TOWARDS AN UNDERSTANDING OF THE CULTURAL PILLARS OF ETHICAL ADMINISTRATION IN TURKEY

Kemal Oktem

Business ethics deals with ethical aspects of management and entrepreneurship, activities closely linked to “this world’s” problems. Surprisingly enough religious traditions have their impact on the argumentation in this field. The paper focuses on two biblical parables: on the talents and on the good Samaritan. Both are not only present in business and management literature but also widely discussed in the context of today’s economy and society. The first one seems to be a basis of the doctrine of corporate social responsibility in its original form presented within the “gospel of wealth” movement. The second one however offers even more opportunities to discuss the responsibilities of business in today’s world. So the religious narratives cannot be ignored within business ethics. This conclusion applies, of course, to all religions, esp. the Asian ones in view of the fact of the rapid development of Chinese or Indian economies.

Since the 1970s, a discursive formation has arisen around the timeless concern that is commonly labelled “business ethics” today. Often dismissively characterised as an oxymoronic expression, business ethics is also an odd beast from the perspective of the broader history of ideas. Moral criticism of business practice particularly in the US during the 1960s and 70s has led to the development of new theories, notions and standards of moral reasoning in a business setting that claim particularly to be based in (secular) reason, not received religious (i.e. traditionally moral) values. This paper investigates the origins of this approach to the moral aspect of decision-making in a business setting, one which is quite different to that which previously prevailed in commercial education and practice, particularly in terms of its increasing divorce since the 1970s from institutional religious understandings.

Despite growing interest in examining the role of religion in business ethics, there is little consensus concerning the basis or standards of ''good'' or ethical behavior and the reasons behind them. This limits our ability to enhance ethical behavior in the workplace. We address this issue by examining worldviews as it relates to ethics research and practice. Our worldview forms the context within which we organize and build our understanding of reality. Given that much of our academic work as well as business practice operate from a modern worldview, we examine how modernism shapes our beliefs and approaches to ethics in business and academia. We identify important limitations of modernism in addressing moral issues and religion. We then introduce the Christian worldview as an alternative approach to examining ethical issues in business

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E & " E + CA B '()*+,+-.(+/0-.1+/ -C F8>78C /"/"#012" " & 8>78 )*3- +) TABLE OF CONTENTS INTRODUCTION ..........................................................................................................v Simon Robinson and Mahmut Arslan CHAPTER 1 CHRISTIAN BUSINESS ETHICS ..................................................................................1 Simon Robinson CHAPTER 2 BUSINESS ETHICS IN ITALIAN STUDIES ON MANAGEMENT: ORIGIN AND NATURE OF A WIDE-RANGING UTILITARIAN NOTION.................................... 23 H Tiziana Di Cimbrini CHAPTER 3 CCTV SURVEILLANCE AND ETHICS: THEORY AND PRACTICE IN THE WEST AND THE MOBESE CASE OF TURKEY ...................................................................55 Mehmet Devrim Aydin Mete Yildiz Erdem Erkul CHAPTER 4 MAXIMIZING AN ORGANIZATION’S VALUE TO SOCIETY: THE CASE FOR ETHICAL BUSINESS DECISIONS, THE ACT OF PRUDENCE ..............................77 Marco G. D. Guidi CHAPTER 5 A QUANTITATIVE RESEARCH ON MACHIAVELLIANISM ................................93 Gamze Mandaci Semra Güney Oznur Azizoglu Eren Miski Aydin i CHAPTER 6 DIFFERENTIATION OF CONSUMER ETHICAL BELIEFS TOWARDS CONSUMER LIFESTYLES........................................................................................117 Pınar Basgoze Leyla Ozer Vugar Hamidli CHAPTER 7 LIVING IN A “SURVEILLANCE SOCIETY”: INFORMATION TECHNOLOGY IN GOVERNMENT, VANISHING PRIVACY, AND THE CALL FOR AN ETHICAL CONDUCT...................................................................................................................137 Mehmet Devrim Aydin CHAPTER 8 EXAMINING THE AUTHORITIES CONTRIBUTING TO THE SOCIAL RESPONSIBILITY ACCOUNTING IN TURKEY ....................................................159 Semra Karacaer Pelin Guven Ozek CHAPTER 9 LINKING ETHICS INTO MANUFACTURING PROCESS THROUGH TOTAL QUALITY MANAGEMENT (TQM) ..........................................................................193 Mine Omurgonulsen Mahmut Arslan CHAPTER 10 CHARACTERISTICS OF PROFESSIONS AND ACCOUNTANCY PROFESSION IN TURKEY ........................................................215 Mustafa Kilic Aysegul Cerci ii CHAPTER 11 TOWARDS AN UNDERSTANDING OF THE CULTURAL PILLARS OF ETHICAL ADMINISTRATION IN TURKEY: A QUALITATIVE RESEARCH ENDEAVOUR........................................................265 Ugur Omurgonulsen M. Kemal Oktem CHAPTER 12 EVALUATION OF INTERNAL LOCUS OF CONTROL AND INNOVATIVENESS IN THE SCOPE OF NEW PRODUCT DEVELOPMENT: COMPARISON OF TURKEY AND MALAYSIA ......................................................................................291 Hatice Calipinar CHAPTER 13 A SUBDIMENSIONAL APPROACH TO THE RELATION BETWEEN ETHICAL CLIMATE AND ORGANIZATIONAL COMMITMENT .........................................313 Oznur Azizoglu Eren Miski Aydin Kubilay Ozyer ABOUT THE CONTRIBUTORS .............................................................................341 INDEX .........................................................................................................................347 iii iv INTRODUCTION by Simon Robinson∗ and Mahmut Arslan∗∗ This book would not have been possible without the support and encouragement of European Business Ethics Network (EBEN) members and its president Prof. Dr. Alejo J. Sison. It has been prepared for publication by the participation of authors in Turkey, Italy, and the UK. The book begins to address many of the issues that have emerged for Business Ethics from the 2007/8 financial crisis. The responses to that crisis have focused on the lack of responsibility and what led to that. Despite calls for more responsible action across the different spectra of institutions, globally there has been little real progress. In the finance industry, for instance, there is neither agreement on the meaning of responsibility, nor on how the irresponsible behaviour involved in the crisis might be addressed (Sun et al., 2011). Even the UK Vickers Report of 2011 pays no systematic attention to the meaning of responsible practice as such (bankingcommission.independent.gov.uk). Academic attempts to understand the financial crisis have, however, raised some key issues both about responsibility as a fundamental ethical category and the development of business ethics itself (Robinson and Dowson, 2012; Rayment and Smith, 2010; Sun et al., 2011; Gregg and Stoner, 2009; Visser, 2011). First, some argue that that the lack of responsibility is focused in negative character attributes such as greed. There is, of course, a long debate about the nature and relationship of private vices and public goods (see Mandeville, 1714). The finance crisis clearly shows private vices leading to bad decision making, based in a lack of awareness of the industrial, social and physical environments. All this raises a renewed interest in virtue ethics in practice, and self-regulation. Simon Robinson (PhD). FRSA. Professor of Applied and Professional Ethics, Leeds Metropolitan University, Leeds, UK. ∗∗ Mahmut Arslan (PhD). President of EBEN-TR, Professor at the department of Business Administration of Hacettepe University, Ankara, Turkey. ∗ v Second, many argue that the cause of irresponsibility was institutional, suggesting that responsible behaviour was affected by the culture of the organization, and its governance. In effect, this argues that it is difficult to practice ethical virtues where there is no community culture, with associated narrative (MacIntrye, 1981). It is not surprising then that the lack of this in management, and thus the sense of any professional identity, has become a major issue, leading to calls for the development of professional identity in management (Khurana and Nohria, 2008; Robinson, 2011), and increased calls for the articulation of ethics in related professions. Third, the focus of the crisis was also seen as outside personal attributes and organizational culture, in the regulation of business through professions and politics. This regulation had failed, leaving questions about how the ethical narrative might be sustained in the relationship between business, professional and political practice. If the ethical importance of these three areas, and related issues, was reinforced by the crisis, then so was the need for synoptic thinking. How do these three areas relate, conceptually and in practice? A simplistic view of virtue ethics will not provide the answer, not least because of the diverse narratives. Culture at any level of discourse is not monovocal (Farrar et al., 2012), and the different narratives, from professions, from academic disciplines, with questions, for instance, about how ethics relates to different areas such as strategy (Porter and Kramer, 2008), and from all stakeholders, demand critical dialogue. At the same time groups such as the Globally Responsible Leadership Initiative (GRLI, 2005; de Woot, 2007) urge Business Ethics to look beyond particular narratives to a common good that both transcends and connects those narratives. This book explores all of these areas. Chapter one and four focus on the virtues. Chapters five and thirteen explore cultures and how they influence ethics in business. Chapters eight and ten develop the narratives of professions, particularly accountancy. Chapters nine and twelve connect business ethics to different disciplines, not least strategy and total quality management. Chapters eleven and six work through the narratives of different stakeholders, highlighting consumers and wider culture. vi Chapters three and seven focus on communication and IT ethics, which in turn connects to social ethics. Chapters one and two examine wider cultural perspectives and how they make distinctive contributions to business ethics. There is a strong Turkish foundation to much if the thinking, and given the political and cultural developments in Turkey this is fitting. Turkey bridges the East and the West, with a strong religious culture and a strong free market. As an emergent market, Turkey needs to pay more attention to business ethics than any other country in the region. History shows that if economic growth is not accompanied by a strong business ethics, an emergent market cannot be an atrractive destination for foreign investment. It should be noted that the economic power of a country does not only depend on its economic indicators such as employment or inflation rates but also its work values. In emergent markets, there has always been a controversy about the relationship between local culture and economic development. In the beginning of the twentieth century, there was no concept of globalisation, and business ethics was only a matter of personal consciousness of businessmen. The aim of this book is to give a brief understanding of ethical side of global economic, political, and social issues in different cultures. vii REFERENCES de Woot, P. (2007) Should Prometheus be Bound?, Basingstoke: Palgrave. Gregg, S. and Stoner, J. (2009) Profit, Prudence and Virtue, Exeter: Imprint Academic. GRLI (2005) Call for Engagement. www.globallyresponsibleleaders.net/ Khurana, R. and Nohria, N. (2008) “It's Time to Make Management a True Profession”, Harvard Business Review, Oct 01. MacIntyre, A. (1981) After Virtue, London: Duckworth. Porter, M and Kramer, M. (2011) “The Big Idea: Creating Shared Value”, Harvard Business Review, Jan-Feb. Rayment, J. J. and Smith, J. A. (2010) MisLeadership, London: Gower. Robinson, S. (2011) Responsibility Leadership, Geneva: Peter Lang. Robinson, S. and Dowson, P. (2012) Business Ethics in Practice, London: CIPD. Sun, W. Stewart, J. and Pollard, D. eds. (2011) Reframing Corporate Social Responsibility. Bingley: Emerald. Visser, W. (2011) The Age of Responsibility: CSR 2.0 and the New DNA of Business. London: John Wiley. viii CHAPTER 1 CHRISTIAN BUSINESS ETHICS Prof. Dr. Simon Robinson Leeds Metropolitan University, UK, e-mail: S.J.Robinson@leedsmet.ac.uk INTRODUCTION This chapter examines elements of Christian Business Ethics. When Business Ethics was first developing as a sub discipline, the idea of separate Christian Business Ethics was not so clear. So many of the original thinkers in this area, as in Medical Ethics, were theologians, not philosophers, that it seemed natural that Christianity was a part of the Business Ethics world. With the development of this as a field of Applied Ethics, it became less clear both as to what a Christian Ethics perspective on Business was and how it might contribute to the wider field. Hence, in an edition of the Journal of Business Ethics (Camenich, 1986) there was a challenge issued to Christianity, and by implication to religion in general. The argument, put simply, was that Christianity has nothing substantive to contribute to Business Ethics and theologians who did contribute were, in effect, practicing philosophy and not theology. In this chapter, I intend to examine the Christian view of Business and in so doing to suggest what Christian Ethics has to offer beyond conversations between Christians. First, I will review the theological basis of Christian Business Ethics. This will reveal that there is no single Christian Ethic of Business, but rather a plurality of views that are in ongoing dialogue. In one respect, these mirror the secular ethical debates. I will examine two of the traditional perspectives of Christian Ethics, a biblical perspective, often associated with Protestant theology, and a natural law perspective, often associated with Roman Catholicism. I will then go on to examine more recent developments around virtues and methodology. Finally, I will reflect on how Christian Business Ethics relates to the broader field of Business Ethics. 1 1. The Protestant Ethic The term Protestant ethic is mostly associated with the Reformation and how the writings of Luther and Calvin contributed towards the development of capitalism. The exact nature of the contribution has been much debated. What is not a matter of debate is how the rise of Protestantism radically affected the Christian view of work and thus business, and this through three doctrines: • Vocation (God’s calling) • The priesthood of all believers • Predestination. The medieval idea of vocation focused on holy orders. The life dedicated to contemplative prayer was held in higher regard than productive work and manual labor. Of course, manual work was part of the monastic routine. However, this was simply necessary for the maintenance of the community. The idea of work as a source of personal satisfaction or as an expression of God’s work was discounted. Luther argued that a divine calling could be followed no matter what ones position. This led to stress on the moral virtues and habits that demonstrated the ethic, such as industrious diligence, hard work, and thrift. In the 18th and 19th centuries the idea of vocation took on an increasingly secular meaning, with the Glory of God being replaced by personal fulfillment and dignity. Indeed, work became core elements of personal identity and value. The priesthood of all believers reinforces the idea of vocation. Working against the church’s practice that access to God was only through the priesthood, this stressed the fact that all had direct access. Saved by grace and not the actions of others, all Christians were equal. From this it is a short leap to the idea that the ordinary person’s work can be of itself a prayer. Finally, the doctrine of predestination gave a strong impetus to the accumulation of wealth. Calvin stressed that God had chosen the elect and that no one could be certain who they were. Nonetheless, the anxiety about whether one was included, led to great interest in what the signs of the elect might be. Material prosperity based in the work ethic, individual initiative and perseverance were seen as key signs. The Reformers did 2 not believe in ostentation and had a strong sense of only being stewards of God's creation. However, wealth was seen as sign of god’s favour and the virtues of asceticism and poverty were no longer views as central. It is easy to see how such a view of the work ethic could support the developing capitalism, and with that, a view of business. It is also easy to see how, shorn of the Christian community it can focus on the identity and worth of the individual worker and soon become a conditional ethic, i.e. an ethic that bases value of the fulfillment of certain conditions- in this case successful work. It is easy then to see how this can be perceived in its more extreme forms as psychologically imbalanced, working against a work/life balance (Furnham, 1990). Others have seen in this development of vocation as divisive and inegalitarian. As Bauman puts it, ‘Work as the meaning of life, work as the core axis of everything that counts, as the source of pride, self esteem, honor and deference or notoriety, in short work as vocation has become the privilege of the few: a distinctive mark of the elite’ (1998, 34). The need for balance in any work ethic is reinforced once we look at a wider view of the Biblical basis of business ethics. 2. Biblical Ethics Biblical perspectives on business provide a broader and more balanced view. There are three main stresses: • Work and with that business is the response to God’s call to humankind to steward His creation, • Work is for the good of the interdependent community. • Work as potentially negative. Creation In the Old Testament (OT), the purpose of man in relation to the land is set out. Adam was placed in the Garden of Eden ‘to work it and take care of it’ (Genesis, 2.15). This provides the basis of a strong sense of humanity’s stewardship of God’s creation. The created world and all its resources are a gift from God. A right to family property was developed (1Kingds, 5.5 and 21), but God retained the overall property right. This sense of the provisionality of ownership was reinforced in the OT by the Sabbatical and Jubilee years, in which slaves were set free and land reverted to its original owner 3 (Exodus, 21.1, 23.20-21, Deuteronomy, 15.7-11, Leviticus, 25.8-19). Though there is some question as to whether the rituals were actually practiced, the ideal remained. In the New Testament, this provisionality is sharpened by the eschatalogical perspective. Paul urges those in business ‘whose life is buying and selling things’, to ‘live as though they have nothing of their own’ (1Cor. 7.30). Schrage (1988) points out that there is no question of refraining from business, and there is also no explicit condemnation of the idea of private property. However, business persons are to refrain ‘from thinking that they have a future disposition over what they bought’ (Schrage, 1988: 231). The Gospels also give no indication of inviolable property rights. Mealand (1986) notes a radical early phase in the Gospels in which Jesus proclaims God’s kingdom, and end to Satan’s rule and justice for the poor. However, this no more pointed to a renunciation of possessions than Acts 2.44 or 4.32-37 pointed to forced communism. It is simply that the idea of unrestricted right to private property was not part of the early church thinking. This positive view of work expands to a view of God as the one who works, with man’s work as secondary and derivative (Richardson, 1963: 11-14). Hence, there is the basis of a creative partnership of work. Such work, alongside this sense of creativity, involves the need to work for maintenance and with that a moral obligation not to ‘play truant’ (2 Thess, 6-13). St Paul, in effect, is focusing on the refusal to work as morally wrong. Behind this is the importance of work and the view of the dignity of work. The importance is reflected also in the practice of Jesus himself as a carpenter and that St Paul continued to be a tent maker. In all this, creativity is essentially social, embodied in partnership. As Meeks (1989) notes the Trinity itself provides the basis for this in Christian Theology. The three persons are located at the point of creation, and each has his role in the divine economy, all working together to develop creation. Community Property, and by extension business, was also functional. Its purpose was to supply the needs of the self and others. This is a strongly communitarian view which sees God providing for all through his creation. In the wilderness the pilgrim community moved towards their goal dependant upon God as the source of resources in a place of scarcity (Exodus, 16. 18). Provision was sufficient for all if it was shared equitably. That sense 4 of dependence on God was central to the Hebrew experience of community, forming the basis of offering the first fruits of their labor and caring for the stranger in their midst (Deut, 26 7-11). The prophetic literature speaks out against the abuse of such community where the rights of the poor are ignored or there is functionless accumulation of wealth (Amos, 2.6 ff. Isaiah, 5.8). The stress in all this is on the idea of a commonwealth. Finally, the Old Testament offers an eschatological vision of the wrongs righted and community truly restored in shalom (justice and peace) (Ezekiel, 47.13). Emerging from this is a rich and complex view of community, as interdependent and also responsible. This sense of responsibility is further developed in the New Testament stressing the importance of taking responsibility not only for the stranger within the community, but also the neighbor who is beyond. The very definition of neighbor is developed to include the enemy (Luke, 6: 27- 36). Work and business in all this has dignity and moral excellence precisely in so far as it seeks to be responsive and responsible and to sustain and develop God’s creation. Work as negative This very high view of work is balanced by a more negative view. At one level, work can be seen as drudgery. This can be viewed as a consequence of sin. Hence, God tells Adam and Eve after the fall, ‘By the sweat of your brow you will eat your food until you return to the ground, since from it you were taken; for dust you are and to destroy will return’ (Genesis, 3.19). In effect this was a curse aimed to punish the disobedience of Eve and the collusion of Adam. Drudgery emerges especially when there is no meaning or value evidenced in the work. Alienation from the work is not simply about distance from what is produced but also about a lack of underlying value and meaning in the business process. In general terms the New Testament stresses the impossibility of following two masters- God and mammon (Luke, 16:13). Mammon in this context is not just money or accumulated riches, but all the individual’s possessions, whatever their value. Once more, this is a stress on purpose, placing responsibility for others above concern for the self. The Wisdom literature (Sirach 34, 5-6, 5 1-2., Proverbs 23, 4-5) also stresses the damage that teleopathy (exclusive pursuit of the inadequate or wrong telos, purpose) can do to the person, to the community, and to the relationship with God. Hence, love of money is the root of all evil (1 Timothy, 6:10). 5 The Hellenized Wisdom literature of the Old Testament also echoes the Greek view of work was a necessary evil, in this case to prevent poverty and destitution. Such a view can quickly ally itself with a narrow view of the Protestant work ethic stressing the individual responsibility for poverty, rather than concern for distribution of goods to the poor. The New Testament, however, does not see work in the negative light of the ancient Greeks, who thought that work was degrading to the free and elite (Preston, 1986). What emerges from these perspectives is an anthropology that stresses the agency of the person as expressed through creativity, the interdependence of humanity, and a sense of shared responsibility for the social and physical environment. Such responsibility is about being responsible for actions and the use of talents, but also a sense of responsibility for the other in the wider community and beyond. Hay (1989) is able to derive from such theology eight points: • The resources of created order should be used to sustain humanity. This involves not wasting or destroying creation. • Every person is called to exercise stewardship of resources. • Every person has a right and obligation to work. • Works itself is the means of exercising stewardship. Hence, it is important that sufficient resources are provided for this. • Work is social activity. Hence stewardship is essentially about collaboration and partnership. • Every person has the right share in God’s provision for the basic needs of food and shelter. These should be supplied in the first place by work. • The stewardship of resources does not imply the right to consume the entire product of those resources. The rich have an obligation to help the poor who cannot provide for themselves through work. None of this provides theological justification for wealth creation per se, and Griffiths goes further than Hay, including in his theology a key role for wealth creation. In Genesis 1.29 he sees a positive mandate ‘to create wealth’ in the Genesis story of creation (Griffths, 1984). Such a creation of wealth would be for the needs of the 6 community (Gen, 1.29). In that light and in the light of a positive view of the market as a key means of distribution, it is possible to see the role of the business person as analogous to all the great professions and wealth creation as a socially responsible activity. This more liberal strand of Protestantism has several problems. Firstly, it is simply not clear that the Genesis narrative can be read as supporting wealth creation as a good in itself. Its context is agrarian and it simply provides a view of provision of goods for all. Secondly, this means that wealth creation as a good in itself would need to be justified on other grounds, such as the through the role of the free market. Whilst the free market can be seen to have enabled distribution of wealth in certain contexts, it is simply not clear that it can achieve such redistribution without support from government (Robinson, 1992). Thirdly, the desire to see the business person as analogous to the traditional professions is important, but in this case problematic. There is an assumption that professions such as the law, medicine or healthcare have at their base a purpose that is foundationally moral (Airaksinen, 1994). In fact, any profession will remain morally ambiguous. Care and health, for instance, may be at the base of the medical profession, however, the profession may put its own interests before that of the distribution of care, exemplified in the resistance of the medical profession to the national health service in Britain (Baggott, 1994). Catholic Social Thought Naughton and Laczniak (1993) argue that Catholic Social Thought (CST) approach to work is person-centered. The experience of work affects the person in various ways. These include: • Formation. This is how the person develops in relation to the experience of work. This pervades the other three aspects of work. • Remuneration. The system of reward in work. This looks to intrinsic and extrinsic, material and psychological rewards, and also the context of these rewards in wider society. • The process of the workplace. This involves the dynamic and ethos of the organization. This can provide meaning and development in the experience of work. • The product. The product and its meaning have effects on both the worker and society. 7 Through writings such as the Papal Encyclical Centesimus Annus (1991) and the U.S Catholic Bishops’ Economic Justice For All (1986) there is a strong emphasis on key principles in each of these areas. In terms of formation, this involves firstly the principle of human dignity, summed in the business context as ‘Every economic decision and institution must be judged in the light of whether it protects or undermines the dignity of the human person’ (1986). By extension, the formation of the person at work has to focus on human dignity. Remuneration is viewed in the context of the community and thus of the value of solidarity. Hence, rewards are subservient to common use of property. This suggests a broad view of justice, to include needs as well as merit. In the production process there is a great stress on the need to enable participation. A key part of participation is the principle of subsidiarity tthat states that responsibility should be fulfilled by appropriate agencies. Hence, the negotiation of responsibility becomes important in work. Finally, in relation to the product, the underlying principle is the Common Good. This is not a utilitarian calculus, but rather a principle that stresses the organic unity of society, connecting family, workplace and state. All are focused on a responsibility for and development of the common good. At the base of this concept is the idea of Natural Law, the idea that God’s purpose is expressed in key absolute principles and institutions, such as the family. There is an assumption that CST, unlike the Protestant approach, has a single view of work and business, shared around these principles. However, like the Biblical perspectives there are in fact different views. The US bishops’ report, for instance can be contrasted with the view of Michael Novak who strongly defends the importance of the marketplace in business. Novak emphasizes a theology of creativity. He argues (1993) that Pope John Paul II founded his views not on liberalism, but upon three key ideas: • The key capacity in human beings ‘to originate action; that is, to imagine and to conceive of new things and them to do them. He finds in creative acts the deepest clue to human identity. This philosophical insight is combined with the doctrine of ‘man’ made in the image of God to produce the vision of man as co-creator, someone whose 8 creativity is founded in personal initiative, as much as in creative response. Behind this is the virtue of enterprise- ‘that is, the intellectual capacity to discern and discover new possibilities, and the moral capacity to realize these in fact’ (Novak, 1990). This is an important development of the so-called Protestant work ethic, because it does not simply call the person to work or even be good stewards, but to create. • At the core of that is a view of liberty that is ordered through the Thomistic view of virtues (Robinson, 1993: 48). This is about the mastery of passions in order to make more objective decisions. Novak refers to this as moral freedom, as distinct from the positive (freedom to act or create) and negative freedom (freedom from oppression or coercion), a distinction first made by Berlin (1969). • The call to create is set in a moral framework. Such a framework, Novak reminds us, was there for Adam Smith (James and Rassekh, 2007) in terms of the moral sentiments and expectations set out by society. This is close to Fukuyama’s thesis that successful enterprise is based in trust and social capital (Fukuyama, 1995). Secondly, he stresses that no Roman Catholic thinker believes in unbridled capitalism. Democratic capitalism, which divides church and state, provides the basis for checks and balances. Thirdly, democratic capitalism is precisely what forms the basis of real community. It is a freely-developed contract that brings people together, with a centripetal force (Novak, 1990: 14). Novak’s approach takes CST further, but also has several problems: 1. The assumption that there is a moral framework for enterprise is not self-evident (Bauman, 1989; Robinson, 1992). 2. Novak’s is a weak view of interdependence and the shared responsibility for community. 3. His view of the virtues and also creation is largely individualistic, with little sense of how virtues can be developed in the corporation (Robinson, 1993). Thus far then we have seen several different Christian perspectives, some overlapping, some divergent, that form the basis of Christian business ethics. They arise from doctrines about the nature of God, creation, work, society and business. These together form the basis for a worldview that establishes value and purpose in business. Lovin (2005) notes that the establishment of a worldview is just as important for Business 9 Ethics as any philosophical theory. Such theories cannot of themselves be the foundation of ethics, and all make assumptions about underlying worldviews. However, Christian Ethics contributes more than a worldview, it also has something to say about the very nature of and motivation behind Business Ethics. This can be summed up in four core virtues or capacities: love, critical reflection, shared responsibility and shalom. Love The ethical starting point of the Christian Applied Ethics is not doctrine per se, but the attitude of shared responsibility. This is based in the concept agape, unconditional love. Agape involves three things: a level of awareness of the other, an inclusive and unconditional moral principle, and a means of empowering the other (Robinson, 2007). In other words, it s not simply a philosophical principle, but also a dynamic and transformative capacity. The awareness of the other precedes any philosophical arguments or moral theory. As Bauman puts it of a related idea, it is pre-rational (1993). This is tied closely to the idea of empathy, awareness of the other, in terms of feelings, values and needs. Such awareness is not value-free, demanding a conscious decision not to exclude others (Robinson, 2007). This is a critical part of any stakeholder management. All too often the pursuit of narrow purpose has led to a lack of awareness and thus exclusion of key stakeholders, leading in turn to crises (Robinson, 2002). The principle of unconditional and inclusive care is about the acceptance of responsibility for the other. By definition, of course, one person or corporation cannot be responsible for everyone. Hence, the idea of pre-rational responsibility has to be social, a shared responsibility for the social, financial and ecological environment. Love as empowering, involves a further level of responsibility, that is, enabling the other to work through and practice their responsibility. Responsibility to respond remains with the individual or the group, in relation to the other. Bauman contrasts precise orders or rules with this fundamental ethical demand, which is ‘abominably vague, confused and confusing, indeed barely audible. It forces the moral self to be her own interpreter, and – as with all other interpreters- remains for ever unsure about the correctness of the interpretation.’ Bauman continues, ‘However radical the interpretation one can never be fully convinced that it matched the radicality of the demand’ (Bauman, 1993: 8). Agape demands responsibility for the other and 10 therefore some response, but at the same time we can never know is that response is absolutely right. The idea of love as at the core of business seems odd. However, a love which is about shared responsibility can be held along with a concern for competence and enterprise. The idea of empowerment also has its parallels in the literature on reflective practice. Schoen (1983), for instance, argues that part of the role of the reflective practitioners is to enable clients and others to critically reflect. Some of these ideas are summed up in May’s view of the covenant relationship, based in examples from the Old Testament. William May (1987) argues that this unconditional agreement involves several things: Firstly, it is a gift. It is not based upon any contractual terms. It precedes and may well initiate any relationship. Secondly, this disinterested concern for the other is constant. Agape promises to be there whatever the response from the other. It is not simply that it is there regardless of the rights of the other. It remains true to the other whatever the other does. This is seen strongly in Hosea’s image of the lover remaining faithful and calling back his lover to the relationship (Hosea, 11: 8-9). There are no conditions in covenant that can break that commitment. Thirdly, the covenant defies precise specification and therefore remains open in terms of possibilities. It has a growing edge ‘which nourishes rather than limits relationships’ (May, 1987). It is always searching for the good of the other. Fourthly, the covenant is often not about an individual agreement, but about one between whole communities, thus raising the possibility of an agreement that can bring many people together into a network of relationships. May contrasts this with the ‘first cousin’ of the covenant, the contract. The contract is based upon conditions that, if broken, can lead to the end of the agreement. The contract attempts to sum up obligations in specific terms. This has the effect of seeing the fulfillment of the contract as discharging all responsibility. The stress in the covenant is upon the underlying relationship, and on being there for the other- any other. This does not mean that the contract approach is wrong or unacceptable. On the contrary, the contract is an important moral instrument that can empower precisely 11 because it enables a sharing of expectations. If, however, contract becomes the only basis of ethics then, it excludes the broader sense of commitment for the other. Hence, May argues that covenant has to inform contract. For business this means a shared commitment to the social and physical environments that it works in and the development of contracts that put that commitment into practice. Critical Reflection If the person is aware and takes responsibility for the other, then there will be need for guidance about the best way to respond. This means turning to principles, doctrines, guidelines, and traditions, the practice of the community or communities of which one is a part. It is clear from the N T that this has to be critical process. Jesus on several occasions reflects on the law and the on the underlying purpose of the law, and this takes it beyond unthinking response to rules (Matthew, 5:17). The law, the torah, is not thereby discounted, but is tested. Hence, there is a critical dynamic, but one that allows one to remain in the tradition to which one belongs. The underlying virtue here is what Aristotle refers to as the intellectual virtue of phronesis- the capacity to reflect on telos (purpose) and how it relates to practice. This has to be a critical faculty precisely because there are, most often, a plurality of traditions, and purposes, some of which will conflict. For example in the case of the Challenger disaster (Robinson, 2002) there were at least three traditions that had underlying values and purposes: the engineering profession; the management profession and the political sphere. In the end, the engineering purpose, focused on creativity and also safety, was ignored in favor of the other purposes. Christian Ethics are sometimes portrayed as simple obedience to God, leading to Plato’s Euthyphro dilemma- is something good because God wills it or an independent reason. If it is the latter, then ethics cannot be dependent on God. But this is a dilemma only if one believes that ethics are the clear commands of God. This idea, however, is hard to sustain in the light of the conceptual and cultural plurality of the Bible. Many areas, such as homosexuality remain controversial, with Biblical references that are ambiguous or contradictory. The clearest commands are those about love (Matthew, 22: 34-40) and these are precisely the commands that require responsibility for working out the most loving thing to do in context. 12 Fasching and Dechant (2001) develop this point about critical challenge, and suggest that religious scriptures have a tradition of ‘audacious challenge’, alongside any stress on obedience (2001: 172). They focus on the Jewish tradition of audacity, set down in the sacred stories, and which models figures contending with God. Judeo-Christian ethics then is an ethics in constant dialogue (Meeks, 1993). A good example of this challenge in the OT is Abraham, involved in arguing with God about how His action against Sodom will kill the ‘righteous with the wicked’ (Genesis 18:23). Fasching and Deschant further suggest that such challenge involves a wrestling that is in itself a core process in the development of moral awareness. This suggests that there is a robust tradition in which ethics, as working out what justice or goodness means, can contend the view of the Church or even God himself. Indeed, it suggests that such a view is important in the development of any ethical meaning and identity. This wrestling involves more than the intellect. Because it can question the identity of the person or group there is need for affective awareness, empathy, as well. Part of this reflection in business then is to ensure that purpose is set out in mission statements, and this along with any tradition, is reviewed and critiqued. Such purpose can be reviewed through annual reports of governance and social responsibility. A good example of a company mission statement with a strong view of purpose that accepts responsibility is that of the Interface company. Interface Mission Statement “Interface will become the first name in commercial and institutional interiors worldwide through its commitment to people, process, product, place and profits. We will strive to create an organization wherein all people are accorded unconditional respect and dignity; one that allows each person to continuously learn and develop. We will focus on product (which includes service) through constant emphasis on process quality and engineering, which we will combine with careful attention to our customers' needs so as always to deliver superior value to our customers, thereby maximizing all stakeholders' satisfaction. We will honor the places where we do business by endeavoring to become the first name in industrial ecology, a corporation that cherishes nature and restores the environment. Interface will lead by example and validate by results, including profits, leaving the world a better place than when we began, and we will be restorative through the power of our influence in the world." (http://www.interfaceinc.com/goals/mission.html) 13 Sharing responsibility A natural consequence of increasing spiritual awareness is an increased awareness of the needs of the other, and thus of the moral demand upon the self. Issues of how such shared responsibility can be fulfilled naturally arise. Finch and Mason (1993), in their research with families, suggest that it is precisely responsibility negotiation that provides the testing moment for any moral response and that for the most part it is through this process groups begin to address ethical issues. Their research found that the negotiation of actual practice was effective at providing shared moral meaning in families that had no ethical rules or even vocabulary (Finch and Mason, 1993). The negotiation itself was the means whereby the shared images of individuals within the family were transmitted from one situation to the next. This formed the basis of a moral reputation, such that ‘people were being constructed and reconstructed as moral beings’ (Finch and Mason, 1993: 170). The negotiations that they describe tended to be built on previous work, often decades old, and most often leading to a confirmation or development of the previous practice. Their work points to a critical element of moral reflection, which is often not given due weight, precisely because formal principles are not always part of the process. The practice of responsibility negotiation involves several things. Firstly, the stakeholders in any situation have to be identified. Secondly, there is an analysis of the stakeholders in terms of power and responsibility. This enables a full appreciation of constraints and resources in the situation, leading to an awareness of creative possibilities. Thirdly, responsibility is negotiated. This does not simply look to the development of goods for all stakeholders. Rather, it accepts the premise of mutual responsibility and enables its embodiment. Hence, it enables a maximization of resources for social responsibility through collaboration. In this process, several things can be achieved: • The further development of ethical identity of the company. • The development of trust and of a sense of shared values with the stakeholders. • Reflection on appropriate levels of responsibility. • Reflection on the how the power of the company can both respond to the effects that they have on the physical and social environment, and how they might enable other 14 stakeholders who have little power to fulfill their responsibility. Once more, Interface provides a good example of this. Core to their mission is shared responsibility for the environment. Their development of carpet squares encourages their customers to return used squares for recycling, thus enabling the customer to develop responsible behavior. Much of this is, in effect, working through the principle of subsidiarity, and thus is also respecting the autonomy of the individual person or group. Shalom Shalom involves peace and justice. Hence, in any response, Christian Ethics seeks to resolve conflict, restore justice and build peace. Justice in this sense is beyond commutative and even distributive justice. It looks to restore others to the community. Often this idea is used of the poor, and thus in the OT, justice is frequently associated with yasa- deliverance or salvation (see Psalm, 76:9). However, restorative justice is not simply about restoring status, but enabling others to be a genuine part of community, something that involves fulfilling responsibilities as well as recognizing rights. Shalom demands this active engagement, not the imposition of a state of peace, and therefore has partnership and creativity at its heart (Lederach, 2005). Once again the idea of business as explicitly espousing justice, and with that issues such as human rights might have seemed improbable two decades ago. However, justice issues have always been part of good governance, beginning with workforce relations. Increasingly, globalization, consumer and NGO pressure has made corporations look more closely at the supply chain and any human rights implications (Robinson, 2007a: 196). Transnational corporations have also developed their ethical concern beyond philanthropy to develop partnerships with community organizations in areas such as the distribution of health and human rights, and peace building, reserving in some cases the right to the critique unjust political actions (Robinson, 2007a: 159-161). These virtues, in turn, form the basis for an ethical decision making framework, involving data gathering, critical reflection on values and purpose of all involved, the negotiation of responsibility, and collaborative creative response. 15 CONCLUSION There are Christian Ethicists such as Stanley Hauerwas (2007) who would argue that there is no such thing as Christian Applied Ethics. He suggests that Christian Ethics is primarily focused in the Christian community, with meaning developed in the narratives and worship of that community. Hauerwas develops McIntyre’s virtue ethics, arguing that the Christian is schooled in a narrative that teaches him or her how to see the world truthfully. Above all, this means seeing what the implications of the narrative are for developing virtues. The narratives that he refers to are to be found at the heart of the Christian rituals, and he is able to suggest that ritual, and therefore Christian worship, is actually the ground of Christian ethical development. Ethics emerges from worship, both in terms of the discovery of meaning, and of ethical formation of the person. In some ways this would confirm the view of De George (1986), that the ethics of Christianity is based in, and is, for the Christian community. This can shine as a beacon on a hill for others, but to really appreciate it you have to be on the inside and to accept the underlying metaphysics. Hence, either the business person comes to the religion, or the theologian goes to the Business Ethics, and becomes a philosopher. However, the view of Christian Business Ethics that I have outlined above suggests a very different dynamic. First, it accepts that any ethical perspective is partial. Hence, the ethical process outlined above involves dialogue and partnership at all levels. This suggests that Christian Ethics cannot be done without conversation and partnership with those who practice business or other disciplines. It is precisely this that enables genuine testing of partiality. It is, moreover, something that is at the core of the Christian gospel, with Christ’s stress on not clinging to identity (e.g. Matthew, 16:25). This in turn assumes the partiality of philosophy and of business itself. Second, Christian Ethics does have a lot to contribute to the ongoing dialogue of Business Ethics: • It stresses the limitations of basing ethics on philosophical theory (Lovin 2005). It reinforces the need to own and develop a worldview (doctrine) that establishes value. • It stresses the need for more existential belief. Christian Ethics focuses on belief in God. However, this can be generalized to broader view of faith and trust that are central to stakeholder relationships. However one responds to the Novak thesis on the development of community, trust is important in business. This is often seen in terms of 16 self-interest, and therefore swiftly dismissed by some. However, once one begins to analyze trust, and how trust is developed, it becomes clear that it depends upon both competence and standards, and on developing integrity. It is beyond simple stakeholder theory. Even stakeholder theories make • assumptions, such as the interdependence of humanity, and too often focus on simply responding to stakeholder needs (Sternberg, 2000). Christian Business Ethics is transformative, looking to enable responsibility to be developed by partners and stakeholders. By extension it is essentially social and not individualistic. Gathering data demands • awareness of all involved in the situation. Reflection on purpose and value is essentially pluralistic. The ethical response requires partnership and responsibility negotiation. It does not involve a polarized ethics - seeing the other as either all right or all • wrong. On the contrary it accepts limitations of the other as given and through agape can hold together the ambiguity of the other. It involves a learning process, precisely because it is not simply about following • codes. At its heart is a threefold stress on responsibility: • i. Responsibility for and awareness of the other. ii. Responsibility to reflect on and test values, to really own the values and purpose. iii. Responsibility of the developing a response to the other that makes a difference. This responsibility applies to the individual, who has to reflect on each major decision taken, and the corporation, which has to develop awareness, reflection and partnerships. Developing ethical codes is important, and it can focus on minimal standards and uniformity of practice. However, codes are also important in developing awareness of the other. Even the UK Highway Code is fundamentally about developing awareness of other potential and actual road users. Prosecutions are often for driving without due care and attention, not simply for breaking the Highway Code. This stresses the individual’s responsibility. Any code also needs to reflect on purpose and value, avoiding the danger of using codes legalistically and thus avoiding of individual responsibility. Another way of looking at ethical identity is in terms of corporate or professional integrity (cf. Brown, 2005; Robinson and Dixon, 1997). Integrity can be defined as 17 congruity and coherence between value and practice in different contexts. As Solomon (1992) notes, this involves several different virtues, including the courage to maintain key values in the face of possible conflict. Christian Ethics, however, stresses learning and plurality as key to integrity. It is not possible to have complete integrity. Therefore, it has to be part of a learning process that develops increasing awareness of stakeholders, values and response possibilities. A critical part of that learning has to be the appreciation of the plurality in the corporation and therefore of the need for individuals to also take responsibility for learning and response. 18 REFERENCES Baggott, R. (1994) Health and Health Care in Britain. London: Palgrave McMillan. Bauman, Z. (1989) Modernity and the Holocaust. London: Polity. Bauman, Z. (1993) Postmodern Ethics. Oxford: Blackwell. Bauman, Z. (1998) Globalization: The Human Consequences. London: Polity Press. Berlin, I. (1969) “Two Concepts of Liberty”, in Quinton, A., Political Philosophy. Oxford: Oxford University Press, pp. 141-153 Brown, M. (2005) Corporate Integrity. Cambridge: Cambridge University Press. Camenich, P. (1986) “On Monopoly in Christina Ethics? Can Philosophy Do It All?”. Journal of Business Ethics. 5, no 6, 433-443. De George, R. 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US Catholic Bishops (1986) Economic Justice for All. New York: USCC. 21 22 CHAPTER 2 BUSINESS ETHICS IN ITALIAN STUDIES ON MANAGEMENT: ORIGIN AND NATURE OF A WIDE-RANGING UTILITARIAN NOTION * F Tiziana Di Cimbrini University of Teramo, Italy, e-mail: tdicimbrini@unite.it INTRODUCTION In Italian studies on management, the ethical and social nature of businesses has been emerging as one of the main aspects around which business strategies are planned. Both external and internal pressures to businesses make the introduction of strong ethical values in management a necessary step rather than simply a business option. Consequently, the Italian literature about business ethics has been going through a phase of expansion and this phenomenon raises the question of its positioning within the landscape of international studies in the field. International studies on Business Ethics emerge chiefly in North-America as an interdisciplinary field and involve experts of several subject areas: above all business economists and ethical philosophers, but also theologians, psychologists and sociologists. They consider all the ethical duties of those who operate within a «business»; that is, the economic operations of everyone acting within a market mechanism. In his review of the status of business ethics, De George (1987) contended that research on business ethics developed in five stages, including the ethics in business stage (prior 1960), the rise of social issues in business (in the 1960s), the rise of business ethics as an emerging field (in the 1970s), the initial consolidation period (the first half of the 1980s), and the refinement and further development of business ethics stage (after 1985). * An earlier version of this chapter was orally presented at Professional Ethics Congress, Antalya, Turkey, Oct. 17-19, 2008 and its abstract was published in the proceedings book. 23 According to Wines (2008), the traditional pillars of the discipline were moral philosophy, ethical dilemmas and corporate social responsibility. The first pillar, moral philosophy, concerns the philosophical theory, which is now associated with various strands of business. From this perspective, any contributor must now include this corpus in order to fit in the various modules through which ethics is taught. This corpus includes Aristotle, Kohlberg, Kant, Bentham, Mill, Rawls, Rousseau, Habermas, as well as Levinas and other thinkers whose works have more recently been applied to the business ethics academy. Generally, when we tackle business ethics in a moral philosophy perspective, a fundamental distinction appears due to the contrast between deontological ethics and utilitarian ethics. On the philosophical plane, these two different positions are briefly attributed to Kant and Bentham’s thoughts, respectively. An expression suggested by Bentham, deontological ethics indicate, in an etymological sense, the ethics of duty, as a part of Kantian philosophy, is connected with the conviction that the morality of any human and social behavior is not linked to the aim that it pursues, but to a deep inner will to fairly operate (Bowie, 1999). Kant’s theory is identifiable as an absolute theory, based on general and universal rules. According to the great philosopher, there are some «categorical imperatives» – principles valid every time and everywhere, which the moral man cannot avoid. Kant’s ethics has often been criticized for its absoluteness, for it does not consider the consequences of its implementation, since it draws the definition of ‘what is good’ not from the preferences or calculations, but from a universal idea that is defined as common to every man endowed with reason. Rather than the purpose of the action or the individually refined virtue, the respect for duty makes a behavior morally fair. In contrast to the absolute ethics, there is another form that considers the consequences of behaviors and therefore, aims at maximizing the positive effects of actions. This is the utilitarian ethics, according to which moral behavior can never set aside the purpose of producing the utmost benefit for all those involved in it. Therefore, utilitarian ethics inserts some relativity and uncertainty, as it introduces a subjective evaluation (the best result), which, as such, would not be the outcome in an absolute judgment. Substantially, the main concerns are the aims and consequences, which avoid appeals to absolute principles. In this sense, ethics does not appear as a set of «dogmas» but it is 24 close to a «strategy» of conduct, driven by those aims that are considered to be historically the best. The second pillar, ethical dilemmas, concerns the researches organized along ethical decision making. It is based on the principle according to which ethics in business deals with making the right choices. Because of the increasingly global nature of commerce, this effort is frequently performed from a cross-cultural ethics perspective, albeit not always in multi-national settings (Greider, 1997). Contributions examine how entrepreneurs and managers experience and deal with the dilemmas (Robinson et al., 2007; Cole, Sirgy and Bird: 2000) and investigate the relationship between personal values and the ethical dimension of decision making (Fritzsche and Oz, 2007). The third pillar, corporate social responsibility, represents a mandatory area of study since the late 1960’s (Rue and Byars, 1986, pp. 61–62). This area contributed to a proliferation of theories and approaches. Garriga and Melè (2004) tried to clarify the situation in ‘‘mapping the territory’’, by categorizing the main theories and related approaches into four groups: (1) instrumental theories, in which the corporation is seen as only an instrument for wealth creation, and its social activities are simply a means to achieve economic results. Three main groups of instrumental theories can be identified, depending on the economic objective proposed: In the first group the objective is the maximization of shareholder value, measured by the share price. Frequently, this leads to a short-term profit orientation. The second group of theories focuses on the strategic goal of achieving competitive advantages, which would produce long-term profits. The third is related to cause-related marketing and is very close to the second. (2) political theories, which concern themselves with the power of corporations in society and a responsible use of this power in the political arena; both political considerations and political analysis are included in this debate. (3) integrative theories, in which the corporation’s focus is the satisfaction of social demands. (4) ethical theories, which are based on the ethical responsibilities of corporations to the society. In addition to the traditional pillars, Wines (2008) also advocates new pillars: moral psychology, organizational design and behavior, motivational theory and a unit on how 25 society, business, and law interact. This last unit builds upon the work of Francis P. McHugh (1988), who urged an integration of all the “disciplines related to business ethics”. It is possible to reach a synthesis that the intellectual structure of business ethics research is organized along three levels: (1) the individual level; (2) the organizational level; (3) the societal/community level. This article is aimed at drawing a profile of Italian studies on management dealing with business ethics in order to provide the fundamental coordinates of their setting in the context of international studies. The study is organized in the following manner: After a brief examination of the theoretical background of Italian studies on management, their relationships with the traditional pillars of business ethics are described. Then, the main theoretical perspectives for setting the ethical and social nature within the strategic project of businesses are investigated and classified. Final remarks reiterate the peculiarity of the Italian approach in the contest of international business ethics studies. 1. The Theoretical Background of Italian Studies on Management In Italy, management studies have been undertaken systematically only towards the end of the 1970s, by acquiring and revising in US treatments an original way and combining them with the pre-existing doctrinal tradition. The pre-existing doctrinal tradition, the Italian Economia Aziendale, is understood as a discipline analyzing businesses in a thorough and systematic way, starting from an economic perspective. As noted by Canziani (1988), in the essays of the “forerunners” of Economia Aziendale (Caprara, 1926; Amaduzzi, 1951; Sassi, 1951; Colletti, 1955; Zappa, 1957; Fazzi, 1958; Giannessi, 1958; Ottavi, 1962), some fundamental features of studies on management were already present. Volpatto (1989) identifies in the work of Gino Zappa, founder of Italian Economia Aziendale, particularly in “Productions in Business Economics” (“Le Produzioni nell’Economia delle Imprese”), the foundations of the business strategy, that is, the general principles upon which business strategies have to be modeled. Theoretical contributions by Capaldo (1965) on long-term planning, and Marchini (1967), where the concept of strategy is explicitly used for the first time, are also pioneers in the field. 26 The discipline of Economia Aziendale is based on the notion of azienda, which is the elementary unit of production and consumption. Its definition delimits the boundaries of the discipline. It is a coordination of economic operations wherein people and wealth are vital components (Zappa, 1927, p.40). It is an organization of persons and parts (Viganò, 1998) but not all organizations are believed to be azienda. Therefore, not all are within the object of Economia Aziendale. Within the abstract concept of azienda, the activities of production and consumption have tended to be separated and located in different economic institutions or organizations. Thus, the economic activity devoted to the direct satisfaction of human needs tends to be carried out in organizations that basically act as units of consumption (aziende di consumo), such as the family. The production activities tend to be located in different organizations, which are basically units of economic production (aziende di produzione, or generally, `firms'), and which aim towards an indirect satisfaction of human needs. In this theoretical context, one can find both a proprietary view (firms as instruments of their owners) and a stakeholder view (firms as instruments of a wider range of economic, and in case social, stakeholders), in terms of the views of the firm. Shortly, the azienda may assume different forms and perform different processes, but retains a level of economic generality that is sufficient to develop a fundamental unitary discipline, the postulate and laws of which may be applied to every kind of azienda; forprofit or not, public or private, operating in any industry. Both the consumption and the production units tend to be treated within a unitary approach as institutions, and every kind of azienda is considered theoretically distinct from the people who deal with it, owners included. The azienda is always a prius and the scientific purpose of Economia Aziendale is that of finding principles aimed at the preservation and long term development of the azienda itself. In such a theoretical context, the Italian studies on management developed mainly dedicated to firms, in part of a wider discipline studying all of the economic aspects of a particular kind of economic entity –the azienda- where the management, organization and accounting practices are strictly interwoven. It is difficult to find positions or relevant statements not supported, directly or indirectly, by a reference to the basic elements characterizing the theoretical representation of the firm within the `doctrine'. 27 The contributions have focused on crucial issues related to the relationship between firms and the environment, such as the reaction speed of firms to variation, their ability to adapt to different conditions that gradually occur in the environment, organization’s ability to learn, the importance both of the view and the underlying strategic direction in driving a business, always aiming at identifying some lines of action that allow to manage external turbulence and to lead the firm to success. Scholarly effort has been channeled, above all, to the identification and containment of all the forces that induce a variation in the environment, and to the planning of effective management methods even when external conditions are characterized by high levels of variability. Absorption of the North American studies has always occurred in an original way, respecting the basic principles of the traditional doctrine. The theoretical fields that have been most affected are those of strategic management (Eminente, 1981; Amigoni, 1982; Sciarelli, 1983; Coda, 1988; Bergamin Barbato, 1991; Paolini, 1993) and strategic planning (Amigoni, 1980; Invernizzi and Molteni, 1991; Bertini, 1995). Regarding the field of business ethics, some of the internationally well-known currents of thoughts in management studies had considerable effects on Italian studies. These currents do not deal with the issues of business ethics, at least not explicitly, but in a tacit way they have led to focus attention on the ethical and social nature of businesses, thus influencing the views of the ethical aspect of businesses’ choices. We refer to the following areas of study: - total quality management; - resource based view of the firm; - network theory; - stakeholder theory. Total Quality Management (Crosby, 1979, 1985, 1989; Deming, 1986; Juran, 1989) has been a movement revolutionizing the methods of production in all industrialized countries. One of the basic principles of Total Quality Management rests on the concepts of external and internal customer, as to the organization. Customer notion refers to anyone, inside or outside the organization, is the addressee of goods production or services supply. The existence of an internal customer, whose needs have to be satisfied similar to those of an external customer, gives some indications of a wider 28 concept of quality, which not only improves the intrinsic characteristics of goods and services, but also the results in the “quality of the business behavior” in the long run – i.e. by adapting certain ethical principles such as honesty, fairness and reliability to certain economic principles, such as effectiveness and efficiency, and by contributing to businesses maximization’. Resource based view of the firm (Wernerfelt, 1984; Barney, 1986, 1991; Amit and Schoemaker, 1993) considers the resources as elementary units of analysis, and as starting points to both understand (ex post) the strategic paths of businesses and identify (ex ante) the company strategies. Despite being insufficient, the essential condition for achieving a competitive advantage is the existence of heterogeneity among competitive units, in terms of their respective resource endowment and their organizational skills that are utilized to combine the same resources. The importance that this approach places on the intangible assets of businesses in supporting the path towards a value creation highlights the ethical and social implication of this strategy. Respect for shared values, staff cohesion, reputation and confidence are progressively regarded as fundamental assets for obtaining and sustaining a competitive advantage. Thus, from the business perspective, a certain necessity emerges. This is related to behaviors focusing on the individual and his/her development, which fuels the confidence towards various interlocutors. Network theories in Business Economics represent a source of renewed interest for ethics, as they emphasize the contribution made by each node in order to improve the efficiency of the system(s) that it belongs to. The exigency of increasing system efficiency, reaching reliable alliances within the production chain, and establishing durable confidence relations inside and outside the same chain explain the preference for behaviors that can be morally shared in comparison with the conflictual, or more strictly “contractual” logic of government. Within networks, each node is invested with a responsibility based on the conditions allowing value generation from all other nodes. Such a combination of autonomy, strategic as well as operational interdependence and social control points out the social nature of relations among economic actors. Stakeholder theory (Freeman, 1984) has deeply affected management studies across the world. It has been fully assimilated by Italian research, which autonomously envisioned the firm as a centre of interests (Ardemani, 1968) or as a constellation of interests both cooperating with each other and in competition with each other (Onida, 1954; Zappa, 29 1957; Masini, 1960, 1979; Rossi, 1962; Argenziano, 1967; Ferrero, 1968; Amaduzzi, 1969; Saraceno, 1970; Superti Furga, 1975; Ardemani, 1982). Defining the stakeholder as each individual or group who can influence the realization of business goals and who are, in turn, influenced by these goals, the theory includes the workers, suppliers of goods and services, customers, shareholders, management and the extended community among stakeholders. As such, the theory emphasizes the necessity of satisfying the interests of all participants – therefore, not just the shareholders’ interests. Over time, the theory evolved into different perspectives. Part of it looks at the management of stakeholders exclusively in instrumental terms, with regards to the profit and value creation objectives. Other perspectives are based on philosophical or moral principles, according to which the interests of all stakeholders have an intrinsic value. In other words, the interests of stakeholders deserve respect, and not this simply due to their ability to contribute to the interests of some other group, such as the shareholders. In this sense, management seems to be linked, by means of a fiduciary relation (as an agent), not only to the shareholders but also to all the participants (principals), whose interests should be coordinated and safeguarded by the shareholders within a business. Not all perspectives theorize or invoke the social sensitivity of the firm towards certain categories of stakeholders. The well-known Frooman’s theory (1999), for instance, explains the relationship between the firm and its stakeholders in terms of power and dependence. However, contributions based on an ethical interpretation of stakeholder management represent the international current of thoughts that mostly influenced the ethical reflections in Italian business studies. In fact, they led to an increasing role of businesses, from creating an economic value for shareholders in the long-run, to satisfying the interests (expectations) of all participants, including the community in which the very business operates. 2. Italian Studies on Management and The Traditional Pillars of Business Ethics In light of the theoretical background of Italian studies, two fundamental profiles of Italian business ethics studies can be identified: - the focus of investigations at the organizational level - the strictly economic perspective First of all, the concept of azienda leads us to focus our attention on the unit/entity level. This does not mean that individual and societal/community levels are completely 30 excluded from the field of research, but rather leaving their treatment as purely accidental and consistent with the preservation and long term development of the azienda itself. This is the reason why, regarding the three pillars of business ethics, Italian studies essentially develop only corporate social responsibility while they rarely deal with purely philosophical issues or ethical decision making. In fact, these two aspects are considered as questions related to individual sensitivity. Therefore, they are alien to the disciplinary field delimited by Economia Aziendale. Secondly, the economic nature of the entity-azienda makes the field of research impenetrable to the extra-economical or meta-economical considerations that do not reconcile - at least not yet- with the principles aimed at preservation and development of the azienda itself. This means that, ideas that plunge into philosophical, political or sociological thoughts are completely alien to the field of possible evaluations. Since this disciplinary field only admits behaviors that are consistent with the preservation and development of the firm, its approach towards business ethics is inevitably utilitarian. This can be observed in two circumstances: First of all, the international currents of thoughts in management studies that have led Italian research to absorb business ethics topics are those that connect the social and ethical dimensions to the economic interests of the azienda. Secondly, the social and ethical nature of the firm is mainly taken into account in the field of strategic choices of the firms, in the form of social strategy (Matacena, 1984; Pastore and Piantoni, 1984; Coda, 1988; Invernizzi, 1999; Chirieleison, 2002, Hinna, 2005; Molteni, 2006; Perrini, Russo and Tencati, 2007; Perrini and Tencati, 2008) and, in any case, understanding the relationship between corporate social responsibility and corporate performance is a central question (Perrini, 2003; Molteni, 2004; Perrini and Tencati, 2006, 2007). The concept of strategic ethics (Rusconi, 1997), is the synthetic expression of the utilitarian ethics applied to azienda. This concept has been formulated by Rusconi in order to denote all those moral choices that are made for safeguarding a long-run balance of the business system, in contrast with the absolute ethics concerning principles and choices that conflict with the aim of business balance, but that have to be implemented with respect to moral values. Associating the implementation of moral choices to some utility on the business 31 economics plane, has been often criticized by some of the most orthodox positions. According to these, we can talk about ethics only if we put others’ interests before our own interests or, the least, on an equal footing. Thus, ethical choices we make entail a cost or a sacrifice. Indeed, for the moral philosophers true ethics entails a sacrifice; and such an idea is the basis of qualifying the choices and actions aimed to produce economic benefits for businesses as ethical, inappropriate. These positions directly follow the Kantian categorical imperative, according to which an action is moral only when it is wanted exclusively for itself, without regarding other aims. Accepting such theses would mean to reject any ethics that has a utilitarian character. Regarding the supposed “non ethicality” of moral choices made in a business, Rusconi (1997, p.154) notes that: In such cases, a proper behavior is also useful on a business economics plane, but this does not absolutely involve its “non ethicality” for two reasons at least: 1. wanting to obtain better business balance in respect of ethics is a moral aim that is valid if it is believed to generate, in such a way, benefits for all businesses’ interlocutors; 2. building an “ethical mind” in a business is useful also for a moral training of those who operate in it and can entail a larger openness towards the sensitivity to moral values themselves. It has to be added that, given the peculiar features of a business (especially if it is largesized), it is also hard to recognize an ethical action within this institution, using a more or less perfectionist concept of virtue, rather than ethical standards, both because free enterprise in the market system is incompatible with fixing general objectives (moreover, on an individual basis) aimed at perfection in a competitive context, and because of the typicality of the business as a moral subject. The boundaries of the disciplinary field can only admit choices that conform to strategic ethics. The adoption of absolute ethics is an option outside of the rationality of the azienda; it is possible when an individual is alone with his own conscience. In this case, there is room for transcendent ethics (Canziani, 1993) that is based not on judgments of convenience. In short, absolute ethics is a question of approaches that are privileging either the observation of personal finalism of subjects when running a business, or the finalism of businesses while considering them as a separate entity. When the personal 32 beliefs and the economic convenience of the azienda are in conflict, ethical dilemmas arise. However, also at this level of analysis, the reasons that may lead to privilege interests that are different from those of the azienda, cannot find explanations by means of a superior will to pursue the greater good. Rather, it is a matter of existence of personal objectives linked to self-fulfilling variables (Canziani, 1984) or the search for personal prestige (Sciarelli, 1996), which also affects the role of business in society. The separation between the individual level analysis and azienda analysis is strictly connected to the question of the moral subjectivity of the firm. This question is resolved almost always in a negative manner: a firm is not believed to have moral autonomy because the individuals working in the firm are the ones who decide how the firm must behave (Sciarelli, 2007). As Rusconi (1997) noted: 1) all the contributions that admit the moral subjectivity of the firm cannot disregard that personal responsibilities exist at all levels. 