Beyond bean counting: Establishing high ethical standards in the public accounting profession

Business professions are increasingly faced with the question of how to best monitor the ethical behavior of their members. Conflicts could exist between a profession's desire to self-regulate and its accountability to the public at large. This study examines how members of one profession, public accounting, evaluate the relative effectiveness of various self-regulatory and externally imposed mechanisms for promoting a climate of high ethical behavior. Specifically, the roles of independent public accountants, regulatory and rule setting agencies, and undergraduate accounting education are investigated. Of 461 possible respondents, 230 questionnaires (a 49.6% response rate) indicated that the profession's own rule setting body (The American Institute of Certified Public Accountants) and the use of peer review were perceived as the most effective mechanisms, while government regulation was ranked least. Respondents also evaluated the extent to which ethics should be covered in the accounting curriculum. For every course, the CPAs believed a greater emphasis on ethics is appropriate than presently exists. Suggestions for more effectively integrating ethics into accounting courses are made. Finally, respondents were also asked whether in answering the questionnaire they used a definition of ethics as either the Professional Code of Conduct or a moral and philosphical framework for guiding beliefs. Those who viewed ethics as abiding by a professional code had more confidence in the mechanisms addressed in this study to aid the public accounting profession's ability to ensure high ethical standards of conduct. Methodological implications of this distinction for future studies in business ethics are discussed. Jeffrey R. Cohen is Assistant Professor of Accounting at Boston College. He received his Ph.D. from The University of Massachusetts at Amherst. He is a C.M.A. and a Peat Marwick Research Fellow. His articles have appeared in the Journal of Accounting Research, Decision Sciences and The Organizational Behavior Teaching Review. His work on Ethics has appeared in Issues in Accounting Education, Management Accounting, and The CPA Journal. Laurie W. Pant is Assistant Professor of Accounting at Boston College. She holds an M.B.A. and a D.B.A. from Boston University and an M.Ed. from Emory University. She serves on the editorial board of Issues in Accounting Education. Her articles on Ethics have appeared in Issues in Accounting Education, Management Accounting and The Organizational Behavior Teaching Review.An earlier version of this paper was presented at the 1989 American Accounting Association National Meeting.     

Norman Bowie and Richard Rorty on multinationals: Does business ethics need ‘metaphysical comfort?’

Norman Bowie wrote an article on the moral obligations of multinational corporations in 1987. This paper is a response to Bowie, but more importantly, it is designed to articulate the force and substance of the pragmatist philosophy developed by Richard Rorty. In his article, Bowie suggested that moral universalism (which he endorses) is the only credible method of doing business ethics across cultures and that cultural relativism and ethnocentrism are not. Bowie, in a manner surprisingly common among contemporary philosophers, lumps Rorty into a bad guy category without careful analysis of his philosophy and ascribes to him views which clearly do not fit. I attempt to provide both a more careful articulation of Rorty's views, and to use his pragmatism to illustrate an approach to business ethics which is more fruitful than Bowie's. This brand of philosophy follows the Enlightenment spirit of toleration and attempts to set aside questions of Truth, whether religious or philosophical, and have ethics centered around what James called that which is good in the way of belief. Rather than looking for metaphysical foundations or some type of external justification, ethicists perform their craft from within the cultural traditions, narratives and practices of their society.Andrew C. Wicks, M.A. in Religious Ethics. Currently a fourth year Doctoral Candidate in the Religious Studies Department at the University of Virginia, Charlottesville.     

A Qualitative Exploration into Voters' Ethical Perceptions of Political Advertising: Discourse, Disinformation, and Moral Boundaries

Political campaign advertising continues to be a controversial policy topic in advertising and marketing research. It is also a prime subject for investigating the ethical evaluations of consumers (or voters). The following study draws from postmodern communication theory and employs a qualitative research methodology in order to explore voters' intimate and subjective views about politics, candidates, and political advertising. The findings include emergent themes relating to significant media rituals in voters' lives, the cynical perspective of politics as a game, and the widespread disapproval and suspicion with which voters regard negative political advertising. Additionally, the a priori theme of political information as disinformation was proposed and expanded upon. Findings are discussed in light of a greater understanding of the appropriateness of the traditional versus the postmodern perspective of political communication, informants' construction of moral boundaries which help them determine right from wrong, acceptable vs. unacceptable political behaviours in this particular context.     

