Ethics, gen Y style.

Enron, WorldCom, Tyco Adelphia Communications, Global Crossing--the list of corporate scandals has grown. Whether these incidents have been the unfortunate outcome of Wall Street driving earnings to maximize stock value or signs of an ethical meltdown is difficult to gauge.

But one of the many outcomes of these events has been a growing interest within the accounting profession to learn more about the ethical beliefs of today's accounting students--and what these students are being taught about ethical behavior.

THEORIES OF ETHICAL BEHAVIOR

Ethics and morality are often used interchangeably, but they don't have the same meaning. Morality can be described as a value system consisting of standards that define good versus bad, right versus wrong. Ethics is the application of these moral principles through decisions and actions.

Denis Collins and Thomas O'Rourke described the following five theories of ethical behavior in their book Ethical Dilemmas in Accounting:

* Egoism: How does the action relate to me? If the action furthers my interests, then it is right. If it conflicts with my interests, then it is wrong.

* Social Group Relativism: How does the action relate to my social group? If the action conforms to the social group's norms, then it is right. If it is contrary, then it is wrong.

* Cultural Relativism: How does the action relate to the national culture, particularly its laws? If the action conforms to the national culture's norms, then it is right. If it is contrary to the national culture's norms, then it is wrong.

* Utilitarianism: How does the action relate to everyone who is affected? If the action is beneficial to the greatest number of people, then it is right. If it is detrimental to the greatest number, then it is wrong.

* Deontology: How does the action relate to my duty to treat others the way that I would want to be treated? If it treats every stakeholder truthfully and with respect and integrity, then it is right. If it does not, then it is wrong.

WHAT STUDENTS SAY

In April 2002, Zogby International polled college seniors nationwide; 97 percent of the 401 respondents said that their college studies were preparing them to behave ethically. However, 73 percent said their professors were "more likely to teach them that what is right and wrong depends on individual values and cultural diversity, and that there aren't clear and uniform standards of right and wrong by which everyone should be judged."

In the poll, commissioned by the National Association of Scholars, business and accounting majors represented 14 percent of the sample and less than 2 percent of the respondents were attending California universities.

MORE LOCALIZED STUDY

In a study conducted in February 2003 at California State University, Northridge, 212 accounting majors (132 juniors and 80 graduating seniors) responded to questions about ethics. The survey included the two Zogby questions and a question examining the five theories of ethical behavior described earlier.

In response to what their professors were more likely to communicate to them in courses that discussed ethical or moral issues, 56 percent selected "clear and uniform standards of right and wrong by which everyone should be judged." The other 44 percent responded that their professors had more often communicated to them "what is right and wrong depends on differences in individual values and cultural diversity."

The students also were asked about their own beliefs without regard to what they thought their professors had communicated to them. Some 60 percent of the graduating seniors and 55 percent of the juniors said that they believe there are clear and uniform standards of right and wrong. And 81 percent agreed that their college studies had prepared them to behave ethically in their future careers as accountants.

Responding to what best describes their actual ethical behavior--not what it should be--sing the five theories, 55 percent of the students selected the action that treats others in the way they would want to be treated--deontology. An additional 22 percent of the respondents selected the action that is beneficial to the greatest number of people affected by it--utilitarianism.

WHERE DO WE GO FROM HERE?

If these results reflect the general population of accounting majors, what can we conclude? While more than three-quarters of the students have ethical beliefs that place them in the higher levels of moral development, the ethical standards they apply raise some questions.

One could certainly argue that, over time, the moral compass changes within the same society. One also could argue that in different societies at the same point in time, the moral compass varies due to cultural differences. But within the same society at the same point in time, the moral compass that guides the ethics practiced in that society should be calibrated so as to apply clear and uniform standards of right and wrong, not differences in individual values and cultures.

The Zogby poll and the Cal State Northridge study provide evidence that this is not what all students are being taught. As a result, too many of these soon-to-be accounting professionals are not measuring their ethics by this standard.

Society has higher ethical expectations of professionals and, as a result, the law holds them to a higher standard of due care. It is true that ethical standards cannot be codified to cover every situation. However, if we desire to strive for the higher levels of ethical behavior, there needs to be a more effective understanding and application of clear and uniform standards of right and wrong.

Survey Says ...

1. In your college courses that discussed ethical or moral issues (including nonbusiness courses), which one of the following statements was more likely to be communicated to you by your professors?

44% What is right and wrong depends on differences in individual values and cultural diversity.

56% There are clear and uniform standards of right and wrong by which everyone should be judged.

2. Based on your own personal viewpoint (not what you think your professors communicated to you), which of the following statements do you actually believe?

43% What is right and wrong depends on differences in individual values and cultural diversity.

57% There are clear and uniform standards of right and wrong by which everyone should be judged.

3. Which of the following descriptions best describes your personal ethical behavior (not what it should be, but what it actually is)?

6% If the action furthers my interests, then it is right.

6% If the action conforms to my social group's norms (my family and friends), then it is right.

11% If the action conforms to my national culture's norms (my country and its laws), then it is right.

22% If the action is beneficial to the greatest number of people affected by it, then it is right.

55% If the action treats others in the way I would want to be treated (truth, respect and integrity), then it is right.

4. Your college studies (including nonbusiness courses) have prepared you to behave ethically in your future career as an accountant.

38% Strongly agree

43% Somewhat agree

9% Somewhat disagree

5% Strongly disagree

5% Don't agree or disagree

Gary R. Stout, DBA, CPA, and Earl J. Weiss, JD, MS, CPA, are professors of accounting and information systems at Cal State Northridge. You can reach them at [e-mail] and [e-mail].