ISSUES IN ACCOUNTING EDUCATION
Vol. 20, No. 2
May 2005
pp. 145–150
Hollow Men and Women at the Helm …
Hollow Accounting Ethics?
Sandra Waddock
ABSTRACT: Until business schools teach future accountants and leaders how deep the
connections are between business, society, nature, and the world, corporations will
continue to be run by hollow leaders who have no sense of ethics or responsibility.
Accounting for performance is likely to remain too narrowly focused to be helpful in
today’s demanding environment.
We are the hollow men
We are the stuffed men
Leaning together
Headpiece filled with straw. Alas!
Our dried voices, when
We whisper together
Are quiet and meaningless
As wind in dry grass
Or rats’ feet over broken glass
In our dry cellar
Shape without form, shade without colour,
Paralysed force, gesture without motion …
—T. S. Eliot, “The Hollow Men”
The hollow men and women of T. S. Eliot’s poem might double as some of today’s corporate
leaders, who seem to be lacking both substance and heart. The collapse of Arthur Andersen in the
wake of the Enron scandal suggests that there are troubling issues facing the accounting profession
and accounting education. If we consider the numerous financial restatements that have been required in recent years, we must ask some pointed questions about the training and education of
companies’ top financial executives. What did they learn as basic business principles? Why have
they, their businesses, and their financial statements been so prone to scandals? Did widely held
beliefs and attitudes at major business schools contribute to the corporate disasters that opened the
decade of the 2000s?
The collapse of giants like Enron and Arthur Andersen signaled a major turning point in the
conversation about corporate ethics and integrity. The creation of the Public Company Accounting
Oversight Board to oversee the audits of publicly owned companies represents a serious loss of
professional autonomy for accountants. The accounting scandals and subsequent Congressional
Sandra Waddock is a Professor at Boston College
This article is reprinted with the permission of AACSB International. It was adapted from Sandra Waddock’s article
published in the July/August 2004 issue of BizEd.
Editor’s note: This paper was accepted by Sue Ravenscroft, Editor.
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response raise compelling questions about the role of public accountants, and thus of the accounting
education those public accountants obtained. Certainly, in these post-Enron, post-Andersen days, it
is difficult to ignore the impact of the simplistic and supposedly value-neutral economic theory that
currently dominates management thinking in many business schools.
Many of the abuses that have come to light in the past few years are the result of CEOs reacting
to the systemic pressures and performance expectations of Wall Street (e.g., Berenson 2003). But
problematically, these CEOs and other top financial managers have been both implicitly and explicitly supported by their auditors who, under pressure to improve short-term performance, have sometimes been too willing to overlook their public regulatory responsibilities to help provide financial
statement integrity. In 2002, leading scholars in the Academy of Management debated the Academy’s
role in responding to the ethical scandals of the early part of the decade. They diagnosed the root
causes as the “overemphasis American corporations have been forced to give in recent years to
maximizing shareholder value without regard for the effects of their actions on other stakeholders”
(Kochan 2002). Accountants have been no less subject to these pressures than managers, as the
ongoing spate of scandals indicates. We have seen accounting and financial staff at Enron, WorldCom,
Halliburton, Tyco, etc., who were pressured to present misleading financial statements to the public,
and audit firms who failed to protect the public from such misrepresentations.
Proponents of corporate responsibility have argued for years that today’s typical management
education turns out leaders who have a limited capacity to think broadly about the impacts of their
decisions on stakeholders, societies, and the natural environment. The same criticisms have been
applied to accounting education. Because most management theory focuses predominantly on maximizing shareholder wealth, it considers only some stakeholders and fails to educate managers and
accounting professionals about all of the consequences of their decisions, or indeed, about the full
range of issues that rightly need to be embedded in accounting statements. Indeed, competitive
pressures on managers, ranking pressures on business schools, and “up-or-out” policies at major
accounting firms have combined to encourage business educators and corporate leaders to pay even
more attention to short-term profit maximization today than in the past. The result is that companies,
educators, and accountants avoid paying adequate attention to important emerging societal issues
like the need for lifecycle or full-cost accounting, environmental accounting, and accounting for
issues of corporate responsibility.
To avoid a repeat of corporate and accounting scandals in the future, it is critical to look at how
today’s business schools are teaching tomorrow’s leaders. If business schools do not teach future
managers and accountants about the integral relationships that exist between corporations and societies, we cannot expect top CEOs to understand them. Business educators must focus on integrity at
the individual, company, and societal levels—and they need to work toward an attendant transformation in the curriculum that covers business in society, not just business in economy.
