1、Behavioral Decision Research and Management Accounting: The Case of Conflicts of Interest,Max Bazerman Harvard Business School Based on my collaborations with Mahzarin Banaji, Dolly Chugh, George Loewenstein, Don Moore and Lloyd Tanlu,1,Max and Accounting,University of Pennsylvania (Wharton), B.S.E.

2、 in Accounting, 1976 1987-1997: Lots of experience teaching employees of the Big X accounting firms Our 1997 paper Bazerman, Morgan, and Loewenstein no more work with the Big X accounting firms SEC call in 2000 The changes made were weak focusing on disclosure Bazerman, Loewenstein and Moore 2002 HB

3、R paper A few talks to accounting and psychology departments on the prior work and some initial empirical data,2,Max and Accounting,University of Pennsylvania (Wharton), B.S.E. in Accounting, 1976 1987-1997: Lots of experience teaching employees of the Big X accounting firms Our 1997 paper Bazerman,

4、 Morgan, and Loewenstein no more work with the Big X accounting firms SEC call in 2000 The changes made were weak focusing on disclosure Bazerman, Loewenstein and Moore 2002 HBR paper A few talks to accounting and psychology departments on the prior work and some initial empirical data,4,Core Argume

5、nt on Auditor Independence,Psychologists have known for a long time that individuals with a vested self-interest, even honest ones, are incapable of unbiased (independent) judgment. a) Auditors have made tremendous profit from selling other services to their audit clients. b) Auditors want to be reh

6、ired. c) The personnel on the audit often take jobs with the client firm. As long as these other motives are present, auditors are not independent.,5,Management Accounting - Wikipedia,Management accounting or managerial accounting is concerned with the provisions and use of accounting information to

7、 managers within organizations, to provide them with the basis to make informed business decisions that will allow them to be better equipped in their management and control functions.,6,Bounded Decision Making,Bounded Rationality March and Simon Bounded Willpower - Thaler Bounded Self-Interest Thal

8、er Bounded Awareness Chugh and Bazerman,7,8,Bounded Decision Making,Bounded Rationality March and Simon Bounded Willpower - Thaler Bounded Self-Interest Thaler Bounded Awareness Chugh and Bazerman Bounded Ethicality Banaji, Bazerman, and Chugh; Banaji and Bhaskar,9,Bounded Decision Making,Bounded Ra

9、tionality,Bounded Willpower Bounded Self-Interest,Bounded Awareness Bounded Ethicality,10,Bounded Ethicality (Chugh, Bazerman, and Banaji, 2005),Bounded ethicality refers to the systematic and predictable ways in which humans act unethically beyond their own awareness.,11,Boundedness in your ethical

10、ity Boundedness in noticing the ethicality of others,Bounded Ethicality,12,A: Boundedness in Your Ethicality(Overviews: Banaji, Bazerman, and Chugh, 2003: Chugh, Bazerman, and Banaji, 2005),Implicit Attitudes (lots of work by Banaji, Greenwald et al.) In-group/Out-group Biases (Messick op-ed) Discou

11、nting the Future (Wade-Benzoni, 1999, 2002; Bazerman and Watkins, 2008) Overclaiming Credit (Ross and Sicoly, 1979; Caruso, Epley, and Bazerman, 2006; Epley, Caruso, and Bazerman, 2006) Moral Disengagement: (Bandura, 1986, 1990; Paharia and Deshpande, 2009; Shu, Gino, and Bazerman, 2010) Greater Une

12、thical Behavior under a Loss Frame than under a Gain Frame (Kern and Chugh, 2009),13,B: Boundedness in Noticing the Ethicality of Others,14,B: Boundedness in Noticing the Ethicality of Others,Conflicts of Interest (Chugh and Bazerman, 2007; Moore, Tanlu, and Bazerman, 2010) Outcome bias in judging e

13、thics (Baron and Hershey, 1988; Gino, Moore, and Bazerman, 2009) Slippery slope (Gino and Bazerman, 2009) Indirect blindness in judging unethical behavior (Paharia, Kassam, Greene, and Bazerman, 2009; Coffman, in preparation),15,B: Boundedness in Noticing the Ethicality of Others,Conflicts of Intere

14、st (Chugh and Bazerman, 2007; Moore, Tanlu, and Bazerman, 2010) Outcome bias in judging ethics (Baron and Hershey, 1988; Gino, Moore, and Bazerman, 2009) Slippery slope (Gino and Bazerman, 2009) Indirect blindness in judging unethical behavior (Paharia, Kassam, Greene, and Bazerman, 2009; Coffman, i

15、n preparation),16,Surgeons versus Non-Surgeons: Should We Operate?,Lots,0,Lots,0,Surgeons,Non-Surgeon Physicians,Dont Operate,Operate,17,The Case (Moore, Tanlu, and Bazerman, 2010),E-Settle is an Internet-based dispute resolution firm that is interested in being acquired. Crilley is an established p

16、layer in the field of alternative dispute resolution services. Crilley is interested in acquiring E-Settle. Participants are given a variety of information regarding E-Settles revenues, earnings, market share, and competition, as well as information about prices for other pre-IPO Internet-based serv

17、ice firms in related industries. How much is E-Settle worth?,18,The Case,COI,19,Experimental Design (Expt. 1),2 X 2 X 3 between-subjects design: Played role of principal vs. auditor Represented buyer vs. seller Auditors pay:,COI2,20,Experimental Procedure (Expt. 1),COI2,21,Principals Public Valuatio

18、ns,COI2,22,Auditors Recommendations,COI2,Auditors Private Valuations,COI2,COI2,24,Use of Experiments,Used by fields where causal evidence is central Primary method of behavioral decision researchers Recent move toward field experiments Early critiques: incentives, sophomores, context Generalizabilit

19、y has been outstanding When you question the generalizability of experiments, I believe that it should be based on the interaction between what the scholar is studying and a difference that you assess between the lab and the real world context that is the focus on the generalization,25,Conflict of I

20、nterest,How could Arthur Andersen vouch for the financial health of Enron, concealing billions of dollars in debt from its shareholders? Enron was not unique: Adelphia, Cendant, Global Crossing, Haliburton, Tyco. Xerox, Worldcom, and Lehman (?),26,Chief Justice Warren Burger wrote on behalf of a una

21、nimous U.S. Supreme Court (1984):,By certifying the public reports that collectively depict a corporations financial status, the independent auditor assumes a public responsibility transcending any employment relationship with the client. The independent public accountant performing this special fun

22、ction owes ultimate allegiance to the corporations creditors and stockholders, as well as to the investing public. This “public watchdog” function demands that the accountant maintain total independence from the client at all times and requires complete fidelity to the public trust.,27,Which makes m

23、ore sense?,In order to maintain auditor independence, auditors are prohibited from establishing durable long-term cooperative partnerships with their clients, from providing non-audit services to their clients, and from taking jobs with their clients. Start by creating a variety of incentives that lead auditors to want to please their clients, and then try to identify a complex set of legislative and professional incentives to counteract the corrupting influences creating by the desire to plea