2) a firm is not a person: this fundamental organic-ontological difference cannot be misunderstood, neither by legal fiction, nor by introducing concepts that do not compare to reality. A firm does not have a conscience (Sacconi, 1991; Sciarelli, 1997) but this does not mean one should disregard or underestimate the impact of its past on organizational behavior. Over time, the consolidation of a system of values, which is more or less ethically oriented, does have an important effect on individuals’ actions. This means that the firm is a morally oriented entity (Sciarelli, 1997), but is not a moral subject. 3. The Nature of the Italian Utilitarian Approach As seen previously, Italian studies on management generally follow the utilitarian ethics, – typical of such studies – being compatible the best with the aim of pursuing the best conditions of development for firms. However, one should not think that the Italian doctrine recognizes a utilitarian ethics in business behavior, and assigns a crudely instrumental meaning to it, regarding the economic performances businesses. The utilitarian approach of Italian studies cannot be captured by the rule of good ethics is also good business (Vogel, 1991), as it deeply involves business finalism. Essentially, it 33 is a “more substantial” utilitarian view (Ferraris Franceschi, 2002), opening up to the enrichment of interactions between economics and ethics. Consequently, we can identify two interpretations of the utilitarian ethics in business behavior: (1) ethics serving merely as a means for businesses’ economic aims (“narrow” utilitarian notion) (2) ethics as a component of a business multidimensional finalism which combines economics and sociality (“wide-ranging” utilitarian notion). Both these notions are somehow intertwined with the concept of business strategy, but in order to trace the «wide-ranging» utilitarian notion within the concept of strategy, it is necessary to pay attention to the scope of this concept in Italian studies. Business studies have formulated various definitions of the concept of “strategy”, often conflicting with each other. A feature shared by all of them is represented by the analysis of the ways of interaction between business and environment that is aimed at preserving the balances of business system, while the factors differentiating various notions can be found in the extent of the strategy concept and in the temporal perspective adopted. Regards the scope of such a concept, different definitions can be classified into two main groups (Consorti, 2001): (1) meanings of strategy according to which the aims assigned to businesses are considered as given aims (exogenous variable); the strategy concerns exclusively with the ways of realizing them (Ansoff, 1965; Hofer-Schendel, 1978); (2) meanings of strategy which admit both business aims and every possible way of pursuing them (Chandler, 1962; Andrews, 1971; Coda, 1988). According to the first meaning of strategy, basically the aims and the ways to pursue them are two distinct aspects, the first ones being given exogenously. In such a theoretical context, the concept of ethics overlaps with that of strategy only if you adopt a “narrow” utilitarian notion, according to which ethics serves purely as a means to pursue business economic aims. We can trace back to this definition all those positions which propose the development of an ethical dimension as an excellent “policy” for pursuing a positive economic result, that is, as an attitude towards “enlightened egoism” (Di Toro, 1993). 34 As to the second notion of strategy, in Italian studies it is adopted by Coda, whose definition of business strategy is the following: A pattern of search of business success that the same business has in fact adopted or is going to adopt, being “business success” not a priori defined, but an integral part of that pattern within which it is defined. If we mean such a strategy in this sense, it defines the real or sought identity of business, highlighting what it does or wants to do; why it does or wants to do it; how it does or wants to do it. This identity defines itself step by step both in terms of ideas, beliefs, attitudes representing business basic strategic orientation (BSO), and in terms of strategic policies in which BSO is realized. (Coda, 1988). In accordance with this second definition that the Italian doctrine strategy largely followed, the aims and the ways of pursuing them are inseparable aspects within the concept of strategy. Thus, it includes ethical business behavior, no matter which utilitarian notion is adopted. Coda’s approach to the basic strategic orientation of business has represented a significant incorporation of a wide-ranging utilitarian notion within Italian studies on management. Such a theoretical construction implies a widening of the aims permeating the business action, including both the ethical and social nature of businesses. Indeed, profit is neither considered absolute nor placed at the top of a hierarchical structure of aims and objectives, but it represents, as Coda claims, one of the essential elements inserted in a circular movement of competitive and social –both being equally important- aims and objectives, with which it has to combine synergistically. Such a notion of business finalism strongly unites the business prosperity with social satisfaction of the interlocutors. Economic aspects and social aspects are interwoven, and economic objectives cannot be recognized in shareholders’ profit but in the economic convenience of all of the interlocutors of the azienda. The reflections carried out thus far clearly highlight that respecting ethical criteria does not represent an option dependent on the achievement of a profit’s result to be obtained in the long run. Rather, it would be bound to the compatibility with the collective economic convenience, that has to be safeguarded. Such a change of perspectives from instrumental ethics to a wide-ranging utilitarian ethics is summarized by Sciarelli as follows: 35 That is to say that in these two cases there would be a passage from the pre-eminence of a result objective (instrumental ethics) to that regarding a cost constraint (compatible ethics) (Sciarelli, 2007). 4. Perspectives and Paradigms of the Wide-Ranging Utilitarian Notion According to the analysis of Italian studies on management carried out by Faccipieri (1989), two different approaches have taken turns in time: a classical approach and a renewed approach. A fundamental break took place in the second half of the 1970s. In those years, subsequent to the international economic crisis that followed to the first oil shock, strategic behavior businesses became strongly innovative in comparison to the past. New behaviors and changes they have caused in market structures have modified not only the current interpretations of competitiveness process, but also the notions of how to formulate business strategies. Classical approach starts with the works of the Ansoff, particularly with the Corporate Strategy (original edition: 1965). This approach also includes Hofer and Schendel (Strategy formulation: analytical concepts, 1978), who complete and develop both Ansoff’s initial approach, organize the strategic analysis and its relevant decision processes within the different management levels («corporate and global» level, «business area» level, «functional» level), and Porter (Competitive strategy: techniques for analyzing industries and competitors, 1980), in which we recognize the merit of explicitly introducing the strategic analysis in the investigation of competitive forces and structures at the sector level. Faccipieri recognizes some common features in these trends. Firstly, they are all normative trends, that is, they provide businesses with an operative method in order to formulate strategic decisions. Secondly, these trends share the same concepts with the strategic subject. The addressee of such approaches is the strategic top management which is represented either by an individual or by a small group of top executives, and is considered to be a very cohesive group, sharing the same conceptual patterns for interpreting the strategic business situation. Thus, top management is considered as the only site where management strategic intelligence lies. It is a privileged site where all the information relevant for analyzing and taking strategic decisions meet without being modified. Such a conception of the strategic subject entails, first of all, scant attention to potential conflicts arising among key management actors with regard to the evaluation of strategy issues and their possible solutions. As to the second consequence, the role of 36 management in shaping the process of formulating strategic decisions is disregarded. The influence of the management remains in the background. It follows that there is a clear separation between the formulation of a decision and its implementation. Briefly, the structure takes on the task of carrying out the strategies on the basis of the implicit assumption that business management is characterized by a high potential of flexibility and adaptation. A third aspect shared by all the trends included in the classical approach deals with the peculiar concept of the process of formulating strategic decisions. According to the classical approach, we can claim that such a process observes a form of rationality called linear and additive. Linear because the process is composed of a series of independent phases (fixing objectives, analyzing alternatives, choosing a strategy, implementing and evaluating) unraveling in time according to a well-defined scheduling; and additive because the complex issue of business strategy is split into more limited issues, their management left to organizational units that are placed at different levels of responsibility (corporate, divisional, functional level). Thus, the business strategy results substantially from the procedure of adding up all the strategies, processed by each independent profit centre. The last aspect considered relates to the environment notion of each trend composing the classical approach. Business environment is exclusively made up of the economic environment and, in particular, of the markets on which the business operates and of the competitive relations with which the business has to cope with. Given such a view of the environment, the question of strategic analysis is to identify those lines of action that can assign to businesses a solid competitive advantage compared to their competitors. Competitive process is conceived as a zero-sum game that does not provide space for cooperative behavior, that is, the possibility of agreements bearing benefits for competitors bigger than those deriving from non cooperative behaviors. In this notion, the ethical and social nature of businesses is completely absent. In other words, neither the behaviors managing competitive relations (i.e. behaviors regulating competition), nor the behaviors managing institutional relations between a business and its socio-political environment are considered. In short, we can claim that in the classical approach, strategic business rationality is not only linear and additive, but it is also strictly technical and economic, excluding the analysis of every social or political factor. 37 In the renewed approach, the notion of strategic subject changes to such an extent that it is no more possible to regard it as a unitary subject. It becomes a composite subject, within which different interpretations of the environmental evolution, therefore different opinions on the most appropriate behavior to pursue may coexist and in some time conflict. Furthermore, the strategic subject extends itself towards the environment in which some individuals as well as some groups act based on their own sources of power and their own independent capacity of conditioning – and, sometimes, even of vetoing – strategic business behaviors. Thus, looking at the «structural» conditions of businesses action, the strategic subject is not purely the business top management, but that wider planning coalition whose consensus – that has to be searched by distributing business surplus – is essential for sustaining business strategy in the medium term. The adoption of a more complete and structured notion of strategic subject is only a specific aspect of a broader issue – the influence of management on shaping processes of strategic change. Finally, after the reasoning presented above, we can understand why the processes of management of strategic change cannot be rebuilt only from a linear and sequential notion of decision-making rationality, but follow much more complex patterns of rationality. Particularly, it is possible to note that the opening of the strategic subject towards the inner management is explained by the necessity of strategic flexibility, while the opening towards outside is traced back to the consensus needed in order to support business strategy. Briefly, we can conclude that the ethical and social nature acquires its importance concurrently with the progressive acquisition of the flexibility objective, which is strategically important for businesses. Strategic flexibility needs to widely involve both the inner forces, in terms of participation to formulate some shared patterns of strategic analysis, and forces outside business, in terms of support for the resulting strategic plan. Thus, the necessity of consensus on business strategic plan emerges. As it developed just to coincide with the establishment of the “renewed” approach, the Italian studies on strategy have identified the issue of consensus on the aims and trends that management wants to pursue as a central aspect in managing the relations with social interlocutors (Coda, 1988)*. * According to Coda’s approach, an issue on consensus originates when the actual consensus which the business enjoys with its various social interlocutors is inferior to the consensus 38 According to the point of view of “classical” approach, businesses are engaged in meeting with approval in reference markets, looking for an approval – that we could call commercial approval – under which upstream and downstream subjects in its production chain recognize and “choose” the business as market operator, or as production function, buying from it or selling to it goods and services. From the “renewed” approach point of view, the area of consensus necessary for businesses in order to operate, has progressively has expanded until it included a wider social consensus according to which new stakeholders were added to previous ones or were included in wider social groups, such as the community as a whole, and a business is recognized as a social subject and legitimated through its works. Social consensus is the precondition of commercial consensus and conditions of its existence. Some authors highlight the meaning of consensus as a legitimation act (Matacena, 1993). Others approaches (Miolo Vitali, 1993; Allegrini, 2000) identify the search for consensus as a strategy for minimizing the risks related to business behavior, originating from the conflicts that may emerge around the business choices. By reducing the conflicts both inside and outside the management, we contribute to reduction of risks related to the achievement of business economic aims, particularly the risk regarding the lack of consistency between the strategy that is decided upon and the one implemented. In the years following the period investigated by Faccipieri, there has been an interesting development of the “renewed” approach: several studies have focused on the needed to carry out the selected strategic trend. Thus, a first discriminant between excellent businesses and second-rate businesses is represented by management awareness of the issue of consensus. A second discriminant is given by the level of satisfaction of interlocutors’ expectations that business executives are pursuing. While it is typical of second-rate businesses to privilege the expectations of some interlocutors (usually, shareholders or control groups), taking care to satisfy those of others at a minimum level, indispensable for having their collaboration, excellent businesses aim at developing a higher capacity of satisfying all interlocutors’ expectations, in view of obtaining the maximum consensus and collaboration, and thus increasing a higher capacity of competing in the market. Finally, a third discriminant is represented by the quality of the searched consensus. The last one depends on the level of maturity and awareness of social interlocutors and on what executives do for favouring or obstruct the maturity of their interlocutors. Thus, we can have, as the occasions may require, a consensus obtained on the grounds of an unquestioned confidence, of a paternalistic dependence, of a psychological subjection, which come from conventionality, influenced by some limited and misleading information; or, on the opposite, we can have a consensus of mature and aware people, adequately and systematically informed about results, issues, business perspectives, linked by a reliance which is fuelled by concrete facts and coherent behaviors both of the management and the owners. 39 connection between ethical business behavior and the attainment of confidence resources. The value of confidence resources produced by businesses is recognized as ethically valid by that part of literature which identifies a synonym of «common good» in the «social confidence». (Corno, 2002). Other approaches highlight the connection between confidence resources and business flexibility (Sciarelli, 2005). Such a pattern shows how the introduction of ethics represents an unavoidable passage in order to increase business reliability. Turbulent changes in the environment, characterized by the variability and the unpredictability of conditions surrounding businesses, entail the necessity of making the business structure and behavior more flexible. On the one hand, the weight of hierarchy and controls, both increasing the inelasticity of business answers, is reduced, and on the other the establishment of steady relations with stakeholders is enhanced. In order to be built on a solid base, such relations have to originate from the acknowledgement of business reliability in social terms. This «reliability chain» finally finds its proper and effective implementation in managerial procedures soaked with truly ethical principles, that is, those principles are able to build the confidence inside and outside a business in a durable fashion. Following such a pattern, we can reasonably claim that confidence resources produced by businesses favor flexibility, as they increase the operating consensus and reduce the conflict area both outside and inside, thereby contributing to the reduction of risks that hamper the business capacity to achieve its own economic aims. In this sense, we identify a logical sequence, in the following way: ethical behavior ĺ confidence ĺ consensus ĺ strategic flexibility. A further radical change in the strategic approach is achieved when confidence resources developed by businesses are identified not only as a vehicle of flexibility, but also as a lever for development. Accordingly, the logical sequence is as follows: ethical behavior ĺ confidence ĺ increase of strategic options ĺ opportunity of innovative development. As for individuals, in all situations requiring confidence, businesses recognized as honest are preferred as partners compared to those well-known for their opportunistic behaviors. In this direction, we can notice substantial progress of the meaning of ethical and social nature that businesses promote by fulfilling new opportunities of development of competitive relations and inter-businesses alliances (Molteni, 2004, Perrini and Tencati, 2008). Thus, the latest progresses in theory are steered in a way to 40 interpret the improvements in business’s ethical and social nature as an opportunity for formulating innovative strategic solutions. As with every strategic innovation, the realization of this opportunity is linked to the capacity of expressing business creativity as a «unitary expression of the intelligence of business subjective system» (Molteni, 2004). Molteni formulated the concept of «sociocompetitive creativity» that indicates a creative process, combining the ethical, social and competitive nature of businesses. This concept is based on two levels of corporate social responsibility: (1) the level of rights protection; (2) the level of socio-competitive creativity. According to such an approach, the real exertion of social responsibility from a firm occurs when it takes stakeholders’ expectations upon itself and also exceeds the legal obligations, not as a pure surge of generosity, but as a behavior inscribed within a strategy that tends to constitute a source of competitive advantage by means of a winwin situation – i.e. by taking advantage to all the parties involved. In such a theoretical context, the two forms of social responsibility above-mentioned are complementary to each other, while considering that the boundary between these two definitions cannot be traced distinctly. Rights protection interprets the responsibility mainly as a moral limit to firm’s decisions – regarding its relations with collaborators, its communication policy, its health safeguard, its relations with suppliers, and so on – which, in view of a maximization of short-run profits, may damage the rights of internal and external individuals involved. Socio-competitive creativity «is distinguished by a search for innovative solutions that can increasingly satisfy the expectations of one or more interest groups, aiming at making such solutions a factor of development of firm competitiveness». Substantially, it represents a source of innovation in business activities -setting up both forms of relations with collaborators that can increase cohesion within a business-, as well as in new products connoted by a social or ecological value and ways of communication involving all the actors in the plan of development of business. Therefore, “sociocompetitive synthesis” is a creative act which combines the tension of business development with the tension to satisfy stakeholders’ expectations. 41 The two levels of social responsibility detected by Molteni are substantially compatible with the two meanings of the ethical and social nature in business strategy: the level of rights protection is functional to strategies aimed at attaining and preserving social consensus oriented to strategic flexibility, whereas the «socio-competitive creativity» is a prerequisite for strategies of innovative development combining all the dimensions of business conduct. Therefore, first of all we can conclude that the ethical and social nature of business acquires relevance exclusively in the “renewed” strategic approach and according to two different perspectives: as a vehicle of strategic flexibility and as a lever for development (see table 1). Table 1. Two Perspectives of the “Renewed” Approach Typology of Considerations on the Aim of the ethical and strategic ethical and social social dimension approach dimension Classical Absent Renewed Present Strategic flexibility (first perspective) Innovative development (second perspective) These two perspectives are also recognizable in different «strategic archetypes» identified by Sinatra (1994). These archetypes, which are general patterns of strategy used to describe single firms and to constitute some super-ordinate references that are relatively stable in time for projecting a strategy, differ not only in environmental variability – cyclic or structural – but also in relation to the fact that business action is strongly dependent on external environment or relatively independent of it. When the variability prevailing in external environment has a structural character, like in current markets, Sinatra identifies the archetype of flexibility under the hypothesis of high dependence of the business on external environment, and the archetype of innovation under the hypothesis of low dependence on external environment *. 4F4F4F4 F4 F4 F * When the variability of the environment takes on a cyclic character, Sinatra provides for the 42 In the archetype of flexibility, the aim is to increase the capacity of business to adapt to the environment, and to see that the strategy is able to evolve at a speed comparable to the rate of environmental change. The emphasis is placed on the process of generating the strategy. The strategy appears no longer through an organic set of well-defined projects, but through more general lines of development, leaving more autonomy of interpretation to executives and taking shape by successive approximation. Strategic flexibility and the capacity of reacting to environment changes are reached by strategies that are developed from the bottom (bottom-up) and spread by experimentation. Such a pattern distinguishes itself with the increased importance it gives to social stakeholders compared to economic stakeholders- inside the businesses, thereby possibly guaranteeing the consensus needed for fast changes in the businesses. In the archetype of innovation, the main purpose is to determine the development of environmental variability, showing systematically innovative strategic behaviors originated from the capacity of auto-renewal. Innovations appear in new products, new services and new interpretations of salient dimensions that have to be considered in the archetype of optimisation, under the hypothesis of high dependence of business on the environment, and the archetype of collusion under the hypothesis of low dependence on the environment. The archetype of optimisation occurs under the same conditions in which businesses operated in Western economic systems, determining, consequently, the lines of development of strategic thought, until the first half of Seventies. In such conditions, it was possible to identify development trend in the long run by means of anticipatory instruments (related to mathematics, statistics, simulation, etc.), of which it is possible to know before the error risk, thus to define the lines of development of business structure that allow the fastest and most profitable path of development. In such conditions, the projecting logic aims at maximizing the efficiency and the effectiveness in satisfying environment needs (optimisation). According to this archetype, strategic plan mainly regards economic stakeholders (competitors, customers, suppliers, etc.). The archetype of collusion is frequently the result of the institutionalisation reached by businesses grown up within a logic of optimisation. With the upsizing businesses acquire power against their competitors, strategic objectives of growth are strengthened, in function of the achievement of a competitive dominance. Nonetheless, upsizing entails that non-competitive components of external environment become strategically relevant, consequently, next to competitive objectives, those referred to the role of business within the wider social and economic system are developed. The extension of the logic of optimisation, though the business influences more the social part, leads the same business towards a strategy of preservation of the status quo. The most common way of showing such an objective is summarised in the development and consolidation of game rules aimed at preserving the current structure. The achievement of a relative independence on external environment occurs by controlling directly environmental variability. The emphasis is put on the formation and management of competitive and political coalitions, and the main objective is to strengthen the position of power of the business both in the competitive context and in the institutional one. The weight of non-economic stakeholders, not relevant for preserving the current balance, is ignored or minimised. 43 strategic plan. Strategic aims expand towards more components inside and outside business. It has to be noticed that the two archetypes related to environmental structural variability are highly compatible with the two perspectives that define the ethical and social nature in the “renewed” strategic approach. The archetype of flexibility favors the strategic flexibility as the main factor towards which business strategic plan is addressed. Such a plan also involves the social stakeholders, and this can justify strategies that are aimed at building social consensus (first perspective). The archetype of innovation favors the research of innovative lines of development, as the core of strategic plan, and this can imply a process of «socio-competitive creativity». Furthermore, Sinatra’s pattern allows the justification of the difference between the two perspectives as a difference between an open system and a closed system, upon which the same pattern is based*. Indeed, we can coherently suppose that the matching of business ethical behavior to the issue of consensus (first perspective) is set in the business conceptual framework, seen as an open system that needs to expand consensus area in order to improve its capacity of adaptability to environmental changes, when environmental variability increases. Accordingly, the logical sequence is the following: ethical behavior ĺ confidence ĺ consensus ĺ strategic flexibility. Within the conceptual framework of the closed-autopoietic systems (Maturana and Varela, 1980, Vicari, 1991), the logical sequence is the following instead: ethical behavior ĺ confidence ĺ increase of strategic options ĺ opportunity of innovative development. Remarks passed thus far regarding the renewed approach are summarized in the Table 2. * In the first case, we refer to the notion of «open systems». In situation where there is less dependence or even independence, we refer to «closed systems» or «autopoietic systems». The notion of open system helps us to consider the variability as a fundamental point of reference, in order to identify business structure. In this hypothesis, external variability shapes the structure and sets business functioning (open system), which is, therefore, moulded by the environment. On the other extremity, in the notion of autopoietic systems, variability and environment features act only as a «detonator» for starting up activities, but they’re determined by internal processes (Vicari, 1991). 44 Table 2. Two Paradigms of the “Renewed” Approach Degree of systemic Strategic Contribution Aim of the ethical openness approach required to and social prevailing stakeholders, dimension in towards particularly to business strategic environment social ones plan Adaptive Consent Facilitating/ High level of dependence from the environment towards (perspective of open strategic decisions system) favoring strategic flexibility in reply to environment impulses Low level of dependence Proactive Support and Contributing to from the environment participation innovative lines of (perspective of close- to strategic development in autopoietic system) decisions terms of differentiation CONCLUSION A significant part of the theoretical basics of international studies on business ethics draws its inspiration from aspects that lie outside the strictly economic profiles of a business, and belong to the fields of political economics, philosophy or sociology. Moreover, it has to be stressed that business ethics includes several areas and does not refer to a specific unified business economics subject. This refers to the fact that neither in the countries where this area of study was born, nor in Italy, there is a unified business science. Indeed, the range of all the phenomena investigated by such a study is much wider and includes «speculative» phenomena as well, which are not the subjectmatter of Italian business economics studies – such as, for instance, the isolated investment choices of the savers. Italian studies on management, on the other hand, represent an original mixture between the strong tradition of Economia Aziendale, which limits the field of research to the 45 preservation and development of an economic entity, and the North American studies about strategic management. The result is an equally original mixture between ethical behavior and firm strategy, which has been synthesized in the concept of strategic ethics. Key principles of international studies on business ethics have surely had a strong influence on Italian scholars. Only some of them, however, are consistent with the disciplinary boundaries of a field of research that confines reflections on moral philosophy and on ethical dilemmas to the individual conscience sphere and attributes a strictly economic connotation to corporate social responsibility. Nevertheless, Italian studies have gone beyond the utilitarian conception of pure instrumentality of ethical behavior with regards to the economic objective of the firm. 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Prof. Dr. Mete Yildiz Hacettepe University, Turkey, e-mail: myildiz@hacettepe.edu.tr R. Erdem Erkul Microsoft Turkey, Turkey, e-mail: eerkul@microsoft.com INTRODUCTION For more than five decades the world witnesses the proliferation of video surveillance (closed circuit television - CCTV). During the 1990s its presence exploded in public accessible space in many countries. In the late 1990s, CCTV developed considerably in the West, proliferating particularly in the urban areas. Today, CCTV became an indispensable part of the fight against crime and terrorism, and almost all the urban centers in the developed west are now monitored by CCTV systems. That means, in the liberal west, citizens are monitored in public urban spaces without their permission. According to some human rights experts, this situation amounts to a significant problem in terms of ethics and ethical conduct. CCTV is a multifunctional technology to be found in almost every field of life for various uses, but its main use is the management of risks; traffic jams, fire, accidents and crime. Given the social control potential of CCTV painted in dystopic visions by warning voices it may be described as “risk technology” created to deal with risks being * An earlier version of this chapter was published in the proceedings book of Professional Ethics Congress, Antalya, Turkey, Oct. 17-19, 2008. 55 a risk itself. CCTV as a tool of social control has “left” private and semi-private space to which it was confined from the 1970s till the mid-1980s (Hempel and Töpfel, 2002: 2). Standard evaluations of CCTV, usually carried out by operators of a system, highlight crime statistics so as to justify the efficiency of CCTV. They generally have a high effect on the public and political decision making processes. However, their scientific value is doubtful. Not only is the explicit focus on changes in crime rates insufficient but the statistical procedure itself is often not so strong. Scientific evaluations show that "CCTV is not a universal panacea" to fight against crime. The findings of these evaluations demonstrate inconsistent outcomes. There are success stories next to examples of mixed as well as negative results (Hempel and Töpfel, 2002: 2). For example, a recent comprenhensive report by the Surveillance Studies Network (SSN) in the UK, which was requested by the Commons home affairs committee, warns that Britain was "sleepwalking into a surveillance society" (Guardian, 2010). The SSN cites the developing use of unmanned drones, full body search scanners and workplace surveillance techniques to monitor employees as worrying indicators of what is to come. Their report says that use of CCTV systems has become even more widespread in recent years and is now a routine feature of most urban public spaces. Yet despite its public and political support the relative ineffectiveness of CCTV in tackling crime remains a concern (Guardian, 2010). In addition to the report of SSN, another challenging report comes from Metropolitan Police in the UK, declaring that number of crimes caught on CCTV falls by 71 per cent in the past five years (The Telegraph, 2010): “This drop has raised fears that the effectiveness of CCTV has been exaggerated. Prosecutions in Britain's largest force fell once it changed the way detections linked to cameras were recorded. Other forces are expected to have seen a similar effect... Figures released under the Freedom of Information Act to The Daily Telegraph show a 71 per cent fall in the number of crimes "in which CCTV was involved" in the Metropolitan Police area, from 416,000 in 2003/4 to 121,770 in 2008/9. The number of these crimes which resulted in a charge, summons or caution fell from 47,000 to 23,000 over the same period.” 56 Controversy upon the effectiveness of CCTV systems may arise since different contexts of CCTV employment lead to different outcomes. The outcomes depend among others upon the management of a CCTV system, the integration with the police work and organisation and the social and spatial shaping of targeted space. Within this controversial context summarized above, this study tries develop an understanding towards CCTV practices from the western countries to Turkey and help develop a strong legal and ethical framework in which CCTV systems operated. With this aim in mind, chapter starts with a theoretical framework of video surveillance, by focusing on the existing literature. Western practices in an historical perspective and “benefits and risks” of the CCTV systems are presented and citizen perceptions of CCTV systems were given in the following parts of the chapter, respectively. In the third part, the Turkish case (MOBESE) is examined in detail. Finally, in the conclusion part, helpful recommendations to improve the ethical conduct of CCTV systems are made. 1. Video Surveillance: Theoretical Framework Before examining the controversial aspects of the issue, one should understand the meaning and the scope of the term; CCTV. Closed circuit television surveillance is a commonly used and debated method for preventing crime. Technological developments have also contributed to the constant growth in the use of CCTV surveillance (Welsh and Farrington, 2007). CCTV is used to monitor and store images of what takes place in specific locations in real time. The images collected are then sent to a monitor and recorded on video tapes or stored as digital information. The cameras can be fixed or set to scan an area automatically or they can be operated by controllers. Monitors can be watched by controllers or left unmonitored. The recorded information can be stored and/or reviewed by those who have access to the recordings at their convenience (CCTV, 2006). In other words, CCTV is a situational measure that enables a locale to be kept under surveillance remotely. This system makes it possible for the police and other law enforcement and regulatory agencies, such as private security firms, to respond to incidents when alerted, and have information about what to look for when they arrive at the crime scene (Gill and Spriggs, 2005). The ability to store images indicates that post-incident analysis useful for an investigation can be facilitated. Nevertheless, there are many different types of CCTV systems and each has different capacities to meet a diverse array of purposes (Gill and Spriggs, 2005: 1, 2): 57 “Despite the tendency within the criminological literature to discuss CCTV as if it were a single measure, CCTV systems can differ quite markedly. Cameras can be static (focusing on a single view), or can pan, tilt and zoom (moved by operators, or placed on ‘tours’ to survey a succession of scenes); they can be fixed (permanently installed in one location); redeployable (moved around power points within an area), or mobile (placed in vehicles and transported to where they are needed); they can transmit analogue or digital images, via cable or wireless links. The images can be recorded in different ways with different implications for quality.” Different techniques of storing and manipulating images have different implications in relation to the type and speed of monitoring that can be carried out. As a consequence, the availability of specialized uses, such as number plate and facial recognition, has generated yet more potential applications of this flexible technology (Gill and Spriggs, 2005: 2). 1.1. Video Surveillance in the West Since the 1950s when the first cameras were installed for traffic management purposes we witness a rapid proliferation of CCTV in the developed and developing world. After the invention of the Video Cassette Recorder in 1956, which provided a cheap and simple method of recording and storing images, suppliers launched CCTV systems for banks and shops selling luxury items. Although these systems had been primarily deployed for the deterrence and apprehension of robbers and shoplifters they were soon found to be helpful instruments for consumer surveillance in order to rationalise business resources, e.g. by devising “shopping routes” that could be found more stimulating. In the following years, CCTV was particularly refined for workplace surveillance: It became possible to advance the control of equipment security, regularity of labour performance and quality. During the 1980s, CCTV usage was also increased in urban public transport for crowd management and combating vandalism (Hempel and Töpfel, 2002: 4). As mentioned above, the visual surveillance of “public space” started more than fifty years ago for traffic management purposes. For example, in Germany the first cameras were installed in 1958 in Munich. They were followed by a system in Hannover in the following year. Hannover was also the first city in Germany which installed remotecontrolled pan-tilt-zoom cameras in 1976. Today monitoring traffic on roads and 58 motorways is common: For instance, the Brussels Ring Road is watched by more than 100 cameras since 1993. At the busy A20 in the South of France 250 cameras observe traffic flow. On the Meridionale Freeway connecting Naples with Salerno which is used by 150.000 cars per day each of the 13 tollway plazas is monitored by CCTV (Hempel and Töpfel, 2002: 8). In Lisbon the city police and motorway traffic controllers watch all the main roads and the Ponte 25 de Abril bridging the Tejo. Major tunnels in the Alps, the Scandinavian countries and in Spain are observed by cameras so as to prevent serious fire accidents, such as in the Øresund Tunnel connecting Denmark and Sweden, the Guadarrama Tunnel between Madrid and La Coruña or the reopened Montblanc Tunnel connecting France and Italy. Many video surveillance systems initially installed for traffic management purposes were found to be a helpful tool for social control as well. While speed control almost suggests itself, the early systems in Hannover, Hamburg or Munich have been soon deployed for the surveillance of social fringe groups. The first 145 traffic control cameras installed in London in 1974 were rapidly used by the police for the surveillance of political demonstrations. In the German town Regensburg traffic control cameras of the local transport corporation have been used by the police for a pilot project on surveillance as law enforcement tool in 2000/2001, and although no criminal act has been captured on tape the police noticed that it helped containing the presence of Punks in the town centre. The mutability of traffic control systems was proven lately also in Genoa where they have been used by the police to observe the protests against the G8 summit. Complicated systems like the “Ring of Steel” around the City of London combine “digital cameras” and “automated licence plate recognition software” to control vehicle movements in order to war with terrorism. However, even in the city of Zurich such an automated system compares license plate numbers of cars driving past with a database of the Swiss Ripol computer (Hempel and Töpfel, 2002: 89). In the last decade, there has been a marked and sustained growth in the use of CCTV in public places in many western nations. It has been estimated that the number of surveillance cameras in London are approximately 400,000 and the total number of cameras in the UK are approximately 4,200,000. It has also been estimated that an average Briton is caught on camera 300 times per day (Associated Press, 2007). 59 As of yet, there are no national estimates on the number of CCTV cameras operating in the US, but local accounts point out that they are being deployed at an extraordinary speed and CCTV systems are now prevalent in small urban centers and rural areas as well (Welsh and Farrington, 2007; Fountain, 2006; Nieto et al., 2002). Parallel to this astonishing expansion in the number of CCTV systems, there is also a growing amount of literature on CCTV, examining different sides of this hotly-debated topical issue (Welsh and Farrington, 2007; ACLU, 2006; Hempel and Töpfel, 2004; Urbaneye, 2004; Gill, 2003; McCahill and Norris, 2002a; McCahill and Norris, 2002b; McCahill, 2002; Norris and Armstrong, 1999; Norris et al., 1998). Most of the literature articulates the threats that CCTV poses on civil liberties and the privacy of citizens and discusses the concerns about the ‘big brother’ syndrome and surveillance more broadly (Gill and Spriggs, 2005; Whitaker, 2000). With the advent of CCTV and other monitoring technologies, the risk of creating a surveillance society as George Orwell (1984) fictionalized in his novel 1984 became more apparent. With this fear in mind, the American Civil Liberties Union (ACLU) asserts that governments should be responding to intrusive new technologies by building stronger restraints to protect individual privacy (ACLU, 2006). However, ACLU also claims that governments do the opposite by loosening regulations on surveillance, and thereby allowing surveillance to grow unchecked. Within this framework, Wagenaar and Boersma (2008) present us with a dilemma. They ask whether the “big brother” perspective of government surveillance, or the “soft-sister” perspective of surveillance by the privately owned companies, such as Google or MasterCard, is more preferable as an unavoidable consequence of modernization and the accompanying “control revolution” (Beniger, 1986). In fact, current debate on the use of CCTV is mainly concerned with the balance between the potential benefits and the risks of violations of individual privacy (Welsh and Farrington, 2007). 1.2. CCTV as a Double Edged Sword The role of CCTV in preventing crime is rather controversial as well, since there are studies both in favor and against. One of the most important surveys, aiming at assessing the impact of CCTV on crime, was realized by Home Office in the UK in 2005 (Gill and Spriggs, 2005). The survey report evaluated 13 Closed Circuit Television Camera (CCTV) projects (comprising 14 separate systems) implemented 60 in a range of contexts, including town centers, city centers, car parks, hospitals and residential areas. Following results were obtained on the impact of CCTV on crime (Gill and Spriggs, 2005: vi-vii): 1. All the systems had the broad objective of reducing crime. Out of the 13 systems evaluated six showed a relatively substantial reduction in crime in the target area compared with the control area, but only two showed a statistically significant reduction relative to the control, and in one of these cases the change could be explained by the presence of confounding variables. Crime increased in seven areas but this could not be attributed to CCTV. The findings in these seven areas were inconclusive as a range of variables could account for the changes in crime levels, including fluctuations in crime rates caused by seasonal, divisional and national trends and additional initiatives. 2. A number of quantifiable aspects of systems, which could have explained the impact measured were investigated and it was found that certain types of system were more effective than others: - Systems installed in a mixed category of areas (e.g. Car parks, a hospital and various other areas covered by one system) displayed the most encouraging results in terms of reduction in crime, particularly in car parks. - Town centre and residential systems showed varied results, with crime going down in some areas and up in others. - Residential redeployable schemes appeared to show no long-term reduction in crime levels. However, the cameras were dealing with short-term problems, which require sensitive measures to detect the impact of the cameras. 3. Certain types of offence were affected more than others: - Impulsive crimes (e.g. alcohol-related crimes) were less likely to be reduced than premeditated crime (e.g. theft of motor vehicles). - Violence against the person rose and theft of motor vehicles fell in the target areas in accordance with national trends in recorded crime. 4. Some system attributes had more effect than others: - Camera coverage was positively correlated (r = 0.51) to effect size. However, this was not statistically significant (p<.05). 61 - Increased camera density (numbers of cameras installed per unit area) was related to effect size only where the number of cameras installed in an area had not reached saturation point. - There are indications that CCTV is more effective in sites with limited and controlled access points, such as entrances and exits to the area. 5. Spatial displacement was not common but did occur: - One system showed evidence of displacement of overall crime into the surrounding area. - Another showed displacement of burglary into the surrounding area. - Another showed displacement of vehicle crime into the gaps in coverage between cameras. - None of the factors outlined above determine exactly how well a system will work, but they can work together to reduce crime. In addition to Gill and Sprigg’s (2005) findings, there are many other surveys citing the risks and benefits of CCTV systems. For example, Welsh and Farrington (2006) summarize the results of different studies regarding with the main advantages of the CCTV systems as follows: 1. CCTV provides a surveillance function that may work to deter people from committing crimes in the area in which it is used, 2. CCTV signals to the public that an area with CCTV is a safe place, leading to an increase in the use of the space, which in turn means that crime is less likely to be committed as there would be more potential witnesses, 3. The presence of CCTV may act as a prompter to remind people to take other security measures, such as locking their car. On the other hand, among the possible disadvantages of CCTV systems, the following can be listed (Report on the Surveillance Society, 2006: 8; Phillips, 1999: 128-36): 1. Some studies report that CCTV systems do not decrease the crime rate or the outcome is mixed, 2. Visual records can be hacked and/or stolen, 3. Cameras may also; 62 • Make some people feel that their privacy is violated, • Make crime shift to locations without camera systems, • Make people become less aware and agile about their surroundings and about the risk of crime. In conclusion, when we put together all those surveys and reports cited above in this part of the chapter like Welsh and Farrington (2006), Report on the Surveillance Society (2006), Phillips (1999) and Gill and Spriggs (2005), it becomes obvious that CCTV seems to be a double edged sword, meaning that it can have both favorable and unfavorable results based on the use/abuse of the system. At this point, perhaps one should focus on the perception of citizens towards the system, because it is important to understand the reaction of the people in the West, since public perception is one of the most important issues when questioning the status of CCTV in today’s world. 2. How Do People Perceive CCTV CCTV in Europe has been analyzed in many studies (Gras, 2005; Hempel and Töpfel, 2004; Hempel and Töpfel, 2009). The Urbaneye Project, one of the most significant of those studies, was conducted with the participation of approximately 1,000 respondents in five different European countries (Hempel and Töpfel, 2004). The results of this study in terms of the attitudes of people toward CCTV in Europe are summarized at the table below: 63 Table 1. People’s attitudes towards CCTV according to the locations of cameras Camera Location Good Neutral Bad Bank Counters 91.9% 3.8% 4.3% Subway/railway platforms 86.7% 9.3% 4.0% High street shops 82.9% 10.2% 6.8% Shopping mall walkways 62.5% 23.4% 14.1% Along motorways 62.6% 21.9% 15.5% Open high streets 56.1% 21.5% 22.3% Taxi passenger seats 46.6% 24.9% 28.5% Hospital wards 42.7% 28.6% 28.6% Outside entrance to homes 36.1% 27.1% 36.8% Public toilet washrooms 22.2% 17.5% 60.3% Sports center changing room 13.8% 17.8% 68.4% Clothing store fitting room 13.0% 13.6% 73.4% Source: Hempel and Töpfel (2004: 43) As seen above, most people have positive opinions towards CCTV at the banks, station platforms, shops, shopping malls, along motorways and on open streets. In contrast, some people express negative opinions towards CCTV in public toilet washrooms, changing and fitting rooms. Although the general characteristic of the spaces where CCTV is clearly opposed can be easily described as more intimate, it is difficult to find a common denominator for the locations where CCTV is supported. Some of those locations might be seen as mono-functional or less “social”, hence, intimidating spaces, such as station platforms. In the others, people might sympathize with the interests of property owners who might want to protect their assets. Or, people might simply 64 recognize the “power of facts” when they support CCTV at the banks or in stations (Hempel and Töpfel, 2004: 43). When these findings are plotted with respect to the European cities that the study was conducted, as well as the age groups of respondents, we get the following results: Table 2. General attitudes towards CCTV in selected European cities Category Supportive Ambivalent Critical Total 200 (City & Age Group) Berlin Budapest London Oslo Vienna Aged 15-19 Aged 20-39 Aged 40-59 Aged 60+ Total 112 10 78 (56.0%) (5.0%) (39.0%) 136 16 42 (70.1%) (8.2%) (21.6%) 167 3 7 (94.4%) (1.7%) (4.0%) 149 14 40 (73.4%) (6.9%) (19.7%) 91 26 83 (45.5%) (13.0%) (41.5%) 94 7 40 (66.7%) (5.0%) (28.4%) 235 26 118 (63.7%) (6.5%) (29.7%) 196 27 67 (67.6%) (9.3%) (23.1%) 112 9 25 (76.7%) (6.2%) (17.1%) 655 69 250 (67.2%) (7.1%) (25.7%) 194 177 203 200 141 397 290 146 974 (27 missing) Source: Hempel and Töpfel (2004: 44) The results illustrate that in general, most people are supportive of CCTV. For example, an overwhelming majority of Londoners (94%) state that having CCTV at more settings is a “good thing” than a “bad thing”. Although most of the people in all countries are 65 supportive of CCTV at banks and station platforms, they are against CCTV in more intimate spaces, such as changing rooms at the gyms and fitting rooms at clothing stores (Hempel and Töpfel, 2004: 43). In addition, it is clear that attitudes towards CCTV are culturally bound, since it changes from country to country, and from context to context. Urbaneye report puts this in the following way (Hempel and Töpfel, 2004: 8-9): “... the acceptance of CCTV differs significantly between different countries with the Britons being the most supportive and Germans and Austrians being comparatively skeptical. Skepticism is often based on the grounds of civil liberties in general or privacy in particular. Though around two thirds of the respondents to our survey agreed with the statement “who has nothing to hide, has nothing to fear from CCTV”, more than 50 % think that footage can be easily misused and 40 % felt that “CCTV invades privacy”. Attitudes towards CCTV surveillance differ markedly depending on where it is. Moreover, people draw a clear line where they accept CCTV. Most people support CCTV in banks or transportation facilities while they oppose it in “intimate spaces” such as changing rooms. In international comparison the most different attitudes are found towards open street CCTV which is seen as a good thing by 90% of the respondents in London and by only 25% in Vienna. In particular younger people have opposing attitudes towards CCTV. In terms of socio-demographic rather than national background, gender turned out to be of minor importance as predictor for people’s attitudes towards CCTV. Age was found to be most likely to influence the opinion on CCTV. As a general rule younger people were much more likely to be found opposing CCTV and doubting its benefits than the elderly. Teenagers found themselves most likely to be disciplined: Almost one third of the respondents aged under 20 thought that CCTV affects their behavior while only 14 % of those aged 60 and older thought so. ” After this general review of CCTV studies in the West, we would like to discuss the details of the Turkish case (MOBESE), in light of the Western experiences. 3. Video Surveillance in Turkey In Turkey, continuous surveillance of avenues and streets by security cameras has begun with the implementation of the “Mobile Electronic System Integration Project” (Turkish acronym, MOBESE) in 2005 (MOBESE, 2010). The first MOBESE cameras were installed in Istanbul on June 17th, 2005 (although a pilot project had first been implemented in Diyarbakir). 66 The MOBESE system in Istanbul mainly had three sections (MOBESE, 2010; SonDakika, 2010): 1. A call center (data input not only by cameras, but also through the 155-police emergency number), 2. Mobile Applications (Tablet PCs, GPRS, person or vehicle ID plate search), 3. 4,017 digital cameras (automatic system alerts: such as a higher numbers of people in an environment than normal). The following figures can help us understand the potentials of the system, in terms of the performance of MOBESE for the first two years (Pakkan, 2007): • 1,633 crimes were spotted and 2,008 criminals were arrested, • 563 individuals, who were selling pirated CDs and DVDs were apprehended, 1,650,000 pirated CDs and DVDs were confiscated, • 768 traffic accidents were spotted, • 102,574,973 vehicle plates were screened while crossing the bridges connecting the two sides of Istanbul, and 801 stolen vehicles were spotted, • 8,495,109 vehicle plates were screened on the streets of Istanbul and 11,574 stolen vehicles or stolen vehicle plates were spotted, • Mobile police units used their tablet PCs for making 4,148,454 searches for stolen vehicles. In the project that serves the security of Istanbul, police officers watch the locations and activities of the security forces from satellite images of the city, which are projected on large screens. A total of 4,017 digital cameras at 1,179 points throughout the city record images 24 hours a day and feed the system with this information. The incoming images can both be viewed simultaneously and stored in the command and control center (MOBESE, 2010; SonDakika, 2010). The police vehicles are equipped with Tablet PCs, which enable the policemen to communicate easily with the MOBESE command and control center. The tablet PCs also have GPS systems installed within, so that the locations of the police vehicles can be tracked on the digital map in the MOBESE command and control center for decreased response time (MOBESE, 2010). 67 All the elected neighborhood heads (muhtar) are connected 24/7 to the MOBESE command and control center. They send the identification information and photographs of citizens who are living in their respective neighborhoods to the system, which forms a pool of information and images. The system also has a component that scans the photographs and identifies suspects with previous records through retina analysis from their photographs (MOBESE, 2010). The cameras are not pointed to personal spaces such as houses. Such an option, if attempted, is limited by a special smart software placed within the MOBESE system. In addition, the policemen who watch the cameras are also being checked and any sign of misuse, such as using cameras for any unapproved purposes, can easily be detected through this mechanism of internal control. The success of CCTV in very high profile cases, such as the identification of the bomber of the Anafartalar Mall in Ankara and the murderer of journalist Hrant Dink in Istanbul in 2007, increased the popularity of MOBESE. From then on, the system was established in most cities of Turkey. For example, in the capital city, Ankara, MOBESE began operating in October, 2010 (CNNTURK, 2010). Formal opening ceremony of the system took place on December 1st with the participation of Prime Minister Erdogan (Ministry of Interior, 2010a). MOBESE in Ankara includes 1,400 cameras at 513 different locations (BT Dünyası, 2010). Some of those cameras are designated to serve the security of the citizens against crime and terrorism and others are used solely for traffic surveillance (CNNTURK, 2010). With the advent of the system, on the first day, 2,723 speeding and 16,900 red light violations were recorded in Ankara metropolitan traffic (Zaman, 2010). It is obvious that the success of the MOBESE system in Istanbul has created an impetus for other cities in Turkey (BT Yönetim, 2008). On December 7, 2010, a press release from the Turkish Ministry of Interior stated that establishment of MOBESE systems would be completed in all urban centers of Turkey in a few months and subsequently, the system will be implemented at the district level. The press release also pointed out that 38 districts already had a MOBESE system in operation (Ministry of Interior, 2010b). 68 CONCLUSION Surveillance through the CCTV systems became an important subject on the public policy agenda, mostly due to the increasing incidents of crime and terrorist attacks. However, human rights experts claim that unethical use of CCTV systems poses an alarming threat on individual privacy in today’s world. Prevention of the abuse of CCTV and establishment of a more ethical framework for the operation of those systems are critical steps in decreasing the privacy related anxieties. Following recommendations can be helpful along those lines (Hempel and Töpfel, 2004): 1. Training of operators: All CCTV operators should be required to have a professional accreditation of six months. This accreditation needs to involve written or legal and competency-based assessments. 2. Organization: Administrators of CCTV centers must be professionally accredited. They should be legally liable for compliance with human rights, data protection and associated codes of conduct. 3. Technology: All digital systems must undergo a privacy and security audit, which demonstrates how privacy enhancing technologies have been incorporated into the system. 4. Licensing: All systems must be licensed by a video surveillance licensing agency. 5. Evaluation: Routine and random inspection/evaluation to ensure the following concerns are addressed: • Human rights complaints • Data protection • Fitness of purpose 6. Transparency: Subject access rights must be guaranteed and audited, if visual images are linked to the identified individuals on databases. Subjects must be informed of their inclusion in the system and have a right to access their information. 7. Scope: There should be a presumption against video surveillance in public and semipublic spaces. It must be justified in relation to appropriateness and the available alternatives. In some specific spaces (intimate publicly accessible places) the concept of a surveillance-free zone should be implemented. 69 What about Governance? In addition to the suggestions above, governance is another issue to elaborate on. Authorities should not consider surveillance mechanisms as systems established and administered solely by the police (Çapar, 2008: 185-199). The fight against crime and terrorism is not only police duty, but also citizen responsibility. Maintaining the coordination of governmental and non-governmental bodies in the process can produce vast contributions by creating an environment of governance. For example, a new structure under the name of common action boards can be very helpful while creating an atmosphere of governance (Çapar, 2008: 185-199). City governors or district governors can also be the heads of those boards and other members of the board can come from the local governments and professional associations in the province. Those boards can undertake the establishment and administration of CCTV systems. Interestingly, on November 7, 2010, such a governance project was completed and put into operation in Kemer, Turkey (a touristic district along the Mediterranean Coast) with the full funding of South Antalya Tourism Development and Infrastructure Management Association (Turkish acronym, GATAB). This is the first and definitely the most inspiring example in Turkey that a nongovernmental body by itself undertook the full burden of the investment costs (over 1,300,000 US dollars) of a MOBESE project (GATAB, 2010; Ministry of Interior, 2010b). However, there is still a lack of partnership in the administration and control of those systems. We hope that in the near future; investment, administration and control of MOBESE systems would be a common responsibility of both governmental and nongovernmental bodies in the cities and districts. If this can be achieved, most of the reservations towards unethical conduct of CCTV systems would be eliminated and transparency can be achieved, to a great extent due to the citizen participation and control of those systems. Final Remarks As the above discussion illustrates, collaboration in the investment, administration, and control of the CCTV systems for a better ethical conduct is a significantly important issue. In addition to this, the laws and regulations protecting the rights of citizens against the abuse of CCTV systems are as important as the governance issue. 70 In Turkey, there is an increasing effort to strengthen the regulations and update the current legal framework. For example, regarding the above-mentioned protections of individual privacy and data security, a recent constitutional amendment in Turkey, in September 2010, included additional clauses in the Constitution regarding the privacy of personal information. This constitutional amendment will soon be supported with a new law that will specifically focus on the misuse of personal information in a detailed manner. Those efforts are definitely worth citing, since they demonstrate the sensitivity of government authorities on ethics and privacy issues in general, and CCTV systems in particular. However, when the rapid pace of technology is considered, one can easily see that current regulations will soon be obsolete unless they are continuously updated. 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Zaman (2010) MOBESE'den Ankara'ya ceza ya÷dı, Zaman Newspaper, 15th October, 2010, last access date: 12.05.2011, <http://www.internethaber.com/mobesedenankaraya-ceza-yagdi-302106h.htm#ixzz16g1O8DRU> 76 CHAPTER 4 MAXIMIZING AN ORGANIZATION’S VALUE TO SOCIETY: THE CASE FOR ETHICAL BUSINESS DECISIONS, THE ACT OF PRUDENCE * 7F Marco G. D. Guidi Glasgow Caledonian University, UK, e-mail: Marco.Guidi@gcu.ac.uk INTRODUCTION In recent years, Arjoon (2007) and Louden (1984) observe that virtue per se is a prerequisite for a moral life. In fact, Pieper (1966: 8) states that “ethical virtue is the print and seal placed by prudence upon volition † and action.” This follows Aristotle’s F doctrine that a decision-maker grappling with the difficulties of a moral life must bring to task the master virtue ‡ known by several names; that is practical wisdom, prudence, F or sound moral judgment (MacCunn, 1906). Thomas Aquinas argues that virtue is a ‘perfected’ ability of an ethical decision-maker and that justice, fortitude and temperance, as ‘abilities’ achieve their ‘perfection’ only when they are founded upon prudence, that is to say, the perfected ability to make good decisions (Pieper, 1966). Aristotle observes that a decision-maker who has mastered the virtue of prudence will also have mastered all the other virtues (MacCunn, 1906). Thus, prudence is at the core of all the other cardinal virtues’§. Good decision-making is just, * An earlier version of this chapter was orally presented at Professional Ethics Congress, Antalya, Turkey, Oct. 17-19, 2008 and its abstract was published in the proceedings book. Volition is the ability to make conscious (i.e. informed) decisions. ‡ However, Adam Smith found prudence as a “middling virtue” well below better virtues such as justice and benevolence (MacCunn, 1906: 298). Benevolence is associate the virtue of charity, which is performing ‘good’ or charitable acts and not seeking to make a profit. However, Pieper (1966: 11) observes that “the common goals of all human action”, that is prudent decision-making, presupposes “the three theological virtues of faith, hope and charity.” § The other 3 cardinal virtues are Justice, Fortitude and Temperance (Pieper, 1966). Adam Smith (1790) replaces fortitude with benevolence as a cardinal virtue. † 77 brave and temperate in that essentially “whatever is good must first have been prudent” (Pieper, 1966: 6). Can virtues associated with an individual be transferred to an organization? The four cardinal virtues relate to principles-based ethics and all the other virtues relate to the four cardinal virtues (Arjoon, 2000). Although Schudt (2000) argues that virtues of an organization are different from that of an individual, Gowri (2007) states that an individual and organization should have similar virtues. Whatever the debate, many theorists agree that decision-makers within an organization, from an ethical and economic perspective, must integrate virtues into business decisions (Bastons, 2008; Arjoon, 2007, 2000; McVea, 2007; Fowers, 2003; Whetstone, 2001; Louden, 1984; Bricker, 1980; Pieper, 1986, 1966; Fortenbaugh, 1964). 1. Prudent Decision-making An external act adds something to the internal act of the will by perfecting the act. A decision-maker who intends to make prudent decisions, but fails to carry out the intention, has less good in his or her conduct than another who has made the prudent decision and fulfils it by externally performing the prudent decision. In other words, decision-makers need to be able to ‘walk the talk’ or be one in word and action. The goodness or malice of a human act can be found in the internal act of the will, even if it is not externalized. However, the external act can manifest the intensity of the internal act and thereby increase prudent (i.e. good) or imprudent (i.e. bad) decision-making (Arjoon, 2007; Michaelson, 2005). Prudence presupposes the intrinsic goodness of man/woman and is reinforced by their decision-making and actions (Pieper, 1966). Furthermore, Adam Smith was concerned with how an individual distinguishes right from wrong and placed greater importance on how that individual acts upon that decision (Grampp, 1948; Smith, 1982). On this subject, Aristotle asserts that it is difficult to be ‘good’ (i.e. to be prudent) because there are so many possible ways of going wrong in a moral life (MacCunn, 1906). Morality requires consideration of three components: the extent of a decision-maker’s knowledge of the situation and the rightness and wrongness of the act itself (moral object), the motives of the agent (intention) and the conditions under which the agent acts (circumstances) (Arjoon, 2007; Steiner, 1995). Furthermore, Pieper (1989) 78 observes that prudent decision-making can only be achieved through the process of reality*, understanding (reason) and action. Reality is the foundation of the virtue-based ethics of Aquinas and Aristotle (Bastons, 2007; Pieper, 1989, 1966). That is, what we deem to be good and prudent is that which is in accord with known reality. The individual or firm wishing to know and make prudent decisions must turn their gaze upon the objective world of being (i.e. reality). Furthermore, Pieper (1989: 123) states the following: “objective reality is the measure of our knowledge means precisely this: the real objects are the pre-forms and models of that which our mind cognitively forms and actually is… The intellect receives its measures from objects; that is, human knowledge is true not of itself, but it is true because and insofar as it conforms to reality...Our knowledge, then as image and copy, is reality itself…The nature of knowledge rests upon objectivity as the only proper attitude of man…if we demand objectivity in knowing, this means simply that knowledge must be really knowledge. Nothing else is involved here but the true character of knowledge. Knowledge is the relation between the subject and the object…in the fact that action is determined by knowledge, action is really determined by the objective reality itself.” This supports the argument that moral understanding and moral improvement follows Aristotelian classification of virtue as knowing, loving and doing good and thus, being prudent is, in fact, to effect a reconciliation between oneself and one’s world (Michaelson, 2005; Steiner, 1995; Bricker, 1980). In other words, decision-makers need to visualize and seek knowledge of the consequences that may arise from their business decisions, based on the real situation that the organization is faced with (Pieper, 1986, 1966; Steiner, 1995; Guidi et al., 2008). That is, business decision-makers require moral imagination† which is ‘‘the missing element in many instances of alleged managerial or corporate wrongdoing’’ * See Pieper (1989) for a full discussion of the two meanings of reality which are based on the two Latin words realis (derived from res-thing) and actus (action). The meaning used here follows Pieper’s (1989: 111) interpretation that “Res is everything that is ‘presented’ to our sense perception or our intellectual cognition, all that has being independently of our thinking. ‘Real’ in this sense is whatever is ‘opposed’ to us.” † Defined as ‘‘the ability to understand that context or set of activities from a number of different perspectives, the actualizing of new possibilities that are not context-dependent, and the instigation of the process of evaluating those possibilities from a moral point of view’’(Werhane, 1999: 5). 