Hijacking the Moral Imperative: How Financial Incentives Can Discourage Whistleblower Reporting

2017 ◽  
Vol 36 (3) ◽  
pp. 1-14 ◽  
Author(s):  
Leslie Berger ◽  
Stephen Perreault ◽  
James Wainberg
Keyword(s):  
House Of Representatives ◽  
Financial Incentives ◽  
Moral Motivation ◽  
Psychological Theory ◽  
Data Availability ◽  
Audit Committees ◽  
Policy Makers ◽  
Incentive Programs ◽  
The Right ◽  
Do The Right Thing

SUMMARY Recently, policy makers have focused significant attention on the use of financial rewards as a means of encouraging whistleblower reporting, e.g., the Dodd-Frank Act (U.S. House of Representatives 2010). While such incentives are meant to increase the likelihood that fraud will be reported in a timely manner, the psychological theory of motivational crowding calls this proposition into question. Motivational crowding warns that the application of financial rewards (an extrinsic motivator) can unintentionally hijack a person's moral motivation to “do the right thing” (an intrinsic motivator). Applying this theory, we conducted an experiment and found that, in certain contexts, incentive programs can inhibit whistleblower reporting to a greater extent than had no incentives been offered at all. We discuss the implications of our results for auditors, audit committees, regulators, and others charged with corporate governance. Data Availability: Available from the authors upon request.

scholarly journals Forgoing earned incentives to signal pure motives

2020 ◽  
Vol 117 (29) ◽  
pp. 16891-16897
Author(s):  
Erika L. Kirgios ◽  
Edward H. Chang ◽  
Emma E. Levine ◽  
Katherine L. Milkman ◽  
Judd B. Kessler
Keyword(s):  
Behavioral Change ◽  
Financial Incentives ◽  
Large Field ◽  
Policy Makers ◽  
Safe Driving ◽  
Self Image ◽  
Past Action ◽  
Right Reason ◽  
The Right ◽  
Pure Motives

Policy makers, employers, and insurers often provide financial incentives to encourage citizens, employees, and customers to take actions that are good for them or for society (e.g., energy conservation, healthy living, safe driving). Although financial incentives are often effective at inducing good behavior, they’ve been shown to have self-image costs: Those who receive incentives view their actions less positively due to the perceived incompatibility between financial incentives and intrinsic motives. We test an intervention that allows organizations and individuals to resolve this tension: We use financial rewards to kick-start good behavior and then offer individuals the opportunity to give up some or all of their earned financial rewards in order to boost their self-image. Two preregistered studies—an incentivized online experiment (n= 763) on prosocial behavior and a large field experiment (n= 17,968) on exercise—provide evidence that emphasizing the intrinsic rewards of a past action leads individuals to forgo or donate earned financial rewards. Our intervention allows individuals to retroactively signal that they acted for the right reason, which we call “motivation laundering.” We discuss the implications of motivation laundering for the design of incentive systems and behavioral change.

Moral Obligation and Moral Motivation

1995 ◽  
Vol 21 ◽  
pp. 187-219 ◽  
Author(s):  
David Copp
Keyword(s):  
Moral Obligation ◽  
Moral Motivation ◽  
Moral Judgments ◽  
Moral Truth ◽  
Arbitrary System ◽  
Moral Obligations ◽  
Internal Connection ◽  
The Right ◽  
Do The Right Thing

'Internalism’ in ethics is a cluster of views according to which there is an ‘internal’ connection between moral obligations and either motivations or reasons to act morally; ‘externalism’ says that such connections are contingent. So described, the dispute between internalism and externalism may seem a technical debate of minor interest. However, the issues that motivate it include deep problems about moral truth, realism, normativity, and objectivity. Indeed, I think that some philosophers view externalism as undermining the ‘dignity’ of morality. They might say that if morality needs an ‘external sanction’ - if the belief that one has an obligation is not sufficient motive or reason to do the right thing- then morality is debased in status. Even an arbitrary system of etiquette could attract an external sanction under appropriate conditions.Although I believe that the more interesting internalist theses are false, there are important truths that internalism is attempting to capture. The most important of these is the fact that moral judgments are intrinsically ‘normative’ or ‘choice-guiding,’ that they are, very roughly, relevant to action or choice because of their content.

Board Risk Committees and Audit Pricing

2015 ◽  
Vol 34 (4) ◽  
pp. 59-84 ◽  
Author(s):  
Christopher S. Hines ◽  
Adi Masli ◽  
Elaine G. Mauldin ◽  
Gary F. Peters
Keyword(s):  
House Of Representatives ◽  
Audit Committee ◽  
Global Financial Crisis ◽  
Audit Fees ◽  
Data Availability ◽  
Audit Committees ◽  
Audit Pricing ◽  
Wall Street ◽  
The Global Financial Crisis ◽  
Risk Oversight

SUMMARY Conditions leading up to and surrounding the global financial crisis prompted an increasing number of firms to create board-level risk oversight committees (RCs). The Dodd-Frank Wall Street Reform and Consumer Protection Act (U.S. House of Representatives 2010) even legislates RCs for certain large banks. Distinct from audit committees, RCs present a unique setting to extend our understanding of the relation between emerging governance mechanisms and auditing. Using a sample of 3,980 U.S.-listed banks from 2003–2011, we find that on average, the presence of RCs is associated with higher audit fees. Our results are robust to multiple specifications, including self-selection and propensity score matched samples. For a reduced sample of 458 firms that employ an RC we also examine RC characteristics. We find RC independence and audit committee overlaps are associated with lower audit fees and RC size, relative to board size, is associated with higher audit fees. Supplemental analysis provides discussion of the potential audit environment implications of mandatory versus voluntary risk management controls. Data Availability: The data used are publicly available from the sources cited in the text.

