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
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
ethics.
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
recognition.
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
share.
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.