79 (Werhane, 1999: 5). Furthermore, Eduard von Hartmann, as cited in Steiner (1995: 11), states that “human willing depends on two main factors: motive and character…If we consider that different human beings make an idea or mental picture into a motive only when their character is such that the idea in question gives rise to a desire, then human beings appear to be determined from within and not from without.” For instance, managerial business decisions lacking in moral imagination allows the manipulation of accounting information, i.e. to play the earnings smoothing* game. These business decisions are then based not on the real trading situation that an organization finds itself in, but on the unrealistic growth expectations of external shareholders and capital markets that destroy the market value of an organization (Jensen, 2003, 2001). In a sense, “we have created the present world in this particular manner because our minds were trained to believe in a particular set of ways which led to the formulation of the world ... People say I am crazy, but no one can achieve anything without a dream ...If one is going to make headway against poverty, one cannot do business as usual. One must be revolutionary and think the unthinkable.” (Muhammad Yunus in Jolis, 1996: 3). Pieper (1986, 1966) and MacCunn (1906) both assert that the difficulties of the moral life does not lie in asceticism or ignorance, but rather in prudent decision making in real life situations. For example, when decision-makers play the earnings game in order to meet the capital market expectations on continuous growth, collude in private executive remuneration or maintain over-valued share prices, they do not generate but destroy organizational value in the long-run through such imprudent business decisions (Guidi et al., 2008; Jensen, 2004, 2003, 2001; Jensen and Murphy, 2004; Fuller and Jensen, 2002; Jensen and Meckling, 1998). Even Cicero argues against imprudent decision * Chih et al. (2008: 183) explain that smoothing of earning depends “on the specific circumstances of the firm, either a positive or a negative cash flow shock can be viewed as undesirable by insiders wishing to conceal that firm’s actual performance. A large-scale use of discretionary accounting accruals to buffer ‘‘undesirable’’ cash flow shocks results in a large negative correlation between accruals and operating cash flow. The magnitude of this negative correlation is, therefore, likely to indicate opportunistic smoothing of reported earnings, which does not reflect the firm’s true underlying economic performance”. 80 making that only considers the financial profitability, because it may incur a loss to others and thus unjustly redistributes wealth (Michalos, 2008). Adam Smith (1982) argues that seeking wealth (solely an end/goal) whilst maintaining virtue (both a means and a goal) is beneficial to society, however, men have to be aware of the pitfalls. On this issue, Grampp states the following: Since “men pursue wealth and... their acquisitiveness is beneficial to society…In the eternal fitness of things men find beauty, and wealth is one of the fit means to the good life, the life of virtue and wisdom…Yet, the economic man, instead of turning toward these other objectives, is driven all the more strongly after wealth” (Grampp, 1948: 318). 2. Prudence and Apprenticeship How can a decision-maker perfect his/her ability and master the virtue of prudence? Aristotle and others argue that a decision-maker can only master the virtue of prudence by serving a long apprenticeship in the moral virtues (Bastons, 2008; Arjoon, 2007; Moore and Beadle, 2006; Mintz, 1996; Pieper, 1966; MacCunn, 1906). Moreover, the person “will never fail, by the union of habitual desire for noble ends, deliberative faculty and discriminating choice, to decide and do just what the circumstances of the hour demand” since prudence never “faileth” (MacCunn, 1906: 308). That is, prudence per se supplies the goal and foundation for good decision-making (Arjoon, 2007; Fortenbaugh, 1964). Furthermore, McVea (2007: 376) cites Dewey’s view on good ethical decision-making as a “process of deliberation, or an enlightened way of living” that requires to “grow out of our concrete, everyday experience” which is the means ultimately leading to “a process of self-realization and character formation within a deeply social context.” The most efficient and successfully run organizations assign decision-making authority in ways that effectively link authority with the knowledge and experience needed to make good business decisions. That is, these organizations incorporate performance measurement systems that gauge shareholder value creation, reinforced by compensation systems that provide decision makers with the appropriate incentives and motivation to maximize the value of an organization in the long term by making prudent business decisions (Brickley et al., 2003, 2002). Ethicists recognize that motivation is an essential part of the decision-making process especially considering how decisions 81 arise within a decision-maker (Bastons, 2008; Altman, 2007; Steiner, 1995; Rawls, 1971). Jensen and Meckling (1998) argue that it is important for an organization to have systems of organizational culture (i.e. control systems that set rules and incentives) to motivate long-term value creation, as well as to restrict short-term value destroying decisions, e.i. by restricting the self-control problem (Thaler and Shefrin, 1981). As Guidi et al. (2008: 19) observe, “the solution to the short-sighted selfish ‘doer’ problem is the same for a firm and an individual, in that, to reduce this internal conflict two techniques need to be used: rules and incentives, which will control and reward an individual or group of individuals depending on the behavior (decision-making).” Thus, there needs to be a habit forming self-control capacity (i.e. temperance) that develops prudent decision-making when there are conflicting motivational alternatives (Bastons, 2008; De Graaf, 2005). Therefore, an organization requires cultural systems (i.e. rules and incentives) in place to allow for habitual prudent decision-making. This follows Altman’s (2007: 256) assertion on Kant’s view that volition (i.e. the ability to make informed decisions) should condition a decision-maker “to adopt maxims that could serve for everyone (as universal) and could bind everyone (as practically necessary).” To maximize an organization’s value to society, there needs to be a just distribution of ‘moral debt’ and residual claims to all stakeholders (Guidi et al., 2008). That is, an organization is required to make prudent business decisions that incorporate all three forms of justice (Exchange, Legal, and Distributive) which protect alienable* and inalienable † rights of all stakeholders (Guidi et al., 2007; Arjoon, 2002; Wilson, 1991; F Pieper, 1966). For example, a firm may need to follow fiduciary and statutory laws that provide a ‘guiding hand’ in making corporate decisions (Young, 2007). However, it is acknowledged by both ethicists and economists that, there is little evidence that these fiduciary laws or statutory mandates significantly determine prudent * Alienable rights usually pertain to private property rights including intellectual, copyright, intangible rights (Guidi et al., 2007) Inalienable rights pertain to a natural common claim associated with human rights such as the right to life, shelter, work, education, access to clean drinking water, as well as decent wage, holiday pay, share in firm’s residual income -performance related pay, etc. Therefore, inalienable rights cannot be transferred or repudiated (Guidi et al., 2007) † 82 corporate decision-making (Di Lorenzo, 2006; Shliefer, 2005; Djankov et al., 2003; Johnson et al., 2002). Wines (2008: 483) argues that ethical decisions in business “start, in general, where the law ends”. Therefore, decision-makers will need many ‘guiding hands’ including those from within an organization such as organizational ownership structure (e.i. employee-ownership similar to Scott Bader Commonwealth and John Lewis Partnership, see Guidi et al., 2010), organizational cultural systems (i.e. rules and incentives) and external legislation (i.e. fiduciary law and statutory mandates) to support and motivate the perfection of the ability (i.e. habit) to make prudent business decisions. 3. The Individual and the Organization There seems to be tremendous burden on decision-makers within a firm to make imprudent business decisions due to unrealistic expectations from stakeholders (McVea, 2007). Adam Smith also realized that market expectations have too strong of an influence on economic man’s conscience for prudent decision-making (Grampp, 2000, 1948). More recently, Alzola (2008) argues the same point in that a decision-maker is easily influenced by the organization that he or she works for and thus, may not be able to make prudent decisions. One of the unrealistic expectations faced by many decisionmakers, i.e. management, from shareholders and capital markets is for continual earnings growth no matter the actual performance of a firm or demand for an organization’s products or services (Jensen, 2003; Fuller and Jensen, 2002). As Pieper (1966: 30) argues, economic growth is analogous to real world growth, which in essence “is the ever-changing diversity of growth and decay, not a permanent being (only God is who He is).” Thus, an organization needs cultural systems less orientated towards making trade-offs between a set of given alternatives, e.i. meeting or failing to meet growth targets and more oriented towards engaging in a creative problem-solving, the purpose of which is the construction of prudent business decisions (Bastons, 2008; McVea, 2007; De Graaf, 2005; Pieper, 1989, 1966). Furthermore, rather than considering the character of the decision-maker as being independent of the decision, decisions made by an individual for an organization will affect the decision-maker’s values and beliefs (McVea, 2007). In other words, the problem may not solely be due to an individual’s moral disposition in making business decisions per se but also due to internal and external influences, i.e. cultural systems 83 and capital market expectations, on the prudent decision-making process of an individual (Wines, 2008; McVea, 2007; Jensen, 2003; Fuller and Jensen, 2002; Brickley et al., 2003, 2002; Schumacher, 1993). For example, Jensen (2003) observes that through their budgetary systems, organizations have played a critical role in eroding the honesty and integrity* of individuals within a firm due to the unrealistic expectations of shareholders and markets. Another example for the negative influence of internal cultural systems is from Wines (2008: 488) who cites Wartzman (1987) that business executives have “felt pressure to conform and compromise personal values” suggesting that “…even the most upright people are apt to become dishonest and unmindful of their civic responsibilities when placed in a typical corporate environment.” It is, however, possible for an organization to motivate individual moral imagination† in supporting prudent decision-making (Michaelson, 2005; Werhane, 2002; VidaverCohen, 1997). As Badaracco (1997: 64) observes; ‘‘[defining decisions] call attention to one of the most challenging and creative elements of the work of business leaders: adapting, interpreting and customizing basic human values in a way that guides and shapes an entire organization. This is the task of shaping or creating a way of life, not for just a decision-maker, but for an entire organization.’’ Thus, the type of prudent decision-making that apprenticeship individuals undertake within an organization will influence the sort of decision-makers and the sort of organization that the society will have. Therefore, a practical solution is to cultivate and facilitate prudent business decision-makers through ownership structure and cultural systems (Michaelson, 2005; Werhane, 2002; Pieper, 1966). As Brickley et al. (2003, 2002) observe, the formal cultural systems that assign rules and incentives to control, measure and reward performance in an organization must be designed to encourage value-adding prudent decision-making. * A virtue ethics perspective integrity of prudent decision-making “is to do everything simultaneously, that we are capable of doing, with true knowledge so that we can obtain the best good” (Bastons, 2008: 398). † As Steiner (1995: 187) observes, “it is true that an individual’s ethical ideas evolve from those of his or her predecessors, but it is equally true that individuals are ethically sterile if they lack moral ideas of their own” (see also Pieper, 1966, 1989; Fox, 1999). 84 The organization can take the lead in shaping and creating the desired way of business life. Guidi et al. (2008) show that an organization can maximize its value to society by becoming an employee-owned organization with a better ownership structure and better cultural systems that motivate decision-makers to protect the alienable and inalienable rights of all inside shareholders. For example, an employee owned organization, such as the John Lewis Partnership and the Scott Bader Commonwealth, have better goal congruence from their inherently more democratic cultural systems that are written into their constitutions (Guidi et al, 2010). In other words, John Lewis Partnership and Scott Bader Commonwealth facilitate a better environment for prudent business decisions necessary for value maximization (Guidi et al., 2010, 2008). Furthermore, Yeh et al. (2008) empirically show that external shareholders with excess control rights relative to cash flow (i.e. residual) rights encourage entrenchment by redistributing wealth from minority shareholders to themselves. However, this type of redistribution of wealth is less possible in an employee-owned organization with ‘good’ cultural systems since it is not prone to unrealistic external shareholder demands or market expectations for continual growth. In other words, an employee-owned organization can deliver better value to society through its capacity to make more prudent business decisions that justly distribute residual and ‘moral debt’ claims through the protection of alienable and inalienable rights of inside shareholders and outside stakeholders (Guidi et al., 2010, 2008). Finally, are codes of ethics adopted by an organization that attempts to infuse ethics into its business decisions acceptable? Intuitively, it makes sense to consider principlesbased theories* within a virtue ethics perspective†. For instance, the concepts of duty and rightness attributable to codes of ethics add a virtue perspective to complex business situations that will support decision-makers to problem solve in real time and context (Whetstone, 2001; Ledden, 1947). However, adopting a code of ethics in the real world is not sufficient to guarantee prudent business decisions (Guidi et al., 2008; Brickley et al., 2003, 2002). In fact, it is * † That is, what is the right thing to do? That is, what kind of person I ought to become, in order to consistently do the right thing. 85 not possible to achieve prudent decisions by “slavishly and literally following certain prescriptions which have been blindly and arbitrarily set forth” (Pieper, 1966: 24). 4. Prudence and Society There are many ways in which business decisions are not fully borne by a firm, for example, through externalities and monopolies (Jensen, 2001). Under the Coase Theorem, externalities can exist only if some alienable rights are not defined and assigned to a private individual or organization in a market (i.e. private) economy (Coase, 1960; Jensen and Meckling, 1992; Jensen, 2001). Jensen (2001) argues that externalities create social waste because an individual or an organization does not incur the full social cost of its decisions. For example, the market value of Enron at its peak was $70 billion but its real value should have been near $30 billion (Jensen, 2004; Brickley et al., 2003). Who would benefit from the decision to keep Enron so over valued? Managers, analysts and financial institutions would definitely benefit in manipulating accounting information in order to receive high bonuses, and shareholders would also benefit through redistributing residual and ‘moral debt’ claims (Guidi et al., 2008). Thus, the Enron scenario is an easily observable case of wealth redistribution i.e. an unjust distribution of wealth from an uninformed stakeholder group or individual to an informed and more powerful stakeholder group or decision-maker. As Aarjoon (2000); Peiper (1966); and Wilson (1991) argue, prudent business decisions are a prerequisite for justice (exchange, legal, distributive). Thus, prudent business decisions need to be based upon the reality of the situation facing an organization, before that organization can maximize its value to the society (Guidi et al., 2007; Jensen, 2004). This is in line with the argument that ‘enlightened shareholder value’ requires consideration of the long-term consequences of any good business decision by the individual in his or her stewardship of an organization (Young, 2007). CONCLUSION In conclusion, prudent business decisions do not just happen in isolation. 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Journal of Business Ethics, no 79, 151-166. Young, S. B. (2007) “Fiduciary duties as a helpful guide to ethical decision-making in business”. Journal of Business Ethics, no 74, 1-15. 92 CHAPTER 5 A QUANTITATIVE RESEARCH ON MACHIAVELLIANISM * F Gamze Mandaci (MA) Hacettepe University, Turkey Prof. Dr. Semra Guney Hacettepe University, Turkey, e-mail: semguney@hacettepe.edu.tr Assist. Prof. Dr. Oznur Azizoglu Hacettepe University, Turkey, e-mail: nur@hacettepe.edu.tr Dr. Eren Miski Aydin Hacettepe University, Turkey, e-mail: erenma@hacettepe.edu.tr INTRODUCTION Machiavelli was born 3 May 1469 in Florence; he became a student of a famous Latin teacher, Paolo da Ronciglione. It is speculated that he attended the University of Florence, and received an excellent humanist education. It is only with his entrance into public view, with his appointment as the Second Chancellor of the Republic of Florence, nevertheless, that we begin to acquire a correct picture of his life. Machiavelli engaged in a lot of diplomatic tasks on behalf of Florence, travelling to the important centers of Italy as well as to the royal court of France and to the imperial curia of Maximilian for the next fourteen years. There are letters, dispatches, and occasional writings that confirm his political tasks as well as to his sharp talent for the analysis of personalities and institutions (Stanford, 2009). * An earlier version of this chapter was published in the proceedings book of Professional Ethics Congress, Antalya, Turkey, Oct. 17-19, 2008. 93 Florence had been under a republican government since 1484, when the Medici family and its supporters had been driven from power. Machiavelli thrived under the support of the Florentine gonfaloniere (or chief administrator for life), Piero Soderini, throughout this time. Nevertheless, with the help of Spanish troops, the Medici defeated the republic's armed forces and dissolved the government in 1512. Machiavelli was a victim of the government change: He was firstly placed in a form of internal exile and, when he was (wrongly) suspected of conspiring against the Medici in 1513, he was imprisoned and tortured for several weeks. His retirement thereafter to his farm outside of Florence afforded the chance and the motivation for him to turn to literary pursuits (Stanford, 2009). The first of his writings was also ultimately the one most frequently associated with his name, “The Prince”. It was written at the end of 1513, but only formally published posthumously in 1532. The Prince was composed by an author who was, among other things, trying to regain his status in the Florentine government (Stanford, 2009). Machiavelli, in The Prince, suggests that a politician shall not comply with moral values for the maintainance of the society. Machiavelli did not name this book “The Art of Ruling”. He intentionally named his work “The Prince” as he believed that the success or failure of states is directly dependent upon the characteristics of the leader (Jay, 1994:35). Machiavelli puts forth that politics cannot take place when one is bound by the moral values, therefore a politician is not obliged to comply with moral norms. The important fact is to come to power and to sustain it. For a state to be sovereign or legitimate, it shall not obey any external pressures or values and for this reason a state, prince or politician shall refrain from values, norms and rules; otherwise he cannot be successful (Dilan, 2003:184). The philosophy of the Machiavellianism is “ends can justify the means of an action” (Geis and Moon, 1981). The means which are used to achieve the ends are not solely limited to moral norms. In other words, all means used to reach the ends are considered to be ethical. Machiavelli believes that human being has the tendency to be evil by birth and Machiavelli’s moral principle excludes weakness and vulnerability. Machiavellianism is a social impact process introducing the usage of politics, power and manipulative behavior in order to achieve the desired goals (Christie and Geis, 1970). Machiavellianism is the degree to which an individual is pragmatic, maintains emotional distance and believes that ends can justify the means (Robbins, 94 1998: 58). Another definition of Machiavellianism is the readiness of an individual to do anything to act in line with his desires (Nelson and Quick, 1997). While Guterman (1970:3) defines Machiavellianism as immoral, manipulative attitude towards others, Ang (2000) defines it as the personality trait of making use of others for one’s success. Ergeneli counted Machiavellianism among basic personality traits affecting organizational behavior, and mentioned that “the ends can justify the means” leads them to become more successful in situations where there are not much rules and regulations and the need for bargaining (Ergeneli, 2006:91-104). With a similar approach, Robbins (1998:96-99) listed Machiavellianism among basic personality traits affecting organizational behavior. Some studies on Machiavellians highlighted different characteristics of these individuals. As Rim (1966) noted, High Machs (those who score high on the Machiavellianism scale) impose more individual control over their environment and take more individual risks when compared with Low Machs. There are also other studies in the literature stating that High Machs tend to be more risk takers than Low Machs (Allsopp et al., 1991; Tamborni et al, 1998). Christie and Geis (1970: 312), who developed a psychometric scale to measure Machiavellian-type behavior based on Machiavelli’s views, stated that, “High Machs manipulate more, win more, are persuaded less, persuade others more, and otherwise differ significantly from Low Machs in situations in which subjects interact with others, when the situation provides latitude for improvisation and the subject must initiate responses as he can or will, and in situations in which affective involvement with details irrelevant to winning distracts Low Machs.” There are studies supporting that it is advantageous for organizations to have a Machiavellian point of view within certain limits. Findings of the study Hegarty and Sims (1979), which was carried out using simulation, support this idea. According to this, High Machs tend to bribe more than Low Machs. McHoskey, Worzel and Szyarto (1998) noted that although the delusive characteristics of a Machiavellian is useful in the short run, their sly and manipulative strategies may be interpreted in a negative way by others; and a Machiavellian may also be percieved as a sociopath. However, different from the sociopaths, Machiavellians can be integrated with the society. Machiavellians are emotionally neutral to events and situations, they tend to lie (Fletcher, 1990; DePaulo and Rosenthal, 1979; Geis and Moon, 1981; Lewichi, 1983), to cheat (Flynn, 1987; Shapiro et al, 1995) and to work more for their personal 95 achievements (Harrel and Hartnagel, 1976). Aziz (2004) believes that High Machs try to accomplish personal objectives by manipulating others, and for this reason their talent of using their knowledge and developing communicational strategies are different from others. According to him, when Machiavellians need to work with others they share information with their surroundings, however in high competitive situations they preserve the information for themselves. There are also studies supporting that Machiavellianism is independent from work, environment and situational factors (Litchko, 1984). Many studies have been carried out on the difference between Machiavellianism levels in various professions and working groups. Some researchers have studied Machiavellianism levels of salesmen, marketing experts, university students and bank executives; and have reached different conclusions. For instance, the result of Siegel’s (1973) study on Machiavellianism level carried out on 73 management students, 36 managers and 13 academics showed that academics had the highest Mach level, followed by management students, while bank executives had the lowest Mach level. He explained the reason of management students being the second High Machs was due to their lack of experience and their lack of knowledge about realities in the organizational life. Findings of McLean and Jones (1992) suggest that management students and particularly marketing students score higher Machiavellianism on the scale; while Manley, Russel and Buckley (2001) found out that accounting students tend to rather comply with rules and standards that the sector expects from them within the framework of Generally Accepted Accounting Principles. The Machiavellianism tendecies of marketing students are found to be higher than accounting students, while their compliance with rules generally tend to be less than accounting students. Therefore, marketing students tend to show less ethical behavior than accounting students. In his study, Calhoon (1969) notes that Machiavellian managers can employ aggressive, exploiting and devious behavior to achieve personal or organizational goals. Another profession which was investigated for its relation to Machiavellianism is medicine. Bakır (1993) carried out a study based on Mach IV scale and his findings suggest that as age, seniority, professional status increase; social values regenerate more and individuals show less propensity to prioritize their personal interests. 96 Various studies on Machiavellianism were conducted in different countries. Cyriac and Dharmaraj (1994) measured the Machiavellianism level of Indian businessmen and found out that executives living in metropolitan cities of India have been under Machiavellianism impact, much like in many European countries. In a study Siu (1998) carried out in China, he frequently mentioned the inverse relation between the level of Machiavellianism and work satisfaction. Siu’s approach to the issue contradicts with the results of another study performed in Hong Kong which concludes that Mach level of bankers is parallel with their work satisfaction. Corzione and Buntman (1999), in their studies on Machiavellianism on the U.S. bankers, found out that Machiavellianism levels do not change according to gender. They also concluded that there were no significant differences in Machiavellianism scores between Hong Kong and the U.S. banking personnel. Another finding of their study was that there was not any correlation between the level of Machiavellianism and the salaries. Kavak (1999) in her study found that the level of Machiavellianism in Turkey was 97.13 with a mean score of 100. The results of the same study showed that the Machiavellianism level among civil servants was approximately 86 and it was 85 among private sector employees. The study of Kavak (1999) also suggests that the Machiavellianism level in Turkey is higher than the Machiavellianism level in the US (84.5) and lower than Austria (98.6) (Atakan 2002). The aim of this survey is to examine the Machiavellianism level of employees in sales and marketing departments of some banks in Ankara and investigate the demographic factors affecting these levels. The following part offers some information on previous studies investigating the relationship between Machiavellianism and demographic factors: 1. Findings 1.1. Machiavellianism and Gender Various studies highlight that differences in ethical behaviors can be explained by gender (Christie and Budner, 1959; Singer, 1964; Browers, 1964; Buckly, Weise and Harvey, 1998; Chonko and Hunt, 1985; Ferrell and Skinner, 1988; Franke, Crown and Spake, 1997; Jones and Guatschi, 1988; McCabe and Trevino, 1997; Ruegger and King, 1992; Whipple and Swords, 1992). In many societies, it is socially accepted for women to be more dependent on others, be more permissive, respectful, compassionate, attentive, warm, obedient and flexible, while men are expected to be more aggressive 97 and independent. Regardless of the circumstances, women have a higher propensity to comply with social rules, while men define their unethical behavior as moral, as long as it helps them achieve their goals. The study carried out by Christie and Geis (1970) supports this hypothesis and notes that Machiavellian traits are not significantly widespread among women. In their studies, Wilson et al. (1998) claim that although High Mach traits are similar in men and women, they are weaker in women. Studies carried out by Sherry et al. (2006) indicate that there is a slight difference between men and women. While some studies investigating the difference between Machiavellianism level of genders determine a positive relation for men (Gable, Myron, Hollon, Charles, Dangello, Fank 1990); others find no relations at all (Gable and Dangello, 1994; Aziz, 2004; Atakan, 2002). 1.2. Machiavellianism and Marital Status Bakır (1993) in his study on medical doctors found out that marital status affects social values, and that Machiavellian attitude is decreased among married doctors. Aziz (2004) identifies a strong positive link between Machiavellianism and absence at work, and determines that part-time employees have higher Mach scores than full-time personnel. This study further supports that married individuals have higher Machiavellian tendencies. 1.3. Machiavellianism and Age The relation between machiavellianism and age has been heavily investigated in literature and there are contradictory findings. Mudrack (1994) claims that Machiavellianism level increases with age. This view is supported by the study of Ruegger and King (1992) on business ethics students and they found that students falling into the 40 plus years age group were the most ethical, followed in order by the 31-40 group, the 22-30 group and those 21 years of age and under. On the other hand, Christie (1970) claims that the increase in age has a negative impact on Machiavellianism, whereas Atakan (2002) concluded that there is no significant relationship between Machiavellianism and age. 1.4. Machiavellianism and Educational Level Although there are no studies establishing a definitive relationship between Machiavellianism and educational levels in the literature; Bakir (1993), in his survey 98 carried out on 648 students at the Gulhane Military Faculty of Medicine, identifies significant increase in the Mach IV scores of students in their last year of education. Webster and Harmon (2002) compared Machiavellianism level of current university students with university students in the 1960s by using the study of Christie and Geis (1970) on students in the 1960s. Webster and Harmon found that today’s university students have higher Machiavellianism levels and there are no significant differences in the Machiavellianism levels of male and female students. 1.5. Machiavellianism and Seniority at Organization The only study examining the relationship between Machiavellianism and seniority in the literature is carried out by Atakan (2002). However, in this study no significant relationship could be identified between the two variables; and this was associated with the fact that Machiavellianism is a personality trait. Therefore, one may conclude that as tenure increases, loyalty to the organizational values grows and consequently, Machiavellianism level of individuals decreases. 2. Research 2.1. Sample Recent fluctuations in financial markets, the environment of intense competition, need to meet aggressive sales targets and increase the profits of the banks all lead the banking personnel to show more Machiavellist tendencies while performing their jobs. The aim of this study is to identify the impact of some demographic factors that might affect Machiavellian tendencies of the sales personnel in banking sector. Surveys were given to 350 marketing and sales representatives in three private and three public banks in Ankara. Of the 350 surveys, 230 were found to be suitable for analysis and were included in the study. 2.2. Hypotheses In light of past research, the following research hypotheses are articulated: H1: Female employees have lower Machiavellianism levels than male employees in banking sector. H2: Married employees have lower Machiavellianism levels than single employees in banking sector. 99 H3: As age increases Machiavellian tendencies of employees increases in banking sector. H4: As education level increases Machiavellian tendencies of employees increases in banking sector. H5: As seniority increases Machiavellianism levels of employees decrease in banking sector. Aside from the above mentioned hypotheses, this study is also looking for an answer to the following research question: ‘Are there any significant differences between the Machiavellianism levels of the employees of private banks and public banks?’ 2.3. Methodology The Mach IV scale is a well-validated measure of Machiavellian-type behavior. The Mach IV scale is a 20-item instrument designed to measure a respondent’s feelings as to whether a person believes that others are susceptible to manipulation in interpersonal situations (Gable, 1988). The original Mach IV scale consisted of 71 items based on the writings of Niccolo Machiavelli adapted from The Prince and The Discourses. An item analysis indicated the ten highest-related items in favor of Machiavellian statements, and the ten highest-related items not in favor of Machiavellian statements, resulting in a total of twenty statements comprising the scale. The 20-items are scored on a 7-point Likert scale (“agree strongly” being scored 7, “no opinion” 4, and “disagree strongly” 1). A constant of 20 was added to the calculation so that the scores range from 40 points (most ethical) to 160 points (least ethical), with a neutral score of 100 points. The level of scores gained by individuals in the survey shows the tendency in their Machiavelliantype behaviors. High score is generally considered as an indication for high Machiavellian tendencies in the literature. This is because of the fact that Machiavellianism is not a socially acceptable type of behavior. Christie and Geis (1970) in their studies found Mach IV scale’s Cronbach Į value 0.79. In this study, reliability score is found to be Į= 0.7737. 100 Table 1. Cronbach Alpha Score of the Scale Level of Machiavellianism Average Variance Standard Deviation Number of Number of of Scale of Scale of Scale Observations Questions 57.8000 116.8929 10.8117 225 Alpha 20 0.7737 2.4. Results Table 2 shows the distribution of sample by each bank: Table 2. Distribution of Sample BANK Number of Participants 38 38 41 40 36 37 230 Private1 Private 2 Private 3 Public 1 Public 2 Public 3 Total Percentage 16.5 16.5 17.8 17.4 15.7 16.1 100.0 H1: Female employees have lower Machiavellianism level than male employees in banking sector. Of the 230 participants, 52.2% was female and 47.4% male. Findings of the survey showed considerable difference at the level of Machiavellianism between men and women (p=0.000<0.50). To identify this, “t” test was implemented in order to assess the difference between the means of two independent samples and to find out whether the difference is significant. T test was implemented to H1 hypothesis, and the t value was 9.928 (p=0.0000). Mean scores of the male participants (3.2019) were significantly higher than the mean scores of female participants (2.6058). Statistically speaking, one can conclude that Mach levels of women are lower than Mach levels of men. Therefore, the first hypothesis of the study is varified. Descriptive statistics for H1 hypothesis are noted in Table 3. 101 Table 3. Descriptive Statistics on H1 Hypothesis Points Gender N X 1. Female 120 2.6058 0.3982 2. Male 107 3.2019 0.5048 S Mach level sd t P 225 -9.928 0.000 H2: Married employees have lower Machiavellianism levels than single employees in banking sector. 53.5% of the respondents were married and 46.1% were single. No significant difference was found between the Mach levels of married and single respondents (p=0.644>0.050). Means of married respondents were 2.8720, while means of single respondents were calculated as 2.9052. T value was found to be 0.462 and p value as 0.644. Given that p>0.05, there were no statistically significant differences between the Mach levels of married and single individuals. Therefore, the second hypothesis is rejected. Statistical results for the hypothesis are shown in Table 4. Table 4. Descriptive Statistics on Hypothesis H2 Points Marital N X 1. Married 123 2.8720 0.5339 2. Single 105 2.9052 0.5473 Status S Mach Level sd t P 226 -0.462 0.644 H3: As age increases Machiavellian tendencies of employees increase in banking sector. 7.4% of the respondents were at the age of 25 or less, 44.8% between 26-34 years old, 25.7% between 35-44 years old, and 22.2% were above the age of 45. F Test (variance analysis), which is the expanded version of the t test, is used when comparing more than two sample means. Single factor variance analysis was used to test this hypothesis. The result of single factor variance analysis implemented to the four groups showed F value as f=1.539 and significance level as p=0.205 (0.205>0.050). Therefore, based on the data, it is not possible to say that Mach levels are different for different age groups. 102 The mean of employers for 25 year-olds and younger is 2.7794; for 26-34 year olds it is 2.8232; at 35-44 it is 2.9358; and for 45 years and older it is 2,9941. Therefore, the third hypothesis is rejected. Statistics for H3 are shown in Table 5. Table 5. Descriptive Statistics on Hypothesis H3 Points Mach Level Age Groups N X 1. 25 years or less 17 2.7794 0.5758 2. 26-34 years 101 2.8232 0.5322 3. 35-44 years 59 2.9358 0.5319 4. 45 years 51 2.9941 0.5407 S sd F Differ- P ence 3 224 1.539 0.205 - 227 H4: As education level increases Machiavellian tendencies of employees increase in banking sector. 17% of respondents were high school graduates or less, 69.1% were university graduates, while 12.6% have completed their postgraduate studies. Single factor variance analysis was used to test this hypothesis. Analysis results showed that F value was f=9.015 and significance level was p=0.000. Mach level of employees varied in accordance with their educational level (p=0.000<0.050). There are significant differences between the group of high school graduates & lower and those who completed their graduate studies, as well as the group of university graduates with those obtained their master’s degrees/PhDs. The mean of high school graduate or lower was found to be 2.9298, university graduates as 2.8134, and mean of those who obtained their masters/doctorate degrees was 3.2586. Statistics shows no increase in Machiavellian attitudes when educational level increases from high school to university. Machiavellian attitudes tend to increase when educational level increases from undergraduate degrees to masters/doctorate degrees. Hypothesis 4 is partially being accepted. Statistical information on H4 can be found in Table 6. Given that the educational levels of the respondents did not show a balanced distribution between groups, the statistical results are open to interpretation 103 Table 6. Descriptive Statistics on Hypothesis H4 Points Educational Level 1. High school and lower Mach Level N X 39 2.9298 0.5442 S sd F P difference 2 1-3 2. University 157 2.8134 0.5208 222 9.015 0.000 2-3 3.Masters /doctorate 224 29 3.2586 0.5023 H5: As seniority increases Machiavellianism levels of employees decrease in banking sector. 28.7% of the respondents have less than five years of experience in banking sector, 25.8% have between 5-9 years of experience, and 42.2% have worked in the sector for 10 or more years. When single factor variance analysis (ANOVA) was applied to the groups, F value was found as f=0.9946 and significance level as 0.390. Therefore, Mach level of employees does not vary with respect to their seniority in banking sector (p=0.390>0.050). The mean of those working for less than five years in banking sector is 2.8477, the mean of those who worked for 5 to 9 years is 2.8554, and those senior than 10 years is 3.0816. Given these results, one cannot argue that Machiavellian tendencies decrease as seniority increases, threfore, the hypothesis 5 is rejected. Statistics for the H5 are shown in Table 7. 104 Table 7. Descriptive Statistics on Hypothesis H5 Points Seniority in Sector 1. less than 5 years Mach Level N X 65 2.8477 0.5616 S Sd F P difference 2 2. 5-9 years 3. 10 years and more 58 2.8554 0.5322 217 0.946 0.390 97 2.9531 0.5434 - 219 Research Question: Are there any differences between the Machiavellianism levels of private bank and public bank employees? 50.9% of the respondents work at private banks, while 49.1% work at public banks. The result of t test yielded the t value as t=1.745, and p significance as p=0.082. Therefore, no differences were found in the Mach levels of private bank employees and state bank employees (p=0.082>0.050). The mean of private bank employees was found to be 2.8264, while the mean of public bank employees was 2.9504. Consequently, no significant differences were found between the Mach levels of private bank employees and public bank employees. The related statistical results are shown in Table 8. Table 8. Descriptive Statistics on the Research Question Scores Bank 1. Machiavellianism Level Private bank 2. bank Public N X 116 2.8264 0.5247 112 S 2.9504 0.5490 105 sd t P 226 -1.745 0.082 3.5. Limitations One of the limitations of this study is that Mach IV score was measured by self-report. There was some evidence that common variance was not a problem, but, as with all self-reports, common method variance, social desirability biases and response distortion due to ego defence tendencies may constitute some points of concern (Sy et al.,2006). Taking factors like time and cost into consideration, the study was limited to the marketing and sales representatives of three private and three public banks in Ankara. Therefore, generalization of the results may cause some problems. The Mach IV scale used in the study was translated from English into Turkish. No matter how well the translation was conducted, some difficulties were experienced due to the differences in social and cultural contexts. CONCLUSION Many important results were obtained in this survey study of 230 individuals working at the marketing and sales departments of six banks in Ankara. One such results is that there is significant difference between the Machiavellianism levels of men and women. More than 20 years ago, Harvard psychologist Carol Gilligan indicated that besides the fact that females have different expression styles than men, females have a different understanding of ethics, and consequently their behaviors are predominantly ethical. As a world renowned psychologist in the field of women’s studies, Gilligan and her book titled ‘In a Different Voice’, launched a new period for women’s psychology from a moral and ethical point of view. According to Gilligan, men’s behavior is calculated while women’s behavior is more thoughtful and humane. Men’s moral traits are concentrated on rights, laws, rules and social principles, while women’s moral traits are concentrated around emotional characteristics like sympathy, compassion, safeguarding (Onur, 1997). According to Gilligan, boys move from the phase of ‘pleasing others’ to the phase of ‘living in line with rules’, while girls always give importance to human relations. As women get older, they migrate from the phase of ‘pleasing others for gaining benefit’ to the phase of ‘establishing close and generous relations for the benefit of others’ and this change makes women happier. Assisting someone who needs something is a basic moral principle for women. Men tend to solve value conflicts through logic, while women tend to solve it through dialogue, by talking and trying to understand each others’ points of view and needs. Independency, individualism and success are in priority for men, while for women 106 issues like fulfilling responsibilities, caring about others and helping them rather than preceding, and preserving relationships are more important. Boys find their male identities by getting away from their mothers, while girls develop their identities by attaching to their mothers and imitating them. Men consider commitment as threat and boggle, while loneliness is threat for women; and committment is frightening for men, while it is a source of confidence for women. On the other hand, autonomy is frightening for women, while it is a source of self-esteem for men. Men define themselves with their successes; women prefer to define themselves with their relations. For women, a successful person is the one who help and support others, while the one who controls others is the successful person for men. Individual rights are in priority for men whereas showing interest to others is in priority for women. Both values are equally important for a moral behavior: Respecting rights of others and themselves, defending beliefs, individual integrity and undertaking responsibility against other people (Gilligan, 1982). Therefore, it is highly probable that women who prioritize caring about others and keep their individual rights as secondary, who like helping others and value to their relationships have lower Machiavellianism levels than men. The findings of our study show that marital status, experience in the sector and age do not have significant impact on the Machiavellianism level. This may have been a result of the fact that employee training in banking sector leads them to act homogeneously regardless of their age, martial status or their banking experience. This result may also be linked to the impact of the collectivist culture in which individuals are raised. In a country like Turkey, where collectivist culture is dominant, individuals may not show Machiavellian traits associated with invidualist behaviors even when their marital status, their experience and their age change. The survey findings partially support the hypothesis H4 which foresees that Machiavellian trends increase as educational level increases. The findings support the H4 at the stage of transition from undergraduate education to the post-graduate education, but it does not support the same hypothesis for transitions from high school education to undergraduate education. This result may be due to the fact that undergraduate education in Turkey needs more collective work than graduate education; and post-graduate students are directed towards more individualistic studies. The survey findings suggest no significant difference in the Machiavellianism levels of the private bank and public bank employees. 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The best way to handle people is to tell them what they want to hear. 2. When you ask someone to do something for you it is best to give the real reasons for wanting it, rather than reasons that carry more weight. 3. Anyone who completely trust anyone else is asking for trouble. 4. It is hard to get ahead without cutting corners here and there. 5. Honesty is always the best policy. 6. It is safest to assume that all people have a vicious streat that will come out when given the chance. 7. Never tell anyone the real reason you did something unless it is to your benefit to do so. 8. Only take action when you feel it is morally right. 9. It is wise to flatter important people. 10. Overall, it is better to be humble and honest than important and dishonest. 11. Barnum was wrong when he said there was a sucker born every minute. 12. People suffering incurable diseases should have the option of being put to death painlessly. 13. It is possible to be good in all respects. 14. Most people are basically good and kind. 15. There is no excuse for lying to someone else. 16. Most people forget more easily the death of their father than the loss of their property. 17. Most people who succeed in life lead clean moral lives. 18. Generally speaking people won’t work hard unless they’re forced to do so. 115 19. The biggest difference between criminals and other people is that criminals are stupid enough to get caught. 20. Most people are brave. 116 CHAPTER 6 DIFFERENTIATION OF CONSUMER ETHICAL BELIEFS TOWARDS CONSUMER LIFESTYLES* Dr. Pinar Basgoze Hacettepe University, Turkey, e-mail: pinaran@hacettepe.edu.tr Assoc. Prof. Dr. Leyla Ozer Hacettepe University, Turkey, e-mail: leyla@hacettepe.edu.tr Vugar Hamidli (MA) Hacettepe University, Turkey, e-mail: vhamidli@yahoo.co.uk INTRODUCTION Academic interest in ethical issues has considerably increased over the last decade. Marketing and consumer ethics, in addition to being highly interdependent, are also critical. Studies in ethics literature cite large amount of research dealing with this topic and several of them include theoretical models in the field of marketing ethics. However, the marketing discipline remains rather inattentive in its examination of the consumer ethics phenomenon. While numerous studies had examined the major ethical problems that the marketers are faced with, few have analytically observed the ethical beliefs and attitudes of the final consumers. As laid out in the literature review section of this chapter, researchers investigated ethical issues mostly from the business perspective, such as the ethical decision-making intentions of the managers and employees. On the other hand, in recent years, various studies have examined the ethical issues from the consumers’ perspective. While only a few of these studies focus on the ethical decision making mechanisms of the consumers, the others investigate the * An earlier version of this chapter was orally presented at Professional Ethics Congress, Antalya, Turkey, Oct. 17-19, 2008 and its abstract was published in the proceedings book. 117 antecedents of the ethical beliefs. According to these researches, demography, religiosity, idealism and relativism, monetary ethics, attitude towards business, and political and social values are some of the determinants of the ethical beliefs of consumers. These will be discussed briefly in the literature review section of this chapter. Despite the fact that lifestyle characteristics influence the entire aspects of consumption behavior (Hawkins, et.al., 2001; 435) and that all those aspects of consumer behavior have an integral ethical component (Vitell, 2003), thus far no studies have examined the effects of lifestyle on ethical beliefs. In other words, ethical beliefs of the consumer’s are important in the consumption decision making process. Since lifestyle influences the consumptive behavior, it may also create differences in the ethical beliefs of the consumer. As a result, it can be significant to investigate whether consumers’ ethical beliefs differ with respect to their lifestyles. 1. Consumer Ethics Literature Overall, a significant body of literature has emerged concerning business ethics in the marketplace. However, majority of this tends to focus mainly on the ethical decision making intentions of the managers (Vitell et al., 2003; Paolollo and Vitell, 2004; AlKhatib et al., 2004), while some, such as Al-Khatib et. al., (2002 and 2004), investigate employee intentions. Singh et al (2004) for instance, focused on the seller side of the buyer/seller dyad, whereas, others like Muncy and Vitell (1992) examined ethical issues from the consumer’s perspective. Some of these studies (Vitell et al., 2003a; Brinkmann and Peattie, 2008; Bateman et al., 2003; Dorantes et al., 2006; Steenhaut, 2006; Shaw et al., 2005) have focused on the consumers’ ethical decision making, while others (Van Kenhove et al., 2003; Brinkmann, 2004; Shen and Dickson, 2001; Dodge et al., 1996; Belk et al., 2005; Vitell et al., 2003a) have focused on the consumers’ ethical behavior and have mostly investigated the antecedents of the ethical beliefs (Vitell and Paolillo, 2004; Vitell et al., 2007; Vitell et al., 2005; Vitell et al., 2006; Chiou and Pan, 2008; Belk et al., 2005; AlKhatib et al., 2005; Vitell and Muncy, 1992; Swaidan et al., 2004). Vitell et al., (1991) have investigated the relationship between Machiavellianism, ethical ideology and ethical beliefs. According to Vitell and Paolillo (2004), religiosity is a significant determinant of both idealism and relativism, and since idealism and relativism determine consumers’ ethical beliefs, religiosity is a significant indirect determinant of 118 these beliefs. In addition to these findings, other researchers (Vitell et al., 2005; Vitell et. al, 2007; Vitell and Paolillo, 2003) have found out that religiosity assumed a certain role in determining consumers’ attitudes/beliefs. On the other hand, money ethics (Vitell et al., 2007; Vitell et al., 2006), the attitude towards business (Vitell et. al, 2007, Vitell and Muncy, 1992), idealism-relativism (Swaidan et al., 2004), and political and social values (Chiou and Pan, 2008) are some of the other determinants of the ethical beliefs of consumers. In addition, in an increasingly multicultural marketing context, the question of compatibility of ethical values across cultural borders has gained much more importance over the last decades. Most of the studies (Vitell et al., 1993; Shen and Dickson, 2001; Al-Khatib et al., 2002; Al-Khatib et al., 2005; Belk et al., 2005; Singh et al., 2007; Vitell et al., 2003a) have investigated the cultural effects on ethics. Demographic factors were also analyzed, and Rawwas and Singhapakdi (1998), among others, have found that the senior citizen consumers are generally more ethical than the younger ones. Fullerton et al. (1996) concluded that the younger and more educated consumers are more inclined to accept unethical behaviors. Ethics in millennium reflects a growing interest among consumers in the forms of consumption, which are more sustainable and more ethically oriented (Brinkmann and Peattie, 2008) due to the increase in globalization, competition and advancements in technology. Globalization and global communications keep consumers better informed, thus, the number of conscious consumers is rising and their values are changing. These consumers are becoming increasingly more ecologically and socially aware and demand more from the companies than just the efficient production of goods and services (Fuentes-García et al., 2008). Those who are better informed and conscious, as well as sensitive to corporate social performance, have values allied with movements like green consumerism and socially responsible investments. (Giacalone et al., 2005). This comprehension is typically observed in the increasing demand for ethical investment products, organic produce and fair trade goods (buying products from the farmers in developing countries and marketing them in developed countries at an ethical premium) (Brinkmann and Peattie, 2008). In essence, buying fair trade goods is a specific type of ethical consumer behavior (De Pelsmacker et al., 2005). 2. Consumers’ Lifestyle and Ethics The relationship between lifestyle and ethics can be handled in two ways. One is the consumers’ behavior perspective and the other is the social responsibility perspective. 119 Lifestyle is considered as a mental construct (Lass and Hart, 2004) that explains human behavior, which denotes how individuals typically choose, experience their freedom of choice and assign their purchasing power and time within a range specified by their living circumstances (Brinkmann and Peattie, 2008). Green et al (2006) defines lifestyle as a pattern of intentional behaviors, both personal and social, as represented by a set of purposeful activities. In other words, it is determined by a consumer’s past experiences, innate characteristics and current situations. Specifically, it manipulates all aspects of consumers’ consumption behaviors (Hawkins et al, 2001), such as the acquisition or use and disposition of goods that have an integral ethical component (Vitell, 2003). Besides, consumer ethics has been defined as the moral rules, principles and standards that guide the behavior of an individual (or group) in the selection, purchase, use or sale of a good or service (Muncy & Vitell, 1992). Consequently, consumer ethics has been defined as a guide in the consumption process. Therefore, if lifestyle influences the consumption behavior and consumer ethics guide the consumption behavior, then lifestyle can make a difference in consumer’s ethical beliefs. Thus, according to the consumptive behavior perspective, it might be important to examine whether the ethical beliefs differ with regard to lifestyle characteristics. From the perspective of social responsibility, it has been mentioned earlier that the consumptions of consumers are more sustainable and more ethically oriented, and one of the ways of responding to the socially responsible consumers can be to persuade them to adopt more ethically oriented lifestyles (Brinkmann and Peattie, 2008). This means, if the consumers can be encouraged to adopt more ethically orientated lifestyles, they can recognize the moral purchasing styles and thereby, can purchase more ethical products with a moral decision making process (Brinkmann and Peattie, 2008). Hence, lifestyle is expected to be able to alter the ethical beliefs of consumers. However, so far, studies have not jointly investigated the lifestyle and ethical beliefs. This study aims to fill this gap in the literature. Based on the discussion above, the main research questions is the following: RQ1. Will the ethical beliefs of respondents differ with regard to their lifestyle characteristics? 3. Methodology Questionnaire and Sample 120 In this study, survey method (questionnaire) was used to collect data. In order to gather reliable data, measurements of validity and reliability tests were applied. Among the most significant researches concerning the consumer ethics are the works of Muncy and Vitell (1992), and Vitell and Muncy (1992). In these articles, the authors developed a consumer ethics scale that examines the consumers’ ethical beliefs regarding various questionable behaviors. They further linked these consumer beliefs to demographic and attitudinal information. Their research resulted in a four-dimensional solution for consumers’ ethical beliefs: (1) actively benefiting from illegal activities, (2) passively benefiting, (3) actively benefiting from deceptive (or questionable but legal) practices, and (4) no harm/no foul activities. In this study, a recent revision of the original scale, as modified by Vitell and Muncy (2005) added a new dimension, which basically measured the consumers’ desire to recycle products and their ethical product buying intentions. The latest version of the ethics scale was used in order to gather ethics data, which included 31 statements measuring the ethical beliefs consumers. A five-point Likert scale (ranging from 1= totally disagree; 5= totally agree) was used. The questionnaire also includes (Green et al., 2006) a conceptualized lifestyle scale that measures people's hobbies, recreational and social activities in general, as well as their work and special interest activities. Moreover, a five point Likert scale was used in the questionnaire (ranging from 1=Strongly believe that its wrong; 5= strongly believe that it is right). 121 Table 1. Demographic Characteristics of Respondents Age 20 and Frequency Percen. Frequency Percen. (n) (%) (n) (%) 54 12,1 21-29 210 30-39 40-49 Gender Female 255 57,2 47,1 Male 191 42,8 88 19,7 Total 446 100 65 14,6 Very 4 0,9 younger Education 50 and older 29 6,5 Primary 0,7 3 Income Education Low High School 29 6,5 Low 7 1,6 Graduate 241 54 Middle 268 60,1 173 38,8 High 156 35 Very 11 2,5 Degree Postgraduate Degree High The sample was drawn from consumers who use the Internet and have personal computers (PCs), relevant to the survey questions (such as, downloading music from internet, installing software on your computer). Accordingly, in order to select respondents from a wide range of demographic, socioeconomic and organizational backgrounds, the survey was sent to 1000 persons who were selected by a convenience sampling method through the mailing lists of the firms, public corporations as well as 122 private and public universities in Ankara. A total of 570 questionnaires were returned with responses, of which 446 questionnaires were accepted as valid, and out of 446 respondents 42.8% were men and 57.2% were women. The respondents were relatively young, majority of them being below 40 years old (78.9 %). They had relatively high educational levels: 92.8% had a graduate or a postgraduate degree. Most of the respondents were from the middle-income level (60,1%) and 3.5% was between high and very high-income levels (See Table-1). Procedures for Statistical Analyses In line with the analytical procedures employed in this study, the lifestyle statements were subjected to a factor analysis. Then, the respondents were clustered based on their lifestyle characteristics. For this study, the hierarchical cluster and the K-means clustering methods were used. Analysis of variance (ANOVA) was then employed to ascertain if there was a differentiation in ethical beliefs of the consumers with regards to their lifestyle characteristics. As to the ethics scale, first Cronbach Alfa scores were calculated and entire categories (Actively benefiting from illegal actions (ACT)= 0,74; Passively benefiting (PAS)= 0,77; Questionable, but legal actions (QUEST)= 0,76; No harm no foul (NOH)= 0,75; Recycling (REC)= 0,77 and Doing good (GOOD)= 0,70) of the ethics scale were reckoned as reliable, except downloading copyright materials/buying counterfeit goods (DL) category (0,393). Consequently, the DL category was eliminated from the analysis. In order to examine a potential lifestyle segmentation of the respondents, an exploratory factor analysis was conducted (Table-2) using principle components analysis (with Varimax rotation) of the lifestyle items. First, a factor analysis was performed to 36 lifestyle statements and only to those variables with factor loadings greater than 0.45. Eleven lifestyle statements were eliminated due to the factor loadings smaller than 0.45. Afterwards, the factor analysis was repeated to a total of 25 lifestyle statements and 8 lifestyle factors were identified explaining 62,506 % of the total variance. 123 Table 2. Results of the Factor Analysis of Lifestyle Variables Factor FACTORS Loadings Modern Life (Percent of Variance 21,696) K2 Use the Internet, e-mail or personal computers at home 0,712 J2 Actively participate in an environmental or conservation group or organization 0,659 A4 Invest in and keep up with the stock market 0,623 M2 Attend movies at the theater once or more in a month. 0,61 C2 Spend time with one or more grandchild/grandchildren. -0,608 G3 Live somewhere else three months or more in a year 0,536 L1 Socialize with friends or neighbors 0,536 Self Improvement (Percent of Variance 8,595) B2 Grow vegetables or fruit in your garden 0,668 H4 Read news, business, or professional magazines 0,619 K1 Keep informed about the latest consumer technologies and gadgets 0,543 H1 Read nature, wildlife, or environmental magazines 0,532 Social (Percent of Variance 7,492) H3 Attend cultural events, concerts or other performing arts 0,841 I1 Take walks in my neighborhood or nearby park 0,825 Hobbies (Percent of Variance 5,889) A1 Spend time on creative arts such as painting, playing a 124 0,83 musical instrument, writing, etc. A2 Enjoy making things out of wood, metal, glass, yarn, or other materials 0,762 B1 Do your own home improvement, decorating, or auto maintenance 0,667 Conservative (Percent of Variance 5,234) C1 Spend time raising children or attending activities related to them 0,767 F4 Attend religious services and church gatherings 0,7 Independent (Percent of Variance 4,825) I2 Visit a fitness club or otherwise exercise at least 3 times a week 0,765 Dl Operate your own independent business 0,741 Education (Percent of Variance 4,484) H2 Attend classes to learn new skills, languages or subjects, e.g., continuing education 0,727 L2 Use the facilities or attend events at a country club or other private recreation club 0,664 Gl Take vacations away from home at least once a year 0,457 Home (Percent of Variance 4,290) C3 Take care of and play with one or more pets 0,842 G2 Spend time at your vacation home or property, including time-shares 0,707 Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization. 125 a Rotation converged in 10 iterations. Kaiser–Meyer–Olkin Measure of Sampling Adequacy= 0.816;Bartlett’s Test of Sphericity=3023,798; df=300; sig.=0.000. Respondents were then clustered based on their life style factors. A cluster analysis procedure was conducted based on 25 lifestyle variables. Despite the fact that cluster analysis is commonly used in market segmentation research, both its reliability and validity have been questioned (Punj and Stewart, 1983; Davis and French, 1989 cited in Yang (2004)). Two clustering methods were employed in order to avoid this problem, similar to what Yang (2004) used in his study. Segments were formed after using the Ward method in hierarchical clustering approach for defining an initial cluster solution. Eight natural clusters were identified based on dendograms produced using the objective function in the Ward method. Afterwards, as in Tang’s (2001) study, the Kmean cluster approach was used, on the basis of the eight clusters that had been previously identified in dendograms. To test the differences between mean scores for each lifestyle group, one-way ANOVA test was performed within the significance level of 0.05. Based on ANOVA test results, significant differences among all of the eight lifestyle groups were found. Results The results indicated that respondents in this study were composed of eight major lifestyle segments. The eight lifestyle clusters were named according to the loading of psychographic characteristics, such as “Maker”; “Environmentalist”; “Modern”; “Routine”; “Actualizer”; “Home”; “Conservative”; “Social”. The “Maker” (17,9 %) is a relatively large group among the eight clusters. Hawkins et al. (2001: 446), defined “makers” as those who experience the world by working on it i.e. by building a house, raising children, fixing a car or canning vegetables. In this study, the first cluster held the highest mean score for statement such as “do your own home improvement, decorating and auto maintenance” and “a strong agreement on spending their time raising children or attending activities related to them”. Thus, they are called “makers”. The “Environmentalists” (27,1%), are the most environmentally conscious group among the lifestyle clusters. They generally “grow vegetables or fruits in their garden” and “actively participate in an environmental group or organizations”. Those falling in the “modern” (29,6%) cluster are conscious about stock markets and 126 tend to use Internet and their personal computers. They take vacations away from home and attend movies in theatres. In addition, they tend to use facilities or attend events at the country clubs or private recreational clubs. They hold very low mean scores for the statement “spend time raising children”. The “Routines” (10,1%) are those who are mostly inclined to spend time at home and take care of and play with pets. The “Actualizers” (2,5%) are defined in the study (Hawkins, Best and Coney, 2001; 440) as successful, sophisticated and active people with high self-esteem. In this study, this cluster held the highest mean scores for statements such as “operate your own business” and “visit a fitness club or exercise otherwise”. Therefore, this cluster is called the “actualizers”. The “home” (4.9%) group holds strong views in connection with the family. They prefer to spend their time raising children or attending activities related to them. Respondents in the “conservative” group (6,5%) are mostly inclined to attend religious services and church gatherings. They prefer to enjoy life by spending time with their grandchildren. They hold the lowest mean scores for investing in stock markets because they cannot handle risk. Those in the “social” (1,3 %) cluster frequently attend social activities such as getting together with friends or neighbors. They enjoy life by living somewhere else during three months or more of the year. In order to understand the differences of ethical beliefs according to the lifestyle characteristics, the ANOVA test was conducted and the results are displayed in Table – 3. Two of the six ethical belief dimensions that were tested show significant statistical differences between eight lifestyle segments, namely recycle [F(7,445) = 3,723; p < 0.005] and doing good [F(7,445) = 5.237; p < 0.005]. In order to understand which lifestyle groups are different from each other, the Tukey test was conducted. According to findings of the Tukey test, both “environmentalists” ( x =2,14) and “moderns” ( x =2,12) desire more recycled products, and their ethical product buying intentions can be much more than the “conservatives” ( x =2,90), (p< 0.005). For “Doing good” dimension, “conservatives” ( x =1,87) can have a much greater intention in comparison with the “moderns” ( x =2,74) and “makers” ( x =2,48) (p< 0.005). In addition, the “environmentalists” ( x =2,36), “routines” ( x =2,24) and “actualizers” ( x =1,77) may intend more to “doing good” than the “moderns” ( x =2,74) (p< 0.005). 127 Table 3. One-way ANOVA Analyses of Respondents Ethical Beliefs towards Modern Routine Actualizer Home Conservative Social x x x x x x x p-value Environmentalist x F- value Makers Dimensions Lifestyle Groups ACT 1,61 1,67 1,54 1,44 1,71 1,75 1,68 1,53 1,06 0,388 PAS 1,67 1,64 1,58 1,56 2,24 1,77 1,64 1,3 1,505 0,164 NOH 3,29 3,28 3,55 3,13 3,56 3,59 3,51 3,1 1,793 0,087 QUEST 1,96 1,94 1,88 1,76 2,34 2,18 1,99 1,43 1,398 0,204 Rec 2,37 2,14 2,12 2,3 2,14 2,5 2,9 2,5 3,723 0,001 Good 2,48 2,36 2,74 2,24 1,77 2,52 1,87 2,46 5,237 0,000 The scale ranges from 1= believe that absolutely wrong to 5= believe that absolutely right. *p < 0.005, x :mean The analysis of the post hoc multiple comparison suggests that the “environmentalist” and “conservative” segments derive different values considering the recycled product buying attitude. Besides, the “modern” segment differs significantly from the “conservative” also in terms of the inclination to recycle products and in the ethical product buying intentions of the consumer. Accordingly, the environmentalists and moderns can be more inclined to recycle products and their ethical product buying intentions can be higher than those of conservatives. For “doing good” dimension, the “maker” segment differs significantly from the “conservative” segment, whereas the “modern” segment differs significantly from the “Environmentalist”, “Routine”, “Actualizer” and “Conservative” segments. These findings imply that the consumer’s ethical beliefs can differ with respect to lifestyle characteristics. Based on these 128 findings, “makers” may intend much more to “doing good” in comparison to the conservatives, and the moderns can also prefer “doing good” much more in comparison to the environmentalists, routines, actualizers and the conservatives. CONCLUSION These findings reveal that the consumers’ ethical beliefs can differ with regard to their lifestyle characteristics. Specifically, the “environmentalists” and “moderns” can be inclined more to recycle products and can have higher ethical product buying intentions than the “conservatives”. This could possibly be due to the fact that the environmentalist consumers can attach much higher importance to the environment, and in order to protect the environment they can be more inclined to buy ethical or recycled products. The “moderns”, who tend to use the Internet and personal computers and attend movies more, are much more informed about the environment and recycled products in comparison to the conservative consumers. Conservatives believe much more in the “doing good” dimension than the “moderns” and “makers”. Returning to the store and paying for an item that the cashier mistakenly did not charge for or correcting a bill that has been miscalculated in consumers favor, are considered among “doing good” behaviors. These kinds of behaviors can be observed more frequently among the conservatives. It is assumed that “doing good” behaviors are in compliance with the religious beliefs and the society’s moral codes, while the adverse behaviors are considered forbidden by both religion and moral codes. Therefore, the conservatives may have stronger beliefs than the other groups. Additionally, the environmentalists, routines and the actualizers may show stronger inclination to “doing good” behaviors than the “moderns”. This could be due to the fact that the segment “actualizer” is defined in the study as a sophisticated group with high self esteem, therefore they may attach importance to those kinds of mistakes and may not purchase products from companies which they believe do not to treat their employees fairly (another “doing good” behavior). Moreover, the environmentalists attach importance to these kinds of behaviors because they may want to make the world a better place and correct the unfair behaviors. According to the findings of the ANOVA analysis, accept recycle (REC) and doing good (GOOD) dimensions, none of the ethical beliefs were found statistically significant. No significant differences were found between the 8 lifestyle groups towards actively or passively illegal, questionable and no-harm-no-foul activities. 129 However, when the frequencies of the responses that were given in the “Actively benefiting”, “Passively benefiting” and “Questionable behaviors” parts of the ethical belief scale were examined, it can be seen that the responses intensify on 1 (strongly disagree) and 2 (disagree). This means that, all lifestyle groups are more likely to believe that actively benefiting (ACT), passively benefiting (PAS), and questionable behaviors (QUEST) are wrong. But, no-harm-no-foul (NOH) activities, like installing pirated software on a computer, burning a CD rather than buying and taping a movie off the television, would score higher than 3 (mid point of the 5-point likert scale). In short, respondents generally believe that no-harm-no-foul activities are right. Moreover, downloading (DL) activities that were determined as not significant, score higher than 3. This might be due to the fact that, nearly all respondents believe that downloading activities are right. The implications of these results point out an understanding of consumer ethical beliefs as an essential aspect for both marketers and theoreticians. From a theoretical perspective, these findings provide an initial empirical evidence for the consumers’ ethics on how a person lives and perceives life. Consequently, in future researches, a new lifestyle scale that consists of ethical behaviors can be developed. In addition to the lifestyle, life cycle also can be investigated. Results of the current study indicate that the entire lifestyle groups contribute to the ethical beliefs. Relatively speaking, the ethical beliefs are intensified by some of these lifestyles. Therefore, according to the respondents’ lifestyles and how they perceive their lives, the market segmentation can be accomplished and marketing mix can be differentiated with respect to this market segmentation. On the one hand, loyalty programs intending to award ethical beliefs and diminish unethical ones can be expanded. Consumer loyalty can be achieved through loyalty programs. On the other, Customer Relation Management (CRM) can be accomplished, and by doing so, unethical behaviors can be discouraged. According to the management approach, being informed about the ethical beliefs is fundamental in order to discourage the unethical behaviors of consumers. For instance, markets can inhibit the consumption of soft drinks without pay, primarily by spreading surveillance cameras. In addition, marketers who care for the ethical beliefs and lifestyle characteristics of consumers can forge more ethical lines of communication with the consumers. For example, honest advertisement and sound product can create a virtuous environment, 130 which in turn, might result in more trustworthy exchanges between the marketers and consumers (Rawwas et al., 1994). Lastly, marketers may promote the formation of a green lifestyle by producing and promoting ethical and green products. One of the limitations of this study is that the ethical lifestyles were not investigated in detail. Furthermore, the sample size could be expanded. This study can be reproduced with different demographic futures and different cultures. Finally, it is possible to investigate the factors and attitudes (behavior, cognitive, emotion) in consumption process that can influence the ethical beliefs. 131 REFERENCES Al-Khatib, J. A., Robertson C. J., Stanton, A. D'Auria, and Vitell, S. J. (2002) "Business Ethics in the Arab Gulf States: A Three-Country Study". International Business Review 11, no 1, 97. Al-Khatib, J. A., Rawwas M. Y. A., and Vitell S. J. 