Impact of Ethical Education or Training on Moral Values Concerning Finance and Accounting - Coursework Example

Impact of Ethical Education/or Training on Moral Values Introduction Integrity among finance and accounting professionals is essential to the success of any industry. Nowhere is effective management of ethical behavior of greater consequence than in the banking and insurance industries. Finance and accounting professionals have been in recent litigation because the nature of their working relationship has allowed them to share information that should otherwise not have been shared (Dimitris, 2009). The Sarbanes-Oxley Act of 2002 (SOX) is the legislative solution to the ethical scandals, such as Enron, Tyco, Qwest, Global Crossing, and WorldCom, involving accounting irregularities and fraud (Stephan, 2007). This Act implements extensive changes to public accounting and corporate laws, and also expands corporate governance extending the responsibilities of senior executives and board members. SOX has changed the current business environment. In the past business ethics was viewed as important (Bies & Forte, 2010). Now, business ethics is mandatory, but where is the map for business managers to follow? SOX mandates ongoing comprehensive ethics programs, but does not give clear exact criteria, leaving the responsibility of education and training employees in ethics up to the organization (Stephan, 2007). In order to provide all stakeholders in corporate America assurance around ethical behavior, further research is needed. The foundation of this dissertation is Kohlberg's Cognitive Moral Development theory, which will be used to determine whether age, gender, and education influence an individual's ethical decision-making capability. This study will compare the moral value of finance and accounting professionals who had ethical training with finance and accounting professionals who have not had ethical training, based on gender, age and education level. Brief Literature Review Finance and accounting professionals must resolve financial problems with the highest of ethical standards. Both finance professionals and accountants have developed codes or standards for guidance in performing their fiscal duties. The National Commission on Fraudulent Reporting concluded that written codes are important for communicating expectations and that more corporations should adopt a code of conduct (Rich, Smith, & Mihalek, 1990). However, Rich et al. conducted a study of selected respondents from the National Association of Accountants' database. Rich et al. found that for the performance measure net income, there was pressure on the respondents to achieve a targeted net income, and the pressure was greater in companies with a formal code. For a second performance measure, return on investment (ROI), there was pressure to achieve a specific ROI in those companies with a formal code. Since there was no evidence that a written code of conduct helps an individual resolve ethical dilemmas, the authors suggested companies focus on creating an ethical environment. The inability of a code of conduct to solve ethical behavior problems is evident in the investment profession, specifically regarding insider trading violations. In a study using members of the Financial Executives Institutes, it was found "ethics in the securities markets" is of the greatest concern (Veit & Murphy, 1996). Verschoor (2004) reported that Enron and the scandals which followed were a failure of ethical behavior and not of inadequate laws and regulations. He emphasizes moral behavior can not be legislated. Corporate leaders should have a record of building a culture for doing the right thing (Verschoor, 2004). Senior leadership set the ethical standards that management will follow. When there is no clear guideline, individual judgment based on personal moral and personal ethical codes are used (Smith & Bain, 1990). The research of Sims and Keon (1999, 2000) support the conclusion that perceived organizational and managerial expectations must match in order to achieve optimal employee ethical decision ­making. Their results show that the organizational environment is considerably related to the ethical decision of the employee. Is there financial incentive to continuously train employees to develop positive values in order to promote ethical behavior? According to Tanner, Lamberth, and Goselin (2005), reported settlements by “investment banks in the WorldCom litigation have exceeded $6 billion collectively. Similarly, Citigroup settled its alleged liability for $2.6 billion with WorldCom and for $2 billion with Enron” (p. 1). These are examples of what happens when there is no training or ethical behavior within the organization. Training and education have taken on more importance as a change agent for ethical behavior because Sarbanes Oxley (SOX) has mandated evidence of codes of behavior and ongoing training programs. The Code of Conduct serves to outline the principles, policies, and laws that employees must adhere to and that govern the activities of the company. Importantly, it pertains to people who work with or represent Citigroup directly or indirectly. The introduction states, "We must never compromise that integrity either for personal benefit or for Citigroup's purported benefit" ("Code of Conduct," 2004, p. 4). One outcome of SOX is ensuring that employees, who are uncertain of a course of action, know whom to contact within the company. For example, if an employee is unsure of a situation, or if a situation seems unethical or improper, additional contacts include the supervisor, Human Resources, and an ethics hotline telephone number found in the employee handbook. New hires sign a copy of the code of conduct and return it to their manager to show compliance. Similarly, what Ernst & Young has done is another example of the reaction to public concern and SOX requirements. Their published Global Code of Conduct expresses their commitment to upholding high ethical standards. A code of conduct provides a framework that guide employees in their decision-making. Having an ethical framework, employees are expected to make proper decisions while maintaining objectivity and independence, which includes rejecting pressure from clients, being alert for conflicts of interest, and avoiding relationships that may impair objectivity or