Justice: The root of american business ideology and ethics

Although there are many conceptions of Justice, these different perceptions can provide many interesting insights into a business person's ethical standards as well as that person's decision-making processes. Using the Bishops' Pastoral Letter on the U.S. Economy as the basis for asking questions about justice, twenty-four business executives were interviewed about their conception of justice. An analysis of these interviews reveals that this group of businesspeople operated under very different conceptions of Justice at the Macroenvironmental and Microenvironmental levels. This result has some interesting implications not only for those scholars concerned with business ethics but for everyone who has a stake in business education.Men are called good, chiefly on account of their Justice. Cicero, 56 B.C. Ideology is applied philosophy. Lodge, 1986 Richard McGowan, S. J. is an Assistant Professor of Operations and Strategic Management at Boston College. His research focus involves examining both the rationale behind business and public policy decisions as well as determining the effectiveness of these policy measures. Some of his recent publications include Deciphering the Japanese Import Quota, Policy Studies Journal (1988) and Public Policy Measures and Cigarette Sales: An ARIMA Intervention Analysis Study JAI Social Issues Management Volume (1989).     

Corporate responsibility and corporate personhood

In this paper, I consider the claim that a corporation cannot be held to be morally responsible unless it is a person. First, I argue that this claim is ambigious. Person flags three different but related notions: metaphysical person, moral agent, moral person. I argue that, though one can make the claim that corporates are metaphysical persons, this claim is only marginally relevant to the question of corporate moral responsibility. The central question which must be answered in discussions of corporate moral responsibility is whether corporations are moral agents or moral persons. I argue that, though we can make a case for saying corporations are moral agents, they are not moral persons, and hence, we can hold them responsible. In addition, we need not treat them the way we would be obligated to treat a moral person; we needn't have the same scruples about holding a corporation morally responsible as we would a moral person. Rita C. Manning is Lecturer at California State College, San Bernardino. She has published in Southern Journal of Philosophy and in Informal Logic.     

What is business ethics? A reply to peter drucker

In his What is Business Ethics? Peter Drucker accuses business ethics of singling out business unfairly for special ethical treatment, of subordinating ethical to political concerns, and of being, not ethics at all, but ethical chic. We contend that Drucker's denunciation of business ethics rests upon a fundamental misunderstanding of the field. This article is a response to his charges and an effort to clarify the nature, scope and purpose of business ethics.     

Relationship Marketing and Sustained Competitive Advantage

This paper examines four perspectives of relationshipmarketing that have been discussed in the marketing literaturein recent years and which are being touted as sources of long-termprofitability for organizations. We examine each of the fourperspectives (locking in customers, customer retention, databasemarketing, and building strong, close, positive relationships)to assess their potential for achieving a sustained competitiveadvantage. Our analysis suggests that only those organizationsthat build strong, close, positive relationships with their customershave the potential to develop a sustained competitive advantagethat may lead to above normal performance.     

Equal pay for equal work in the third world

If the principle of equal pay for work of equal value is valid, then the practice of paying workers in third-world countries at a lower rate than workers doing the same jobs in industrialized nations is unjust. Recently Henry Shue argued that the principle is not valid. In this paper I criticize Shue's arguments and offer additional arguments in support of his conclusion. Hugh Lehman is a Professor of Philosophy at the University of Guelph. His most important publications are Introduction to the Philosophy of Mathematics, Basil Blackwell, 1979, Mathematical Proofs, Gaps and Postulationism, The Monist 67, and Intuitionism and Platonism on Infinite Totalities, Idealistic Studies XIII. He also edited a special issue of Animal Regulation Studies 2 that contained papers from the conference: Ethical Issues Concerning the Use of Animals in Agriculture and Scientific Research.     