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Prof. Dr. Mehmet Devrim Aydin Hacettepe University, Turkey, e-mail: mdaydin@hacettepe.edu.tr INTRODUCTION Information Technologies (IT) had a considerable impact on the public services with respect to speed, productivity, cost, and quality. While this encouraging IT transformation is gaining an impetus, some practices of IT are under suspicion. For example, “Mass Surveillance Technologies” (MST) which can be seen as a security related subfield of IT (especially used by security and intelligence agencies in order to fight against terrorism) are being questioned due to their restricting effects on civil rights and liberties. Moreover, some examples of corruption in MST usage are strengthening the worries about the emergence of a “Surveillance Society”. Stanley and Steinhardt (2003: 1), from American Civil Liberties Union (ACLU), in a report titled “Bigger Monster, Weaker Chains: The Growth of an American Surveillance Society”, define the current “Surveillance Society” threat as follows: “Privacy and liberty in the United States are at risk. A combination of lightning-fast technological innovation and the erosion of privacy protections threatens to transform Big Brother from an oft-cited but remote threat into a very real part of American life. We are at risk of turning into a Surveillance Society. The explosion of computers, cameras, sensors, wireless communication, GPS, biometrics, and other technologies in just the last 10 * This chapter was developed from Aydin (2007). 137 years is feeding a surveillance monster that is growing silently in our midst. Scarcely a month goes by in which we don’t read about some new high-tech way to invade people’s privacy, from face recognition to implantable microchips, data-mining, DNA chips, and even brain wave fingerprinting. The fact is, there are no longer any technical barriers to the Big Brother regime portrayed by George Orwell.” The most problematic and threatening instruments of MST, having a risk of creating a Surveillance Society, will be scrutinized in detail in the following parts of this chapter. Those MST instruments can be categorized under six headings (Aydin, 2007: 295-322): 1. Telephone tapping and surveillance of Internet traffic, 2. Internet Censorship, 3. Control of the Internet: Government Units’ Demands for Private Individual Information from Search Engines, Chat Rooms and E-mail Service Providers, 4. Surveillance by Security Cameras, 5. Fingerprint and DNA databases, 6. New Developing Data-Gathering Technologies (Biometrics, GPS/RFID chips, etc.). In the highly problematic framework that is given above, this study tries to make an analysis of those MST threats to individual rights and liberties and to suggest a way to prevent the possible problems. With this aim in mind, the study first dwells on the origin of worries regarding IT abuse. In the second part of the study, current MST practices of the governments are scrutinized. After this part, basic legal regulations in the developed countries in order to protect civil rights and liberties against the abuse of cited MST practices are examined. In the conclusion part of the study, some recommendations are made in order to “protect privacy” and “advance civil rights and liberties”. The study ends with the conviction that it is possible to respect privacy of the citizens in the 21st century, but this ideal rests on three conditions; a continuously updated legal structure with strong sanctions; a democratic, open and pluralistic society, and a public administration highly committed to ethical conduct. 138 1. The Origin of Worries Regarding IT Abuse IT is seen as a means of increasing public service quality, cutting costs, boosting productivity, and creating a much more citizen-oriented public administration model in the modern world. However, much like many other technological innovations, IT is also open to abuse. Although IT in general, and the Internet in particular can serve to create a citizen-oriented public administration system, there is always the risk of abuse of those technological advancements for authoritarian/totalitarian purposes. 1.1. Surveillance Society in the Famous Works of Literature The arguments about IT-based new totalitarianism originated at the beginning of the 20th century. Most notably, Yevgeny Zamyatin in 1920s, with his book “We”, radically departed from the utopian views of many scientists and writers who envisaged the creation of a world of abundance due to industrial development and technological progress (Zamyatin, 2006). Zamyatin’s “We”, together with George Orwell’s “1984” (2003) and Aldous Huxley’s “Brave New World” (2006), emphasized the danger of totalitarian regimes abusing technology, and put forth an antithesis or anti-utopia. This anti-utopia has become a weapon of radical criticism against Socialist block and therefore, Zamyatin’s book could not be published in the Soviet Union and the author himself died in exile. Zamyatin defines his anti-utopia by the following words: “Human beings are torn apart from nature and from their true self in the society of the future. They become “we”, and are taken under the control of technology and bureaucracy. There is no individuality; people do not have names, however everybody has a “number”. They live behind transparent glass walls, and the pace of their lives is shaped and controlled by the state. Orwell and Huxley, who followed the footsteps of Zamyatin, made themselves known by greater audiences. A similar work is that of Foucault (1979), “Discipline and Punish: The Birth of Prison”, in which he warned against the continuous surveillance in a “Panopticon Society”. The concept of panopticon originally belongs to Samuel Bentham, brother of philosopher Jeremy Bentham. However, since the concept has merged into the philosophical views of Jeremy Bentham, it is associated with him more commonly (Pease-Watkin, 2003). 139 1.2. Panopticon Society As emphasized above, the panopticon concept owes its reputation to Michel Foucault (1976). He argued that all hierarchical structures would evolve into Bentham`s prison due to constant surveillance practices, and implied that the modern world, in a sense, became a big prison. As mentioned above, the sociological response to the general issue of surveillance has been dominated by images of the Panopticon. This has been especially true of video surveillance which naturally invites comparisons with Jeremy Bentham’s proposal, written in 1787, for an architectural system of social discipline, applicable to prisons, factories, workhouses and asylums. According to Bentham, panopticon is the design of a circular prison structure, with a watch tower in the middle where the person in the tower can observe each and every prisoner in the cells. Its design prevents the passing of light and sound with its maze-like structure, therefore it makes it impossible for the prisoners to understand whether they are being watched or not. Even in the absence of a watchman in the tower, people would not dare to escape due to the fear of being watched (Pease-Watkin, 2003). In this respect, the architectural design of the Panopticon created a state of conscious and permanent visibility that assured the automatic functioning of self-control and selfdiscipline (McCahill and Norris, 2002a: 3). Although Bentham’s model prison was never built, it was nonetheless a crucial development for Foucault who believed that the principles of Panopticism would “seep out from their institutional location to infiltrate non-institutional spaces and populations” (McCahill and Norris, 2002a: 3). The arrival of time-space transcending technologies, many writers believe, reflects this dynamic, extending the disciplinary potential of the panopticon to non-institutionalized public space. Surveillance refers to two related sorts of phenomena (McCahill and Norris, 2002a: 3): “One is the accumulation of ‘coded information’, which can be used to administer the activities of individuals about whom it is gathered ... the other sense of surveillance is that of direct supervision of the activities of some individuals by others in positions of authority over them”. In relation to the accumulation of “coded information”, the 140 emergence of powerful computers and telecommunications networks has allowed for the systematic categorization of whole populations (McCahill and Norris, 2002a: 3). Similarly, for many writers the development of mass video surveillance systems extends the disciplinary potential of panoptic surveillance to wider public space. Historically, the “direct supervision” of individuals has been limited to relatively confined areas, such as small rural communities, or in the enclosed and controlled spaces of modern organizations. Nevertheless, with the development of modern video systems in public spaces and telecommunications networks the “direct supervision” of the subject population is no longer confined to specific institutional locales, nor does it require the physical co-presence of the observer. In this respect, the power of the panopticon has been dramatically enhanced by technological developments which have allowed the disciplinary gaze to extend further and further across the entire social fabric (McCahill and Norris, 2002a: 3). It is hardly surprising, then, given the parallels that can be drawn with video surveillance, that many theorists have been drawn to both Foucault’s concept of the Panopticon and his analysis of its disciplinary potential. Video surveillance like the Panopticon facilitates the power of the watchers over the watched not only by enabling swift intervention to displays of non-conformity but also through the promotion of habituated anticipatory conformity (McCahill and Norris, 2002a: 3). Indeed, nowadays, the use of surveillance cameras in work places, streets, supermarkets, subways, and parking lots, inspection of employee e-mails, control of Internet traffic; all create panopticon-like structures, a development which confirms Foucault’s predictions (ACLU, 2006a; Blanchette and Johnson, 1998:1; Whitaker, 2000:139). 2. Information Technology: A Real Threat to Privacy Today? In the last decade, there is an abundance of news in the media regarding with the continuing assault on citizens’ privacy arising from some Information Technology (IT) applications. Today, human rights advocates claim that abuse of IT poses an important threat for individual rights and liberties (Steinhardt, 2003). In fact, until recently, the notion of a “surveillance society”, where every facet of private lives is monitored and recorded, has sounded abstract, paranoid or far-fetched to many people (Stanley and Steinhardt, 2003). However, today human rights experts assert much more confidently 141 that today’s society is transforming into a Surveillance Society. They cite famous works of literature; Orwell’s (1984) “Big Brother” or Foucault’s (1979) “Panopticon Society”. As mentioned above, both of those works draw a terrifying picture of a society where every moment of people’s lives are monitored by the government (ACLU, 2006a; Blanchette and Johnson 1998:1; Whitaker 2000:139; Pease-Watkin, 2003). Then, what is the reason of this change from “an abstract notion of surveillance society” into “a real threat” in the last decade? The answer is clear: “Global Terrorism”. The increasing degree of IT usage by security and intelligence agencies in order to fight against global terrorism more effectively is also creating an unexpected threat on privacy. War against terrorism is changing almost everything in today’s world by also making the fears of a “Surveillance Society” alive in the 21st century even in industrialized democratic countries like the United States (US) and the United Kingdom (UK). There have been important terror acts in western countries in the last decade that caused a total paradigm change in security perception: Firstly, attack towards twin towers in the US on September 11th, 2001; secondly, subway and bus bombings in London on July 7th, 2005 and lastly, attempt of attack towards planes in London on August 9th, 2006. After those events, governments of two countries increased the power of security forces to fight against terrorism. However, this has created the worries that are mentioned above. And in this new paradigm making the fight against terrorism as the number one priority; people of developed countries are forced to make a choice between their “security” and their “privacy”. Naturally, they choose to give up some of their rights and liberties in order to save their lives from terrorist acts (Stanley and Steinhardt, 2003). In addition to this, some experts, by observing the excessive measures taken after those attacks, also claim that western governments are trying to use fear of terror as a tool to implement their own political objectives by creating huge terror paranoia after such kind of attacks (Knox, 2006). Therefore, technological applications and especially Mass Surveillance Technologies (MST) used by security and intelligence agencies to fight effectively against terrorism create a hot debate on the agenda. The risks of those IT applications when used improperly are really high. Perhaps at this point it may be useful to cite words of some human rights experts. For example, Harvard University professor David Lazer who is studying the ethical aspects of DNA 142 databases asks a striking question: “Would you like J. Edgar Hoover to have his hands on everyone's DNA?" (New Scientist, 2005). Lazer’s question can be seen as a warning for the risk of abuse of some politicians or bureaucrats who are indifferent to legal regulations. Another similar sentence comes from Lieberman, the president of New York Civil Liberties Union. In one of his speeches about fingerprint and DNA databases, he expresses his worries about the developments in the US: “I do not think that this is the society that we want to live in.” (Kugler, 2006). A number of negative examples faced until now support worries of human rights advocates like Lazer and Lieberman in relation to abuse of IT. What is more, Watergate scandal in 1972 in the US can also be seen as a reinforcing evidence for the seriousness of those claims. Decades after Richard Nixon resigned the office of the president, Watergate remains one of the top presidential scandals of modern time. When the listening equipments were discovered in Democrat Party headquarters, this also became the symbol of the risk of IT abuse in government (Fox, 2005). At this point, it will be helpful to remember the details of Watergate Scandal in order to fully understand the threat of IT abuse today. After four decades of technological advancement since Watergate, governments all around the world have much more sophisticated MST instruments in their hand today! Therefore, it is not strange to foresee or expect new Watergate-like scandals (maybe much higher in magnitude) in the near future. 143 Watergate Scandal (Watergate, 2011) “The Watergate scandal was a political scandal that occurred in the United States in the 1970s as a result of the June 1972 break-in at the Democratic National Committee headquarters at the Watergate office complex in Washington, D.C., and the Nixon administration's attempted cover-up of its involvement. The scandal eventually led to the resignation of Richard Nixon, the President of the United States, on August 9, 1974, the only resignation of a U.S. President. The scandal also resulted in the indictment, trial, conviction and incarceration of 43 people, including dozens of top Nixon administration officials. The affair began with the arrest of five men for breaking and entering into the Democratic National Committee (DNC) headquarters at the Watergate complex on June 17, 1972. The Federal Bureau of Investigation (FBI) connected cash found on the burglars to a slush fund used by the Committee for the Re-Election of the President, a fundraising group for the Nixon campaign. In July 1973, as evidence mounted against the president's staff, including testimony provided by former staff members in an investigation conducted by the Senate Watergate Committee, it was revealed that President Nixon had a taperecording system in his offices and he had recorded many conversations. Recordings from these tapes implicated the president, revealing he had attempted to cover up the break-in. After a protracted series of bitter court battles, the U.S. Supreme Court ruled that the president had to hand over the tapes to government investigators; he ultimately complied. Facing near-certain impeachment in the House of Representatives and a strong possibility of a conviction in the Senate, Nixon resigned the presidency on August 9, 1974.” (Watergate, 2011). In the following part of the study, the most problematic instruments of MST will be explained in detail. 2.1. IT and New Threats: Mass Surveillance Technologies (MST) IT applications have important contributions on the society, but MST usage by security and intelligence services are being criticized due to their threats on privacy. Furthermore, since the cost of MST usage is decreasing and the power of this technology is increasing, mass surveillance is getting easier and becoming more 144 widespread day by day (ACLU, 2006b). In the following part of the study, those MST applications are scrutinized. Those applications can be categorized under six topics (Aydin, 2007: 295-322): 1. Telephone tapping and surveillance of Internet traffic, 2. Internet Censorship, 3. Control of the Internet: Government Units’ Demands for Private Individual Information from Search Engines, Chat Rooms and E-mail Service Providers, 4. Surveillance by Security Cameras, 5. Fingerprint and DNA databases, 6. New Developing Data-Gathering Technologies (Biometrics, GPS/RFID chips, etc.). 2.1.1. Telephone Tapping and Surveillance of Internet Traffic Although in theory, telephone tapping is bound to the permission of legal authorities in many countries, in the practice the urgency of the situation is shown as an excuse and those permissions are omitted from time to time. Interestingly, when permission is obtained the problem is not solved, because some experts claim that permissions for telephone tapping are easily obtained on a routine basis without further investigation by the court or other entity granting such permission. This fact makes the telephone tapping a hot issue on the agenda. In the US, a research published at New York Times on 16th of December, 2005, declared that President Bush provided National Security Agency (NSA) with the right to control telephone and Internet communication of thousands of American citizens without getting a prior legal permission. This is also clearly against the American constitution (Risen and Lichtblau, 2005). Another research at USA Today in 2006 supports this claim and reports that biggest telephone companies of the US cooperate with NSA on surveillance of telephone calls of American citizens (Cauley, 2006). Today another surveillance technology went far beyond in surveillance of personal data: “Surveillance of Internet with filters”. For example, in the US, Federal Bureau of Investigation’s (FBI) controversial “Carnivore” program is supposed to be used to tap into the e-mail traffic of a particular individual (Stanley and Steinhardt, 2003: 8). Carnivore was essentially a customizable packet sniffer that could monitor all of a target user's Internet traffic. Unlike a telephone wiretap, however, it doesn’t cover just one 145 device but filters through all the traffic on the Internet Service Provider to which it has been attached. Another example is the international eavesdropping program codenamed Echelon (Stanley and Steinhardt, 2003: 8-9): “Echelon can capture radio and satellite communications, telephone calls, faxes, e-mails and other data streams nearly anywhere in the world and includes computer automated analysis and sorting of intercepts. Operated by a partnership consisting of the United States, Britain, Canada, Australia, and New Zealand, Echelon reportedly grabs e-mail, phone calls, and other electronic communications from its far-flung listening posts across most of the earth. Like Carnivore, Echelon may be used against particular targets, but to do so its operators must sort through massive amounts of information about potentially millions of people. That is worlds away from the popular conception of the old wiretap where an FBI agent listens to one line. Not only the volume of intercepts but also the potential for abuse is now exponentially higher (Stanley and Steinhardt, 2003: 8-9).” As is seen, what is criticized here by Cauley (2006) or Stanley and Steinhard (2003) is not the use of these technologies against the terrorists or ciriminals, but the risk of abuse due to “operations outside the legal framework”. 2.1.2. Internet Censorship In some closed political regimes including China, Internet traffic is closely being monitored by the help of Internet filters and various computer programs. These countries also block access to web sites, which they believe, are the source of rebellious activities (Hermida, 2002). Human rights advocates argue that the Chinese government employed around 30,000 personnel in 2002 in order to control web sites, chat rooms and private e-mail messages (BBC, 2002). (Although having a democratic parliamentarian system, Turkey also took some measures reminding the closed systems. It has blocked numerous websites including YouTube and MySpace and this prohibition has lasted for 5 years until the end of 2010.) Today, the search engines and firms operating in China, sign a private-specific agreement (Public Pledge on Self-Discipline for China Internet Industry) with the Chinese government, in which they pledge that they will abstain from any activity that would jeopardize state security, disturb societal harmony, violate rules and regulations, publish and distribute any information that contain superstition and obscenity. For 146 example, in “Yahoo China” and “Google China” (search engines that operate in the Chinese language), it is impossible to search thousands of forbidden keywords such as “Tiananmen Square”, “Tibet”, and “Falun Gong” (a spiritual discipline), or browse many forbidden websites, such as the websites of the “New York Times” newspaper, “Radio Free Asia”, “Human Rights Watch”, and “Australian Broadcasting Association” (HRW, 2006). Senior management of Yahoo and Google argue that such limitations are normal, as their firms have to conform to the laws and regulations of the countries in which they operate (Wong, 2002). Similarly, in 2006, the Microsoft Corporation, which is accused of self censoring certain words that the Chinese Government determined, used the same excuse, and argued that the websites in China are subject to Chinese laws and regulations. In addition, chat programs such as MSN Messenger and Skype does not allow the use of certain forbidden words while chatting online (HRW, 2006). 2.1.3. Control of the Internet: Government Units’ Demands for Private Individual Information from Search Engines, Chat Rooms and E-mail Service Providers Search engines, chat rooms and e-mail service providers have very valuable private information about the users that utilize their services. The main concern in this area is the misuse of these data. For example, a search engine has information about all the areas of interest of a single user. Chat rooms can uncover all private and commercial links of a person. Similarly, e-mail accounts can provide all kinds of personal and commercial data about an individual. Service provider firms like Google, Hotmail, and Yahoo conform to the laws and regulations of the countries that they operate in. In other words, if government authorities ask for information, they have to supply this information in order to operate in this country. For example, if one examines the privacy policy of Google, especially Article 9 that concerns government intervention, it can be seen that the firm acts in compliance with any search warrants, court orders or information warrants that come from government authorities (Google Privacy Center, 2011). Gmail, which is an e-mail and chat service of Google, has a privacy policy which states that deleted e-mail correspondence can be saved offline in company servers as backups. Therefore, Gmail states that it archives user e-mails. This means that, upon request, email and chat traffic and contents from past years are in searchable databases (Gmail 147 Privacy Notice, 2011). Such a technological capability has a potential to harm individual privacy, if it is misused. Of course, nobody wants the service suppliers to uncover his/her personal data, however if the need for information is related to prevention of a possible terrorist act, it becomes a different issue! It is obvious that what is important here is “the legality of the request and of the process”. Therefore, service suppliers like Google, Hotmail or Yahoo must be very sensitive on the legitimacy of the information requests coming from government authorities. As is seen above, today, government agencies make use of IT in mass surveillance for a wide range of purposes, such as control, censorship, interception of voice and image, information gathering, and archiving. All these practices must be controlled by the help of “detailed legal arrangements”, in order to prevent governments from creating serious violations on individual rights and privacy. 2.1.4. Surveillance by Security Cameras First security cameras (Closed Circuit Television/CCTV) were used at 1950s for traffic monitoring, since then this technology developed a lot and it is being used to prevent crime and detect criminals today (Hempel and Töpfel, 2002; Urbaneye, 2011). Today all the city centers in the United Kingdom are monitored by security cameras. That is to say, the citizens are monitored in the streets without their permission and/or information. Current technology also enables to listen to the citizens on the streets as well by fitting microphones next to the cameras. It has been estimated that the number of surveillance cameras in London as around 400,000 and the total number of cameras in the UK as around 4,000,000 (McCahill and Norris, 2002b; McCahill and Norris, 2002c). In Turkey, continuous surveillance of avenues and streets by security cameras has begun with the implementation of “Mobile Electronic System Integration Project” (MOBESE) in 2005 (øEM, 2011). The first MOBESE cameras were installed in Istanbul on June 17th, 2005. Due to its success in Istanbul, in near future this surveillance system is planned to prevail all over the country (MOBESE, 2011). With the advent of CCTV and other technologies, the risk of creating a surveillance society George Orwell fictionalized in his novel 1984 became closer. ACLU asserts that governments should be responding to intrusive new technologies by building stronger restraints to protect people’s privacy. However, ACLU claims that governments do the 148 opposite by loosening regulations on surveillance, and thus surveillance grows unchecked (ACLU, 2006a). 2.1.5. Fingerprint and DNA Databases At the beginning, fingerprint databases were used to detect criminals who are arrested and brought to police stations, but today security experts claim that governments have to use all inclusive databases covering entire population in order to make use of those databases more effectively (Smith, 2006). Today ordinary citizens’ fingerprints are taken at visa application interviews, at airports, etc. and those practices demonstrate that all inclusive databases are already being realized. Another related issue is DNA databases that are used with the same purpose. For example in the US, FBI’s DNA database system (CODIS/Combined DNA Index System) includes all the data of the American states in one big pool and it covers millions of people (CODIS, 2011; NDIS, 2011). Similarly, in the UK, there is a fingerprint and DNA database covering millions of people (Forensic, 2011; NDNAD, 2006). However, the consequences of an abuse of this DNA database system will likely include the following (Stanley and Steinhardt, 2003: 5): 1. Discrimination by insurers. Health and life insurance companies could collect DNA for use in deciding who to insure and what to charge them, with the result that a certain proportion of the population could become uninsurable. 2. Employment discrimination. Genetic workplace testing is already on the rise, and the courts have heard many cases. Employers desiring healthy, capable workers will always have an incentive to discriminate based on DNA - an incentive that will be even stronger as long as health insurance is provided through the workplace. 3. Genetic spying. Cheap technology could allow everyone from schoolchildren to dating couples to nosy neighbors to routinely check out each other’s genetic codes. A likely high-profile example: online posting of the genetic profiles of celebrities or politicians. On the other hand, the power of DNA databases in fight against crime cannot be denied. In the United Kingdom, between the years 1995 and 2005, criminals were detected due 149 to the comparison of DNA data in almost 600,000 events. This is a kind of revolution in criminal research (New Scientist, 2005). 2.1.6. New Developing Data-Gathering Technologies In the beginning of the 21st century, business world discovered the monetary value of “personal information” and “tracking the habits of consumers” has been made possible by advances in computers, databases and the Internet. Thus newly developing technologies on data-gathering are gaining an impetus. Below are some of these datagathering technologies (Stanley and Steinhardt, 2003: 6-7): • Cell phone location data. The government has mandated that manufacturers make cell phones capable of automatically reporting their location when an owner dials 911. Of course, those phones are capable of tracking their location at other times as well. And in applying the rules that protect the privacy of telephone records to this location data, the government is weakening those rules in a way that allows phone companies to collect and share data about the location and movements of their customers. • Biometrics. Technologies that identify us by unique bodily attributes such as our fingerprints, faces, iris patterns, or DNA are already being proposed for inclusion on national ID cards and to identify airline passengers. Face recognition is spreading. Fingerprint scanners have been introduced as security or payment mechanisms in office buildings, college campuses, grocery stores and even fast-food restaurants. And several companies are working on DNA chips that will be able to instantly identify individuals by the DNA we leave behind everywhere we go. • Black boxes. All cars built today contain computers, and some of those computers are being programmed in ways that are not necessarily in the interest of owners. An increasing number of cars contain devices akin to the “black boxes” on aircraft that record details about a vehicle’s operation and movement. Those devices can “tattle” on car owners to the police or insurance investigators. Already, one car rental agency tried to charge a customer for speeding after a GPS device in the car reported the transgression back to the company. And cars are just one example of how products and possessions can be programmed to spy and inform on their owners. • Radio-Frequency Identification (RFID) chips. RFID chips, which are already used in such applications as toll-booth speed passes, emit a short-range radio signal containing a unique code that identifies each chip. Once the cost of these chips falls to a 150 few pennies each, plans are underway to affix them to products in stores, down to every can of soup and tube of toothpaste. They will allow everyday objects to “talk” to each other – or to anyone else who is listening. For example, they could let market researchers scan the contents of your purse or car from five feet away, or let police officers scan your identification when they pass you on the street. • Implantable GPS chips. Computer chips that can record and broadcast their location have also been developed. In addition to practical uses such as building them into shipping containers, they can also serve as location “bugs” when, for example, hidden by a suspicious husband in a wife’s purse. And they can be implanted under the skin (as can RFID chips). As is seen above, insuring ethical conduct is not an easy step to take, since the technological advancements are rather fast and highly complicated. Perhaps the most important part is a “legal system” advancing parallel to the incredible pace of development of IT. The following heading summarizes the legal framework in the western countries and Turkey aiming at responsible use of IT. 3. An Overview of Basic Regulations Aiming at Insuring Ethical Conduct in the Western Countries To prevent abuse of the privacy and building a transparent state system, western countries took important steps in 1960 and 1970s. One of the most important steps is the “Freedom of Information Act” enacted in 1966 in the US (FOIA, 1966; USDOJ, 2011). After the Watergate scandal in 1972, “Privacy Act” was enacted in 1974 to prevent such kind of unlawful attempts in the future (Privacy Act, 1974). France followed USA and established the Commission for Informatics and Liberties (Commission Nationale de l'Informatique et des Libertés) with the same purpose in 1974. The UK started the efforts to establish a law infrastructure on Data Protection in 1979 by founding Lindop Committee on Data Protection. European Union built one of the most significant regulations in the field by enacting Data Protection Law on October 24th, 1955 (Directive 95/46/EC, 1995). Turkey also enacted Freedom of Information Act in October 2003 (Act no: 4892) and the Act came into force in April 2004. Turkish parliament passed two more regulations to arrange the usage of “Freedom of Information” on January 24th, 2004 and April 24th, 2007. Thus legal framework for transparency and accountability was reinforced. On the 151 other hand, on July 23rd, 2006, a Telecommunication Agency (Telekomünikasyon øletiúim Baúkanlı÷ı) was founded in order to put and end to telephone tapping without legal permission (Telecommunication Agency, 2006). CONCLUSION A legal system guaranteeing accountability and transparency will be helpful to prevent abuse of power and to protect privacy. In fact, there are rather successful examples of well-established legal frameworks as summarized above. Regulations on “Privacy”, “Freedom of Information” and “Data Protection” in the US and the UK are successful examples of those efforts. However, especially in developing countries, surveillance and database technologies are being used without building this legal infrastructure. Western or industrialized countries are not fully immune to abuse of IT; the most important problem field for those countries is the continuous need to update legal regulations in order to catch up with the development pace of IT. By taking the precautions and “continuously updating the legal framework”, the risk of IT abuse can be avoided or at least minimized, and by only doing this, an ethical conduct can be guaranteed. The technologies of surveillance are developing at the speed of light, but the body of law that protects citizens is stuck back in the Stone Age. In the past, new technologies that threatened the privacy of citizens, such as telephone wiretapping, were assimilated over time into society. The legal system had time to adapt and reinterpret existing laws, the political system had time to consider and enact new laws or regulations, and the culture had time to absorb the implications of the new technology for daily life. Conversely, today, change is happening so fast that none of this adaptation has time to take place – a problem that is being intensified by the scramble to enact unexamined anti-terrorism measures. The result is a significant danger that surveillance practices will become entrenched in new way of life that would never be accepted if we had more time to digest them. Law and legal principles must be developed or adapted to rein in particular new technologies such as surveillance cameras, location-tracking devices, and biometrics (Stanley and Steinhardt, 2003: 15-16). Such a legal system does not mean that the power of security forces is curtailed for the sake of protecting civil rights and liberties. The aim of establishing a strong and updated legal framework is to prevent abuse of IT and “to continue the war against terror” by building a “mutual trust” between the governments and the public. 152 In the 21st Century, it is not possible anymore to design public services in a more efficient and cost effective way without utilizing opportunities offered by IT. Nevertheless, potential risks related to abuse of IT in government are still seriously debated not only in developing countries but also in developed ones. It is irrational to curtail the power of governments in their fight against terrorism, however we must know that there is a risk of abuse if the surveillance occurs outside the legal framework. Such an abuse may lead to the destruction of privacy, and this causes a lack of trust between citizens and governments. In conclusion, it is obvious that “protection of privacy” and “advancement of civil rights and liberties” in the 21st century are both possible, but the realization of those ideals rests on three conditions; a continuously updated legal structure with strong sanctions; a democratic, open and pluralistic society, and a public administration highly committed to ethical conduct. 153 REFERENCES ACLU (2006a) Surveillance & Wiretapping. 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Prof. Dr. Semra Karacaer Hacettepe University, Turkey, e-mail: semra@hacettepe.edu.tr Pelin Guven Ozek Gazi Osman Paúa University, Turkey, e-mail: pelin_guven@hotmail.com INTRODUCTION Corporate social responsibility received increasing attention in recent years with the growing interest in the capital markets and the corporations as their basic units. This concept requires companies to view themselves as part of the society and the environment in which they operate, and act in ways that create the minimum negative impact on the surrounding structure. In this framework, today’s corporations fulfill the social and environmental expectations through not only by fulfilling the legal expectations, but also by going beyond compliance and investing more into human capital, the environment and the relations with their stakeholders (Calafell et al., 2006: 125). On the other hand, the implementation of corporate social responsibility is not sufficient without effective communication with the society. In other words, the corporations need an accounting system for generating the information on the social responsibility activities of the companies and communicating the results of these activities to the society (Calafell et al., 2006: 126). Therefore, social responsibility adds new concepts and processes into the accounting theory and practice. These new concepts are referred as social accounting, environmental accounting or social and environmental accounting and social responsibility accounting. This study uses the term social responsibility 159 accounting for these concepts, which assumes accounting to generate and report the social and environmental information in addition to its traditional functions. Originally, social responsibility is not a new concept for the accounting; it has a long history as one of the basic principles of accounting. The early definitions of social responsibility for the accounting were based on the effective performance of the profession. However, this perspective did not include the general social issues, such as social accounting or environmental impacts (Smith, 2007:152). In the 1940s, an alternative view on social responsibility of accounting had begun to develop, which assumes that the obligations of the accountants towards their clients could be mitigated by their duty to serve in behalf of the general public (Smith, 2007: 154). In other words, this approach on social responsibilities of the accountants began to include the general public interests, along with the clients’. In recent years there has been a marked renewal of interest in the areas of corporate social responsibility and social and environmental accounting, as these concepts began to settle more in accounting practices (Brown and Fraser, 2006: 103). Mathews and Perera (1995) define social responsibility accounting as an extension of disclosure into non-traditional areas, such as providing information about employees, products, community service and the prevention or reduction of pollution (Mathews, 1997: 483). Although there is not much consensus about the activities to be performed within the social accounting framework, three general objectives about this concept could be stated (Rahahleh and Sharairi, 2008: 7-8). The first objective is to determine and measure the net social contribution of the organization on a periodic basis. This includes the internal costs and specific benefits of the organization, as well as the cost and external social benefits that influence segments of the community. The second objective is to evaluate the social performance of organizations by identifying whether the organization's strategies and objectives are consistent with the social priorities. The last objective is to disclose the activities that have social influence carried out by the organization. As stated above, there is no consensus about the activities to be performed in the social responsibility accounting framework for it covers a variety of social and environmental issues. However, governments, public policymakers, private sector organizations and professional bodies have set up working groups on various aspects of social responsibility accounting and have issued a number of discussion papers and best 160 practice guidelines (Brown, 2006: 103). In this manner, this study aims at investigating the legislative and professional bodies that contribute to the theoretical, professional and practical development of social responsibility accounting and then examining the current situation of the social responsibility accounting in Turkey. Thus, it is intended to contribute to the future studies and initiatives which would be needed for this development process. 1. The Law of Independent Accountancy, Certified Public Accountancy and Sworn-in Certified Public Accountancy No: 3568 The Law of Independent Accountancy, Certified Public Accountancy and Sworn-in Certified Public Accountancy No: 3568 *, which is prepared by the Ministry of Finance F can be considered as the first important step for the development of the social responsibility consciousness in accounting profession and practices. The purpose of the Law No: 3568 is to establish the Certified Public Accountant (CPA), and Sworn-in Certified Public Accountant (Sworn-in CPA) as a profession and to establish Chambers of Certified Public Accountants, Chambers of Sworn-in Certified Public Accountants and The Union of Certified Public Accountants and Sworn-in Certified Public Accountants of Turkey. Thus, the Law aims to regulate the accounting and auditing profession, and make sure the activities and transactions of the businesses are treated in a well-planned and reliable manner. Moreover, it aims to audit and evaluate the results of the activities in the regulatory framework and present the actual situation neutrally to the related parties and legal authorities. Although this Law is not a direct arrangement about the social responsibility of accounting, it makes important contributions. First, it develops the profession and social responsibility consciousness of accountants by providing the accounting profession with a legal setting. Second, it adopts the social responsibility as an accounting principle in Article No: 2, which arranges the generally accepted accounting principles (GAAP). In addition, Article No: 48 of the Law contains statements which require the accounting professionals to be independent, neutral, honest and truthful in their tasks (Bas et al., 1997). Finally, the establishment of the chambers and the union of accountants, which is stipulated in the Law, can be seen as an important contribution to the development of the social responsibility consciousness in accounting profession. * Turkey Legal Newspaper No: 20194, 06.13.1989 161 2. The Regulations Related with the Implementation of the Accountancy Law The Ministry of Finance declared the responsibilities of accounting professionals and their activities with the Regulation on the Work Method and Principles of Certified Public Accountants and Sworn-in Certified Public Accountants in 1990*. The main topics of the Regulation are as following: Professional Name and Proficiency Principle: The accounting professionals who prove to have the proficiency required by the Law and receive a professional name have to show respectful and reliable behaviors as their professional names requires. Professional Training and Knowledge: Professional knowledge is improved by training programs on professional subjects. These training efforts are managed by the Union and Chambers. Honesty, Reliability and Neutrality: Honesty, reliability and neutrality underlie the accounting profession. The accounting professionals can be successful in their professional efforts only if they behave honestly, reliably and neutrally. They avoid conflicts of interest in their works and demonstrate professional care and attention during their tasks. Keeping a Secret: The accounting professionals and their personnel should not betray the confidence of their clients or disclose information and secrets related to their professions, even if they terminate their professional relationships. They cannot benefit from the rights and advantages entitled to the informants by various laws. However, it is compulsory to notice related authorities about situations which constitute a crime according to the criminal justice. Responsibility: a) Social Responsibility: Members of the profession have responsibility to the society and Government while they perform their profession. b) Responsibility to the business owners and managers: Members of the profession provide business owners and managers with correct and reliable information so that they can make effective decisions. c) Responsibility to counterparts: Members of the profession have responsibility to give and share all information to/with each other in the related regulatory framework and in their professional trainings. They establish necessary cooperation among them to provide a solid foundation and improve the profession. * Turkey Legal Newspaper No: 20391, 01.03.1990 162 Independence: Members of the profession perform their tasks under their own responsibility and with full independence. Independence is the foundation and an indispensable component of the profession. Members should avoid relationships and behaviors which could compromise their independence. Unfair Trade: Members of the profession should be aware of their professional cooperation responsibilities and avoid the behaviors and situations which may cause an unfair trade. They should not attempt to give professional service to people who have a professional service contract with another member of the profession. Likewise, the accounting professionals should not behave in ways that may damage each other on the subjects such as wages and employment. The Situations Incompatible with the Profession and Professional Honor: The following behaviors of the professionals are considered as the situations incompatible with the profession and professional honor: a) Treating the personnel inappropriately b) Having excessive alcohol and gambling problems c) Concealing information or providing misleading information deliberately to the counterparts, clients, individuals and institutions for whom providing accurate information is a legal obligation within the framework of related legislation d) Performing jobs or tasks which are legally forbidden. e) Violating the rules of professional ethic and independence As seen in the Articles, the Regulation considers social responsibility of the accountants as a basic foundation of the profession. The other legal arrangement associated with the social responsibility accounting is “The General Notification on the Accounting System Implementation Serial Number: 1” (MSUGT), which is published by the Ministry of Finance in 1992*. The relationship between the accounting professionals and social responsibility concept primarily begins with the social responsibility principle of this document (Baú et al., 1997). Therefore, it is necessary to examine the social responsibility arrangements of this notification. The purpose of this notification is to conduct accounting of the operation results of the enterprises and businesses owned by natural and legal persons in a well-planned and reliable way, provide the information * Turkey Legal Newspaper No: 21447, 12.26.1992 163 that is presented to the related parties by the means of the financial statements, be comparable and reflect the real situation and facilitate the auditing in businesses. The main feature of the notification is explained as: “The only party related to the operations and results of a business directly is not the owners and shareholders of that business. As well as the business owners and shareholders related to the businesses directly, businesses or society members, finance and investment institutions and various public institutions and organizations, who have any commercial, financial and economic relations with that business, are interested in the operations and results of that business and want to receive a well-planned and reliable information. The sources of information on the operations and results of a business are the accounting records and documents and financial statements of that business. The most important factor for related parties in making decisions based on the financial statements by which the accounting information is presented is this information to be reliable and comparable. In a macro level, to provide the uniformity in accounting is essential for deriving the national income accounts and similar statistics, preparing the development plans, to regulate the national and international capital movements, and controlling and governing the economic activities by the Government. Moreover, it is clear that the implementation of the uniform account plan will reduce and facilitate the workload of the auditing when the information presented to the related parties by the means of the financial statements have to be audited.” As can be seen from the statements above, this notification points out that the accounting professionals are responsible not only to the business owners and shareholders, but also to all the persons and institutions, who have a financial and economic relationship with that business. The aim of the notification is a) To communicate the accounting information sufficiently and accurately with the related parties, b) To compare the different businesses and the different periods of the same business, c) To provide the same meaning for the account names of the financial statements in all segments d) To ensure the term unity in accounting to be understandable 164 e) To generate trust between the businesses and related parties. In addition, the accounting methods and principles are explained in 5 sections in the notification. In the first section, basic concepts of accounting, which include social responsibility, personality, the continuity of the business, periodicity, the monetary measure, cost basis, impartiality and documentation, consistency, full description, cautiousness, materiality and core priority are explained. The explanation of the social responsibility concept is as following: “This concept denotes the responsibility of accounting on its own functioning and indicates the scope, meaning, location and purpose of accounting. The social responsibility concept refers to oversee the interests not only of certain individuals or groups but also of the society in general in the organization of accounting, implementation of accounting practices, and in preparation and presentation of financial statements; thus to be accurate, impartial and honest while creating information.” This statement highlights the need for acting with social responsibility consciousness when presenting information about the businesses to the stakeholders (Baúar, 2006: 219). In the other sections of the notification, accounting methods and principles on the issues of disclosure of the accounting policies, financial statement principles, the preparation and presentation of the financial statements, uniform account framework, account plan and account plan disclosures are explained; thus, the legal framework of the responsibility of accounting is determined. 3. The Union of Certified Public Accountants and Sworn-in Certified Public Accountants of Turkey (TÜRMOB) TÜRMOB is founded by the enactment of the Law No. 3568 in 1990*. TÜRMOB Notification explains the purposes of the Union as following: a) To perform the tasks which are stipulated by the Law and notifications. b) To conduct business in professional fields and to ensure the development of the profession. c) To protect the honor of the profession, rights of the members and the chambers. * Turkey Legal Newspaper No: 20545, 06.11.1990 165 d) To develop norms regarding the implementation of the profession, to contribute to the development of professional training in cooperation with the training and public institutions. e) To ensure solidarity between the members and the chambers to prevent unfair trade. The tasks of the Union are listed in the same notification as: a) To work for improving the profession b) To maintain the interests, professional ethic, order and tradition of the professionals c) To provide feedback to the authorities on the issues concerning the chambers d) To resolve professional disputes between the chambers e) To determine the compulsory professional rules and standards; in this framework, to create and develop professional ethical standards, auditing standards, professional training standards and quality assurance standards that are compatible with international standards f) To prepare the regulations to be issued according to law g) To maintain membership in the national and international professional organizations, to participate in the international professional meetings h) To fulfill the duties given by the Ministry of Finance i) To fulfill other duties stated by the laws and regulations, j) To provide information and give opinions on the professional issues as requested by the authorities. After the enactment of the Law No: 3568 and the issuance of the MSUGT Serial Number:1, on February 9th 1994, Turkish Board of Accounting and Auditing Standards (TMUDESK) was established by the TÜRMOB. The aim was to ensure the development and adoption of accounting principles for presentation of the audited financial statements to be accurate, reliable, consistent, comparable and understandable in the nature, well-suited to the needs. Another aim was to create national accounting 166 standards that would benefit the public, and issue national auditing standards for accounting professionals to execute auditing activities in a disciplined manner*. As a basic principle, TMUDESK adopts Turkish accounting standards in accordance with the international accounting standards. Thus, it initiates the efforts to ensure the uniformity of the accounting and auditing (Erdo÷an, 2002: 52). Nineteen Turkish accounting standards have been issued since the foundation of the TMUDESK to 2003. However, these standards failed to reach the goal because of the lack of legal enforcement mechanisms (Gücenme, 2003). In order to improve social responsibility consciousness of accountants, another important arrangement of the TÜRMOB is the “Regulation on the Ethical Principles Complied by the Certified Public Accountants and Sworn-in Certified Public Accountants in Their Professional Practices” in 2007†. The purpose of this regulation is to determine the minimum ethical principles with which the accounting profession members have to comply in their professional relations; to achieve the goal of creating an audience of professional members who have maximum professional knowledge and social responsibility consciousness, who are faithful to ethical values, have competition consciousness based on service with better quality and who are reliable and respectful. Lastly, establishing an ethics committee was included in the regulation. In the first part of the regulation, basic ethical principles with which all members of the profession have to comply, and conceptual framework for implementation of these principles are presented. The second and third parts reveal how the conceptual framework would be applied to certain cases. The second part includes the principles and situations that apply to the professionals working independently, and the third part includes the principles and situations that apply to the professionals working dependently. Basic ethical principals with which all professionals have to comply are as follows: a) Honesty: Professionals have to be honest and truthful in all professional and business relations. * † http://turmob.org.tr/tmudesk/tmudesk.html Turkey Legal Newspaper No: 26675, 10.19.2007 167 b) Impartiality: Unfair and inappropriate pressures from third parties, pro- or prejudiced acts, must not affect or prevent the professional decisions of the accountants. c) Professional Sufficiency and Attention: The professional should act in accordance with the technical and professional standards and be careful and diligent while fulfilling professional activities. d) Privacy: The professional should not disclose the information obtained as a result of the professional relationship to the third parties, or use this information for personal or third party interests, unless he has a right or a duty to disclose. e) Professional Behavior: Professionals must comply with the existing laws and regulations and avoid of any behavior that will detract the profession. Ethical principles that the independent professionals need to comply with includes the following components: a) The first section of this part explains the application of the general ethical principles and conceptual framework presented in the first part to the professionals who work independently. Also, this section includes examples of the situations which may jeopardize the compliance to the ethical principles. b) The second section is related with the professional appointments, and determines the ethical principles associated with the client adoption, contract adoption and changes in the professional appointments. c) In the third section, the ethical principles that the professionals must comply with in the cases of conflict of interests are explained. d) In the fourth section, compliance to basic ethical principles when the professionals are requested to provide a secondary opinion on issues like accounting, auditing, reporting or the application of the other standards on behalf of a non-business clients are explained. e) The fifth section includes the ethical principles on wages and other income. f) The sixth section includes the ethical principles on professional services marketing. g) The seventh section includes the ethical principles regarding gifts and hospitality. h) The eighth section includes the ethical principles on maintenance of client assets. i) The ninth section includes the ethical principles about the impartiality. 168 j) The last section explains the ethical principles related to the assurance contracts, independence, and contract period. The ethical principles with which the dependent professionals need to comply includes the following components: The first section of this part explains the application of the conceptual framework presented in the first part to the professionals who work dependently. Ethical principles related to the potential interests are explained in the second section, preparation and reporting the information in the third section; performing with sufficient professional knowledge in the fourth section; the financial interests in the fifth section and finally, the incentives are explained in the sixth section of the regulation. 4. Basic Training and Practical Training Foundation (TESMER) One of the most important tools for improving the social responsibility quality of accounting is education. Therefore, “Directive On Foundation, Study Method and Basis of Basic Training and Practical Training Foundation of Turkish Public Accountant Financial Advisors and Sworn Financial Advisor”* issued in 1993, and the establishment of the Basic Training and Practical Training Foundation (TESMER) could be considered as important steps in improving the profession. TESMER complements the potentially lacking issues in the basic knowledge of candidate professionals, and helps the members of the profession to update their knowledge constantly and improve their own professional knowledge. In this framework, TESMER makes training arrangements before receiving the license, and provides training of the accounting professionals and continuous professional development in line with the international advancements. According to the “Directive on Continuous Professional Training” (SME) of TÜRMOB, organized trainings for protecting and improving the professional abilities, increasing the service familiarity and efficiency of professional members and candidate professionals are provided. Another purpose as defined in the Continuous Professional Training (SME) is to ensure that the professionals are trained for higher ranks. The training sessions in the SME framework are scheduled in two formats: The first is the training of the candidate professionals, and the second one is the training of the professional members. The candidate professionals are required to participate in the * Turkey Legal Newspaper No: 21447, 01.26.1993 169 basic educational programs, preparatory educational programs and practical training. In this framework, two important contributions of the TESMER are; 1. To complete the deficiencies in the basic professional knowledge of the individuals who are about to enter or have recently entered the profession 2. To ensure that professionals have opportunities to improve their own qualifications The other non-formal education programs organized by TESMER are, 1. Intern Meetings 2. Training of Preparation for the Exams 3. Professional Education Studies In addition, TESMER is responsible for organizing and performing the following examinations: 1. Practical Training Examinations of Public Accountancy 2. Examinations of Public Accountancy 3. Examinations of Certified Public Accountancy 4. Examinations of Sworn-in Certified Public Accountancy TESMER has initiated and is currently carrying out the following projects, which provide important contributions to the development of the profession*: • The Project Monitoring and Information Center (PøB-MER) is established by the cooperation of TESMER and BøTAV, which is a foundation of TÜBøTAK Science Board. The purpose of PøB-MER is to improve the project ability of the chambers and local civil society organizations; to benefit from the funds for civil society organizations in a correct, scientific manner and in higher rates; and to increase the local efficiency of the chambers. PøB-MER provides information, consultancy and training services in the areas of project management, monitoring and evaluation and works as a professional service center that has the competence to manage international relations. In the framework of PøB-MER, various project bids have been prepared for the European Union Grants Program to be executed by the chambers. In later stages, PøB-MER began * www.turmob.org.tr 170 to implement PøB-“Project Management Training” for the professionals who wanted training on the areas of project preparation and execution. • The TESMER Automation System Project (TEOS) is initiated to allow the establishment of an automation system for facilitating the information sharing between all the departments and bureaus of TESMER, for meeting the software needs of the departments, and for ensuring effectiveness in the tasks conducted. • The LUCA project is the first and the only web-based central accounting system in Turkey. The LUCA Project is initiated for all certified public accountants in Turkey to overcome the economic and social difficulties easily in their professional lives, and practice their profession more efficiently in the future. With the LUCA project, TÜRMOB intends to unite professionals under shared software by using advanced technology in national and international platforms, which can generate the appropriate reports in accordance with the standard reporting system. With this project, all members of the profession in Turkey are intended to access all the information relating to the profession fast and from anywhere, and thus, save time; work in an environment where the security and reliability are ensured, and generate more business solutions regardless of the location. For the system to be the central, changes in legislation or software updates are reflected to all users simultaneously and free, thus apart from the time saving, serious cost savings for the members are achieved. The LUCA Project provides the financial report outputs which are in accordance with the international standards (IFRS) and have the same meanings in each country where they are received and electronic data transfer to public institutions are conducted. 5. Turkish Accounting Standards Board (TMSK) Another effort in Turkey to develop an understanding of social responsibility in the accounting profession can be seen in the Turkish Accounting Standards Board (TMSK), which was established in 2002 under the Ministry of Finance*. The Board was established to ensure the development and adoption of national accounting principles for financial statements, so that they would reflect the actual situation, are reliable, comparable, appropriate for the needs, understandable and consistent. Moreover, the Board would determine and issue the national accounting standards which will be * Turkey Legal Newspaper No: 24726, 04.14.2002 171 applied in ways to serve the public interest. The tasks of the Board are determined as following: a) To determine the Conceptual Framework and prepare the Turkish Accounting Standards Drafts, open them to public scrutiny and establish accounting standards on the basis of these works. b) To determine Turkish Accounting Standards, which ensure the production of financial information that is accurate, reliable, comparable, appropriate for the needs, understandable and consistent. c) To make necessary efforts that the standards are updated to meet the changing needs. d) To make necessary efforts to ensure that the national accounting standards are in accordance with the internationally accepted accounting principles, and with the codes of best accounting practices, thereby, ensure the international compatibility of financial information. e) To ensure the comments of accounting interest groups are heard, and to inform the public regularly about the process of standard formation; to take necessary precautions for the problems which may arise from the financial statements and standards in practice. f) When further clarification is necessary, to publish comments on the issues related to the application of accounting standards. g) To organize activities like meetings, conferences, symposiums and congresses for creating public awareness, and prepare and publish materials on the adoption and implementation of the national accounting standards. TMSK evaluated the past studies of TMUDESK and adopted the Turkish Accounting Standards (TAS1-TAS19), which were published by TMUDESK as drafts. Then, it began to publish accounting and financial reporting standards in accordance with the international standards. Today, there are 41 Turkish Accounting Standards and 8 Turkish Financial Reporting Standards published by TMSK. These standards ensure the of the uniformity of national accounting practices within the country, their harmonization with the international practices, and thus, provide 172 information that is comprehensible to all and is more transparent and reliable. The Turkish Accounting Standard 1 “The Presentation of the Financial Statements” states: “The emphasis in the 25th paragraph of the Conceptual Framework of Preparation and Presentation of Financial Statements is on the assumption that the users have a reasonable degree of information on the business, economic activities and accounting and evaluate this information with a reasonable effort. Therefore, how the users with these features will be affected when making economic decisions should be taken into consideration in the assessments. In this manner, the aim of this standard is the creation of correct and reliable information, which will be used by the users of the financial statements in their decision-making processes. This aim, at the same time, could be considered as a basis for the implementation of social responsibility accounting (Baúar, 2006: 219) 6. Turkish Commercial Law (TTK) One of the legal arrangements on the accounting system and its components is the Turkish Commercial Law. Turkish Commercial Law No: 6762, which is still in effect, was enacted and put into the effect in 1957. Its aim is to regulate the commercial affairs. The provisions of the TTK are generally related to the shareholders of the incorporated companies and regulate these issues (Uçma, 2005). The Law has certain provisions associated with social responsibility. For example, in the Article 75, which is about the principles of clarity and accuracy, the section regulating the Commercial Book of the Law states that: “It is necessary for the inventory books and balance sheets to be arranged as complete, clear and easily understandable according to the national currency, and the commercial principles for the related parties to have an idea about the economic and financial situation of the business as accurate as possible” (Baú et al., 1997). However the arrangements about social responsibility in the Law are very limited. In this manner, the Law does not serve the public disclosure philosophy (Sayar, 2002). On the other hand, the Law could not be updated sufficiently, while the business and economic conditions were changing rapidly. The Ministry of Justice established the “Turkish Trade Law Commission” in 1999 to resolve this deficiency and initiated efforts to arrange a new trade law. The draft of the new Turkish Commercial Law, which is still in the negotiation phase by the Turkish General Assembly, does not 173 include the corporate governance codes. Instead, it includes the institutions and provisions that establish the system, which embody main principles like fairness, accountability, transparency and responsibility (Tekinalp, 2009: 651). The balance of interests and fairness are taken into the consideration in all provisions of the draft. Transparency is provided by means of the company web sites, the general assembly in the online environment and financial statements in accordance with the Turkish Accounting standards and auditing in accordance with Turkish Auditing Standards. The new accounting and auditing environments, loyalty reports, notification obligations and the provisions relating to the enterprise communities ensure accountability, and all of these and differentiated solidarity refers the modern responsibility consciousness (Tekinalp, 2009: 652). The Draft brings international financial reporting standards and international auditing standards to the agenda by force of transparency and clarity. As mentioned in the general reasons of the Draft, financial statements based on full transparency and international accounting standards, and audit reports based on these financial statements and international auditing standards are needed for the capital and credit markets of a country to be part of the international markets, as well as necessary for a country to attract foreign capital and be competitive. In this framework, the Draft refers to the International Accounting Standards (IAS), International Financial Reporting Standards (IFRS) and Turkish Accounting Standards (TMS) and admits the Turkish Accounting Standards Board as an authority (Arıkan, 2005: 8). In the Article No: 1507 of the Draft, The Turkish Capital Market Board is stated to be an authority for determining the corporate governance codes. Collecting the arrangements on corporate governance codes under the authority of a single institution could be seen as progress, which would contribute to the efforts to prompt accountability, fairness and transparency in corporate practices and financial reporting in Turkey. Some topics of the Draft related to the corporate governance codes are as following (Kayacan, 2006: 77-78): • The board of directors has “independent members”, who do not have any relationship with the majority shareholders or founder/manager family, because of their professional knowledge and experience. 174 • All kinds of companies are required to be audited independently. Large/medium sized companies are audited by independent audit firms, whereas small companies can be audited by two certified public accountants externally. • The audit committee must be established by members who will make comments on the internal audit reports and the externally prepare financial statements and audit reports, based on their specialty and professional knowledge, and they will be responsible from these comments. • Independent audit firms and certified or sworn-in certified public accountants who regularly audit and share the results with the public according to the legislation on financial statements should be replaced after a certain period of time. • Turkish Accounting Standards Board has the task and authority of determining the accounting rules, with which the companies under the Turkish Commercial Law regulations will comply, while Capital Markets Board is given the authority to form the corporate governance codes, and thus overlapping and confusion is prevented. • The board of directors should prepare and disclose the corporate governance report annually. • All equity companies should have web sites and provide information, so that all she stockholders can have access to the financial statements. • All companies should comply with the international accounting principles. • Attorneys are allowed in the polling in General Assembly. 