Backdating of stock options is an example of an agency problem. It has emerged despite all the measures (i.e., new regulations and additional corporate governance mechanisms) aimed at addressing such problems? Beyond such negative controlling measures, a more positive empowering approach based on ethics may also be necessary. What ethical measures need to be taken to address the agency problem? What values and norms should guide the board of directors in protecting the shareholders' interests? To examine these (...) issues, we first discuss the role values and norms can play with respect to underlying corporate governance and the proper role of directors, such as transparency, accountability, integrity (which is reflected in proper mechanisms of checks and balances), and public responsibility. Second, we discuss various stakeholder approaches (e.g., government, directors, managers, and shareholders) by which conflicts of interest (i.e., the agency problem) can be addressed. Third, we assess the practice of backdating stock options, as an illustration of the agency problem, in terms of whether the practice is legally acceptable or ethically justifiable. Fourth, we proceed to an analysis of good corporate governance practice involving backdating options based on a series of ethical standards including: (1) trustworthiness; (2) utilitarianism; (3) justice; and (4) Kantianism. We conclude that while executive compensation schemes (e. g., stock options) were originally intended to help remedy the agency problem by tying together the interests of the executives and shareholders, these schemes may have actually become "part of the problem," and that the solution ultimately depends upon whether directors and executives accept that all of their actions must be based on a set of core ethical values. (shrink)

This study examines events at the conclusion of the 2006 stock option backdating scandal: the departures of C-level executives from firms implicated in backdating. The authors ask whether removing executives brings closure to the scandal, or if executive turnover creates greater uncertainty. Using a sample of 236 executive departures, the authors find that although overall market reaction to executive departures is negative, those departures involving a firm’s CEO or CFO ameliorate the market reaction. The authors also find (...) that market reaction worsens when the CEO “resigns,” versus being terminated, and when the firm involved has been previously identified as socially responsible. Results suggest that firms, by shaping who and how executives depart, may amplify or dampen the damage of existing scandalizing events. (shrink)

We examine market reactions to the stock options backdating scandal in a slightly unusual way, but focusing on firms who were not perceived to have had a backdating concern, but were instead linked to firms who did have a backdating concern. These linkages can be found via board interlocks and the roles those directors perform. In addition we examine the linkages which occur from shared professional services firms, such as auditors and outside legal counsel. That (...) these potential conduits are available is not in question, but rather, do investors perceive the conduits are used to pass along information about backdating stock options? We then ask if affiliation with dominant audit and legal services firms ameliorates or exacerbates those investor market reactions. We find that firms linked to the scandalized firms also face negative reactions, which are worsened when they also are serviced by professional services firms who are themselves are also linked to the managerial practice. (shrink)

High-profile corporate scandals earlier in this decade provoked outrage and legislative action; however, corporate executive-level ethical lapses continue to come to light. This article examines the work of Professor Dunfee and his coauthors on corruption, ethical leadership, and social contracts theory, and relates that literature to corrupt activities by corporate executives. Corruption is defined broadly to encompass executive self-dealing, which harms their firms. The specific example of stock options backdating is used to show the harmful impact on (...) shareholders and the lack of managerial integrity though consequentialist, deontological, and legal analysis, as well as a critique of the practice using social contracts principles. Ultimately, this article utilizes the insights of Dunfee and his coauthors, and the lessons from the backdating example, to propose a framework aimed at improving corporate governance and preventing future executive corruption. The framework includes a strategy of identification and prevention, employing detection and eradication mechanisms, and institutional learning from past instances of corporate corruption. (shrink)

