Showing papers in "Business Ethics Quarterly in 2004"

Getting to the Bottom of “Triple Bottom Line”

Abstract: In this paper, we examine critically the notion of “Triple Bottom Line” accounting. We begin by asking just what it is that supporters of the Triple Bottom Line idea advocate, and attempt to distil specific, assessable claims from the vague, diverse, and sometimes contradictory uses of the Triple Bottom Line rhetoric. We then use these claims as a basis upon which to argue (a) that what is sound about the idea of a Triple Bottom Line is not novel, and (b) that what is novel about the idea is not sound. We argue on both conceptual and practical grounds that the Triple Bottom Line is an unhelpful addition to current discussions of corporate social responsibility. Finally, we argue that the Triple Bottom Line paradigm cannot be rescued simply by attenuating its claims: the rhetoric is badly misleading, and may in fact provide a smokescreen behind which firms can avoid truly effective social and environmental reporting and performance.

Does Type of Wrongdoing Affect the Whistle-Blowing Process?

Abstract: We analyzed data from a survey of employees of a large military base in order to assess possible differences in the whistle-blowing process due to type of wrongdoing observed Employees who observed perceived wrongdoing involving mismanagement, sexual harassment, or unspecified legal violations were significantly more likely to report it than were employees who observed stealing, waste, safety problems, or discrimination Further, type of wrongdoing was significantly related to reasons given by employees who observed wrongdoing but did not report it, across all forms of wrongdoing However, the primary reason that observers did not report it was that they thought nothing could be done to rectify the situation Finally, type of wrongdoing was significantly related to the cost of the wrongdoing, the quality of the evidence about the wrongdoing, and the comprehensiveness of retaliation against the whistle-blower These findings suggest that type of wrongdoing makes a difference in the whistle-blowing process, and it should be examined in future research

The UN Global Compact: The Challenge and the Promise

Abstract: The United Nations Global Compact is a new initiative intended to increase and to diffuse the benefits of global economic development through voluntary corporate policies and actions. Kofi Annan, secretary-general of the United Nations, addressing the Davos World Economic Forum in January 1999, challenged business leaders to join a “global compact of shared values and principles” and to provide globalization a human face. Annan argued that shared values provide a stable environment for a world market and that without these explicit values business could expect backlashes from protectionism, populism, fanaticism and terrorism.’ Following the 1999 Davos meeting, Annan and a group of business leaders formulated nine principles, which have come to be known as the UN Global Compact. After lengthy consultation, a tenth principle against corruption was added in June 2004.

The Obligations of Transnational Corporations: Rawlsian Justice and the Duty of Assistance

Abstract: Building on John Rawls’s account of the Law of Peoples, this paper examines the grounds and scope of the obligations of transnational corporations (TNCs) that are owned by members of developed economies and operate in developing economies. The paper advances two broad claims. First, the paper argues that there are conditions under which TNCs have obligations to fulfill a limited duty of assistance toward those living in developing economies, even though the duty is normally understood to fall on the governments of developed economies. Second, by extending Rawls’s account to include a right to protection against arbitrary interference, the paper argues that TNCs can be said to have negative and positive obligations in the areas of human rights, labor standards, and environmental protection, as outlined in the U.N. Global Compact. More generally, the paper aims to further our understanding of the implications of Rawls’s account of justice.

The Ethics of Mentoring

Abstract: Mentoring is an age-old process that continues to be practiced in most contemporary organizations. Although mentors are often heralded as virtuous agents of essential continuity, mentoring commonly results in serious dysfunctions. Not only do mentors too often exclude people different from themselves, but also the people they mentor are frequently abused in the process. Based on the conception of mentor as a quasi-professional, this paper lays out the ethical responsibilities of both parties in the mentoring process.

The Effects of Context on Trust in Firm-Stakeholder Relationships: The Institutional Environment, Trust Creation, and Firm Performance

Abstract: Recent work on the subject speaks to the importance trust has for firm performance (e.g., Hagen and Choe, 1999; Hill, 1995). Yet little work has been done to show how context affects the ability of firms to create trust in relationships with key stakeholders. This paper looks at how the institutional environment may affect the performance of different strategies for managing firm-stakeholder relationships, and in turn, how this affects firm performance. The authors put forward propositions that build on these theoretical insights and offer prospects for future empirical work.

