What’s the Right Thing to Do? An
Ethics Toolkit for Accountants
A presentation to the Association of
Government Accountants
March 12, 2014
Morality
• Some definitions:
– Moral--of, pertaining to, or concerned with the principles or rules of
right conduct or the distinction between right and wrong; ethical
– Immoral--violating moral principles; not conforming to the patterns of
conduct usually accepted or established as consistent with principles
of personal and social ethics.
– Amoral--having no moral standards, restraints, or principles; unaware
of or indifferent to questions of right or wrong
– Nonmoral--having no relation to morality; neither moral nor immoral
Hypotheticals
• Classic trolley car dilemma
• Business dilemmas
Hypotheticals
• Does it matter when a life is involved versus a
livelihood?
• Why or why not?
• What is the role of profitability?
• Does the same framework for making
decisions apply to all of the different
hypotheticals?
Emerging Principles
• The right thing to do depends upon the consequences
that will result from the action.
– Consequentialism locates morality in the state of the world
that will result from the thing you do.
• The right thing to do has to do with the intrinsic
characteristic of the act.
– Categorical reasoning locates morality in certain absolute
moral requirements, in certain duties and rights.
• The right thing to do has to do with the virtues and
values that define the decision maker
– Virtue locates morality in the qualities of character that
the decision maker wishes to cultivate in himself or herself
and in the community.
Why and How to Examine these
Questions
• Skepticism—Throughout the centuries, these
questions have never been answered. So, why
study them? Can they ever be answered?
• The response to skepticism…
• Philosophical debate versus applied moral
reasoning.
What does it take to be ethical?
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Moral sensitivity
Moral reasoning
Moral decision making
Moral courage and action
Moral sensitivity
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Perception
Attention
Awareness of ethical dimension to decisions
Ability to recognize impact of decisions on others.
A capacity to recognize emotions experienced by others—empathy.
Horton’s sensitivity
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Heard a small noise then turned toward the sound
His senses told him it was nothing
• “I’ll help you said Horton, ‘But who are you? Where?’”
• “He looked and he looked. He could see nothing there.”
His sensitivity told him to keep looking and listening
• “I’ve never heard tell of a small speck of dust that is able to yell”
• “…I think that there must be someone on top of that small speck of dust”
• “…Some sort of creature of very small size, too small to be seen by an elephant’s eyes.”
Moral Reasoning
• Levels of moral development
– Preconventional—focus on self
– Conventional—focus on maintaining relationships and
norms
– Postconventional—focus on justice for society as a
whole
– Horton’s reasoning:
• “A person’s a person, no matter how small.”
• “I’ve got to protect them. I’m bigger than they.
So he plucked up the clover and hustled away.”
• “Please don’t harm all my little folks, who
have as much right to live as us bigger folks do.”
Moral Decision Making
• Illustrative decision making model (in textbook
out of which I teach)
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Recognize a situation as a potential ethical dilemma.
Obtain relevant facts
Identify ethical issues from the facts
Identify stakeholders
Identify alternatives
Identify consequences
Decide
• Others
Moral Decision Making
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Sense the elements of a moral issue.
Identify your gut reaction.
State the moral issue.
Evaluate the values and virtues that your gut reaction honors.
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Determine whether you have an overriding duty
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If you were to go with your gut reaction, what would be the economic, legal, and regulatory consequences?
Is your gut reaction appealing because the consequences to you are appealing?
Is there an alternative that produces more satisfying consequences to all parties involved?
Consider the community of which you are a part
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Would I want everybody in my situation to behave as my gut is telling me to behave?
Is there an alternative that I could wish to be a universal law of behavior?
Is there an alternative that respects the rights of others more completely?
Consider the consequences
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Are they consistent with the values and virtues that you wish to honor?
Are there other alternatives that would be more consistent with your values and virtues.
Consider the values and the personal narrative that ties you to a community.
Do you have an obligation tied to your role within a community?
Make your decision
Marshal organizational support
Act
Moral Decision Making
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Explicit vs. implicit use of a model.
Gut reaction vs. logic and reason.
Instinctive vs. learned
Discrete vs. continuous
Horton’s decision making
– “…some poor little person who’s shaking with fear
that he’ll blow in the pool! He has no way to steer.”
