How Powerful CFOs Camouflage and Exploit Equity-Based Incentive Compensation

While numerous studies have examined the impact that powerful CEOs have on their compensation and overall firm decisions, relatively little is known about how powerful CFOs influence their compensation and important firm financial reporting and operational outcomes. This is somewhat surprising given the critical role CFOs play in the financial reporting process of a firm. Using managerial power theory (Bebchuk and Fried in J Econ Perspect 17:71–92, 2003) and the theory of power and self-focus (Pitesa and Thau in Acad Manag J 56(3):635–658, 2013), we predict that powerful CFOs employ a two-part strategy to camouflage excessive incentive compensation above what efficient contracting would dictate. First, powerful CFOs use their power and influence to negotiate shorter incentive pay duration to maximize the present value of their performance—based compensation. Second, when their incentive equity compensation vests, we suggest that CFOs manage earnings to further enhance their personal income. Consistent with our theoretical expectations, we find higher levels of income-increasing accrual-based earnings management and real transactions management, a potentially unethical practice, in firms with powerful CFOs who have short pay durations. We discuss the implications of our analysis in the context of mitigating CFO power and managing the ethical environment “tone at the top.”     

Value differences as determinants of importers’ perceptions of exporters’ unethical behavior: The impact on relationship quality and performance

The article focuses on the value drivers of the unethical marketing behavior of exporters, as seen from the perspective of their importers, and how this in turn affects the quality of their working relationship and performance. Based on a sample of 189 Cypriot importers, the study revealed that similarities in national, corporate, and personal values between importers and their foreign suppliers are negatively related to unethical marketing practices of the latter as perceived by the former, and vice versa. Perceived export marketing unethicality, in turn, negatively influences the exporter–importer relationship quality (as expressed in terms of cooperation, communication, trust, and commitment), which subsequently has harmful effects on the performance of the relationship. In addition, the existence of a high similarity in both value strength and ethical codes between importers and their export suppliers was found to positively affect the quality of the working relationship. Finally, the association of both corporate and personal values similarity with perceived export marketing unethicality was found to be moderated by network ties, although this was not evident in the case of national values similarity. The findings of the study have important implications for import managers in terms of properly selecting and handling relationships with their foreign suppliers.     

This is your stomach speaking: Anthropomorphized health messages reduce portion size preferences among the powerless

As food portion sizes increase, so too does the amount of energy consumed. The purpose of this study was therefore to determine whether the portion size preferences of individuals could be reduced. Across two experiments, this paper shows that a personally threatening health message that has been endorsed by a digestive system featuring anthropomorphic cues can reduce portion size preferences for energy dense foods and beverages, but only among those who feel powerless. This effect emerges because partially anthropomorphizing an internal body system transforms that system into an agent of social influence. The powerless, who are more sensitive to social influence than the powerful, will consequently be more attuned to threatening health information that has been endorsed by this partially anthropomorphized body system, shaping their behavioral preferences. Anthropomorphizing elements of the self may therefore represent a novel means for motivating behavior change.     

So Then Why Did You Do It?

What causes unethical behavior and what can we learn from those individuals who have had spectacular ethical lapses? The profiles of six prominent individuals, including Dennis Levine, Charles Keating, and Robert Citron are examined to try to provide some insight into what lead them down the slippery slope to criminal and unethical behavior. What we found is that all six certainly knew that they were breaking the law and most went to extra-ordinary lengths to cover up what they were doing. Additionally, we found that each individual had attained a position of authority that enabled them to break the law without being seriously challenged by others who knew, or suspected, what was being done. Each person was highly compensated for their efforts, yet, they choose to engage in unethical and illegal activities in the pursuit of just a little more money or power.     

Power moderates the impact of desire for exclusivity on luxury experiential consumption

This research examines the effect of desire for exclusivity on evaluations of luxury experiences and proposes a boundary condition for the effect. The scarcity effect literature suggests that consumers prefer scarce products due to limited supply because they appeal to consumers’ desire for exclusive consumption. Building on this thesis, the current research argues that luxury experiences are intrinsically scarce enough to appeal to consumers’ desire for exclusivity: Consumers with a strong desire for exclusivity will evaluate luxury experiences more favorably than those with a weak desire for exclusivity. A pilot study confirms a positive correlation between consumers’ desire for exclusivity and attitudes toward luxury experiences. Study 1 demonstrates that consumers with a strong desire for exclusivity show more favorable attitudes toward luxury experiences than those with a weak desire for exclusivity. Further, Study 2 finds that consumers’ power state (powerful vs. powerless) moderates the effect of desire for exclusivity on their affinity for luxury experiences: Only when feeling powerful do consumers with a strong desire for exclusivity evaluate luxury experience more favorably than those with a weak desire for exclusivity. However, this is not the case when consumers feel powerless.     

