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Business Unit Controller Integrity Violations: A Mirror Neuron Investigation
March 6, 2014 @ 12:00 pm - 1:00 pm
Speaker(s): Frank Hartmann
Affiliation: RSM Erasmus University
Organised by: Professor Breda Sweeney
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Business Unit (BU) controllers have a fiduciary role to ensure the integrity of their units financial reporting. They often face, however, social pressure from line managers to violate accounting rules or principles. Moreover, the position of BU controllers often also involves a role of providing support for unit decision making, resulting in close personal relations to those same line managers. In this paper neurological information is used to predict controllers ability to withstand line manager pressure, drawing on recent findings on the human mirror neuron system. A sample of professionals participated in an electroencephalogram (EEG) recording to measure neurological response in the motor cortex to an emotional facial expressions task, and also completed a survey on violations of accounting integrity. These are measured using vignettes, which describe situations of unit managers exerting emotional pressure on controllers to transgress ethical norms. Our results indicate a strong and significant positive relationship between controllers mirror neuron activity and integrity violation. Furthermore, we find that the predictive validity of mirror neuron activity is limited to cases in which the line manager has a personal interest at stake. This finding confirms the role of social pressure in financial reporting integrity violations, and suggests that controllers mirror neuron activity is an important factor. This means that consideration of BU controllers biological characteristics adds to the explanation of financial reporting integrity and possible violations thereof.