7. Capital Markets Board (SPK) The Capital Markets Board was founded in 1981 by the Capital Markets Law No: 2499. It is a regulatory institution, which uses its authority independently under its own responsibility, and maintains administrative and financial autonomy. It is related to the State Ministry. Main tasks of the Board are:* • To ensure that capital markets function in a reliable, clear and determined manner, • To ensure that the rights and interests of savings owners or investors are protected. * www.spk.gov.tr 175 The contributions of the Capital Market Board to social responsibility consciousness could be examined under two sections. Under the first one, the roles played and studies conducted by the Board to promote the international codes of corporate governance in Turkey are examined. In the second section, the Board publishes notifications for organizing the accounting systems of companies that operate in the capital market. Corporate Governance Codes and Arrangements Issued by the Capital Market Board The Capital Market Board carried out the most comprehensive study on corporate social responsibility in Turkey through corporate governance. This study, which attempts to increase the adoption of corporate governance especially by publicly held companies, is initiated in 2003 when the Board announced the corporate governance codes. The Corporate Governance Codes, which are based on the concepts of fairness, transparency, accountability and responsibility, aim at (Kayacan, 2006: 67): • Enforcing the shareholder rights, • Increasing the transparency of the financial reporting process, • Ensuring uniformity in accounting, • Developing sanctions and their enforcement, • Independence of the board of directors, • Strengthening the firm and bankruptcy laws, • Promoting competition, • Preventing unfair gains. The corporate governance codes are developed in accordance with the corporate governance codes of OECD. They constitute generally accepted principles and country requirements, especially for the publicly held companies. The codes include basic principles under four topics, namely stakeholders, public disclosure and transparency, interest owners and board of directors. The first section includes the principles on the rights of and equal treatment to the stakeholders. The rights of the stakeholders include the right of receiving and analyzing information, the right of participation and voting in the general assembly, the right to receive dividend and the rights of minority shareholders. This section also deals with 176 the issues related to the records about the share ownership, transfer and sale of the shares, and equal treatment to the stakeholders. The second section includes principles on the concepts of public disclosure and transparency. In this framework, the principles for companies to determine their information policy and rules toward their stakeholders, and how to make public disclosures adhering these rules are determined. Moreover, the information in the periodical financial statements and reports are standardized while taking the global changes and country requirements into the consideration. The third section deals with the interest groups. The interest group is defined as an individual, institution or interest owner who is interested in the activities and progress of the business. The interest group of the company includes the stakeholders, employers, creditors, customers, suppliers, unions, various civil society organizations, government and also the potential savings owners, who may invest in the company. The principles in this section are associated with the regulation of the relations between the companies and their interest groups. The fourth section includes the principles about the functions, tasks and responsibilities, activities, constitution and the financial rights of the board of directors, and committees and managers assisting the activities of the board of directors. The implementation of these principles is optional. However, the companies are required to explain whether they are applying the principles of the codes. If they do not apply the principles, they need to disclose the reason for this, as well the conflict of interests that may result, and their plans on this issue in the annual reports. In addition, the Capital Market Board issued the “Notification on the Principles of the Rating Activity in the Capital Market and The Rating Companies” in 2003, and regulated the activities of the credit ratings and corporate governance compliance ratings. Accordingly, the rating companies accredited by the Capital Market Board rates the associations and capital market institutions based on their compliance with the corporate governance codes. In line with these arrangements, the companies listed in the østanbul Stock Exchange are obliged to present the Corporate Governance Codes Compliance Report in their annual reports to the Capital Market Board. The minimum standards for the report are explained in the sample format prepared by the Board. 177 On the other hand, the Board announced in 2004 that to promote the corporate governance applications, a separate index would be formed in the ISE for the companies applying the corporate governance codes. In March 2005, the ISE announced that the corporate governance index would be initiated if at least five companies received 6 out of a 10-point rating score by the rating companies, and carried the necessary qualifications. After two years, this index was implemented in 2007. The Arrangements on the Accounting Standards and Independent Audit by the Capital Market Board When the Capital Market Law No: 2499 and related regulations are examined, one could encounter many arrangements related to the social responsibility of accounting. One example is the Article No: 16/A about the public disclosure (Baú et al., 1997). In addition, the Board made arrangements and published regulations for standardizing the financial statements and reports of the companies in capital market. Through these regulations, the Board placed the principle of public disclosure for the first time in Turkish law (Uçma, 2005). These notifications are*: • Notification Serial: XI, No: 1 on Principles and Rules Regarding Financial Statements and Reports in the Capital Market • Notification Serial: XI, No: 3 on Principles and Rules Regarding Interim Financial Statements in the Capital Market • Additional Notification Serial: XI, No: 5 on Principles and Rules Regarding Financial Statements and Reports in the Capital Market • Notification Serial: XI, No: 6 on Principles and Rules Regarding Financial Statements and Reports of Security Investment Trusts • Notification Serial: XI, No: 7 on Principles Regarding Account Plan and Usage of the Plan of Intermediary Institutions • Notification Serial: XI, No: 19 on Accounting Methods and Principles Regarding the Derivatives Contracts • Notification Serial: XI, No: 20 on Principles Regarding Financial Reporting in Hyperinflationary Periods * www.spk.gov.tr 178 • Notification Serial: XI, No: 21 on Methods and Principles Regarding Consolidated Financial Statements and Accounting of Ventures in Capital Markets • Notification Serial: XI, No: 29 on Principles Regarding the Financial Reporting in Capital Market Additionally, the Board determined the tasks and responsibilities, activities, general administrative principles, commission formations, personnel requirements, budget, accounting, income and expenditures of the Turkish Accounting Standards Board in a publication called the “Regulation No: 25404 on the Principles and Basis of the Works of the Turkish Accounting Standards Board” in 2004. On the other hand, the Board arranged the independent auditing in capital market with the following regulation and notification *: 3 • Regulation on Independent Auditing in the Capital Market • Notification Serial: X, No: 22 on Independent Auditing Standards in the Capital Market 8. Banking Regulation and Supervision Agency (BDDK) The corporate governance codes and concepts were initiated in the banking legislation with the enactment of the Banking Law No: 5411 in 2005. According to the Law, the structures and processes regarding the corporate governance codes and principles would be determined by the BDDK through the opinions of the Capital Market Board and Agency Associations (Article No: 22). The establishment of an autonomous supervision and regulatory institution in the banking sector in order to enhance the efficiency of the supervision and regulation was seen as a necessity and therefore, the BDDK was established in 1999 †. The Agency 3 aims at ensuring confidence and stability in the financial markets, efficiency in functioning of the credit system and protecting the rights and interests of depositors. On the other hand, the Agency set five objectives within the framework of the BDDK Strategic Plan 2006-2008. These are: 1. A confident, stable, efficient and competitive financial market * † www.spk.gov.tr www.bddk.gov.tr 179 2. An efficient and effective auditing system 3. A flexible regulatory framework 4. Transparent, fair and encouraging practices for customer rights 5. Sufficient and effective corporate governance Based on the objectives above, the arrangements of BDDK in the framework of the corporate governance and social responsibility are as follows: Regulation on the Corporate Governance Codes of the Banks*: This regulation determined the structure, process and codes regarding the corporate governance in banking sector. The concept of corporate governance codes is defined in the Regulation in the following way: “all principles, which are determined to attain the goals by the board of directors and the top management of the bank, which includes determining corporate values, ensuring management transparency, determining authorities clearly, constituting a payment system in accordance with the internal balances of the bank, using the internal audit reports efficiently and thus which ensures the banks to be managed in a more efficient and reliable manner, so that the rights of the depositors could be protected.” Compliance with the corporate governance codes is optional. Regulation on Internal Systems of the Banks† This regulation aims at determining the principles and procedures of the internal supervision (control/audit) systems and risk management systems that the banks shall establish in order to monitor and control the risks they are exposed to. In the regulation, the tasks and responsibilities related to the internal systems of the board of directors, audit committee and the top management and the requirements for the audit committee members are determined comprehensively. Regulation on the Principles and Procedures Regarding The Announcement of the Appointments to the Top Management, Swearing and Declaration of Property and Keeping the Casebook‡ * Turkey Legal Newspaper No: 26333, 11.01.2006 Turkey Legal Newspaper No: 26333, 11.01.2006 ‡ Turkey Legal Newspaper No: 26333, 11.01.2006 † 180 This regulation lists the documents to be declared to the Agency by the members of the board of directors, audit board and the bank president and assistant president. It also includes the procedures and principles in sworn statements and declarations of property, as well as in keeping the records of the decisions by board of directors, audit committee and the credit committee. Board Resolution Nr. 1918:* According to the Article 24 of the Banking Law No: 5411, the qualifications of members of the board of directors that are eligible for the audit committee are determined. Other arrangements of the BDDK on social responsibility are as following: • Regulation on the Principles of Professional Conduct to be Observed by the Members of the "Banking Regulation and Supervision Board" and by the Staff of the "Banking Regulation and Supervision Agency" (02.02.2007) • Regulation on the Human Resources of Banking Regulation and Supervision Agency (10.02.2007) • Amendment to the Regulation on the Principles and Procedures Regarding the Agency Supervision (10.03.2007) • Regulation on the Competition, Authority and Competency Examinations and the Work Principles and Procedures Regarding the Professional Staff of the "Banking Regulation and Supervision Agency" (23.03.2007) • Regulation on The Bank and Credit Cards (10.03.2007) • The Law No:5667 The Repayment of the Amounts Collected by Türkiye ømar Bankası Whose Permit to Make Banking Transactions Was Removed (30.05.2007) Additionally, the other arrangements of BDDK contributing to the development of the corporate governance and corporate social responsibility in accounting processes of banks are as following: • Regulation on Principles and Procedures Regarding the Accounting Practices and Keeping Documents in Banks*: The purpose of this regulation is to determine the bases, * Turkey Legal Newspaper No: 26221, 07.07.2006 181 principles and procedures for providing transparency and uniformity in accounting and record order of the banks, preventing their unregistered transactions, booking their activities in a sound and reliable manner in compliance with their real natures, preparing their financial statements including the information regarding their financial status on a consolidated and non-consolidated basis, financial performances and management efficiency in a timely and correct manner, and reporting and publishing thereof. The Regulation adopts the Notification Serial: 1 on the Conceptual Framework Regarding the Preparation and Presentation of Financial Statements and requires the banks to comply with the Turkish Accounting Standards. It also includes important provisions regarding the public disclosure and transparency by requiring the banks to disclose the interim and annual financial reports in their web pages and to provide the public access to these reports for five years. • Notification on the Uniform Accounts Plan and Its Explanation †: The purpose of the 1F Notification is to ensure the uniformity in the accounting and financial reporting of all banks, to ensure that the balance sheets and income statements are prepared in the same format, to acquire the necessary information for auditing and supervision directly and in a verifiable and controllable manner, to provide the authorities with direct acquisition of necessary information and other statistical information for monitoring and directing the economy, to ensure the necessary information for various analyses and comments, such as financial analysis, risk analysis and productivity analysis in a standardized way. • The Notification Serial: 17 on the Regulation of Accounting Practices‡: This notification standardizes the financial statements and their explanations and footnotes which will be announced to the public, and determines the form and content of the consolidated and unconsolidated financial statements of banks and their explanations and footnotes, and the principles for public disclosures. * Turkey Legal Newspaper No: 26333, 11.01.2006 Turkey Legal Newspaper No: 24793, 06.22.2002 ‡ Turkey Legal Newspaper No: 24793, 06.22.2002 † 182 9. The Public Financial Management and Control Law No: 5018 and Social Responsibility in the Governmental Accounting Social responsibility accounting is important not only in private sector, but also in the public sector. This is because social responsibility is a necessity for the governmental accounting as well as the private sector accounting. The first legal arrangement on the governmental accounting in Turkey was the General Accounting Law No 1050, enacted on May 26th 1927*. This Law remained in force until the enactment of The Public Financial Management and Control Law No: 5018 † in 4 2003. Over such a long period of time, it was unable to respond to the changing needs and demands, and therefore the governmental accounting could not generate the appropriate information that could satisfy the emerging needs (Karaarslan, 2004: 4849). On the other hand, The Law No: 5018, which was enacted in 2003, contributes to the social responsibility of governmental accounting by generating information in order to meet the increasing need for financial transparency. The following improvements in governmental accounting are provided by the new Law (Ertaú and Güven, 2008: 180911): 1. The new Law has brought significant changes in the governmental accounting and reporting processes. The first change relates to the bookkeeping methods. The former governmental accounting system was using cash basis of accounting, which does not record or report a variety of financial information. The new governmental accounting system uses cash basis for budgetary processes and accrual basis for activities. The second progress with the new Law is that it departs from the budget oriented accounting system and covers all financial activities of the government. As a result, all the tangible and intangible fixed assets and accumulated depreciation will be reported accurately in the financial statements with the new governmental accounting system. Third, the new governmental accounting system covers all of the public administration within the scope of general government and provides unity in accounting practices. Last, the new regulation ensures that the financial reports and statistics conform with the international accounting and reporting standards. * † Turkey Legal Newspaper No: 606, 05.26.1927 Turkey Legal Newspaper No: 25326, 12.24.2003 183 2. One of the important applications regulated in the Law No. 5028 has been the establishment of the internal control system. In the Law, internal control as a public financial management component is defined as the financial management, ex ante financial control and internal audit processes that are performed to provide that the revenues, expenses, assets and liabilities that belong to the public financial transactions and activities are performed in accordance with the aims, defined policies of the administration and with legislation. 3. The other improvement is the establishment of the Governmental Accounting Standards Board. In accordance with the article 49 of the Law, it is stipulated that the accounting and reporting standards to be implemented by the administrations within the scope of the general government, and the form, period and types of the reports to be prepared shall be determined by the Board in accordance with the international standards and by taking the opinions of concerned administrations. These changes contribute to the transparency of the governmental accounting system and ensure that (Karaarslan, 2002); • All institutions in the public sector will record and report their financial transactions according to the same accounting standards. • All possible liabilities and semi-financial activities of the government will be recorded and reported in an appropriate manner. • Public expenditures will be recorded within the periods that they belong to in order to ensure responsibility and transparency. • Financial information and reports will be published regularly. • Deviations from the assumptions and estimates, and financial risks that could arise from the potential liabilities will be reported. Additionally, the structure of the liabilities and the assets of the government will be presented regularly by preparing a balance sheet according to the standards determined by the authorities. • Information on public activities will be obtained, and more accurate evaluations and inferences could be made. 10. Contributions of the Accounting Chambers and Institutions The professional chambers established by TÜRMOB are important means for the development of the accounting profession. By the year of 2008, 80 cities have the 184 Chambers of Certified Public Accountants and 7 cities have the Chambers of Sworn-in Certified Public Accountants in the country. There are 72.727 certified public accountants and 3.840 sworn-in certified public accountants, who are registered to these chambers*. One of the important functions of these chambers is their attempt to prevent accounting profession to be performed by unauthorized persons. With this aim, the Chambers are monitoring and supervising the accountants in their region†. Another important contribution of the chambers is annually organizing the traditional Accounting Forums. The purpose of these forums is to share the views and comments on the future of the profession. Some examples where the future of the profession was discussed are the following: “Yesterday and Today of the Accounting Profession” was the first forum in 2006, “New Horizons in the Development of the Accounting Profession” was the second forum in 2007 and, “Environmental Relations of the Public Accountants in the Restructuring Process of the Profession” was the third one in 2008 ‡ 7F CONCLUSION After the observations above, the current state of social responsibility accounting in Turkey could be discussed under the following titles: Legislative Contributions The legislative construction of the accounting profession in Turkey begun with the enactment of the Law of Independent Accountancy, Certified Public Accountancy and Sworn-in Certified Public Accountancy No: 3568 in 1989. Therefore, this Law and related regulations can be considered as the most important contribution to the social responsibility accounting. When examined from the social accounting perspective, it can be seen that the social responsibility of accountants is viewed as the professionals’ basic obligations to their clients. Declared in 1990, The Regulation on the Work Method and Principles of Certified Public Accountants and Sworn-in Certified Public Accountants takes a further step and states that the accountants have responsibilities to the society and the Government. * www.turmob.org.tr www.turmob.org.tr ‡ www.turmob.org.tr † 185 The General Notification on the Accounting System Implementation Serial Number:1 declared in 1992 extends the scope of responsibility to the businesses or society members, business owners and shareholders related to the businesses directly, finance and investment institutions and various public institutions and organizations, who have any commercial, financial and economic relations with that business, and are interested in the operations and results of that business and want to receive a well-planned and reliable information. The notification views the uniformity and standardization in accounting as an important factor for fulfilling the expectations of these related parties. Social responsibility refers to being accurate, impartial and honest in creating and communicating the financial information. This legislative structure provides social responsibility with a legal basis from the aspect of related parties. It develops the profession and social responsibility consciousness of the accountants by providing the accounting profession with a legal framework. In addition, the establishment of the chambers and the union of accountants, which is stipulated in the Law, can be seen as an important contribution to the development of social responsibility consciousness in the accounting profession. Although it does not include generating and communicating social information or related contemporary social accounting issues among the responsibilities of accounting, it serves the social responsibility accounting indirectly, by ensuring uniformity in the accounting. When another legislative body namely Turkish Commercial Law No: 6762 is examined, it can be seen that the arrangements on social responsibility are very limited. However, the draft of the new Turkish Commercial Law, which is still in the negotiation phase in the Turkish General Assembly, includes institutions and provisions of a system that materializes the main principles of corporate governance philosophy, such as fairness, accountability, transparency and responsibility. The new accounting and auditing environment, loyalty reports, notification obligations and provisions relating to enterprise communities ensure the accountability. All of these and differentiated solidarity refers to modern responsibility consciousness. Professional Contributions One of the authoritative bodies for the development of social responsibility accounting is the Union of Certified Public Accountants and Sworn-in Certified Public Accountants of Turkey, which is founded in 1990. Its purpose is to develop the profession and the 186 norms regarding the implementation of the profession, to contribute to the development of the professional training in cooperation with the training and public institutions. Until now, TURMOB made several contributions to the social responsibility of accountants. One of the most important contributions is its efforts to develop accounting standards in accordance with the international standards. With this aim, TURMOB established the Turkish Board of Accounting and Auditing Standards (TMUDESK) in 1994. Other important arrangement of TÜRMOB to improve the social responsibility consciousness of accountants can be seen in the “Regulation on the Ethical Principles Complied by the Certified Public Accountants and Sworn-in Certified Public Accountants in Their Professional Practices”. Its efforts to establish the Basic Training and Practical Training Foundation (TESMER) in 1993 have also contributed social responsibility development in accounting by providing more qualified professionals. However, any direct arrangement or publication on social responsibility accounting has not been observed throughout this study. In addition, the professional chambers established by TÜRMOB are important means of the development of the accounting profession and social responsibility of accounting professionals. Because one of the most important tools for improving the social responsibility of accounting is education, the activities of TESMER are also useful in terms of contributing to the social responsibility accounting. The training activities and projects such as The Project Monitoring and Information Center (PøBMER), the TESMER Automation System Project, and especially the LUCA project of TESMER have provided significant progress for the profession in recent years. Another important authority of accounting profession in Turkey is the Turkish Accounting Standards Board (TMSK), which was established in 2002. TMSK evaluated the past studies of TMUDESK and adopted the Turkish Accounting Standards (TAS1-TAS19) published by TMUDESK as drafts. Then, it began to publish accounting and financial reporting standards in accordance with the international standards. Thus, further steps towards social responsibility accounting were taken. If the contributions by professional bodies, namely TURMOB, TMUDESK which were later replaced by TMSK, TESMER and TMSK, to social responsibility accounting are summarized, it could be said that these bodies provide the accounting profession with rapid and substantial improvements in practical, theoretical, ethical and professional 187 bases of the accounting. These improvements provide a foundation upon which social responsibility accounting can be built effectively. The Regulation Boards Two important regulatory bodies in Turkey are the Capital Markets Board (SPK) and the Banking Regulation and Supervision Agency (BDDK), which are regulating the capital markets and the banking sector, respectively. The Capital Markets Board can be said to make major contributions to the social responsibility accounting in Turkey, for it introduced the Corporate Governance Codes, which included social responsibility of the corporations and required companies in the capital markets to present the Corporate Governance Codes Compliance Report in their annual reports. These initiatives can be seen as direct introduction to the social responsibility accounting in Turkey. On the other hand BDDK, which is an autonomous supervision and regulatory institution in the banking sector, followed the SPK and introduced the Corporate Governance Codes for the banking sector. Like the codes of SPK, corporate governance codes of BDDK provided banks a framework for the social responsibility accounting. Although codes of both bodies do not determine social responsibility activities directly, they provide the banks, corporations and the other companies in Turkey with social responsibility accounting consciousness and with a framework for reporting the social and environmental activities. The Governmental Accounting The social responsibility accounting gains importance in the public sector for it is seen as a necessity for governmental accounting as well as private sector accounting. In this manner, there have been substantial improvements in the governmental accounting in recent years. Enactment of the Public Financial Management and Control Law No: 5018 can be seen as an important contribution to the social responsibility of governmental accounting by generating information that would meet the needs and increase financial transparency. 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Smith, G.S. (2007) “Maurice Stans’ Views on Social Responsibility in the Accounting Profession”, Accounting Historians Journal, 34 (1): 147-172. Uçma, T. (2005) “Türk Muhasebe Hukukunu Oluúturan Düzenlemeler ve Türkiye’de Uluslararası Muhasebe Standartlarına Uyum Çalıúmaları”, Mevzuat Dergisi, Sayı 89, http://www.mevzuatdergisi.com/ Tekinalp, Ü. (2011) “Türk Ticaret Kanunu Tasarısının Kurumsal Yönetim Felsefesine Yaklaúımı” http://www.tkyd.org/files/downloads/unal_tekinalp_makale.pdf 31.01.09 3568 Sayılı Serbest Muhasebeci Mali Müúavirlik ve Yeminli Mali Müúavirlik Kanunu 1 Seri No'lu Muhasebe Sistemi Uygulama Genel Tebli÷i 190 www.turmob.org.tr http://turmob.org.tr/tmudesk/tmudesk.html www.spk.gov.tr 191 192 CHAPTER 9 LINKING ETHICS INTO MANUFACTURING PROCESS THROUGH TOTAL QUALITY MANAGEMENT (TQM)* Assist. Prof. Mine Omurgonulsen Hacettepe University, Turkey, e-mail: mergun@hacettepe.edu.tr Prof. Dr. Mahmut Arslan Hacettepe University, Turkey, e-mail: marslan@hacettepe.edu.tr INTRODUCTION The philosophy of the 1960-1970s of “whatever being produced can be sold in the marketplace” is no more valid today. That is to say, due to the severe competition and diversified customer needs in today’s business, customers no longer tolerate poor quality products. There are some important reasons behind poor quality products. Inadequate design and production processes lead to defective and sometimes unsafe and hazardous products, which could lead to product liability, insurance difficulties and increased regulatory activities (Helms, 1992:35). However, the results of supplying poor quality products to the marketplace is more crucial in a sense that these products not only damage the firm’s reputation, but also help to take attention to the consideration of ethical values in manufacturing process (Omurgonulsen, 2007a: 62). This fact is even more vital for the firms operating in sectors that are directly associated with health, safety and hygiene. If * An earlier version of this chapter was orally presented at Professional Ethics Congress, Antalya, Turkey, Oct. 17-19, 2008 and its abstract was published in the proceedings book. 193 a firm is operating in a sector that is directly linked with these, then it has to give more emphasis to standards and ethical values in production. This chapter examines this crucial, but most of the time missing, linkage between quality and ethics. Within this framework, the concepts of “Quality” and “Total Quality Management” (TQM) and are discussed first. The remainder of this chapter is dedicated the to association of ethical theories with TQM, to linking ethics into manufacturing with specific reference to TQM-ethics interface and to what managers have to do with ethics for TQM. Within this framework, a food and beverage producing non-profit governmental organization called “Ataturk Forest Farm (A.F.F.)” is to be examined in regards to its meeting ethical standards in production as an in-depth and longitudinal case-based analysis. The discussion, managerial implications and directions for the future research conclude the chapter. 1. The concepts of “Quality” and “Total Quality Management” Quality is defined in terms of the degree of the product’s conformance to its requirements to sustain customer satisfaction and in terms of a product that contains no defects (Juran, 1988: 22). The customer-based approach of quality focuses on satisfying the customer, while the manufacturing-based definitions evaluate quality as conformance to specifications (Garvin, 1984: 26). When quality is defined in a traditional way like this, the big and complete picture of the whole system is ignored most of the time. That is to say, organizations should also take into consideration the principles of TQM along with integrating quality performance targets with a social responsibility strategy, which is the key for world class manufacturing and excellence (Gentili et al., 2003: 239). Thus, creating an ethical climate within the organization is also vital for fulfilling this aim. Among the quality definitions, there also exists the definition of quality as eliminating waste and doing it right the first time (Tamimi and Sebastianelli, 1996: 34), which also addresses the common denominator of the concepts of quality and ethics. Therefore, it would not be wrong to say that quality and ethics are two similar concepts that share the same perspective in a way of sustaining customer satisfaction by producing goods and services in a right way at the first time they are produced, doing the right things right. In a study dealing with the ethical implications of quality, the “right way” is referred as the most effective, most efficient, lowest cost, fastest highest value approach to produce the 194 right outcome the first and every time (Pace, 2007), where quality cost measurement is a good indicator of quality performance in this respect (Omurgonulsen, 2007b). Total Quality Management, by the same token, is a name given to all systematic efforts in an organization taken towards sustaining quality, representing a philosophy together with implementation. Customer satisfaction, continuous improvement and employee involvement are central to the philosophy of TQM (Russell and Taylor, 2003: 623). Likewise, education and training of the employees is an important ingredient of a TQM program. However, one of the difficulties in the implementation of TQM is that the employees are expected to know their processes absolutely and work in accordance within the control limits, as well as being creative and independent. It is argued that this contradiction can be overcome by using enforced self-regulation model that aims ethics indirectly and the standards that regulate professional behaviour are the ethics of the profession (Arav, 2007: 6), which directly addresses empowerment. Empowering the employees and turning them into professionals responsible for the outcomes of the company will lead to ethical quality culture, which enable the people to achieve selfsatisfaction and a professional pride that together lead to professional and quality behaviour (Arav, 2007: 6). This study is an attempt to show an ethical ground can be formed through the use of TQM. To be successful in the implementation of TQM, an organization must concentrate on some key elements such as ethics, integrity, trust, training, teamwork, leadership and communication (Wicks, 2001: 502). To the extent that products are in accordance with the standards, it is more likely that there will be trust created towards company products (Nayebpour and Koehn, 2003: 39), which is an important determinant in forming customer loyalty that is a direct result of a positive post-purchase behaviour and customer satisfaction. That is to say, integrating quality efforts with ethics and the stakeholders’ needs would mean to strengthen the company’s position in the marketplace. 2. How are Ethical Theories associated with Quality and TQM After defining ethics, it would be easier to explain how ethical theories match with TQM. In another words, the same ground of ethics and TQM is to be analyzed. At this point, it is worth mentioning that there has been a consensus in the literature that among the values that make up an organization’s culture, ethical values are considered the most important, where ethics is defined as the code of moral principles and values that 195 governs the behaviours of a person or a group with respect to what is right or wrong (Daft, 1995: 342). Modern Western business ethics is based on the stakeholder theory. Stakeholders are a group of people who can affect or can be affected by activities or decisions of a business firm. Stakeholder theory suggests that managers of firms have obligations to some group of stakeholders. Stakeholder groups are: • Employees • Customers • Stockholders • Trade unions • Suppliers • Competitors • Creditors • Government • Political groups (Freeman, 1997). The stakeholder approach can be vital for the production process. As an example, poor quality products directly coincide with ethical theories. One of the intersection points is product liability. Product liability costs are from one of the external failure costs* of quality costs, which are defined as company-paid costs due to liability claims, including the cost of product or service liability insurance. Whereas the other external quality cost element is recall cost, which includes the cost of recall activity due to quality problems (Campanella, 1999: 203). The following ethical theories clarify the point. Utilitarianism/Teleological Theory: What is important or emphasised in this theory is the outcome of the individual actions and in the final analysis, the aim is to maximize the satisfaction of the organization’s stakeholders (Helms, 1992: 37). This theory can also be referred to as social cost/benefit analysis. A good example of the applied version of this theory is the miscalculation of Ford in manufacturing a sub-compact (small) car * External failure costs are the costs incurred as a result of correcting the products produced that do not conform standards or specifications after delivery to the customer (Campanella, 1999, p. 155). 196 called Pinto with a serious defect in its gas thank in 1970 due to incorrect production and design problems. It was unfortunately too late, when 900 burn deaths occurred. Ford did not have the ability to return the injured or killed back to their original state; therefore the act should have been considered unethical (Helms, 1992: 39). By the same token, General Motors made the same mistake with respect to the introduction of Chevrolet Corvair in 1959. Due to the defective and hazardous design, the introduction of this car to the marketplace was unethical, placing the people who use this car in a harmful and life-threatening position. The probable result of such an action would be to recall the product from market, which would also mean that the firm will suffer from high quality costs. It is especially at this point, where the firms should be aware of the fact that their costs would be higher, which also lead them to be forgotten in the marketplace due to being incompatible and their poor image, unless they care about ethical values in production. Another major characteristic of utilitarian approach is that “it emphasizes achieving the greatest good for the greatest number of people irrespective of the means used giving the books on best seller lists preferred by majority of readers even though few would agree that they represent the highest quality or most ethically desirable literature available” (Petrick and Manning, 1993: 16). Universalism/Deontological Theory has two basic premises, the first of which is to act in a way that would want all others to act, faced with the same of circumstances. The second one is always to treat other people with dignity and respect (Helms, 1992: 38). This approach also focuses on doing the right thing and honouring contracts at all costs (Petrick and Manning, 1993: 16); which means the action will not be undertaken by the company as long as the action is not in favour of its stakeholders, though it contributes company’s profitability. This is also the major deviation of Deontological Theory from Utilitarian Theory. Within the framework of Deontological Theory, unethical product quality means a liability to internal stakeholders, such as owners, managers, employees, other products, company goodwill and reputation and external stakeholders such as customers, suppliers, distributors, competitors and the target market (Helms, 1992: 45). The ideal combination will be, without doubt, satisfaction of all the stakeholders simultaneously. Therefore, it is critical for any firm to analyse whether any right of the stakeholder is being violated. Meeting ethical standards in the production process should be one of the 197 core organizational values of any given firm. Otherwise, the organization’s image would be damaged to a great extent, which then will be highly difficult to rebuild. In this respect, Robert Bosch’s striking words can be referred: “Lieber Geld verlieren als Vertrauen (I prefer to lose money instead of losing trust).” (Simon, 2005: 103) The conclusion of this thinking is that the employees know that they should behave in accordance with the ethical values, where these ethical values should be one of the core values of them so that the product is of good quality and meets or exceeds the customer expectations. After discussing Utilitarian versus Deontological Theory, the next section discusses how to combine ethics with manufacturing to draw attention to production ethics* with giving special emphasis on TQM-ethics interface. 3. Linking ethics into manufacturing with specific reference to TQM-ethics interface It has been pointed out in the literature that of all the management functions, operations management has been the least discussed in relation to ethical issues (Stainer and Stainer, 1995: 3). Although the research in the fields of quality management and business ethics have been separated with each other due to stemming from different origins, the former from management studies and the latter from philosophy, the present developments in both fields show that there is a strong need to combine them with each other (Fisscher and Nijhof, 2005: 150). That is because quality cannot be managed successfully without an explicit focus on moral values and ethical behaviour in a business environment assumes full quality control to answer moral questions (Fisscher and Nijhof, 2005: 158). Therefore, it would not be wrong to say that although there is a lack of emphasis given to TQM-ethics interface, they are mutually and strongly dependent on each other. Although there is a lack of research with respect to interface of manufacturing with the other business functions, like the interface of manufacturing and marketing (see Omurgonulsen and Surucu 2008), these kinds of interdisciplinary studies have recently gained much importance due to the increasing amount of research in this field. Likewise, the manufacturing-ethics linkage is also critical not only because this linkage would help business functions to work in harmony with each other to be successful, but * This term is also used in relevant literature (see Mceachern and Schröder, 2002). 198 also due to the importance to point out this, often times, missing linkage. This approach is also called a new paradigm in literature, which stresses the importance of interdisciplinary work for success to solve dysfunctional conflict (Petrick and Manning, 1993: 17). Therefore, the purpose of this chapter is to shed light on this missing interface between manufacturing and ethics through the use of the principles of Total Quality Management in one of the crucial sectors for health, namely the food and beverage manufacturing industry. Keogh, Atkins and Dalrmple’s (1998) study represents one of the few studies, which focuses on the missing human resource factor in the manufacturing process, showing that workforce participation to TQM in the form of education and training is vital for TQM to be successful* Therefore, it is once again evident that all the business functions are strongly interrelated with each other, necessitating a harmony especially between human resources and manufacturing, just as the relation between ethics and manufacturing. Lessons learned from Baldrige Award-winning companies also demonstrated that it is vital for firms to understand the role of human resources (HR) function in implementing TQM, such as to what extent the HR function is designed for continuous learning and improvement (Blackburn and Rosen, 1993: 63). Schoengrund argues that, when going back 2000 years to Aristotle’s writing, which dominated Western philosophy, he shows that it is necessary to understand material, temporal and functional properties of phenomena before making judgement on quality (Schoengrund, 1996: 82). According to him, it is possible to measure the single example’s goodness, but always against the entire species’ greatest potential. This way of thinking is found to be in parallel with what is today referred as “benchmarking†”, to compare your company with the best manufacturer in its class, from which another evidence of the same ground of ethics and TQM can be followed. * It has also been pointed out in this study that, when the workforce has been involved into manufacturing process through a quality cost improvement program, the result was an overall improved quality performance along with the shift in quality costs from failure category to prevention (Keogh, Atkins and Dalrymple, 1998, p. 144). This is because the investment is made before the defect happens, like quality improvement programs, quality training and quality certification costs. † Benchmarking is the process of comparing and measuring an organization’s operations or its internal processes against those of a best-in-class performer from inside or outside its industry (Goetsch and Davis, 2001, p. 215). 199 As Schoengrund has pointed out, the quality of graduates of a school can be judged according to how well an employing organization functions in an individual and social improvement process. Such a process includes actualisation of ethical, technical and intellectual qualities- all of which are necessary for the well-being of employees, clients and society (Schoengrund, 1996: 88). Good managers understand human nature and construct learning organizations based on natural intrinsic human capacities and devise policies and strategies to facilitate individual creativity and organizational growth. In such environments, people become self-motivated, creative and productive in the service of personal, group and societal improvement (Schoengrund, 1996: 89). Total quality management should not be considered alone as a miracle for solving the problems of the firms. Yet one should cautiously remember from the contingency approach that everything depends on a given situation indicating that there is no unique solution and problem at hand should be thought within its own circumstance. In other words, the most appropriate structure for an organization is the one that best fits the particular organization, depending on variables such as size, technology and environment (Lawton and Rose, 1994: 54). Therefore, it is also not wrong to say that research designs and methods, management policy, quality improvement strategies and institutional practice must always be preceded by rational and ethical judgement as to what kind and scale of problem is at hand (Schoengrund, 1996: 90). There is also considerable literature that strongly discuss the need to bring together the concept of the morally good and the competitively effective, which directly address the need to combine TQM with ethics and criticizes ethics research just for focusing on the morally good (see Liedtka, 1998: 254). This study attempts to draw attention to a moral progress in the form of a new ethic of business perspective whose aim is to create a community in which people are able to think, speak and act freely within the guidelines of civility. In this respect, it is challenging to observe one of the principles of this new ethic business perspective, self-care, as defined in the way of a combination of challenge and support, besides setting priorities and limits, just like the basic elements of teamwork, strategic planning and employee involvement and empowerment defined within TQM. It has also been mentioned in the same study that a morally good organization thinks carefully in designing its information systems, job scope, training programs and procedures, and involves employees in relevant decision making so that the new ethic is grounded on the premise that the work itself has an intrinsic value 200 something worthwhile and it is impossible to separate the product or a service from the goodness of the people and firms that produce them (Liedtka, 1998: 264). Another important conclusion drawn from Liedtka is that in a community with a strong moral foundation in the form of respecting each other’s capacity to grow, recognizing each member’s responsibility to help those within their reach to develop their abilities, engaging an agreement in an honest dialogue with each other will also serve for competitive success in the marketplace (Liedtka, 1998: 265) and being competitively effective is achieved through cost reduction due to high product quality, low scrap and returned goods (Sciarelli, 2002: 1145). An organization that has a negative ethical impact will inevitably result in a bad reputation and the withdrawal of the market for its products (Vinten, 1998: 89). It is exactly at this point that the missing piece in the puzzle has been found. It has been shown in the literature that the only guaranteed way to ensure ethical considerations is the adoption of total quality management practices so that the ethical aspects are able to be internalized and become an important part of the organizational tissue. Yet, the quality movement’s emphasis on ethical considerations still remains a question mark. Different from Liedtka’s study, which criticizes ethics research having a narrow focus, Vinten’s study points out the lack of emphasis that is being given to ethics by TQM (Vinten, 1998: 94). In a study dealing with ethical dimensions of total quality management, four main intersection areas of quality and ethics have been strongly emphasized (Gentili et al., 2003: 241): - Values – are the core beliefs and moral principles that shape the organization’s culture, where managers should work to establish an environment, in which values lead to ethical behaviour and best performance simultaneously. - Trust – is the expectation of ethically justifiable behaviour, which is crucial for communication, interpersonal relations and conflict management. - Empowerment – is the employee involvement that matters, where employees take the sense of ownership of their jobs, enter into decision-making process take risks to make improvements and speak out when they disagree (Goetsch and Davis, 2001: 53). - Responsibility – management is responsible for every decision and action it has, just like everybody’s being responsible for quality in TQM. 201 One of the most important need to combine ethics with quality is the responsibility discussed in quality management being associated with organizational responsibility of employees, while business ethics’ responsibility is more concerned with professional, relational and social responsibility (Fisscher and Nijhof, 2005: 156). The emphasis given to organizational and social responsibility in TQM is the need to translate the strategy into action and the need to recognize the impact on the society of whatever is being done. In the same study, it has been strongly criticized that relational responsibility is missing in TQM which is based on the values, considerations, communication and behaviour of individuals and the incorporation of this kind of responsibility into quality programmes is considered as an important step in the development of quality management (Fisscher and Nijhof, 2005: 158). Therefore, for an organization to be successful, it is a prerequisite that the organization has a dynamic interaction with its environment and takes all the stakeholders’ (customers, investors and employees) needs into consideration. It is also worth mentioning 4S for quality-ethics interface as “satisfaction” of stakeholders needs, “safety” of products/services and processes, “social acceptability” of the company and “sustainability” of its activities (Gentili et al., 2003: 241). Along with these, provision of information with transparency and no misrepresentation, sustainability of the resources used, impact on the environment, safe materials for a safe product in use and storage and integrity and honesty to contribute towards good reputation and image do all matter for this important interface and all coincide with ethical issues in production. Ethics, therefore, can help foster a quality culture, where employees are encouraged to think, speak up and improve the key processes (Gentili et al., 2003: 242). This strategy, in the end, will inevitably help the firms to have a good reputation together with being able to compete in the marketplace, as well as a ladder to world-class manufacturing. For the firms that understand that ethics go hand in hand with TQM, there is a potential to have reductions in their costs, to remain competitive and to have a good reputation in the marketplace simultaneously.* * In line with this thinking, it has also been stated in the literature that poor quality can be cured through heavy doses of trust, communication and education, which are all ingredients of an overall prescription for total quality management based on ethical business behaviour (Riaborn and Payne, 1996: 971). 202 Although TQM fosters an ethical climate, there are some blind points to be mentioned where TQM does not automatically result in ethical behaviour (Nayebpour and Koehn, 2003: 41). Some crucial examples can be given as whether the product is within the ethical standards depends upon the ultimate goodwill of the people using them such as guns, just concentrating on quantifying issues and ignoring ethical issues that are qualitative (Nayebpour and Koehn, 2003: 42). It should be kept in mind that what the customer wants may not be always right. Another good example from the same study is a glue producing firm whose process is statistically under control, but the end users of the product are young people, who are using glue as a drug. In this case, the firm has to take its responsibility under consideration to combat this abuse if it really cares about ethics. In another study, it has been argued that customer satisfaction should not be sacrificed at the expense of employee satisfaction, which represents a threat for TQM by ignoring crucial ethical issues and the human issues (soft side) of business operations should be as obvious of a part of TQM as the operational issues (hard side) (Svensson and Wood, 2005: 146). The next section of the chapter is devoted to the managerial implications of ethics for managers and business operations. 4. What do managers got to do with ethics for TQM Poor quality is considered not only as totally unethical, but also as an unwise business practice, as it produces the consequences of the wrong thing or the failure to do the right thing. An example of a brand new cellular phone’s delivery on time without functioning can be given for the case of wrong thing and to buy the functioning phone with a high price due to inefficiency of the market is an example of getting the right thing in a wrong way (Pace, 2007). Quality is found to be the most important strategic priority not only for customers, but also for the producers as indicated by the results of the studies conducted in European and Turkish manufacturing industries (Stainer and Stainer, 1995: 8; Ulusoy et al., 2007; Omurgonulsen and Surucu, 2008: 53). In the study conducted in Europe, 61 % of the organizations in the UK, 58.1 % of the organizations in France and 64 % of the organizations in Germany have been found to have an ethical corporate culture and statements or codes of ethics (Stainer and Stainer, 1995: 9), showing that most of Western culture had already combined quality and ethics as a part of the operations management culture. 203 The modern customer oriented way of business exists in the Turkish Ahi tradition. An Ahi saying can still be seen on the walls of many Turkish shops in Anatolia: “A customer is our benefactor”. (Müúteri velinimetinimizdir.) Ahi ethic also includes the modern concept of total quality management (TQM). Customer orientation and high quality requirements in Ahi organizations are very similar to modern TQM (Arslan, 2008). Ahi tradition is also known to be an important motivation tool in enhancing the quality of the goods and services among manufacturers and artisans in Turkey (Karagullu, 2008: 1) Ethics for TQM certainly has implications for business. Firstly, companies would like to have minimum acceptability for their products to be able to sell their products (Julliard, 2004: 122). That is to say, taking ethics into consideration during the manufacturing process would also mean that the firms have acceptable products at the end. Otherwise, it will be an economic disaster for them that can result in bankruptcy. Secondly, there is a strong need for companies for an ethical framework in the technology they are using. A good example of this fact is Shell’s decision not to dump the platform into the sea due to social pressure, even though it was legally allowed to do so (Julliard, 2004, p.123). Above all, it is top management’s responsibility to establish a system that enables ethical decision-making by the employees, just as its responsibility to carry out the activities associated with TQM as being the leader of all these efforts companywide. In a study which investigates the consequences of quality culture and ethical values in Turkey is worth mentioning at this point in a sense that the success of the quality improvement program depends on management’s dedication on ethical excellence, where corporate ethical values serve as the guidelines upon managers make decisions based on honesty, integrity, confidence and trust (Elci et al., 2007: 298). Another implication of ethics for managers is to encourage the development of written codes of ethics and to train employees about ethical issues, which might increase employee’s commitment towards ethics (Elci et al., 2007: 298). International standards provide technological, economic and societal benefits, where for businesses, the widespread adoption of these standards means that suppliers can develop and offer products and services meeting specifications that have wide international acceptance in their sectors (http://www.iso.org/iso/about/discovers-iso_who-standardsbenefits.htm). Therefore, businesses using International Standards can compete in many more markets around the world. It has been suggested in the literature that it is possible 204 to extend this ISO system to ethical standards and values (Julliard, 2004: 133). Quality certification costs, costs incurred to obtain certificates like ISO 9000 and ISO 14000 (Simga-Mugan and Erel, 2000: 228), are also considered to lie at the quality-ethics interface by ensuring quality so that the competitors could not take advantage of lower costs associated with unethical behaviour (Sciarelli, 2002: 1148). After discussing the TQM-ethics interface and the managerial implications of this interface, a case study from the food beverage industry is to be illustrated as a case study. 5. A case study from food and beverage industry The food manufacturing industry is one of the crucial industries that one has to take special attention with respect to TQM-ethics interface, as it is directly related with health. In cases where customers confront defective products in the food and beverage manufacturing industry and situations like food poisoning, illness or death occur, these circumstances would be something impossible to provide compensation. Therefore, the food industry and Ataturk Forest Farm (A.F.F.) are not randomly chosen in a sense that both the industry and the firm are considered to represent the vitality of taking ethics into consideration during manufacturing process. 5.1. Ataturk Forest Farm (A.F.F.) Ataturk Forest Farm (A.F.F.) was founded by Mustafa Kemal Ataturk, the founder of the Turkish nation, in 1925 in Ankara (http://www.aoc.gov.tr/tarihce.html) with the idea of forming first modern agricultural farm. Its was established with the mission of being a leader and role model to Turkish farmers in the application of modern agricultural and administrative techniques, to supply cheap, hygenic and good quality food products to the public of Ankara and planting around city of Ankara (TBMM Alt Komisyon Raporu, 2000). A.F.F. has a wide range of products like dairy, wine, fruit juice, honey and other agricultural products. It is a governmental organization, which is affiliated with a governmental ministry. The expenses of the organization are covered by its own revenues. That is why this organization is not a typical state-owned economic enterprise whose losses are not paid by Treasury in the form of duty loss (Timur et al., 2002: 28). A distinctive feature of A.F.F. is that its corporate culture strongly supports ethics, as it is also a non-profit firm founded in Ataturk’s period. Along with this feature, from the date of its foundation it emphasizes quality, thereby creating trust towards A.F.F. 205 products throughout Ankara and neighbouring provinces. In this respect, it is not a randomly chosen organization for this study either, because the authors of the study are familiar with this organization. One of the authors conducted a reorganization and determining standard positions project in 2002 (see Timur et al., 2002) and the other author conducted a quality cost measurement project in A.F.F. in 2005 (Omurgonulsen et al., 2006). This is deep and longitudinal research, comprised of structured interviews with approximately 1/4 of the 500 employees, including quality manager and personnel. 5.2. The quality policy of A.F.F. and how is ethics integrated into manufacturing in A.F.F. Quality is defined as the economic way of producing a product or service within the firm. To find the deviations in quality, statistical process control and total quality management are used. The incoming inspection and test, in-process inspection and test and final inspection and test are all being done, showing that the quality level is checked during every phase of manufacturing process. The average defect rate of the final product is around 3-5 %. The year 2003 was a striking year for A.F.F., as the quality movement in this year reached a considerable pace, especially in the Wine and Fruit Juice Factory of A.F.F. The ratio of quality costs to total manufacturing costs for the year 2003 for the factory was found to be 5 %, indicating that quality costs did not represent an important portion of the total costs. The reason for this circumstance, as explained by the quality manager, was the efficient use of workforce in the factory (23 employees in the year 2003), that is to say, to be able to complete a lot of work with a limited number of employees and to have free technological support from the dairy factory of A.F.F. Therefore, the Wine and Fruit Juice Factory of A.F.F. can be given as an example of being small and efficient simultaneously. In the year 2003, the wine of A.F.F. was also among one of the most qualified wines of Turkey (http://arama.hurriyet.com.tr/arsivnews.aspx?id=173477). According to the information taken from an in-dept interview with the quality manager of the Wine and Fruit Juice Factory of A.F.F., since the year 2005, TS-EN-ISO 90012000 standards along with HACCP (Hazard Analysis and Critical Control Points) have been used in all of the manufacturing departments of A.F.F. (Guldas, 2005: 2). The wine and fruit juice factory of A.F.F. has an independent quality department and the focus of the quality management program is customer satisfaction with the purpose of 206 increasing profitability. In the focus of customer satisfaction, there lies the accountability of A.F.F. to its customers, which is thought to represent the ethical dimension of TQM in A.F.F. The employees are given responsibility to sustain the target quality. Table 1. The Quality Cost Elements in Wine and Fruit Juice Factory of A.F.F. for the Year 2005. Turkish Lira (%) Prevention Costs 32.750 40,8 Appraisal Costs 17.000 21,2 Internal Failure Costs 15.227 19,0 External Failure Costs 15.227 19,0 Total Costs of Quality 80.204 100,0 Source: Omurgonulsen et al., 2006. The quality cost measurement project conducted in Wine and Fruit Juice Factory of A.F.F. in 2005 indicates that 40 % of the quality costs are prevention costs. This figure is in line with the philosophy of “getting the right things at the first time they are produced”, which means that the emphasis is given to prevent the defects long before they occur such as the quality review and verification of design, calibration and maintenance of quality measurement and test equipment, quality improvement programs and quality certification costs, which are all available in wine and fruit juice factory of A.F.F. A.F.F., from the date of its foundation, has been known as an organization giving emphasis to ethics, as the logic of the foundation principle was to be a representative farm to the Turkish economy. Therefore, it should not be surprising that Turkish society has trust towards A.F.F. products like its dairy products and ice-cream. Therefore, the foundation based on ethics, by itself, is the first step of foundation of the ethical culture. One of the most important characteristics of A.F.F. is that it is an historical and cultural heritage, as it is one of the symbols of the foundation of Turkish Republic. In this 207 context, when the values of the organization on the date of its foundation are analyzed, it can be clearly seen that these values represent a revolution in a period of uncertainty and the lack of planning in the first years of the foundation of the Republic. With the foundation of A.F.F., there was a transformation of hopelessness into trust, faith into logic, traditions into science and technology, traditional ways of life into a contemporaneous civilization state, environmental recklessness into environmental consciousness; all of which represent the core values of the organization (http://www.peyzajmimoda.org.tr/genel/bizden_detay.php?kod=364&tipi=2&sube=). When A.F.F. is examined with respect to the main areas of TQM-ethics interface, it is seen that the organization has values that are directly related with ethics. Therefore, the trust created towards A.F.F. products can be regarded as a result of A.F.F.’s taking ethical principles into consideration during manufacturing process. In this context, yogurts of A.F.F. are less durable, but healthier than other yogurt brands in the sector, as A.F.F. does not use any artificial additives in the production process. It is also not wrong to conclude that the ethical practice of A.F.F. is undertaken in a deontological way. That is to say, all the stakeholders’ needs are taken into consideration with a clear emphasis given to production ethics. CONCLUSION Producing low quality products due to lack of ethical standards in production process may seriously affect the image of the company. Therefore, an ethical production process through TQM can be a good remedy for preventing defective production and its negative consequences. TQM is built on a foundation of ethics, integrity and trust, as it fosters openness, fairness and sincerity and allows involvement by everyone. This is the key to emphasize the ultimate potential of TQM, where ethics moves together with the TQM. The reason for analyzing TQM-ethics interface in the food industry and mainly in A.F.F. is to show this relation is even more critical in a sector involved with health. A.F.F. is also a special enterprise in this respect not only by being Ataturk’s heritage to the Turkish society, but also by having ethical values from the date of its foundation in 1925. 208 Apart from the foundation principles, from the quality cost measurement project and the reorganization project of A.F.F., it can be concluded that the way the TQM activities implemented are totally ethical. This is also evident from the fact that the majority of the quality costs are prevention costs that aim to prevent defective products before they occur. Through this, the waste level is minimized, which is in accordance with the efficient use of resources and is vital for every business in a world of scarce resources and high competition in the marketplace. The values of the organization, trust generated towards its products and the responsibility given employees, are also the results of the emphasis given to ethics in manufacturing process through the use of TQM and the unsurprising success of A.F.F. Other firms in the food and beverage sector are mostly profit-oriented private organizations. They also pay attention to customer satisfaction through “user-friendly products”, such as longer durability in dairy products by using artificial additives. However, longer durability means less nutritious products. Therefore, user-friendly strategy in dairy products shows a clear utilitarian ethical ground. On the contrary, A.F.F. focuses not on longer durability or user-friendly products, but on nutritious products and this approach of A.F.F. indicates a more deontological viewpoint. Other things can be done to improve quality efforts, which are also in line with the ethical efforts, such as concentrating on wine, fruit juice and dairy production, where A.F.F. has a clear competitive advantage. That is to say, the organization can divert its attention from a less efficient branch of activities to more efficient activities, like from stock-breeding to wine, fruit juice and dairy production. This study can be extended to privately-owned firms in the food manufacturing industry and in other industries, like automotive industry to reveal the similarities and/or differences with respect to the importance given to ethics during production process. 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(2001) “The Value Dynamics of Total Quality Management: Ethics and the Foundations of TQM”, Business Ethics Quarterly 11(3), 501-535. http://www.iso.org/iso/about/discovers-iso_who-standards-benefits.htm “Discover ISO” 20.07.2008 http://www.aoc.gov.tr/tarihce.html “Ataturk Orman Ciftligi Mudurlugu'nun Kurulus Tarihcesi” 27.07.2008 http://arama.hurriyet.com.tr/arsivnews.aspx?id=173477 “Turkiye’nin en iyi 10 sarabi, 26 September 2003” 27.07.2008 http://www.peyzajmimoda.org.tr/genel/bizden_detay.php?kod=364&tipi=2&sube=0 “Ataturk Orman Ciftligi’nin Misyonu 214 ve Vizyonu” 30.07.2008 CHAPTER 10 CHARACTERISTICS OF PROFESSIONS AND ACCOUNTANCY PROFESSION IN TURKEY Mustafa Kilic Hacettepe University, Turkey, e-mail: mkilic@hacettepe.edu.tr Aysegul Cerci Development Bank of Turkey, Turkey INTRODUCTION Professions, professionals and professionalism are important and central concepts for the operation of contemporary society. The importance of professions within a society has continuously been increased as societies become more complex due to the technological advancements and their impacts on societal relationships. Historically, professionalism has been the standard organizational solution for the production and delivery of expertise. Classically, there were only three professions: divinity, medicine, and law (Perks, 1993: 2). With the rise of technology and occupational specialization in the 19th century, other bodies began to claim professional status such as pharmacy, teaching, and social work. Accounting as a profession has evolved as have medicine, law and other professions in response to social and economic needs of society. Though it is a thousand years old work dated back to Mesopotamia, and revolutionized by Luca Paccioli’s double entry bookkeeping system in 1494, the accounting function expanded in order to meet the needs of a various interested parties as business and society became more complex over the years. Two major user categories are internal users which is basically management and external users represented by all governmental bodies, investors, creditors and other decision makers in the public. American Institute of Certified Public Accountants (AICPA) defined accounting as "the art of recording, classifying, and summarizing in a significant manner and in terms of 215 money, transactions and events which are, in part at least, of financial character, and interpreting the results thereof" (Singh Wahla, 1941). In short it is the process of communicating financial information about a business entity to users such as shareholders and managers. The communication is generally in the form of financial statements that show in money terms the economic resources under 1 the control of management; the art lies in selecting the information that is relevant to the user and is reliable (Thomas and Hewitt, 2011, 3). The principles of accountancy are applied to business entities in three divisions of practical art, named accounting, bookkeeping, and auditing. In this chapter, a brief theoretical background about atributes of a profession and professionalization process has been introduced and evolution and current state of accountacy in Turkey as a profession has been discussed in terms of atributes of professions concerning basically the Law of accounting profession. 1. Defintion and Attributes of Professions 1.1. Definition of a Profession Burns & Haga (1977, 709) define a profession as “an occupation that possesses both a high degree of cruciality and a high degree of mystique in the eyes of its relevant work audience”. Cruciality and mystique are two prerequisite conditions that must exist and be perceived by a profession's work audience to distinguish genuine professions from imitators. An occupation possesses cruciality when some group of "significant" others surrounding it recognizes that occupation as being necessary for their prosperity or their survival. Cruciality means an occupation has an almost life-or-death, fateful relationship with its clientele, employers or other publics. The second condition, mystique, arises out of the first. People with a serious problem seek help from the practitioners they perceive are best able to solve it. The practitioner is seen as knowing a great deal more about the problem than the lay person even can begin to grasp. The practitioner who is a member of a genuine profession is one who is perceived to be "in possession of a mystery”. Parsons (cited in Blackmore, 1999: 21) gives a comprehensive definition for profession stressing its strong social function as follows: (It)… performs a crucial social function. (It) ... requires a considerable degree of skill... in situations which are not wholly routine... although knowledge gained through experience is important, this is insufficient to meet professional demands, and the 216 practitioner has to draw on a body of systematic knowledge (which) ... requires a lengthy period of higher education (which) ... involves the process of socialization into professional values (which) ... tend to centre on the pre-eminence of clients’ interests, and to some degree they are made explicit in a code of ethics. ... the professional (must) have the freedom to make his own judgements... the organized profession should have a strong voice in the shaping of relevant public policy, a large degree of control over the exercise of professional responsibilities, and a high degree of autonomy in relation to the state. Lengthy training, responsibility and client-centredness are necessarily rewarded by high prestige and a high level of remuneration. Abbott (1988) notes that professionals ‘heal our bodies, measure our profits and save our souls’ in order to explain their crucial role within the society. According to Kornhauser (1963) a primary function of professionalism is the protection of standards of excellence in the face of pressures for quick or easy solutions which may be detrimental in the long run. It serves this function by developing expertise, autonomy, commitment and responsibility among its practicioners in significant areas of human endeavor. Ability to solve these crucial individual and societal problems has guaranteed significant privileges (monopolies, restrictive arrangements, self regulation) and rewards (high income, status, discretion). Although, privileges and rewards which have often been criticized and resisted in other areas of the economy, in this context, are justified and accepted through rhetorics of quality and public interest (Muzio, 2007). Mooka et al (2009, 81) define profession with reference to sociologists as “a vocation with a body of knowledge and skills (expertise) put into service for the good of others; the welfare of society”. To clarify and sharpen our understanding of professionalism, the detailed exposition of the ideal-typical attributes of professionalism in the following paragraphs overtly links the classical meaning of professionalism to its social and temporal context. It is to these attributes of professionalism that we now direct our attention. 