Recent scandals at Enron, WorldCom and Global Crossing have put the ethical spotlight on corporate malfeasance as never before. However, these are the situations in which management knew that they made the wrong choice. As professor Joseph Badaracco of Harvard Business School points out, the real ethical dilemmas arise when people must choose between right and right — where both choices can be justified, yet one must be chosen over the other. Whether or not to reprice stock options (...) represents one such ethical dilemma. Repricing can help exodus of talented employees and motivate them to improve firm performance. However, it alienates shareholders and other workers of the company who are left unprotected from the adverse economic consequences of a stock price decline.In this paper we examine the ethics and the economics of stock option repricing. We find that repricing runs counter to two key tenets of business ethics — distributive justice and ordinary decency. To examine the economics of repricing, we draw upon agency theory to identify situations where repricing has the potential to benefit shareholders. However, a survey of empirical research reveals that these benefits do not translate into reality. Repricing does not improve employee retention or firm performance. In addition, managers benefit by opportunistically timing the repricing. Due to weaknesses in corporate governance such as lack of independence and conflicts of interest, the current repricing practice seems to be at odds with the objective of shareholder wealth maximization, and at a more fundamental level, a violation of board's fiduciary duty to shareholders. We offer suggestions that mitigate the ethically undesirable effects of repricing in the wider context of prevailing corporate governance and regulatory environment. We believe that these suggestions, if properly implemented, can transform repricing from a greed-inspired evil to a valuable compensation tool to retain employees, boost their morale, and enhance stockholder wealth. (shrink)

Prior research has examined several ethical questions related to executive compensation. The issues that have received most attention are whether executives' pay is fair and justified by performance. Since more recent studies show that stock options grants constitute the single largest component in executive compensation, we examine the relations of these grants to economic determinants and corporate governance for firms in the stagnant stage of their lifecycle. We find that, on average, stock options grants comprise a (...) significant portion of annual CEO compensation (26.4%) for stagnant firms. We also find that economic (corporate governance) factors explain less (or more) of the cross-sectional variation in stock options grants for stagnant firms than for growth firms. Furthermore, we document lower pay-performance sensitivity (i.e., weaker incentive alignment) and no improvement in future firm performance from past stock options grants to CEOs of stagnant firms. In particular, our study provides empirical evidence on some inefficiencies associated with stock options grants to CEOs of low potential (stagnant) firms, a long-standing concern of business ethics researchers (Moriarty, 2005; Nichols and Subramaniam, 2001; Perel, 2003). Our results also provide support for the corporate governance reforms discussed in Matsumura and Shin (2005), especially those proposed provisions that curtail the power of CEOs in the governance of firms. (shrink)

Recent changes to accounting standards for employee stock-based compensation with contingent features are examined. The implementation of FAS 123R by the Financial Accounting Standards Board in December 2005 now requires the fair value of such expenses to be recorded in net income. This accounting change is now impacting the reported financial statements of firms that have been substantial users of employee stock options. This provides an opportunity to directly observe the actual impact FAS 123R is having on (...) such firms. Arguments for and against mandatory expensing are reviewed and an assessment of the contrasting positions provided. Significant limitations of current reporting requirements for executive stock options identified in Poitras (2004) still have not been addressed. (shrink)

This paper examines the ethics of contemporary managerial compensation in the context of executive stock options. Economic considerations would dictate that executive stock options should be adjusted to eliminate the effect of overall stock market movements which are beyond the control of the executive. However, in practice, most executive stock options are not adjusted to control for these outside factors. Agency considerations are the most likely culprit. Adjusting for the influence of outside factors, (...) such as a generally rising stock market, from executive stock options sets a higher bar for managers to reach. Furthermore, traditional accounting standards permitted firms that did not adjust options to avoid reporting options as expenses. This presents CEOs and boards of directors with a major ethical dilemma. On the one hand, their duty to their shareholders and stakeholders dictates that executive stock options should be adjusted to eliminate outside noise from unrelated movements in the overall stock market. However, financial statements are presented in the language of accounting. If the overwhelming majority of the users of a language define a particular item in one way, then to deviate from the norm implies that the recipient of such a deviant statement may not properly interpret the statement. Likewise, if the standard practice is for firms to use unadjusted options and thus under-report expenses, to deviate from this industry norm risks that users of financial statements would not properly interpret the financial statements, with perhaps negative consequences for the shareholders. In short, if "everyone else does it," then it could be wrong for an individual firm to deviate from the norm as that would harm the shareholders. (shrink)