Globalization, Ethics, and Opportunism: A Confucian View of Business Relationships

Abstract: Opportunism impacts the behavior of firms in market situations where they purchase goods and services externally and create dependency relationships with other firms. Opportunism as a business issue is addressed in economics and marketing literature as an important factor in transaction cost analysis and market governance. Management and business ethics scholars, however, do not address this issue in depth, if at all.The recent bankruptcy of MCI WorldCom highlights some of the risks inherent in a world economy where customers and companies of one society are dependent upon the business practices of partner companies in other societies. Telecommunications customers and companies in Asia, Europe and other places, who depended upon MCI WorldCom for connections to North America, now have important areas of their business in jeopardy because of the uncertainty about the fate of a critical business partner.MCI WorldCom’s situation appears to be the result of an attempt to obtain personal gain, at the expense of others, by at least one senior manager. This is called opportunism. Williamson (1985) defined opportunism as “self-interest seeking with guile.” It can wreak havoc with companies, customers, stock markets and economies and is demonstrated regularly in press accounts of misstatements on financial reports and other ways senior managers use their positions to enhance their personal wealth and influence.This paper will focus on the ethical issues surrounding business relationships and how Confucianism, with its focus on trust, reciprocity and mutual benefit in relationships, can offer a moral foundation to the inter-firm arrangements that are so much a part of the contemporary business landscape.

Is There a Special E-Commerce Ethics?

Abstract: The speed and degree to which e-commerce is infiltrating the very fabric of our society, faster and more pervasively than any other entity in history, makes an examination of its ethical dimensions critical. Though ethical lag has heretofore hindered our explorations of e-commerce ethics, it is now time to identify and confront them. In this paper we define e-commerce and describe the characteristics that set it apart from traditional brick and-mortar business. We then examine the ethical foundation of e-commerce, focusing on the question, “Is there a special e-commerce ethics?” Our answer is “no.” We support our answer by showing that the current issues in e-commerce ethics and brick-and-mortar business are fundamentally the same, but that e-commerce issues have different manifestations and scope. We then demonstrate that ethical principles and rules in e-commerce and brick-and-mortar business are fundamentally the same, but have different manifestations at the most specific level. We elucidate this point by discussing the use of personal information and the opt-in, opt-out debate. We conclude with a call for research on trust, a key value in the success of e-commerce.

Stakeholder Conceptions of the Corporation: Their Meaning and Influence in Accounting Research

Abstract: In this paper we develop a categorization scheme for stakeholder research based on differences in studies’ primary level of analysis (managerial agency, organizational, or societal) and use this scheme to review and critique genres of stakeholder-based accounting research. We draw three primary conclusions: 1) stakeholder research in accounting should more clearly incorporate the business ethics stakeholder literature, 2) ethical issues are much less likely to be considered in stakeholder-based accounting research when a managerial agency level of analysis is adopted, and 3) the accounting discipline can learn from debates within the business ethics literature concerning shareholder dominance and stakeholder legitimacy. These conclusions, taken together, demonstrate the need for accounting researchers to become more focused on ethical considerations in the design of accounting information systems, performance measurement criteria, and financial reporting models.

The Development of International Business Norms

Abstract: International business norms do not exist. Content and development of such norms is a significant research question for business ethics scholarship. Any norms must address difficult practical and moral problems facing multinational enterprises. The author’s thesis is as follows. A key circumstance is that international relations remain a Hobbesian state of nature. The theoretical solution of a global sovereignty for norm formulation and enforcement is unlikely. The business ethics literature proposes other insightful but theoretical and conflicting solutions to abstract wealth-responsibility and universalism-relativism controversies. Theoretical convergence seems unlikely. Evolution of multiple international policy regimes fragmented by policy arena is more probable. Regimes will typically be neither morals by agreement nor a morality of the marketplace. Regime development can occur in various other ways. Moral leadership, by firms, stakeholders, nongovernmental organizations or governments, can be a vital force. Formal ethical theories can inform and guide such leadership initiatives. This process perspective is applied to several recent case examples cited here as supporting evidence: anti-corruption, labor, environmental, human rights, and fiduciary responsibility initiatives.

A Kantian Perspective on the Characteristics of Ethics Programs

Abstract: The literature contains many recommendations, both explicit and implicit, that suggest how an ethics program ought to be designed. While we recognize the contributions of these works, we also note that these recommendations are typically based on either social scientific theory or data and as a result they tend to discount the moral aspects of ethics programs. To contrast and complement these approaches, we refer to a theory of the right to identify the characteristics of an effective ethics program. We draw from Kant’s ethical theory to identify three guiding principles of a moral ethics program and then apply those principles to the specific components of ethics programs as discussed in the Federal Sentencing Guidelines. Doing so provides insights as to how an ethics program ought to be designed from a moral point of view and sparks discussion of the moral aspects of ethics programs.

