An Institutional Perspective - American Accounting Association

API Volume Five 2005

The Impact of Accounting Education on Ethical Values: An Institutional Perspective Alan G. Mayper, Robert J. Pavur, Barbara D. Merino, and William Hoops ABSTRACT: The accounting scandals at the beginning of the 21st century led to public distrust and demands for reform. Were these scandals unexpected? From an old institutional economics (OIE) perspective, which originated with the work of Thorstein Veblen in the 1890s, these failures and the moral lapses should not be a surprise. OIE theorists, like critical theorists, generally, contend that corporate hegemony, i.e., the domination of business values in all areas of human life, has eroded moral sensitivities. All institutions, including our once-autonomous educational institutions, have become mechanisms for promoting economic interests. We first present a brief overview of institutional theory, to provide a theoretical framework for our subsequent experimental analysis. We discuss the concept of corporate hegemony and explain how hegemony impacts higher education, generally. We then examine efforts to commodify higher education and explain how that impacts all students in universities in the United States. Finally, we discuss the effect of commodification on accounting education to explain why we posit that our current accounting educational environment should be expected to desensitize students to the ethical aspects of their profession. This theoretical framework provides the basis for three hypotheses that we test in an experimental context to determine if accounting education desensitizes students to the moral aspects of their discipline. The experiment utilizes a capital budgeting context, which incorporates financial, social, and environmental factors. Subjects ranked and provided perceptions on eight alternatives as to their economic and moral content. Three groups of students, with differing levels of accounting knowledge, participated in the experiment. We develop hypotheses based on institutional theory and test those hypotheses in the latter part of this paper. Our results suggest that accounting education needs reform, so that accounting students become more aware of the ethical dimensions of our discipline. Keywords: institutional economics; moral recognition; corporate hegemony; education reform; behavioral experimentation. Data Availability: All experimental materials are available from the lead author, email: [email protected].

Alan G. Mayper is a Professor, Robert J. Pavur is a Professor, and Barbara D. Merino is a Professor, all at University of North Texas; and William Hoops, CPA.

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INTRODUCTION At the beginning of the 21st century, the accounting profession was rocked by a spate of scandals that have led to public distrust and demands for reform.1 From what now has been labeled the old institutional economics (OIE) perspective that originated with the work of Thorstein Veblen in the 1890s, the failure of accountants to act in an ethical manner is not unexpected.2 In fact, institutional theorists, like critical theorists, generally, contend that corporate hegemony, i.e., the domination of business values in all areas of human life, has turned onceautonomous educational institutions into mechanisms to promote business interests. Our theoretical framework for this study comes from the body of literature that has been labeled OIE theory. McPhail and Gray (1996), Funnell (1998), and Hines (1989) argued that the depiction of accounting as a mere technical subject has served to mask the ethical dimensions of the discipline. Funnell (1998) suggested that some tried to mask the inhumanity of the holocaust by depicting accounting as an objective, i.e., a technical, mathematical practice. McPhail and Gray (1996) and Shaub et al. (1993) conducted experiments to determine if accounting training desensitizes students and auditors to the ethical aspect of the accounting discipline. These studies found that auditors in the U.S. and students in the U.K. perceived their discipline as technical and did not recognize moral issues when those issues were couched in an accounting context. Collinson et al. (2000) in their survey of U.K. accounting students concluded that the education is hegemonic in nature with a clear distinction of what is and what is not accounting. We do not find these conclusions surprising from an institutional theoretical perspective since institutional theorists posit that corporate hegemony has resulted in business domination of the educational establishment in the United States.

OUTLINE OF OUR STUDY We present a brief overview of institutional theory, to provide a theoretical framework for our subsequent experimental analysis. We discuss the concept of corporate hegemony and explain how hegemony impacts higher education, generally. We then examine arguments that university education in the United States has been commodified and outline the implications that this has for our study. Finally, we discuss the effect of commodification on accounting education to explain why we posit that our current accounting educational environment should be expected to desensitize students to the ethical aspects of their profession. This theoretical framework provides the basis for three sets of hypotheses that we test in an experimental context to determine whether accounting education subjugates students’ moral sensitivity. The experiment utilizes a capital budgeting context, which incorporates financial, social, and environmental factors. Subjects ranked and provided perceptions on eight alternatives as to their economic and moral content. Three groups of students, with differing levels of accounting knowledge, participated in the experiment. We develop hypotheses based on institutional theory and

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See Berenson (2001) for a discussion of how accounting failures that occurred at Enron, Cisco Systems, Waste Management, Lucent Tech, etc, have resulted in congressional demands for reform and loss of public confidence in both financial statements and the fairness of the investment process. When we refer to institutional economics in this paper, we refer to the body of literature, starting with Veblen at the turn of the century and being continued by scholars publishing in the Journal of Economic Issues, which has been labeled OIE (Old Institutional Economics) by positivistic economic theorists. See Drobak and Nye (1997) for an overview of the NIE (New Institutional Economics) and whose work is associated with journals, such as the Journal of Law and Economics.

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test those hypotheses in the latter part of this paper. Our results suggest that accounting education needs to be reformatted so that accounting students become more aware of the ethical dimensions of our discipline.

Corporate Hegemony—The Institutional Perspective Dugger (1980, 898) defines institutions as organized patterns of roles, often enforced through regulations or positive sanctions that create patterned habits of thought learned by individuals who perform those roles. He posits that every society has six basic types of independent, autonomous institutions (economic, educational, military, kinship, political, and religious) that shape societal beliefs.3 Institutional theorists argue that corporatism had become so dominant in the United States that economic values permeate all other societal institutions, resulting in a loss of independence and autonomy of other societal institutions (Tillman 2001). Institutional theory focuses on the processes by which one institution becomes dominant within a society. Dugger (1989) provides a concise outline of the four basic processes—subreption, contamination, emulation, and mystification—that allows one institution to become dominant. Dugger (1980) defines each process as follows: subreption occurs when the function (the ends) of the major institution have become the means to achieve the end (pecuniary profit) of the dominant economic institution (corporations); contamination occurs when appropriate motives of an institution are contaminated with motives of the dominant institution; emulation occurs when dominant institutions deny the legitimacy of other claims and realizes it own, i.e., one rationality only, in this case, economic rationality; and mystification occurs through the distribution of symbols, such as free enterprise and private property, that have fostered corporate hegemony. The dominant economic institution in the United States is the corporation. OIE theorists contend that other societal institutions, including education, in the United States have simply become means to achieve corporate (economic) ends. Dugger (1989, 131), paraphrasing Veblen (1898), attributes growing corporate hegemony and power to the blind drift of retreat by other institutions.4 OIE theorists depict power as a complex, interactive processual relationship between individuals and societal institutions. Hodgson (2002, 323) describes this relationship as one where individuals create and change institutions just as institutions model and constrain individuals.5 Veblen (1919) and Mitchell (1918) warned that if co-opted by the business interests, education could be used as a powerful force to instill market (economic) values as natural and, therefore, paramount in society. OIE theorists, like Foucauldians, recognize the most effective form of power is not coercive power but power that is exercised silently upon a willing subject (Veblen 1919; Hodgson 2002).6

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Dugger (1989) classified these six institutions as basic, independent, and autonomous in his analysis, but that is not to say other institutions do not exist. For example, OIE theorists consider the market as one of the most powerful institutions in contemporary society, but the market is not basic, it is a subset of the economic (see for example, Veblen 1898; Hodgson 2002). Dugger (1989, 134ff) argues that state privatization, religious reactionism, vocational education (careerism), truncated families, and the military / business alliance reflect the blind drift of retreat. He concludes that privatization, reaction, vocation, truncation, and commercialization trivialize all institutional values, except economic values. For other discussions of power from and OIE perspective, see Dugger (1988) and Klein (1980, 1987). OIE theorists reflect the same concerns as Foucault (1980) in his discussion of disciplinary power; they, like Foucault, recognize resistance is probable. Tracing the development, subjugation, and resistance to corporate hegemony would be a fruitful endeavor, but it is beyond the scope of this paper. For an excellent overview of power from a variety of traditional and postmodern perspectives, see Scott (2001).