: Do the Right Thing . Spike Lee.

1989 ◽  
Vol 43 (2) ◽  
pp. 35-40 ◽  
Author(s):  
Thomas Doherty
Keyword(s):  
Spike Lee ◽  
The Right ◽  
Do The Right Thing

Do the Right Thing

CFA Magazine ◽  
2010 ◽  
Vol 21 (5) ◽  
pp. 13-14
Author(s):  
Crystal Detamore
Keyword(s):  
The Right ◽  
Do The Right Thing

It is better an approximate answer to the right question than the exact answer to the wrong question : the case of the psychometric analysis of the ASQ:SE

2020 ◽  
Author(s):  
Luis Anunciacao ◽  
janet squires ◽  
J. Landeira-Fernandez
Keyword(s):  
Internal Structure ◽  
Statistical Methods ◽  
Principal Component ◽  
Psychological Theory ◽  
Published Data ◽  
Multivariate Statistical ◽  
Exact Answer ◽  
Wide Range ◽  
Ages And Stages Questionnaire ◽  
The Right

One of the main activities in psychometrics is to analyze the internal structure of a test. Multivariate statistical methods, including Exploratory Factor analysis (EFA) and Principal Component Analysis (PCA) are frequently used to do this, but the growth of Network Analysis (NA) places this method as a promising candidate. The results obtained by these methods are of valuable interest, as they not only produce evidence to explore if the test is measuring its intended construct, but also to deal with the substantive theory that motivated the test development. However, these different statistical methods come up with different answers, providing the basis for different analytical and theoretical strategies when one needs to choose a solution. In this study, we took advantage of a large volume of published data (n = 22,331) obtained by the Ages and Stages Questionnaire Social-Emotional (ASQ:SE), and formed a subset of 500 children to present and discuss alternative psychometric solutions to its internal structure, and also to its subjacent theory. The analyses were based on a polychoric matrix, the number of factors to retain followed several well-known rules of thumb, and a wide range of exploratory methods was fitted to the data, including EFA, PCA, and NA. The statistical outcomes were divergent, varying from 1 to 6 domains, allowing a flexible interpretation of the results. We argue that the use of statistical methods in the absence of a well-grounded psychological theory has limited applications, despite its appeal. All data and codes are available at https://osf.io/z6gwv/.

Auditors' Communications with Audit Committees: The Influence of the Audit Committee's Oversight Approach

2018 ◽  
Vol 38 (2) ◽  
pp. 125-150 ◽  
Author(s):  
Krista Fiolleau ◽  
Kris Hoang ◽  
Bradley Pomeroy
Keyword(s):  
Audit Committee ◽  
Level Of Detail ◽  
Data Availability ◽  
Audit Committees ◽  
Communication Style ◽  
Quality Audit ◽  
Resolution Process ◽  
Asking Questions

SUMMARY Policymakers have identified effective communications between the auditor and the audit committee (AC) as an indicator of a quality audit, but little is known about the factors auditors consider when deciding what to communicate about significant accounting issues. We propose auditors use the AC's oversight approach as a cue for the level of detail in their communications that is necessary to satisfy the AC's preferences for auditors' insights on issues that were resolved with management. In our experiment, auditors resolved an inventory obsolescence issue with a hypothetical CFO, and then wrote a communication about it for the AC. We manipulate the AC's preference for getting involved in the issue resolution process and its reputation for asking questions. Our results, supplemented by findings from audit partner interviews, suggest auditors tailor their communications to the AC's oversight approach, the AC's industry and accounting knowledge, and the AC chair's preferred communication style. Data Availability: Contact the authors.

Strategic Audit Inquiry: The Impact of Timing and the Promotion of Statutory Protections on Client Fraud Disclosures

2020 ◽  
Vol 34 (3) ◽  
pp. 153-167
Author(s):  
John R. Lauck ◽  
Stephen J. Perreault ◽  
Joseph R. Rakestraw ◽  
James S. Wainberg
Keyword(s):  
Best Practices ◽  
Audit Quality ◽  
Self Regulation ◽  
Data Availability ◽  
Audit Committees ◽  
External Auditors ◽  
Extant Literature ◽  
Psychological Theories ◽  
Inquiry Process ◽  
The Impact

SYNOPSIS Auditing standards require external auditors to inquire of client-employees regarding their knowledge of actual or suspected fraud (PCAOB 2010b; AICPA 2016). However, the extant literature provides little guidance on practical methods that auditors can employ to increase the likelihood of fraud disclosure and improve audit quality. Drawing upon best practices in the whistleblowing literature and psychological theories on self-regulation, we experimentally test the efficacy of two practical strategies that auditors can employ during the fraud inquiry process: actively promoting statutory whistleblower protections and strategically timing their fraud inquiries. Our results indicate that auditors are more likely to elicit client-employee fraud disclosures by actively promoting statutory whistleblower protections and strategically timing the fraud inquiry to take place in the afternoon, when client-employee self-regulation is more likely to be depleted. These two audit inquiry strategies should be of considerable interest to audit practitioners, audit committees, and those concerned with improving audit quality. Data Availability: From the authors by request.

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