‘When I hear about the complex transfer pricing schemes at companies such as Amazon and Starbucks, I start wondering whether the accountants knew they were avoiding tax.’ Photograph: Mike Blake/Reuters
As a university teacher of accounting, I see the world through a particular lens. When I read about the sales scandal at Wells Fargo, I can’t help but think about the people who naively designed the incentive schemes that triggered this type of unethical behaviour. When I hear about the complex transfer pricing schemes at companies such as Amazon and Starbucks that enable them to avoid tax, I start wondering which accounting techniques they used. In short, I see the strong connection between unethical business practices and accounting techniques.
One reason why these problems persist is that the textbooks used in most elementary management accounting courses ignore this connection. They tend to focus on the technical aspects of accounting – understanding the formulas, definitions, mechanics and calculations – while ignoring its ethical aspects. The ethical dimension is usually nothing more than an add-on in an isolated chapter, introduction paragraph, or in a separate course on business ethics. This makes ethics an afterthought detached from the topics it is intended to reflect on.
Take the example of transfer pricing – the practice of setting a price for a good or service delivered by one part of an organisation to another. When these units are located in different tax regions, the chosen transfer price affects the amount of tax that has to be paid. Various accounting textbooks discuss the technical aspects of transfer pricing, framed with questions such as “how can multinationals minimise their taxes payable?”. The ethics of whether it’s fair to avoid paying taxes – like how many developing companies are harmed by tax-avoiding multinationals - are rarely discussed.
This may lead students to believe that business decisions are only technical, and bear no ethical implications. In fact, business decisions almost always bear ethical implications: they may deteriorate work conditions elsewhere in the supply chain, create a profit-justifies-the-means culture or increase inequality on a global level.
As a university teacher of accounting, I see the world through a particular lens. When I read about the sales scandal at Wells Fargo, I can’t help but think about the people who naively designed the incentive schemes that triggered this type of unethical behaviour. When I hear about the complex transfer pricing schemes at companies such as Amazon and Starbucks that enable them to avoid tax, I start wondering which accounting techniques they used. In short, I see the strong connection between unethical business practices and accounting techniques.
One reason why these problems persist is that the textbooks used in most elementary management accounting courses ignore this connection. They tend to focus on the technical aspects of accounting – understanding the formulas, definitions, mechanics and calculations – while ignoring its ethical aspects. The ethical dimension is usually nothing more than an add-on in an isolated chapter, introduction paragraph, or in a separate course on business ethics. This makes ethics an afterthought detached from the topics it is intended to reflect on.
Take the example of transfer pricing – the practice of setting a price for a good or service delivered by one part of an organisation to another. When these units are located in different tax regions, the chosen transfer price affects the amount of tax that has to be paid. Various accounting textbooks discuss the technical aspects of transfer pricing, framed with questions such as “how can multinationals minimise their taxes payable?”. The ethics of whether it’s fair to avoid paying taxes – like how many developing companies are harmed by tax-avoiding multinationals - are rarely discussed.
This may lead students to believe that business decisions are only technical, and bear no ethical implications. In fact, business decisions almost always bear ethical implications: they may deteriorate work conditions elsewhere in the supply chain, create a profit-justifies-the-means culture or increase inequality on a global level.
We need to see a much stronger integration of ethical considerations into business education. This is how managers make real-life business decisions. This could be achieved through a discussion on the techniques and ethics of transfer pricing in one and the same accounting class, using a case that highlights both aspects. Business education should also challenge its own underlying assumptions about human behaviour, and bring in other disciplines such as the humanities to help students think critically about business practices that are taken for granted.
Of course it’s important that business students acquire technical skills, and universities shouldn’t be paternalising students by dictating what is and isn’t ethical. Instead, a more critical and integrated debate about the moral implications of financial instruments, accounting techniques and new technologies should play a central role in business education.
In the film Jurassic Park, Dr Ian Malcolm says: “Scientists were so preoccupied with whether or not they could, they didn’t stop to think if they should.” I would like us – business educators, but also students, managers and accountants – to not make that same mistake. Let’s take that step back every once in a while to reflect on the ethics of the technics.
Of course it’s important that business students acquire technical skills, and universities shouldn’t be paternalising students by dictating what is and isn’t ethical. Instead, a more critical and integrated debate about the moral implications of financial instruments, accounting techniques and new technologies should play a central role in business education.
In the film Jurassic Park, Dr Ian Malcolm says: “Scientists were so preoccupied with whether or not they could, they didn’t stop to think if they should.” I would like us – business educators, but also students, managers and accountants – to not make that same mistake. Let’s take that step back every once in a while to reflect on the ethics of the technics.
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