In this paper, we compare firm-specific attributes including outside director remuneration for two groups of firms. One of these groups consists of 96 firms that did not give stock options to the CEO during the sample period 1992 2001, while the other group of 571 firms granted stock options on a consistent basis during these years. Our results indicate that for the group with stock option grants, the remuneration to outside directors was significantly higher and (...) the CEO had longer tenure compared to the other group. These results are robust even after controlling for other economic attributes associated with the decision to grant stock options. (shrink)

This article introduces the special issue on “Corporate Reputation: Being Good and Looking Good.” Three of the five included articles help to reinforce a conclusion that “being good” and “looking good” are not dichotomous, mutually exclusive conditions. Rather, the two dimensions are linked in some kind of causal relationship for which continuing conceptual and empirical research is desirable. A fourth article concerns the reputational effects of the stock-option backdating scandal. The fifth article offers a critique of conventional approaches (...) to defining and measuring reputation. (shrink)

Abstract:While many aspects of stock and option based compensation for corporate officers remain controversial, we suggest that the growing trend for similar practices in favor of boards of directors will prove to be even more contentious. High-ranking corporate managers do not set their own salaries nor authorize their own stock options. By contrast, boards of directors do, in fact, set their own compensation packages. Other potential conflicts of interest include setting option performance targets, stock buybacks, (...) class='Hi'>stock option resets and reloads, consolidations (mergers and acquisitions), and service on multiple boards. As trust is the most valuable commodity in a capitalist society, we suggest that these potential conflicts of interest and related outcomes may ultimately serve to erode any anticipated benefits of director stock compensation. (shrink)

Two obvious trends in corporate governance include broadening board accountability beyond shareholders’ interests and paying outside directors with equity compensation (stock and stock options). By integrating common agency and instrumental stakeholder theories, we examine the effect of stock compensation on secondary stakeholders and a firm’s participation in social issues, two areas where interests are less aligned with shareholder value. Consistent with our predictions, we found that while stock compensation may be an effective way to align (...) directors’ goals to those of shareholders, it has adverse effects on important non-shareholder constituencies in the company’s operating environment. (shrink)

Islamic banking, based on the prohibition of interest, is well established throughout the Muslim world. Attention has now turned towards applying Islamic principles in equity markets. The search for alternatives to Western style markets has been given added impetus in Muslim countries by the turmoil in Asian financial markets in 1997. Common stocks are a legitimate form of instrument in Islam, but many of the practices associated with stock trading are not. In this paper the instruments traded and the (...) structure and practices of stock markets are examined from an Islamic perspective. Speculation is not acceptable in Islam and measures would have to be taken to control speculative trading. In addition short selling and margin trading are severely restricted. The use of stock index and equity futures and options are also unlikely to be acceptable within an Islamic market. Regulatory authorities in Muslim countries will therefore find a vast array of problems in attempting to structure a trading system that will be acceptable. (shrink)

In this chapter, I pursue two aims. Firstly, I propose an original survey and analysis of the way proponents of 4E cognition have until now defined the relations between normativity and cognitive science. A first distinction is made between making normativity an explanandum of 4E cognitive science, and turning normativity into a property or part of the explanantia of 4E cognitive science. Inside of the latter option, one must distinguish between methodological, ontological and semantic claims on the value of normativity (...) for studying and defining cognitive phenomena. The second aim of the paper consists in developing the further claim that normativity is an essential property of daily intentional concepts and of scientific concepts. I show how 4E cognition might further develop this latter claim in the context of recent debates about cognitive ontologies in neuroscience. (shrink)

This chapter defends a theory of objectification, conceiving of it as a species of what aestheticians have called ‘seeing‐as’, and more specifically, a kind of seeing‐as which to some degree is insensitive to the mind or mental aspects. An advantage of this view is that it covers both sexual and racial objectification, and can also explain how photographic images can objectify their subjects: namely, by encouraging the viewer to view in a way insensitive to the mind or mental aspects of (...) the subject. It also explains in what context objectification to can be harmless. This view is discussed in relation to several others. (shrink)