independence. As a result, ethical behavior is expected to improve; however, as stated, codes of conduct cannot be relied on solely without ethical training and education. Hence the need for ethical training, which research has shown can influence adults in ethical decision making and the reasoning process (Mujtaba, 1996). In the business world, ethical behavior is both important and helpful. The environment created is one that is open and supportive of ethical behavior, which provides for growth and compliance to federal legislation. Recently implemented company codes of ethics will guide ethical employee behavior. Ethical behavior always has been at the forefront of good business practice; research has shown it to be good for growth and earnings. Ethics as a set of shared concepts and principles guide one in determining the behaviors that help or harm (Thorp, 2005). Ethics are not social conventions or religious beliefs in that ethical guidelines are not influenced by contrary cultural or religious beliefs. Ethics and beliefs are complimentary as one's ethical behavior flows out of one's values; ethics relate to behavior and values relate to beliefs. "Values are core principles that define for individuals what are ideal personal standards" (Thorp, 2005, p. 1). Foundations for universal ethical principles which form values come from philosophy. Two key philosophical theorists and their contributions will be discussed. Research Question Can ethics education and/or training help develop a more moral finance and accounting employee? In order to answer the question, this study will ascertain whether a statistically demonstrable relationship exists between the moral cognizance of finance and accounting professionals, based on Kohlberg's Cognitive Moral Development scale as measured by Rest's Defining Issues Test (DIT), and the variables of age, gender, education level, and ethics training. Methods & Instrument This study will employ quantitative research technique. Defining Issues Test (DIT) developed by Rest et al. (1997) will be used as the test instrument. The DIT is a widely used and well-documented measure of moral judgment based on Kohlberg's theory. Various studies used around the world have attested to the validity of the DIT. Numerous researchers using the instrument have reported reliabilities in the 0.70 to 0.80 range (Elm & Weber, 1994). Sample, Data Collection and Analysis The sample population for this study will consists of finance and accounting students, many of whom attend school at night and are working adults, and can be considered as professionals in their area. DIT will be administered to these professionals and they will be asked to complete it. Additionally, demographic questionnaire will also be used to collect data regarding profession, age group, gender, ethics training, and ethics courses. The DIT will be ordered from the Center for the Study of Ethical Development at the University of Minnesota. The Center began in the early 1970's and continues today with a focus on empirical research. Once the subjects fill out the DIT and complete the demographic questions, the surveys will be mailed back to the Center for a report of the scored data. The Center's Scoring Service provides a report that will have the actual score for each participant. The demographics questionnaire will be scored by the researcher using SPSS. Analysis will be made to find out effects of ethics education and/or training on participants moral values. Ethical Issues To avoid possible ethical concerns, informed consent will be obtained from the study participants. The informed consent form will explain the purpose of the study and the procedures that will be used to collect the data. In addition, the risks and benefits will be explained to the participants. Participants will be informed that their participation in this study is completely voluntary and they can leave this study at any stage. There will be no monetary costs to the participants. Furthermore, to ensure the confidentiality of the participants the numbers will be assigned to each name in order to protect the identity. Timeline May Jun. Jul. Aug. Sept. Oct. Dec. Proposal Done Literature review Methods Materials Data Collection Data Analysis Write-up Revisions Final Dissertation References Bies, A., & Forte, D. (2010). Policies and Procedures for Leaders: Conflict of Interest, Transparency, and Accountability. Leadership in Nonprofit Organizations: A Reference Handbook. Sage Publications. Code of conduct. (2004). Citigroup. Retrieved, from http://www.citigroup.com/citi/corporategovernance/codeconduct.htm Dimitris N. (2009), IT Auditing and Sarbanes-Oxley Compliance: Key Strategies for Business Improvement, CRC Press. Elm, D., & Weber, J. (1994). Measuring moral judgment: The moral judgment interview or the defining issues test? Journal of Business Ethics, 13(5),341-356. Gunther, M. (2004). Money and morals. Fortune, 150(10),176-180. Mujtaba, B. (1996). Ethics and morality in business. Journal of Global Competitiveness, 4(1). Rest, J. (1973}.The Hierarchical nature of moral judgment: A study of patterns of comprehension and preference of moral stages. Journal of Personality, 41(1),87-109. Rich, A., Smith, C., & Mihalek, P. (1990). Are corporate codes of conduct effective? Management Accounting, 72(3). Sims, R., & Keon, T. (1999). Determinants of ethical decision making: The relationship of the perceived organizational environment. Journal of Business Ethics, 19,393-401. Sims, R., & Keon, T. (2000). The influence of organizational expectations on ethical decision making conflict. Journal of Business Ethics, 23,219-228. Smith, M., & Bain, C. (1990). The challenge of professional accounting ethics. Internal Auditing, 5(4), 20-31. Stephan M. (2007), The Complete Guide to Sarbanes-Oxley: Understanding How Sarbanes-Oxley Affects Your Business. Adams Media Corporation. Tanner, J., Lamberth, R., & Goselin, J. (2005). Evolving theories of scheme liability: Does our D&O policy cover guilt by association? Risk Management, 52(9),46-52. Thorp, J. (2005). Values and ethics for CPAs in a changing world. The CPA Journal, 75(8), 18. Veit, T., & Murphy, M. (1996). Ethics violations: A survey of investment analysts. Journal of Business Ethics, 15(12), 1287-1297. Verschoor, C. (2004, January). Toward a corporation with conscience. Strategic Finance, 4(85),20. Read More