Linda Thorne

Emotion and Ethical Decision-Making in Organizations

While the influence of emotion on individuals ethical decisions has been identified by numerous researchers, little is known about how emotions influence individuals ethical decision process. Thus, it is not clear whether different emotions promote and/or discourage ethical decision-making in the workplace. To address this gap, this paper develops a model that illustrates how emotion affects the components of individuals ethical decision-making process. The model is developed by integrating research findings that consider the two dimensions of emotion, arousal and feeling state, into an applied cognitive-developmental perspective on the process of ethical decision-making. The model demonstrates that certain emotional states influence the individuals propensity to identify ethical dilemmas, facilitate the formation of the individuals prescriptive judgments at sophisticated levels of moral development, lead to ethical decision choices that are consistent with the individuals prescriptive judgements, and promote the individuals compliance with his or her ethical decision choices. In particular, the model suggests that individuals experiencing arousal and positive affect resolve ethical dilemmas in a manner consistent with more sophisticated cognitive moral structures. Implications for theory and practice are discussed.

The Socio-Cultural Embeddedness of Individuals' Ethical Reasoning in Organizations (Cross-Cultural Ethics)

While models of business ethics increasingly recognize that ethical behavior varies cross-culturally, scant attention has been given to understanding how culture affects the ethical reasoning process that predicates individuals ethical actions. To address this gap, this paper illustrates how culture may affect the various components of individuals ethical reasoning by integrating findings from the cross-cultural management literature with cognitive-developmental perspective. Implications for future research and transnational organizations are discussed.

The Impact of Mandated Disclosure on Performance-Based CEO Compensation

Regulators argue that mandated compensation disclosure improves corporate governance by permitting shareholders to enjoin boards of directors to reward executives in ways that are consistent with shareholder value creation. We posit that mandated compensation disclosure, or the absence thereof, has a greater impact on the CEO compensation practices of widely held firms than of closely held firms. More specifically, we expect that, in the absence of mandated disclosure, CEO compensation is likely to be less performance-contingent among widely held firms than among closely held firms. Moreover, we also expect that the advent of mandated disclosure leads widely held firms to increase the extent to which CEO compensation is performance-contingent, much more so than closely held firms would. We use a unique database resulting from the Ontario Securities Commission amendment of Regulation 638 in October 1993. For the first time, this amendment required firms listed on the Toronto Stock Exchange to provide detailed executive compensation data similar to that required by the SEC, for current year as well as retroactively for the previous two years. We find that, in the absence of mandated disclosure, CEO cash compensation in widely held firms is less performance-contingent than in closely held firms. With the imposition of mandated disclosure, performance-contingent cash compensation increases more in widely held firms than in closely held firms. Results with respect to stock option grants are mixed, with both closely held and widely held firms reacting to the advent of mandated disclosure.

Institutional Context and Auditors' Moral Reasoning: A Canada-U.S. Comparison

This paper compares the moral reasoning of 363 auditors from Canada and the United States. We investigate whether national institutional context is associated with differences in auditors moral reasoning by examining three components of auditors moral decision process: (1) moral development, which describes cognitive moral capability, (2) prescriptive reasoning of how a realistic accounting dilemma ought to be resolved and, (3) deliberative reasoning of how a realistic accounting dilemma will be resolved. Not surprisingly, it appears that institutional factors are more likely to be associated with auditors deliberative reasoning than their prescriptive reasoning in both countries. Additionally, our findings suggest that the national institutional context found in the United States, which has a tougher regulatory and more litigious environment, appears to better encourage auditors to deliberate according to what they perceive is the ideal judgment as compared to the Canadian context. We then discuss the implications of these findings for regulators and for ethics research.

Refocusing ethics education in accounting: an examination of accounting students’ tendency to use their cognitive moral capability

Abstract The traditional focus of accounting ethics education research has been on developing an understanding of how to increase the cognitive moral capability of students entering the accounting profession. Nevertheless, it has not previously been ascertained whether accounting students use their cognitive moral capability in the resolution of accounting-specific moral dilemmas. This study examines the cognitive moral capability, prescriptive reasoning, and deliberative reasoning of 110 accounting students enrolled in a cooperative accounting program. The results suggest that cooperative accounting students do not use their full cognitive moral capability in the resolution of accounting-specific moral dilemmas. In addition, associations between demographic variables and accounting students cognitive moral capability reported in existing accounting ethics research do not appear to extend to cooperative accounting students propensity to utilize principled moral considerations. This suggests the need for additional investigation of factors that may influence accounting students propensity to use principled moral considerations in the resolution of accounting-specific moral dilemmas, and for further investigation into the effect of cooperative accounting education on accounting students moral reasoning.