Business Unethicality as an Impediment to Consumer Trust: The Moderating Role of Demographic and Cultural Characteristics

The article reports the findings of a study conducted among 387 consumers regarding their perceptions of the unethicality of business practices of firms and how these affect their response behavior, in terms of trust, satisfaction, and loyalty. The study confirmed that high levels of perceived corporate unethicality decrease consumer trust. This in turn reduces consumer satisfaction, which ultimately has negative effects on customer loyalty. It was also revealed that, although both consumer gender and urbanity have a moderating effect on the link between perceived unethicality and trust, the age group and level of education of the consumer did not exhibit such an effect. With regard to consumer cultural characteristics, both high uncertainty avoidance and low individualism were found to increase the negative impact of business unethicality on trust, as opposed to power distance and masculinity that did not have any moderating effect on this relationship. Implications for managers are extracted from the study findings, as well as directions for future research.     

Assertiveness Bias in Gender Ethics Research: Why Women Deserve the Benefit of the Doubt

Gender is one of the most researched and contentious topics in consumer ethics research. It is common for researchers of gender studies to presume that women are more ethical than men because of their reputation for having a selfless, sensitive nature. Nevertheless, we found evidence that women behaved less ethically than men in two field experiments testing a passive form of unethical behavior. Women benefited to a larger extent from a cashier miscalculating the bill in their favor than men. However, in three follow-up studies, we found that women did not necessarily intend to benefit at the expense of someone else. Women are less prone to speak up to a cashier than men are, even when the mistake is made in their disfavor. These results reveal that gender differences in assertiveness affect differences in unethical behavior.     

领导排斥对员工亲组织非伦理行为的影响：自我提升动机的中介作用

基于自我提升理论，从自我提升动机和马基雅维利主义视角出发，探讨了领导排斥对员工亲组织非伦理行为的作用机制。通过对两阶段收集的451份问卷进行数据分析，结果发现：领导排斥对员工亲组织非伦理行为具有显著正向影响；员工自我提升动机在领导排斥与员工亲组织非伦理行为关系中起中介作用；员工马基雅维利主义调节了其自我提升动机与亲组织非伦理行为间的关系，即员工马基雅维利主义水平越高，其自我提升动机对亲组织非伦理行为的正向影响越强；员工马基雅维利主义正向调节员工自我提升动机在领导排斥与亲组织非伦理行为间的中介作用，即员工马基雅维利主义水平越高，其自我提升动机的中介作用越强。研究结论不仅拓展了领导排斥理论的研究，也为管理者正确认识领导排斥、管理员工遭受领导排斥后的认知与行为提供了新思路。     

“What’s the Harm in Being Unethical? These Strangers are Rich Anyway!” Exploring Underlying Factors of Double Standards

Previous studies show evidence of double standards in terms of individuals being more tolerant of questionable consumer practices than of similar business practices. However, whether these double standards are necessarily due to the fact that one party is a business company while the other is a consumer was not addressed. The results of our two experimental studies, conducted among 277 (Study 1) and 264 (Study 2) participants from a Western European country by means of an anonymous self-administered online survey, demonstrate that the respondents were not only harsher in their judgments of unethical business (vs. consumer) behavior, but also harsher in their judgments of unethical behavior by prosperous (vs. non-prosperous) consumers and prosperous (vs. non-prosperous) business companies (Study 1). Further, they were also less tolerant of unethical behavior by consumers (vs. one’s best friend) and business companies with which they have a less than good (vs. a good) relationship (Study 2). These results indicate that double standards are due to differences in perceived wealth between subjects and in the individual’s relationship with subjects. These two factors imply that double standards are not strictly reserved to consumer–business relations, but might also be used in business–business and consumer–consumer relations. Further, these results indicate that companies need to be aware of the fact that good financial figures may backfire as they might lead individuals to be more critical of a company’s deceptive practices. Moreover, these findings point to the importance of businesses investing resources—and to keep investing resources—in developing a good relationship with stakeholders as these good relationships lead to stakeholders being less prone to make moral condemnations.     