1.2. Attributes of a Profession Hall (1968), suggest a professional model consists of a series of attributes which are important in distinguishing professions from other occupations. The attributes of the model are of two basic types. First are those characteristics which are part of the structure of the occupation, including such things as formal educational and entrance requirements. The second aspect is attitudinal, including the sense of calling of the 217 person to the field and the extent to which he uses colleagues as his major work reference Wilensky (1964) has intensively examined the structural side of the professional model and noted that occupations pass through a rather consistent sequence of stages on their way to becoming professions. Wilensky includes the following attributes in his discussion: (a) Creation of a full time occupation- (b) The establishment of a training school- (c) Formation of professional associations- (d) Formation of a code of ethics-these ethical codes are concerned with (e) Autonomy The attitudinal attributes of professionalism reflect the manner in which the practitioners view their work. The assumption here is that there is some correspondence between attitudes and behavior. If this assumption is correct, then the attitudes comprise an important part of the work of the professional. If he or his occupation has met the structural prerequisites of professionalism, the approach taken in practice becomes the important consideration. The attitudinal attributes to be considered here are (Hall, 1968): (a) The use of the professional organization as a major reference- (b) A belief in service to the public- (c) Belief in self-regulation- (d) A sense of calling to the field-. (e) Autonomy- A professional attribute that is both structural and attitudinal is the presence of professional autonomy. The combination of the structural and the attitudinal aspects serves as the basis for the professional model. It is generally assumed that both aspects are present to a great degree in highly professionalized occupations, while they are present to lesser degrees in the less professionalized occupations. Sherlock and Morris (cited in Engel, 1969: 31) state that [profession] is a "… combination of systematic, often esoteric, knowledge, technique, and self-control through a system of ethics-all developed to a high degree -which ... differentiates the professional man as an ideal type from members of other vocations” 903; 1960) Goode (1960, points out that "The two core characteristics are a prolonged specialized training in a body of abstract knowledge and a service orientation." As occupations become professionalized, they acquire several features which Goode sees as reflective of the two core characteristics of professionalism are: 218 (a) the profession determines its own standards of education and training, (b) the student professional goes through a more far-reaching adult socialization experience than the learner in other occupations, (c) professional practice is often legally recognized by some form of licensure, (d) licensing and admission boards are manned by members of the profession, (e) most legislation concerned with the profession is shaped by that profession, (f) the occupation gains in income, power, and prestige ranking and can demand higher caliber students, (g) the practitioner is relatively free from lay evaluation and control, (h) the norms of practice enforced by the profession are more stringent than legal control, (i) members are more strongly identified and affiliated with the profession than are members of other occupations with theirs, and (j) the profession is more likely to be a terminal occupation. Early work among so-called functionalists attempted to distinguish the professions from nonprofessional occupations by citing a set of attributes which would point out the distinctiveness of professional groups. Now known as the attribute approach, the presumption of this approach is that the greater the intensity of each attribute, the more 'professional'the respective occupation (Raelin, 1989: 102). Unfortunately, there has never been complete accord on the precise list of attributes, but among those most mentioned have been the following six (Kerr, Von Glinow, and Schriesheim, 1977): Expertise: Engaging in prolonged specialized training in a body of abstract knowledge. Autonomy: Possessing the freedom to choose the examination of and means to solve problems. Commitment: Showing primary interest in pursuing the practice of one's chosen discipline. Identification: Identifying with the profession or with fellow professionals through formal association structures or through external referents. Ethics: Rendering service without concern for oneself or without becoming emotionally involved with the client. Standards: Commiting oneself to help in policing the conduct of fellow professionals. Lawson (2004) uses three attributes to depict the professional ideal- knowledge, organization, and the ethic of service- in order to subsume the detailed and expanded lists. More explicitly, his conceptualization of the professional ideal consists of the following: 219 Knowledge, as expressed and reflected in a body of theory, professional authority, and higher education; Organization, as expressed in professional associations, monopoly and licensing, and professional autonomy; and The ethic of professional service, as expressed in the service ideal, codes of ethics, and the career concept. It seems that most students of professions tend to suggest their own atributes and there appears to be no absolute agreement on attributes of a profession. However, the congruence among them is striking, and the differences appear to be ones of emphasis or omission, rather than true disagreements. In this study, we preferred Lawson’s classification as a general framework to discuss the accounting profession in Turkey. 2. Phases of Professionalization Process Professionalization is a process where each craft is evolved into a technician’ occupation and eventually become a profession. But this does not happen in a linear way. Not every craft would turn into an occupation and not all technician’s occupation evolves into a profession. (Hickson and Thomas, 1969: 37). Therefore, “professionalisation refers to the path taken by occupational associations to attain professionalism” (Birkett and Evans, 2005: 102) Professions obtained the status at the end of the process and increase its social and economic status together with rising power (Wilensky, 1964: 137). Increased specialization, high level of skills and knowledge requirement, high level of education, and objectives standards set in work life lead to licensing and certification system to be adopted and services sector be expanded hence accelerating the process of professionalization. However these developments are not sufficient for an occupation to be called an as a profession. Other rquirements such as; an occupation should be a full time job, the existence of internalization of professional knowledge by member professions, formations of professional associations, restricting professional operations by using tools such as licencing and certification and setting code of professional ethics should be fulfilled. ( Wilensky, 1964: 138). 3 220 Table 1. Characteristics of Professions, Technicians' Occupations and Crafts Attribute Professions Technicians' Occupations Crafts Nature and Knowledge and skills Knowledge and skills are Basic skills and distribution of are esoteric and well esoteric. In some knowledge are knowledge and guarded. Few outside instances. Amateurs may widely held by skills the occupation have exist but, in general, they persons outside more than a trivial are rare. the occupation, understanding of the but finesse is less content of the widely occupation's distributed. knowledge base Mental/analytic Tasks are heavily Tasks have a heavy Tasks are heavily versus mental and analytic weighted toward manual/sensate mental and analytic component but also a manual and work significant manual or sensate skills. weighted toward work. sensate component. Importance of Most require either Many require either a May require a formal specialized and bachelor's degree or a formal education for socialization specialized associate's apprenticeship; training undergraduate or degree or its equivalent. otherwise,formal graduate training. education is irrelevant. Evidence of Professional societies, Some technical Unionization formal licensing, occupations have common but not occupational accreditation boards, journals and professional universal organization professional journals associations. Others have are nearly universal none. Importance of Important but of Frequently reported as The primary on-the-job secondary relevance critical form of training. avenue by which In some occupations, it is neophytes enter 221 training the primary form of the occupation. training Formal Yes Common among No certification technicians' occupations required to in medicine. Otherwise, practice rare Occupational High Low with exception of Low, primarily means of technicians" occupations through union controlling in medicine. control of entry apprentice programs. Tendency to Low unionize Less common than High among crafts, more common than among most professions. Source: Barley, 1996: 413 MacDonald ( 1995: 32) argued that an occupation can only evolved into a profession 4 when the state grants a monopolistic power to the profession for providing its service thus knowledge monopoly could be maintained within the profession, and special values and norms attributed to the profession which lead to a high status and respect for the profession in the social order come together and consequently form the trust for the occupation which will lead to recognition as a profession in the society. Barley explores different stages of professionalization as in the Table 1. Another classification made by Edgell (1998: 43-44) adopts a broader view on social work structure and classify profesions as; professional, qualified, semi-qualified and non-qualified. On the other hand, Etzioni (1969: i-x) emphasize the phase the occupation placed in the process of professionalization and groups professions as; nonprofessional occupations, semi-professional occupations and professional occupations. Nevertheless, it is quite common to observe similarities among different occupations in terms of life style, socialization structures and process therefore it is more appropriate to 222 classify occupations according to where they placed in professionalization process continuum rather than defining as professional and non-professional. It is also widely accepted that professionalization is a product of certain historical and social developments, therefore each occupation has followed a different path in different society. (Neal and Morgan, 2000). For example, medicine became a full time profession at the beginning of 1700’s whereas accountancy had to wait until 19th century to become a full time profession. 3. Accountancy Profession in Turkey 3.1. Evolution of Accountancy Profession in Turkey The accounting practices in Turkey have a long history. Accounting practices date back to the period of Ilhanlilar in 13th Century. Until mid-19th century, these activities pertained only to the monitoring of public finance. Accounting practice in Ottoman Empire was traditional one way recording until 1850’s when first commercial code which was more of a translation of French Commercial Code had been enacted and double entry recording began to be practiced (TURMOB, 2011). The development of accounting practice in Turkey has been heavily influenced by the practices of a number of Western countries as a result of economic and political ties over the past two centuries. The first legal initative influencing accounting development in Turkey was the Commercial Law of 1850 (adopted from French Commercial Code and practice); and ‘the impact of French accounting on Turkish Accounting Practices was significant’ as a result of the adoption ( Simga-Mugan, 1995: 352). From 1850 till 4 about the end of the first quarter of this century, the impact of French accounting on Turkish accounting practice was significant. After the First World War and the establishment of the Turkish Republic, accounting practices were influenced by the development of the second Commercial Code Law 826, which was largely adopted from German Commercial law. The influence of German accounting endured until the 1960s due to close ties between the two governments (Cooke and Çürük, 1996: 341). After 1960, however, the accounting system shifted to an adoption of the US model of accounting. The evolution of accountancy profession naturally influenced by the policies implemented for economic development since the foundation of the Republic, 1923. Economic development model based on pioneering role of state-owned economic 223 enterprises together with private sector investments has been adopted in early years of the Republic. State owned enterprises maintained their dominance in the economy until 1980’s when the economic policy shifted to market economy and significance of private sector investments and enterprises in the economy increased. Hence creating a demand for accountancy service that is compliant with international practices. Therefore, although it has a long history, the accounting and auditing profession in Turkey has received its legal public recognition only lately. “The Law on Certified Public Accountancy and Sworn-in Certified Public Accountancy” was enacted only in 1989 and amended in 2009. The Law establishes accounting and auditing as a profession and defines those who are rendering services in these fields as professionals. Tenker and Tetik (2007) summarize the milestones of the development of Turkish Accoounting Profession as below: 3.2. The Chart of Accounts for Sumerbank The first attempt that aimed to establish uniformity in accounting practices throughout the country started with Sumerbank, a State-Owned Enterprise (SOE), in 1938. During this time, specially designed commissions were appointed to work on the uniformity in accounting applications for Sumerbank. Other SOEs followed the Sumerbank Accounting System in the following years (Tenker and Tetik, 2007: 459). Endeavours of the Reorganisation Committee of the State-Owned Enterprises In order to follow recent developments in the world, a commission was appointed by the Prime Ministry of Turkey to reorganise the SOEs in 1960. One component of this project was a reorganisation of the accounting system for state companies. The project outcome, called ‘Uniform accounting system for state owned companies’, was released in 1968. It took another four years before the new accounting system became effective in the state companies. The use of the uniform chart of accounting, financial accounting rules and regulations and the adoption of the general, basic accounting assumptions and principles that became effective in 1972 were obligatory for the state companies. Although it was not mandatory, the system was welcomed and used widely by some of the enterprises of the private sector afterwards. The 1972 uniform accounting system remained in practice for 22 years until 1993, when it was replaced by a new one. 224 Endeavours of the Capital Markets Board of Turkey The Capital Markets Board of Turkey (CMB), established by the Capital Markets Law (CML) which were enacted in 1981, constitutes another milestone in accounting in Turkey and had a direct and positive impact on Turkish accounting practice and the profession (Cooke and Çürük, 1996: 345). The CMB has a wide range of responsibilities based on the main objectives of fair and orderly functioning of the markets and protecting the rights of investors. One of the main reponsibilities of the CMB among others is “to carry out studies on the establishment of general and private accounting standards related to the institutions subject to the CMB, in harmonization with international accounting standards. The CMB has a special unit namely “Departmant of Accounting Standards” in order to fulfill this this responsibility and to supervise the activities of independent auditing firms starting from their start-ups and the quality of the services they provide. This function of the CMB was new to the country and played a very important role in helping the accounting profession reach the place where it is at today ( Tenker and Tetik, 2007: 461). The publicly owned enterprises 5 had to follow the accounting procedures and principles that were prepared by the department in harmonisation with international accounting standards. Capital Markets Board also regulates independent external auditing practices for publicly owned companies and specifies additional qualifications required to provide auditing services for publicly owned enterprises*. Efforts of the Banks Association of Turkey The Banks Association of Turkey was founded in 1958 and acts as the representative body for all the banks operating in Turkey. The association has always focused some effort on providing uniformity in accounting and financial reporting among the banks that operate in Turkey (Tenker and Tetik, 2007: 462). For example, using a uniform balance sheet and income statement for the last three years of the financial results of a company before applying to any bank for credit was a requirement that was brought up by the association for the first time in 1969 (Baúpınar, 2004). * www.spk.gov.tr 225 Another important contribution of the association is the leading role for the preparation of a uniform accounting system, accounting rules and regulations for the banks in Turkey. This initiative had two main purposes: • to provide standardisation for accounting and financial reporting practices among the banks in the country • to provide a uniform numerate coding system for the accounts so that automation in accounting for the banks could be achieved. This project completed at 1986 and later updated in 1992 more efforts were spent on the harmonisation of the domestic applications to new developments in accounting standards in the world. (Tenker and Tetik, 2007: 462). Turkish Standardization Institute The need for a single standard accounting practice for general purposes in the economy compelled the Turkish Standardization Institute to create a committee in order to prepare accounting standards in 1987. The committee prepared 43 standards in accounting and made them ready for publication. Although the Institute played an important role in the first development phase of standardisation process, it could not help to distribute the standardisation works in a wide area in Turkey. Consequently, the committee handed over its functions to the Turkish Accounting and Auditing Standards Board (Baúpınar, 2004). The Auditing Council for Insurance Companies The work of the Auditing Council for Insurance Companies for a standard accounting system for insurance companies ended in 1994 (Baúpınar, 2004). The outcome of the work was a uniform chart of accounts for the insurance and reinsurance companies, and uniform financial reporting within the sector. Regulations by the Ministry of Finance and Uniform Accounting System The Ministry of Finance brought a group of experts from universities, the CMB and SOEs together in 1990. The commission had the purpose of not only preparing a new uniform chart of accounts, but also of combining all efforts exerted on this matter by different groups or institutions. The Commission completed its work in 1992 and published the outcome as a government decree. The chart became effective for all sectors as of 1 January 1994, excluding financing institutions. The objective of this 226 work was stated in the government decree as “providing true and fair, sound, comparable financial information in the financial statements for the public”. The difference of this work from previous efforts was that the new system was mandatory for use by all sectors excluding financial institutions – banks – no matter how small or big, whether state owned or public. The 1994 uniform accounting system has been used and is still being used by all enterprises throughout the country with a great success (Tenker and Tetik, 2007: 464). Establishment of the Union of Certified Public Accountants and Sworn-In Certified Public Accountants of Turkey, TURMOB*. The accounting profession in Turkey gained its legal public recognition in 1989 after the law of Independent Accountancy, Certified Public Accountancy and Sworn-in Certified Public Accountancy was enacted by the parliament. The Law established accounting as a profession and defined those who were rendering services in these fields as professionals and created the professional association of the profession namely the Union of Certified Public Accountants and Sworn-in Certified Public Accountants of Turkey, TURMOB The Law enacted in 1989 primarily applies to the private sector with the objective of providing effective and reliable accountancy and auditing services in Turkey and sets the qualifications that should be possessed to be a member of the profession and organizational setup of the profession. Later on in 1992, TÜRMOB’s Education and Training Center (TESMER) for professional training and development has been established. Banking Regulation and Supervision Agency (BDDK)† After a severe financial disaster in the banking and financing sector in 2002, the BDDK was established and became the primary authority to control and regulate the banking institutions in Turkey. It published a set of accounting rules and regulations for banking institutions in a government decree in June 2002. The decree updated previous accounting standards and adopted the international accounting and auditing standards for the sector. * † Turkish Acronym Turkish Acronym 227 Turkish Accounting Standards Board, (TMSK)* The Turkish Accounting Standards Board, TMSK – established in 1999 and became active in 2002 – is the only professional organisation that has the authority to set professional standards in Turkey. The board is an independent organisation administratively and financially. The main task of the board is setting the professional standards in harmonisation with the IAS and IFRS. The Board has nine representatives from the Ministry of Finance, Higher Education Council, CMB, the Undersecretariat of Treasury, Ministry of Industry and Commerce, the Banking Regulation and Supervision Agency (BDDK), the Union of Chambers and Commodity Exchanges in Turkey (TOBB)†, a self-employed accountant and a certified financial consultant from Union of Certified Public Accountants and Sworn-in Certified Public Accountants in Turkey (TURMOB). Following the establisment and commisioning of Turkish Accounting Standards Board (TMSK), establishment and commisioning of an independent and autonomous Turkish Audit Standards Board (TUDESK)‡ within TURMOB has been founded in 2003 Full set of Turkish Accounting Standards (TMSs)/Turkish Financial Reporting Standards (TFRSs) fully convergent with the IASs /IFRSs has been published by TMSK at 2010. New Turkish Commercial Code enacted in February 2011, which requires SMEs and Corporations to implement Accounting Standards for Turkey and Financial Reporting Standards for Turkey which are fully aligned with International Financial Accounting Standards (IFRS) to adopt by Jan.1, 2013. Congress and Symposiums Besides all institutional and legislative developments, another pillar which has significant impacts on organization and evolution of the profession in Turkey, 18 congresses hold since 1950’s on accounting and 30 symposiums organized on accounting education since 1979 to date. Authorities from Ministery of Finance, Ministry of Finance Board of Tax Inspectors, auditors form various government institutions, Ministry of Commerce and Industry * Turkish Acronym Turkish Acronym ‡ Turkish Acronym † 228 represntatives, private sector accountants, independent financial consultants, independent accountants, executives from state-owned economic enterprises, public finance, law, accounting academicians have come together in these platforms to discuss the problems of accounting profession and challenges to overcome. The participants who have conflicting interests with each other expressed their opinions and made important decions on the future of accounting profession after having long and heated debates . Aysan (2006) studied Accounting Congresses held in Turkey and analyzed the historical development process in detail. Although, most of the decisions made in these congresses and symposiums have never been implemented, most of their lagging effects on the society were observed. However, these debates and discussions were the most important contribution to the development of accounting profession. (Avder, 2007: 11). 3. Current State of Accountancy Profession in Turkey in Terms of Professional Attributes Scope of the Profession and Legal Status Functions of Accounting Today accounting has various functions performed by accountants employed in different fields of economy in Turkey alike in the World. These are; 1) Public accounting 2) Private accounting (business or industry) 3) Governmental accounting 4) Accounting education. Members of these accounting fields are practitioners of the same body of accounting theory and principles with different perspectives. Each group has its own efforts and contributions to the development and adoption of Generally Accepted Accounting Principles in national and international level. Public accountants are those accountants who offer their professional accounting services, and those of their employees, to the public for a fee. They act as an independent third party and study the operations of an entity and disclose its findings to all interested parties. This function of checking, reviewing, testing, and verifying the accounting work of other, generally with the objective of expressing a formal opinion on the fairness of the resulting information is called auditing. The major purpose of the audit process is to increase the credibility of the financial reports issued by an entity. The audit function, frequently referred to as the “attest function” -- that is attesting to the fairness of an entity’s financial statements, is the primary service of public 229 accountants. In addition to auditing function, public accountants also perform two other major services; management advisory services and tax services. Accountants employed by a particular business firm or a not-for-profit organization or, other than an accounting firm, are said to be engaged in industrial or private accounting. More accountants are employed as private accountants than in any other field of accounting. Included in the many functions performed by private accountants are the following: basic recording and reporting, budgeting, cost accounting, internal auditing, information systems design and tax services . Accountants employed by government units perform the same functions as accountants in private business -- basic recording and reporting, budgeting, information systems design, tax services, and internal auditing. In order to obtain qualified government, private, and public accountants there is a need to properly educate these people. Accounting educators’role is essential for the profession theyalso contribute to the advancement of the practice of accounting through their research activities. Legal Framework for the Accountancy Profession in Turkey Public accountancy is operating under the authority of the Law of Certified Public Accountancy and Sworn in certified Public Accountancy, Law no.3568 in Turkey. It was enacted in June 13, 1989 and amended in 2009 that primarily applies to the public accountants with the objective of providing effective, reliable accountancy and auditing services and sets the qualifications that should be possessed to be a member of the profession and organizational setup of the profession. The Law creates and defines three categories of accounting and auditing professionals; • Independent accountant (SM) • Certified Public Accountant, (SMMM) • Sworn-in Certified Public Accountant, (YMM) Although it regulates mainly public accountancy services, principles of professional conduct stated in the law rules to all members including who are operating in, industry, government and education that are called as dependent/employed accountants by the law as well as public accountants. Employed accountants are those who were licenced once as public accountant, but no longer does the public practice, joined other 230 organizations as internal auditors, financial managers or management accountants. However, regardless of the role, these accountants also have an obligation to provide clear, concise and credible financial information to the public.Therefore, Law no.3568 is accepted as the main legal framework for the accountancy profession in Turkey. Three categories of professionals were defined including” independent accountant” category in the original law dated in 1989, referring to only record keeping professionals but it was repealed in 2009 amendment which introduced a 5 years of transition period, training and competency exam requirements for independent accountants in order to become CPA. Currently operating acountants as independent accountants are attending to specific training program, take a competency exam for certified public accountancy and after that they will be entitled to be a certified public accountant. It is important to note that sworn-in certified public accountancy does not have an equivalent title in many countries, according to the Law definition, it is not a different type of accountancy rather it is a higher level of certified public accountancy on which some of the priviledges, mainly related to tax issues are given by the state and some additional responsibilities are assigned them in return ( Büyükmirza, 2009: 12). 6 It is widely accepted that the major area of interests for certified public accountants are auditing and attestation. However, in Turkey, the law gives CPAs the right to record keeping and offer financial accounting services to clients in addition to auditing and related services wheras sworn-in CPAs are forbidden from record keeping and only allowed to offer auditing and other tax related services. It can be interpreted that swornin CPA category is created by the law as an entity to transfer some of the rights and duties of tax related government functions to professionals who are equipped with additional ten years of CPA practical experience and are successful at competency exam series. The scope of accounting services can be classified into two basic categories referring the Law No: 3568: 1) The subjects of Certified Public Accountancy comprise the following services rendered to enterprises and business concerns owned by real and legal persons. 231 a. To keep books; prepare the balance sheets, profit and loss statements, tax returns and other relevant documents in compliance with generally accepted accounting principles and the provisions of the relevant legislation. b. To establish and improve accounting systems: to regulate administration, accounting, finance, financial legislation and to perform the jobs related to their applications and to provide advisory services in the related fields. c. Based on the relevant documents on issues specified in the aforementioned paragraph, to perform investigations, analyses and audit, to present written opinions regarding financial statements and tax returns, to prepare reports and similar documents, to perform arbitration, expertise and similar services. Professionals who perform the activities mentioned above independent from a business entity or a governmental organization, are defined as Certified Public Accountants. 2) Subject of Sworn-in Certified Public Accountancy In addition to the duties specified in sub-paragraphs (b) and (c) of paragraph (1) above, the subject of Sworn-in Certified Public Accountancy also includes the application of certification within the framework of the regulation to be promulgated in compliance with Article 12 of the Law. Article 12 explains that Sworn-in Certified Public Accountants certify the compliance of the financial statements and tax returns prepared by individuals and entities and the enterprises and establishments thereof, with the provisions specified in the legislations, accounting principles and the accounting standards, and further certify that the accounts have been inspected in accordance with the auditing standards. Sworn-in Certified Public Accountants can not keep books related to accounting, cannot establish an accounting office and cannot become partners to the accounting offices already established. On the other hand, Capital Markets Board of Turkey (CMB) has also regulated the external audit requirements for enterprises whose shares publicly held and/or issued capital markets instruments and set the specifications in communique Series:X, No:22*. According to CMB, partners and managers of an authourized auditing firm must be certified public accountant or sworn in public accountant and got the licence for * http://www.spk.gov.tr/apps/Mevzuat/?submenuheader=-1 232 independent auditing from Capital Markets Board of Turkey. Consequently, to be able to render an independent auditing service for enterprises subject to CMB regulations, a profession must be either a CPA or a Sworn in CPA and got the independent auditing licence which is obtained with a proficiency exam conducted by CMB. Another recent development is the enactment of New Turkish Commercial Code Law no: 6102 on February 14, 2011* which introduce mandatory external auditor for all corporations regardless of their status being subject to Capital Markets Board regulations. The external auditor can only be an auditing firm whose partners are either at least a CPA or a Sworn in CPA according to article no.400 of new Commercial Code. Small and medium size enterprises may assign one or more CPA or Sworn in CPA as external auditor instead of an auditing firm. Auditors must rotate after rendering auditing service of 7 years for at least 2 years. Accounting Professionals in Turkey Total number of accounting professionals are 86.101; 14.919 IA, 67.238 CPA and 3.944 Sworn in CPA in total that have been certificated for operation according to data provided by TURMOB as of November 2011. It is worth to note that total number of professionals when the law was enacted, as of 1990 was only 19.160, of which 11.393 Independent Accountant, 6.537 Certified Public Accountant and 1.230 Sworn in Certified Public Accountant. This substantial increase in the number of professionals, – more than four times within 12 years- which can be explained by the organizational developments of the profession, economic growth and its accelarating integration with the global economy in Turkey. The breakdown of current total number of accounting professionals by employmet status, education, gender and ratio to taxpayer are given below tables†. * ASMMO, Turkish Commercial Code, p.92-93, Ankara 2011 Data to produce these four tables obtained from TÜRMOB’s Website, <http://www.turmob.org.tr/TurmobWeb/turkce/istatistikselRaporlar.aspx> Accessed at 1.11.2011 and Ministry of Finance, Income Department’s Website <http://www.gib.gov.tr/fileadmin/user_upload/VI/20111.htm>, Accessed at 14.11.2011. † 233 Table 2. Accounting professionals in Turkeyby Employment Status Working as Dependent/ Employed Public TOTAL Accountant IA 7780 7139 14,919 CPA 29,303 37,935 67238 2,150 3,944 47,224 86,101 Sworn in 1,794 CPA Total 38,877 Freelance professionals operating publicly consists 55% of total members. It is important to note that nearly 45% of members are dependent that is working in enterprises operating in commerce, industry or government not performing the profession publicly. Dependent professionals are some academicians, government officers, tax inspectors who has some exemptions and whose services are considered as practical experience requirements. Therefore when they pass the exam, they are awarded the license but continue to work for their organizations. Another large group of dependent professionals are accountants employed by private or government sectors who had already licenced as CPA or Sworn-in CPA. Industry prefers hiring licensed profesionals due to the credibility of certification brought in the organization and some cost advantages in some tax related fees paid to Sworn in CPAs. 234 2,232 4,321 CPA 332 6,790 2,480 0 0 0 1,852 13,553 4,712 Sworn in CPA TOTAL 82 PhD 6,763 Degree 1,520 TOTAL Master Bechalor Associate High School IA School Level Prmary Education Commercial Table 3. Accounting professionals in Turkey by Education Status 1 14,919 55,294 2,278 64 67.238 3,002 367 3,944 432 86,101 575 62,617 2,935 The level of education among membera are high due to the admission criterion. Only independent accountants who do the recording and book keeping for micro and small size enterprises have lower level of education. That is why this category has been removed and IAs are required to take training and exam in transition period of 5 years Table 4. Accounting professionals in Turkey by Gender Sex Male Female TOTAL IA 12,231 2,598 14,919 CPA 50,299 16,939 67,238 260 3,944 19,767 86,101 Sworn in 3,684 CPA Total 66,304 It is obvious that the number of male members are predominantly high in profession, 3 out of 4 professional members are male. 235 Table 5. Accounting Professionals and Taxpayers Ratio in Turkey Status and Number of Active Taxpayers Number of Income Accounting Tax professionals Income Tax by Simple Procedure Value Corporate Added Tax Tax 1.706.534 720.304 2.294.426 662.689 IA 14,919 114 48 153 44 CPA 67,238 25 11 34 10 3,944 432 183 581 168 86,101 20 8 27 10 Sworn in CPA TOTAL The comparison between number of tax payers and number of professionals operating independently indicates that professionals are far less than the tax payers leading to more work hours and days for professionals. This also shows that there is a strong demand for professional accountancy services in Turkey. Professionals who participated to Yereli’s (2006) research indicated that they did not go for holiday previous year, that’s why they would be happy about the “financial holiday” introduction. Later in 2007 financial holiday was adopted by Law to be implemented in July1-20 of each year. According to Capital Markets Board of Turkey statistics there are only 93 independent auditing companies are authorized by CMB as of June 2011. Number of companies registered with the Board is 580, registered and listed in Istanbul Stock Exchange (ISE) is 361, registered with the Board but not listed in ISE is 219 as of June 2011*. There is huge potential for growth of capital markets in the future, as more companies registered with the Capital Markets Board, listed in ISE and issued capital markets instruments, the need for professional accountancy services will increase. * http://www.spk.gov.tr/apps/aylikbulten/index.aspx?submenuheader=0 accessed: Nov,3, 2011 236 4. Accountancy Profession in Turkey with Reference to Attributes of the Profession Knowledge Body of Knowledge for Accounting Profession One of the main indicators for professionalization is the existence of a school that the occupation was taught. This could also be possible if there is enough body of knowledge which is worth for teaching in a school, rather in a university. Even if this education is given by a non-university institution such as a client public or, less often, a professional association at the first stages, they always eventually seek contact with universities, and there is a steady development of standard terms of study, academic degrees, and research programs to expand the base of knowledge (Wilensky 1964, 142). Accounting knowledge has been transferred to accounting professionals by both universities and professional associations in Turkey. Today, accounting is called "the language of business" because it is the vehicle for reporting financial information about a business entity to many different groups of people. Accounting that concentrates on reporting to people inside the business entity is called management accounting and is used to provide information to employees, managers, owner-managers and auditors. Management accounting is concerned primarily with providing a basis for making management or operating decisions. Accounting that provides information to people outside the business entity is called financial accounting and provides information to present and potential shareholders, creditors such as banks or vendors, financial analysts, economists, and government agencies. Because these users have different needs, the presentation of financial accounts is very structured and subject to many more rules than management accounting. The body of rules that governs financial accounting in a given jurisdiction is called Generally Accepted Accounting Principles, or GAAP. Other rules include International Financial Reporting Standards, or IFRS*. In Turkish context these are Turkish Accounting Standards and Turkish Financial Reporting Standards. The massive development of information technology has affected the accounting profession, has minimized the time required for traditional accounting jobs * www.ifrs.com 237 bookkeeping, taxation and auditing and it has created the need for the accounting profession's expansion in new broader business activities. Accounting profession also has been affected by globalization and increasing global economic and financial transactions. This lead to the emergence of the need for developing standards in accounting practice, IFRS (International Financial Reporting Standards) which has been thoroughly discussed by many countries, including Turkey and their professional authorities lately. International Accounting Standards Board have put these eforts into effect by publishing international accounting standards. More than 100 countries including EU countries have been adopted International Accounting Standards/International Financial Accounting Standards and either require or allow their practice (A÷ca and Aktaú, 2007: 228). One of the main indicators for professionalization is the appearance of professional journals and becoming widespeared that identifies accounting, auditing, tax, legal and business issues affecting professional accountants. They provide a means of publicizing and criticizing the accountancy body of knowledge. There are several publications on accounting and chambers have their periodical bulletins which have articles on accounting issues in Turkey. However, according to research conducted by Mengulerek (2008), these accounting journals are far from the format of refereed journal and have limited academic quality. On the other hand, chambers’ publications aim to contribute effectively to the discussion of accounting issues encountered by members. Accounting Education The primary purpose of the professional schools in universities is to transmit formally a body of expert knowledge that will enable the professional to practice his or her skills at an acceptable level of competence. A secondary purpose of higher education—not always acknowledged because it is achieved not through formal instruction, but through contact with faculty and peers—is the transmission of values, attitudes, and commitments that serve to assimilate the novice to a set of professional attitudes and controls, professional conscience, and solidarity. In addition to transmitting professional knowledge and values to students, an equally important responsibility of the university is to develop new and better knowledge and theory on which professional practice is based (Barber, 1963) Historically, during the Republic period, accounting education had been given by Commercial Secondary Schools, Commercial High Schools and Colleges, Commercial 238 Sciences Academies and Faculties. However, today, after the regulation made by the Law no: 5786 dated July 10, 2008, these 2 years of education period and forms are not accepted for joining to accounting profession. Basically, the candidate must have a bachelor/undergraduate degree in law, business administration, accounting and so on as cited in the law covering a wide range of fields. Accounting is tought mainly in business administration departments, however, it is usually not organized as independent department and accounting is tought widely in different departments of Turkish universities as indicated by the law of 3865. The main accounting courses in the 60 Turkish universities for the 2006-2007 included in their undergraduate curricula were financial accounting (98%), cost accounting (95%), managerial accounting (82%) accounting audit (75%) financial statement analysis (62%) and corporate accounting (52%) (Gücenme and Arsoy, 2006: 6). Practical experience of certified public accountancy are gained at public practices of certified public accountants’ or sworn-in certified public accountants’ firms. In order to begin the practical experience it is a must to pass the practical experience entrance exam and to successfully complete the education program of the Education and Training Center (TESMER) established by the Union. The periods, not longer than six months, spent at the courses and seminars of the Education and Training Center are considered as practical experience periods. Those who have relevant work expriences that considered as practical experience period as indicated in the related sections of the Law; some of them are services of tax inpectors, budget controllers, faculty members teaching accounting, business administration or law and other specified fields in the law. Professional Authority In the professional-client relationship, it is the professional who possesses authority, with the client being in a subordinate position; thus, professional authority is an expression of social control. Although professional authority retains some vestiges of status authority, the principal basis for professional authority was scientific expertise. This kind of authority claimed by professions here involves not only skill in performing services, but also the capacity to judge the experience and needs of clients. Control is expressed, in part, by the client’s dependence on the professional’s superior competence, with the client’s acceptance of authority signifying a surrender of private judgment (Lawson 2004, 28). Stated another way, the authority of the professional is 239 ‘‘...more than advice and less than a command, an advice which one may not safely ignore’’(Starr, 1982: 9-10,14). Professional authority suggests a relatively wide knowledge gap between the client and the professional; it highlights the layman’s comparative ignorance and need in contrast with the professional’s knowledge and competence. This gap between professional and lay knowledge constitutes the historical and logical basis for two well-known professional taboos—advertising and fee-bidding for professional services (Lawson, 2004: 29). In both of these instances, professional ideology holds that clients lack the ability—the discriminating capacity—to capably select from among competing practitioners or forms of service based on such information. As it is explained in above sections in detail, accounting professionals have significant professional authority in terms of authorized transactions. CPAs have similar authority with CPAs in United States and European countries. According to findings of Gucenme and Arsoy (2006) study, there is no country having the same sworn-in category as Turkey, because sworn-in CPAs in Turkey have an additional authority over tax returns on behalf of the State. Ten years of practical experience for CPAs to be eligible for sworn-in CPA exam is never observed for professionals of another country. The admission exams to the profession are conducted by professional associations in United States of America and United Kingdom, by related ministries in France, Germany and Italy whereas they are conducted together with professional association and the government in Turkey (Gücenme and Arsoy, 2006). Organization Professional Organizations/Associations Professional associations have taken an important role in evolution and recognition of professions (Hickson and Thomas 1969).These associations have legitimate authority which is given by the state to regulate all issues related to the profession in their jurisdiction. They control the access to the group, enforce code of conducts to be adopted by members and if needed impose penalties on members including expelling. Externally, they develop policies to increase the profession’s power domain in the societal relationships. 240 Most professionals are socialized through their discipline and culture to carry out their technical responsibilities as members of a professional group. Once in practice, many also retain their professional ethos through identification with other professionals who are willing to make a life-long commitment to professional values and standards. These values and standards are often upheld through professional associations, which also establish ethical guidelines to shape proper norms of conduct. (Raelin, 1989: 216). The organization of accounting profession in Turkey is regulated by the Law no 3568.. The law required that certified public accountants and sworn-in certified public accountants establish their separate chambers and these two groups of chambers together form another umbrella organization for the profession,the union namely TURMOB. The union is founded to form an official association of the profession through the participation of all the Chambers of Certified Public Accountants and Sworn-in Certified Public Accountants in 1989. These chambers are professional organizations regarded as legal entities with the objectives of meeting the needs of members of the profession, facilitating their professional activities, providing the development of the profession in compliance with common requirements, maintaining professional discipline and ethics, and providing the prevalence of honesty and mutual confidence in the work of the members of the profession and in their relations with their clients (The UNCTAD Secretariat, 2007: 10). Chambers of CPAs and Sworn-in CPAs are also treated as professional organization acting as subdivision of the union, TURMOB. They are also regarded as legal entities with the qualities of public institutions, and are established for the objectives of meeting the needs of the members of the profession, facilitating their professional activities, providing the development of the profession in compliance with common benefits, maintaining professional discipline and ethics, and providing the prevalence of honesty and mutual confidence among the members of the profession and in their relations with the entrepreneurs. The union is the unique authority that is empowered to award professional licenses. The qualifications that are required to be possessed to become a member of the profession are specified by the Law no 3568 and only those who have been awarded a license by TÜRMOB are entitled to render professional services. 241 The elections concerning the members of the organs of the Union are based on secret voting system and are carried out under the judicial surveillance . The revenues of the Union consist primarily of the fees and receipts received in exchange for the services rendered (license fees, training and examination fees). Any government subsidy or financial contribution is irrelevant. Profesional socialization is facilitated by professional development programs of the Union and the Chambers. Both chambers and the Union closely monitor the economic, social and professional developments in national and international level and keep members informed on relevant subjects through various channels. Among other activities, TÜRMOB set professional standards through the Turkish Accounting and Auditing Standards Board (TMUDESK)* which was founded in 1994. The function and authority of standard setting of TMUDESK have been handed over to a new organization Turkey Accounting Standards Board, TMSK which was founded in 1999 and works independently. However TFRS-Turkish Financial Reporting Standards which is the equivalent of IFRS-International Financial Reporting Standards is usually applicable to corporations whose shares are traded publicly, banks, insurance firms and corporations which are subject to Capital Markets Board regulations,. IASB-International Accounting Standards Board also published another set of standards called IFRS for SMEs to be applied by small and medium size enterprises which is less complicated and appropriate for SMEs’ use. Accounting Standards Board of Turkey within the framework of harmonization process with IFRS, published the TFRS for SMEs, fully in line with international IFRS for SMEs in Nov.01,2010. SMEs are expected to benefit from this regulation particularly in international funding and other areas of operation (De÷er, 2011). TÜRMOB has been a member of the International Federation of Accountants (IFAC) since 1994 and is also a founding member of the Federation des Experts Comptables Méditerranéens (FCM), which was established in October 1999. TÜRMOB is a member of the South Eastern European Partnership on Accountancy Development (SEEPAD), a * Turkish Acronym 242 regional accountancy reform initiative consisting of the principle accounting and/or audit associations in South Eastern Europe, since 2006. TÜRMOB is also a member of Edinburgh Group which was constituted in 2004 to provide a forum for the exchange of views on issues affecting Small and Medium Sized Enterprises (SME), Small and Medium Sized Accountancy Practices (SMP), Developing Nations (DN) and Professional Accountants in Business (PAIB) in the context of the advancement of the accountancy profession internationally, since 2004 Recently, another institution for setting accounting and auditing standards has been established and duties of Turkey Accounting Standards Board transferred to the new institution. However, the new board, Public Surveillance, Accounting and Auditing Standards Board and the institution with the mandate to determine Turkish Accounting Standards, Turkish Financial Reporting Standards and Turkish Auditing Standards will assume the standard setting function of TURMOB and hence the professional association will loose some of its power regarding the standard setting. Although TURMOB will be represented in the new Board, with one member, Republic of Turkey Undersecreteriat of Treasury, Capital Markets Board, Banking Regulation and Supervision Agency and The Union of Chambers and Commodity Exchanges of Turkey will also be represented by one member and Ministry of Finance and Ministry of Customs and Trade will be represented by two members of nine members board*. Clearly, the influence and authority of TURMOB has been diminished with the new regulation. However, as stated as one of the urgent issues in Turkey in UNCTAD report (2007), multi-institutional structure problem of the accounting profession in Turkey has been solved with this new legislation by authorizing only one entity on accounting and auditing standards yet decreasing legal power of the profession. Other criticisms to the Board are its formation as a public entity, funding by basically state budget and allowing limited representation for the profession. Monopoly and Licensing Professions seek the formal sanction of society—a de facto monopoly over their particular area of jurisdiction. Pointing to the legitimate authority of their knowledge * Official Gazette dated Nov.2,2011. 243 and expertise as well as their ethic of professional service, the professions establish institutions that make society’s judgments of secondary importance and the profession’s judgments paramount. Society grants this degree of power to professionals because they are persuaded that ‘‘...no one else can do the job and that it is dangerous to let anyone else try” ….and also it is accepted that …“only one professional can train or judge another’’(Lawson, 2004: 29-30). The profession’s official monopoly exists through the profession’s control over its training centers, use of the professional title, the professional license, and other privileges and powers. What is required is the guarantee offered by professionalism so that ignorant principals can trust the agents to behave in appropriate ways. Quality degradation can be managed by professional organization with internal accountability and punishment. This generates an effective guarantee to consumers, from which guarantee reputation and/or second opinion possibilities follow (Roberts and Dietrich, 1999). How effective solutions to the problem of trust between the professional and the client are offered through professional regulations determines the degree of monopolistic power of profession over its activities. Monopolistic power of professional organization over professional operations in its jurisdiction is considered one of the major phases of the transition from occupation to profession (Karasu, 2001: 112). Regarding the accounting practice in Turkey, TURMOB is the only authority to issue professional licences in national level and only those who have been awarded a license by TURMOB are entitled to render professional services. The employment of the titles of "Certified Public Accountant", and "Sworn-in Certified Public Accountant" by unlisenced individuals, and the employment of titles, signs and symbols simulating the said professional titles, or likely to cause erroneous identification, are prohibited. The Chambers are required by Law to inform the Public Prosecutor, should they become aware of any such violations. The Chambers and the concerned individuals will be notified on the results of the investigation to be carried out by the public prosecutor. TURMOB as a professional organization has the authority to supervise member professionals’s conduct according to the Law and the Union’s regulations on diciplinary penalties. Disciplinary penalties ranging from warning to expulsion from the profession are to be applied by TURMOB for members of the profession who act contrary to the 244 honor and dignity of the profession, those who fail to perform their duties, or who upset the confidence that is a requisite of the profession. Those members are penalized according to the sanctions mentioned in regulations and, which varies according to the degree and gravity of the crime, to the effect of performing the accounting and consulting services in the appropriate manner. Those who fail to perform their duties independently, objectively and honestly, or those who act contrary to the general principles of this profession are penalized by the sanction of temporary withholding of professional activities. As for the accounting profession in Turkey, the law determines the education and training requirements for admission to the profession. Following a three year of supervised practical experience with a CPA or sworn-in CPA’s firm, and being successful at competency exam, the candidate get the admission to the profession. For candidate sworn-in CPAs, another 10 years of practical experience as CPA is required to be eligible for sworn-in CPA exam. It is important to note that the candidate professional must participate the professional training program before starting to the practical experience and be successful at the exam conducted by the Education and Training Center (ETC/TESMER) established by the Union. Training completed at TESMER before the exam are considered as practical experience when the candidate passes the exam and starts to practical experience. TESMER also provides ongoing professional training and development programs for operating members. Special requirements in addition to general conditions such as to be a citizen of Republic of Turkey, to be competent in exercising the civil rights and some more, related to education and training requirements stated in the Law are given below; Conditions Applicable to Become a Certified Public Accountant are cited in the Law: • To have at least a B. A. degree in law, economics, business administration, accounting, banking, public administration and political science from a Turkish university, or from foreign universities offering degrees equivalent to their Turkish counterparts, on the condition that this equivalence is ratified by the Higher Education Committee, or to hold a post-graduate degree in one of the disciplines mentioned above, following an undergraduate degree received in a different branch. • To have a practical experience of minimum 3 years. 245 • To pass the examination for Certified Public Accountants. • To receive a license as a Certified Public Accountant. Conditions Applicable to Become a Sworn-in Certified Public Accountant are listed in the Law: • At least ten years of experience as a Certified Public Accountant, • To pass the Sworn-in Certified Public Accountant examination • To receive a license for practicing in the field of sworn-in certified public accountancy. Regulations on auditing firms and licencing by Capital Markets Board of Turkey mentioned at previous sections are secondary regulations in this context. Because, being a CPA or a Sworn-in CPA is required for eligibility for auditing licencing exam by CMB. In other words, it is not possible to have an auditing licence from Capital Markets Board without having a CPA or a sworn-in CPA licence. However, the recent institution established in Nov, 2011, for accounting and auditing standards, is also given mandates to authorize and supervise independent auditing firms established by CPA or sworn-in CPA. That may mean a restriction on monopolistic power of professional organization, TURMOB. Because professionals, CPAs and sworn-in CPAs have already authorized to do external auditing by definition with the Law 3568, but according to the recent regulation, professionals will be subject to another authorization process by newly established Board which is not a professional organization. Professional Autonomy/Independence Professional autonomy is based on the belief that qualified practicioners are able to determine how the function ought to be performed, and that each practicioner must be free to exercise his own judgement in the specific case. Regardless of their theoretical base, all observers agree that legitimate, organized autonomy is the key feature of a profession. Autonomy is generally listed as one of the “traits” that any profession must have (Wilensky, 1964; Hall, 1968; Goode, 1957, 1960, 1960), and a central tenet of the power approach is that professionalism is an effort to gain for certain types of workers a degree of autonomy that most occupations cannot achieve (Larson, 1977; Johnson, 8 1972). 246 Engel (1969: 31) stated that “professional autonomy exists on two separate but related levels, autonomy with respect to the individual professional and autonomy with respect to the occupational group or profession”. According to Engel on the group level autonomy is defined as “the control an occupational group possesses over its decisions and activities in the community in which it functions, or its freedom to direct the activities of the profession”. Autonomy on the individual level is defined as “the professional's self control over both his decisions and his work activities within a particular work setting, or his freedom to deal with his client”. Professional autonomy of professional accountants in Turkey can be examined in two levels as it is suggested by Engel (1969). Professional autonomy with respect to group level can be discussed in the context of professional organization’s control on standard stting, education, licencing, scope of the profession. TURMOB has monopoly power over the entrance to the profession, lisencing and professional training and specification of code of conduct for the accountancy profession. However, it lost almost all of its autonomy with respect to external auditing and standart setting functions of the profession due to the recent regulations establishing the Public Surveillance, Accounting and Auditing Standards Board. To be autonomous, ideally, regulators should operate independently from political pressures—from ministries and from the regulated enterprises, private or public (Estache, 1997). Nevertless in Turkish context, the Board is set up as a non-professional public entity funded by state resources. External auditing is one of the essential part of the profession and, the board is also authorized to determine and declare the list of professionals who will conduct the external auditing function on which TURMOB will have no involvement. Professional autonomy with respect to individual level that is profession’s self control over both his decisions on his work and his relationship with his client is recognized within the framework of generally accepted accounting principles, relevant legislation, and accounting and auditing standards by the Law no.3568. Member professionals’conduct are subject to supervision by the law and TURMOB’s regulations, namely professional code of conduct which set the framework of autonomy for individual member Professional autonomy in terms of independence is the hallmark of the public accountant and is defined here as a firm commitment to professional standards rather 247 than the demands of clients. A member should maintain objectivity and be free of conflicts of interest in discharging professional responsibilities. A member in public practice should be independent in fact and appearance when providing auditing and other attestation services.(Colson, 2004) That is; independence in fact is the state of mind that permits the expression of a conclusion without being affected by influences that compromise professional judgment, allowing an individual to act with integrity, and exercise objectivity and professional skepticism. Independence in appearance can be explained as the avoidance of facts and circumstances that are so significant that a reasonable and informed third party, having knowledge of all relevant information, including safeguards applied, would reasonably conclude a firm’s, or a member of the assurance team’s, integrity, objectivity or professional skepticism had been compromised. The significance of economic, financial and other relationships should also be evaluated in the light of what a reasonable and informed third party having knowledge of all relevant information would reasonably conclude to be unacceptable. 5. The Ethics of Professional Service Professional ideology A professional, first, is a person who owns expertise, who has mastered a body of knowledge, including both practical knowhow and esoteric theory. He or she usually gains this mastery through formal, university education and extended training. Such knowledge is the primary source of professional authority, which legitimately places the professional in a position of control over the lay client. Second, distinctive forms of organization and control characterize the professions, with such organizational forms also reflecting the profession’s unique expertise. Professions establish professional associations, they seek a monopoly to practice in their area of jurisdiction through licensing and related means, and, most important, professions possess a high level of autonomy—the freedom of self-regulation (Lawson, 2004: 32). Lawson (2004) underlines the term trust as “the nexus of autority and autonomy” and notes that “autonomy exists only to the extent that vulnerable clients believe the authoritative claims of individual practitioners and the professions”. Thus, the trust relationship places moral obligations on the professional which leads us the concept of service ideal and professional ethics. 248 The service ideal requires that the professional provides not only technically competent, high-quality work, but that he devotes to the client's interests more than personal or commercial profit should guide decisions when the two are in conflict and the norm of selflessness is more than lipservice. It is probably acted out in the established professions at a somewhat higher rate than in other occupations (Wilensky, 1964: 140). The point is that the ethic of placing someone else’s interests ahead of one’s own, especially when that someone else is in a weaker or subordinate position, has been around for hundreds if not thousands of years. Regarding the professions, this was viewed as fully consistent with the notion of professionalism (Lawson, 2004). The service ideal was thus the preferred means to regulate professional-client relationships. Professisonal ideology rely on expertise, commitment, responsibility, autonomy and altruism concepts. According to this ideology, professionals are logical and responsible experts who proposes scientific and humanistic solutions to social problems. Professional ideology centers on the public interest instead of self interest oriented business approach (Parsons, 1967: 121). Accounting as a profession has all components of professionalism where high level of esoteric knowledge and expertise is essential to practice, profession has certain degree of autonomy in practicing and the principle that the profession should carry out its responsibilities in way to serve the public interest the best is an integral part of the profession. Professionalism can be explained as“Members should accept the obligation to act in a way that will serve the public interest, honor the public trust, and demonstrate commitment to professionalism.”* A distinguishing mark of a profession is acceptance of its responsibility to the public. The accounting profession's public consists of clients, credit grantors, governments, employers, investors, the business and financial community, and others who rely on the objectivity and integrity of certified public accountants to maintain the orderly functioning of commerce. This reliance imposes a public interest responsibility on certified public accountants. The public interest is defined as the collective well-being of the community of people and institutions the profession serves. * http://www.aicpa.org/Research/Standards/CodeofConduct/Pages/default.aspx Nov,6,2011 249 accessed on In Turkey, the Union has been given the duty and authority to regulate professional activities among others, in a way that they are being carried out in compliance with the Law, to preserve profesional ethics, order and the traditions, and maintain professional discipline. Union issued a bylaw of Code of Ethics for CPAs andSworn-in CPAs practicing in Turkey in 2007. The regulation emphasizes the professionalism and specifies the principles which will be discussed in detail in next section. Professional Code of Ethics The function of a professional ethic is two fold. It is the glue that binds the professional community together and in which the professional culture is embedded. Second, the professional ethic is in effect a guarantee and forms the basis of trust between a profession and society. It is intended to assure and re-assure society that, even though it and its members are vulnerable because esoteric knowledge and skills have been consolidated within a particular class of people, nevertheless these people will act for the benefit of society and its members. It provides a tangible standard against which the performance of a professional can be measured. This promise is not free, however. A quid pro quo, effectively another promise based upon trust, has developed between society and the professions. It is that in return for the professions’ altruistic orientation they will be left to regulate themselves (Brien, 1998: 396-97). Each professional accounting body including international organizations such as International Federation of Accountants (IFAC) has adopted their own code of conduct or code of ethics in order to provide a guidance and rules in performance of professional services by all members. International Federation of Accountants (IFAC) has a mission as set out in its constitution, “to serve the public interest. In pursuing this mission, the IFAC Board has established the Ethics Standards Board for Accountants to develop and issue, under its own authority, high quality ethical standards and other pronouncements for professional accountants for use around the world. International Ethics Standards Board for Accountants (“IESBA”), which is an independent standard-setting body within the International Federation of Accountants (IFAC) prepared and released a Code of Ethics for Professional Accountants in June 250 2005 and Revised in July 2006*. The IESBA develops and issues in the public interest high-quality ethical standards and other pronouncements for professional accountants for use around the world. It encourages member bodies to adopt high standards of ethics for their members and promotes good ethical practices globally. The IESBA also fosters international debate on ethical issues faced by accountants. TURMOB is a member of IFAC since 1994 and adopted its principles on ethics and released a bylaw on Codes of Ethics for Certified Public Accountants and Sworn-in Certified Public Accountants in 2007. (Official Gazette date: Oct 19, 2007) TURMOB also published a bylaw of disciplin to be applied to members who fail to comply with the rules. The Code of ethics of TURMOB aims to establish minimum ethical requirements for professional accountants, recognize responsibilities, fundamental principles and their applications on particular professional settings. The code is adopted by the membership to provide guidance and rules to all members—those in public practice, industry (business), government and education—in perfoming their professional responsibilities. In carrying out their responsibilities as professionals, members should exercise sensitive professional and moral judgments in all their activities. Consistent with their role in the society, members of TURMOB have responsibilities to all those who use their professional services, that is to the public, to clients and to colleagues. A distinguishing mark of a profession is acceptance of its responsibility to the public. The accounting profession's public consists of clients, credit grantors, governments, employers, investors, the business and financial community, and others who rely on the objectivity and integrity of certified public accountants to maintain the orderly functioning of commerce. In discharging their professional responsibilities, members may encounter conflicting pressures from among each of those groups. In resolving those conflicts, members should act with integrity, guided by the precept that when members fulfill their responsibility to the public, clients' and employers' interests are best served. The Code is in three parts. Part I establishes the fundamental principles of professional ethics for professional accountants and provides a conceptual framework for applying * http://www.ifac.org/sites/default/files/publications/files/ifac-code-of-ethics-for.pdf 251 those principles into practice. Professional accountants are required to apply this conceptual framework to identify threats to compliance with the fundamental principles, to evaluate their significance and, if such threats are other than clearly insignificant to apply safeguards to eliminate them or reduce them to an acceptable level such that compliance with the fundamental principles is not compromised. Parts II and III illustrate how the conceptual framework is to be applied in specific situations. It provides examples of safeguards that may be appropriate to address threats to compliance with the fundamental principles and also provides examples of situations where safeguards are not available to address the threats and consequently the activity or relationship creating the threats should be avoided. Part II applies to Professional accountants in public practice. Part III applies to professional accountants in business. Professional accountants in public practice may also find the guidance Part III relevant to their particular circumstances. Fundamental Principles A professional accountant is required to comply with the following fundamental principles: (a) Integrity A professional accountant should be straightforward and honest in all Professional and business relationships. The principle of integrity imposes an obligation on all professional accountants to be straightforward and honest in professional and business relationships. Integrity also implies fair dealing and truthfulness. (b) Objectivity A professional accountant should not allow bias, conflict of interest or undue influence of others to override professional or business judgments. The principle of objectivity imposes an obligation on all professional accountants not to compromise their professional or business judgment because of bias, conflict of interest or the undue influence of others. A professional accountant may be exposed to situations that may impair objectivity. It is impracticable to define and prescribe all such situations. Relationships that bias or unduly influence the professional judgment of the professional accountant should be avoided. 252 (c) Professional Competence and Due Care A professional accountant has a continuing duty to maintain Professional knowledge and skill at the level required to ensure that a client or employer receives competent professional service based on current developments in practice, legislation and techniques. A professional accountant should act diligently and in accordance with applicable technical and professional standards when providing professional services. The principle of professional competence and due care imposes the following obligations on professional accountants: • To maintain professional knowledge and skill at the level required to ensure that clients or employers receive competent professional service; and • To act diligently in accordance with applicable technical and Professional standards when providing professional services. Competent professional service requires the exercise of sound judgment in applying professional knowledge and skill in the performance of such service. Professional competence may be divided into two separate phases: • Attainment of professional competence; and • Maintenance of professional competence. (d) Confidentiality A professional accountant should respect the confidentiality of information acquired as a result of professional and business relationships and should not disclose any such information to third parties without proper and specific authority unless there is a legal or professional right or duty to disclose. Confidential information acquired as a result of professional and business relationships should not be used for the personal advantage of the professional accountant or third parties. The principle of confidentiality imposes an obligation on professional accountants to refrain from: (a) Disclosing outside the firm or employing organization confidential information acquired as a result of professional and business relationships without proper and specific authority or unless there is a legal or professional right or duty to disclose; and (b) Using confidential information acquired as a result of professional and business relationships to their personal advantage or the advantage of third parties. 