Morality, ethical awareness and ethical behavior in business: challenges for twenty-first century organizations

Citation

Koumbiadis, N. (2014), "Morality, ethical awareness and ethical behavior in business: challenges for twenty-first century organizations", Journal of Accounting & Organizational Change, Vol. 10 No. 2. https://doi.org/10.1108/JAOC-10-2013-0082

Morality, ethical awareness and ethical behavior in business: challenges for twenty-first century organizations

Article Type: Guest Editorial From: Journal of Accounting & Organizational Change, Volume 10, Issue 2

Introduction

Unethical behavior within organizations early this century has undoubtedly impacted the world of business (Earley and Kelly, 2004). As a result, companies and universities are attempting to rebuild their responsibility through diverse methods. The topic of ethics in organizations, or the lack of it in some organizations, is not at all new. Researchers have studied ethics in business for decades (Brennar and Mollander, 1977; Beltramini et al., 1984; Whipple and Swords, 1992). Some studies have focused on attitudes of business professionals towards ethical situations while others have examined how college students view the role of ethics in business. Some studies have looked at the impact of demographics such as race, age and gender on ethical judgments, while others have examined ethics as it relates to specific areas of business such as marketing (Tsalikis and Fritzsche, 1989). The issue of ethics in business resurfaced especially after the financial scandals of 2001-2002 and 2008-2009 when large corporations went into financial distress due to the unethical shenanigans of their top managers and millions of investors saw their wealth evaporate before their eyes. Today, the reality still exists that unethical acts are carried out by individuals, groups of individuals, and even entire organizations. Therefore, an interdisciplinary approach to understanding unethical behaviour within organizations may be necessary.

The contributions to the special issue

This special issue of Journal of Accounting & Organizational Change includes five papers focusing on business ethics. The first three articles focus on the interaction of business ethics with culture, education, and the accounting profession. The last two articles, by Esen and Ritsatos focus on whistleblowing behavior and tax evasion, respectively.

Unethical practices in international business are widespread and growing. The globalization of business has also led to an increase in ethical difficulty and dilemmas for managers of global firms. In the first article, entitled “The effects of national culture on managers’ attitudes toward business ethics: implications for organizational change”, John O. Okpara discusses how the increase in globalization of business highlights the importance of incorporating cultural differences into ethics research. The article incorporates the idea that cultural differences exist among managers from different nations. These differences can be attributed to perceptions of power, ability to cope with uncertainty, regard for material goods and quality of life, openness to change, and group orientation. Using a sample of participants from the firms listed in the Manufacturers Association of Nigeria, which was also stratified based on industry, management position held and location of the firm, the author uses a questionnaire to survey the participants. Based on the results presented, one may conclude that ethical behavior can also be influenced by cultural factors like differences among different societies’ values, tendencies towards collectivism, and importance given to materialistic life. These differences ultimately affect the ethical attitudes and decision-making abilities of managers, particularly those in multicultural environments. So, when multinational organizations that are spread across the boundaries of different countries displaying different cultures develop their organizational codes of conduct, they should take into account the cultural attributes of their local entities and the people who make those entities. A code of ethical conduct that balances cross-cultural beliefs and values is likely to have a greater chance of acceptance among the managers who are expected to abide by it especially when such managers represent different cultures.

The importance of understanding the value of ethics in the lives of business students and especially accounting students cannot be emphasized enough. In “Has the AICPA changed the accounting profession for better or worse? The case of educational change”, Nicholas Koumbiadis and Ganesh M. Pandit examine perceptions of two groups of students, those who graduated from the standard 120-credit accountancy programs and those who graduated from the AICPA-mandated 150-credit accountancy programs. The objective is to compare and contrast the students’ ethical perceptions to determine whether the extra 30 credit hours that also contained an emphasis on ethics really made an impact on students’ understanding of ethics (Dellaportas, 2006). The authors gather data via questionnaires administered to the two groups of accounting students in the above two types of accounting programs. Results show that compared with graduates of the 120-credit program, graduates from the 150-credit program score significantly higher on ethical perceptions on five domains: company profit, friendship, team interest, personal morality, and rules. However, the two groups are not significantly different in the domains of self interest, efficiency, social responsibility, or laws. It is important to note that increased emphasis on ethics in the curriculum through the expanded accounting program tends to heighten the accounting students’ ethical awareness in at least some areas. The accounting graduates are tomorrow’s accounting professionals who will play a role in shaping the financial reporting environment in the country and perhaps worldwide. Their appreciation of ethics in accounting in particular, and in business in general, will only help promote the ethical climate of our business world.

In the third article entitled “An examination of the ethical discourse of the US public accounting profession from a Foucaultian perspective”, C. Richard Baker addresses the question of whether the code of ethics in the US public accounting profession exists to protect the public interest or it is really serving the interests of the public accounting profession. He examines the evolution of the code of ethics adopted by the US public accounting professionals over the last century in relation to Foucault’s concept of “codified discourse”. Baker proposes that the changes that happened to the code of ethics in the accounting profession were not driven by a desire to enhance the ethical behavior of accountants. Rather the code has evolved in order to regulate the accounting profession. This is also seen from the way accountants begin to behave early in the careers, conforming to a structure of rules and policies and not necessarily to a code of ethics. Baker’s paper asserts that, in the US public accounting profession, accountants become ethical not simply by adhering to an established code of ethics but by disciplining themselves into conforming to the self-regulatory practices of the profession. This seems encouraging, in that, accountants’ ethical behavior will not necessarily be bound by the existence or non-existence of a code of ethics. Accountants seem to appreciate the importance of following ethical practices when carrying out their professional responsibilities, and strive to become “ideal professionals.