The foremost aim of this research was to forecast the performance of three stock market indices using the multilayer perceptron, recurrent neural network, and autoregressive integrated moving average on historical data. Moreover, we compared the extrapolative abilities of a hybrid of ARIMA with MLP and RNN models, which are called ARIMA-MLP and ARIMA-RNN. Because of the complicated and noisy nature of financial data, we combine novel machine-learning techniques such as MLP and RNN with ARIMA model to predict the three (...) stock market data. The data used in this study are taken from the Pakistan Stock Exchange, National Stock Exchange India, and Sri Lanka Stock Exchange. In the case of Pakistan, the findings show that the ARIMA-MLP and ARIMA-RNN beat the individual ARIMA, MLP, and RNN models in terms of accuracy. Similarly, in the case of Sri Lanka and India, the hybrid models show more robustness in terms of forecasting than individual ARIMA, MLP, and RNN models based on root-mean-square error and mean absolute error. Apart from this, ARIMA-MLP outperformed the ARIMA-RNN in the case of Pakistan and India, while in the context of Sri Lanka, ARIMA-RNN beat the ARIMA-MLP in forecasting. Our findings reveal that the hybrid models can be regarded as a suitable option for financial time-series forecasting. (shrink)

What is fiction? It permeates contemporary life: via novels we read, stories we tell, box-sets we watch, and as philosophers, thought experiments we use. Many think it should be characterised in terms of a relation to the imagination. In this essay, I’ll consider prominent expressions of this view, as well as rejections of it. Before this, I’ll introduce two methodological approaches that it’s helpful to distinguish.

Recollection is a central component of Kierkegaard’s dramaturgical aesthetics, as it is recollection that allows for the actor and audience to accomplish continuity between the past and present, and, crucially, the private and the public. This continuity is accomplished imaginatively, wherein an actor or a poet seeks to elicit mood and establish an interpersonal dimension to inwardness, hence allowing the act of recollection to have both existential and social significance. My task is to articulate this aspect of his dramaturgical aesthetics (...) and demonstrate how there is a further continuity, between Kierkegaard’s thinking of the aesthetic and the religious in his authorship. I establish this continuity by analyzing the relationship between the living and the dead in recollection. Because recollection also forms an inward relation to the dead, this analysis has important implications for his doctrine of Christianity. Consequently I suggest Kierkegaard’s authorship fits Lessing’s criteria for a successful Christian drama. At a minimum Kierkegaard wrote in order to be read dramaturgically, with the reader thinking alongside and interpreting the text based on the mood it elicits. Finally, Kierkegaard’s own work of recollecting Christ in a “martyrdom of laughter” [Latterens Martyrium] establishes a continuity between the aesthetic (im)possibility of Christian theater qua Lessing and the religious (im)possibility of imitating Christ. (shrink)

On Our Allotted Guardian Spirit is a lively and at times perplexing text combining general reflections on the nature of the soul with a discussion of the phenomenon of a personal guardian spirit. Plotinus wants to interpret Plato, and aims to integrate Plato's various statements about daimones into one comprehensive theory. This leads to some views that are, if not exotic, then at least strange on first encounter. However, a closer reading reveals that Plotinus is not interested in demonology per (...) se. Instead, the central concern of the treatise are ideas about the soul, the self, and self-consciousness. Plotinus' explorations produce a theory of the mind as the agent and activity responsible for a person’s ethical choices and conduct of life. The demon emerges as a philosophical tool passed down from Plato, but adapted and rationalized to try to explain motivation to action, the impulse toward the ethical life, and even the various differences in human ethical and psychological constitution. This innovative theory is a response to a strong and ongoing current of thought in the philosophical tradition. The introduction offers an overview of ancient demonologies, starting with Homer and the Presocratics, and is followed by an in-depth examination of Plato, the Stoics, Plotinus, and later Neoplatonic developments. As such the book presents Plotinus’ specific rationalizing response to the idea of a guardian spirit in the context of ancient philosophical demonologies. (shrink)