253 A professional accountant should maintain confidentiality even in a social environment. The professional accountant should be alert to the possibility of inadvertent disclosure, particularly in circumstances involving long association with a business associate or a close or immediate family member. (e) Professional Behavior A professional accountant should comply with relevant laws and regulations and should avoid any action that discredits the profession. The principle of professional behavior imposes an obligation on Professional accountants to comply with relevant laws and regulations and avoid any action that may bring discredit to the profession. This includes actions which a reasonable and informed third party, having knowledge of all relevant information, would conclude negatively affects the good reputation of the profession. In marketing and promoting themselves and their work, professional accountants should not bring the profession into disrepute. Professional accountants should be honest and truthful and should not: • Make exaggerated claims for the services they are able to offer, the qualifications they possess, or experience they have gained; or • Make disparaging references or unsubstantiated comparisons to the work of others. Conceptual Framework Approach The circumstances in which professional accountants operate may give rise to specific threats to compliance with the fundamental principles. It is impossible to define every situation that creates such threats and specify the appropriate mitigating action. In addition, the nature of engagements and work assignments may differ and consequently different threats may exist, requiring the application of different safeguards. A conceptual framework that requires a professional accountant to identify, evaluate and address threats to compliance with the fundamental principles, rather than merely comply with a set of specific rules which may be arbitrary, is, therefore, in the public interest. This Code provides a framework to assist a professional accountant to identify,evaluate and respond to threats to compliance with the fundamental principles. 254 A professional accountant should take qualitative as well as quantitative factors into account when considering the significance of a threat. If a professional accountant cannot implement appropriate safeguards, the professional accountant should decline or discontinue the specific professional service involved, or where necessary resign from the client (in the case of a professional accountant in public practice) or the employing organization (in the case of a professional accountant in business). Professional Career Accounting profession as a professional career in Turkey is regulated by the Law as axplained in moopoly and licencing section in which a candidate professional join the profession after the bachelor degree on specific fields, complete three years of professional training, take proficiency exams and entitled to become CPA. After ten years of practice the CPA can take proficiency exam to be a sworn-in CPA. Technically sworn-in CPA level is the ultimate professional title one can own. Another option for CPAs is not to proceed to take a sworn-in title which is usually observed case for certified public accountants who are in public practice and in business. The regulations made in 1992 education requirement for entrance has been increased from high school to university. However the two level hierarchy defined by the Law is creating a perception that Sworn-in CPAs are more powerful than CPAs and more prestigious where in reality sworn-in CPAs and CPAs have many duties and rights in common. The status and duties related to tax issues given to sworn-in CPAs by Law makes them act like a government tax auditor and dominate their tax related functions. This perception is reinforced by the fact that most of the sworn-in CPAs have a tax auditing/inspection past. A demand for professional services is expected to increase sfter New Commercial Code put into effect in 2013. According to the law, SMEs and corporations must choose their auditing firms or auditors who are already CPA or Sworn-in CPA. It is also encouraging CPAs and Sworn-in CPAs to establish auditing firms together which is often not seen in current state of the profession. This legislation will create a demand for trained professionals in external auditing who are also comply with international auditing requirements of IFAC’s standards. It is estimated that 10 thousand external auditor will be needed by the implementation of the law (Sayar, 2011). 255 CONCLUSION In this chapter, we have attempted to bring to light the development process and current state of accounting profession in Turkey concerning attributes of a profession. We have summarized the cornerstones in the evolution of the accounting profession, and the enactment of the law on “Certified Public Accountancy and Sworn-in Certified Public Accountancy” has appeared as the most important landmark in this process. The Law established accounting and auditing as a profession and defined those who are rendering services in these fields as professionals. The professionalization of accountancy profession in Turkey has been lagging as compare to western countries though its practice dated back to 13th century. The profession has evolved as economy grows and liberalized. The law, that recognized accountancy as a profession and regulated its scope, education and training requirements, professional organization and professional ethic, was enacted only in 1989 following other major actions taken to liberalize Turkish economy. TURMOB was established as only professional organization authorized for licensing and regulating professional conduct. It also assumed the responsibility in standard setting through Turkish Accounting and Auditing Standards Board and harmonization of accounting standards with international standards. TESMER was established as a professional education and training center. Accounting as a profession has evolved as have medicine, law and other professions in response to social and economic needs of society. Today, accountancy is one of the critical components of economic activities through its financial reporting and auditing services and functions as a bridge between enterprises and rest of the society, hence contributing to establish an environment of trust. Accounting professionals work as public accountants in which auditing is considered a major part of the work, as private accountants that are employed by a business firms, work for government units mainly assuming tax related duties and work as educators in universities. Accounting as a profession performs a crucial social function and requires a considerable body of knowledge, skills and expertise. However, it differs from medicine, law and other established professions in terms of having pure university education as base of knowledge and expertise. This situation may be originated from the wide scope of accounting profession that requires knowledge and expertise from different fields such as business management, finance, economy, low, tax etc. 256 A pillar for professional knowledge and expertise is the development of professional journals and it can be said that some improvements are required in especially academic and refereed journals on accountancy. The profession has a written code of ethics and TURMOB is granted the authority on its implementation for all accounting professionals regardless of their work function both for public accountants and employed accountants in industry. Total number of licensed professionals in 1990 was 19.160 whereas in 2011 total number reached to 86.101. Over the course of time, professional training requirement raised from two years to three years, proficiency exams to be a candidate for the profession were introduced and independent accountant title disappeared as part of efforts to increase overall quality of the profession. One of the most recent developments related to accounting profession in Turkey was enactment of New Turkish Commercial Code in February 2011, which requires SMEs and Corporations to implement Financial Reporting Standards for Turkey which are fully aligned with International Financial Accounting Standards (IFRS) by Jan.1, 2013 and introduces mandatory external auditor for all corporations. The external auditor can only be an auditing firm whose partners are either at least a CPA or a Sworn in CPA according to the Law. Another important development is the establishment of a board and an institution for setting accounting and auditing standards, namely Public Surveillance, Accounting and Auditing Standards Board and the institution with the mandate to determine Turkish Accounting Standards, Turkish Financial Reporting Standards and Turkish Auditing Standards. The new board will assume the standard setting function of TURMOB and hence the professional association will loose some of its power regarding the standard setting. Although TURMOB will be represented in the new Board, with one member together with other public entities and ministries, Clearly, the influence and authority of TURMOB has been diminished with the new regulation. As a conclusion the state of accountancy profession in Turkey can be summarized according to Barley’s classification as in Table 6. 257 Table 6. Current State of The Accountancy Profession in Turkey Concerning the Attributes of Barley’s Clasification ATTRIBUTES Nature and distribution of knowledge and skills CURRENT STATE OF THE ACCOUNTANCY PROFESSION IN TURKEY Knowledge required to practice profession is taught at specific departments at undergraduate level. Additionally, 3 years of practical experience requirement with before and after exams for practical experience and proficiency examinations restrict the admission to the profession. Hence protect the knowledge. Mental/analytic Accountancy works requires analytical thinking and mental versus capacity such as applying Generally Accepted Accounting manual/sensate principles on operations of enterprises, preparing financial work statements, setting up accounting systems, conducting auditing Importance of formal education for training In addition to general conditions for admission to the profession, it is mandatory that the candidate must have at least bachelor degree in such as law, business administration or economics or, in case the candidate does not have bachelor degree in cited fields he/she must have a graduate degree/masters in these areas. Evidence of CPA and Sworn in CPA chambers are established separately and formal there is a union as umbrella occupational Professionals are not allowed to practice unless they become the organization member of the related chambers. professional organization. In order to progress as professionally, practical experience with a CPA or Sworn in CPA are required. Duration of compulsory Importance of practical on-the-job Union/Chambers through official training center TESMER are training important. Practical experience requirements for candidates are 3 experience and training programs by the years, for Sworn in CPA qualification 10 years of actual practical experience as CPA is required. 258 Formal certification required to practice Occupational means of controlling entry It is compulsory for the candidate to pass the CPA exam conducted by Union upon completion of practical experience and get the public practice license. Practical experience is carried out in CPA or Sworn in CPA offices. Candidates must take exams which are conducted by TESMER in order to start to the training and successfully complete the training program of TESMER. 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Yereli, A.Burçin (2006) Muhasebe Meslek Mensupları Anketi: Mesleki Profil, Sorunlar, Çözüm Önerileri. www.alomaliye.com. 264 CHAPTER 11 TOWARDS AN UNDERSTANDING OF THE CULTURAL PILLARS OF ETHICAL ADMINISTRATION IN TURKEY: A QUALITATIVE RESEARCH ENDEAVOUR ∗ 6 Assoc. Prof. Dr. Ugur Omurgonulsen Hacettepe University, Turkey, e-mail: omur@hacettepe.edu.tr Assoc. Prof. Dr. M. Kemal Oktem Hacettepe University, Turkey, e-mail: kemalok@hacettepe.edu.tr INTRODUCTION In most countries, public servants are obliged to adopt the fundamental values of public service and follow ethical rules developed in light of such values and prescribed in the ethical codes for public service. Developing a nation-wide and internationally accepted ethical code for the public service is a basic requirement for establishing an ethical administration in any country. Therefore, both individual governments and various international organisations (see World Bank, 1997) put genuine effort to equip the public employees with such ethical codes against bureaucratic corruption and make public servants comply with these codes. Our previous works on this issue illustrate that the Turkish public administration is equipped with minimum necessary legal rules and institutions against most kinds of bureaucratic corruption despite significant deficiencies. The insufficiency of legal instruments and institutional mechanisms have also been rectified partly in the process of accession to the European Union (EU). If so, why has the Turkish public administration experienced a serious ethical crisis since the second half of the 1980s? This question is partly explained by the side effects of neo-liberal economic policies and new managerial techniques that were implemented without sufficient attention to their ∗ This chapter is produced from the papers of Omurgonulsen (2003) and Omurgonulsen and Oktem (2005 and 2006). 265 philosophical essence. It can also be explained by the political-administrative culture of Turkey. Therefore, not only the legal measures and institutional structures, but also the cultural strengths and weaknesses of the Turkish public administration in struggling with bureaucratic corruption and unethical conducts need to be discussed (see Omurgonulsen, 2003; and Omurgonulsen and Oktem, 2005 and 2006). The legal and institutional dimensions of the question, which have been discussed in some detail particularly in our aforementioned works, can be revealed by reviewing the legal documents and elaborating on the organisation of Turkish public administration. In this chapter, the cultural dimension of public service ethics will be examined. The cultural dimension of the question will focus on the political science and public administration department of a public university in Turkey, which educates potential candidates for the public service. In order to conduct a qualitative research, Schein’s (1999) “interview model” has been adopted and subsequently adjusted in accordance with the purpose of this chapter. This adjusted model has three separate working groups: “academic colleagues”, “undergraduate students” and “graduates who are currently at work as public servants”. This model with all the three components will be employed to uncover some of the tacitly shared assumptions of Turkish public administration on public service ethics and corruption. The effects of cultural factors in the ethical development process of Turkish public administration can be assessed by this way. 1. The Cultural Dimension of Ethical Administration in Turkey Turkish governments have undertaken certain legal-administrative regulations and institutional reorganisations under the name of “administrative reform” in order to cope with the structural and operational dysfunctions, including the ethical problems in public administration since the World War II (see Kaya, 1991). However, these attempts could not yield successful results because they neglected the political culture dimension of the problems (Emre, Hazama and Mutlu, 2003: 438). Since the public service ethics concerns with the values and behaviours of the civil servants, ethical problems of public administration should be analysed not only in a legal-administrative context, but also within a cultural context (see Emre, Hazama and Mutlu, 2003). Most of the authors on the issue of public service ethics and corruption advise considering cultural relativity when searching for applicable prescriptions for unethical conducts, particularly in non-Western settings (for example, see Kernaghan 266 and Dwivedi, 1983; Khassawneh, 1989; Cooper, 1990; and Emre, Hazama and Mutlu, 2003). Therefore, in an examination of the ethical dimension of Turkish public administration, analysing some features of the Turkish bureaucratic culture is helpful to understand the feasibility of proposed solutions to the ethical problems (Emre, 1993; Emre, Hazama and Mutlu, 2003: 438). When a well-defined ethical code for the public service is lacking, public bureaucrats that rely on the bureaucratic tradition of a given country may adopt various personal missions, which are not always in accordance with the general interest of the public. Either they become an elite group isolated from the public and identify their personal interests with the public interest in accordance with their worldview (i.e. modernising mission), or they become an entrepreneurial group and clearly put their personalistic or group interests before the public interest (i.e. enterprising mission) (see Stever, 1988: 88). The founders of the Turkish Republic (i.e. the political and bureaucratic elites) established a highly bureaucratic state in Turkey in the 1920s and 1930s, due to the “bureaucratic ruling tradition” inherited from the Ottoman Empire.. Although they put emphasis on law and order, they perceived themselves as the “state elite”, whose mission was “modernising” Turkey. The state elite could keep control of the country with an “étatist” economic and bureaucratic system, until the end of the World War II. Since the bourgeoisie was a dependent ally of the state elite and the peasants were living in a closed world, there was no serious organised opposition against the state elite and its political party (i.e. the Republican People’s Party/Cumhuriyet Halk Partisi). A guardian type of bureaucracy in a state-centric polity was the essential feature of the single-party politics. With the transition to multi-party politics after the World War II, the state elite was challenged by a new and “anti-state” political elite represented by a new political party (i.e. the Democrat Party/Demokrat Parti). The DP and its successors (the Justice Party/Adalet Partisi in the 1960s and the 1970s and the Motherland Party/Anavatan Partisi after 1980) were actually grand coalitions of liberal intellectuals, bourgeoisie, and the peasantry who came to power as the society demanded change from the 1950s on. The new political elite attempted to substitute the state-centric polity with a party-centric one.Through strategies politicising and financially depriving the bureaucracy, they aimed to create a bureaucracy subservient to their governments (i.e. party-book bureaucracy) instead of a guardian-type of bureaucracy. The politicisation of 267 civilian bureaucracy by the anti-state political parties was also facilitated by the fragmentation of the bureaucratic elite during the 1960s and the 1970s as a consequence of socio-cultural and economic policies of these parties. During these decades, the earlier official ideology of the Republic (i.e. Kemalism) was challenged by various leftist and rightist, as well as religious ideologies. In the second half of the 1960s, the primary purpose behind the politicisation of bureaucracy was to promote individuals sympathetic to the government to higher levels of the bureaucracy. In the 1970s, this basic motivation was coupled with unbridled political patronage and staffing of the bureaucracy with partisans (see Heper, 1985). As Emre et.al. point out, all these developments led to the corrosion of ethical values in bureaucracy on the one hand, and the opening the door to traditional elements of social values into bureaucracy on the other. This meant the stabilisation of an “alaturca” administration (i.e. an administration with heterogeneous cultural values) (2003: 440). In spite of all the negative developments against the bureaucratic ruling tradition, which can be criticised on democratic grounds such as participation, accountability, and transparency, a “law and order” understanding still remained scarce and the bureaucratic control mechanism against corruption was still in effect more or less until the so-called “liberal revolution” of the early 1980s. The Motherland Party (MP) governments under the premiership of Mr. Turgut Özal initiated the liberalisation and globalisation policies that were dominant in the global system. Major slogans of the MP governments were “opening to the outside world”, “liberalisation of the economy”, “privatisation”, “minimal state”, “de-bureaucratisation”, “government of the people”, “bringing down the taboos” within the general framework of “big transformation” claim of Mr. Özal. All these slogans refer, in practice, to a struggle against the established “bureaucratic and moral values” (Emre, Hazama and Mutlu, 2003: 440-441). Prime Minister Özal and his close entourage wanted to decrease the influence of the bureaucracy as a whole, in accordance with their so-called “liberal revolution”, because bureaucrats could not summon the dynamism their government’s policies required. They also believed that the bureaucrats had an aloof and condescending attitude towards people. Despite this liberal rhetoric, the MP governments did not feel compelled to transform the bureaucracy and its legal-patrimonial characteristics into a rationalproductive or even a legal-rational one in the Weberian sense. Instead, during the 1980s, they tried to turn the bureaucracy virtually into a subordinate arm (i.e. the party-book 268 bureaucracy) by further politicisation and reorganisation. Almost all the authority and responsibility in public affairs were concentrated in the hands of the prime minister and his close entourage. The relegation of career bureaucrats to virtual insignificance or the side-stepping of the traditional bureaucracy accelerated the de-bureaucratisation process in general. One particular manifestation of this was increasing disregard for the rules and regulations in the name of “getting things done without delay” (“iúbitiricilik”). With little respect for legal-administrative rules, bureaucracy and business worlds were free from all control mechanisms (see Heper, 1989 and 1990; and Heper and Sancar, 1998). Nevertheless, this tendency gave rise to a serious erosion in social and economic ethics (i.e. “personal achievement whatever the social and moral costs may be!”/“köúeyi dönme!”); and to bureaucratic corruption (i.e. “My civil servant knows how to survive well!”/“Benim memurum iúini bilir!”) in the long run (see Birand and Yalçın, 2001: 267, 341-343; Kafao÷lu, 2001: 21-22). Although Turkey has been suffering from large, interventionist, and cumbersome government (see Aktan, 1995), launching new economic and managerial strategies, without understanding and adopting the essence of the policy of withdrawal of government, resulted in further corruption and deterioration of public service ethics. Corruption in the economic sphere that involved Prime Minister Özal, his family and his close entourage was the primary public concern in the 1980s (Aktan, 1992: Chp. 2/III; Emre, Hazama and Mutlu, 2003: 441-442). Corruption in the economic sphere soon spread to other spheres of the Turkish society, particularly during the coalition governments of the 1990s. In the triangle of corrupt politicians, corrupt bureaucrats-security forces, and Mafia, many legal and ethical rules and standards were ignored in the name of sorting out the economic and domestic security problems of the country (Emre, Hazama and Mutlu, 2003: 442). In brief, political instabilities in the 1970s and 1990s and socio-economic policies pursued since the 1980s have accelerated the social disintegration and caused erosion in the value system of the Turkish society. Political and administrative corruption increased as the judicial system and bureaucratic control mechanisms further degenerated. This obviously is not an optimistic picture of Turkey regarding the public service ethics. Many questions might come to mind about the socio-political and cultural factors that 269 hinder the enforcement of legal-administrative regulations and mechanisms for combating corruption. Recent research on the cultural base of the values in Turkish bureaucracy (see Emre, 1993; and Özen, 1996) provided us an opportunity to make an assessment on this issue. The results of these research show that significant elements of Turkish bureaucratic culture include “collectivism, solidarity and harmony” in “community” or “groups”. The literature on the Turkish culture also supports this finding (see Ergun, 1991; and Güvenç, 1993). In contrast to the “individualistic” culture, special characteristics of “collectivist” culture emphasize loyalty to one’s own community, as well as solidarity and harmony with the other members of the community and individual irresponsibility. In a collectivist culture, community (i.e. family in the broader sense, friendship groups, membership to a professional organization or a government department) is responsible for taking care of individuals and community leaders enjoy an extraordinary prestige (see Emre, 1993: 136-137). Much like the ordinary Turkish people, the Turkish bureaucrats feel themselves secure only in a community. They try to develop good interpersonal relations within the community (i.e. the public bureaucracy) in order to survive in the political and bureaucratic arena. The guardianship for group interests is also the easiest way to access higher posts in the bureaucracy. This also means the development of negative attitudes against other communities or groups. The establishment of a community or group as a way of securing extra benefits makes impartiality an impossible practice within the Turkish bureaucracy. That is why, independent or impartial ethics committees might not function in Turkey. The extraordinary prestige of political and bureaucratic elite and their underdeveloped personal responsibility also facilitate the expansion of corrupt activities in the public sector (Emre, Hazama and Mutlu, 2003: 450-451). The “unquestionable state” is a strong cultural value, which is another negative aspect of the bureaucratic ruling tradition in Turkey. This is the main obstacle to achieving transparency and accountability of government. As mentioned above, “protecting the interests of the State” is one of the official duties of civil servants. Any kind of activity which is done in the name of protecting the interests of the State, even if it is criminal or offensive, would be seen morally if not legally right. Furthermore, other cultural values encourage the concealment of crimes or offences committed in the name of the State. A Turkish proverb clearly defines the collectivist mentality of the Turkish people on this 270 manner: “a broken arm should remain inside the sleeve” (“kol kırılır yen içinde kalır”). It means “you should not wash your dirty linen in public” (Emre, Hazama and Mutlu, 2003: 451-452). In spite of the existence of “unquestionable state” as a social value, it should be emphasised that ordinary people, who for a long time remained in the periphery of the society and were isolated from the government of the country by the state elite, do not show any respect in practice to the protection of public money and property against any kind of corruption. A general expression, “the property of the State belongs to everybody but nobody” (“devlet malının herkesin ama hiç kimsenin olması”) might explain this attitude. Furthermore, ordinary people do not refrain from capturing parts of it in illegal ways, since they regard that public resources were controlled by the Sultans or the state elite for a long time in the history, and now it is their turn to use them. As a matter of fact, another Turkish proverb perfectly explains this manner: “the property of the State is plentiful and the one who does not possess it is obstinate” (“devletin malı deniz yemeyen domuz”). This general attitude can also be explained by an ancient tradition of the Turks. Traditional Turkish folk stories tell about “feast (toy) tradition” in which tribe leaders open their tents once a year for pillage. Since that was an egalitarian society, personal wealth not was tolerated but distributed. This method of wealth distribution would continue in one way or another. This attitude reminds the words of Calvin Coolidge: “Nothing is easier than spending the public money. It does not appear to belong to anybody. The temptation is overwhelming to bestow it on somebody”. 2. Findings of the Empirical Study: Are there any Cultural Factors Facilitating or Hindering the Establishment of an Ethical Administration in Turkey? The theoretical and historical points mentioned above indicate that combating corruption and unethical conduct need to be supported with cultural as well as legaladministrative strategies. Now, this argument can be reconsidered with the findings of empirical study. 2.1. Methodology of the Empirical Study Since culture is ‘deep, extensive, and complex covering all aspects of reality and human functioning’, if an organisation is not achieving its goals or improving, one does need to ‘get in touch with the deeper cultural assumptions that are driving’ him/her (Schein 1999: 58). Schein claims that surveys and questionnaires to measure culture do not 271 reach “tacit shared assumptions” of organisations, since one would not know what to ask about, or asking about a shared phenomenon is inefficient and possibly invalid (1999: 59-60). In order to uncover such assumptions, which are tacit and subconscious, Schein’s interview model (1999) is likely to be more effective. The cultural dimension of public service ethics will be experimented at the political science and public administration department of a Turkish public university (Hacettepe University), which educates potential candidates for the public service. In order to conduct a qualitative empirical research about the cultural dimension of the question, Schein’s (1999) “interview model” has been adopted and then adjusted in accordance with the purpose of the chapter. Since the authors are well aware of the methodological and practical limitations of the questionnaire technique and believe that it is highly difficult to obtain honest answers from the respondents in a very sensitive topic such as public service ethics, this interview model has been preferred. This adjusted model has a facilitator component (the authors in this case), who creates the setting for three separate working (self-study) groups composed of “academic colleagues” (six academics of whom two are newcomers), “undergraduate students” (twelve senior students) and “graduates” (twelve graduates who currently work as public employees in the public sector). The interviews with first two groups were conducted in April 2005 (see Omurgonulsen and Oktem, 2005) and the interviews with the last group were conducted in April 2006 (see Omurgonulsen and Oktem, 2006). This model will be employed to reveal certain tacitly shared assumptions of Turkish public administration on public service ethics and corruption. Thus, the effects of cultural factors (historical traditions, artefacts, proverbs, moral and religious sanctions, public shame, cognitive preparations, cooperation) on the ethical development process of the Turkish public administration can be assessed this way. In this model, the interview session takes at least half a day for each working group. The facilitators, who create the setting and provide the model, ask provocative questions until the working group reveals some important tacitly shared assumptions of culture. This interview session is about problem areas that matter to the “continuing success” and performance of an organisation (Schein 1999: 65-66, 68). Those steps are: (1) meeting in a room with a bunch of flipcharts, to focus on “ethics performance” to improve; (2) reviewing the concept of culture existing at levels of “visible artefacts”, “espoused values”, and “shared tacit assumptions”; (3) identifying the artefacts 272 characterising the organisation; (4) (after an hour or so) identifying the organisation’s values (often written down and published); (5) comparing values and artefacts in the same problem areas where they do not support each other, and there are inconsistencies and conflicts indicating that “a deeper tacit assumption is operating and driving the systems”; and (6) assessing the pattern of shared assumptions identified in terms of how they aid or hinder the accomplishment of goals (i.e. achieving an ethical public administration). Although cultural perspective is very important to understand both overall bureaucracy and individual bureaucratic organisations (see Ott, 1989), even Schein (1985) warns that this perspective has its own problems, limitations and dangers. Therefore, both the problems of cultural perspective used to understand the cultural foundations of ethical or unethical conducts in the Turkish public service and the limitations of the adjusted interview model used to uncover the cultural dimension of the issue empirically have been taken into account in this qualitative empirical study. 2.2. Findings of the Empirical Study 2.2.1. Findings from the Interview with Colleagues The first interview session with 6 academics of whom two are newcomers has provided us with the following: (i) The inadequacy of secular ethics and the role of religious ethics in a transitional society Since secular ethics is not fully developed due to inadequacies in transition from community culture to the culture of a modern society in Turkey, religious ethics is one step further in social relations. Social control system still does have some religious content and for this reason, some solutions for unethical conducts, even in the public service, are also religious. Since there is not enough institutionalisation, it is difficult to establish organisational work ethics. Everyone tries to find his/her own way, otherwise, s/he would be deemed to be foolish. In such a society, there are social rules imposed by the society, but those rules are often overriden by most individual members of the same society. In fact, during the transition process of Turkish society, since social control lessens and secular work ethics norms are not established; bribe and other types of corruption emerges. (ii) Factors causing or, at least, facilitating unethical conduct in the public service 273 * Political instabilities in the 1970s and 1990s and socio-economic policies pursued since the 1980s * Degeneration of the judicial system and other legal-administrative control mechanisms. * Overcoming red tape, speeding up bureaucratic processes and avoiding to pay extra taxes, fees and penalties * Negative effects of compulsory donations (payments) to the staff foundations of public organisations, which legitimize bribery and make it collective * Dominance of a gift-giving culture; blurred lines between gift and bribe; the lack of legal regulation defining the line between gifts and bribe * Lack of internalizing in the actual meaning and function of certain values and symbols, used widely due to imposition from higher authorities or sometimes imports from the West (e.g. democracy, pluralist politics, public service, public service ethics, taxation system) (iii) Turkish proverbs and idioms reflecting the private interest-seeking attitude of the public and public servants, leading to corruption * “No job gets done without a bribe in bureaucracy!” * “What I have gained in return for hard work in the public service?” There are enough legal-administrative rules against corruption; but most people want to follow it. Not only the people but also the public servants do not sometimes follow rules. So, breaking the rules not just accepted, but also preferred. (iv) Turkish proverbs and idioms reflecting the indifferent attitude of public complicating fight against corruption * “Let the snake, that does not hurt myself, live long!” * “Whatever you do you cannot change the whole system!” * “Correcting the system is not my task!” * “Avoid anything likely to cause trouble, even if you are aware of unethical conduct!” * “Do not worry, be calm, be tolerant, in time all the things will change!” 274 (v) Several measures including some elements of the Turkish culture can be used to solve basic ethical problems * Legal-administrative regulations, which determine the meaning and scope of corruption clearly (e.g. what is the monetary limit of a gift? what sorts of gifts can be considered as bribe?), should be enacted * Anti-corruption control mechanisms should be developed and strictly operated; and deterring penalties should be applied in cases of unethical conduct * Red tape in daily functioning of public organisations should be eliminated * Proactive secular ethics is needed rather than a passive religious ethics * Self-control, social responsibility and citizenship awareness should be developed though education * Trust should be established between public administration and citizens 2.2.2. Findings from the Interviews with Students The second interview session including 12 senior undergraduates (from all geographical regions of Turkey and 4 students’ parents are public employees) has provided us with the following: (i) Contradictions between the actual and perceived meanings of symbols of public organisations * “Lady justice” of the judicial organisations vs. the lady with the blindfold who holds the scale of justice but blinks to favoured people rather than ordinary citizens * “Medical snake” (antidote) of public health organisations vs. the spiral image of snake reflecting the complexity of the public health system that leads to corruption (ii) Pejorative images of the corrupt public servants in the eye of public * “Bribe-taker public servant’s belly!” * “Corrupt bank-teller’s official!” * “Cash-dispenser public servant!” (iii) Turkish proverbs and idioms supporting an ethical conduct * “Bribe is religiously illegitimate!” 275 * “This material world’s goods will stay in this world!” * “The shroud has no pockets” (iv) Turkish proverbs and idioms facilitating non-ethical conduct (corruption) * “One who holds the honey jar licks his finger!” * “State’s property is plentiful and anyone who does not take from it is obstinate!” * “My civil servant knows how to survive well!” * “He does take a bribe, but he does his job well!” * “The one who tells the truth is expelled from many towns!” (v) The cultural perception of society on ethical and unethical conducts The cultural perceptions of the society supporting ethical conduct is more passive; but if it is facilitating non-ethical conduct, it is more active. This is because, the former one is related to religious ethics and covers certain religious symbols like: * “Religiously legitimate thing” (halal) or “religiously illegitimate thing” (haram) * “God will punish one who gives or takes bribes!” * “The one who gives and also the one who takes a bribe, shall be in hell!” * “Aspiration of Muslims for the Holy days of Omar, a just administration” * “Even if you are forced to take bribe, just tell bribe-giver: Make this bribe halal, my friend!” All these indicate that there is almost no other control mechanism other than religious values. This can be understood that religious values have become popular in the Turkish society again for last two decades because of the international socio-political movement called “moderate Islam” as well as some national socio-economic developments. In Turkish society, people do not easily forgive any individual attack against them, but they can easily forgive collective ones. This culture does not forgive little things; but may tolerate big mistakes. It is a very pragmatic culture based on “religious forgiveness”. Without any doubt, slow functioning of the judicial system based on secular ethics and administration system is another factor for maintaining and developing religion-based solutions for corruption. (vi) The erosion in the value of an ethical behaviour in society 276 As the unethical conducts increase, an ethical behaviour seems to be perceived as ‘wrong’ by the society. Ethical behaviour is unwelcome by some transitional segments of the society, who suffered from socio-economic inequities for a long time. Although both the giver and taker of bribe are equally guilty, tacit values for it as a symbol may bring self-legitimation: * “Since everybody is doing this, why am I not taking bribe?” * “You can find a “way” for all problems in “democracy!” * “Whistle-blowing” is regarded as a telltale. There are actually enough legal-administrative control mechanisms for corruption, but they are only on the surface and not very effective. Since corruption has been embedded in social transactions, society has become almost accustomed to it. It should also be pointed out that these highly pejorative images of corrupt public servants in the eye of public, including the students, are partly a result of the post-1980 period in which corruption has become widespread. (vii) Several measures including some elements of Turkish culture can be used to solve basic ethical problems: * Perception of a strong state (i.e. implementing deterring sanctions against unethical conduct) * Where possible, indication of some pragmatic benefits of ethical conduct * Self, social and work discipline * Openness to social change (i.e. legal-administrative requirements of the EU; imitation culture) * Mass media can show positive sides * Personal influence of popular figures and charismatic individuals can be used * Education in family and school to indoctrinate all individuals in society 2.2.3. Findings of the Interview with graduates The sample group has been selected among public servants (12 people), who were graduates of the Department of Public Administration in the last decade, and are currently working in the public sector. Findings of the interview with them are as follows: 277 (i) The uncertain relation between the logos of public organizations and the functions of public organizations regarding public service ethics or corruption Some public organizations’ logos or symbols clearly represent what they actually perform. Some others have ordinary logos mainly consist of the initials of their names. Even in those organizations that have better designed logos, such logos may not reflect the internal functioning symbolized by the logos, i.e. the logo has gone one step further than the actual performance. Therefore, logos per se do not carry much meaning. Moreover, those logos may change over time, but this does not mean a real change for the organization involved. It may only indicate that there is a desire and effort to change the some aspects of the organizations. (ii) Contradictions between general and professional codes of ethic A general code of ethics can be designed for all public servants. Besides, professional ethical codes for certain organizations or professions may exist, and these various codes may conflict or contradict with one another. In this case, public servants may be forced to make a choice between public interest and professional concerns. This is a significant issue that needs to be addressed seriously. (iii) The crucial effects of socio-political culture on the ethical behaviours of bureaucrats and citizens The basis of bureaucratic (public service or administrative) ethics is the culture of a given society. When solving the problems of corruption and forming a set of ethical values, the values of the general society, of the organisation leaders of and the whole system are all important. In Turkish socio-political culture, the state has a highlighted role, which is a mix of kindness, authority and protection. The image of the state as “a father” has a deep impact in the Turkish society’s sub-consciousness. Therefore, obeying the authority of the state, and in return, expecting kindness and even all kinds of socio-economic benefits from the state have become a collective attitude in the society. On the one hand, an “unquestionable/untouchable bureaucrat” and his/her behavior in this authority relation, on the other hand, an “uncaring/docile individual response” while making use of social and economic resources that theoretically belong to the state, further ignite corruption. Yet, public servants should adopt an understanding of “serving to the public”; and every individual as a “citizen” should stand against the exploitation of his/her country’s resources. 278 (iv) Gift culture in the Turkish society and the delicate demarcation line between gift and bribe Turkish people have an overdeveloped sense of indebtedness and gratefulness in their social culture. They would like to give a “gift” (even if with little financial value) to a public servant (e.g. a medical doctor in a public hospital) who has welcomed and served them affably. Especially, when the situations are joyful (such as maternity, wedding or even at the deed office), they are easily inclined to give a “tip”. Such an internalized behavior has become a normal way of doing things over time and paving the way for transition from a gift giving culture to a bribe giving one (e.g. “knife-money” to surgeons, “soup-money” for traffic police officers). Thus, a simple gift or tip as part of a positive tradition transforms into a bribe, but is still accepted as something traditionally inherited. In fact, serving the public properly and timely is the essential duty for any public servant. (v) The effects of organisational culture on the ethical behaviors of public servants Public service ethics should also be discussed in terms of organizational culture since organizational culture is a reflection of the social culture. A newcomer public servant to the public service either adopts the organizational culture, or rejects it and then resigns from the organization. If he adopts the organizational culture, that means the cycle that already exists would go on, in other words, organizational culture would dominate his/her behavior. In the face of the existing high unemployment rate in Turkey, entering to the public service and becoming a public servant is still attractive for the middle and lower income groups. This background implies that majority of the newcomers to the public service adopt the culture of public organization without questioning. A small minority may move or ask to be transferred to another organization, or take a more radical stand and move to the private sector. Another feasible option for a large number of public servants can be temporarily accepting the existing organizational culture. The only way to break this cycle may be a significant increase in the number of newcomers. This can change the organizational culture over time to some extent by providing a blood transfusion. Otherwise, like a “small pond of stagnant water”, organizational culture would further corrupt itself to go decay. In changing an organizational culture, the level and starting point of change are also important questions: “Who is dominant to initiate change in the organization: Upper or lower, leadership, or mid-ranking officiala?” In order to change organizational culture 279 towards the direction of ethical values, there is a need for a “transformative leader who has vision”, and “lower-level support”, which makes the leader’s task easy. In an organizational climate, a leader acting as a role-model is very important. In this respect, showing a good example can quicken the process of change. It should be kept in mind that the organizational leader can start the change and make improvements, but they cannot be successful in the long-run without getting support from lower ranks and public opinion. (vi) Dilemma between individual conscience and social pressure Corruption is simultaneouly a social problem and an individual problem, related to individual conscience. An individual with high moral values is key to the solution of ethical problems to some extent. Personality traits and parental training play an effective role in having a proper personal ethical attitude. Public servants have actually position to resist corruption by having a personal standpoint against it in order not to suffer from twinge of conscience. Not everything is a social or systemic problem. There could be two public servants in identical financial situations: one might take a bribe while the other might not. However, this is not always the case. Whatever might be the personal efforts to behave in an ethical way, systemic problems and pressures exercised upon public servants can be daunting. Moreover, in a cycle of bribing, the ones who do not take bribes are often labeled as “fools”. As a matter of fact, there are some policemen who prefer office jobs to have limited contact with the public and who would not like to participate in critical positions, in order not to take bribes. On the other hand, those who take bribes usually follow a reasoning such as “others do it, so do I” to have an excuse for their unethical behaviors. For instance, some traffic police officers call a bribe “soup money”, in an attempt to make it look innocent in their own and others’ minds (there are a number of jokes on this matter). Again, as an excuse for their extra-charges from patients under the name of “knife-money”, some surgeons argue that, “after having six-year undergraduate education and then post-graduate studies on top of it, our salaries are too low”. (vii) The special position of the Ministry of Finance in combating corruption The term the “Ministry of Finance” brings people’s minds concepts such as taxes, taxation office, fines, allocation of financial resources, and by all means gift and all sorts of bribes. A classical profile of financial officers (tax collectors) was a traditional 280 source of fear in peasants’ and craftsmen’s historical experiences, so, to avoid taxes in return of a smaller ratio bribe can be a social habit. In fact, can this fearful face of the Ministry of Finance be transformed into an “anticorruption tool”? The classical career system of the Ministry with a well-established onthe-job training especially for career positions can be an effective tool to set up an ethical understanding. High level financial control officers do inquire and check in cases of special or extraordinary problems, instead of general or routine and limited inspections. For this reason, there may be differences between higher bureaucrats and lower level (rank-and-file level) officials in terms of ethical and unethical behaviors (e.g. modes of taking bribes or combating corruption). (viii) The special position of control and inspection officers in terms of corruption Public servants who are in charge of daily control and inspection in the market on behalf of their agencies (e.g. lower-level inspectors and controllers of many ministry and departments, traffic police officers, municipal police officers, customs and forest guards) have, in general, lower levels of education and salary; and in a sense some of them are degraded in office and forced or penalized to take those sorts of jobs. Being at the same work place for a long time, they tend to loose standards of the inspection over time, and they get intimate relations with the segments of the society that they are supposed to control. This triggers bribe and gift taking, and ultimately distorts the image of the organizations they work for. This prejudice developed against these organizations and their personnel leads to a vicious cycle, where indecent proposals for offering gifts or bribes by business people or citizens become more frequent (e.g. “soup money” for traffic police officers), even if there is no such demand from the public servants. (ix) The lack of a general act about administrative procedures In practice, we can mention two types of bribes: “compulsory” and “facilitating”. In Turkey, we can observe both types; however, facilitating bribes have been more common. Especially when a public service is too slow or late, facilitating type of bribe comes to the agenda of the related parties. “Exceeding numbers and complexity of administrative procedures” create a sense of “unreachable transaction” in the minds of citizens and then cause facilitating bribes. With a motive to generate continuous jobs for the bureaucrats and to elevate them to an important position in the eyes of citizens, complex legal texts have been increasingly 281 made even more complicated. Particularly those having plans to take posts in the private sector after their retirement, try to make their names as “knowing all in their field” by preparing legal documents/directives difficult to understand. Thus, they want to keep their weight on the subject matter, and in a sense, provide themselves with opportunities for bribe by using technical methods. *“If rules are made simple, administrative processes will become fast. Yet, complicated rules put clients in a relatively difficult position in need of some assistance, at least, to make a phone call and ask how is the process going, try to thank, to give a gift, and thus, to create an opportunity to receive a bribe”. In addition, former public servants, particularly the ones retired from the Ministry of Finance with technical knowledge and expertise on the gaps of the system, perform mediating roles between private firms and the public organizations by using their specialist knowledge and connections, which, in turn, corrupts the system. In order to prevent such situations, there is a need for “administrative procedures act”. The steps of administrative procedures should be clear and visible; citizens should be able to see all actions that need to be taken. (x) The non-function and malfunction of complaint or grievance mechanisms In the Turkish public bureaucracy, complaint or grievance mechanisms do not function properly or do not function at all. To complain about a public servant is usually regarded as an incorrect behaviour culturally. *“Whistle-blowing is considered as preventing someone from earning his/her living” or to “threatening his/her livelihood”. Or, afterwards, there might be a potential bureaucratic transaction with that public servant again in the near future, and in that case, there is a risk of either being unable to pursue the administrative process or experience delays/ or being put off one’s tasks continually. Sometimes, some people do not start a complaint procedure for the reason that they have already had some unethical conducts. For instance, a traffic police officer who experienced bribe giving at the deeds office, can accept the case as something ordinary, since he/she himself/herself takes a bribe in his/her office. (xi) The role of new managerial approaches in combating corruption 282 New managerial approaches (right to access to information, transparency, accountability, consumerism, and so on) can contribute to establish ethical values in the public sector. It should be remembered that the EU membership process is an institutional learning process as a whole; and public service ethics and combating corruption are now on the agenda of the EU. (xii) The role information technologies in combating corruption Information technologies and data base management are all recent developments making reporting activities easy. In this case, control, which is crucial for an anticorruption action becomes more feasible. The profile of the new generation personnel in the field of IT, who are more educated, gives optimistic signs on the matter. (xiii) The role of in-service ethics training for public servants in combating corruption In-service training of public servants on ethics is important. The factors influencing behaviors of public servants should be identified and training seminars to correct such behaviors should be organized. These training activities should include all (top, middle, and lower levels) public servants. Good cases should be reported and good examples for leading public administrators should be highlighted, thus, “learning by seeing” method can be used. However, there are no such specialized training institutions in Turkey. In spite of the mass media programs displaying exceedingly unethical behaviors and frequently occuring corruption cases, the sensitivity of public servants on ethical topics can be increased by such a focused training. Having a new generation public servants who are much better educated and equipped, more alert and conscious, can be a facilitating factor in this regard. (xiv) The necessity of a delicate balance between punishment and reward in combating corruption If a public servant conducts an unethical behavior despite such a training, s/he should be severely punished. This is the only way to get better results. Insufficient punishments cannot produce effective results. In Turkish bureaucracy, instead of punishing an unethical conduct, the public servant involved is generally transferred to another office, or even s/he may not be assigned to any duty. This simply means that an ethically weak public servant is unjustly protected, instead of being punished. On the other hand, the only focus should not be on “punishment” and there should also be a “rewards” system as well. Ethically appropriate and decent behaviors of public servants should be 283 rewarded at the end of a specific period. Thus, this method encourages ethical behavior. In promotion, not nepotism but merit and ethical behavior should be the essential criterion. (xv) The ethical attitudes of international organizations and foreign companies operating in Turkey Do some international organizations and foreign companies take local work culture as a model or do they bring their own work principles while operating in Turkey? As far as it is observed, such organizations and companies, while preserving their culture in their internal operations, behave in accordance with the Turkish or organizational culture in their interactions with Turkish institutions. For instance, distributing promotional materials is arranged according to the Turkish gift giving culture. (xvi) Turkey’s corruption record in comparative perspective It is true that Turkey’s record on corruption is not promising. However, Turkey is not alone in this league. Undesired situations related to corruption in Turkish public sector can be observed in other countries as well. Turkey’s rating in terms of corruption is similar to some of the South and Eastern European countries. In some places, including Central Asian and African countries, during the transition to democracy the situation is even worsened. (xvii) Religion as an uncertain factor in combating corruption Religion can be considered as an effective means in combating corruption. However, if this was the case, why did the corruption cases continue in the last few years, when an Islamic-conservative affiliated political party was in power? For instance, a local politician from the governing party sees no problem in stating that: * “Social democrats took bribes with their left hands, liberals with their right hands, and we, religious-conservatives, take bribe in the name of God”. (xviii) Without political ethics there is no bureaucratic ethics Naturally, since corruption is mainly a systematic problem, *“Without political ethics there is no bureaucratic ethics!” 284 * Ex-prime minister and ex-president Turgut Özal’s way of expressing (although he argued that he did mean something else), “My civil servant knows how to survive well!” has been a bad manner of leading the way. In sum, the findings of the qualitative empirical work indicate that “education” (formal and informal), “effective control and supervision” (legal-institutional and social), “decisive and stable reward-punishment mechanisms” and “cultural factors” (artefacts, proverbs, secular and religious-moral sanctions, public shame, cognitive preparations, co-operation) are all important in the ethical development process of Turkish public administration. There is also a need for improving a “more secular approach” to ethical issues. CONCLUSION In the processes of accession to the EU and recovering from the recent economic crises, Turkish governments put some serious effort in making new legislation and establishing new institutional structures towards constituting an ethical administration (see Omurgonulsen and Oktem, 2005). The most important aspect of the fight against corruption is, of course, not only enacting anti-corruption legislation, but also the proper application of this new legislation and continuous monitoring of activities of all public officials in light of this legislation. It is now obvious that this can be achieved through “cultural strategies” as well as legal-administrative ones. Public service ethics, without any doubt, is not only concerned with the conscience of individual public servant or with some legal-institutional measures. The prevention of unethical conducts of civil servants cannot only be maintained by punishing public officials who committed corruption, but through understanding the “cultural dimension of ethical administration”. The most important point is to establish an administrative climate in public administration based on ethical values; and even to create an understanding based on ethics in the society as a consequence of the legal-institutional measures and cultural-behavioral efforts. As a matter of fact, the general findings of the aforementioned qualitative empirical study clearly indicate the significance of this point and its link with the normative aspects of the issue. The general findings of this empirical study also show that some “traditional religiousmoral values and symbols” are still important measures in the Turkish society for combating unethical conducts, but obviously they are not enough. However, “how can such passive religious-moral measures be utilised in public service ethics in addition to 285 secular measures in a secular state?” This is an “unresolved question” for Turkey as well as for many other countries. For a general and an effective combat strategy, there is “genuine need for developing a more secular and generally accepted approach to ethical issues”. The recent political-military crises (e.g. Iraq crisis) and natural disasters (e.g. Hurricane Katrina) indicate that the existence of secular social order and ethics is not only necessary for countries governed by strict religious rules but also for all the developed and developing countries of the world. This result is also crucial for establishing a link between normative research and empirical research and evaluating a normative issue on the basis of empirical data. The findings of this empirical research indicates that “other normative questions” (or tasks) appeared to be resolved: “How can passive traditional religious-moral rules and sanctions be utilised in public service ethics beside to secular measures in a secular state?” and “how can a more secular and generally accepted approach to ethical issues be improved?” 286 REFERENCES Aktan, C. C. (1992) Politik Yozlaúma ve Kleptokrasi: 1980-1990 Türkiye Deneyimi. Ankara: Yeni Türkiye. Aktan, C. C. (1995) 21.Yüzyıl øçin Yeni Bir Devlet Modeline Do÷ru: Optimal Devlet. østanbul: TÜSøAD. Birand, M. A. and S. Yalçın (2001) The Özal: Bir Davanın Öyküsü. østanbul: Do÷an. Cooper, T. L. (ed.) (1990) The Responsible Administrator. San Fransisco: Jossey-Bass. Emre, C. (1993) Toplumsal Kültürel Etmenler Açısından Türk Kamu Yönetimi Üzerine Bir ønceleme. (unpublished PhD Thesis), Ankara Üniversitesi, Sosyal Bilimler Enstitüsü, Ankara, Turkey. Emre, C., Y. Hazama and S. 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(1996) Bürokratik Kültür 1: Yönetsel De÷erlerin Toplumsal Temelleri. Ankara: TODAøE. Schein, E. H. (1985) Organizational Culture&Leadership. San Fransisco: Jossey-Bass. 288 Schein, E. H. (1999) The Corporate Culture Survival Guide: Sense and Nonsense About Culture Change. San Francisco: John Wiley & Sons, Inc. Stever, J. (1988) The End of Public Administration: Problems of the Profession in the Post Progressive Era. New York: Transnational Pub. Inc. World Bank (1997) Helping Countries Control Corruption: The Role of the World Bank. Washington D.C.: World Bank. 289 290 CHAPTER 12 EVALUATION OF INTERNAL LOCUS OF CONTROL AND INNOVATIVENESS IN THE SCOPE OF NEW PRODUCT DEVELOPMENT: COMPARISON OF TURKEY AND MALAYSIA Assist. Prof. Dr. Hatice Calipinar Hacettepe University, Turkey, email: chatice@hacettepe.edu.tr INTRODUCTION Innovation plays an important role within national economies and enterprises. There is a close relationship between the developmental level and the culture of nations, as well as their innovation systems. The culture of a nation, in which there is an innovation system, forms the difference between developed and developing countries. The extent of human resources and enterprises which apply an innovation system are closely related with the approach individuals take towards innovation and internal control. Moreover, there is a close association between the innovation approach of individuals working in certain departments and the role adopted by production management for the purpose of creating and generating new products and processes. There are advantages of innovation for a national economy on a macro basis and for enterprises on a micro basis. The execution of sustainable growth, acceleration of economic growth, increase of employment and quality of life can be listed among the advantages of innovation to the national economy. Benefits provided for enterprises include cost advantages, competition superiority, growth of enterprise, increase of efficiency, increase in the market share and their level of profitability. There are various different fields within enterprises where innovation can be observed. Within these fields, production management and human resources have a determining role in innovation. The effect of human resources, which has internal control and an innovational approach, is important in the formation and development of new products 291 within product management. The success of a process is achieved through good management at every stage of the process. In particular, the support of top management is important in terms of product development, determination of related strategies and the separation of required resources (Özer, 2006). At the same time, managers should provide a reliable environment while coordinating and controlling the workplace. In the process of practice, personal traits and decisions of project managers become prominent. An analysis on the issue of innovation reflects that there is insufficient detailed research available in literature. This is important for both national economies and the sustainability of enterprises on the basis of transnational differences and the influence of individual traits of human resources in the process of developing new products. Studying the issue in this context would enable important contributions to literature. The aim of this study is to analyze the innovation and internal control of human resource traits for Turkey and Malaysia which are both developing countries, although they have different cultural features. The study will determine, compare and evaluate the possible effects of these traits on the process of developing new products. 1. Culture, Innovation and New Product Development Culture is an element which directly influences the behavior and personality of individuals where the individual is part of the culture. Many studies have shown that innovation is related with culture. “Defining a culture consists therefore in finding the beliefs and values that are common to a given society, or on the contrary the characteristics that allow us to distinguish social groups” (Husler, 2004). Hofstede (1984) stated that a culture of a society must be considered in the frame of different dimensions and he determined four dimensions in his study carried out to detect dimensions which cause cultural differentiations. These dimensions are uncertainty avoidance, power distance, individualism, and masculinity. Most researchers have used Hofstede's values to assume links between national cultures and new product development or innovation. (Herbig and Miller, 1992; Shane, 1995; Nakata and Sivakumar, 1996; Im et al., 2003). Culture affects innovation because it shapes the patterns dealing with novalties, taking individual initiatives and collective actions, understanding and behaviours in regard to risk as well as opportunities (Kaasa, 2010). 292 “An innovation is the implementation of a new or significantly improved product (goods or service), or process, a new marketing method, or a new organisational method in business practices, workplace organisation or external relations” (OECD, 2005). Two common forms of innovation within the manufacturing arena relates to product innovation and process innovation. Product innovation generally involves the introduction of new products or services to meet market needs. “Process innovation is the implementation of a new significantly improved production or delivery method, which includes changes in techniques, equipment and/or software” (OECD, 2005). These two forms of innovation are usually categorized as technological innovation. The process of developing a new product is examined with different approaches in literature and differs according to the strategy of the enterprise, attitude of management and organizational structure. New product development is defined as a process that designs and develops new services or products from inputs received from the market in general through the customer relationship process (Krajewski et. al., 2010). The main steps of the process are composed of the creation and evaluation of ideas, the detection of customer needs, functional features, production features, operational and financial analyses, the development of the product (making the prototype and pretesting), the intra-company product tests, customer product test, domestic market sales tests, making the final prototype, work analysis before commercialization, starting the manufacture of the product, and marketing and assessing its success (Cooper et al., 1986; Heizer and Render, 2008). Some of the phases within the process determine the success of new product development. The traits of innovation and the internal control of human resources are important factors which determine the success of a new product especially in the phase of product design. The efficiency of the process is determined by the importance given by management, the centralization in the process of decision-making, the experience in new product development and traits of human resources. Factors which affect new product development are analyzed in three main groups (Balbontin et al., 2000): non-controllable: environmental influencing factors and potential challenges; partially controllable: market and measures of performance; 293 controllable: process (NPD and marketing), people and personal culture, organisational characteristics and corporate culture, learning (practices, abilities and skills), project manager characteristics, technology, and product. The process of new product developments through different approaches is discussed within various literature. Hegarty and Hoffman (1990) expressed the difference of process innovation approaches of managers in different countries and cultures. Nakata and Sivakumar (1996) proposed a relationship which links the new product development process to the five dimensions of national culture. These are individualism, power distance, masculinity, uncertainty avoidance, and Confucian dynamism. Today, an innovation approach proposes that innovation shall be adopted as an enterprise culture being conducted not once but systematically and continuously. Applying innovation successfully within enterprises is only possible by creating a suitable environment and the good management of internal and external factors. Some significant factors include the size and age of enterprises, the characteristics of the labor force, intellectual capital, culture of the enterprise, national culture, management strategies, public promotion and competition. The human element is the most prominent when these factors are analyzed in terms of production management and process of new product development. 2. The Role of Managers in the Decision Making of New Product Development The process of new product development differs according to the strategy of an enterprise, the attitude of management and its organizational body. The success of the process of new product development is related with the factors below: (Poolton and Barclay, 1998; Bessant and Francis, 1997) - Good Internal and External Communication - Innovation as a Corporate-Wide Activity - Selection and priority between projects - High Quality Management and Management Style - Integration of different functional perspectives - Key Individuals 294 - Good Planning and Control - Forecasting technological developments - Efficient Development Work - Marketing and User Needs - After-Sales Service and User Education Top management plays important role in the initiation and support of new product development (Cooper and Kleinschmidt, 1986; Zirberg and Maidique, 1990). Enterprises working with managers of high quality, flair, and ability affect the process positively. In addition to this, the coordination and communication of middle managers and top managers in the direction of new product development should be given special attention. Middle-level managers play a critical role since they are usually the implementers of new product development. The success of new product development differs according to the practices of management in different cultures (Nakata and Sivakumar, 1996). Calderini and Cantamessa (1997) state that management has very little effect on the internal innovation process. The main reason is due to the fact that many managers are from an engineering background; hence, their past work experience and skills overshadow their managerial practices in the future. New product development basically has two determinants; technology and demand. In management literature, the driving power of the management is considered to be the third determinant. When innovations driven by management are analyzed, it is seen that much of the decisions are conducted by the owners of international enterprises. At the same time, problems experienced in the process of product development are caused by functional disharmony or the lack of environmental and cultural support. (Calderini and Cantamessa, 1997). Since service providers have different characteristics compared with goods-producing businesses, the support of the labor force in terms of ability, capacity and behavior changes including the process of new product development. There is a close relationship between the organizational body and success or failure of new product development (Dwyer and Mellor 1991) which is determined by its process. Lee and Souder (2000) studied the process of new product development in enterprises in 295 Korea and USA which have different organizational features and researched the effect on the process of new product development. There is the effect of integration of R&D and marketing departments, top management support, ability of project managers, motivational skills of project managers, as well as the production development performance of product managers. At the same time, there are different effects due to the level of authority concentration, project manager’s participative style and existence of the product champion which had different impacts on new product development performance in Korea and USA. From Lee and Souder’s (2000) findings, it is suggested that certain criteria needs to be considered when recruiting new personnel, as well as strategies need to be implemented in the motivation of team members. Therefore, innovational traits of individuals and their willingness to take risks should be considered during staff selection. Human Resources is an important catalyst of innovation. There is a strong relationship between innovation capacity and human resources. In order to be successful in an innovational environment, employees need to be trained and given the opportunity to utilize and generate their innovational traits. 