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Model for the transition from ethical deficit to a transparent corporate culture
Kermis, George F. Kermis, Marguerite D.
Kermis, George F.
Kermis, Marguerite D.
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n09183.pdf
Adobe PDF, 108.63 KB
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Abstract
Numerous corporate officers and managers, who had abused power or disregarded fiduciary responsibilities, were able to hide their ethical deficits behind corporate cultures of deceit. This deceit puts the economic health of the nation at risk because unethical conduct by executives and employees—ranging from fraud to excessive perks for CEOs—can inflict much greater financial damage than deadly terrorist acts (Kitazume, 2006). In attempts to “fix” the fraud crisis, new and stiffer laws were enacted with enhanced enforcement tools and stiffer penalties on corporate wrongdoers. The Sarbanes-Oxley Act (SOX), for example, is founded on the theory that ethical behavior and transparent financial transactions are essential to insure that the spirit of GAAP (generally accepted accounting principles) is followed and markets are making decisions based on the economic realities faced by an organization rather than illusions. But laws have not been effective deterrents to criminal behavior. Given this environment, it becomes even more important to select accounting and management professionals who possess the qualities of character and integrity that will minimize the risk of fraud. This paper describes a model to help companies transition away from a culture of deceit to ethical and transparent cultures. This creates a plan for a return of confidence in financial information by adding an active dimension to the issue of ethical behavior and integrity. A transparent culture requires that the tone at the top be an ethical one. We show that the tone depends on a company’s hiring and promoting processes.
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2009-07
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With permission of the license/copyright holder