A popular approach to defining fictive utterance says that, necessarily, it is intended to produce imagining. I shall argue that this is not falsified by the fact that some fictive utterances are intended to be believed, or are non-accidentally true. That this is so becomes apparent given a proper understanding of the relation of what one imagines to one's belief set. In light of this understanding, I shall then argue that being intended to produce imagining is sufficient for fictive utterance (...) as well. (shrink)

The contribution analyses (self-)descriptions of hearing experiences articulated by cochlear implant (CI) users through internet blogs. These auto-medial testimonies (Dünne/Moser) are understood as elements of an individuation process that reciprocally produces the CI-user as well as the CI itself. The analysis therefore focuses on those acoustic effects that are established by the CI, its first activation and the further mapping or adaptation processes as well as early CI-hearing experiences and subsequent listening exercises. It can thus be shown how the cultural (...) practice of hearing/non-hearing is produced within a specific socio-technical arrangement. (shrink)

One of the strangest of the many strange habits of philosophers, which mark them out as the Ishmaels of the scientific world, is their refusal to agree as to the precise meaning of the words they use. No philosopher, it seems, is bound by the definitions given by predecessors or contemporaries of even the most central terms: each has to define his terms for himself. The resulting situation certainly lends itself to ridicule and caricature, as in the legend of the (...) theological disputants who arrived after long argument at the conclusion that when the one said ‘God’ he meant what the other meant when he said ‘Devil.’ Still it is probable that this idiosyncrasy of philosophers has some real ground in the special nature of the task on which they are engaged, and is not a mere exhibition of aimless malice or sheer incompetence. Whether that is so or not, one of the consequences of this situation is that the titles of philosophic discourses are apt to be singularly unilluminating: as an indication of the problem to be raised they are, to say the least, highly ambiguous. How the reader may understand the title of this paper I do not know; but the question which I had in mind in choosing it was this. (shrink)

A study of moral values is a study of the values relevant to character and conduct. Since conduct consists of actions and character is exhibited in and inferred from actions, the phrase “values relevant to actions” would perhaps suffice. The term “values” needs little amplification. But it is necessary to observe that there are on the face of it two sets of values relevant to actions, namely those which actions themselves possess, so that we differentiate them as good and bad (...) actions—a differentiation which may be made by a spectator in regard to a process in which he himself takes no part; those asserted implicitly by an agent in his action considered as an interference with the course of events. In the most obvious and typical cases this second set of values attach themselves, not to actions, but tothe environment of action as modifiable by it; in particular, to states or events which action may help to maintain or bring about. Thus the act of tidying a room implies a preference under the given circumstances for a tidy rather than an untidy room. (shrink)

In these days, when, if the words of constitutions can be trusted, sovereign Parliaments based on manhood or adult suffrage are rapidly extending their sway over the greater part of the world, there is surely no conception more deserving of the attention of the political theorist than that of Representation. There was a time when government for most men meant monarchy, when ruler meant king or king's minister. To-day for most men ruler means Parliament or ministers responsible to Parliament, and (...) government means representative government. In those former times the political theorist would naturally take the king or prince for his centre-piece, and devote himself to expounding the nature and attributes of the office. “For from the prince, as from a well spring, cometh the flood of all that is good or evil upon the people” . In our own day he would perhaps do well to devote himself first and mainly to reflection on the meaning of this term representation, standing as it does for something which is taken by general consent to constitute the distinctive feature of the normal modern type of government. He may run the risk of speaking merely for his own day; but he should at least be sure of remaining near the centre of his subject. (shrink)

We may look at the relation of will and motive from another side as follows: Will, we have said, is an individual response to an individual situation. Like the situation itself, it is not a fixed thing persisting through change, but involved in a continuous flow of change, re-adapting itself constantly in one respect or another to recognized changes of circumstance. It can have no more immutability than circumstance, and if it is not to be left behind in the march (...) of events and become old-fashioned, it should have the capacity for the same rapidity of change. Now motives also change, but in a different way. First one motive operates, then another, as circum-. (shrink)