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In a society dominated by economic values, higher education becomes a means to serve corporate ends, rather than a means of promoting knowledge for knowledge’s sake, the traditional role of higher education.7 Corporate hegemony leads to calls for the commodification of higher education to make it more efficient in the training of students, a movement that all critical theorists deplore since it subordinates the basic role of higher education from developing knowledgeable citizens to providing trained workers.

Corporate Hegemony and the Commodification of Higher Education Veblen (1918) presented a powerful indictment of ongoing efforts by business interests to commodify education, i.e., to deliberately transform knowledge from individual and collective self-knowledge, to training subjects for the use of others. The merger movement of the late 19th century in the United States created a small powerful group of men—financial capitalists—who Veblen (1918) argued sought to subvert all societal institutions to serve the interests of a few powerful men who controlled the nation’s wealth. He bitterly noted the impact that business interests had on higher education, concluding that after World War I, universities in the United States had lost their identity, becoming competitors for traffic in merchantable instruction (Veblen 1918, 65). Critical theorists echoed institutionalists’ concerns about corporate hegemony throughout the 20th century. Lyotard (1984), like Veblen, noted the constant efforts by business interests to commodify education. More recently, Noble (1998, 2002) has addressed the technological revolution in higher education. He concluded that the push toward distance education has not been driven by technology, but rather by the desire of business interests to further commodify education. Technology has created the opportunity for universities to produce what Veblen labeled merchantable instruction. Noble, like Veblen, posits that commodification is driven by the profit motive. Knowledge becomes defined as technical training, i.e., as a set of skills or a body of information, and training involves the honing of a person’s mind so that it can be used for the purposes of someone other than that person (Noble 2002, 2). Veblen (1918), Lyotard (1984), and Noble (2002) all noted that commodification stands in stark contradiction to the traditional objective of education, which has been the integration of knowledge (self knowledge)—to create a knowledgeable (as opposed to trained) citizen. Throughout the 20th century, institutional theorists continuously warned that financial interests had gained control of the institutions of higher education in the United States, causing loss of autonomy of higher education. Dugger (1995) contended that corporatism has resulted in subreption, contamination, and emulation of business education in the United States. He suggests that business education has become transparent in its desire to serve corporate interests. The language of business accreditation standards lend support to Dugger’s (1980) claim that the major role of higher education has become to produce a supply of trained and disciplined specialists for corporate employment rather than to produce an informed citizenry. Employers have become the consumers of the educational products (disciplined specialists).8 7

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We are aware of Young’s (1996) paper that uses an institutional framework based on Douglas’s work to examine the FASB process, but depiction of the FASB process as institutional is antithetical to the institutional economic theory used in this paper. Starting with Veblen (1898), through Mitchell (1918), to the radical institutionalism of Dugger (1980), institutionalists have maintained a critical distinction between technological (productive, inventive) and ceremonial (nonproductive, inherited) behavior. From an institutional perspective, the economic system is an inventive process (an institution), whereas accounting is a ceremonial practice, which impedes progress and retards inventive behavior. The AACSB accreditation standards may not reify commodification of education, but the language of the standards certainly suggests that training is the key outcome measure in assessing the effectiveness of business disciplines.


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From an institutional perspective, there is no reason to expect that higher education, serving as a means to further corporate ends, would sensitize students to the moral responsibilities of their disciplines. While the dominance of economic reasoning in higher education in the United States can be expected to dull the moral sensibilities of students in all disciplines, we concur with Hines (1988), Funnell (1998), and Zeff (1989), who conclude that the depiction of accounting as a mere technical discipline masks ethical concerns in accounting in an aura of false objectivity.9

Corporate Hegemony and Accounting Education Institutionalists do not view accounting favorably; they view accounting as fostering ceremonial behavior (focusing on pecuniary profit) rather than technological behavior (focusing on producing goods and services). Dugger (1995) and Tool (1986) suggest that educators’ primary task should be to foster the developmental capacity of students. The dynamic element of social change is human beings’ capacity to think critically and coherently over wide areas of their experience (Dugger 1995, 1017). They argue that the development capacity to reflect, to ask why, to perceive means-consequence relations and to communicate symbolically regarding such insights and understandings has been the fundamental element subversive of the status quos over the centuries (Tool 1986, 7; quoted in Dugger 1995, 1017). When accounting is taught as a technical discipline that is neutral and objective, then the developmental capacity of students is not enhanced.10 Veblen (1904) and Mitchell (1918) specifically warned against using pecuniary (accounting) profit as an output measure; they argued it should be only one input for decision making. Other economists concur with this view. Keynes (1933) most concisely captured OIE theorists’ concerns when he wrote that under the peculiar calculus of modern accounting, the men of the 19th century built slums rather than model cities because slums paid. Technical accounting education does not address questions about the sources of profit or the social impact of profit maximization. We posit that accounting education will not enhance students’ developmental capacities if such issues are not raised. Students need to be challenged to debate how various accounting measurements impact the distribution of wealth and the moral implications of various measurement procedures. Today, most accounting textbooks do not convey that message. Zeff (1989) raised the question of whether accounting, as traditionally taught, belonged in university curricula. He criticized accounting educators for presenting the subject as a tedious catalogue of technical practices, a collection of rules to be memorized in an uncritical and almost unthinking 9

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One reviewer suggested that recent call for change in accounting education makes the technicist designation less certain. While it is beyond the scope of this paper to determine if that is the case, we suggest that Readings (1996) and LaCapra (1998) offer interesting insights into why, despite calls for change, there has been little curricula change or resistance to commodification in U.S. universities. LaCapra (1998) suggests the most important principle in Readings’ (1996) book is the idea of how corporatization of education has conflated accountability with accounting. He see this reduction of accountability to accounting as part and parcel of a market-oriented bureaucratically administered university in which the rule of exchange value leads to questionable equations in the attempt to abet efficient functioning (LaCapra 1998, 36). He points to the growing use of multiple choice tests or the fill-in-the-blank evaluation forms as examples of the conflation of accounting for accountability. These issues deserve future study. Veblen (1904) vehemently rejected the idea that accounting profit could be used as a measure of societal well being; he noted that profit could be maximized by a variety of means that led to the suffering, not well being, of the common man. He was enraged after World War I by the restriction of production; he noted the common man had won the war but lost his livelihood. He argued that business does not produce what it could because the desire to maximize profit creates incentives for businessmen to limit production at a cost to society (Veblen 1919, 343).