Global Business Ethics: Regulation, Code, or Self-Restraint

Abstract: Three strategies for developing just and consistent global business practices are examined: 1) international treaties and agreements, 2) global codes of business conduct, and 3) voluntary self-restraint. International agreements investigated are: NAFTA, Global Warming Treaty, OECD Anti-Bribery Treaty and Infant Formula Agreement. The codes examined are the Caux Round Table’s Principles for Business, The Global Sullivan Principles and The United Nations Global Compact with Business. Each of these three strategies is probed for its relative strengths and weaknesses, and its prospects for developing ethical business practices—especially in the areas of improving the environment, human rights and working conditions.

The Structural Origins of Conflicts of Interest in the Accounting Profession

Abstract: A6stract: This paper describes the professional ethical context behind the failure of Arthur Andersen's audit of Enron. It is argued that the evolution of extreme industrial concentration in the accounting profession, and the subsequent unrestrained diversification of the 'Big Five" accounting firms were the sources of multiple conflicts of interest that were unresolved by the time of the Enron debacle. In the post Enron era, the problems of commercial conflicts of interest and of highly concentrated power in the profession remain important issues. Accountancy is believed by its practitioners to be a profession, not a commercial venture. (Magill, Previts, and Robinson 1998: 4) The spectacular collapse of Enron in 2001 and the subsequent disintegration of l their auditors, Arthur Andersen, was arguably the most significant scandal in modern U.S. business history. The debacle has provided enough analytical fodder to engage the minds of scores of academics, and there will no doubt be many theories advanced for the reasons behind the fraud and for the failure of the audit firm to perform its role properly. In this paper I wish to advance my own particular theory. I suggest that a substantial contribution to the Enron collapse came from the failings of Enron's audit firm, which was itself affected by a general build-up of tensions related to conflicts of interest in large audit firms and within the accounting profession itself. These ethical tensions, like pressures between tectonic plates in geology, had built up over decades as the structure of the accounting profession evolved. This paper will argue that there was a systemic failure to note and correct the increasing range of new conflicts of interest that were emerging from the way in which the industrial structure of the accounting profession's delivery of services evolved in the latter part of the twentieth century. These conflicts of interest placed intoler

Employee Governance and the Ownership of the firm

Abstract: Employee governance, which includes employee ownership and employee participation in decision making, is regarded by many as morally preferable to control of corporations by shareholders. However, employee governance is rare in advanced market econo- mies due to its relative inefficiency compared with shareholder governance. Given this inefficiency, should employee governance be given up as an impractical ideal? This article contends that the de- bate over this question is hampered by an inadequate conception of employee governance that fails to take into account the difference between employees and shareholders. It offers a different, more ad- equate conception of employee governance that recognizes a sense in which employees currently have some ownership rights. The argu- ment for this conception of employee governance is built on an expanded understanding of the ownership of a firm. The article also suggests new strategies for strengthening the role of employees in corporate governance.

The Imperfect Nature of Corporate Responsibilities to Stakeholders

Abstract: In this paper, I specifically consider the issue of corporate governance and normative stakeholder theory. In doing so, I argue that stakeholder theory and responsibilities to non-shareholder con- stituencies can be made more intelligible by reference to Kant's conception of perfect and imperfect duties. I draw upon Onora O'Neill's ( l 996) work, Towards lustice and Virtue: A Constructivist Account of Practical Reasoning. In her text O'Neill underlines a number of relevant issues including: the integration of particularist and universalist ac- counts of morality; the priority of obligations over rights; the importance of the distinction between imperfect and perfect duties; and the relation between the virtues and imperfect duties. On the basis of the foregoing analysis, the paper argues that business ethi- cists should avoid recommending the institutionalising of stakeholder responsibilities in terms of legally defined sets of stakeholder rights. Instead, we should regard stakeholder responsibilities as uniformal- ised imperfect duties. Conceiving responsibilities to all stakeholder groups in this manner, allows the firm the freedom to perfect these duties in ways appropriate to cultural and societal setting, and in accordance with the capacity to do so. T n this paper I intend to draw upon Onora O'Neill's (1996) work, Towards 1 Justice and Virtue: A Constructivist Account of Practical Reasoning to ad- dress a principal issue of corporate governance, the normative responsibilities of a corporation toward its stakeholders. O'Neill in her text underlines a number of important points including: the integration of particularist and universalist accounts of morality; the priority of obligations over rights; the importance of the distinction between imperfect and perfect duties; the relation between the virtues and imperfect duties. It is my argument in this paper that applying O'Neill's analysis of justice and virtue to corporate governance will bring a level of clarity to certain issues that have become the focus of stakeholder theory such as stakeholder rights, the institutionalisation of stakeholder rights, the ob- ligations of the corporation according to the stakeholder model, and the structure of corporate organization.

