Ethical Dimensions in Business:
Reflections from the Business Academic Community
Sponsored by the Institute for Ethical Business Worldwide
Thursday, November 29 & Friday, November 30, 2007
Conference Abstracts
Governance, Gatekeepers, and God
Joseph V. Carcello, University of Tennessee
The importance of corporate governance and “gatekeepers” in ensuring reliable financial
reporting is examined in this paper and the roles of individuals in this process is examined from a
Judeo-Christian ethical perspective. Initially adopting the positivist tradition that predominates
the academic literature in accounting, the relation between financial reporting quality and the
activities of senior management, the board of directors and its committees, internal and external
audit, regulators, and various public watchdogs in the financial reporting process is examined.
Unlike much of the academic literature, the paper also adopts a normative perspective and offers
suggestions as to the proper roles of these parties.
Shaping Moral Judgments of Information Systems Misuse through Security Controls
John D’Arcy, University of Notre Dame
Opportunities for unethical misuse of information systems (IS) abound in today’s organizations.
In fact, industry statistics indicate that a substantial proportion of information security incidents
are due to the intentional actions of legitimate users. Prior research suggests that individuals with
strong moral inhibitions are less likely to engage in IS misuse. As such, it is important to
understand what factors influence moral judgments of IS misuse to better predict such behavior.
Criminological studies have found that social control mechanisms (i.e., laws and regulations) can
influence moral judgment. This is thought to occur through a socialization process in which the
social controls become internalized as self-regulatory mechanisms. In this paper, we investigate
the influence of three information security controls (security policies, security awareness
programs, and computer monitoring) on level of moral commitment related to IS misuse, and
indirectly on IS misuse intention. A survey was conducted on a sample employed professionals
from eight companies across the U.S. The results suggest that security polices, security
awareness programs, and computer monitoring each contribute to higher levels of moral
commitment among computer users, which in turn leads to decreased IS misuse intention.
Implications for research and practice for both business ethics and information security will be
discussed.
New Product Development Imperatives for Durable Goods and Planned Obsolescence:
Some Challenges for Consumers, Managers, and Researchers
Joseph Guiltinan, University of Notre Dame
Three decades ago, planned obsolescence was a widely discussed issue in marketing and some
leading academics in the field were quite optimistic about the contribution that this field would
make to the environmental movement. Those forecasts have not been borne out, and managerial
and academic concerns for the consequences of planned obsolescence are invisible in the
marketing field today. In this paper I (1) review the literature (from other disciplines) on planned
product replacement strategy and product obsolescence practices for durable goods; (2) identify
the ethical and social responsibilities of managers and consumers with respect to these practices;
(3) point out some research issues that marketing academics might pursue in order to contribute
to more responsible durable goods product development practices.
Distributive Justice: Its Ethical Foundation and its Role in Judging the "Fairness" of
Marketing Exchanges
Gene R. Laczniak, Marquette University
The nature of distributive justice (DJ) will be explained and connected to its marketing
dimensions. Current applications of DJ debates and research in marketing will be briefly
discussed. The promise and pitfalls of Rawlsian DJ will be explored especially in regard to
"marketing to the impoverished".
A Wolf in Sheep’s Clothing: The Use of Ethics-Related Terms in 10-K Reports
Tim Loughran, University of Notre Dame
Bill McDonald, University of Notre Dame
Hayong Yun, University of Notre Dame
We examine the occurrence of ethics-related terms in 10-K annual reports over 1994-2006 and
offer empirical observations on the conceptual framework of Erhard, Jensen, and Zaffron (2007).
We use a pre-Sarbanes-Oxley sample subset to compare the occurrence of ethics-related terms in
our 10-K data with samples from other studies that consider virtue-related phenomena. We find
that firms using ethics-related terms are more likely to be “sin” stocks, are more likely to be the
object of class action lawsuits, and are more likely to score poorly on measures of corporate
governance. The consistency of our results across these alternative measures of ethical behavior
suggests that managers who portray their firm as “ethical” in 10-K reports are more likely to be
systematically misleading the public. These results are consistent with the integrity-performance
paradox.
What Can Psychology Tell Us about Business Ethics
David M. Messick, Northwestern University
Insights from contemporary psychology can illuminate the common psychological processes that
facilitate unethical decision making. I will illustrate several of these processes and describe steps
that may be taken to reduce or eliminate the undesirable consequences of these processes. A
generic problem with these processes is that they are totally invisible to decision makers--that is
decision makers are convinced that their decisions are ethically and managerially sound.
Opportunistic Disclosures of Earnings Forecasts and Non-GAAP Earnings Measures
Jeffrey Miller, University of Notre Dame
The Securities and Exchange Commission requires publicly held US corporations to disclose all
information, whether it is positive or negative, that might be relevant to an investor's decision to
buy, sell, or hold a company’s securities. The decisions made by corporate managers to disclose
such information can significantly affect the judgments and decisions of investors. This paper
examines academic accounting research on corporate managers’ voluntary disclosures of
earnings forecasts and non-GAAP earnings measures. Much of the evidence from this research
indicates that some managers engage in opportunistic disclosure behavior. The paper concludes
by discussing the ethical implications of this behavior.
Fair Trading at Home and Abroad
Meir Statman, Santa Clara University
Stories about tainted Chinese products are new in the United States but they are old in China.
Bad formula killed at least a dozen Chinese infants in 2004. One China expert said “There is no
sense of solidarity that would tell you: I put this stuff in and maybe children are going to die.”
A sense of solidarity, along with ethics, fairness, trust, and freedom from corruption are all part
of the social capital of a country, and social capital matters in product and financial markets
because consumers and investors consider not only the available information but also how much
they trust the accuracy of the information and the fairness of markets.
Ethics and fairness in the financial markets of a country are reflected, in part, in people’s
assessment of the fairness of trading practices, such as insider trading. Why is insider trading
considered more unfair in some countries than in others? And what can be done to improve
levels of ethics and fairness around the globe? I present assessments of fairness in financial
market in a dozen countries, including the United States, China, Taiwan and Hong Kong.