The Only Solution to the Decline in Business Ethics: Ethical Managers

This paper defines business ethics as a seriesof behaviors that adhere to values held by theindividual manager, the manager's supervisorsand subordinates, general society and, mostimportantly, the manager's customers andclients. The concept of business ethics isexplored through several levels of businessorganizations and operating environments.The paper then examines recent evidence of thedecline in business ethics by noting a fewexamples involving Beech-Nut, Hertz, MichaelMilken, E.F. Hutton, Sears, Salomon Brothers,Dalkon Shield, Exxon Valdez, S&L scandal,brokerage analysts. Surveys are cited toindicate that the American public believes thatbusiness ethics are declining.To further analyze the topic, the authorreports on a series of structured interviewswith managers in a variety of organizations.Fourteen senior managers were interviewed: 4from large county government, 3 from stategovernment, 4 from large corporations, 3 fromsmall businesses. The managers were asked theiropinions concerning the decline of businessethics, and for their recommendations topossibly retard the decline. All managers saidthey believed that ethics are in decline andthat the public believes ethics are declining.The recommendations for retarding or reversingthe decline yielded several suggestions: teachethics in schools and business organizations,develop and enforce Codes of Ethical Conductwithin all organizations, establish bettermonitoring and reporting mechanisms, and hireethical managers.The paper builds on theinterview results by coupling the managers'remarks with admonitions from many authors:while teaching ethics and Codes of EthicalConduct are important, the most importantfactor is the ethical behavior of managers(leaders). Ethical leadership is fundamentalsince ethical behavior is an individual – not acorporate – matter. In practice, ethics is notsomething that a manager ``does'; it issomething that the manager ``is.'     

Shadow Financial Regulatory Committee statements

Shadow Financial Regulatory Committee statements     

Risk and the miller equilibrium: Capital structure choice with risk-averse investors

Merton Miller's (1977) tax model of equilibrium capital structure choice results in capital structure irrelevance and the existence of tax clienteles, assuming the restrictive case of risk-neutrality. Relaxation of the assumption of risk-neutrality in Miller's tax framework, allowing utility-maximizing risk-averse investors, indicates that capital structure irrelevance continues to hold under reasonable assumptions about utility. Evaluation of resulting tax clienteles shows that marginal tax rates do not restrict investors from investing in equities but do affect the tax status of purchased bonds.     

FIRST-MOVER ADVANTAGE: THE OPPORTUNITY CURVE

A model depicting first-mover dynamics is proposed wherein certain types of strategic barriers activated by the first-mover strategy figure prominently in preserving benefits in the time dimension. Strategic barriers conferring singularity (i.e. one-time benefit) are considered to be the most effective preservers of first-mover advantage. the theoretical model is tested empirically in a study of six major industries. Benefits operationalized as industry share and profit share were found to decline consistently with industry age according to an exponential function designated the opportunity curve.     

An interview with Rhonda Anderson. Interview by Connie R. Curran

Nurse executives working in a hospital system experience varied and challenging opportunities to enhance the quality of patient care as well as the success of their professional careers. In this interview, Rhonda Anderson, MPA, RN, CNAA, discusses the hospital system, the managed care environment, and the importance of developing nurse managers.     

Measurement error and panel data1

The underidentification of linear models with measurement error does not necessarily extend to panel data models, as has been shown by GAiliches and Hausman (1986). We discuss and extend some of their results for a simple case and address particular issues concerning identification and asymptotic variances.     

A note on securities market response to pension fund termination*

Abstract. A recent article in this journal (Hsieh, Ferris, and Chen, 1990) presents evidence demonstrating that financially distressed firms that terminate overfunded pension plans experience significantly positive abnormal returns, while nondistressed terminating firms experience returns not different from zero. The article concludes from this evidence that the market regards the property rights to excess assets as residing fully with the sponsoring firm prior to termination, particularly when the sponsoring firm is not financially distressed. Accordingly, the reporting requirements of Statement of Financial Accounting Standards (SFAS) No. 88, which require immediate recognition of gains resulting from termination, are inconsistent with the market's view of the ownership rights to excess plan assets. Similarly, the article suggests that the excise tax imposed on asset reversions is “punitive” because property rights to fund assets resided with the company prior to termination. This paper questions three aspects of the Hsieh, Ferris, and Chen article: (1) the plausibility of the theory explaining differential reaction to the announcement to terminate for distressed and nondistressed firms; (2) the effect of the distressed/nondistressed classification criteria, event date specification, and event window length on the results; and (3) the appropriateness of using the empirical results, if reliable, to evaluate accounting treatment or federal tax policy. Résumé. Dans un récent article paru dans cette même publication, Hsieh, Ferris et Chen (1990) soumettaient des faits démontrant que les entreprises en difficulté financière qui mettent fin à un régime de retraite surprovisionné enregistrent des rendements anormaux positifs importants, tandis que les entreprises qui mettent fin à un régime de retraite sans être en difficulté financière enregistrent des rendements qui ne sont pas différents de zéro. De là, les auteurs concluaient que le marché estime que les droits à l'excédent d'actif appartiennent exclusivement à l'entreprise responsable du régime avant la cessation, en particulier lorsque cette dernière n'est pas en difficulté financière. Par conséquent, les exigences de la norme SFAS No. 88 en matière d'information à fournir, qui prévoient la constatation immédiate du produit de la cessation du régime, ne sont pas conformes à la façon de voir du marché relativement aux droits à l'excédent d'actif du régime. De la même façon, selon les auteurs, la taxe d'accise imposée en cas de retour de l'actif est “punitive”, étant donné que les droits à l'actif du régime appartenaient à l'entreprise avant la cessation du régime. Les auteurs s'interrogent ici sur trois aspects de l'article de Hsieh, Ferris, et Chen: 1) la pertinence de la théorie expliquant la réaction marginale à l'annonce de la cessation d'un régime pour les entreprise qui sont en difficulté financière et celles qui ne le sont pas; 2) l'incidence sur les résultats des critères permettant de classer les entreprises comme étant en difficulté financière ou ne l‘étant pas, de la précision de la date de l’événement et de la longueur de la période pré-post relative à l‘événement; et 3) l'opportunité de l'utilisation des résultats empiriques, s'ils sont fiables, pour évaluer le traitement comptable ou la politique fiscale fédérale.