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way (Zeff 1989, 204). A review of accounting textbooks validates Zeff’s views.11 Recently, critical accounting researchers have echoed Zeff’s criticisms, calling for a more enlightened and emancipatory form of accounting education (Funnell 1998; Neu 2000; Gallhofer and Haslam 1996). We suggest that given economic domination of higher education and the technicist approach to accounting education, resistance to change will be strong, but that change can occur by enhancing students’ understanding of the moral aspects of our discipline. From a critical, institutional perspective, we do not find McPhail and Gray’s (1996) and Shaub et al. (1993) conclusions that accounting students and auditors were not aware of the moral aspects or ethical dimensions of their discipline to be surprising. Both corporate hegemony with its demands for trained subjects and the technicist approach to accounting education serve to exorcise ethical concerns from basic classroom discussions. Therefore, we posit that while corporate hegemony reduces the ethical sensibilities of students in all disciplines, a technical accounting education further limits students’ ethical sensibilities and developmental capacities.

OVERVIEW OF OUR BEHAVIORAL STUDY We examine why students at a U.S. university (accounting and nonaccounting students) appear to view accounting as different from other parts of human experience and why their moral judgment process may not be invoked (McPhail and Gray 1996 and Loeb 1991). Collinson et al. (2000) and McPhail (1999) imply that students are enveloped in a corporate hegemony that would inhibit recognition (or concern) with many social and environmental concerns. We posit that the primary problem is that the students fail to recognize any moral content in accounting data. As noted earlier, we believe this recognition failure stems from the technicist approach used to teach accounting and the corporatism of education, which masks the moral aspects of our discipline. We believe this contributes to prior researchers’ findings that the accounting educational process serves to suppress students’ moral reasoning and independent thinking, two attributes vital to accounting practice. Shaub et al. (1993, 154) studied the effects of personal experience, cultural environment, organizational influence, and professional influence on ethical sensitivity. Their measure of ethical sensitivity related to three distinct ethical issues implied in the AICPA’s Code of Conduct. Their results showed that twice as many auditors recognized the ethical aspects of underreporting hours in an audit engagement over the subordination of a staff auditor’s opinion, to that of his manager, concerning noncompliance with GAAP. This suggests that the ethics involved in procedural concerns are more discernible to auditors (and accountants in general) than concerns dealing with the effect of auditors’ actions on others. Using Forsyth’s (1980) Ethics Position Questionnaire (EPQ), they measured the effects of the auditor’s cultural environment and personal experience on ethical sensitivity.12 They hypothesized that idealism would be positively associated with ethical sensitivity, and relativism would be negatively associated with ethical sensitivity. They found, as they expected, that auditors who scored high in relativism were less likely to recognize the ethical issues in the experimental scenario. In contrast to their expectations, they found that idealism was negatively associated with ethical sensitivity. Since idealists

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We acknowledge that accounting textbooks used in the United States include ethical scenarios in text or cases at the end of the chapters. Most do. But, those scenarios do not emphasize the subjectivity of accounting data or focus on the ethical dangers inherent in uncritical acceptance of accounting data. Forsyth’s (1980) EPQ uses two individual orientations, idealism and relativism, to categorize how an individual approaches ethical problems.


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focus on the harm to others created by a particular action (Shaub et al. 1993, 165), it can be concluded that the participants in the study did not realize this harm. A broader indication would be that these auditors failed to see the effects of their actions on society as a whole. Ponemon (1992) and Ponemon and Gabhart (1990) ethical studies (1990, 1992), based on Kohlberg’s (1969) and Rest’s (1983) models, have reported that accountants are at a low conventional level of ethical reasoning with few obtaining the post-conventional level as their career advances. These studies indicate that accountants with lower ethical reasoning remain in the profession while those with higher levels are not promoted. Ponemon (1992, 254) argues, ‘‘A prerequisite to ethical development is more effective educational interventions at both the university and the firm level. ... Therefore, traditional ethics education in accounting should be replaced by formal courses and programs that foster the highest order of ethical reasoning.’’ None of the above addressed the problem of recognition. It may be useful to identify why accountants fail to invoke a moral reasoning process before recommending specific educational interventions. Shaub et al. (1993) indicate that there is low level of ethical sensitivity in a nonprocedural context in the accounting profession is consistent with accountants’ inability to recognize moral issues. As discussed in the next section, ethical sensitivity (or recognition) is a prerequisite for the application of ethical judgment.

MORAL JUDGMENT AND RECOGNITION—COGNITIVE AND INSTITUTIONAL IMPACT The cognitive aspects of moral behavior are defined here as the steps leading up to an action that will have an effect on others. Much importance has been placed on understanding how individuals make moral decisions. Rest et al. (1999), Jones (1991), and Hunt and Vitell (1986) noted that in order for moral decision-making processes to be invoked, there must be recognition that a particular decision has a moral dimension. The implication is that the failure to employ a moral decision-making schema will result in amoral decisions, i.e., decisions that only consider the technical. Many authors have presented models of the ethical judgment processes (e.g., Rest 1983; Hunt and Vitell 1986; Ferrell and Gresham 1985; Trevino 1986; Dubinsky and Loken 1989; Jones 1991). Jones (1991) observed that these models have certain components in common. This includes: 1. A recognition stage where the moral situation is acknowledged. 2. A moral judgment stage where the alternatives are evaluated to determine the most ethical course of action. 3. A moral intent stage where the decision maker establishes what effects he/she will accept. 4. A moral behavior stage where the decision maker acts on his/her judgment and intent. These four components are most apparent in Rest’s Model (Rest 1983). Reiter and Flynn (1997, 4) present this model as the prototype of models of cognitive moral decision making for accounting education. The first component of Rest’s model is the recognition stage. Rest (1983, 559) identifies the following three findings concerning cognition and the recognition component of his model: 1. Individuals have difficulty interpreting even the simplest of moral situations. The more difficult the situation is to interpret, the less likely moral behavior will occur (Rest 1983, 559).


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2.

Differences exist between individuals concerning their sensitivity to the needs and welfare of others. Rest notes that some only recognize that their actions have an effect on others when the effect is most severe (Rest 1983, 559). 3. The ability to interpret moral situations is developed over time. Older individuals interpret moral situations better than younger individuals (Rest 1983, 560). The first issue influenced Jones (1991) in the development of his moral intensity construct (discussed later). The second and third findings imply that an experimenter should control for the differences in the subjects’ experiences and individual approaches to moral issues, as well as their age. Jones (1991) reviews existing models of the moral judgment process and presents his own (see Figure 1). We adapt his model for our experiment. His model includes the four stages contained in Rest’s (1983) model plus the inclusion of contextual contingency attributes,

FIGURE 1 Jones’ Issue-Contingent Model of Ethical Decision Making in Organizations Moral Intensity Magnitude of Consequences Social Consensus Probability of Effect Temporal Immediacy Proximity Concentration of Effect

Recognize Moral Issue

Make Moral Judgment

Establish Moral Intent

Engage in Moral Behavior

Organizational Factors Group Dynamics Authority Factors Socialization Processes

Source: Jones (1991, 379).


