Professional Ethics

Excerpts from “Understanding Accounting Ethics”

by Michael Pakaluk and Mark Cheffers

[Until summer 2010, Dr. Michael Pakaluk was at the Institute of Psychological Sciences. From this August 2010 on, he’s teaching at Ave Maria University, Florida.]

Outline of the Book:




Ethical Education

Ethical Awareness. The study of Agacer, Valcarcel, and Vehmanen, (1993) empirically examined whether differences in ethical attitudes exist between the groups of business students from the U.S., Philippinesand Finland.  While their results showed that the students from the Philippines expressed the highest degree of ethical awareness for the ethics vignettes shown to the respondents, there were nevertheless a few ethical situations to which these Filipino students expressed indifference.  Given that Philippine history has been constantly dotted with questionable actuations of people in government and business, there seems to be a need to develop corporate cultures that send strong signals to managers and employees regarding sanctioned or unsanctioned ways of ethical decision making.

Socialization. The discussion in this paper has implications for the process of ‘socialization’ within the organization.  That is, thoroughly communicating ethical rules to new employees is an important first step.  The second step is relentless signaling to maintain faith in the ethical cultural rules of the firm (Camerer and Vepsalainen, 1988).

Ethical Practices. Ethical awareness does not mean that ethical values are also being practiced. Awareness is only a first step (Agacer, Valcarcel, and Vehmanen, 1993).  In an increasingly complex organizational environment that requires that both corporate value-maximization objectives and external stakeholder demands be met, it is easy for businesses to succumb to what is termed ‘ethical ambivalence’.  This occurs when the behaviors, attitudes, and norms that are shaped and maintained by the organizational reward system conflict with the behaviors, attitudes, and norms congruent with the ethical values and judgments of organizational stakeholders (Jansen and von Glinow, 1985).  It is, thus, necessary to ensure that organizations and persons employed therein act in congruence with basic ethical principles.

Institutionalization of Ethics

Corporate Codes of Conduct. Over the last several decades, there has been a growing interest in developing and implementing corporate ethical policies in order to foster ethical conduct among managers and employees.  These policies take on various forms, among them being corporate ethics statements, which define the firms’ philosophy, values and norms of conduct.  Codes of ethics were introduced as early as the 1930s but became popular only in the 1970s when many large firms adopted them as a response to several corporate scandals at that time.  While research has shown that companies appear to have sufficient ethics statements in place, the potential effectiveness of such codes is likely dependent on organizational commitment to them (Melé, Debeljuh, and Arruda, 2006; Murphy, 2005).  It behooves us, therefore, to think whether Philippine organizations possess as much commitment to such ethics codes as do their Western counterparts.

Corporate Social Policy. Over and above mere formulations of corporate ethical statements or social performance policies, it has been suggested that companies go through the so-called ‘corporate social policy process’, whereby firms and their leaders can be assisted in incorporating value considerations and social performance issues into ongoing organizational and individual policies and practices.  Key to this proposition is the institutionalization of value-based moral reflection and choice concerning individual and organizational behavior, with special attention to issues arising from the specific products (consequences) of corporate actions (Epstein, 1987).