NORMATIVE PERSPECTIVES ON ACCOUNTING ETHICS

DEONTOLOGICAL ETHICS
The main proponent of the deontological position is Immanuel Kant. His position is based on
two fundamental principles: reason and respect. Kant advocated that Socrates’ question, how
should I behave? should be answered through deductive reasoning. When reason is applied to
this dilemma, Kant suggests that we will come to the conclusion that we should act in
accordance with universal principles that apply, irrespective of the consequences of the actions.
Knowing what to do in any situation will be determined by these universal principles, regardless
of the specific context and consequences of the action. Take for example the issue of theft. If we
were tempted to steal, Kant suggests that we ask ourselves whether we could accept that our
children, neighbours, employees, and so on be allowed to steal at will . . . from us!? We may
then conclude that stealing is always wrong, whatever the circumstances. Kant called such a
principle, or rule, which must be always obeyed with no exceptions, a categorical imperative.
Second, however, Kant argues that we have a duty to treat other individuals as ends in
themselves and to act in a way that respects their capacity to act. Kant suggests that anyone
who behaves in accordance with both these principles can be described as acting out of duty
and therefore acting ethically. Let’s apply Kant’s position specifically to accounting. How would
the actions of an individual accountant be justified from a Kantian perspective? When an
accountant is faced with an ethical dilemma, they would have to consider whether they would
like their proposed course of action to be a universal law. However, we also need to consider
whether the normal function of the accounting profession can be justified from a Kantian
perspective. Does the economic system that accounting serves, be it capitalist, command or
some mixture of the two, treat individuals as means or ends? Kant’s position is generally
criticized for being too general to be helpful because it ignores the specifics of individual
situations. Take for example the case of a young mother in intensive care who has been involved
in a bad car accident. She asks the doctor about her son who was also in the car. According to
Kant a lie is wrong because of the kind of thing it is, so the doctor would be obliged to tell the
woman that her son is dead, despite the possibility that the shock might send her into cardiac
arrest. However, most people would accept that it is wrong to lie under oath about the
circumstances of some medical negligence if the woman was administered the wrong drug and
went into cardiac arrest. Some people would therefore suggest that Kant’s position is too
inflexible and that the goodness or badness of telling a lie, for example, depends on the
circumstances. Others would criticize Kant for grounding moral decision-making exclusively in
reason; however, we shall return to this point later in the chapter. John Rawls’ theory of justice
represents an attempt to advance the deontological position further. Rawls suggests that while,
as individuals, we might be able to see the logic of the categorical imperative and agree that it is
important to treat other human beings with respect, we need some help in proceduralizing this
principle. His solution comes in the form of a ‘veil of ignorance’. According to Rawls, deciding on
a course of action that respects other individuals requires that I put myself in ‘the original
position’, behind a veil of ignorance. From an original position of equality, not knowing what or
who I might become, I am therefore compelled to respond to Socrates’ proposition, by placing
myself in the position of everyone affected by the decision, or at least each category of
individual, since I do not know whether I am likely to become one of these people. Kant’s
deontological response to the question of how one ought to behave is thus based on deductive
reasoning. However, Rawls’ complementary position obviously requires quite a different kind of
moral capacity. It takes quite a well-developed moral imagination to be able to place oneself
behind the veil of ignorance or in the circumstances of each individual who might be affected by
your decisions. And, even if we were able to do this, how do we mediate between the many
different perspectives? It would also seem quite difficult to translate Rawls’ position into a set of
institutional arrangements.
TELEOLOGICAL ETHICS
A standard distinction within the normative literature is generally drawn between deontological
ethics on the one hand and teleological ethical perspectives on the other. While a deontological
position focuses on the rightness or wrongness of an action in itself, a teleological position
establishes the morality of a particular action by reference to the consequences of that action.
Take the example of theft discussed earlier. From a deontological perspective theft may be
considered morally wrong because of the kind of action it is (i.e. it contravenes the categorical
imperative because we cannot will it as a universal law), regardless of whether or not the act
produces good consequences, for example in the case of Robin Hood. By contrast, teleologists
contend that the rightness or wrongness of an action can be established by reference to its
consequences. Let’s apply this type of moral thinking to an accounting dilemma. Consider the
situation where a company director has deliberately manipulated the accounts but only because
there is a liquidity problem that she believes will be rectified in the following one or two
accounting periods. As an accountant, would you ignore the misrepresentation in an attempt to
save the company and its employees? Consequentialist theory is based on an important
distinction between good actions and the goal. In other words, determining whether a
particular action is right or wrong is based on the consequences of that action in relation to
some predetermined goal. Suppose you are the financial controller of a mediumsized clothing
manufacturer. The company is trying to deciding whether to outsource part of the production
process to Indonesia. If the goal is financial growth, the common assumption underpinning
virtually all financial and management accounting and market-based economics, then only a
certain set of consequences are relevant. If, however, the goal is some other more obscure
aspiration like fairness, then we would need to take into consideration a broader range of
consequences. The questions are, how is the goal defined, who defines it and what is the goal of
accounting? These are not trivial questions. This distinction between the action and the goal
highlights an important source of criticism of the consequentialist position. This criticism is
based on an apparent contradiction in that it allows a course of action to be inconsistent with
the goal. Suppose I am specifically concerned about the environment. Should I exemplify the
kind of life that I think we need to live in order for the planet to have a sustainable future or
should I spend my time travelling the world trying to persuade others of my concern, even
though it is environmentally unfriendly? The consequentialist position might allow me to travel
extensively by aeroplane polluting the environment in order, for example, to lobby the
European Parliament against the development of regional airports. While deontological ethics is
often criticized for producing rules that are too general to be helpful in specific ethical
dilemmas, the teleological position is criticized first, because identifying every possible
consequence of an action is impossible, and second, more importantly, because it can be used
to justify some heinous actions. Let’s take a contemporary example: suppose a terrorist has
planted a bomb somewhere in London. A consequentialist position could be used to justify
torturing the single individual in order to save the lives of numerous others.