A Loss of Integrity
While some believe that integrity and individual ethics are largely formed through family and
early childhood experiences, management education still conveys a perspective on what can be
considered ethical in business and accounting for business activities. Yet until quite recently, only
ethics professors and business in society professors dealt much with issues of integrity and responsibility. With some exceptions from other management disciplines, there has been notable silence on
these topics.
The problem extends all the way to the boardroom. Many of today’s corporate leaders and their
financial advisors seem to be lacking fundamental integrity (Waddock 2002). Such integrity means
looking beyond self-interest: “justifying a decision requires a sincere commitment to standards that
transcend that decision” (Shamoo and Resnik 2003, 19). Business leaders too often fail to understand
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the important public responsibilities that attend their profession; financial markets, investment processes, and public trust in corporations all rely on the integrity of audited financial statements. In an
era of Internet connectivity, external activists are increasing their demands for transparency and
accountability and have caused some significant new demands on the accounting profession’s integrity and breadth of understanding of its inherent responsibilities. In business, the written and unwritten code allows the system to work efficiently when people and organizations trust each other in
transactions (Noreen 1988). Investors trust that corporate executives will follow their fiduciary
obligations—and that the financial statements they issue are trustworthy. Customers trust that products and services will provide reasonable value for their cost. Employees trust that the jobs they have
today will be there tomorrow. Trust is central to the effective functioning of all markets. Trust is
destroyed, however, when individuals and institutions act without integrity, when financial statements are constantly being “re-stated,” and when scandals pervade the industry.
A top executive with integrity will not only be true to his or her own critically examined beliefs
and standards, but will develop mission statements that define the whole corporation and encourage
accurate reporting that represents the company’s true performance. The majority of top executives
and accountants are decent people who possess integrity and live by personal standards. But some
have been led astray by a lack of self-examination, by the fact that no one in their organizations offers
them alternatives to a profit-based style of management, and by the fact that they learned no different
course of action during their business school education.
Mindful Accounting Education
The accounting profession seems to have failed to acknowledge that accounting is fundamentally an ethical, rather than a technical, discourse. Accountability inescapably assumes the fulfilling
of some dutiful requirements. If we want accountants who are capable of acting with integrity and
understanding the broader system in which they work, we must teach them to be mindful—aware of
their belief systems, conscious of consequences, and capable of thinking broadly about the impact
of their actions and decisions. Accountants have positions that are inherently value-laden and imbued with ethical responsibilities. Their decisions affect other people, organizations, communities,
and the natural environment; they affect the ways a company is viewed and they must be based on an
essential foundation of trust. From this view, ethics, accuracy, and transparency are integral to
accounting, not something to consider only when dilemmas arise. It is the integrated relationship of
ethics and accounting that business schools have generally failed to recognize.
Unfortunately, the courses that might teach accounting students to be mindful of consequences
and consider the perspectives of multiple stakeholders are hardly considered mainstream in accounting or management education today. Courses on ethics, corporate responsibility, business/public
policy, stakeholder relationships, and other “soft” subjects are typically given short shrift in favor of
applied analytical tools and techniques, conceptual models, and measures of profitability, which are
all rooted in the mythology of positive economic science. Despite some efforts of the accounting
industry, there are altogether too few courses on lifecycle accounting, environmental and social
accounting, and full cost accounting and few ways to fuel a demand-side need for such courses.
The faculty might be partially to blame. In 1996, AACSB International launched a Task Force
on Faculty Leadership, which found that business faculty at all levels lacked sufficient real-world
contact and did not have a good understanding of the global or technological environment. Faculty
members were found to be inhibited from leading efforts for institutional change, in part because of a
tight focus on disciplines and in part because they did not understand the need for change. Problems
were exacerbated by narrow, disciplinary orientations; pressures to publish in respected peer-reviewed journals; and limited rewards for integrative work.
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Some students also discount the importance of integrated coursework and classes on corporate
responsibility. In fact, once they are enrolled in business schools, management students lose whatever idealism they may have brought with them. A recent study by the Business and Society Program
of the Aspen Institute (Initiative on Social Innovation through Business [ISIB] 2003) shows that
once M.B.A. students enter a program, their attitudes shift away from a focus on customers and
product quality and toward shareholder value.