– “I’ll just have to save him. Because after all, a person’s
a person, no matter how small.”
Moral Courage/Moral Action
• Depends on the work done in the previous stages.
• Without moral action, the work done in the other stages doesn’t amount
to much.
• What are the reasons why we fail to act in accordance with our values and
beliefs?
• Horton’s Courage:
– Doubt
– Ridicule: “I think you’re a fool!...Your the biggest blame fool in the Jungle of Nool.”
– Isolation: “Through the high jungle tree tops, the news quickly spread: ‘He talks to a dust
speck! He’s out of his head!”
– Physical and economic threats:
• “While Horton chased after, with groans, over stones that tattered his toenails and
battered his bones.”
• “You’re going to be roped! And you’re going to be caged!”
Ethical Perspectives
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Egoism
Utilitarianism
Rights
Justice
Virtue ethics
Communitarian ethics
Egoism
• Psychological egoists—consider only consequences to self
• Ethical egoists—believe that considering only consequences to self is the
most ethical approach.
– Moral agents ought to act in their own self-interests.
– Effects on others are incidental—should not be considered in determining
what is best.
• Contrast this view with the principles stated in the Code of Conduct
• Before you dismiss this perspective, reflect honestly on the extent to
which egoism plays a role in your decision-making processes.
• Horton: The kangaroo seemed to be acting through egoism, considering
Horton’s behavior as a threat and using her power to remove the threat.
Utilitarianism
– Jeremy Bentham, John Stuart Mill
– “The greatest good for the greatest number”
– Focus on consequences
– Cost/benefit analysis
– Problems
• Does not respect rights of the individual
• Impossible to count all costs
• Assigning a common currency of value
– Putting a dollar value on human life—e.g.,Ford Pinto case
• Amoral analytical tools such as cost/benefit analyses often trump serious
and thoughtful utilitarian analysis and masquerade as moral decision
making. (e.g. Ford Pinto case and KPMG tax shelter case).
Ford Pinto Case
• Cost/Benefit analysis of recalling Pintos and retrofitting a bladder to
prevent future explosions:
– Benefits—By recalling Pintos, the following costs could be avoided:
Savings: 180 burn deaths, 180 serious burn injuries, 2100 burned vehicles
Unit Cost: $200,000 per death, $67,000 per injury, $700 per vehicle
Total Benefit: ((180 x $200,000) + (180 x $67,000) + (2,100 x $700)) = $49.5 million
– Costs—By recalling Pintos, the following costs would be incurred:
Sales: 11 million cars, 1.5 million light trucks
Unit Cost: $11 per car, $11 per truck
Total Cost: ((11,000,000 x $11) + (1,500,000 x $11)) = $137 million
– The cost/benefit analysis suggests that Ford Motor Company is morally
obligated to make the profit maximizing choice to settle litigation as it arises
according to the calculations above rather than to incur the excessive costs of
recall.
KPMG Tax Shelter Case
Excerpts from memo prepared by KPMG tax personnel:
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First the financial exposure to the Firm is minimal. Based upon our analysis of the applicable penalty
sections, we conclude that the penalties would be no greater than $14,000 per $l00,000 in KPMG fees.
Furthermore, as the size of the deal increases, our exposure to the penalties decreases as a percentage of
our fees. For example, our average deal would result in KPMG fees of $360,000 with a maximum penalty
exposure of only $31,000.
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This further assumes that KPMG would bear 100 percent of the penalty. In fact, as explained in the
attached memo, the penalty is joint and several with respect to anyone involved in the product who was
required to register. Given that, at a minimum, Presidio would also be required to register, our share of the
penalties could be viewed as being only one-half of the amounts noted above. If other OPIS participants
(e.g. Deutche [sic] Bank, Brown & Wood, etc.) were also found to be promoters subject to the registration
requirements, KPMG's exposure would be further minimized. Finally, any ultimate exposure to the
penalties are abatable if it can be shown that we had reasonable cause.
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http://www.pbs.org/wgbh/pages/frontline/shows/tax/schemes/3.html#ixzz1bxomzHmW
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http://www.law.cornell.edu/uscode/text/26/6111?quicktabs_8=1#quicktabs-8
http://www.law.cornell.edu/uscode/text/26/6707A
Rights--Duty
– Immanuel Kant
• “I ought to act only in such a way that the guiding
principle for my actions would become a universal law”
• “Treat humanity as an end of itself rather than a means
to an end.”