Business ethics and commercial morality: Report of the Royal Commission into Commercial Activities

This section is focused on some areas of concern which were identified in The Report of the Royal Commission into Commercial Activities of Government and Other Matters (1990–1992). In the Report a number of situations were examined in which some individuals acted without recourse to any ethical guidelines. Most of the people mentioned in the Report held responsible positions in either Government or the private sector, and all were very well known in the community. The Report of the Royal Commission made a number of findings of serious impropriety on the part of several individuals, although there was comparatively little evidence of illegal or corrupt conduct. This section shows what happened to a governmental system in an Australian state when a number of Ministers and their advisors placed their personal or party advantage over their constitutional obligation to act in the community's interests.Those who cannot remember the past are condemned to repeat it.George Santayana (1863–1952)Michael Small is a Senior L1ecturer in the Curtin Business School, Western Australia. Earlier positions have included appointments with the Commonwealth Attorney-General's Department and more recently as Senior Lecturer in the Australian Police Staff College.     

The indefensibility of insider trading

The article, Inside Trading Revisited, has taken the stance that insider trading is neither unethical nor economically inefficient. Attacking my arguments to the contrary developed in an earlier article, The Ethics of Inside Trading (Journal of Business Ethics, 1989) this article constructs careful arguments and even appeals to Adam Smith to justify its conclusions. In my response to this article I shall clarify my position as well as that of Smith to support my counter-contention that insider trading is both unethical and inefficient. Patricia H. Werhane is the Henry J. Wirtenberger Professor of Business Ethics at Loyola University, Chicago. She is the author or editor of seven books including Ethical Issues in Business,edited with Tom Donaldson, in its third edition, Persons, Rights, and Corporations, Profits and Responsibility,and Philosophical Issues in Human Rights,edited with David Ozar and A. R. Gini. She is past president of the Society for Value Inquiry, founding member, past president and Executive Director of the Society of Business Ethics, and Chairperson of the Ethics Advisory Council of Arthur Andersen & Co. She serves on the editorial boards of the Journal of Business Ethics,the Journal of Value-Based Management, and Public Affairs Quarterly,and is Editor-in-Chief of Business Ethics Quarterly.Her book, Adam Smith and his Legacy for Modern Capitalismis forthcoming with Oxford University Press.     

The ethics of Nigeria's proposed withdrawal from the organisation of petroleum exporting countries

In the wake of the prevailing world oil glut which has affected the revenue earning powers of OPEC (Organisation of Petroleum Exporting Countries) members, there are serious proposals and arguments in favour of Nigeria's withdrawal from OPEC.The mission of this paper is to question the ethical basis of this proposed strategy after she has benefited from OPEC membership for over a decade. This paper postulates that it would be ethically wrong to do so and suggests a strategy that would boost the petrochemical industry for agriculture, building, pharmaceuticals, automative industry, etc. Dr. Bedford A. Fubara is Senior Lecturer and Head of the Department at the Rivers State University of Science and Technology in Port Harcourt, Nigeria. He was awarded the Columbia University Fellowship 1970–1972 and he received the Unesco Research Award in 1981/1982. His most important publications are: Negative Profitability Performances of Public Enterprises in Developing Countries: A Business Policy Anatomy, 1984, Public Enterprise 4; Government in Business, 1983, Management in Nigeria; Corporate Planning Art in Nigeria: The Experiental Evidence of Corporate Executive, Long Range Planning (forthcoming).This research was financed by the Rivers State University of Science and Technology under Project No. SRPC/014 dated 11th June, 1984.     

Assessing Industrial Buyer Preferences: Using the Swait-Louviere Test to Test the Key Informant Assumption

When using professional buyers to study an organizations buying behavior an important consideration is whether their preferences reflect those of the organization. Since this is a key informant problem, the present article focuses on the issue of the degree to which key informants can be used to provide insights into their own organizations preferences. We conduct a direct test of the key informant assumption using the Swait-Louviere test. In this test preferences from a choice experiment using actual buyers, and from market decisions made by the organization, are estimated separately, then jointly in multinomial logit models. We found that buyers experimental preferences were similar to estimates obtained from the market decisions. Buyers preferences were closer to the intuitive preferences of the organizations top executives than the estimates based on past market decisions, although a model based on the combined data outperformed either. We discuss the implications of these results for industrial buying research.This revised version was published online in May 2005 with a corrected cover date.     