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which he posits will impact the moral judgment process. Using a cognitive psychology framework, he views moral decision making as activation of moral schema. Failure to recognize the existence of a moral issue prevents the employment of the schemata (Jones 1991, 383). His issue-contingent model incorporates a multidimensional construct called moral intensity, which has the following six components: magnitude of consequences, social consensus, probability of effect, temporal immediacy, proximity, and concentration of effect. Jones (1991, 380) indicated that moral intensity affects recognition by its impact on the individual’s recognition of the consequences of decisions.13 Our study includes the magnitude of consequences component and the concentration of effect component. The first component of moral intensity, magnitude of consequences, represents the relative harm or good that arises from a moral act. For example, a drug is developed and tested that has a side effect that may result in death for 30 percent of the people who take it. The potential side effect of this drug has a higher magnitude of consequences than for a drug that may cause a skin rash in 30 percent of the people who take it. Therefore, recognition is more likely to occur with the drug that results in death than the one that results in a skin rash. Social consensus, the second dimension of moral intensity, represents the degree of society’s overall agreement that a moral action is good or evil. The third element of moral intensity, the probability of effect, represents the decision-maker’s certainty that a particular action will be pursued and the likelihood that this action will result in the predicted consequences. Temporal immediacy, the fourth component of moral intensity, represents how quickly the predicted consequences of a moral act will be realized. The fifth component of moral intensity, proximity, represents the moral agent’s perception of nearness with those affected by the moral act. Concentration of effect, the final element of moral intensity, concerns the distribution of the consequences of an action. It is a function of the number of people who will be affected by and the relative harm or benefit that arises from an action. Jones (1991) described this function as an inverse relationship. The outcome of this relationship is that the smaller the number of people affected, the greater the severity of the consequences. An example involves a firm attempting to deal with an unmanageable wage cost. This firm has two alternatives, lay off workers or nominally reduce the wages of all workers. The result of the first alternative would be the layoff of 20 workers who each earn $25,000 per year, and the result of the second alternative is to reduce 5,000 workers salaries by $100 per year. Although the net effect of these alternatives is the same, the former has a higher concentration of effect and, thus, a greater potential to be recognized as a moral issue. Jones’s (1991) moral intensity construct is consistent with the institutional theory. People choose (voluntarily or reflexively) to submit to the norms and goals of dominant institutions; in our society the dominant institution is the corporation. Dugger (1980, 904) concludes that corporate hegemony impacts all other societal institutions, including educational, political, and religious institutions, and individuals within each institution form habits and thoughts consistent with the dominant structure. Economic concepts override all other concerns and become the

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Jones (1991) also stated that moral intensity influences the salience and vividness of the effects of a moral issue. Salience concerns how moral issues stand out from the backgrounds (Jones 1991, 380). Vividness deals with how moral issues create emotion, are concrete, create images, or invoke a sense of proximity (Jones 1991, 381).


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substitute for what is right and good.14 An individual would either not be able to recognize a moral issue or give it secondary weighting (compared to the economic issues) when an economic frame of reference is perceived. Therefore it would be difficult to reach a moral intensity threshold (necessary to invoke a moral decision process) when an economic frame of reference is used. Dugger (1980, 905–906) concludes: Being contaminated with the motives of corporate business, very few people notice that the values and prestige claims of corporate life are emulated in all (emphasis in original) walks of life. ... All this is done, not in the name of the corporation, but in the name of free enterprise, or private property, or individual initiative. We posit that most decisions are dominated and viewed through an economic lens, with the moral dimension being unrecognized or subservient. In summary, in order to engage a moral decision-making schema, an individual must first be consciously aware that a particular decision has moral implications. The recognition of these moral implications is dependent upon the characteristics of the decision maker, the issue itself, and societal institutional norms. If, as suggested by Ponemon (1992), educational intervention is needed, then these interventions should provide students with moral skills that they do not possess, or the institutions related to accounting must be changed in order to make the practice itself ethical (Francis 1990). Further, if ethical failures are a product of the failure to recognize the ethical dimension of problems, then skills concerning recognition should be developed. This leads to our general research question: In an accounting decision context, do students recognize a moral dimension as well as an economic/technical dimension?

HYPOTHESES DEVELOPMENT The hypotheses consider whether accounting training influences an individual’s recognition of ethical issues in an accounting context. Studies involving moral recognition, Volker (1984) using psychological counselors and Bebeau et al. (1985) using dentists, found that these professionals got caught up in performing their professional tasks and tended to filter out the moral implications that were part of the decision context. McPhail and Gray (1996) provide evidence that accounting students do not view accounting as possessing a moral dimension. Therefore, it is expected that individuals with accounting training will focus on the technical aspects of solving a problem and overlook the ethical implications of its potential solutions. Nevertheless, Dugger (1980) implies that the economic dimension of accounting information will dominate the moral dimension for all students. Hence, students will weight the financial factor as the most significant factor in their decision, since it will establish an economic frame of reference. This leads to our first set of hypotheses. (Hypotheses in this study are stated in the alternative, unless otherwise indicated.) 14

The preference for what some call economic imperialism in the U.S. education should not be understated. Fine (2002) discusses Becker’s human capital theory and notes that Becker, a Nobel prize winner, proudly announced he would like to create a market for everything so that economic values would dominate all other values. We do not mean to say that classical economic theorists, like Adam Smith and John Locke, did not consider the moral aspect of property ownership; they did. They suggested that the productive use of property would benefit society. We view the utilitarian ethics of Bentham as providing the basic justification for the pecuniary calculus of accounting and divorcing economics from morality. We concur with Brown (1987, 191) who credits Bentham with saying goodbye to morals and politics by reducing them to economic comparability and commodity exchange.


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H1a: Individuals with more accounting training will be more likely to perceive the financial aspects of a capital budgeting decision scenario as compared with individuals without accounting training. H1b: Students will view the financial information as an economic issue and not a moral issue. H1c: Students will weight the financial factor as the most significant factor in their capital budgeting decision. It further stands to reason that individuals who are not professionals in a certain discipline cannot focus on the technical aspects of the problem, for they are not too familiar with the tools and practices of the profession. Consequently, it is expected that individuals with less accounting training will focus on the societal impacts of a problem and not on the technical. This leads to our second set of hypotheses. H2a: Individuals with less accounting training will be more likely to perceive the social implications of a capital budgeting decision scenario. H2b: Students with less accounting training will perceive social factors relatively more as a moral issue than as an economic issue. If these hypotheses are supported, then it will indicate that accounting training has a desensitizing effect toward ethical issues. McPhail and Gray (1996) explored ethical issues involving the environment and other social issues. Their findings suggest that, with respect to these two broad categories of issues, accounting students recognize their ethical dimensions more easily than with accounting issues. Since this study includes environmental issues in a direct presentation, we expect that our subjects will recognize an environmental dimension. This leads to our third set of hypotheses. (Stated in the null form and in accordance with our expectations of the results.) H3a: There will be no difference between individuals with accounting training and individuals without accounting training in the recognition of the environmental dimensions of a capital budgeting decision scenario. H3b: There will be no difference between individuals with accounting training and individuals without accounting training in their perception of environmental factors as an economic and a moral issue.