– Seuss: “A person’s a person, no matter how small.”
– Problem—distinguishing among competing rights
or duties.
– Public interest
Justice—Social Contract
– Thomas Hobbes
• State of nature—nasty, brutish, and short
• Origins of society—cede natural rights for protection
– John Locke
• Government should act as impartial agent deriving power from the consent of
the governed
– John Rawls
• “Veil of ignorance”
• “Social and economic decisions should be of benefit to the least advantaged
members of society”
• Egalitarianism
– Seuss: “I’ve got to protect them. I’m bigger than they.”
– Social Contract—in what sense does accounting derive from a social
contract?
Virtue Ethics
• Aristotle
• “Justice means giving people what they deserve”
• “Meaning of life is pursuit of happiness and the means
of attaining happiness is through living a virtuous life”
• Focus on individual choices
• Telos—purpose
• To reason about justice in distribution of resources we
need to reason about the telos or purpose of the item
in question and the virtues we wish to honor with the
distribution of resources.
Communitarian Perspective
• MacIntyre
• We have certain moral ties that we cannot trace to an act of
consent
• Narrative conception of the self.
– What am I to do? Depends upon the story of which I am a
part.
– We can’t make sense of our lives without taking into
account our roles.
• The moral choice is the one that balances virtues and values
of the community with fundamental duties.
Consequentialism within a Framework
Framework Component
Sensing—This is how I frame
the issue. It is the angle from
which I view issues
Reasoning—This is how I
deliberate. These are the
factors I consider
Deciding—This is how I make
my decision. This is the
decision rule that I use.
Acting—This is what I hope to
achieve through my actions.
Consequentialism
I view the ethical choice in terms of the outcomes
that my action might produce
My focus is on the future. What will happen as a
result of each of the alternatives? Which alternative
produces the most good (or least bad)? I try to
quantify all of the consequences.
I choose the alternative that produces the greatest
good for the greatest number. Principle: The best
decision is the one that produces consequences that
are best for …
•Society (utilitarianism).
•Me (egoism).
My action should produce the most good.
Duty within a Framework
Framework Component
Sensing—This is how I frame the
issue. It is the angle from which I
view issues
Reasoning—This is how I
deliberate. These are the factors I
consider
Deciding—This is how I make my
decision. This is the decision rule
that I use.
Acting—This is what I hope to
achieve through my actions.
Duty
I view the ethical choice in terms of the
responsibilities that I have to the stakeholders
My focus is on the responsibilities that I have (and
everyone has) going into the situation and what
duties I have within the situation.
I choose the action that is right in light of my
duties. My choice should be universalizable. I
should wish that everyone would make the same
choice in that situation. I should treat people as a
worthy end rather than a means to an end.
Principle: The best decision is the one that uses a
process that respects the basic rights of the
individuals involved.
My action should be viewed as right and in
accordance with my responsibilities in any situation
Virtue within a Framework
Framework Component
Virtue
Sensing—This is how I frame
the issue. It is the angle
from which I view issues
Reasoning—This is how I
deliberate. These are the
factors I consider
I view the ethical choice in terms of the kind of person
that I want to be and what my choice says about who I
am.
I consider my own character traits and motivations
within the situation and the motivations of others. I
consider the purpose (or reason for being) of the item
under consideration.
Deciding—This is how I
make my decision. This is
the decision rule that I use.
I choose the action that reflects the most honorable
virtues and that is consistent with the purpose of the
items involved.
Principle: The best decision is the one that is consistent
with important virtues.
Acting—This is what I hope
to achieve through my
actions.
My action should contribute to the development of my
character. My action should make the world a better
place.
Accounting as a Profession
• What is a profession? Common attributes
– Skill—development of intellectual skill or knowledge
– Values—adherence to shared values reflected in a code of
conduct
– Duty—responsibility to serve in the public interest
– Autonomy—community grants the power to train,
license, and regulate to the profession itself.
(arguably, this is a result of the first three
attributes rather than a fourth attribute).
• Does accounting possess these attributes?
• What are the implications for accounting,
accountants, and you, personally?