RULE AND ACT UTILITARIANISM
We will discuss a form of consequentalist argument known as utilitarianism in Part II of the text
when we consider how decisions are routinely made within accounting practice; however, at
this point we would like to introduce an important distinction that is often made between the
consequences of a specific individual action and the consequences of a general rule, or practice.
John Rawls makes an important distinction between what is generally termed rule utilitarianism
and act utilitarianism. Just think about the distinction in terms of consequences for the time
being. This is an important and useful analytical distinction. For example, John Hooker (2007)
draws on these different levels to explore the difference between the ethics of professions and
the ethical obligations of professionals. Specifically, he explores the ethical obligations of
individuals in relation to the institutions of which they are a part. Professions create
expectations in lots of different ways and Professor Hooker’s point is that professional obligation
then involves living up to those expectations. For example, you wouldn’t normally expect your
bank manager to start giving you advice on the mole on your forehead when you go to enquire
about re-mortgaging your house. You probably wouldn’t let her examine the swelling in your left
ankle either. These might seem rather silly examples, but they do highlight a number of
interesting dilemmas in relation to public expectations and the boundaries of professional
jurisdiction. Most would assume that the function of a profession involves more than saving us
time and helping us quickly establish which experts we can trust to apply their knowledge in the
way their professional status implies they would. Professor Hooker suggests that once public
expectations are established there is nothing much for professionals to do than do it and this
does not involve ethics. Professional institutions serve a social function and when society has
decided what that function is to be, we are obliged just to do it. The inference of this argument
is that professional ethics is about performing this role well and therefore not about ethics
proper. Once the rules of the game have been established, we are obliged to play by the rules.
Yet for many, the action of determining whether or not to apply the expectation is not ancillary
to professional practice, it is professional practice! This is obviously a contentious area of
professions and ethics. It opens up the question of individual professional judgement and where
the boundaries of such judgement lie. Very often the tensions associated with these boundaries
are related to conflicts between these different levels. For example, the public expectation is
that pharmacists dispense medicines, but some of the most difficult professional dilemmas that
individual pharmacists face relate to the point at which this expectation should no longer apply.
Expressed in general terms, the dilemma is, at what point should the individual professional
question the general rule that provides the institution with its legitimacy. As John Rawls (1955)
says in the introduction to his famous paper, it draws out the distinction between justifying a
certain practice and justifying a particular action that comes within the boundaries of that
practice. Who should decide what the rules of the professional game are? And when they have
been determined, how do they evolve? And when is it legitimate to question and even break
those rules? The famous legal philosopher H.L.A. Hart once wrote about this dilemma in terms
of proles and archangels. When can we behave like archangels, and say no, the normal rules
don’t apply in this particular situation?
VIRTUE-BASED APPROACHES TO INDIVIDUAL ACTION
The deontological and consequentialist positions outlined above are generally termed principle-
based approaches to the problem of how one should act. However, virtue theorists provide an
alternative position to these principle-based approaches. Virtue theorists contend that while it
may be important to be able to articulate certain moral principles, in practice virtue is more
important than abstract philosophizing (MacIntyre 1982; Collier 1995; Whetstone 2001).
Hartman (1998) comments,
virtue ethicists deny that making moral decisions is a matter of calculation as principle-based
theories, particularly utilitarian ones imply . . . Even if we can describe an ethical person as one
whose acts conform to certain principles, it does not follow, that the best way to teach Smith to
be ethical is to give her principles to follow.
The concern of virtue theorists is that while an individual may adhere to a set of principles, this
does not necessarily imply that these principles are an integral part of their character. For
example, while an accountant may enact a certain principle, this may be because of routine self-
interest or some other ulterior motive. It is another thing entirely to say that an accountant is
honest. Hartman (1998) explains that the virtuous person is inclined to do the right thing. Virtue
is therefore not about calculation, it’s a matter of predisposition. Proponents of virtue theory
therefore contend that virtue is an element of character (Hartman 1998; Shaw 1997; Whetstone
2001). They also suggest that specific virtues arise from, are given meaning by, and are
sustained by the broader narratives within which the individual is situated (MacIntyre 1982).