METHODOLOGY We addressed the above hypotheses by administering a computerized experiment. The experiment incorporated a capital budgeting scenario, which included three decision dimensions (financial, social, and environmental). Voluntary subjects came from one of three academic backgrounds. The first group included 35 accounting majors who were enrolled in senior-level or graduate-level accounting courses; the second group was comprised of 41 students enrolled in introductory financial accounting, their second introductory accounting course; and the third group consisted of 27 students without any accounting (or business) training who were enrolled in lower- or upper-division art and music classes. These groups represent three levels of Accounting and the Public Interest

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accounting/business training: in-depth training in accounting/business (by way of formal academic courses), limited exposure to accounting/business training, and no formal exposure to accounting/business training.

Capital Budgeting Scenario (Experimental Context) The context of the experiment is a basic capital budgeting scenario requiring staff members to recommend to management eight alternatives in a ranked order. Each alternative redesigns the production process to comply with new Environmental Protection Agency (EPA) emission standards. The manipulations of the three factors (each at two levels) were balanced across the eight alternatives. The three manipulated variables, as described below, included a financial factor, an environmental factor, and a social factor. The experimental materials are available from the lead author.

Manipulated within Subject Variables Three-year profitability index is included as the technical financial accounting information (the financial factor). This is a return on asset (ROA) measure, but we presented and defined it in less technical language, allowing for understanding by a layperson. This presentation was done based on the feedback we received in our pilot studies. The three-year profitability index is also compared with industry norms. We believe that this technical accounting information will be viewed strictly as economic information, since these factors will not reach an individual’s minimum threshold of moral intensity. The subjects were told that other capital budgeting measures are consistent with the three-year profitability index (e.g., internal rate of return). Subjects viewed both high-profitability and low-profitability index alternatives (the high ranged across four alternatives from 13.3 percent to 13.7 percent and the low ranged across the other four alternatives from 5.2 percent to 5.9 percent). Sulfur emission is included as the environmental factor. The two levels of sulfur emissions are one level where emissions barely meet the new EPA regulations (ranging from 1.91 parts per million to 1.99 parts per million across four alternatives) and another level where sulfur emissions are nearly eliminated (ranging from 0.20 parts per million to 0.29 parts per million across four alternatives). We intend for the social consensus construct of moral intensity to be strongly in play with this variable since society is very sensitive to environmental issues. McPhail and Gray (1996) found that what they called green issues was consistently seen as moral issues across the subjects in their study. The level of sulfur emissions is also related to the moral intensity construct of magnitude of consequences. Though there are no negative effects in the study, the magnitude of consequences is represented by the two levels of sulfur emissions. We expect the contrast between clearly exceeding the standards and barely meeting the standards will invoke an individual’s moral intensity threshold due to the contrasting magnitude of consequences. Labor cost savings is related to the transportation subsidiary of the firm. This subsidiary is either closed or remains open in the experimental alternatives. We include this as our social factor for the study. The moral ramifications of this factor are demonstrated by the constructs of magnitude of consequences and the concentration of effect (Jones 1991), because either the 1,000 transportation subsidiary employees lose their jobs (across four of the alternatives) or continue to work (across the other four alternatives). This information is framed as labor cost savings, but we also clearly presented in the background material that the 1,000 employees Accounting and the Public Interest

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would be permanently laid off. We believe accounting training and the corporate hegemony within our culture will make it less likely that the moral implications will be recognized.

Covariates To control for individual differences in ethical orientations we use Forsyth’s (1980) Ethics Position Questionnaire (EPQ). This classifies a person on two dimensions—idealism and relativism. Idealism refers to the extent to which an individual believes that a desired outcome can be obtained without violating moral standards. Relativism represents an individual’s lack of belief in absolute moral standards that govern behavior. We also control for standard demographic differences. This included age (measured categorically), gender, work experience, and class level. We include these effects only when there was a significant impact on the reported results.

Experimental Procedures We computerized the experimental task allowing us to control the presentation of the experimental materials, to create a data file, to measure time and to randomly assign subjects to one of four experimental orders.15 The experimental procedures included the following: • Each subject picked a computer station that was previously set up for one of the four experimental orders (subjects did not know the order they were receiving in advance). Included at each station was a manila envelope containing a participant letter, general overview and instructions, background information on the company, and the randomized order of the eight experimental alternatives (each alternative was on a separate page). • Subjects were then told to begin the experiment on the computer. The first screen the subjects saw was the participant thank-you letter, followed by screens repeating the overview and instructions. A motivational incentive was given by holding a lottery. We told the subjects they would take a written quiz about the details of the materials at the end of the experiment. The more correct answers they had, the more lottery tickets they would receive. Lottery prizes were $100, $50, and $20. The quiz average was greater than 95 percent. After reading the incentive subjects did a short training session, which reviewed all the keystrokes used in the experiment. Finally subjects were forced to spend five minutes (minimum) reviewing the background information and the eight alternatives contained in the manila envelope. (The computer program would not let the subject go to the next part of the experiment until five minutes elapsed.) • After their review of the eight alternatives, the subjects ranked the alternatives (from most preferred to least preferred) and then they rated each alternative (on a 100-point scale where 1 ⫽ totally unacceptable and 100 ⫽ the perfect alternative). Approximately onehalf the subjects rated each alternative before the ranking task (see footnote 15). • Subjects then provided their perceptions of the alternative choice decision and of each independent factor given to make the alternative choice. Approximately one-half the subjects gave their economic perceptions first followed by their moral perceptions; the remaining subjects provided their moral perceptions first. Perceptions were measured using

15

Subjects first ranked the eight alternatives followed by rating each alternative on a 100-point scale or vice versa (rate then rank). Next the subjects provided their economic perceptions followed by their moral perceptions or vice versa. There were no order effects nor any time effects and these control variables are not reported in the results section.


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a four-point Likert scale ranging from strictly economic (moral) to strictly non-economic (non-moral). Forsyth’s (1980) Ethics Position Questionnaire was the next task performed by the subjects. The EPQ consists of 20 statements measured on a five-point Likert scale. Finally, subjects completed a demographic questionnaire and a debriefing questionnaire. The demographic questions included educational background, age, and gender questions. The debriefing questionnaire included manipulation checks on the operationalization of the three independent variables (was there appropriate perceived differences between the high and low levels). Additionally, subject’s perceptions on the negative and positive benefits to both the individual firm and society were obtained as related to both the minimization of sulfur emissions and labor cost savings.