The Effects of Escalating Commitment on Ethical Decision-Making

Although scholars have invoked the escalation framework as a means of explaining the occurrence of numerous organizationally undesirable behaviors on the part of decision makers, to date no empirical research on the potential influences of escalating commitment on the likelihood of unethical behavior at the individual level of analysis has been reported in either the escalation or the ethical decision-making literatures. Thus, the main purpose of this project is to provide a theoretical foundation and empirical support for the contention that escalating commitment situations can induce unethical behavior in decision makers. An experimental research design utilizing a computerized investment task was administered to 155 undergraduate business majors as a means of assessing the hypotheses presented here. Results from a hierarchical logistic regression analysis found strong support for the contention that exposure to an escalation situation increases the likelihood of unethical behavior on the part of decision makers. Further, results also supported previous ethical decision-making findings by confirming the effects of locus of control (LOC) on ethical behavior. Specifically, the data indicated that individuals with an external LOC orientation were significantly more likely to select the unethical option than were individuals with an internal LOC orientation. Interestingly, support was not found for the effects of Machiavellianism or gender on ethical decision-making.     

Money,Emotions, and Ethics Across Individuals and Countries

This article presents two separate but closely related studies. We used a first sample to investigate the relationships among individuals’ reports of their income and their subjective well-being, and their approval of unethical behavior in 27 countries and a second sample to investigate the relationship between corruption in 55 countries and their populace’s aggregated feelings of subjective well-being (happiness). Analysis of data from 27,762 working professionals showed that, although reported feelings of subjective well-being were negatively related to their approval of unethical behaviors, income was positively related to their approval of unethical behaviors. In addition, the effects for feelings of subjective well-being were particularly strong for high-income people. Analyses also showed that, after controlling for economic development and other country-level factors, corruption was negatively related to a country’s feelings of happiness. These findings suggest that feelings of subjective well-being may lead to more ethical, less corrupt behavior and that the tolerance of unethical, corrupt behavior may lead to less collective happiness and subjective well-being.     

Language power and persuasion

Powerless language involves the use of various linguistic markers (i.e., hedges, intensifiers, deictic phrases, overly polite language, tag questions, and verbal and nonverbal hesitations), which signify relatively low social status in a given communication context. Powerful language suggests higher social status and is characterized largely by the absence of these markers. The results of a laboratory experiment indicated that language power influenced attitudes toward a hypothetical new consumer electronics product, regardless of whether the communication was presented in print versus videotape. For both print and video modalities, speakers using powerful language were more persuasive than speakers using powerless language. However, powerless language had the additional effect of generating more thoughts about the speaker. These results are discussed in terms of the multiple roles postulate of the elaboration‐likelihood mode. © 2005 Wiley Periodicals, Inc.     

The Effects of Transgressor Sex on Judgments of Unethical Behavior

This study investigated the effect of gender stereotypes on evaluator judgments of unethical behavior. Subjects were working adults who completed a mailed survey in which they evaluated unethical behavior depicted in written scenarios. Sex of the transgressor in the scenarios was manipulated. Both quantitative and qualitative analyses indicated that there are no stable differences in evaluations of men and women across scenarios. These results suggest that evaluators do not hold different standards of ethical behavior for men and women, they do not make different causal attributions for the behavior of men and women, nor do evaluators treat men and women differently when an ethical transgression has been committed.     

Unethical and Unwell: Decrements in Well-Being and Unethical Activity at Work

Previous research on unethical business behavior usually has focused on its impact from a financial or philosophical perspective. While such foci are important to our understanding of unethical behavior, we argue that another set of outcomes linked to individual well-being are critical as well. Using data from psychological, criminological, and epidemiological sources, we propose a model of unethical behavior and well-being. This model postulates that decrements in well-being result from stress or trauma stemming from being victimized by, engaging in, or witnessing unethical behavior, or even from being associated with individuals involved in such behavior.     

Toward Effective Codes: Testing the Relationship with Unethical Behavior

A business code of ethics is widely regarded as an important instrument to curb unethical behavior in the workplace. However, little is empirically known about the factors that determine the impact of a code on unethical behavior. Besides the existence of a code, this article studies five determining factors: the content of the code, the frequency of communication activities surrounding the code, the quality of the communication activities, and the embedment of the code in the organization by senior management as well as local management. The full model explains 32% of observed unethical behavior while the explanatory value of a code alone is very modest. The study shows when codes are effective, and even when they become counter effective.     

