Does Self-Certification Make Managers More Ethical?

Oct 12th 2016
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If you the manager sign off on a request or statement, will the act of doing that increase your honesty?

Known as self-certification, the theory is that it enhances truthfulness even when there’s no monitoring or potential penalties. That’s the premise of a new study, Does Self-Certification Encourage or Reduce Opportunistic Behavior? in the current issue of the American Accounting Association journal, Behavioral Research in Accounting.

In other words, employees who are required to self-certify are less likely to engage in opportunistic behavior. Ah, if only it was that easy.

Appealing to a person’s internal moral values to curb opportunism has both benefits and limitations, according to the study, which was authored by Nicole Ang, senior lecturer in the School of Accounting at the University of New South Wales in Australia, and Mandy Cheng, professor and head of the School of Accounting at the university.

That’s because the troublesome psychological issue of cognitive dissonance – stress caused by contradictory thoughts or actions – is at work. The authors figured that managers won’t behave opportunistically at the expense of the organization because they want to avoid the stress of doing so. But that’s not always the case.

Ang and Cheng set up two experiments. The first consisted of two stages. The first stage involved 103 participants who were told they were the only people with access to information about a project. Self-certified statements about the project would not be reviewed. More than half of the self-certifiers opted to stop underperforming projects, compared to about a third of those who didn’t self-certify. Those self-certifiers who decided to continue their underperforming projects put their own interests ahead of the organization’s.

In the second stage of the experiment, participants were told that their underperforming projects of the prior year were still underperforming. The majority of the self-certifiers who had continued their projects in the first stage did so again. According to the study, “managers who choose to continue an underperforming project in stage one are significantly more likely to continue that project in stage two if they have a self-certification requirement than if they do not.”

Why? “Our finding is consistent with prior psychology research that shows that the desire to maintain commitment to a previous unethical act in order to reduce dissonance can lead to even more unethical acts,” the authors wrote.

In the second experiment, participants were asked to decide what would happen to their underperforming projects. They were told there was a 5 percent chance that their decisions would face internal audits. This time, self-certification was found to be less effective when formal monitoring is involved.

“Instead, there is some evidence that managers are more likely to continue an underperforming investment when they are required to self-certify their decisions in the presence of formal monitoring,” the authors wrote.

Hmm, what’s the takeaway?

Let’s go back to the stress issue. Managerial decisions can depend on whether you want to avoid expected dissonance or reduce experienced dissonance.

“From a practical perspective, our findings suggest that an informal self-certification requirement is most useful for decisions that do not have multiple decision points, as it has the potential to backfire in a setting in which managers make repeated decisions about the same course of action,” the authors wrote.

They believe their study shows that self-certification places the onus of doing the right thing on managers. But managers could interpret random internal audits as placing the onus of detection on the organization, they wrote.

So, combining the two – self-certification and monitoring – could possibly make managers behave more dishonestly.

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