Multidimensional Preference Analysis This research used a multidimensional preference (MDPREF) analysis on the rankings of each person’s preference for the eight alternatives of the capital budgeting scenario. This scenario included the three manipulated variables (financial, environmental, and social factors) across the eight alternatives, as previously described. The MDPREF analysis resulted in three factors explaining 89 percent of the total variation in the data. Associating the sign of the factor components for each of the eight alternatives with the financial, environmental, and social levels in the scenario led to a clear interpretation of the factors. The three factors directly mapped into the manipulated levels for each of the variables. The financial factor, environmental factor, and social factor accounted for 50 percent, 20 percent, and 18 percent, respectively, of the total variation in the data. These same three factors appeared when we performed an MDPREF analysis on each of the three groups with varying levels of accounting training. For the groups with advanced accounting training, introductory accounting exposure, and no accounting exposure, the three factors explained 92 percent, 87 percent, and 91 percent, respectively, of the total variation in the data. This is strong evidence that the subjects utilized the factors that we intended them to use in making their rankings. Further, the validity questions asked in the debriefing questionnaire clearly demonstrated that the subjects differentiated between the high and low levels of the manipulated variables and they also agreed that there was not a material difference within the low ranges and within the high ranges of the variables. We believe that the internal validity of our experiment is adequate to test the hypotheses.

ANALYSIS, RESULTS, AND DISCUSSION To measure the importance of each subject’s perception of the factors, we used the loadings (factor weights) of each individual on the financial, environmental, and social factors. The magnitude of an individual’s loading for each factor (financial, environmental, or social) was then used as the dependent variable to evaluate H1a, H2a, and H3a across the three different accounting/ business training exposure groups. Each of these hypotheses was evaluated using an ANOVA model. The model also included all relevant covariates and their interactions with the three levels of accounting/business exposure. To increase the power of the statistical tests, the demographic variables were only included in the final models if their contribution was significant in explaining the variation of the dependent variable. The statistical analyses of H1b, H2b, and H3b use the means of individuals’ self-reported assessment as to whether the financial, environmental, or social factors are perceived as being an economic issue or a moral issue. Two four-point Likert


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scales were used to assess the perception of these factors on an economic and a moral continuum. The endpoints of the scales were strictly economic (moral) and strictly non-economic (non-moral). The statistical analysis for H1c uses the factor loading weights from the multidimensional preference analysis. Table 1 presents all the statistical results related to H1a, H1b, and H1c. According to H1a, individuals with more accounting training will be more likely to perceive the financial aspects of a capital budgeting decision scenario as compared with individuals without accounting training. Analysis of the regression model to test this hypothesis reveals that the overall model is significant (.05 level) and that relativism plays a significant role. Panel A of Table 1 illustrates the results of the statistical analysis. Relativism and levels of accounting training show a significant interaction; therefore, we examine the means of the magnitude of the loadings for the levels of accounting training and the categories of high and low relativism. We define low and high relativism by classifying the relativism score as either less than the mean (n ⫽ 54) or above the mean (n ⫽ 49). The range of the financial loading weights are between 0 and 1 with 0 representing no relationship between the individuals’ rank preferences and the financial dimension while a 1 represents a perfect linear relationship between them. Panel B of Table 1 displays these means of the loading weights for the financial dimension for low and high relativism. For individuals in upper accounting, low relativism is associated with a higher weight on the financial dimension (.719); just the opposite appears for the non-business student (.531). Thus, the conclusion to H1a is that perceptions of the financial aspects of a capital budgeting decision scenario are a function of a student’s relativism and their background in accounting. At the 5 percent significance level, the category of upper-level accounting training and low relativism is different from the category of non-business and low relativism. These are the only two categories that are significantly different from each other. All subjects had relatively high weights on the financial dimension, hence reducing the potential for differences between the groups. Restricting the analysis to those individuals with low relativism weakly supports H1a. Panel C of Table 1 reports the results related to H1b. At an observed .0001 significance level, there is sufficient evidence that students viewed the financial factor as an economic issue and not a moral issue. The means indicate that all groups perceived this factor as an economic issue and not a moral issue. For each group, the moral versus economic differences were significantly different from zero and positive, thus revealing that for each group the perception of the financial dimension is economic. Clearly, these results support our H1b. The overall capital budgeting decision was clearly dominated by the financial dimension and viewed as an economic issue, not a moral issue. The financial factor accounted for 50 percent or more of the variance in the multiple dimension preference analyses, for all students together and for each of the three groups. The other two factors, individually, accounted for no more than 25 percent of the variance. Panel D of Table 1 clearly shows that the financial dimension dominated the overall capital budgeting decision, across all groups. These results clearly support H1c. Accounting and business training tends to portray accounting data as objective technical information relevant for decision making. This implies that this technical information is a given and an end unto itself (e.g., shows increase/decrease in profit). The consequences (e.g., why the increase/decrease profit) of accounting data are less relevant in decision making (Devine 1999). Those who have not been biased (trained) on the objectivity and neutrality of accounting data may see the consequences behind the technical information obtained (e.g., labor cost


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TABLE 1 Financial Aspects of Capital Budgeting Decision Scenarioa Related to H1a, H1b, and H1c Panel A: Categorical Analysis of Variance Dependent Variable Subject’s loading weight on the financial dimension of a multidimensional preference model. Model

F-statistic

p-value

2.30

.027

Full model predicting subject’s loading weight on financial factor Source of Variationb

t-statistic

p-valuec

⫺.97 ⫺2.12 ⫺1.71 1.79 2.83

.332 .036 .091 .077 .006

Lower Accounting Students Non-Business Students Relativism Lower Accounting * Relativism Non-Business * Relativism Panel B: Mean Loading Weights on Financial Dimension

Means by Accounting Education and Levels of Relativismd Upper Accounting

Lower Accounting

Non-Business

.719 (n ⫽ 21) .611 (n ⫽ 14)

.640 (n ⫽ 20) .654 (n ⫽ 21)

.531 (n ⫽ 13) .671 (n ⫽ 14)

Low Relativism High Relativism

Hypothesized test that more accounting training is associated with an increase in subject’s perception of financial aspects. Classes

t statistic

p-valuee

Upper Accounting versus Non-Business

1.96

.030

Category Low Relativism

Panel C: Perception of Financial Factor as an Economic or Moral Issue Mean Response to Perception of Financial Factor (Likert Scale: 1 ⴝ Strictly Moral to 4 ⴝ Strictly Non-Moral and 1 ⴝ Strictly Economic to 4 ⴝ Strictly Non-Economic)

Moral Perception Economic Perception Difference in Perceptionsf

Upper Accounting (n ⴝ 35)

Lower Accounting (n ⴝ 41)

Non-Business (n ⴝ 27)

3.40 1.54 1.86

3.20 1.56 1.64

3.11 1.37 1.74

Difference in Moral and Economic Perceptions Upper Accounting Students Lower Accounting Students Non-Business Students

t-statistic

p-valueg

9.85 7.07 7.02

⬍ .0001 ⬍ .0001 ⬍ .0001 (continued on next page)


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TABLE 1 (continued) Panel D: Weightings of Financial, Environmental, and Social Dimensions Factors Financial Environmental Social a b

c

d

e

f

g h

Percentage of Variance Explained by Factorsh 50 20 18

Total number of participants is 103. Main effect and interaction terms involving realism were not significant at the 10 percent significance level and thus are not displayed. p-values are reported for two-sided tests to determine if main effects and interaction terms make a significant contribution to the model. Since the interaction of Accounting Education and Relativism is significant, a table of means is used to illustrate the relationship of Relativism and Accounting Experience. p-value is for one-sided test since H1a is a directional hypothesis. The values .719 and .531 are italicized since they are the only cells that are significantly different at the .05 significance level. t-tests support H1a. Negative values indicate dimension is perceived as being more moral than economic, whereas positive values indicate dimension is perceived as being more economic than moral. Standardized values are .32, –.29, and .03, respectively, for Upper Accounting, Lower Accounting, and Non-Business. One-sided p-value to test that the mean difference is positive. t-tests support H1b. Variance explained by the Financial factor is approximately 2.5 times the variance explained by either of the other factors, which clearly supports H1c. No test statistic procedure is performed since the percentage explained by Financial is so much larger than that of the other factors.

