This week’s reading looks at ethics and performance measurement.

The ethics of metrics
The last two decades have seen a great deal of scandals in the business world. Many of them have to do with accounting and management control, but in substantially different ways.

This paper focuses on the dysfunctional effects of systems of measurement and incentives, and the possible ways to overcome those dysfunctional effects, achieving a stable state of goal congruence through the introduction of justice in the design and use of management control systems, by contributing to the ethical development within the organisation.

Cugueró-Escofet and Rosanas first analyse how the discipline of control systems came into being, and show how, in the last decades, both in theory and practice, has gone in a direction of becoming more ‘automatic,’ and then, they provide some case studies of how they are at the origin of many of the scandals. Borrowing from Rosanas and Velilla (J Bus Eth 57:83–96, 2005) and from Cugueró-Escofet and Rosanas (Manag Account Res 24:23–40, 2013), the authors develop a model of control systems based on justice, where they make the distinction between formal and informal justice. Cugueró-Escofet and Rosanas are then able to show how informal justice is the key element in the dynamics of a control system: to preserve formal justice, or to evolve toward formal justice. In any case, it is a necessary condition to reach a state of maximum goal congruence, stable through time, as a consequence of the ethical development that this type of systems are able to generate.

Cugueró-Escofet, N. & Rosanas, J.M. 2017. The Ethics of Metrics: Overcoming the Dysfunctional Effects of Performance Measurements Through Justice.
Journal of Business Ethics, 140(4), 615–631.


Spiritually informed not-for-profit performance measurement 
Performance measurement has far-reaching implications for not-for-profit organisations because it serves to legitimise, attract resources, and preserve expectations of stakeholders. However, the existing theory and practice of not-for-profit performance measurement have fallen short, due in part, to an overuse of profit-oriented philosophies.

Therefore, this paper examines not-for-profit performance measurement by utilizing Marques’ (J Bus Ethics 92:211–225, 2010) “five spiritual practices of Buddhism.” Marques’ spiritual practices—a pro-scientific philosophy, greater personal responsibility, healthy detachment, collaboration, and embracing a wholesome view—are the foundation of the research design. Responses from senior not-for-profit practitioners (n = 63) support the linkages between spiritual practices and not-for-profit performance measurement.

The authors identify three essential performance measurement principles and elaborate on their capacity to generate awareness, higher meaning, and connectedness within not-for-profits.

Gamble, E.N. & Beer, H.A. 2017. Spiritually Informed Not-for-profit Performance Measurement.
Journal of Business Ethics, 141(3), 451–468.


Is quantitative research ethical? Tools for ethically practicing, evaluating, and using quantitative research
This editorial offers new ways to ethically practice, evaluate, and use quantitative research (QR). The central claim is that ready-made formulas for QR, including ‘best practices’ and common notions of ‘validity’ or ‘objectivity,’ are often divorced from the ethical and practical implications of doing, evaluating, and using QR for specific purposes.

To focus on these implications, Zyphur and Pierides critique common theoretical foundations for QR and then recommend approaches to QR that are ‘built for purpose,’ by which they mean designed to ethically address specific problems or situations on terms that are contextually relevant. For this, the authors propose a new tool for evaluating the quality of QR, which they call ‘relational validity.’ Studies, including their methods and results, are relationally valid when they ethically connect researchers’ purposes with the way that QR is oriented and the ways that it is done—including the concepts and units of analysis invoked, as well as what its ‘methods’ imply more generally.

This new way of doing QR can provide the liberty required to address serious worldly problems on terms that are both practical and ethically informed in relation to the problems themselves rather than the confines of existing QR logics and practices.

Zyphur, M.J. & Pierides, D.C. (2017). Is Quantitative Research Ethical? Tools for Ethically Practicing, Evaluating, and Using Quantitative Research.
Journal of Business Ethics, 143(1), 1–16.


The relationship between informal controls, ethical work climates, and organisational performance 
Due to the frequent occurrence of ethical transgressions and unethical employee behaviours, there has lately been an increasing interest in the ethical foundations of contemporary organisations. However, large-scale comprehensive analyses of organisational ethics are still comparatively limited.

This study contributes to both management control and business ethics literature by empirically examining potential antecedents as well as resulting effects of ethical work climates on organisational-level outcomes. Based on a cross-sectional survey among 295 large- and medium-sized companies, Goebel and Weißenberger find that more informal means of control constitute important elements of a broader organisational control context that are strongly related to the emergence of coherent ethical work climates with an increased awareness of ethical issues.

Moreover, the results show that the relationship between ethical work climates and organisational performance can be considered as rather indirect as it is fully mediated by increased mutual trust among employees. Overall, this study thus supports the particular importance of ethical work climates and identifies appropriate means to encourage ethical conduct.

Goebel, S. & Weißenberger, B.E. 2017. The Relationship Between Informal Controls, Ethical Work Climates, and Organizational Performance.
Journal of Business Ethics, 141(3), 505–528.


Ideology and the Balanced Scorecard – Tension between shareholder value maximisation and CSR
In a society where the ideology of shareholder value maximisation (SVM) prevails, how do evaluators make appraisal and bonus decisions when corporate social responsibility (CSR) measures and financial measures in the balanced scorecard (BSC) point in different directions?

To explore this question, the authors conducted two studies to develop and test a conceptual framework. Participants were asked to evaluate the performance of two managers, using a case the authors wrote about a commercial bank.

Results showed that
(1) evaluators are more willing to drop CSR performance measures than financial measures from the evaluations;
(2) perceived CSR relevance is influenced by where evaluators stand in regard to CSR (“stakeholder view” in the “Perceptions of the Role of Ethics and Social Responsibility” or PRESOR scale) and also by where evaluators believe shareholders stand (shareholder support); and
(3) there is a financial bias in appraisal and bonus decisions when CSR measures are used in the BSC, consistent with SVM ideology.

The authors conclude by discussing the implications of the influence of SVM ideology on the use of CSR measures in terms of business research, practice, and education.

Bento, R.F., Mertins, L. & White, L.F. 2017. Ideology and the Balanced Scorecard: An Empirical Exploration of the Tension Between Shareholder Value Maximization and Corporate Social Responsibility.
Journal of Business Ethics, 142(4), 769–789.


Enhancing the role and effectiveness of CSR reports
Corporate Social Responsibility (CSR) reporting by large corporations has witnessed phenomenal growth over the last two decades. The voluntary nature of these disclosures, however, has led to inconsistencies in reporting formats, treatment, and inclusion of various contextual elements, and a lack of robust measures pertaining to the quality and accuracy of the reports’ content.

Efforts to address these drawbacks such as Global Reporting Initiative and ISO 26000 have proven unsatisfactory due to their primary emphasis on process for creating CSR reports without similar attention on measurement criteria to ensure robust implementation, or verify accuracy of information.

This paper attempts to fill this gap in the literature. It uses a new framework—called the CSR-Sustainability Monitor®—of analysing and evaluating the contents of CSR reports in a manner that allows for a single report to be compared with any other single group, and groups of reports based on industry, country-of-origin, and similar other groupings.

Using data from the CSR reports of 614 large corporations worldwide, this study analyses the character and scope of integrity assurance contained in these CSR reports. The analysis is further extended to explore some external factors that would explain variations in the assurance decision and the quality of integrity assurance in these reports.

S. Prakash Sethi, Terrence F. Martell & Mert Demir. (2017). Enhancing the Role and Effectiveness of Corporate Social Responsibility (CSR) Reports: The Missing Element of Content Verification and Integrity Assurance.
Journal of Business Ethics, 144(1), 59–82.