The fourth article is entitled “An empirical research about whistleblowing behavior in accounting context” by Turhan Erkmen, Arzu Özsözgün Çalışkan and Emel Esen which investigates the interactions of demographic characteristics of accountants with the whistleblowing intentions among them when there is a serious wrongdoing in the workplace. The demographic factors studied include differences among accounting professionals based on their employment status, i.e. working independently or committed to an organization, number of years in the position, gender, age, membership of professional organizations, and the number of clients served. In general, the authors hypothesize that, based on these demographic factors, accounting professionals who are more experienced and more “secure” in their positions are also more likely to blow the whistle when faced with unethical working environment. Instead of using questionnaires, the authors use the scenario technique to gather data from accountants’ whistleblowing behavior. The study finds that while accounting professionals would blow the whistle in an unethical working environment, there are no statistically significant differences in accounting professionals’ whistleblowing behavior based on their demographic characteristics, with the exception of gender and age. Again, this could be an encouraging finding that shows that both young and older accounting professionals, from both genders, would tend to report unethical working conditions or behavior in the workplace equally regardless of what their professional circumstances might be.

Last but not least, Titos Ritsatos writes about “Tax evasion and compliance; from the neo classical paradigm to behavioural economics, a review”. Tax evasion and tax compliance have been popular research subjects in the past (Allingham and Sandmo, 1972). The importance of studying tax compliance is highlighted by the fact that many nations are currently going through a fiscal scenario short of a crisis where the challenge before the national governments is how to finance rising level of public expenditures without relying too much on public debt. Ritsatos’s article presents a comprehensive review of the literature explaining individual taxpayers’ behavior. He distinguishes between tax avoidance and tax evasion, and provides an analysis of alternative theories related to tax evasion which is an economic phenomenon. Ritsatos also makes reference to the “slippery slope framework” introduced by Kirchler et al. (2008), where it is theorized that tax compliance can be achieved by using persuasion with those tax payers that want to comply with tax laws and pay their dues while strong-arming those tax payers who have a tendency to evade taxes. The concept of tax compliance through persuasion is important because it does not assume that all taxpayers are trying to evade taxes. It recognizes that some taxpayers do understand their moral obligation to pay their fair share of taxes. Ritsatos’s paper concludes by identifying various factors involved with tax evasion, including but not restricted to, the levels of income, probability of being caught, the rigor of penalty, and peer behavior.

Concluding remarks

The issues of ethical awareness, morality and ethical behavior in business in general and in the accounting profession in particular have been studied for several years. As we end each decade in the business world with memories of financial and/or business scandals caused by the unethical behaviors of managers at different strata of organizations, we have paused and asked ourselves the question: are organizations doing enough to recognize the differences among individuals when dealing with their ability to understand and respond to ethical dilemmas, and are they taking appropriate and timely actions to promote behavior suitable to a business professional while discouraging any opportunities to engage in unethical or immoral behavior in the business context. In this special issue, we take a look at several pieces of literature that examine factors related to why and how different business professionals behave the way they do when dealing with unethical situations, and how some of these professionals regulate themselves proactively instead of waiting for a formal code of ethics to govern their behavior. We would like to extend many thanks to Dr Zahirul Hoque for allowing us the opportunity to participate as guest editors for this special issue. In addition, we would like to give special thanks to Dr Nikolaso Apergis, Dr Jean Kabongo, Dr C. Richard Baker, Dr Richard Morfopoulos, Dr Idowu Samuel, Professor Socrates Boussios, Dr Mollik Abu, and to the late Dr Appa Rao Korukonda for their reviews of the papers that were submitted.

Nicholas Koumbiadis, John O. Okpara and Ganesh M. Pandit
Guest Editors

References

Allingham, M.G. and Sandmo, A. (1972), “Income tax evasion: a theoretical analysis”, Journal of Public Economics, Vol. 1, pp. 323–338

Beltramini, R.F., Peterson, R.A. and Kozmetsky, G. (1984), “Concerns of college students regarding business ethics”, Journal of Business Ethics, Vol. 3 No. 3, pp. 195–200

Dellaportas, S. (2006), “Making a difference with a discrete course on accounting ethics”, Journal of Business Ethics, Vol. 65 No. 4, pp. 391–404

Earley, C.E. and Kelly, P.T. (2004), “A note on ethics educational interventions in an undergraduate auditing course: is there an ‘Enron effect?’”, Issues in Accounting Education, Vol. 19 No. 1, pp. 53–71

Kirchler, E., Hoelzl, E. and Wahl, I. (2008), “Enforced versus voluntary tax compliance: the ‘slippery slope framework’”, Journal of Economic Psychology, Vol. 29, pp. 210–225

Tsalikis, J. and Fritzsche, D.J. (1989), “Business ethics: a literature review with a focus on marketing ethics”, Journal of Business Ethics, Vol. 8 No. 9, pp. 695–743

Whipple, T.W. and Swords, D.F. (1992), “Business ethics judgments: a cross-cultural comparison”, Journal of Business Ethics, Vol. 11 No. 9, pp. 671–678

Further Reading

Brenner, S.N. and Molander, E.A. (1977), “Is the ethics of business changing?”, Harvard Business Review, Vol. 19, pp. 48–54

Kubasek, B., Brennan, B. and Browne, M. (2003), The Legal Environment of Business, Prentice-Hall, Upper Saddle River, NJ