Magazine article CMA - the Management Accounting Magazine

Corporate Ethics and the Controller

Magazine article CMA - the Management Accounting Magazine

Corporate Ethics and the Controller

Article excerpt

If good ethics is good business, what are Canadian controllers doing to instill ethical behavior in corporate decision-making?

All too frequently one can read a newspaper or watch television and be informed of yet another disaster resulting from business decisions. Examples include the Hagersville tire fire, the disputed takeover of Dome Petroleum, the fall of Campeau, the consequences of clear-cut logging, the feud in Canadian Tire, and the collapse of Principal Trust. Often implicit in such reports is the concern that these decisions TABULAR DATA OMITTED reflect unethical behavior -- behavior motivated by short-run, bottom-line self interest, versus appropriate consideration of consequences in the long run for a variety of stakeholders (i.e., customers, employees, the community at large). Cynicism and mistrust of business in general is a result. Alternatively, we are also informed that business persons are aware of ethical concerns and are countering the negative incidents by publicizing examples of their companies' ethical behavior in the press, financial reports, and top executive speeches. Clearly there is recognition in corporate circles that "good ethics is good business" (or at least that bad ethical behavior is bad for business).

Generally, however, actions demonstrating commitment to ethical behavior speak louder than words. Precisely, what specific actions are companies in Canada taking to incorporate ethical behavior into their decision-making processes? Answering this question was one of the major objectives of the research reported herein.

The perspective was taken that a company's management control system could include various formal ethics control mechanisms designed to instill an ethical orientation into decision making. Seven such mechanisms were identified based on an examination of existing research in the area. Figure 1 lists these mechanisms and links them to one of the three components of a management control system (MCS). While each mechanism has been specifically related to one of the three components of a MCS, it is recognized that the boundaries of these components are fuzzy and that the mechanisms necessarily interact.

Making a MCS work requires leadership and support within an organization. Generally the controller in an organization is significantly involved in the design, implementation, use and maintenance of the information system which is a fundamental aspect of a MCS. Therefore, in this regard at least, a controller may be expected to play an important role in implementing and using ethics-related control mechanisms in a company. The controller's role in instilling ethical behavior can be seen as being much broader based on perceptions that he or she is governed by professional ethics, has a particular expertise in the area, is the "keeper of the corporate conscience," or is the "bellwether person" when it comes to business ethics.|1~ While such perception clearly supports the likelihood of an important role for controllers, no research exists which documents what controllers are actually doing in this area. To help fill this gap, this research also addressed the questions: What is the role of Canadian controllers regarding implementation and use of ethics control mechanisms? What steps are Canadian controllers taking to fulfill their responsibility?

A stratified random sample of 300 company controllers were sent a questionnaire. Respondents totalled 171. This high 57 per cent response rate reflects the results of making phone calls to the 300 controllers sampled to request their participation and the fact that the topics being studied were viewed as being very important in today's environment.

Approximately 74 per cent of the controllers responding to the questionnaire stated that their company was using at least one of the seven ethics control mechanisms or taking some other specific action to promote ethical behavior.

Eighty-four companies (49 per cent of respondents) stated their company used at least one of the seven formal ethics control mechanisms. …

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