The Universe of Ethics: The Buck Stops with You!

Copyright 2015. Association of Government Accountants. AGA® and the Journal of Government Financial Management® are registered trademarks. Republished with permission. All rights reserved.

Suzanne M. Ogilby, Ph.D., CGFM, is a professor of accounting at California State University, Sacramento.

Ramona Farrell, CFE, is a principal with EisnerAmper LLP, a national audit, tax and advisory firm with a specialization in forensic accounting and forensic technology investigations.

High-profile cases of ethical failures cross the boundaries of all sectors of our economy, cause devastating financial results and erode public trust. The Association of Certified Fraud Examiners (ACFE) annually reports survey findings on ethical failures and dilemmas. The ACFE’s 2014 Report to the Nation on Occupational Fraud and Abuse found that the number of fraud cases in the governmental and public administration sector reached 10.3% of the total — second only to the Banking and Financial Services Industry.1 In support of the ACFE findings, Johnson, Hartong and Kidd presented multiple examples of government office employee fraud and essential internal controls as preventative measures.2 Notwithstanding the importance of fraud prevention in the workplace through internal controls, the core solution to reinstating public trust is ethical decision making on the part of organizations, executives, management, or the individual employee.

What is the universe of ethics? As we move through life, making ethically responsible decisions is perhaps the most serious challenge we face.3 Understanding the universe of ethics includes the overlap and integration of laws and regulations, educational efforts, professional codes, organizational culture, and individual development and reasoning. This article posits that these facets of the universe of ethics must be integrated into the ethical decision-making process.

Laws, Rules and Compliance

The creation of laws and regulations that impose specific courses of action on other governmental entities, businesses, professions, educational institutions and individuals is one method to affect decision-making. For example, in direct response to the Enron and WorldCom scandals, the U.S. Congress passed the Sarbanes-Oxley Act (SOX) in 2002. SOX was established to help increase the transparency, integrity and accountability of public companies.4 Similarly, each state addresses conflicts of interest through constitution, statute or rule to direct the actions of their respective state legislators.5 Many state and/or local governments also have conflicts-of-interest regulations for their municipal employees.

Specific regulations requiring or prohibiting certain actions do not ensure certainty in the application of those regulations. When ambiguity is perceived, leadership must make a judgment weighing the effects on the organization’s mission. Similarly, many employees at all levels of the organization may not perceive the existence of conflicts of interest while conducting business. “Conflicts of interest arise when an employee benefits at the expense of the organization or cannot exercise independent judgment because of an investment, activity, or association.”6 Professional bodies and organizations have created professional codes of conduct and/or ethics departments that monitor compliance with standards of conduct and provide ethics training to improve the awareness of the existence of conflicts of interest in employees’ daily activities.7

Professional Codes of Conduct

Many professional associations have an established code of professional conduct. For example, the American Institute of Certified Public Accountants (AICPA), the International Federation of Accountants and AGA each have codes that include similar principles: public interest, integrity, objectivity and independence, due care, confidentiality, professional behavior and technical standards.8,9,10

The existence of codes of conduct does not ensure ethical decisions will be made. Professional bodies have been called upon to enhance their education role to address the range of ethical issues encountered by accountants in business and government organizations.11 State legislation regarding ethics has also affected specific professions and the related education requirements. State boards of accountancy have continuing education ethics requirements and some have added pre-qualification ethics education requirements.

Education — Can Ethics Be Taught?

Ethics education extends beyond a business school and accounting curriculum, and/or professional certification and licensure requirements. In order to affect individual ethical decision making, education must begin in elementary schools to nurture a “specific set of core values — character traits their community aspires to and chooses to focus upon”12 and must be repeated in all levels of education and in the workplace. For example, college students across the country may join a network of students committed to ethical leadership called the Student Center for the Public Trust with the following mission: “to promote ethical thinking and the developing character and conscience of students.”13

From an academic perspective, business ethics studies those standards, values and principles that operate within business and is a “multidisciplinary field, incorporating information from a variety of disciplines such as philosophy, management, economics, law, marketing and public policy.”14 Business ethics “is more a matter of ethical reasoning and thinking than ethical behavior”15 or the decision. Ethics education should engage students, our future workforce, in the active process of thinking and questioning.