Measuring Market Orientation: Generalization and Synthesis

This paper reports on an integrative, cross-nationalstudy which synthesizes and retests work of three separate groupsof researchers who in the late 1980s developed measurementsof a firm's Market Orientation. The projects resulted in threedifferent but syntactically similar Market Orientation scaleswhich, along with other measures, were used to support substantiveconclusions, particularly those involving firm Performance. Basedon a new study of 82 managers in 27 European and U.S. companies,we show that all three scales are reliable and valid. The scalesalso seem to generalize well internationally, both in terms ofreliability and prediction of Performance. We also show thatthe scales are similar to one another in terms of various validitymeasures and in terms of correlations with Performance measures.Finally, we synthesize a 10-item scale based on a more parsimoniousdefinition of Market Orientation as: the set of cross-functionalprocesses and activities directed at creating and satisfyingcustomers through continuous needs-assessment.     

Mergers,takeovers, and a property ethic

The recent takeover and merger trend cries out for ethical evaluation. This essay proposes a model for evaluating them in terms of their impact on a firm's immediate stakeholders: investors, owners, management and employees. Since mergers and takeovers are Transfers of Ownership of Firms (TOFs) they entail a property ethic of ownership, control, securing stakeholder interests, and defining which stakeholders should exercise these rights. I use the model to evaluate two fictional cases, a friendly merger and a hostile takeover. The results show that neither TOF serves all interests equitably. Since the control structure of the private firm is legitimized by its interest structure, I reason that both should be reformed. Both rest on a broader economic rationale; but it is controverted. Accordingly, the economic and ethical evaluation of TOFs, I conclude, both entail the democratic reform of the control structure of the firm.A corporation represents far more than its current stock price; it embodies obligations to employees, customers, suppliers and communities.Robert S. Saul, Peers Merchant BankVincent di Norcia is Associate Professor of Philosophy at the University of Sudbury. He is the author of Ethics in Management and Beyond the Red Tory.     

Values in Decision-Making Processes: Systematic Structures of J. Habermas and N. Luhmann for the Appreciation of Responsibility in Leadership

"Ethical Leadership" in modern multicultural corporations is first the consideration of different personal and cultural value systems in decision-making processes. Second, it is the assignment of responsibility either to individual or organisational causalities. The task of this study is to set the stage for a distinction between rational entities and the arbitrary preferences of individuals in economic decision making processes.Defining rational aspects of behaviour in economics will lead to the formal structures of organisational systems, which are independent of concrete but varying values. Luhmann's Theory of systems of communication describes the internal dynamic forces of economic communication processes in terms of formal structures. On the other hand Habermas' Theory of discourse integrates the previous relationship between individual subjectivity and rational behaviour. Habermas gives an indication of how to separate subjective values and meaning from rational arguments in rational communication processes. The translation of these theoretical structures into practical applications for decision making processes and decision taking acts links the ethical, or value-oriented, context precisely to both individual and organisational areas of responsibility.     

Demand-side Spillovers and Semi-collusion in the Mobile Communications Market

We analyze roaming policy in the market for mobile telecommunications. Firms undertake quality improving investments in network infrastructure in order to increase geographical coverage, capacity in a given area, or functionality. Prior to investments, roaming policy is determined. We show that under collusion at the investment stage, firms and a benevolent welfare maximizing regulators interests coincide, and no regulatory intervention is needed. When investments are undertaken non-cooperatively, firms and the regulators interests do not coincide. Contrary to what seems to be the regulators concern, firms would decide on a higher roaming quality than the regulator. The effects of allowing a virtual operator to enter are also examined. Furthermore, we discuss some implications for competition policy with regard to network infrastructure investment.     

Risk Management for E-Cash Systems with Partial Real-Time Audit

We analyze coin-wallet and balance-wallet under partial real-time audit, and compute upper bounds on theft due to the fact that not all the transactions are audited in real time, assuming that everything else is perfect. In particular, we assume that the audit regime holds for innocent payees. Let v be the maximum allowed balance in a wallet, and 01 be the fraction of transactions that are audited in real time in an audit round. Assume one unit transactions. We show that the upper bound on expected theft for coin-wallet is lim₀^–2, while for plausible (similar) parameter choice the bound for a balance-wallet is O(exp(mv)), where 1<m. The former is nicely bounded for small transactions, however, the bound for balance-wallet can become huge in those cases where we require very small false alarm probability. We conclude that partial audit, may be suitable for coin-wallets with low denomination coins, and possibly for balance-wallet, when we may tolerate a relatively high false alarm rate, but it may be too risky for balance-wallet, where very low false alarm rate is required.     