Truth or Consequences: A Study of Critical Issues and Decision Making in Accounting

This study applies a theoretical framework, the theory of reasoned action, to the examination of unethical decision making in job-related situations encountered by CPAs. A survey methodology was employed in which respondents were asked to use both self-reported and randomized response techniques for reporting unethical behavior. The results indicate that individuals are unwilling to accurately report either unethical behavior or intention, particularly in situations where there is no question as to the unacceptability of the action or the potential penalty as presented in the AICPA Code of Professional Conduct. Implications for the accounting profession and research are discussed.     

Powerlessness,variety-seeking,and the mediating role of need for autonomy

How does feeling powerless (vs. powerful) affect variety-seeking in retail contexts? Based on the notion that feeling powerless is associated with lower autonomy, and building on studies showing that having a wider choice set enhances autonomy, we predict—consistent with research on compensatory consumption—that low-power consumers (vs. those with high power) will exhibit greater variety-seeking. Findings across nine studies were consistent with this prediction. Further, while all nine studies provide evidence that low-power consumers seek greater variety, three studies (1A, 1B, and 1C) support the prediction that this effect is mediated by need for autonomy and not by any of eight other competing mechanisms, including other-orientation, need for uniqueness, and risk aversion. Studies 2 and 3 explore theoretically and managerially relevant ways, respectively, of reducing the tendency for low (vs. high) power consumers to seek greater variety, while study 4 provides external (real-world) validity for our prediction in retail (i.e., a restaurant) context. The theoretical and managerial implications of our research are discussed.     

Disciplining top‐performing unethical salespeople: Examining the moderating effects of ethical seriousness and consequences

Managers take many factors into account in deciding the level of discipline to administer to subordinates who have engaged in some form of undesirable work behavior. In general, performing other job tasks well, such as being a top sales producer, has been shown to be more likely to bring about an external attribution (attributing the cause of the undesirable behavior to some person or thing other than the performer) and, in turn, more lenient forms of discipline. However, other factors may be taken into account that might alter a manager's diagnosis of, and response to, undesirable employee behavior. This study examines the general tendency of sales managers to treat top sales performers more leniently than poor sales performers when these salespeople engage in unethical selling. Specifically, the study sought to determine if unethical acts of a more serious nature and unethical acts associated with more serious consequential outcomes would offset the general tendency to treat top sales performers more leniently. Findings revealed that top sales performers are still disciplined more leniently than poor sales performers despite engaging in more serious behaviors that produce more serious consequences. Implications for sales managers are presented. © 2006 Wiley Periodicals, Inc.     

Organizational Sensemaking of Non-ethical Consumer Behavior: Case Study of a French Mutual Insurance Company

Researchers and managers alike are becoming increasingly interested in the topic of unethical consumer behavior. Where most studies view unethical behavior as something that is identifiable per se, the authors of the present article believe that it only exists because it has been constructed by people operating within a specific context. Hence the efforts made by this paper to explore, at the level of one specific organization, how interactions between employees and consumers might lead to the construct of unethical consumers. Based on a case study of France’s AMDM—a mutual insurance company set up to serve a client base comprising motorcyclists—the paper addresses how one group of consumers ends up being categorized as unethical by revealing the existence of a sensemaking process within the target organization. This process develops in three main phases: the nurturing of a shared ethos; the protection of employees’ recognized status; and the demonization of any group of consumers threatening this status. Managers incorporating this sensemaking process can avoid or mitigate the negative effects befalling organizations when these kinds of unethical consumer behavior are constructed.     

The Influence of Distributive Justice on Lying for and Stealing from a Supervisor

In a controlled laboratory experiment, we found evidence for our predictions that participants who received fair distributive treatment were more likely to lie to give a supervisor a good performance evaluation than those treated unfairly, and those who received unfair distributive treatment were more likely to steal money from a supervisor than those treated fairly. We further proposed that the presence of an ethical code of conduct would moderate these relationships such that when the code was present these relationships would be weaker than when the code was absent, but we failed to find support for these moderating effects. Our findings suggest that the relationship between distributive justice and unethical behavior is likely more complex than previously considered. Both researchers and managers may benefit from a broader understanding of the factors that motivate and inhibit unethical behaviors intended to benefit and harm supervisors and/or organizations.