Hartman (1998), for example, comments, ‘a good life is an integrated life, one committed to a
consistent set of values, principles, projects, people and in many cases to a community, that can
give it meaning’. Francis (1990; see also Libby and Thorne 2004) brings virtue theory directly to
bear on accounting practice. He says, ‘I want to pose what I regard as the most important
contemporary question facing accountants: Is accounting practice after virtue? That is, do
accountants seek virtue and if so, how do they achieve it?’ The literature on virtue theory
provides a theoretical basis for beginning to explore some of the idealized characteristics often
associated with accounting professionals and the broader narratives that sustain these values.
REASON AND MORAL SENSE THEORISTS
The discussion of inclination in the virtue theory literature hints at a broader debate over the
way individuals should be encouraged to respond to ethical dilemmas. On the one hand some
theorists suggest that reason is the only appropriate basis for ethical decision-making. However,
other theorists contend that something more is required (McNaughton 1988). Immanuel Kant,
whose work we introduced above, represents one of the most celebrated proponents of the
rational approach to ethics. Kant sought to ground ethics in the very nature of reason and
attempted to develop universally applicable moral principles based solely on the application of
reason (Mackie 1977; MacIntyre 1982). The famous English philosopher John Locke similarly
contended that morality could be demonstrated like a mathematical proof (Macintyre 1998).
However, the famous eighteenth-century Scottish thinker David Hume argued that reason
merely furnished the individual with the facts of the matter and that the actual act of making a
moral decision required something more than reason. The Earl of Shaftsbury (Macintyre 1998)
and Francis Hutcheson suggested that moral distinctions depend on a moral sense rather than
reason. Macintyre (1998) explains that Shaftsbury represented this sense as an inner eye that
was able to distinguish right from wrong. He describes Shaftesbury’s argument as follows,
A moral judgement is thus the expression of a response of feeling to some property of an action
. . . just as an aesthetic judgement is the expression of just such a response to the properties of
shapes and figures. (Macintyre 1998)
The theorization of the importance and role of moral sense has come a long way from
Shaftsbury’s inner eye. The fundamental role of empathy towards, and the core responsibility
for, others has been the subject of extensive theoretical exploration both by Zygmunt Bauman
(1996; 1993) and Emmanuel Levinas (Hand 1989), whose work we shall explore in the following
chapter. A more practical analysis of what this inner eye might entail has been developed
through the notion of Social and Emotional Learning (SEL) (Gardiner 1983) or emotional
intelligence (see McPhail 2004). Proponents of SEL suggest that there are different categories of
intelligence and that the qualities associated with emotional intelligence, for example emotional
self-awareness, an awareness of the emotions of others and the imaginative capability to enter
into the feelings of others, can be taught in the same way that competence in deductive
reasoning, or logic, can also be developed (Goleman 1995; Cohen 1999).
SUMMARY
The normative literature contributes towards our understanding of the ethics of individual
accountants in a number of ways. First, it provides us with an insight into how accountants are
routinely taught how to behave. Conventional models of accounting practice are based on the
teleological position outlined above, and in particular, a narrow form of teleological analysis
that focuses primarily on the financial consequences of a proposed course of action (we will
explore financial utilitarianism in more detail in Chapter 6 when we explore the ethics of
accounting practice). These consequences are established through reason. For example,
investment appraisal, product mix, the location of the production function, pension plan
provision, the viability of a particular division, and so on, are all decisions with which
accountants may be routinely involved. They are all quite complex ethical dilemmas but
accountants are taught to resolve them, in part at least, by looking to the financial
consequences of the proposed decision. They are not taught, for example, to put themselves
behind a veil of ignorance in the original position, although from the discussion of the
justification of practices, as opposed to individual actions (remember rule and act
utilitarianism?), hopefully you can see that there is an argument why we may not want
individual accountants to be making decisions in this way. Accountants are therefore exposed to
a particular, teleological, normative ethic during their degree programmes and professional
training (Gray et al. 1994; McPhail 1999). Financial consequentialism provides the ethical basis
for everyday accounting practice and may also influence the resolution of specific ethical
dilemmas. While the normative literature allows us to label the prevailing ethical basis of
accounting practice, it also highlights that there are a number of other possible alternatives that
could be employed. We have only looked at two other perspectives; however, there are many
others. How would accountant practice differ if it was based on a Confucian, Christian or Muslim
ethic, for example? Would there be any ethical conflicts here? Finally, an awareness of the
normative moral philosophy literature encourages us to reflect on whether the teleological
position is in fact the most appropriate mode of ethical thinking for accountants. There is a
considerable literature that critiques the making of ethical decisions which affect other human
beings, the environment and future generations solely on the basis of financial consequences
(see for example Carson 1991; Daly and Cobb 1989). These critiques highlight that the ethical
decisions which accountants make take place within a context. The ethical decisions that
accountants make matter because they have an impact on other people. It is precisely this
matter that the third strand of moral philosophy literature addresses.