Topic 2-5

The impact of accounting information on ethical behavior has been extensively documented. Many ethical issues are imbedded within and around MCSs. Some critics use ethics arguments to question the basic foundations MCSs and capitalistic economies that empower manager to make economic decisions. However, Macintosh (1994) argues that “accounting and control systems can and do play a critical role in defining the moral constitution of an organization.”

Management control systems are a powerful determinant of an individual's behavior (Macintosh 1994; Dirsmith et al. 1997; Pant and Yuthas 1998). These systems are established to motivate employees to implement the strategy of the firm by aligning (使结盟) corporate and individual rewards. However, Horngren (1998) and Merchant (1998) note that many results are often counterproductive (适得其反\事与愿违) (e.g., slack, spend-it-or-lose-it). As organizations become flatter and knowledge is pushed further down into the organization, individuals will become even more responsible for decisions that significantly impact current profitability and future strategy (Johnson 1992; Lancaster 1998). Several of these will have ethical implications.

The first issue regards to creating budgetary slack. Creating budget slack can be interpreted to be in contravention (矛盾) of several of the obligations listed under integrity and objectivity in the IMA’s Standards of Ethical conduct. Also, utilitarianism framework proposes that slack creation raises ethical issue, as it will benefit employees personally from their act. Further, slack creation is often costly to some stakeholders. However, many managers argue that creation of slack is ethical. They claim that creating slack is a rational response within a results control system. For them, budget slack is necessary to address the imbalance of power that is inherent in a hierarchical