The Philosophy and Rhetoric of Auditor Independence Concepts

Abstract: This paper analyzes the rhetoric surrounding the profession’s presentations of auditor independence. We trace the evolution of the character of the auditor from Professional Man in the early years of the twentieth century to the more public and abstract figures of Judicial Man and Economic Man. The changing character of the auditor in the profession’s narratives of legitimation reflects changes in the role of auditing, in the economic environment, and in the values of American society. Economic man is a self-interested and shallow character who offered the auditing profession little protection against involvement in corporate scandals. In the wake of recent accounting scandals, the profession is calling for a return to the character of Professional Man to restore trust in audits and the financial markets.We also analyze the philosophical bases of the metaphors surrounding auditor independence. These metaphors, particularly the metaphor of independence as separation, create problems in conceptualizing independence concepts. How can you discuss appropriate relationships when your basic concept is one of separation, or no relationship? On the other hand, relational concepts of independence are also flawed if they are not based on a firm moral foundation. We suggest how the profession can act to rebuild its moral foundation through recognition of collective responsibility.

Buy Bribes or Bye-Bye Bribes: The Future Status of Bribery in International Commerce

Abstract: Bribery in international business has become a priority concern among business, government, and community leaders. While discussions among philosophers often emphasize the ethical justification for banning bribery, policy-makers around the world are challenging it on the basis of its effects for economic development. In this paper we define bribery, trace recent efforts by the public, private, and civil society sectors to curb it, and attempt to answer the question: Will bribery become less common?

The Identification and Categorization of Auditors’ Virtues

Abstract: In this paper, we develop a typology of auditors’ virtues through in-depth interviews with nine exemplars of the audit community. We compare this typology with prescribed auditors’ virtues as represented in the applicable Code of Professional Conduct. Our comparison shows that the Code places a primary emphasis on mandatory virtues including the virtues of “independent,” “objective,” and “principled.” While the non-mandatory virtues, which involve “going beyond the minimum” and “putting the public interest foremost,” were identified by our exemplars as essential to the auditor’s role, they received little or no emphasis in the Rules of Professional Conduct. We find this particularly alarming, given that the exemplars interviewed for this study viewed these virtues are essential to the auditors’ role. If the audit profession wishes to uphold public confidence by encouraging the possession of non-mandatory auditors’ virtues, our research suggests that non-mandatory auditors’ virtues should be explicitly described and included in rules of professional conduct.

The Fragile Structure of Free-Market Society: The Radical Implications of Corporate Social Responsibility

Abstract: A6stract: In this article thinking on corporate social responsibility (CSR) is compared with the dominant political theory of the market: the neoclassical theory. The comparison shows that thinking on CSR funS damentally collides with that theory. For example, their respective normative views on man are incompatible, as are their respective views on the modus operandi of the market. Given that CSR is desir able it follows that a new political theory of the market is needed. This article suggests some initial steps toward developing that new political theory of the market. For example, it defends the proposiS tion that the neoclassical idea of the market as a harmonic sphere must be replaced by the idea of the market as a fragile system.

Ethical Principles vs. Ethical Rules: The Moderating Effect of Moral Development on Audit Independence Judgments

Abstract: Recent calls have been made to move professional standards to a more principles-based perspective, supposing that emphasizing broad principles would eliminate the legalistic focus that rules may encourage, and accountants’ behavior would be more ethical and uniformly so. However, this supposition has yet to be empirically tested. The AICPA Code of Professional Conduct (Code) provides guidance in both forms: principles and rules. This experiment examines how the form of the Code affects independence judgments in a client acceptance context. We also examine the potential for levels of moral development to influence the effectiveness of the Code. We find that subjects are more likely to consider their independence impaired, and are more likely to reject a questionable audit engagement, when rules-based (principles-based) reasoners are provided with Code rules (principles). Given the popularity of the view that rules-based standards are undesirable, these findings have significant implications for the profession as principles-based ethical standards are discussed.

