors.     

The Next Wave of ESG Integration: Lessons from Institutional Investors

In this panel that also took place at the recent SASB Symposium, senior representatives of four leading institutional investors—BlackRock, Ca lPERS, Ca lSTRS, and Wells Fargo—emphasize the relevance of ESG data for “mainstream” investors and the importance of integrating it with traditional fundamental analysis rather than viewing it as a separate set of reporting responsibilities. Moreover, the logical place for integrating ESG information is in the most forwardlooking section of financial reports, the “Management Discussion and Analysis,” or “MD&A,” which would be strengthened by including more and better information about the companies' ESG risks and initiatives. Some panelists noted that ESG information is likely to be valued by investors because of its ability to shed light on “idiosyncratic” risks that are not captured by the traditional risk factors that have long dominated asset pricing models. Others described ESG information as helpful in evaluating and comparing the “quality” of management in portfolio companies. But all agreed that efforts like the SASB's to standardize ESG data are essential to successful integration of that data into the decision‐making process of large mainstream investors. And as the panelists also made clear, there is an important generational component to the growing movement to integrate ESG into mainstream investing, with Millenials—and particularly Millenial women—showing especially strong support.