savings implies laying off workers or reducing wages) and may utilize this information in their decision making. Consequently, we expect individuals with less accounting training to focus more on the societal impacts of a problem as compared to those students with more accounting training. This led us to our second set of hypotheses. We test that individuals with less accounting training will weight the social implications in our capital budgeting decision scenario (i.e., the labor cost savings associated with laying off 1,000 employees) more than individuals with greater exposure to accounting. The analysis of this hypothesis reveals (at the .10 significance level) an interaction effect is present between the levels of accounting training and relativism. Table 2, Panel A displays the observed significance levels. To facilitate an interpretation of the findings, average loading weights for the social dimension appear in Panel B for subject group and relativism. The category of low relativism and non-business students has the highest average loading (.481) on the social dimension. A t-test reveals that this category is significantly different from all the other average loadings except for the category of lower accounting students and low relativism. The conclusion to H2a is that perceptions of the social aspects of a capital budgeting decision scenario are a function of a student’s relativism and his/her background in accounting. The hypothesis is weakly supported in the sense that the non-business individuals who are low in relativism do perceive the social dimension significantly more than individuals with extensive accounting training. The age and gender variables were significant (at .015 and .065 levels, respectively). These covariates indicate that older individuals are more aware of social implications than younger individuals and that females show higher awareness of the social dimension than males. This latter finding is not surprising as females have traditionally been more concerned with caring issues than males (Gilligan 1982). Accounting and the Public Interest

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A one-way ANOVA was used to test H2b, evaluating if individuals with more accounting training will perceive the social factor more as an economic issue rather than a moral issue as compared with individuals with less accounting training. The difference scores, contrasting an individual’s moral perception from his/her economic perception for the social factor, were used as the dependent variable. The group averages for these difference scores are included in Panel C of Table 2. The ANOVA model was not significant. Thus, there is insufficient evidence to conclude a difference among the groups on viewing the social factor as an economic issue

TABLE 2 Social Aspects of Capital Budgeting Decision Scenarioa Related to H2a and H2b Panel A: Categorical Analysis of Variance Dependent Variable Subject’s loading weight on the social dimension of a multidimensional preference model. Model

F-statistic

p-value

1.70

.070

Full model predicting subject’s loading weight on social factor Source of Variationb Lower Accounting Students Non-Business Students Relativism Age Gender Lower Accounting * Relativism Non-Business * Relativism

t-statistic

p-valuec

1.17 1.68 .70 2.48 1.87 ⫺1.24 2.83

.247 .097 .485 .015 .065 .218 .006

Panel B: Mean Loading Weights on Social Dimension Means by Accounting Education and Levels of Relativismd Low Relativism High Relativism

Upper Accounting

Lower Accounting

Non-Business

.282 (n ⫽ 21) .271 (n ⫽ 14)

.380 (n ⫽ 20) .311 (n ⫽ 21)

.481 (n ⫽ 13) .322 (n ⫽ 14)

Hypothesized test that less accounting training is associated with an increase in subject’s perception of social aspects. Category Compared with Non-Business and Low Relativism Low Relativism and Upper Accounting Low Relativism and Lower Accounting High Relativism and Upper Accounting High Relativism and Lower Accounting High Relativism and Non-Business

t-statistic

p-valuee

2.06 1.01 2.03 1.74 1.63

.024 .161 .027 .041 .057 (continued on next page)


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TABLE 2 (continued) Panel C: Perception of Social Factor as an Economic or Moral Issue Mean Response to Perception of Social Factor (Likert Scale: 1 ⴝ Strictly Moral to 4 ⴝ Strictly Non-Moral and 1 ⴝ Strictly Economic to 4 ⴝ Strictly Non-Economic)





2.69 2.11 .58

2.54 1.93 .61

2.37 2.04 .33

Difference in Moral and Economic Perceptions Upper Accounting Students Lower Accounting Students Non-Business Students a b

c

d

e

f

g

t-statistic

p-valueg

2.49 2.73 1.06

.009 .005 .151

Total number of participants is 103. Main effect and interaction terms involving Idealism were not significant at the 10 percent significance level and thus are not displayed. Interactions with Age and Gender were also not significant at the 10 percent significance level and are not displayed. p-values are reported for two-sided tests to determine if main effects and interaction terms make a significant contribution to the model. Since the interaction of Non-Business Education and Relativism is significant, a table of means is used to illustrate the relationship of Relativism and Accounting Experience. p-value is for one-sided tests since H2a is a directional hypothesis. The value .481 is italicized since it is the only value that is significantly different from other categories. At the .05 significance level, t-tests related to Upper Accounting as well as High Relativism and Lower Accounting support H2a. Negative values indicate dimension is perceived as being more moral than economic, whereas positive values indicate dimension is perceived as being more economic than moral. Standardized values are .03, .06, and –.13, respectively, for Upper Accounting, Lower Accounting, and Non-Business. One-sided p-value to test that the mean difference is positive. Since the t-test for Non-Business Students is not significant and the t-tests for Upper and Lower Accounting Students are significant, the results provide support for H2b.

rather than a moral issue. Panel C, however, shows that the social factor is viewed more as an economic issue rather than a moral issue, for individuals with some accounting/business training. That is, the difference scores of .58 and .61 are significantly positive, whereas the non-business group has a difference score (.33) that is not significantly positive. This implies that the nonbusiness group viewed both an economic and a moral aspect for the social factor. Nevertheless, these are weak results and we must conclude that an individual’s view of the social factor (laying off labor) is more of an economic issue and not a moral issue. This does, however, illustrate an economic dominance in our culture (Dugger 1980). According to H3a, there is no difference between individuals with accounting training and individuals with less accounting training in the recognition of the environmental dimensions in our capital budgeting decision scenario. As Table 3, Panel A indicates, none of the variables are significant. In fact the entire model is not significant. We conclude that there is not sufficient evidence to suggest a difference between individuals with accounting training and individuals without accounting training in the recognition of the environmental dimensions of a capital budgeting decision scenario. The study supports H3a as stated. This conclusion is consistent with the belief that both individuals with and without accounting/business exposure recognize environmental factors in a similar manner, as previously suggested by McPhail and Gray (1996). Accounting and the Public Interest

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TABLE 3 Environmental Aspects of Capital Budgeting Decision Scenarioa Related to H3a and H3b Panel A: Categorical Analysis of Variance Dependent Variable Subject’s loading weight on the environmental dimension of a multidimensional preference model. Model