The Dango Tango: Why Corruption Blocks Real Reform in Japan

Abstract: Japan’s economy has stagnated since the bursting of the twin real estate and stock bubbles in 1990. Construction employment rose after the bubbles burst despite a real estate glut.Systemic corruption is delaying recovery. The key is the dango—Japan’s system of bid rigging, which is pervasive in public construction. The firms rotate who will win the “competitive” bid. The bureaucrats leak the highest price bid that will be accepted in return for favors from the industry and lucrative sinecures when they retire (amakudari—”descent from heaven”). The ruling politicians (the “construction tribes”) get kickbacks and ensure the adoption of enormous public construction programs.The result is that Japanese public and private capital flows are corruptly routed to uses that are not simply inefficient, but outright harmful to society. Pervasive corruption is the primary obstacle to Japanese economic (and environmental) health and political reform.

The Reputation Effects of Earnings Management in the Internal Labor Market

Abstract: The current study is designed to propose and test a model about the ethical reputation of a target manager who must decide whether to engage in eamings management. We employ an expenmental approach to examine the potential negative reputation effects within the intemal labor market of a firm that occur as a consequence of earnings management. We examine participants' responses to a hypothetical (target) manager when both the target's behavior and the corporate incentives were manipulated. Participants assessed how ethical they believed a target manager to be, based on the target's decision regarding earnings management and the nature of the corporate incentives. Participants also assessed the target's managerial ability. Participants' judgments regarding the target's morality were significantly affected by the target's behavior, but were not affected by the incentive structure. Ability judgments were significantly and posi- tively related with morality assessments. Further analysis indicates that morality assessments mediate the relationships between the target's behavior and the participants' willingness to extend workSrelated op- portunities to the target. Implications of these results for management control systems design and for future research are discussed.

Future Generations and Business Ethics

Abstract: Companies have a share in our common responsibility to future generations. Hitherto, this responsibility has been all but neglected in the business ethics literature. This paper intends to make up for that omission. A strong case for our moral responsibility to future generations can be established on the grounds of moral rights theory, utilitarianism and justice theory. The paper analyses two practical cases in environmental policy, in order to come to grips with the complicated ethical issues involved in the responsibility to future generations. The cases deal with the management of finite energy sources and of vulnerable resources of biodiversity. The ethical issues involved in these cases have an important bearing on business ethics: future generations should be included among the stakeholders of the firm. The paper concludes with a plea to institutionalize a "third arena" for debate and deliberation on the protection of the interests of future generations, next to the arenas of the government and the market. Companies should participate in this third arena, led by a participatory ethics.

The Impact of Ethical Development and Cultural Constructs on Auditor Judgments: A Study of Auditors in Taiwan

Abstract: This research examines in a collectivist culture the influence of cognitive moral development, attitudes toward rule-directed behavior, and the perceived importance of codes of conduct and professional standards on auditor judgments about ethical dilemmas. Taiwanese audit professionals were asked to respond to two ethical dilemmas. The first dilemma concerns a situation in which the auditor is asked to acquiesce to a controller’s request to conceal an irregularity. The probability that the auditor’s acquiescence is discovered (i.e., the threat of a sanction) was manipulated in this scenario. The second dilemma involves a case in which the auditor has information that a write-down of obsolete inventory will have a material effect on the earnings of a corporation, and must consider whether or not to inform an individual who is heavily invested in the corporation. The individual’s ingroup status (i.e., whether the individual was a relative or friend of the auditor) was manipulated in this scenario.Auditors were more likely to agree with violations of ethical standards in the first scenario (concealing a client employee’s irregularity) than in the second (revealing confidential information to parties outside the client). In the first scenario, auditors with lower levels of cognitive moral development were less likely to agree with violations of ethical standards when the threat of a sanction was present, while the judgments of those with higher levels of cognitive moral development were not affected by the presence of sanctions. Contrary to expectations, auditors were more likely to agree with violations of ethical standards when the individual involved was a close friend, rather than a relative. In general, as the perceived importance of rules increased, the propensity to violate the Code of Conduct decreased.