Graduates with M.B.A.s do not think they can affect the culture and values of companies. They
believe that they will face ethical conflicts at work, and they say they are more likely to quit than try
to effect change in an organization (ISIB 2003). It is likely that the results of a study of accounting
students would be similar. If business schools don’t pay more attention to fundamental questions
about the meaning and consequences of economic gain and about the balance of property and
welfare rights (Holmes and Sunstein 2003), we are in danger of developing leaders who are incapable of reflective thought about what they are trying to do—and who give up without even trying to
change what’s wrong with business.
A key problem is that management education works. It really does convince students that a
certain system of thinking about business is the right one. It does instill a belief in the ideology of
cutthroat shareholder capitalism that, like a reality TV show, weeds out the weakest links unerringly
and without remorse. Death to those companies that cannot compete, and to hell with the ecological,
individual, community, or societal consequences.
Maybe it is time to consider that something could be wrong with our current emphasis on narrow
fields of discipline and rampant corporate capitalism. Instead, we should teach the types of skills that
societies really need in business leaders by putting corporate responsibility at the core of business
and accounting education.
Radical Change
The systemic changes needed in accounting education may require what Peter Senge calls
metanoia, a shift of mind. Yet, I believe that business schools can teach a specific set of skills that
will develop integrity and integrated thinking into our students. These skills include:
• Individual and institutional integrity, responsibility, accountability, and transparency
• Systems thinking and systems dynamics, as well as synthetic and integrative thinking
• Initiation, risk-taking, and creativity
• The importance of self-efficacy, voice, and confidence
• The ability to speak one’s own mind while being sensitive to the perspectives of others
• The ability to reflect on the implications of actions, decisions, attitudes, and behaviors
• The ability to understand the consequences of actions and, when needed, to take corrective action
or change course
• Ecological awareness
To instill such skills in students, five major elements would have to be embedded in a radical
curriculum for business in society:
(1) A sense of balance. In other words, it’s not just the economy, stupid. Markets are inherently
stupid, focusing almost exclusively on growth and profit while ignoring anything to which traditional
costs and prices cannot be assigned easily. We need to teach students to care about more than the
markets; they must understand social and human values such as love, community, spirituality, connection to self, others, and nature, and the drive to find meaning. Accounting students in particular
must understand the need for accuracy, transparency, and accountability in new ways. Our students
must be disabused of the anthropomorphic view of corporations as private persons, and see them
instead as public beings created by government charter to serve social ends.
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Robert Reich, former U.S. Labor Secretary and now a professor at Brandeis, once asked, “Do
you want to live in an economy or a society?” Presumably, most people would choose to live in a
society. If we act as if an economy and a society are the same thing, we allow business to ignore
important responsibilities. Students who study business in society learn to balance the incentives for
business growth with other important values. Currently this sense of balance is greatly lacking in
accounting and management education.
(2) Integration of body, mind, and heart. Integration turns parts into wholes—individuals into
communities, communities into nations, nations into the world. Management education, which focuses on distinct functional disciplines and analysis of tractable problems, tends to be about parts
that do not necessarily add up to wholes. Thus, we need to design a curriculum that considers society
as one coherent, effective, and efficient whole. We need accounting students who understand the real
costs of production and can translate those costs into reports. The accounting industry as a whole
needs to understand the evolution of social and environmental reporting that has developed on the
side and to begin to integrate its lessons into “traditional” accounting practice. Even a required ethics
course is unlikely to be a strong enough basis for such integration. We need to begin teaching future
accountants to learn to consider how the actions of companies they audit will impact the community
and nature, not just shareholders. Accounting students need a more thoughtful, less dogmatic sense
of what “representational faithfulness” requires. A sense of integration will be better achieved when
accounting leaders fully engage the hearts, minds, bodies, and spirits of individuals and of societies;
when costs are fully measured and reported; and when the entire life cycle process is better
understood.
(3) Holistic understanding. Managers and leaders need to recognize that we all live on a single
planet with limited resources. Things are connected to each other; as physicists and biologists inform
us, one system affects others (Wilson 1998). What happens in the economic realm affects societies,
natural resources, and the day-to-day lives of ordinary people.
This connectivity is underscored by technology, which is building tightly linked global markets
and providing instant access to information. The very interdependence of the global village should
make us more aware of resource constraints, ecological limitations, the need for collaboration, and
the need for sustainable enterprise. In fact, this interconnectedness suggests that accountants must
understand the ecological, physical, and biological bases of human existence far more deeply than
they currently do.