As previously described, efforts have been made to institutionalize ethics as part of the higher education requirement through professional licensure requirements and state legislation. These efforts are necessary but insufficient to ensure ethics education continues into the college years. In 2003, the Ethics Resource Center (now the Ethics & Compliance Initiative, or ECI) fellows wrote a compelling argument urging the accrediting body of business schools, AACSB International, to “have the courage of its conviction and require not only the inclusion of business ethics in separate courses, but also evidence that schools of business are making a concerted effort to develop the ethical competency in core areas of the business curriculum.”16 This plea was made during a time of major revisions in business school accreditation standards. Studies reveal the majority of business schools are not rising to the challenge to prepare their graduates with an understanding of legal and ethical societal responsibilities.17 Neither the 2003 nor 2013 revised accreditation standards mandated a stand-alone ethics course.18

Organizational Culture and Ethical Climate

Codes of ethics are among the most common ethics tools. Companies on the New York Stock Exchange and the NASDAQ are required to have them, and under the Sarbanes-Oxley Act, public firms must disclose whether they have such codes for their senior executives.19 “The way we conceptualize corporations and their ability to act within society is an important question for business ethics,”20 and the lessons learned are transferable across all organizations including the public sector. In situations where the law provides an incomplete answer for ethical decision making, the organizational culture is likely to be the determining factor in the decision. Steven G. Churchwell, Esq., suggests organizations need their top people to get on board with ethics as an integral part of the organizational culture. Organizations need to get back to the basics of sound ethical decision making, individual training, and active communication about ethical dilemmas and ethical decision-making in the workplace.21

Aerojet Rocketdyne’s Ethics & Compliance Officer, Michel Miller, believes compliance rises and falls, succeeds or fails based on everyone taking ownership.22 Miller explained that at Aerojet Rocketdyne the company’s commitment to ethics is transmitted regularly through a variety of initiatives: web-based vignettes about fictional ethical scenarios; monthly employee newsletter articles; talking points for leaders to discuss ethical dilemmas during staff meetings; annual Ethics Week celebrations; and fostering an environment in which anyone can raise a concern when something doesn’t seem right.

As demonstrated by Aerojet Rocketdyne, organizations must find ways to encourage and develop their cultures to embrace the practice of ethical behavior, and to allow ethically responsible decisions by executives, management teams and employees. ECI reports that the “strength of the enterprise-wide ethics culture is the single factor with the greatest impact on misconduct”.23 These survey results support the concept that distrust between the employee and the employer is related to unethical conduct.24 The good news is that the ECI reported in its 2013 National Business Ethics Survey® of private sector employees that the percent of companies with “strong” or “strongleaning” ethics cultures is 66% and 81% of those companies that provide ethics training.25 The bad news is that the ECI conducted a separate 2007 National Government Ethics Survey® (NGES®) of 774 government employees and reported the decline of ethical culture in the government workplace and the prediction that employee misconduct will continue to increase unless well-implemented ethics and compliance programs and strong ethical cultures are introduced. The NGES® also found that when both the programs and ethical cultures are present, misconduct falls by 60% and reporting increases by 40%.26

Like good teachers, good business leaders “seek to empower their employees to make their own decisions.”27 In doing so, it is necessary to simultaneously communicate that their ethical culture is not an “anything goes” and that all values are not equal; however, empowering employees to make their own decisions assumes employees have been given the tools and training necessary to make sound ethical decisions.

Personal Responsibility

According to Hartman and DesJardins, we “often select the alternative that satisfies minimum decision criteria, otherwise known as ‘satisficing.’”28 Research suggests that self-interest poses the greatest threat to ethical performance.29 “Our belief in our own inherent goodness may blind us to potential conflicts of interest that can undermine our objectivity and tempt us to make selfish choices.’’30 ECI revisited the 2011 National Business Ethics Survey® (NBES®) data, without government respondents, to prepare a supplemental report that focused on generational differences.31 The NBES® categorized the employees surveyed as millennials (birth years 1981 to present), generation Xs (birth years 1965 to 1980), baby boomers (birth years 1946 to 1964) and traditionalists (birth years 1925 to 1945). The study highlighted the following results:

  • 22% of the traditionalists, 9% of the baby boomers, 13% ofthe generation X and 15% of the millennials felt pressure to commit unethical acts in the workplace (historic high);
  • 36% of the traditionalists, 44% of the baby boomers, 45% of the generation X and 49% of the millennials observed at least one specific type of misconduct (historic low);
  • 39% of the traditionalists, 64% of the baby boomers, 69% of the generations X and 67% of the millennials reported misconduct; and
  • 16% of the traditionalists, 18% of the baby boomers, 21% of the generations X and 29% of the millennials perceived retaliation for reporting.32