F-statistic

p-value

.70

.693

Full model predicting subject’s loading weight on environmental factor Source of Variationb Lower Accounting Students Non-Business Students Idealism Relativism Lower Accounting * Idealism Lower Accounting * Relativism Non-Business * Idealism Non-Business * Relativism

t-statistic

p-valuec

.04 1.16 .84 .99 .10 ⫺.54 ⫺.75 ⫺1.16

.971 .248 .401 .327 .923 .592 .455 .250

Panel B: Perception of Environmental Factor as an Economic or Moral Issue and Analysis of Variance Dependent Variable Difference in moral and economic perceptions of environmental factor Model One-way ANOVA using levels of accounting education

F-statistic

p-valued

3.83

.025

Mean Response to Perception of Environmental Factor (Likert Scale: 1 ⴝ Strictly Moral to 4 ⴝ Strictly Non-Moral and 1 ⴝ Strictly Economic to 4 ⴝ Strictly Non-Economic)





2.14 2.66 ⫺0.52

1.64 2.93 ⫺1.29

1.93 2.81 ⫺0.88

Hypothesized test that differences in moral and economic perceptions of environmental factor are not associated with levels of accounting education. Comparison of Levels of Accounting Education Upper Accounting and Lower Accounting Upper Accounting and Non-Business Lower Accounting and Non-Business

t-statistic

p-valuee

⫺2.98 1.10 ⫺1.33

.004 .274 .188 (continued on next page)


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TABLE 3 (continued) a b c

d

e

f

Total number of participants is 103. Main effect and interaction terms are not significant at the 10 percent significance level, thus supporting H3a. p-values are reported for two-sided tests to determine if main effects and interaction terms make a significant contribution to the model. ANOVA results show that a significant difference exists across levels of accounting education, thus revealing that H3b is not supported across all three levels. p-values are reported for two-tailed tests to determine levels of accounting education that differ. Upper Accounting and Lower Accounting levels significantly differ, which was not expected. Thus, H3b is only supported between Non-Business and either Upper or Lower Accounting levels of accounting education. Negative values indicate dimension is perceived as being more moral than economic, whereas positive values indicate dimension is perceived as being more economic than moral.

Hypothesis 3b states that there is no difference between individuals with accounting training and individuals with less accounting training in their perception of environmental factors as an economic and a moral issue. This hypothesis is different from H3a in that it does consider how the individual interpreted the environmental factor. A one-way ANOVA was used to test the hypothesis, using the difference scores contrasting an individual’s moral versus economic perceptions of the environmental factor. All groups perceived the environmental factor as a moral issue. However, the groups differed significantly in the magnitude of their perception of this factor. As Panel B of Table 3 shows, introductory accounting students had the strongest perception of the environmental factor as a moral issue (difference score ⫽ ⫺1.29), followed by the nonbusiness group (⫺0.88) and then by the upper-level accounting group (⫺.052). There was a significant difference between the two accounting groups while the non-business groups did not differ significantly from these two groups. We have no explanation for this. Hypothesis 3b is not supported since there is a difference between individuals with accounting training and individuals with less accounting training in their perception of environmental factors as an economic and a moral issue. Nevertheless, the students with various exposures to accounting/business training have the perception that the environmental factors are perceived as more of a moral issue than an economic issue, as expected.

SUMMARY AND CONCLUSIONS Our experiment supported our hypothesis that students viewed an accounting decision context (capital budgeting) as primarily an economic issue, not a moral issue. Additionally, we found weak support for the idea that accounting/business training exposure impacts decision-makers’ weighting of accounting- and nonaccounting-oriented information in our capital budgeting scenario. Upper-level accounting students weighted the financial factor more heavily than nonbusiness students. Non-business students put greater weight, than students with accounting exposure, to the social factor (laying off employees). There was no difference between students in the weighting of the environmental factor in our capital budgeting scenario. All groups viewed the financial factor as an economic issue. This was essentially the same finding for the labor cost savings (laying off employees), except non-business students perceived both the economic and moral issues of this factor (as indicated in Table 2, Panel C). Students tended to view the environmental factor as a moral issue. These findings are consistent with McPhail and Gray’s (1996) survey study. However, students subjugated the environmental factor (which they perceived as a moral issue) to the financial factor in the overall decision context. Even with the above differences, the Accounting and the Public Interest

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economic issue and viewpoint was the driving force in the student’s rankings of the capital budgeting alternatives. Students clearly recognized the ramifications of their decisions. In our debriefing questionnaire, we asked whether labor cost savings and reducing pollution (in two separate questions) were positive, negative, or neither positive or negative to society; we asked the same question in relationship to the company in our experimental case. Most students clearly viewed reduction of pollution as positive and labor cost savings as negative for society. On the other hand, students had mixed beliefs as to the benefits of reducing pollution for the company while they clearly perceived that labor cost savings was a positive benefit for the company. Our subjects’ perceptions show a definite economic bias with respect to weighting of the factors used in their decision evaluation. While they recognize moral content, this does not influence them when making a decision for an individual company. This is in clear agreement with Dugger’s (1980) view of corporate hegemony and the dominance in our culture of economic institutions, leaving all other institutions and viewpoints subservient to the economic. Are these findings and conclusions relevant to us as academicians? We believe they are. It is our responsibility to educate the students of the broader nature of our discipline, to include different viewpoints and show how various institutions tend to dominate. We cannot conclude as to the forces of the economic power any more elegantly than Dugger (1980, 906), where he states: If we are to change that structure, and surely we must, because it is inconsistent with democracy, with liberty, equality, and fraternity, then we must first change the institutions and social processes that create and support it. Simply calling for a revival or a renewal of the individual human spirit will not suffice. That spirit is a pattern of learned habits of thought, and through institutional analysis, we know where those habits of thought are learned. (emphasis added) In today’s environment where accountants have been implicated in the collapse of Enron and the fraud of WorldCom, we need to clearly communicate to students that the moral issues of accounting decisions contexts are equally important to the economic issues. This is part of our role in society. We know that accounting impacts our everyday life, and our duty is to have our students deliberate about the impact of accounting on society. Doing this may help establish education as an independent, autonomous institution in the United States.

REFERENCES Bebeau, M. J., J. R. Rest, and M. A. Yamoor. 1985. Measuring dental students’ ethical sensitivity. Journal of Dental Education 49 (4): 225–235. Becker, Gary. (1996) Accounting for Tastes. Cambridge, MA: Harvard University Press. Bentham, J. (1789) An Introduction to the Principles of Morals and Legislation. London: privately printed. Berenson, D. 2001. Enron unleashes more horrors. The Age (December 6): 1–3. Brown, R. 1987. Reason as rhetorical: On the relations among epistemology, discourse and practice. In Rhetoric of the Human Sciences, edited by J. Nelson, A. Megill, and D. McCloskey. Madison, WI: University of Wisconsin Press. Collinson, D., R. Gray, D. Owen, D. Sinclair, and L. Stevenson. 2000. Social and environmental accounting and student choice: An exploratory research note. Accounting Forum 24 (June): 170–186. Devine, C. (1999) Carl Thomas Devine: Essays in Accounting Theory, edited by H. Hendriksen. New York, NY: Garland Press. Douglas, M. (1996) How Institutions Think. Syracuse, NY: Syracuse University Press. Drobak, J., and J. Nye. 1997. The Frontiers of the New Institutional Economics. San Diego, CA: Academic Press. Accounting and the Public Interest

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