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The well-publicized accounting scandals of recent

years have drawn the attention of academics and the

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The well-publicized accounting scandals of recent years have drawn the attention of academics and the general public to the seeming lack of personal ethical
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general public to the seeming lack of personal ethical

responsibility of executives in a number of public

companies including some of the largest. One result

of these scandals was the passage of the Sarbanes-

Oxley legislation in the United States. Chief Exec-

utive Officers (CEO) and Chief Financial Officers

(CFO) are required to certify the veracity of the

financial statements, clearly placing ethical respon-

sibility on the top management. Corporate officials

should be concerned about pursuing financial

reporting, that is, in the interest of all affected parties;

and not to garner pecuniary ‘‘happiness’’ to them-

selves alone.

The recent history of corporate accounting fraud

could serve as a narrative of the application of util-

itarian ethics to ethical challenges faced by business

executives and, at the same time, could also serve as a

series of examples for the inadmissibility of utilitarian

ethics. One of the reasons why utilitarian ethics, as

an almost exclusive basis for business conduct, has

endured is because harm is usually limited to loss of

material property. In the world of business, stake-

holders face a loss of wealth or fortune, but normally

not loss of life or health. Unlike in medicine or war

where unethical acts can, and often do result in loss

of life, the victims of unethical business practices

may lose employment or capital, but seldom is

unethical business conduct life-threatening. As we

will elaborate on, ethics devoid of deontological

ingredients, that is, ethics that focuses primarily on

the consequences and not on the rightness or

wrongness of the act itself, is, in the end, no true

ethics at all. When the corporate leaders operate

their businesses with a primary interest on the con-

sequences to their personal wealth and reputation,

and devoid of concern for their duty to employees,

investors, the environment and other parties directly

or indirectly affected, capitalism has suffered an

ethical defeat. Self-interest in business should be

tempered by (moral) duty and the rights of the

business executive and his self-interest has to end

where the rights of other stakeholders begin. This is

what our essay attempts to highlight with respect to

the business world and, in particular, to accounting


Ethical decision-making – theory

and practice

It lies in the nature of consequentialism that striving

for a desired result at all cost – in other words, setting

a most wanted result as the absolute goal – implies

the use of or justification of the use of any and all

means available in order to achieve the goal. When

this goal is about one’s own benefit, the entitlements

of others might be ignored and left out of the

equation, or in the least might not be given sufficient


An ethical situation is a situation between human

agents in the sense of the action of one person or

group having a bearing on another person or group

of persons.7 Breaking a situation of ethical decision-

making into its basic dimensions, we arrive at the

triad of incentive – means – result. Both deontological

and teleological (consequentialist) ethics agree that

any action is triggered by a desired result, making

clear that the reason for acting stems from the outer,

empirical world.8 However, deontological and tel-

eological ethics are at variance regarding the reach-

ing of this result. Teleological ethics argues that

the right thing to do is what produces the best

Business Ethics – Deontologically Revisited 19



consequences. Radical consequentialism, as the

philosophical antithesis to deontological ethics,

would justify the usage of all means necessary, for

one must maximize the good and minimize the bad.

In contrast, under deontology, the ends of any

supposed action can never justify the usage of any or

all means, for one must act out of respect for the

(moral) law. The deontological approach, therefore,

is the way to balance the teleological dualism of

means and ends by adding the regulative dimension

of the concept of moral duty, which manifests itself

in self-imposed constraints regardless of potential

unwanted consequences for the acting entity.

In the business world, executive stock ownership

and contingent compensation based on stock options

have become popular measures to induce business

executives to focus on the desired results. Contin-

gent compensation has increased in popularity, such

that by the late 1990s over 85% of CEOs received

stock option compensation (Chingos and Engel,

1998). Yet, stock option compensation has not

necessary aligned interests as expected (Kosnick and

Bettenhausen, 1992). Stock ownership and stock

options in particular, may lead to extremes in self-

interested behavior. Executives who are privy to

internal information regarding corporate perfor-

mance that is not available to the investing public or

the public in general can be tempted to use that

private information to their personal advantage.

Breaching ethical norms can be the result of having a

large number of highly valued stock options or

shares of stock and the financial gain that can be

acquired from exercising those options or selling the


We use the case Schick Technologies, Inc. to

illustrate how the deontological approach provides

an appropriate synthesis of the parameters of the

ethical decision triangle.

Schick went public in 1997. The initial public

offering (IPO) had been considered such a

resounding success that the company was awarded

the Small Business IPO of the Year Award in May

1998 by the New York City Partnership and the

Chamber of Commerce.9 In June, the company

announced that revenues for the fiscal year (FY)

ending 31 March 1998 were 129% greater than in

the previous FY.10 The company was experiencing

rapid growth and revenue expectations were rapidly

increasing as well. But all was not well on the home

front. The CEO realized that the June 1998 quar-

terly earning targets of the company and the analysts’

forecasts would not be met.

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