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This paper uses a laboratory experiment to examine the effect of accountability pressure as a monitoring control tool to mitigate subordinates' propensity to create budgetary slack. The results suggest that budgetary slack is (lowest) highest when accountability pressure is (present) absent under a private information situation. The results further reveal that accountability pressure is positively associated with subordinates' perceived levels of honesty, which in turn is negatively associated with budgetary slack creation. The findings of this paper have important theoretical and practical implications for budgetary control systems design.

Purpose — The aim of this chapter is to explain the concepts of honesty and dishonesty in management and provide a general understanding why and how honesty and dishonesty may manifest in different ways.Design/methodology/approach — This conceptual chapter discusses what (dis)honesty is, which factors affect it and which consequences result from it. It is illustrated with several short examples.Findings — (Dis)honesty is a complex concept. It is not always possible to classify a certain act as honest or dishonest: sometimes, it is in the ‘grey area’. Moreover, the understanding what is honest and what is not depends on the cultural context. Thus, the term (dis)honesty may be sometimes more appropriate.Originality/value — The complexity of (dis)honesty in management (encompassing its nature, impact factors and consequences) has received relatively little research attention.

There has been a call for additional managerial accounting research that examines the effect of non-pecuniary preferences (such as those for honesty and fairness) on managerial reporting decisions.

Drawing from trait theory, agency theory, and psychological contracts theory, Kidder (2005) suggests that personality traits and perceived unfairness in the workplace both help predict detrimental workplace behaviors, with perceived fairness affecting the honesty in reporting of some individuals but not others. We test Kidder’s (2005) theory in an experimental setting where participants have opportunity and incentive to report dishonestly.

Participants’ honesty preferences and ethical values (idealism and relativism) were measured, and the fairness of the participants’ employment contracts was manipulated. As predicted, higher preferences for honesty are significantly associated with honesty in reporting, suggesting that participants make trade-offs between increasing their own wealth and acting honestly. Additionally, the perceived fairness of compensation interacted with honesty preferences and relativism to affect honesty in reporting.

The implication for practice is that while a small number of employees are likely to consistently behave in honest or self-interested ways, firms may be able to positively influence the behavior of the majority of employees by enacting policies and procedures that contribute to perceptions that compensation is fair.

These findings contribute to our understanding of non-pecuniary preferences on managerial reporting decisions.

We examine the effect of peer honesty on focal manager honesty in a budget reporting setting. We disclose peer honesty to the focal manager at three levels: no, partial, and full disclosure of the reporting behavior of the other managers in the focal managers’ cohort. In partial disclosure, only the reports of the least honest peers are disclosed to the focal manager. In full disclosure, all managers’ reports in the cohort are disclosed to the focal manager. We predict and find that disclosure of other managers’ reports leads to less honesty compared to the absence of disclosure. We show that disclosure changes the focal manager’s perceptions of what constitutes acceptable reporting behavior, such that reporting more dishonestly becomes more acceptable. Our results have implications for understanding fraud dynamics and have practical implications for the design of control systems, as they suggest that managers will use peer dishonesty to justify their own dishonesty, even when they know that only some of their peers report dishonestly.

This paper reports the results of a three-year-long research on business relationships, relying on qualitative data gathered through multiple-case study research of four focal companies operating in Australia. The industry settings are as follows: steel construction, vegetable oils trading, aluminum and steel can manufacture, and imaging solutions. The research analyzes two main aspects of relationships: structure and process. This paper deals with structure describing it by the most desired features of intercompany relationships for each focal company. The primary research data have been coded drawing on extant research into business relationships. The main outcome of this part of the research is a five construct model composed by trust, commitment, bonds, distance, and information sharing that accounts for all informants’ utterances about relationship structure.

Purpose — The aim of this chapter is to explore the relative bounds between the domains of dishonesty and honesty, focusing on the antecedences and consequences of these phenomena.Design/methodology/approach — This conceptual paper discusses the literature on the nature of (dis)honesty in management based on the chapters published in this book but also other management literature.Findings — (Dis)honesty is a complex concept, especially in international management. The chapter brings out two main features of dishonesty. First, dishonest behavior occurs always in result of moral path dependency, and second, both honest and dishonest behaviors seem to be contagious — belonging to our social surrounding, we inevitably mirror others.Originality/value — The complexity of (dis)honesty in management (encompassing its nature, impact factors and consequences) has received relatively little research attention.

We use a laboratory experiment to examine a multitask environment common to practice, in which managers have multiple responsibilities, including both managerial reporting, as in participative budgeting settings, and effort provision toward daily tasks. Consistent with typical contracting arrangements, we examine incomplete contracts where honesty and effort are not enforceable. In such a multitask environment, when employers choose to offer comparatively generous wages to managers, we predict that managers will elect to provide higher effort. Meanwhile, we remain agnostic ex ante about the degree of misreporting due to findings in studies on gift exchange, moral licensing, and moral wiggle room. Overall, we find evidence that reciprocity, consistent with the gift-exchange model, does extend across both tasks. Implications for theory and practice are discussed.

Purpose — This chapter aims to present the way how to think about honesty in leadership, practically and simply on an example of the Czech Republic.Design/methodology/approach — This chapter discusses what (dis)honesty in leadership is, how it manifests and how it is perceived in the Czech Republic. It is illustrated with corruption statistics and a short interview with a Czech top manager from Microsoft.Findings — Contemporary leadership models accentuate soft side of leading personalities, including emotion, integrity, communication, networking, and serving others. Honesty belongs to necessary characteristics of effective leaders. Among Czech culture standards, several values are associated with integrity and honesty, particularly generosity, care about relatives, and confidence based on social relations as well as high evaluation of human behavior. The main weaknesses are low acceptance of formal structures and rules, the importance of informal communication, a strong tendency to conflicts and personal interpretation of any criticism.Originality/value — The complexity of (dis)honesty in leadership (encompassing its nature and impact factors) has received relatively little research attention.

Traditional agency theory assumes monitoring is good for the principal, but we investigate an unintended effect: diminishment of the agent’s preference for honesty. We hypothesize greater dishonest behavior in a monitored environment than in a non-monitored environment, when the agent has the opportunity to cheat outside the scope of monitoring. Relevant theories to explain such behavior are behavioral agency theory, where trust and reciprocity are thought to alter contractual outcomes, and the fraud-triangle theory, where the ability to rationalize deviant acts affects behavior. We utilize participants who have been acclimated to either a monitored or an unmonitored condition in an immediately preceding experiment and seamlessly continue that treatment. Within each of these conditions, participants perform a simple task with a performance-based monetary reward. Half self-report and can safely cheat, while the other half are verified; the difference between verified and self-reported scores is a proxy for dishonest reporting. As hypothesized, unmonitored individuals reciprocate with honest behavior, while monitored individuals tend toward dishonest behavior when the opportunity arises. Implications for fraud prevention are discussed.