Motivations for issuing standalone CSR reports: a survey of Canadian firms

Purpose - – The purpose of this paper is to provide insight into the companies’ motivations to issue or not issue voluntary standalone corporate social responsibility (CSR) reports in the Canadian context. Design/methodology/approach - – The authors realized a questionnaire survey that asked Canadian companies why they do or do not issue standalone CSR reports, what their motivations and costs are, and the extent to which they comply with GRI guidelines. Findings - – The results show that larger firms issue standalone CSR reports. As larger firms have more political visibility and are subject to greater external scrutiny than smaller firms (Watts and Zimmerman, 1986), the findings indicate that firms primarily issue standalone CSR reports in response to external scrutiny by stakeholders, which is consistent with a stakeholder perspective. The survey also identifies that ancillary motivations for Canadian firms for issuing standalone CSR reports are consistent with legitimacy and signalling perspectives. Research limitations/implications - – The authors acknowledge that the generalizability of the findings is limited due to the sample being situated within a single national context. The inferences drawn from such a sample in Canada may not be applicable to other countries with different national institutional contexts. In addition, the small size of the sample may limit the generalizability of the findings. The authors also did not specifically consider the quality of the CSR reports in the study. Finally, the work may be affected by the inherent weaknesses associated with survey research, including the inherent bias of the individuals responding to the survey. Originality/value - – The research adds to the growing body of research on voluntary CSR disclosures, with particular reference to the Canadian context.

The Directional Effects of Discussion on Auditors' Moral Reasoning*

Auditors professional judgements are typically made following a discussion of contentious issues with other auditors (Gibbins and Mason 1988). These discussions may be with others at various levels in the hierarchy of the audit firm, with informal discussion with peers often taking place prior to formal discussions with audit supervisors (see, e.g., Solomon 1987). This study uses an experiment, involving 286 public accountants, to consider how discussion with peers may influence auditors subsequent resolution of realistic audit-specific moral dilemmas. Auditors were asked to prescriptively discuss how an accountant ideally should resolve a moral dilemma, or to deliberatively discuss how an accountant actually would resolve a moral dilemma. The results showed that auditors have higher moral reasoning scores after prescriptive discussion with peers and lower moral reasoning scores after deliberative discussion with peers. Thus, the study findings point to the significance of discussion of contentious dilemmas with peers and the importance of type of discussion for predicting and explaining auditors moral reasoning. More specifically, the results indicate that discussion with peers may provide information and/or signal what is important and acceptable to the resolution of a moral dilemma, which facilitates transformation of an auditors moral reasoning. This suggests the importance of informal mechanisms, such as peer discussion, as part of the social control system in audit firms.

Clinical ethical conflicts of nurses and physicians

Much of the literature on clinical ethical conflict has been specific to a specialty area or a particular patient group, as well as to a single profession. This study identifies themes of hospital nurses’ and physicians’ clinical ethical conflicts that cut across the spectrum of clinical specialty areas, and compares the themes identified by nurses with those identified by physicians. We interviewed 34 clinical nurses, 10 nurse managers and 31 physicians working at four different Canadian hospitals as part of a larger study on clinical ethics committees and nurses’ and physicians’ use of these committees. We describe nine themes of clinical ethical conflict that were common to both hospital nurses and physicians, and three themes that were specific to physicians. Following this, we suggest reasons for differences in nurses’ and physicians’ ethical conflicts and discuss implications for practice and research.

The Effectiveness of Stock Option Plans A Field Investigation of Senior Executives

Despite Stock Option Plans (SOPs) widespread use, evidence regarding their use and their effectiveness is relatively sparse and typically relies on an agency theory perspective that emphasizes the principals interests in a market context. This study focuses on the agent as an individual who is involved in SOP management. Eighteen interviews with senior executives were conducted. Their responses indicate that SOPs are used to (a) initially align managements incentives, (b) attract and retain key personnel, and (c)facilitate the payment of high levels of executive compensation. SOPs are successful when they are paid to employees whose actions influence stock prices. Our analysis suggests that no single theory provides a comprehensive explanation of SOP management. A critical assessment of agency theory as the dominant paradigm in executive compensation research and practice is presented, and the need for an integrated theoretical perspective for understanding SOPs is discussed.

An analysis of the association of demographic variables with the cognitive moral development of Canadian accounting students: an examination of the applicability of American-based findings to the Canadian context

Abstract This study describes the association between demographic variables and the moral development of 214 accounting students enrolled in an English-Canadian university and compares it with the moral development of American accounting students. The results of this research indicate that demographic associations identified in American-based accounting-ethics research are found to apply to the Canadian sample. Similar to US-based findings, the moral development of the sample of Canadian accounting students is associated with both years of education and gender, with no significant association with age or audit experience. However, the results of this study do not support Ponemon and Gabhart’s (1994) supposition that the difference in the level of moral development between Canadian and American professional accountants may reflect a difference in level of moral development between Canadian and American accounting students. Furthermore, the results of this study indicate that there may a significant difference in level of moral development between Canadian accounting students with and without English as a mother-tongue.