- Title
- CEOs and financial misreporting
- Creator
- Chen, Stephen
- Relation
- Ethical Leadership: Global Challenges and Perspectives p. 61-92
- Publisher Link
- http://dx.doi.org/10.1057/9780230299061
- Publisher
- Palgrave Macmillan
- Resource Type
- book chapter
- Date
- 2011
- Description
- Recent high-profile accounting scandals involving major companies like Enron, WorldCom, Parmalat and Satyam, along with recent outcries over excessive CEO remuneration, have raised questions about the relationship between ethical leadership, financial incentives, and financial misreporting. One view is based on the assumption that the problem lies with the character and integrity of those CEOs who have been motivated by personal financial gain resulting from performance bonuses. According to this view, these scandals have occurred because the individual leaders concerned have lacked integrity, and have deliberately misled investors in order to protect high bonuses linked to company share price performance. Proponents of this view argue that this shows a need to reform the morals of CEOs in order to prevent such scandals in future. This chapter argues that in order to answer this question it is necessary to look beyond the ethical character of individual CEOs and to examine other factors that may have led the CEOs to take such actions. Research in a number of disciplines including accounting, economics, sociology, criminology and psychology suggests that there are significant international differences in the institutional environment which may affect financial misreporting, such as legal penalties (Leuz et al., 2003; Bushman and Pitrioski, 2006), whistle-blowing (Tavakoli et al., 2003), cultural constraints (Koopman et al., 1999; Aycan et al., 2000) and relationships between the CEO, shareholders and subordinates (Aguilera and Jackson, 2003). Much of this research has been ignored in previous discussions, which have focused largely on the ethical character of the CEO. Secondly, this study seeks to make a methodological contribution to business ethics. In common with other researchers who have adopted a social science approach to questions of business ethics (for example, Harman, 2003), I believe it is important to test the validity of explanations and recommendations against real-world data in order to make robust recommendations for managerial practice (Robertson, 1993). This chapter introduces the use of computer simulations as a way to explore and test some of the arguments presented by other researchers, and to test the possible role of other factors. Computer simulation has become an increasingly popular methodological approach in the management literature but has not been much used in the business ethics literature, apart from in a handful of studies (for example, Miller and Engemann, 2004). This study is designed to demonstrate how simulations can be a powerful tool to examine questions in business ethics, particularly in the absence of data from real life, and that simulations can provide support for studies based on real-life cases.
- Subject
- business ethics; leadership; CEOs
- Identifier
- http://hdl.handle.net/1959.13/1052520
- Identifier
- uon:15440
- Identifier
- ISBN:9780230275461
- Language
- eng
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