(4) Respect for diversity. Despite the fact that we live on one planet, the global village is
incredibly diverse, with values, cultures, consumption patterns, and ecological footprints varying
dramatically from place to place. Few people want globalization to result in homogenization. Yet,
these different values and priorities can lead to conflict. Thus, to operate a business in a diverse
society means accountants must acquire considerable understanding about and respect for cultures
that are different from their own. They must understand in new ways these different values and
cultures, and the ways in which accounting is done around the world. Honoring cultural integrity
requires the ability to work with the both/and logic of paradox, the ability to synthesize multiple
interests and constituencies, the ability to analyze situations and solve problems, and the ability to
report transparently what is going on in understandable ways.
(5) A grasp of complex change. The modern world is facing so many transformative forces it is
impossible to list them all: the technological revolution and the growth of e-commerce; the emergence of small businesses and entrepreneurial companies as the dynamic force in market-based
enterprises; the surrender of local commerce to global commerce and transnational corporations; the
crises of overpopulation, poverty, and ecological devastation; the spread of HIV/AIDS and other
worldwide health issues; and the tensions between religion-based regions in the East and consumerbased societies in the West. All of these forces and many more create a global drama of Shakespearean
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proportions. To deal with a world of constant and complex change, future leaders and even accountants will need to develop skills of conflict resolution and collaboration—-as well as the ability to be
transparent, reflective, and open to responsibility and accountability. The accounting reports they
produce will need to accurately, yet simply, convey this very complexity.
Profound Implications
To meet the challenges of doing business in the modern world, management and accounting
education must undergo a transformation. Courses on analysis must also consider implications of
corporate and individual actions. Corporate-centric courses must become society-centric or even
nature-centric. Passive knowledge transfer must give way to active engagement in learning. Disciplinary specializations must be approached within the context of an integrated perspective on business’s
role in society. The values-neutral posture must shift to one that recognizes the inherent values-based
nature of management itself and the numerous value judgments that go into any financial report. A
narrow focus on shareholder wealth and a blind faith in market forces must broaden to a more
nuanced and intelligent focus that encompasses many stakeholders, including the natural world. We
must strive for a world in balance—for a world in which society takes precedence over economy.
Furthermore, today’s accountants must be able to make decisions based on principles and
relationships; they must be prepared to question the system. They will not be operating from conventional levels of moral reasoning, but from post-conventional levels that allow them to view situations
from a variety of perspectives that include all stakeholders and society as a whole (Rest et al. 1999).
To fully warrant the ascription of “professional” they must assume responsibility for the welfare of
others, not just themselves.
It will not be easy to create such accountants, but if we do not, we live in danger of creating
accountants who are much worse—the hollow men and women that T. S. Eliot described. We live in
danger of ending up in a world ravaged by inequity, corruption, materialism, and wasted resources.
Surely accounting and management education have the power to reverse some of those trends and
work toward a world of integration, intention, and integrity.
REFERENCES
Berenson, A. 2003. The Number. New York, NY: Random House.
Holmes, S., and C. R. Sunstein. 1999. The Cost of Rights: Why Liberty Depends on Taxes. New York, NY: W.
W. Norton.
Initiative on Social Innovation through Business (ISIB). 2003. Where will they lead? M.B.A. student attitudes
about business and society. Available at: http://www.aspeninstitute.org/AspenInstitute/files/
CCLIBRARYFILES/FILENAME/0000000404/Aspen%20Exec%20Sum%20Final.pdf.
Kochan, T. A. 2002. Addressing the crisis in confidence in corporations: Root causes, victims, and strategies
for reform. Academy of Management Executive 16 (2): 139–141.
Noreen, E. 1988. The economics of ethics: A new perspective on agency theory. Accounting, Organizations
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Rest, J., D. Narvaez, M. J. Bebeau, and S. J. Thoma. 1999. Postconventional Moral Thinking: A NeoKohlbergian Approach. Mahwah, NJ: L. Erlbaum Associates.
Shamoo, A. E., and D. B. Resnik. 2003. Responsible Conduct of Research. Oxford, U.K.: Oxford University
Press.
Waddock, S. 2002. Leading Corporate Citizens: Vision, Values, Value Added. New York, NY: McGraw-Hill.
Wilson, E. O. 1998. Consilience: The Unity of Knowledge. New York, NY: Alfred A. Knopf.
Issues in Accounting Education, May 2005