We may look at the relation of will and motive from another side as follows: Will, we have said, is an individual response to an individual situation. Like the situation itself, it is not a fixed thing persisting through change, but involved in a continuous flow of change, re-adapting itself constantly in one respect or another to recognized changes of circumstance. It can have no more immutability than circumstance, and if it is not to be left behind in the march (...) of events and become old-fashioned, it should have the capacity for the same rapidity of change. Now motives also change, but in a different way. First one motive operates, then another, as circum-. (shrink)

In the first half of this book, I offer a theory of fictional content or, as it is sometimes known, ‘fictional truth’.The theory of fictional content I argue for is ‘extreme intentionalism’. The basic idea – very roughly, in ways which are made precise in the book - is that the fictional content of a particular text is equivalent to exactly what the author of the text intended the reader to imagine. The second half of the book is concerned with (...) showing how extreme intentionalism and the lessons learnt from it can illuminate cognate questions in the philosophy of fiction and imagination. For instance, I argue, my position helps us to explain how fiction can provide us with reliable testimony ; it helps explain the phenomenon of imaginative resistance ; and it fits with, and so supports, a persuasive theory of the nature of fiction itself. In my final chapter, I show how attending to intentionalist practices of interpreting fictional content can illuminate the nature of propositional imagining itself. (shrink)

This research applies the impression management theory of exemplification in an accounting study by identifying and measuring differences in both auditor and public perceptions of exemplary behaviors. The auditors were divided into two groups, one of which reported self-perceptions (A-S) while the other group reported their perceptions of a typical auditor (A-O). There were two separate public groups, which gave their perceptions of a typical auditor and were divided based on their levels of accounting sophistication. The more sophisticated public group (...) was comprised of bank loan officers (LO) while the less sophisticated public group consisted of investment club members (IC). Comparisons were made on 30 behaviors contained in the AICPA Code of Professional Conduct, which served as the basis for the research instrument. Profile analysis, a special form of MANOVA technique, was used to analyze the results. A-S perceptions were the highest of the four treatment levels and were significantly higher (i.e., more exemplary) than the perceptions of both the A-O and LO groups. The more sophisticated user group (LO) provided the lowest perceptions of the four treatment levels. For at least four of the six measures, the LO treatment group perceived the typical auditor to be less exemplary than both the IC and A-O treatments. There were no differences in perceptions between the A-O group and IC. Additional analysis revealed that auditors overrated the degree to which the public relied on financial statements. However, both public groups reported a reasonably high level of reliance on financial statements when making decisions. (shrink)

This article considers a series of ideas disturbing the conventional wisdom that decrees education an essential force in saving the world. Taking Morton's descriptions of hyperobjects seriously, we consider his radical idea that the world has ended amidst the eco-political depredations of the Anthropocene. Accordingly, we claim that education in modernity most properly belongs - materially and ideologically - with technological enframing and the rise of biopower. In other words, what is taken almost universally as the sacred realm of education (...) is, in fact, a contributory factor in the global eco-ontological crisis. Morton describes global warming, plastics and nuclear arsenals as hyperobjects: viscous, nonlocal entities that exist in temporal and spatial planes vastly different from our own immediate worlds. They are the threatening, difficult to access entities that express the Anthropocene. While most will propose that education will be vital in combating looming ecological apocalypse, we consider that education is a hyperobject itself. Education, we opine, is aligned with the forces and conditions that have generated the present crisis. This is because education embodies the same qualities as the hyperobjects of modernity; according to any rigorous historical ontology, education as we know it must be seen as the most extensive expression of a dangerous biopower that is beyond control. If this position is to be taken seriously, education is not merely impotent in combatting ecological catastrophe, but is a key apparatus supporting the Anthropocene. Education is thus another element of the end of the world. (shrink)