An investigation of social influence: Explaining the effect of group discussion on consensus in auditors’ ethical reasoning

Abstract: This study introduces Moscovici’s (1976, 1985) model of social influence to the accounting research domain, and uses an experiment to assess whether his theory explains how different types of discussion affects consensus in auditors’ ethical reasoning. Moscovici’s theory proposes three modalities of influence to describe how consensus is achieved following discussion: conformity, innovation, and normalization. Conformity describes the situation where individuals in the minority (e.g., auditors that do not accept the dominant view) accede to the majority (e.g., auditors that hold the dominant view) as a result of group discussion. Innovation describes the situation where individuals in the majority accede to the minority. Normalization describes the situation where there is reciprocal influence.We find that conformity occurs when auditors are asked to prescriptively discuss what ideally “should” be the resolution to an ethical dilemma. Normalization occurs when auditors are asked to deliberatively discuss what realistically would be the resolution to an ethical dilemma. The results of this study suggest that prescriptive discussion of an ethical dilemma encourages auditor groups to strive to find the best response to a moral dilemma if it is represented by the majority view. In contrast, deliberative discussion of an ethical dilemma may encourage the elimination of multiple viewpoints. The results of this study have important implications for understanding the social influence process that affects auditors’ ethical reasoning.

Conflicts of Interest and Self-Dealing in the Professions: A Review Essay. Conflict of Interest in the Professions Michael Davis and Andrew Stark New York: Oxford University Press, 2001; ISBN 0-19-512863-X

Abstract: This anthology begins with an excellent introduction by Michael Davis. Davis 1 identifies three overarching questions addressed in the book: 1. What is, and is not, a conflict of interest? 2. What is morally wrong with conflicts of interest? and 3. What should be done to handle or address conflicts of interest? The papers included in this volume address conflicts of interest in a very wide range of professions including the judiciary, the bar, government service, journalism, accounting, engineering, corporate boards teaching, counseling, anthropology, financial services, criticism, the film industry, medicine, and physical therapy. The great range of professions discussed allows for illuminating comparisons between the issues faced by members of different professions. Most, but not all, of the papers are of high quality and well worth reading. The papers present a dizzying array of examples of conflicts of interests, some familiar, others not. The book as a whole demonstrates the pervasiveness of conflicts of interest in professional life and the centrality and importance of moral questions about conflicts of interest in professional ethics. I will not attempt to summarize or describe all, or even most, of the papers included in this volume. Instead, I will focus on a relatively small number of the papers those that address the definition of conflicts of interest and conflicts of interest in business and medicine. When appropriate, I discuss and refer to other important contributions to the literature on conflicts of interests. I also venture an account of the badly neglected concept of ';self-dealing'8 and explain the relationship between self-dealing and conflicts of interest.

The Evolution of Shell’s Stakeholder Approach: A Case Study

Abstract: Shell’s efforts to integrate the stakeholder management approach into its business practice worldwide involved the gradual development of a long-term, comprehensive strategy. This paper draws on stakeholder management theory and Shell’s experience to identify critical factors that contribute to the process of institutionalizing the principle of stakeholder management in a global company. A key lesson to be drawn from the case is the necessity of ensuring that the process allows for continuous learning, adaptation, and refinement.

Qualitative Financial Statement Disclosures: Legal and Ethical Considerations

Abstract: There is a long-running debate among legal scholars regarding the propriety and enforceability of SEC attempts to mandate disclosures of antisocial or illegal corporate activities that do not materially impact a company’s financial statements. This debate was recently revived by the issuance of SEC Staff Accounting Bulletin 99, Materiality in Financial Statements (SEC 1999), which suggests that quantitatively immaterial information relating to unlawful transactions or regulatory non-compliance should be considered for disclosure. This issue has important implications for the accounting profession, although it has generally been ignored in the accounting literature. This paper reviews legal and ethical considerations raised by the issue of qualitative disclosures, and also presents the results of a preliminary empirical test of the impact of such disclosures on financial statement users’ judgments. The results of this study indicate that investors consider the nondisclosure of immaterial illegal acts to be unethical, and reject suggestions that such information lacks moral intensity. The results also suggest that immaterial illegal acts have a significant effect on investors’ perceptions of the quality of corporate management and the likelihood of investment in a company. This effect was more pronounced when the illegal act was combined with self-dealing on the part of corporate executives.

Looking for Answers in All the Wrong Places

Abstract: In recent years, many business ethicists have raised problems with the “ethics pays” credo. Despite these problems, many continue to hold it. I argue that support for the credo leads business ethicists away from a potentially fruitful approach found in Hume’s moral philosophy. I begin by demonstrating that attempts to support the credo fail because proponents are trying to provide an answer to the “Why be moral?” question that is based on rational self-interest. Then, I show that Hume’s sentiments-based moral theory provides an alternative to the credo that points toward a more fruitful approach to business ethics. Along the way, I examine a recent social contract alternative to the credo that, despite many appealing features, is less effective than is the Humean alternative. Finally, I develop a Humean approach to business ethics and demonstrate why it is a desirable alternative that business ethicists should explore.