In general, it appears that the younger the worker, the more likely they are to feel pressure, observe misconduct and experience retaliation for having reported misconduct.33 According to the study, generations trust different resources, which influences the nature of the ethics and compliance programs put in place by an organization. The study indicates that the perceived degree of strength or weakness of an organization’s ethical culture and programs affects the millennials most dramatically. For example, the millennials would be influenced by programs that offer exposure to ethics training through social interaction, guidance and support. “Overall, it appears that a strong ethics and compliance program drives all generations — particularly millennials — to be more proactive in their conduct. Additionally, a weak ethics and compliance program has a chilling effect on the reporting for the older cohorts.”34 There is not a “one-size-fits-all” ethics program for addressing ethical dilemmas.

The Buck Stops with You

Understanding the universe of ethics is critical to the success and long-term sustainability of any organization. The organizational commitment to fostering an ethical culture and to providing the varying resources for different generational employees is not enough. “Ethics ultimately is a matter of personal responsibility. Consistently making ethically correct decisions is not easy. It requires commitment and practice, which requires first awareness and then a motivation to act ethically.”35 Ultimately, each person is responsible for his or her ethical choices.

1. Available at:
2. Johnson, G. F., CPA; Hartong, R.; and Kidd, B. (Winter 2014). “Fraudtown, USA: Three essential internal controls for public sector entities”, Journal of Government Financial Management, Vol. 63, No. 4,pp. 46-51.
3. Hartman, L. P. and DesJardins, J. (2011), Business ethics: Decision making for personal integrity and social responsibility (Second Edition), McGraw-Hill Irwin.
4. Stanwick, P. and Stanwick, S. (2014), Understanding business ethics (Second Edition). Sage.
5. National Conference on State Legislatures. Available at:
6. Hopen, D. (2002) Guiding corporate behavior: A leadership obligation, not a choice. Journal for Quality & Participation, 25, pp. 15-19.
7. DesJardins, J. (2014). An introduction to business ethics (Fifth Edition), McGraw Hill.
8. American Institute of Certified Public Accountants. Available at:
9. International Federation of Accountants. Available at:
10. Association of Government Accountants. Available at:
11. Jackling, B., Cooper, B. J., Leung, P., and Dellaportas, S. (2007) Professional accounting bodies’ perceptions of ethical issues, causes of ethical failure and
ethics education. Managerial Auditing Journal, Vol. 22 No. 9. Emerald Group Publishing Limited.
12. Harnad, P. and Sutliff, K (2003), “What the School Can Teach Us About Nurturing Values”, Ethikos, Vol. 16, No. 4.
13. ECI. Available at: The Student CPT is a program within the NASBA Center for the Public Trust (CPT).
14. See Endnote 7. p.10.
15. Ibid, p.11.
16. “Proposed Standards and Business School Responsibilities”: ©2003, Ethics Resource Center. Used with permission of the Ethics Resource Center,
17. Swanson, D. L., (2005, August) Business ethics education at bay: Addressing a crisis of legitimacy. Issues In Accounting Education, Vol. 20, No. 3,
pp. 247-253.
18. Available at:
19. Paine, L., Deshpande, R. Margolis, J. D., & Bettcher, K. E. (2005, December). Up to code: Does your company meet world-class standards? Harvard Business
Review, pp. 122-133.
20. Boylan, E. (ed.). (2014). Business ethics. (Second Edition). John Wiley & Sons, Inc., p. 52.
21. Interview July 16, 2015.
22. Interview July 30, 2015.
23. National Business Ethics Survey® (2007). ©2008, Ethics Resource Center. Used with permission of the Ethics Resource Center,
24. See Endnote 4.
25. National Business Ethics Survey (2013). ©2014, Ethics Resource Center. Used with permission of the Ethics Resource Center, Arlington, VA.
26. National Government Ethics Survey: An Inside View of Public Sector Ethics® ©2008, Ethics Resource Center. Used with permission of the Ethics Resource Center,
27. See Endnote 7. p.12.
28. See Endnote 3. p. 60.
29. Johnson, C. E. (2015), Meeting the ethical challenges of leadership: Casting light or shadow (Fifth Edition). Sage. p.322.
30. Ibid.
31. Generational differences in Workplace Ethics: A Supplemental Report of the 2011 National Business Ethics Survey® ©2013, Ethics Resource Center. Used with permission of the Ethics Resource Center,
32. Ibid.
33. Ibid.
34. Ibid.
35. AGA Code of Ethics, Available at:

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