Investing in Socially Responsible Companies is a must for Public Pension Funds – Because there is no Better Alternative

>With assets of over US$1.0 trillion and growing, public pension funds in the United States have become a major force in the private sector through their holding of equity positions in large publicly traded corporations. More recently, these funds have been expanding their investment strategy by considering a corporations long-term risks on issues such as environmental protection, sustainability, and good corporate citizenship, and how these factors impact a companys long-term performance. Conventional wisdom argues that the fiduciary responsibility of the pension funds trustees must be solely focused on their beneficiaries and, therefore, their investment criteria must be based strictly on narrowly defined financial measures. It is also asserted that well-established financial measurements of corporate performance already include long-term risk assessment through discounted present value of future flow of earnings. Consequently, all other criteria are contrary to the best interest of the pension funds beneficiaries. In this paper, we assert that, contrary to conventional wisdom, pension funds, and for that matter other mutual funds, must be concerned with the long-term survival and growth of corporations. These measures are generally referred to socially responsible investing (SRI) and when applied to corporations, it is termed socially responsible corporate conduct (SRCC). We demonstrate that current measurement of future risk assessment invariably understates, and quite often completely overlooks, these long-term risks because of the inherent bias towards short-run on the part of financial intermediaries whose compensation depends greatly on short-term results. Furthermore, there is ample evidence to suggest that these intermediaries have been engaging in self-serving practices and thus failing in their duties to serve their clients, i.e. pension funds, best interests. Because of their large holdings in the total market as well as individual companies, these funds cannot easily divest from poorly performing companies without destabilizing the companies stock and overall markets. Hence, they must opt for a strategy of emphasizing investment criteria that encourage companies to take into account long-term aspects of their operations in terms of their impact on environment, sustainability, and community welfare, to name a few. We argue that an exclusionary, and even a primary, focus on short-term financial criteria is no longer a viable option. It also calls for the pension funds to encourage greater transparency and accountability of the entire corporate sector through improved corporate governance. Thus socially responsible investing practices are not merely discretionary and desirable activities; they are a necessary imperative, which both the corporations and public pension funds, and other large institutional holders, will ignore at serious peril to themselves. Finally, the paper considers some of the recent developments where corporations have been responding to these challenges and how their actions might be strengthened through greater disclosure and transparency of corporate activities. It also makes recommendations for the pension funds to support further research in creating new measurement standards that further refine the concept of socially responsible investing as a necessary ingredient of long-term corporate survival and growth in the context of a changing economic, environmental and socio-political dynamic.     

A note on government policy and the new ‘intrapreneurship’ in Bulgaria

Conclusion I have attempted in this paper to highlight the recent emergence and rapid growth of a particular type of intrapreneurship in the Bulgarian economy. This intrapreneurship involves the creation of new smaller establishments within existing large-scale industrial firms. These semi-autonomous auxiliary plants are exempt from part of the bureaucracy which constrains the larger addition, they have provided a higher rate of technological advance, a better supply of consumer goods, a greater utilization of labor resources, and a higher return to human capital.Only through the continued development of a small-firm sector can the Bulgarian economy meet the challenge currently posed by its western counterparts. Whether the next step from intrapreneurship to entrepreneurship is taken may hold the key for industrial development in Bulgaria.     

Friedman fallacies

Milton Friedman's article, The Social Responsibility of Business Is To Increase Its Profits, owes its appeal to the rhetorical devices of simplicity, authority, and finality. More careful consideration reveals oversimplification and ambiguity that conceals empirical errors and logical fallacies. It is false that business does, or would, operate exclusively in economic terms, that managers concentrate obsessively on profitability, and that ethics can be marginalized. These errors reflect basic contradictions: an apolitical political base, altruistic agents of selfishness, and good deriving from greed. Colin Grant is a Professor in the Department of Religious Studies at Mount Allison University. He teaches an undergraduate course on The Ethics and Ethos of Business. His article Giving Ethics the Business appeared in JBE 7 (1988), pp. 489–495. Some of the journals in which he has published are: The Christian Century, The Dalhousie Review, Journal of the American Academy of Religion, Modern Theology, Religious Studies, Studies in Religion/Sciences Religieuses, The Toronto Journal of Theology.