December 15, 2022
Even if you don’t know much about Enron, you surely know how Enron collapsed — in one of the largest bankruptcy filings in American history that also took down both the energy giant and the accounting company that helped cover up its misdeeds.
Andrew Felo, associate professor of accounting, conducts research into why and how unethical decisions are made in the workplace. His research won the Curt Verschoor Ethics Feature of the Year award from Strategic Finance magazine.
“When I completed my doctorate in 1999, there were a lot of high-profile accounting frauds and there was a lot of interest in why these things keep happening,” Felo says. “What I’ve tried to do is to better understand what leads to these things because there are some really bad consequences — people go to jail; they lose their jobs.”
Felo, along with Steven Solieri of Queens College, conducted a study of Institute of Management Accountants members to examine two specific aspects of unethical behavior: tone at the top vs. tune in the middle (which refers to the organizational culture that exists at the leadership and middle-management levels) and the theory of self-concept maintenance (how individuals faced with an ethical dilemma find a “balance” that doesn’t challenge their opinion of themselves).
Felo found that tone at the top generally plays a more significant role than tune in the middle, but there is some evidence that a more ethical tune in the middle partially (but not completely) reduces the impact of a less ethical tone at the top. He also found that how seriously employees view the consequences of their decisions has an impact on their behavior, but only when a leader demonstrates a weak ethical tone.
“One way to avoid these issues is to educate management accountants about the seriousness of the consequences of the decisions they make,” Felo says, “especially when the tone at the top and/or the tune in the middle are relatively weak.”
Felo believes his research has obvious implications for students preparing for a career in accounting.
“I try to incorporate this into my classes because there are a lot of gray areas — it’s not always clear cut; there is a lot of judgment involved,” Felo says