Highlights of Finance and Accounting Ethics Research
Ethical behavior is difficult for any researcher to measure and analyze, especially in real-life situations. Results are often imprecise due to the challenges inherent in quantifying what is ethical and what is not. Much of the work done is theoretical, and involves either creating or applying ethics models. To draw conclusions from ethics research, due to the many variables involved, researchers must rely on judgment and assumptions as they study an individual's actions, reactions and reasoning for the individual's behavior. Nonetheless, the conclusions drawn and models proposed in ethics research provide valuable insights into ethical behavior, and it is an important area of academic research. ETHICAL SHIFTS AFTER ENRON Recent research suggests a shift in the ethical behavior of management, apparently linked to the highly visible convictions of Enron executives. The timing of two separate studies by the same author reveals interesting changes in the decision-making behavior of management before and after the convictions. This research suggests a movement toward a more "heightened state of ethical awareness" resulting from the greater likelihood of punitive consequences imposed for unethical corporate behavior given high-profile trials for alleged corporate malfeasance. Author Shane Premeaux conducted both studies, each through a questionnaire sent to 1,000 marketing managers in the U.S. and each resulting in a response rate of more than 40%. The first, in 2003, was conducted after Enron's bankruptcy but before its executives were prosecuted. Participants in the study responded to a series of vignettes containing ethical dilemmas. The responses were evaluated to determine their position on the ethical issues presented in situations involving areas such as conflict of interest and interpretation of gray areas within specific laws. Results from the 2003 study suggested that business practitioners at the time relied on a combination of "act and rule utilitarian ethical philosophy" This ethical theory says that, when an individual makes a decision, the best choice is one that provides the greatest good, regardless of laws or socially acceptable behavior. Therefore, decisions are acceptable if they lead to the greatest good, while ignoring justice and the direct spirit of the law. After the convictions of Enron executives, Premeaux repeated his study The 2006 study included several questions identical to those in the 2003 study. Results revealed a change in philosophies, with a current predominant reliance on the combined ethical theories of "rule utilitarian and rights rationale." This suggests a greater respect for the law and a belief that actions are moral when they are fair, just and respect the rights of everyone. This shift in moral philosophy reveals more ethical decision making according to the law, which in turn indicates actions that, according to the author "in the long term may be in the best interest of business and society." The author suggests that managers are now adhering to laws more closely due to the social and political changes since Enron, not due to a shift in moral thinking. Prior to the conviction of Enron executives, business scandals without real consequences had little impact on behavior. Essentially, management decision making is currently more aligned with acceptable ethical behavior, resulting in greater respect for the law as a means of avoiding the sanctions that come with noncompliance. The research, titled "The Link between Management Behavior and Ethical Philosophy in the Wake of the Enron Convictions," appeared in the March 2009 issue of the Journal of Business Ethics. [ILLUSTRATION OMITTED] ETHICS PROGRAMS AND THE PARADOX OF CONTROL Corporate ethics programs have become widespread in part because organizations convicted of ethical violations are eligible to have their federal penalties reduced by up to 95% if they have a qualifying ethics program in place. …