3. Relationship of Internal Locus of Control and Innovativeness The concept of locus of control was first proposed by Rotter (1954). There is the individual in the focus of innovativeness and there are different variables which influence the innovativeness approaches of individuals. Locus of control is among these variables. Locus of control, which states personality tendencies, regards people with two approaches being internal locus of control and external locus of control. Individuals with internal locus of control are defined as individuals who feel they have control over their own lives and take responsibility for their own behavior. Individuals with external locus of control are those who believe that good-luck, bad-luck, coincidences they experience, as well as destiny are related to other people or external factors; likewise these individuals take less responsibility for their own behavior (Rotter, 1966). Issues of innovativeness and internal locus of control with regard to entrepreneurship are discussed in various literature. According to Rotter (1990), an individual perceives the result of a problem within the extent of it being or not being under his control. Internals believe that an individual has the ability, effort and skill to have an impact on 296 the end result. On the other hand, externals believe that impacts apart from the individuals cause results. Internal locus of control has been one of the psychological features which is mostly mentioned in studies regarding entrepreneurship. Internal locus of control increases the possibility of individuals’ adopting the results of their own actions. Individuals who have internal locus of control perform more positive behavior in many issues, primarily in innovativeness and creativity, compared to those who have external locus of control. Individuals who have internal locus of control are more tolerant towards uncertainty. Individuals having internal or external locus of control influence their tendency of innovativeness. It was determined that individuals who especially have internal locus of control are content with the studies which require innovation and creativity. Therefore, there are many studies which analyze innovative individual behavior and locus of control. In their study including thirty countries, Shane (1995) has determined that avoiding uncertainity, individualism and power distance influences the choices of innovation defender strategies and individuals who are more tolerant towards uncertainity are more innovative compared to those who do not have much tolerance towards uncertainty. Individuals who have internal locus of control take more risks in necessary situations, while individuals who have external locus of control take more risks under circumstances dominated by chance. Tabak et al. (2010) could not determine a direct relationship between individuals’ locus of control and innovation levels, yet determined that locus of control influences the level of innovativeness through tolerance towards uncertainity and taking risks. Muller and Thomas (2000) asserted that internal control and innovativeness are not sufficient in explaining the potential of entrepreneurship; therefore, it must be evaluated by considering the characteristics of a national culture. Hence, they have advocated that an innovation trend is more widespread among collective cultures than individual cultures. They have concluded that some cultures are more supportive towards entrepreneurship compared to others. However, they have also concluded that tendency of internal locus of control is high among individual cultures. Shane (1993) and Hussler (2004) have attained similar findings. Some studies suggest that innovation rates cannot be increased only by increasing the research and development of enterprises or by creating industrial infrastructures. 297 There are factors which prevent innovativeness to be formed in enterprises on an individual basis. In particular, the innovation tendency of middle-level managers is formed within such an environment. Individual power bases, individual behavior and individual success are the factors which prevent and influence basic innovation (Figure 1). Locus of control is a factor which determines individual behavior. If the individual has internal control, he will individually make an effort to change conditions. >ŽĐƵƐŽĨ ŽŶƚƌŽů /ŶĚŝǀŝĚƵĂů ƉŽǁĞƌďĂƐĞƐ /ŶĚŝǀŝĚƵĂů ĞŚĂǀŝŽƌ /ŶĚŝǀŝĚƵĂů ƐƵĐĐĞƐƐ ĂƌƌŝĞƌƐƚŽ /ŶŶŽǀĂƚŝŽŶ Figure 1. Model of Innovative Behavior in Barrier Situations Source: Petersen, 2010. Individuals who have a tendency towards internal locus of control and innovativeness are commonly found in cultures where individualism is prevalent and there is support for creativity and creative problem-solving to solve uncertainty. 4. Cultural Differences Between Turkey and Malaysia The countries chosen for this study were Malaysia and Turkey. The reason for selecting these countries is that they both have similar and different elements, thus making them worthy for such a crosscultural analysis. Malaysia is in Southeast Asia and is comprised of many different cultures, languages, history and religion. Turkey is situated mainly in western Asia and partly in Southeastern Europe. Malaysia and Turkey both have Muslim majority populations although Malaysia is a multicultural country which has large ethnic groups: Malays, Chinese and Indian (Juri, 1999). 298 Table 1. National Rankings of Hofstede Cultural Variables for Turkey, and Malaysia Individualism Power distance Country Uncertainty Masculinity Avoidance Index Rank Index Turkey 36 28 66 18-19 Rank 85 16-17 45 32-33 Malaysia 26 36 104 1 36 46 50 25-26 Index Rank Index Rank Source: Hofstede, G. (1997), Cultures and Organisations; Software of Mind, McGrawHill, New York. Hofstede’s research results shows that Turkey and Malaysia have different national cultures (Table 1). That is, Turkey was included in the “small power distance/high individualism/strong uncertainty avoidance/ feminine” cluster, while Malaysia was in the “large power distance/low individualism/weak uncertainty avoidance/ masculine” cluster. Individualism is the relative importance of individual goals compared with group or collective goals (Harvey, 1997). The level of individualism or collectivism in society will affect the organization’s member’s motivation/desire for following the organizational requirements. In more collectivistic societies, the emotional dependence of members on their organization is great and the organizations are expected to have a broad responsibility for their members (Hofstede, 1984). Turkey can be considered to have a mixed culture consisting of both individual and collective value judgements when we compare it to European countries where individual value judgements are more dominant; on the other hand, Asian and Central American countries adopt collectivistic value judgements, (Ayçiçegi-Dinn and Caldwell-Harris, 2011). When we examine Malaysia (score of 26) and Turkey (score of 36) in regard to individual value judgements, there is no significant difference between them although Turkey has a slightly more individual structure. In Hofstede’s study, both countries are evaluated as collectivist when considered separately (Rose et al., 2007). 299 “Turkey, with a score of 37 is a collectivistic society. This means that the “We” is important, people belong to in-groups (families, clans or organisations) who look after each other in exchange for loyalty. Communication is indirect and the harmony of the group has to be maintained, open conflicts are avoided. The relationship has a moral base and this always has priority over task fulfillment. Time must be invested initially to establish a relationship of trust. Feedback is always indirect, also in the business environment (http://geert- hofstede.com/turkey.html). Malaysia, with a score of 26 is a collectivistic society. This is manifest in a close long-term commitment to the “member” group….” (http://geert-hofstede.com/malaysia.html). Power Distance is the degree of inequality of power between a person at a higher level and a person at a lower level (Harvey 1997). This can be explained by a high level of inequality of power and wealth within the societies. In large power distance cultures, one’s social status must be clear so that others can show proper respect (Mooij and Hofstede, 2011). Malaysia (score of 104) has a significantly higher power distance index ranking than Turkey (score of 66). This means that there is greater divide in power with people who work in the same organization (Rose et al., 2007). Hofstede’s study indicates that in high-power distance societies like Malaysia, employees are afraid to express disagreement with their managers. In terms of Hofstede’s cultural dimensions; “Turkey scores high on power distance dimension (score of 66) which means that the following characterises the Turkish style: Dependent, hierarchical, superiors often inaccessible and the ideal boss is a father figure. Power is centralized and managers rely on their bosses and on rules. Employees expect to be told what to do. Control is expected and attitude towards managers is formal. Communication is indirect and the information flow is selective. The same structure can be observed in the family unit, where the father is a kind of patriarch to whom others submit (http://geert-hofstede.com/turkey.html). Malaysia scores very high on this dimension (score of 104) which means that people accept a hierarchical order in which everybody has a place and which needs no further justification. Hierarchy in an organisation is seen as reflecting inherent inequalities, centralization is popular, subordinates expect to be told what to do and the ideal boss is a benevolent autocrat. Challenges to the leadership are not well-received” (http://geerthofstede.com/malaysia.html). 300 Uncertainty Avoidance is the extent to which an organization or society strive to avoid uncertainty by relying on established social norms, rituals, and bureaucratic practices. People in high uncertainty avoidance cultures actively decrease the probabilty of unpredictable future events that could adversely affect the operation of an organization or society and remedy the success of such adverse effects while future possibilities are defended against or accepted (House and Javidan, 2004). Turkey (score of 85) has a significantly higher uncertainty avoidance index in comparison to Malaysia (score of 36). Thus, there is a huge need for laws and rules. In terms of Hofstede’s culturel dimensions; Turkey scores 85 on uncertainty avoidance and thus there is a huge need for laws and rules. In order to minimize anxiety, people make use of a lot of rituals… (http://geert-hofstede.com/turkey.html). Malaysia scores 36 on this dimension and thus has a low preference for avoiding uncertainty. Low uncertainty avoidance index societies maintain a more relaxed attitude in which practice counts more than principles and deviance from the norm is more easily tolerated. In societies exhibiting low uncertainty avoidance index, people believe there should be no more rules than are necessary and if they are ambiguous or do not work, they should be abolished or changed. Schedules are flexible, hard work is undertaken when necessary but not for its own sake. Precision and punctuality do not come naturally, innovation is not seen as threatening (http://geert- hofstede.com/malaysia.html). Masculinity is the extent to which the goals of men dominate those of women. Masculine societies tend to attach more importance to career and money, and the attitude is to live to work; whereas, feminine nations value relationships, helping others, the physical environment, and people only work in order to live. In masculine cultures, household work is shared less between husband and wife than in feminine cultures (Mooij and Hofstede, 2011). Malaysia can be considered a masculine society (score of 50) and Turkey (scores of 45) and on the feminine side. In terms of Hofstede’s culturel dimensions; Turkey scores 45 and is in the “middle” of the scale but more on the feminine side. This means that the softer aspects of culture such as leveling with others, consensus, sympathy for the underdog are valued and encouraged. Conflicts are avoided in private and work life and consensus at the end is important. Leisure 301 time is important for Turks, it is the time when the whole family, clan and friends come together to enjoy life...(http://geert-hofstede.com/turkey.html). At 50, Malaysia can be considered a masculine society – highly success oriented and driven. In masculine countries, people “live in order to work”, managers are expected to be decisive, and the emphasis is on equity, competition and performance. Conflicts are resolved by fighting them out. A clear example of this dimension is seen around election time, with ferocious, no-holds barred battles between candidates (http://geert-hofstede.com/malaysia.html). 5. Research Methodology The aim of the study is to analyze innovativeness and internal control of human resources in Turkey and Malaysia which are developing countries and have different cultural characteristics. The aim has been to determine the tendency of innovativeness and internal locus of control of individuals in the position of middle-level manager living in Turkey and Malaysia. With this aim, a survey method was adopted as the data collection tool, and SPSS 15.0 package program was used in the data analysis. The population of the study was determined as middle-level managers working within the production sector in Ankara and Kuala Lumpur. Stratified random sampling was used as the sampling method. The survey was applied on 185 people with face-to-face interviews with only 168 of them – 90 from Turkey and 78 from Malaysia – which was considered valid. The survey instrument was composed of 22 items. Of the 22 items, 18 were used to construct scales for novelty seeking (YA) (4 items), locus of control (IK) (10 items) and innovativeness (YE) (8 items). Items were adapted from Mueller and Thomas (2000). Respondents were asked to indicate the extent to which they agreed or disagreed with each item by choosing one of five responses: (5) strongly agree, (4) agree, (3) indifferent, (2) disagree, or (1) strongly disagree. 6. Findings of the Study Cronbach’s Alpha reliability analysis was applied for 22 items in the scale; however, the coefficient was below 0.600. As a result of this, 8 items were excluded from the scale since their item total correlation results were low and Cronbach’s alpha reliability coefficient of 14 questions were determined as 0.720. When the averages of the variable are analyzed for Locus of Control the averages of IK8, IK5, and IK7 were similar for both countries. The Malaysian respondents to IK3 questions were slightly less agreeable (2.03) than the Turkish respondents (2.51). Additionally the Malaysian response to 302 Question 13 was marginally higher (3.84) than the Turks (3.67). When each question about innovativeness are compared; the average responses for questions about YE1 (3.29) and YA4 (2.62) given by the Turks are lower than the Malaysians (YE1 3.40 and YA4 3.55); while the averages of YE8 (3.84) and YA3 (4.18) questions are higher than that of the Malaysians (YE 8 3.56 and YA3 3.90). Factor analysis was applied to both countries on the basis of two groups’ innovativeness and locus of control. As a result of factor analyses applied for Turkey and Malaysia, Varimax results for Innovativeness and Locus of Control Factors are given (Table 2). 303 Table 2. Factor Analysis Factor Loads Factors Turkey Malaysia Innovativeness Factor YE1 I often surprise people with my novel ideas. 0.624 0.581 YE2 0.534 0.573 YE4 I prefer work that requires original thinking. 0.498 0.563 YE8 I like to experiment with various ways of doing the same thing. 0.444 0.797 YA1 I like to experiment with new ways of doing things. 0.715 0.842 YA2 I like to fool around with new ideas even if they turn out to be a waste of time. 0.692 0.717 YA3 I like to try new and different things. 0.760 0.851 YA4 When I see a new brand on the shelf, I often buy it just to see what it’s like. 0.413 0.644 IK3 When I get what I want, it is usually because I am lucky 0.410 0.432 IK4 My life is determined by my own actions. 0.599 0.816 IK5 When I get what I want, it is usually because I worked hard for it. 0.312 0.702 IK7 Whether or not I am successful in life depends mostly on my ability. 0.611 0.683 IK8 I feel that what happens in my life is mostly determined by people in powerful positions. 0.614 0.430 IK9 I feel in control of my life 0.369 0.595 People often ask me for help in creative activities. Locus of Control Factor 304 When the table was analysed, it was decided that all the items in the scale were important and needed to be included for the results of both countries. Then, Cronbach Alpha Coefficients were calculated in order to determine the level of reliability of these factors. Since the reliability result of locus of control in Turkey is 0.556 < 0.600, IK3 and IK8 questions, whose item total correlation are low, were excluded and assessment was carried out again. As a result of this evaluation, reliability was calculated as 0.610 for locus of control while reliability was calculated as 0.732 for innovativeness. Locus of control reliability was 0.698 and innovativeness reliability was found to be 0.862 in Malaysia. In the study, two hypotheses were formed about measurement and whether there was a difference between internal locus of control (loc) and innovativeness (inn) of middlelevel managers. Hypothesis 1: There is no statistical difference between Turkish and Malaysian middlelevel managers in terms of internal locus of control. Hypothesis 2: There is no statistical difference between Turkish and Malaysian middlelevel managers in terms of innovativeness. Table 3. Independent Sample t-test Results loc inn Std. Std. Error Country N Mean Deviation Mean 1 TR 90 3.9583 .53822 .05673 2 MA 78 3.4124 .42277 .04787 1 TR 90 3.5236 .58206 .06135 2 MA 78 3.5978 .66500 .07530 305 t p 7.355 0.000* -0.763 0.446 Independent sample t-test was used in order to test the hypotheses. As a result of the first t-test presented in the Table 3, Hypothesis 1 was rejected (t: 7.231, p<0.05). Hence, there is a significant statistical difference between Turkish and Malaysian middle-level managers in terms of locus of control. The level of locus of control of these managers in Turkey is significantly higher than those in Malaysia. As a result of second the t-test presented in the Table 3, Hypothesis 2 was accepted (t: 0.463, p>0.05). There is no significant statistical difference between Turkish and Malaysian middle-level managers in terms of innovativeness. CONCLUSION This study aimed to determine whether there is a difference between middle-level managers in terms of internal locus of control and innovativeness in the process of new product development. As a result of the evaluation, the averages of some of the questions for innovativeness and locus of control differ for each country. The perception of locus of control is noticeably different in Turkey and Malaysia. There is a significant difference between Turkish and Malaysian middle-level managers with regard to locus of control. Factor loads of IK4, IK5 and IK9 questions were high among Malaysian middle-level managers. This difference can be interpreted as Malaysian middle-level managers having internal locus of control while Turkish middle-level managers having external locus of control. Individuals who have external locus of control think they cannot influence the events happening around them and they perceive uncertainity as a threat and avoid obscure environment, which is related to cultural factors. This result is supported with the studies of Hofstede (1984) who states that there is a high level of avoidance because of uncertainty in Turkey. At the same time, this result is parallel with the result of Muller and Thomas (2000) who state that in cultures where there is low uncertainty, internal locus of control and innovativeness features are high. Since individualist societies are more supportive and tolerant towards individual practices compared with other societies, it is expected that the tendency of internal locus of control shall be more common compared with collective cultures (Mueller and Thomas, 2000). The results show that although Turkey has more individualist characteristics compared to Malaysia, it has a tendency towards external locus of control. 306 Tabak et al. (2010) stated that individuals who have internal locus of control have a high tendency of tolerance towards uncertainity while those who have external locus of control avoid uncertainty. In different studies it was determined that individuals who have internal locus of control take risks in necessary conditions, whereas individuals who have external locus of control take more risks in situations dominated by chance (Cohen et al., 1979). According to the results, there was no significant difference between Turkish and Malaysian middle-level managers in terms of innovativeness. Yet considering the little difference between factor averages (Table 3), it can be expressed that Malaysian middle-level managers are more innovative compared to Turkish middle-level managers since Malaysian middle-level managers are more tolerant towards uncertainty. Although individualism has been proposed to encourage innovation (Hofstede, 1984), Shane (1993) found evidence that many collectivist Asian nations are becoming more innovative (Juri, 1999). Moreover, it was determined in the studies carried out in the sense of cultural differentiation that individuals show more tolerant behavior in cultures which show avoidance because of low uncertainty (Vecchi and Brennan, 2009; Singh, 2006: 76). In the process of new production development; management and leadership practices, organization culture and the existence of an organizational climate may have important contributions to the increase in the innovativeness level of individuals. Especially in the sense of in-house innovativeness, Tabak et al. (2010) found that the personal traits and tendencies of low and middle-level managers are quite important. Similarly, as a result of the study on Malaysian and Turkish middle-level managers with regard to innovativeness and internal locus of control, it was determined that there are important differences especially in terms of locus of control. 307 REFERENCES Aycicegi-Dinn, A., and Caldwell-Harris, C. (2011) Individualism-collectivism Among Americans, Turks and Turkish Immigrants to the U.S., In International Journal of Intercultural Relations, 35, 9-15 Balbontin, A., Yazdani, B.B., Cooper, R., and Souder W.E. 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(2009) A Cultural Perspective on Innovation in International Manufacturing, Research in International Business and Finance, 23, 181192. 311 312 CHAPTER 13 A SUBDIMENSIONAL APPROACH TO THE RELATION BETWEEN ETHICAL CLIMATE AND ORGANIZATIONAL COMMITMENT Assist. Prof. Dr. Oznur Azizoglu Hacettepe University, Turkey, e-mail: nur@hacettepe.edu.tr Dr. Eren Miski Aydin Hacettepe University, Turkey, e-mail: erenma@hacettepe.edu.tr Dr. Kubilay Ozyer Gazi Osman Paúa University, Turkey, e-mail: kubilay.ozyer@yahoo.com INTRODUCTION Ethical climate, without hesitation, provide information to its members about the ethical expectations (Wood and Rimmer, 2003; O’Dwyer and Madden, 2006). It is a kind of organizational climate which reflects organizational policies, procedures and applications with moral consequences. In other words, it is the perception of the right behavior. This kind of climates emerge as the organizational members believe in the standards and norms that should be used to make decisions (Martin and Cullen, 2006). One of the most critical issues in an organization is to identify the ethical climate type before applying any strategies to manage ethical behavior as different ethical climate types determine different strategies (Desphande et al., 2000). There are unidimensional and multidimensional approaches to organizational commitment in litereature. Among these approaches Allen and Meyer’s multidimensional approach is the widely known and accepted one. With the help of this approach organizational commitment can be clearly understood. More over workers can examine the three psychological states simultaneously at different levels. For example an employee eventhough have high levels of desire and need to stay in the organization, might not see it as obligatory. On the other hand, another employee might have high 313 level of obligation, medium level of need and low level of desire (Demir et al., 2008). Accordingly to determine the commitment levels of an individual, the different types of commitment has to be assessed. It is easy to find a theoretical reason for the relation between ethical climate and organizational commimtent. Organizational commitment can be developed by the harmony between job experiences, organizational effects (Angle and Perry, 1986), dominant organizational values and personal values. Among the dominant organizational values, ethical climate plays an important role for developing the work conditions (Trevino et al., 1998). Therefor reason the ethical environment effects the employees job experiences and their commitment and drawing the outer limits of organizational environment. 1. Ethical Climate According to different researchers ethical climate is defined as follows: Ethical climate is a sub set of organizational climate and pointing out the norms that help to resolve ethical issues (Lemmergaard and Lauridsen, 2008). Ethical climate is composed of the perception of organizational members’ application and procedures related to ethical issues in organizations. Perceived ethical climate is helping organizational members to find answers to questions such as: “What topics have ethical content?”, “What is the appropriate decision criteria?” and “What should I do?” (Barnett and Vaicys, 2000). An organization’s ethical climate is the shared perception of the ethically right behavior and how the ethical issues should be handled. Ethical climate is a significant part of organizational climate (Wyld and Jones, 1997). The concept of ethical climate can be described as a way to explain ethical issues. An organization’s ethical climate present cues to its members for acceptable and unacceptable behaviors (Wimbush et al., 1997) Ethical climate is the shared acceptances in an organization for handling the ethical problems and what are the right decisions to make to resolve these problems. It is the perception of a member what he/she should do when facing with an ethical problem (Bartels et al., 1998) 314 Some studies in the literature take ethical climate as a unidimensional construct (Schwepker, 2001; Jaramillo et al., 2006; Weeks et al.,2004; Schwepker et al.,1997) whereas many other studies claim that to take ethical climate as a multidimensional costruct makes it much easier and comprehensive to understand the job related attitudes and behaviors of employees (Babin et al., 2000; Martin and Cullen, 2006; Trevino et al.,1998; Erondu et al.,2004; Joseph and Desphande,1997; Victor and Cullen,1988; Ambrose et al.,2008; Wimbush et al.,1997). Recently the most accepted and widely known ethical climate theory is the one developed by Victor and Culen. They studied ethics, moral development theory and the organizational socio-cultural theories all together which lead them find out the ethical climate dimensions (Joseph and Desphande, 1996). Their theory has a multidimensional perspective but these dimensions still have interrelated relations with one another (Kelly and Dorsch, 1991). Victor and Cullen’s (1988) theory used two dimensions for the typology of ethical climate. First dimension represents the ethical criteria used for organizational decision making whereas the second one represents the locus of analysis used as a referent in ethical decisions. As a result of these two dimensions, 9 subdimensions of ethical climate was found. Mentioned subdimensions are at Table 1. 315 Table 1. Subdimensions of Ethical Climate Locus of Analysis Individual Local Cosmopolitan Self-interest Company profit (Instrumental) (Instrumental) Friendship Team Profit (Caring) (Caring) Personal Company Moralitiy and Procedures Professional Codes (Independence) (Rules) (Law and Codes) Efficiency Egoism Social responsibility Ethical Criteria Benevolence Principle Rules Laws and Source: Viktor and Cullen, 1988 Ethical Criterion- This dimension eventough very complicated in details has three major classes: egoism, benevolence and principle. Psychological theories of moral development claim that individuals use same criterias for moral reasoning. These 3 ethical theory classification also lies under Kohlberg’s six development stages (Sims and Keon, 1997; Barnett and Vaicys, 2000). Locus of Analysis- This dimension is the source of moral reasoning used for applying ethical criteria to organizational decision making and it identifies the limits on what would be considered in ethical anaylsis of organizational decisions. According to Victor and Cullen, these classes are individual, local and cosmopolitan. As a result of the factor analysis five dimensions of ethical climate was found (Victor and Cullen, 1988; Cullen et al., 1993; Vaiciys et al.,1996; Wimbush et al.,1997; Barnett and Vaicys, 2000). The table below is summarizing the ethical climate types (Table 2). 316 Table 2. Five Subdimensional of Victor and Cullen’s Ethical Climate Theory Locus of Analysis Ethical Criteria Individual Local Egoism INSTRUMENTAL Benevolence CARING Principle INDEPENDENCE RULES Cosmopolitan LAW AND CODES Source: Martin and Cullen, 2006 Caring: Employees working under this type of climate belive that they should make decisions for the good and benefit of others. They think that decisions are made not only for the good of organization but also for the good of society (Cullen et al., 1993). Laws and Codes: The basis of decision making in this type of ethical climate is the external codes such as laws, religious books and professional ethic codes. When employees are making decisions, they take some external systems as their references and make their decisions accordingly (Wimbush et al., 1997). Rules: Company rules, procedures and policies are seen in “Rules” type under the ethical climate typology. In this type of ethical climate, it is believed that ethical codes or rules are guiding decision making within organizations (Martin and Cullen, 2006). Intstrumental: Instrumental ethical climate is composed of norms and expectations that encourage employees to make decisions from an egoist point of view. In such a climate, the self-interest of employees would guide their own behaviors even though this would harm others. Employees believe that decisions are made to serve the good of organization and to benefit the workers (Martin and Cullen, 2006). Independence: Decisions made under this type of climate reflect the individual moral beliefs. The effect of external factors are minimized. The basis of decision making is the individual principles (Barnett and Vaicys, 2000). 317 2. Organizational Commitment There are a lot of organizational commitment definitions in literature some of which take organizational commitment as a multidimensional construct whereas some take it as a unidimensional one. Below are some of these definitions: Organizational commitment is emphasizing the interest and attachment of the employee for his/her organization, and how the employee can relatively self-describe him or herself with the organization (Jaramillo et al., 2005). Organizational commitment is pointing out the loyalty of the employee to the organization and organizational purposes (Knoop, 1995) Organizational commitment is the sum of the normative pressures which move employees in the direction of organizational purposes and benefits” (Wiener, 1982). Organizational commitment is the willigness of the employee to make an effort to believe in organizational purpose and values and willingness to stay in the organization (Mowday et al., 1979) The concept of commitment can be described as the request to become the member of an organization, as the willingness to exert higher levels of effort for the organization, as the loyalty towards the organization, as the acceptance of the values and purposes, and as the positive peception of the organization (Marsh and Mannari, 1977). Organizational commitment is focusing on employees describing themselves through their organizations. Then the employee will find it valuable to be a member of the organization and will be willing to do more than expected from him or herself to achieve the organizational mission (Welsh and LaVan, 1981). Descriptions above are indicating different sides of organizational commitment. The widely used multi dimensional organizational commitment structure is introduced by Meyer and Allen. In their structure they present three dimensions of organizational commitment which are emotional, normative and continuancee. These 3 dimensions are negatively related to the turnover intention eventhough each one of them show differences (Vanderberge and Tremblay, 2008). 318 Today, studies are heading to combine all of organizational commitment studies under one model and it looks like it is shaping around the widely accepted model of Meyer and Allen (Allen and Meyer, 1990; Jaros, 1997; Cohen and Kirchmeyer, 1995; Somers, 1995; Meyer and Allen, 1984, 1991; Mowday, 1998; Dunham et al., 1994; Meyer et al., 1993; 1991; 1989 Hackett et al., 1994; Allen and Grisafe, 2001; Allen and Meyer, 1996; Randall, 1990; Randall et al., 1990). The assumption behind the three dimensional model is that each dimension occurs as a result of a different experience and they have different effects on job related behaviors. Eventhough the three dimensions are negatively related to job turnover intention, their relation to other job related behaviors such as job achievement and organizational citizenship behavior show differences. As a summary, psychological state which describes the relation between the member and the organization has 3 independent components that determine employee behaviors. Affective commitment is pointing at the emotional relations of employee towards the organization. Continuancee commitment is pointing that the employee realizes what will happen if he or she decides to leave the organization. Lastly, the normative commitment is showing the liability of the employee towards the organization because of a moral or a cultural reason. 2.1. Affective Organizational Commitment In this type of commitment, employees identify themselves with their organization and are happy to be part of it. (Allen and Meyer, 1990). This type of commitment was developed from Kanter’s (1968) cohesion commitment view. Employees with strong affective organizational commitment like to stay in their organization because they want to. Allen and Meyer’s (1984, Meyer and Allen, 1990) affective organizational commitment dimension and Porter and his friends (1974, 1976) unidimensional organizational commitment construct shows resemblances. Organizational commitment can be defined as “the strength of an individual’s identification with an involvement in a particular organization” (Porter et al., 1974). It is an affective repsonse to the whole organization and the degree of attachment or loyalty employees feel towards the organization (Guleryuz et al., 2008). The studies of Porter and his friends can be considered as the predecessor of Meyer and Allen’s multidimensional models affective organizational commitment studies (Dunham et al., 1994). This point of view accepts 319 the definition of affective organizational commitment developed by Porter and his friends as the most widely used one (Mowday et al., 1979; Porter et al., 1974, 1976). 2.2. Continuancee Organizational Commitment Continuancee organizational commitment means more logic and less emotions (Hackett et el., 1994). Just like affective commitment, continuancee commitment is increasing the possibility that the employee would stay in the organization however the cost would be lower job performance (Aúan and Özyer, 2006). Continuancee commitment has two foundations which are side bets and lack of alternatives. These inferences are made based on the studies of Becker (1960) together with Farrell and Rusbult (1981; Rusbult and Farrell, 1983). Meyer and Allen (1984, 1991) and Allen and Meyer (1990) claimed that anything that makes it hard for the employee to leave the organization as they have to pay something, must be considered affecting the continuancee commitment. The employee with high levels of continuancee commitment stay in the organization because he or she has to. They behave in certain ways not because they want or they believe it is the right thing to do but because they believe this would provide them some reward or prevent some risks (Randall et al., 1990). 2.3. Normative Organizational Commitment This refers to the liability employee feels for staying in the organization (Hackett et al. 1994). The normative component of commitment is shaped with experiences employee have before entering the organization through his/her family and cultural factors together with the experiences he/she will have on the process of entering the organization (Allen and Meyer, 1990). Wiener (1982) is defining commitment as the summation of all the normative pressures for achieving the organizational purposes and interests. These kind of people behave in certain ways as they believe it is the right and moral thing to do and they learn to behave that way through socialization process and their individual background (Randall et al., 1990; Aúan and Özyer, 2006). Employees with high normative commitment stay in their organization because they ought to (Allen and Meyer, 1990; Allen and Grisafe, 2001; Wasti 2003; Tsai and Huang, 2008). 320 According to Meyer and Allen’s model, these three dimensions can be summarized as the psychological condition of the employee which are composed of three independent variables that affect the behaviors. 3. Empirical Study 3.1. Hypotheses There are a lot of studies claiming the relation between ethical climate and organizational commitment in literature (Fritz et al., 1999; Hunt et al., 1989). Weeks and his friends (2004) found in their study that ethical climate has positive effects on organizational commitment through higher job performance. Schwepker (2001) studied the relation between ethical climate and organizational variables and as a result he stated that one of the promising studies for the future should be on the relation between Victor and Cullen’s (1998) ethical climate types and organizational commitment. One of the practical uses of the study is to show the practioners that with the use different ethical climate types, organizational commitment of employees could be affected (Cullen et al., 2003). According to the results of some studies it is found that when employees perceive an egoist climate in an organization, they would care their own benefit and gains as everyone else in the organization would do the same. Naturally, under such climates it is not expected to have high collaboration and cohesiveness and therefor there is lower organizational commitment. On the other hand, benevolence ethical climate and organizational commitment is found to be positively related to one another. This result can be explained as employees thinking their organization as a fair place to work which thinks the good of its employees. This type of climate increase the interaction and collaboration among the employees so the organizational commitment of employees will increase as well. Lastly, in accordance with literature it was found that for professionals there is a positive relation between principled ethical climate and organizational commitment whereas it is unrelated for non professionals. One of the reasons for that might be professionals are externalizing some values during their formal trainings and afterwards when they see these values being used in the organization, this increase their attachment and commitment to the organization. H1: There is a positive relation between ethical climate and organizational commitment. 321 Babin and his friends (2000) analyzed ethical climate in four dimensions and found out that ethical climate, role conflict, job satisfaction and organizational commitment are highly related with one another. According to Trevino and his friends (1998) ethical climate which focuses on personal benefits is negatively affecting organizational commitment. Another study by Tsai and Huang (2008) found that the caring is positively related with job satisfaction and normative organizational commitment. Independence ethical climate type is found to be positively related with job satisfaction whereas unrelated with any dimension of organizational commitment. Rules ethical climate type is positively related with job satisfaction and normative organizational commitment. On the other hand, there is a strong negative relation between instrumental ethical climate type and job satisfaction and satisfaction through promotion. Moreover this type of climate demonstrates a negative relation with both affective organizational commitment and general organizational commitment meanwhile positive relation with continuancee organizational commitment. In the light of these findings in literature another hypothesis is added to the study. H2: The relation between the subdimensions of ethical climate and subdimensions of organizational commitment are different from one another. 3.2. Method One structured questionnaire consisting of two seperate surveys were used in order to gather data for analysis of the study. The first survey which was composed of 24 questions was used to measure the organizational commitment and subdimensions of organizational commitment. The second survey was used to measure the participants perception of ethical climate. There were 26 questions which were also measuring the 5 subdimensions of ethical climate. Organizational commitment questionnaire was used previously by some other studies in Turkey. It had a valid and reliable translation therefor the translated version of the questionnaire was used in this study. Ethical climate questionnaire was translated for this study. The questionnaire was back-and-forward translated by different bilingual researchers following Brislin’s (1976) guidelines. Translated questionnaire was reviewed and no changes were made. According to Allen (2003) translation-back 322 translation is the only way to use a survey which is developed for a particular culture in another culture. After back-and-forward translation, a pilot study for 35 people was made to see if the questions are understandable. The pilot study showed the reliability of the translated questionnaire as well. Organizational commitment was measured by Allen and Meyer’s (1990) widely used and reliable multidimensional questionnaire. The reliability of the questionnaire was assessed by computing the Cronbach alfa of the each question of organizational commitment and sub dimensions of organizational commitment. The reliability test results are given at Table 3. Table 3. Reliability Test for Organizational Commitment and Subdimensions of It. Questionnaire/Subdimension Coefficient Alpha Organizational Commitment 0.83 Affective Commitment 0.91 Continuancee Commitment 0.87 Normative Commitment 0.79 The response format was a 5-point Likert-type scale from “I strongly disagree” to “I strongly agree”. The lowest score was 24 whereas the highest was 120. Before the analysis, the reverse questions were taken and according to these results each participant’s score was calculated. Higher scores indicate higher organizational commitment and lower scores indicate lower organizational commitment. As the questionnaire is a multidimensional one, it gives a chance to assess the affective organizational commitment, continuancee organizational commitment and normative organizational commitment of the participants. Each 8 questions of the questionnaire were designed to measure a different dimension of organizational commitment. First 8 questions such as “I would be very happy to spend the rest of my careeer with this organization” and similar were aimed at measuring affective organizational commitment. Second 8 questions were intended to measure continuancee organizational commitment. Among the questions were “Too much in my life would be disrupted if I 323 decided I wanted to leave my organization now” and similar. Last 8 questions were designed to measure the normative organizational commitment like “I was taught to believe in the value of remaining loyal to one organization”. Factor analysis has been done in order to see if the organizational commitment questionnaire is appropriate to be used as multi dimensional. The results of the analysis indicate that questions were grouped in 3 different questions. The second questionnaire of the study was developed by Victor and Cullen (1988) to measure the ethical climate of the organization. Eventhough original of the questionnaire was composed of 9 dimensions, the writers found out 5 factors as a result of the factor analysis. However follow up studies on the same questionnaire found 6 dimensions. In literature it is possible to find studies taking ethical climate as 5 or 6 dimensional. As a result of the current study’s factor analysis, it was found appropriate to group questions into 5. The subdimensions of ethical climate are as fallows: 1. Caring (questions number 1.,2.,3.,4.,5.,6.,7.), 2. Laws and codes (questions number 8.,9.,10.,11.), 3. Rules (questions number 12.,13.,14.,15.), 4. Instrumental (questions number 16.,17.,18.,19.,20.,21.,22.) and 5. Independence (questions number 23.,24.,25.,26.). In order to test the reliability of the ethical climate questionnaire, Cronbach Alpha values of each dimension of ethical climate and the questionnaire was assessed. Reliability test for the questionnaire and the sub dimensions are given at Table 4. 324 Table 4. Reliability Test for Ethical Climate and Subdimensions of It. Questionnaire/Subdimension Coefficient Alpha Ethical Climate 0.89 Caring 0.83 Law and Codes 0.93 Rules 0.86 Instrumental 0.79 Independence 0.80 3.3. Sample To test the hypothesis of the current study a sample of 7 organizations employees in Istanbul was choosen. The main reason to choose the sample was the ease and the size of the organizations. They were relatively big size organizations which have functional departments such as marketing and production. Only the administrative employees of the organizations were given the survey. Total employee number in organizations are 327. Therefor 327 questionnaire were distributed. The response rate was %75,84. Among 248 questionnaires, 37 was not appropriate for the analysis. Therefor only 221 questionnaires were analyzed. 3.4. Findings In order to test the hypothesis of the study, corelation coefficients were examined. Results of the tests were given at Table 5. The first hypothesis of the study was “There is a positive relation between ethical climate and organizational commitment”. In order to test the hypothesis correlation analysis test was used. As can be seen from Table 5, there is a strong positive relation between ethical climate and organizational commitment (r = 0,28; p < 0,01). In other words the first hypothesis of the study was accepted. 325 The second hypothesis of the study which was taking the variables together with their sub dimensions was “The relation between the sub dimensions of ethical climate and sub dimensions of organizational commitment are different from one another”. To test this hypothesis, correlation coefficients of the variables were compared. The results indicate very remarkable findings among which the most important one was that the sub dimensions of ethical climate that found to be positively related with affective and normative commitment, was found to be negatively related with continuancee commitment. Table 5. The Results of Corelations Analysis Affective Commit. Continuancee Normative Organizational Commit. Commit. Commit. Affective 1,000 Commitment Continuancee -0,363* 1,000 0,473* -0,280* 1,000 0,732* 0,190* 0,703* 1,000 Caring 0,527* -0,418* 0,330* 0,504* Law and Codes 0,390* -0,380* 0,376* 0,202* Rules 0,315* -0,240* 0,461* 0,271* Instrumental -0,467* 0,366* -0,159* -0,330* Independence 0,305* -0,216* 0,272* 0,230* 0,309* -0,272* 0,424* 0,282* Commitment Normative Commitment Organizational Commitment Ethical Climate * Correlation is significant at the 0,01 level ** Correlation is significant at the 0,05 level 326 Table 5. - continued Caring Law Rules And Codes Instru- Indepen- mental dence Ethical Climate Affective Commitment Continuancee Commitment Normative Commitment Organizational Commitment Caring Law 1,000 and 0,528* 1,000 Rules 0,429* 0,621* 1,000 Instrumental -0,483* -0,180* -0,112 1,000 0,532* 0,457* 0,277* -0,183* 1,000 0,680* 0,754* 0,670* 0,139** 0,664* Codes Independence Ethical Climate * Correlation is significant at the 0,01 level ** Correlation is significant at the 0,05 level 327 1,000 Another important finding is that, there are strong positive relations between affective organizational commimtent and caring ethical climate (r = 0,527; p < 0,01); law and codes ethical climate (r = 0,39; p < 0,01); rules ethical climate (r = 0,315; p < 0,01); independence ethical climatem (r = 0,305; p < 0,01). The only negative relation is with the instrumental ethical climate (r = -0,467; p < 0,01). The findings for the relation between continuancee organizational commitment and sub dimensions of ethical climate is the opposite of the findings for affective organizational commitment and sub dimensions of ethical climate. The only strong positive relation is between continuancee organizational commitment and instrumental ethical climate (r = 0,366; p < 0,01). The negative relations between continuancee organizational commitmens and sub dimension of ethical climate are with caring ethical climate (r = 0,418; p < 0,01); with law and codes ethical climate (r = -0,38; p < 0,01); with rules ethical climate (r = -0,24; p < 0,01) and with independence ethical climate climate (r = -0,216; p < 0,01). Lastly, when the relation between normative organizational commitment and sub dimensions of ethical climate has been analyzed, it is found that the strong positive relation is with rules ethical climate (r = 0,461; p < 0,01); with law and codes ethical climate (r = 0,376; p < 0,01); with caring ethical climate (r = 0,33; p < 0,01) and with independence ethical cliamte (r = 0,2872; p < 0,01). The only negative relation was found with instrumental ethical climate (r = -0,159; p < 0,01). CONCLUSION Researches have showed that every organization has one of the above mentioned ethical climate types as the dominant one and that the climate of the organization has to be defined with that one (Martin and Cullen, 2006). As the first hypothesis of the study indicate there is a strong positive relation between ethical climate and organizational commitment. This finding indicate that ethical climate positively affects organizational commitment and organizational commitment positively affects ethical climate in an organization. Of course to take the variables as unidimensional would not provide satisfactory information therefor when the sub dimensions of ethical climate and organizational commitment were taken into 328 consideration than the relations between them show significant differences. Furthermore, the findings of the relation between some sub dimensions of the variables show that there is a negative relation between them as opposed to the findings of the first hypothesis. When the relation between affective organizational commitment and sub dimensions of ethical climate has been closely analyzed, remarkable findings were found. There is a positive relation between affective organizational commitment and caring, rules, law and codes, independence sub dimensions of ethical climate. Among which the strongest relation is with caring. Respectively followed by law and codes, rules and independence sub dimensions of ethical climate. The relation between affective organizational commitment and instrumental ethical climate is significantly important as the relation is a strong negative one. This finding indicate the significance of the current study. If the study has taken the variables as unidimensional instead of multidimensional, than the findings of the study were going to be very limited. The first hypothesis verify a positive relation between ethical climate and organizational commitments of the employees whereas the second one indicates a negative relation. According to the findings of the study, if the ethical climate of an organization is the instrumental one than the affective organizational commitment of the employees will be negatively affected which means the level of their commitment will be decreased. Fot that reason it is very important to determine the type of the ethical climate by managers and than to establish a strategy to follow for desirable outcomes for an organization. Another finding that must be addressed is that there is a positive relation between affective organizational commitment and caring type ethical climate. Employees in caring ethical climate type, have behaviors and attitudes for the good and benefit of others. This is not a surprising finding as the Turkish society is collectivist, sociable and friendly. It is natural that an employee who thinks his or her co-workers and managers think their good would have high affective organizational commitment. For that reason managers in Turkish organizations must pay attention to this finding carefully. If organizations can create such a climate, than the employees will bind themselves to their organization affectively. One other striking finding about the analysis of the sub dimensions is the relation between the continuancee organizational commitment and the sub dimensions of ethical 329 climate. Continuancee organizational commitment is the least preferred ethical climate type by the organizations (Allen and Meyer, 1990, 1996) as the employee stay in the organization because he or she has no other choice. According to Allen and Meyer (1990) employee stay in the organization but they would be unproductive. That’s why it would be logical to say that organizations should try to attach their employees to their organization with affective organizational commitment if not with normative organizational commitment but not with the continuancee organizational commitment. Continuancee organizational commitment which is found to provide minimum benefit in rare cases and harm in most cases to the organization, has positive relation only with the instrumental ethical climate. All of the sub dimensions of ethical climate types other than instrumental ethical climate decrease continuancee organizational commitment whereas the instrumental ethical climate increase the contiuance organizational commitment. Indeed the instrumental ethical climate is the least preferred one by the organizations. The finding of the high positive correlation between these two least preferred variables in most cases by the organizations is another contribution of the current study. As mentioned above in societies like Turkey where there are close social relations, people do not like to work but have to work under ethical climates which think only the good of the organization. Similar to previous finding, another negative relation was found between continuancee organizational commitment and caring ethical climate. Caring type has been followed by rules, law and codes and independence type of ethical climates. When the findings about the affective and continurance organizationa commitment brought together, it makes it much easier to see the bigger picture clearly. Lastly, the findings about the normative organizational commitment is in accordance with the nature of normative organizational commitment as it is shaped before entering the organization through family and social learning along with rules in the organization. According to the findings of the study, this type of organizational commitment is found to have strong positive relation with rules type ethical climate. After the rules type, law and codes, caring and independence type of ethical climates are coming. Similar to the findings of affective organizational commitment, there is a negative relation between instrumental ethical climate type and normative organizational commitment. 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Her research interests are organizational behavior and management topics such as organizational culture, emotional intelligence, organizational commitment, job satisfaction and ethics. She has published papers and books on her interest area. Hatice Calipinar (PhD) Hatice Calipinar is an Assistant Professor of Operations Management and Marketing Accounting at Hacettepe University, Department of Business Administration. She received her Ph.D. from Gazi University. Over the years, she has taught courses at graduate, undergraduate, and Ph.D. levels on topics such as production and operations management, production systems and policies, production system selection, supply chain management, total quality management, inventory control, service operations management, and production planning and control. Hatice’s publications have appeared in such journals as Ege Academic Review, Hacettepe University Journal of Economics and Administrative Sciences, Innovative Marketing, Problems and Perspectives in Management, and TSE Standard Ekonomik ve Teknik Trend. Kubilay Ozyer (PhD) Assistant Professor at the Department of Business Administration at Gaziosmanpasa University in Tokat-Turkey. He studied business administration at Hacettepe University. He received his MSc degree from the Hacettepe University in Ankara-Turkey and his PhD degree from Hacettepe University also. His research interests are organizational behavior, motivation, leadership, the Turkish civil service and public service ethics. He took roles as an expert and trainer on various programmes. He recently presented various papers in international conferences and published in national and international journals extensively on management, organizational behaviour and ethics. Leyla Ozer (PhD) Leyla Ozer is currently an Associate Professor at the Department of Business Administration, Faculty of Economics and Administrative Sciences, Hacettepe University, Turkey. She received her undergraduate, MBA and PhD degrees from Faculty of Economics and Administrative Sciences, Hacettepe University. She is 341 specifically interested in marketing management, service management and consumer behaviour. Dr. Ozer’s publications include textbooks chapters and various articles published in national and international journals. Mahmut Arslan (PhD) He is a full Professor at the department of Business Administration of Hacettepe University, Ankara Turkey. He completed his MA degree at Hacettepe University and PhD in Leeds University (UK). He is currently director of Hacettepe University, Center for Business and Professional Ethics. He is also president of European Business Ethics Network Turkey. His research interests are organizational culture and business ethics. He published many articles and books in Turkey and abroad mainly on business ethics. He also conducted various research and consultancy projects in Turkey, China, Japan, and Germany. Mehmet Devrim Aydin (PhD) Associate professor of management and organization in the Department of Political Science and Public Administration at Hacettepe University. He graduated from Middle East Technical University, Department of Public Administration, in Ankara, Turkey. After working as an economist and then as an inspector at Is Bank General Directorate from 1992 to 1996, he became a research assistant at Hacettepe University. He received his Ph.D. at Hacettepe University, in 2001. He conducted his postdoctoral studies at Massachusetts University, Isenberg School of Management. He has written and researched mainly in e-government, new public management, intercultural studies, and leadership. Mete Yildiz (PhD) Mete Yildiz is an associate professor of public administration in the Department of Political Science and Public Administration at Hacettepe University. He received his Ph.D. at Indiana University, Bloomington’s School of Public and Environmental Affairs in 2004. Among the topics he studies are government reform, egovernment, public policy, local government, comparative public administration and networks in and around government. Mine Omurgonulsen (PhD) Mine Omurgonulsen is currently an Assistant Professor of Operations Management in the Department of Business Administration of Hacettepe University, Ankara, Turkey. She obtained her Doctorate at the same Department in 2007. Her current research areas include Quality Management, Quality-Ethics Interface, Manufacturing-Marketing Interface, Forecasting Techniques applied to Operations and Reverse Supply Chain Management. She has published papers in TQM&Business 342 Excellence and Problems and Perspectives in Management. Mustafa Kilic (PhD) Mustafa Kilic is currently an Associate Professor in Department of Business Administration, Hacettepe University, Turkey. He received his bachelor’s degree from School of Health Administration, Hacettepe University and MBA from Faculty of Political Sciences, Ankara University. Later, he completed the MA programme on hospital management at University of Leeds, Nuffield Institute For Health. He received his PhD degree from Hacettepe University, Institute of Social Sciences, Department of Management. He has given consultancy services to the Turkish Ministry of Health, to WHO on Reorganisation of Hospital Services in Turkmenistan and leaded some reorganisation projects for public and private organizations. He is interested in health and hospital management, strategic management and human resources management. Oznur Azizoglu (PhD) Oznur Azizoglu is an Assistant Professor at Hacettepe University, Department of Business Administration, Turkey where she has also obtained her PhD. Her research interest is management and organization behavior topics such as motivation, job satisfaction, emotional intelligence, organizational commitment and ethics. She has published papers and books on her interest area. Pelin Guven Ozek (PhD candidate) She is a research assistant at the Department of Business Administration at Gaziosmanpasa University in Tokat-Turkey. She is also an Accounting and Finance PhD candidate at Hacettepe University. Her research interests are financial accounting and capital markets. She has published articles in the journals such as Investment, Management and Financial Innovations, Muhasebe ve Denetime Bakıs and presented at or participated in conferences such as Knowledge, Economy ve Management Congress, World Congress of Accounting Historians, the Balkan Countries Conference on Accounting and Auditing. Pinar Basgoze (PhD) She is graduated from Business Administration Department at Baúkent University. She holds her MBA and PhD from Hacettepe University, Business Administration Department. She is currently an instructor (Dr) at Business Administration Department. She teaches Promotional Strategies, Marketing Strategies in Tourism, Consumer Behavior and Ethics in Marketing at the Department. She has papers published in national and international journals and conferences. 343 R. Erdem Erkul (PhD candidate) R. Erdem Erkul received his master’s degree from Department of Political Science and Public Administration at Hacettepe University, Turkey, where he served as a research assistant from 2003 to 2010. In years 2005 and 2006, he worked as the coordinator of the Total Quality and Strategic Planning activities at Hacettepe University. His research areas are digital government and mobile government. He continues his education in Ankara University at Department of Public Administration as a Ph.D. candidate. Erkul is currently the Manager of Public Affairs & Corporate Citizenship at Microsoft Turkey. Semra Karacaer (PhD) She is an Associate Professor of Accounting at Hacettepe University, Department of Business Administration. She currently teaches financial accounting, audit, financial statement analysis, international and national accounting standards and financial management both at undergraduate and graduate levels. She received her Ph.D. from Gazi University and Master Degree from Hacettepe University. She has published various articles in international journals such as Banking and Finance Letters, International Research Journal of Finance and Economics, The ISE Review, Investment, Management and Financial Innovations, Journal of Business Ethics, Journal of Combinatorial Optimization. She has also published in Hacettepe ødari Bilimler Dergisi, Muhasebe Bilim Dünyası among others. She has also participated as a presenter and/ or discussant at several international and national seminars. Semra Güney (PhD) Semra Güney is a Professor at Hacettepe University Department of Business Administration, Ankara, TURKEY where she teaches Social Psychology, Introduction to Business, Human Resource Management, Entrepreneurship. Dr. Semra Güney has published in the fields of leadership, business ethics, entrepreneurship, learning organizations, organizational behavior. Simon Robinson (PhD) FRSA. Professor of Applied and Professional Ethics, Leeds Metropolitan University. Educated at Oxford and Edinburgh Universities, Robinson became a psychiatric social worker before entering the Church of England priesthood in 1978. He entered university chaplaincy in Edinburgh and Leeds, developing research and lecturing in areas of applied ethics and business ethics. In 2004 he joined Leeds Metropolitan University. He has written and researched extensively in business ethics, corporate social responsibility, the nature and dynamics of responsibility, equality, ethics and culture, and ethics and care. He is co-general editor of the Peter Lang book 344 series on International Studies in Applied Ethics. Tiziana Di Cimbrini (PhD) Tiziana Di Cimbrini is currently an Assistant Professor of Business Administration and Accounting in the Department of Theories and Policies for Social Development of University of Teramo, Italy. She obtained her Doctorate at the Department of Business Economics Studies of the University "G. d'Annunzio" of Chieti (Italy) in 2002. Her current research areas include Business Ethics, Corporate Social Responsibility, Social Reporting, Inter-organizational Accounting and Accounting History. She has pubblished books about Business Ethics and Social Reporting and also papers about Network Theories, Inter-organizational Accounting and Accounting History. In 2008 she won the AIDEA-Giovani (Italian Academy of Business Administration and Accounting/ young researchers section) award. Vugar Hamidli (PhD candidate) Vugar Hamidli is currently PhD student in the Department of Business Administration of Hacettepe University, Ankara, Turkey. He obtained MA at the same Department in 2006. His current research areas include Consumer Behaviour, Promotions and E-Marketing. 345 346 INDEX A C absoluteness..............................................24 accountability 151, 152, 174, 176, 186, 207, 244, 268, 270, 283 Accounting ...... 53, 88, 89, 90, 96, 163, 166, 171, 172, 173, 174, 175, 178, 179, 181, 182, 183, 184, 185, 186, 187, 188, 189, 190, 215, 223, 224, 225, 226, 228, 229, 230, 233, 234, 235, 236, 237, 238, 239, 242, 243, 247, 249, 255, 256, 257, 258, 260, 261, 262, 263 accounting profession....161, 186, 187, 216, 220, 225, 229, 238, 249, 251, 256 accounting theory ...........................159, 229 ACLU 60, 72, 137, 141, 142, 145, 148, 154, 157 Adam Smith ...........9, 77, 78, 81, 83, 89, 91 adaptability...............................................44 Ahi..................................................204, 210 AICPA............................................215, 263 Aldous Huxley .......................................139 American Civil Liberties Union 60, 72, 137, 154, 157 American Institute of Certified Public Accountants........................................215 Apprenticeship........................................81 Aristotle 12, 24, 77, 78, 79, 81, 90, 199, 213 Ataturk Forest Farm .......................194, 205 azienda27, 30, 31, 32, 33, 35, 46, 47, 49, 50 Calvin................................................. 2, 271 cameras ..... 57, 59, 64, 66, 67, 68, 130, 141, 148 Capital Market Board.... 174, 176, 177, 178, 179 Capital Markets Board175, 188, 225, 232, 233, 236, 242, 243, 246 Capital Markets Law (CML) ................. 225 Catholic Social Thought .......................... 7 CCTV 55, 57, 58, 59, 60, 62, 63, 64, 65, 66, 68, 69, 70, 71, 72, 73, 74, 75, 148, 156 Certified Public Accountancy161, 170, 185, 224, 227, 230, 231, 232, 256 Certified Public Accountant.. 161, 230, 233, 244, 245, 246 Chambers of Certified Public Accountants ........................................... 161, 185, 241 Chambers of Sworn-in Certified Public Accountants ............................... 161, 185 Christian Business Ethics............... 1, 16, 17 Christian Ethics...... 1, 10, 12, 15, 16, 18, 20 Christian Theology .................................... 4 Cicero....................................................... 80 civil liberties ...................................... 60, 66 CMB .............. 225, 226, 228, 232, 236, 246 Coda........................... 28, 31, 34, 35, 38, 48 Competitive strategy ................................ 36 confidence..... 29, 39, 40, 44, 107, 162, 179, 204, 241, 245 consensus ... 38, 39, 40, 42, 43, 44, 160, 195 consumer behavior......................... 118, 119 consumer ethics ..................... 117, 120, 121 Continuancee commitment ............ 319, 320 Continuancee organizational commitment ........................................................... 330 Corporate Governance Codes176, 177, 180, 188 corporate social responsibility .... 24, 25, 31, 41, 46, 159, 160, 176, 181 Corporate Strategy ............................ 36, 47 corruption...... 137, 265, 266, 268, 269, 270, 271, 272, 273, 274, 275, 276, 277, 278, 280, 281, 282, 283, 284, 285 CPA161, 231, 233, 234, 235, 236, 240, 245, 246, 255, 257, 258, 259, 261 B Baldrige Award ......................................199 Barley .............................222, 257, 258, 260 BDDK ............ 179, 180, 181, 188, 227, 228 benchmarking.........................................199 Bentham ...................................24, 139, 157 big brother ................................................60 bureaucracy ... 139, 267, 268, 270, 273, 274, 282, 283 BUSINESS ETHICS...........................1, 23 business economics ......................32, 45, 53 Business Economics...........................26, 29 business ethics...3, 9, 23, 24, 26, 28, 30, 31, 45, 46, 88, 91, 98, 118, 196, 198, 202 347 cross-cultural ethics..................................25 Cruciality................................................216 H Habermas ................................................. 24 Hall ........ 112, 211, 217, 218, 246, 262, 263 Hofstede 135, 292, 299, 300, 301, 306, 307, 308, 309, 310 Human Resources .......... 133, 181, 210, 296 D Data Protection...............................151, 152 de-bureaucratisation .......................268, 269 deontological ethics..................................24 Deontological Theory.....................197, 198 I IESBA.................................................... 250 Independent accountant ......................... 230 Independent Accountant ........................ 233 Information Technologies...................... 137 Information Technology ........................ 141 Innovation ..... 213, 291, 292, 294, 308, 309, 310, 311 Internet Censorship ............................. 146 E Economia Aziendale..26, 27, 31, 45, 47, 48, 51 Eduard von Hartmann ..............................80 Empowerment.........................................201 Engel ......................................218, 247, 261 environmental accounting ..............159, 160 Ethical Administration ...........266, 271, 288 ethical behavior .....40, 44, 46, 96, 118, 284, 313 ethical beliefs 117, 118, 120, 121, 123, 127, 128, 129, 130, 131 ethical climate194, 203, 313, 314, 315, 316, 317, 321, 322, 324, 325, 326, 328, 329, 330 Ethical climate........................313, 314, 322 ethical code.....................................265, 267 ethical decision making 15, 25, 31, 117, 118 ethical theories .................25, 194, 195, 196 Ethicists ..............................................16, 81 Ethics..... 1, 3, 10, 16, 19, 20, 21, 23, 30, 48, 49, 50, 51, 52, 53, 88, 89, 90, 91, 92, 109, 110, 111, 112, 113, 114, 118, 119, 132, 133, 134, 135, 136, 157, 202, 204, 210, 211, 212, 213, 214, 219, 248, 250, 251, 260, 288, 332, 333, 334, 335, 336, 337, 338, 339, 340 Etzioni ............................................222, 261 EU .................. 154, 238, 265, 277, 283, 285 European Union74, 151, 155, 156, 170, 265 ø idealism.................................................. 118 individualism 106, 292, 294, 297, 298, 299, 307 innovation .............................. 41, 42, 43, 44 instrumental ethical climate .. 322, 328, 329, 330 instrumental theories ............................... 25 integrative theories .................................. 25 internal locus of control . 296, 297, 306, 307 J Journal of Business Ethics 1, 19, 49, 52, 53, 89, 91, 111, 132, 134, 135, 136, 212, 260, 334, 336, 338, 339 K Kant.............................................. 24, 82, 88 Kantian......................................... 24, 32, 48 Kohlberg .................................. 24, 134, 316 L Lawson.. 219, 220, 239, 240, 244, 248, 249, 262 Levinas..................................................... 24 lifestyle . 118, 119, 120, 121, 123, 126, 127, 128, 129, 130, 136 locus of control ..... 296, 297, 298, 302, 303, 305, 306, 307 Luca Paccioli ......................................... 215 Luther......................................................... 2 F Faccipieri......................................36, 39, 49 Foucault..................................139, 142, 155 Freedom of Information .151, 152, 154, 158 G George Orwell..........................60, 139, 148 Goode .....................................218, 246, 261 Guidi............... 77, 79, 80, 82, 85, 86, 87, 89 348 Panopticon Society ................ 139, 142, 154 Parsons................................... 216, 249, 263 participation 8, 38, 45, 63, 68, 70, 176, 199, 241, 268 political theories ...................................... 25 Porter.................................. 36, 52, 319, 337 power distance ....... 292, 294, 297, 299, 300 privacy ...... 60, 63, 66, 69, 71, 72, 138, 141, 142, 144, 147, 148, 151, 152, 153, 154, 155 privatisation ........................................... 268 profession...... 7, 12, 96, 160, 161, 162, 163, 165, 166, 167, 168, 169, 170, 171, 184, 185, 186, 187, 195, 215, 216, 217, 218, 219, 220, 222, 223, 225, 227, 228, 229, 230, 231, 233, 234, 235, 237, 239, 240, 241, 243, 244, 245, 246, 247, 248, 249, 250, 251, 254, 255, 256, 257, 258, 259 Professional Authority......................... 239 Professional autonomy................... 246, 247 Professional ideology ................... 248, 249 professionalism ..... 215, 217, 218, 220, 244, 246, 249, 250, 262 professionalization 216, 220, 222, 223, 237, 238, 256 Professionalization Process.................... 220 professionals . 161, 162, 163, 164, 166, 167, 168, 169, 170, 171, 185, 187, 195, 215, 217, 219, 224, 227, 230, 231, 233, 234, 235, 236, 237, 240, 241, 244, 246, 247, 249, 251, 255, 256, 257, 259, 262, 321 Professions.... 215, 216, 220, 221, 243, 248, 260, 261, 262, 263 Prudence ................................ 78, 81, 86, 88 prudent 77, 78, 79, 80, 81, 82, 83, 84, 85, 86 M Machiavellian 95, 96, 98, 99, 100, 102, 103, 104, 107, 109, 112 Machiavellianism ....94, 96, 97, 98, 99, 100, 101, 102, 104, 105, 106, 107, 109, 110, 111, 112, 113, 114, 118, 134 Marketing 52, 109, 110, 117, 132, 133, 134, 135, 136, 212, 332, 334, 335, 338 Masculinity....................................299, 301 Mass Surveillance Technologies...137, 142, 144 Michel Foucault .....................................140 Mill...........................................................24 minimal state ..........................................268 MOBESE. 55, 57, 66, 67, 68, 70, 72, 74, 76, 148, 155, 156 Molteni .................28, 31, 40, 41, 42, 50, 51 money ethics...........................................119 moral philosophy................................24, 46 Motherland Party....................267, 268, 287 MP..........................................................268 MST................................137, 138, 142, 144 mystique .................................................216 N network theory .........................................28 new product development .....292, 293, 294, 295, 306 New Testament.............................4, 5, 6, 21 Niccolo Machiavelli .......................100, 109 Nixon......................................................143 normative organizational commitment..322, 323, 330 O occupation ..... 216, 217, 218, 219, 220, 221, 222, 223, 237, 244 Old Testament ..............................3, 5, 6, 11 open system........................................44, 45 organizational climate ............280, 313, 314 organizational commitment...313, 318, 319, 320, 321, 322, 323, 324, 325, 326, 328, 329, 330 Q quality 28, 29, 39, 49, 50, 58, 137, 139, 166, 167, 169, 193, 194, 195, 196, 197, 198, 199, 200, 201, 202, 203, 204, 205, 206, 207, 208, 209, 210, 217, 225, 238, 249, 250, 251, 257 Quality ...... 28, 49, 194, 195, 199, 203, 205, 206, 207, 210, 211, 212, 213, 214, 244 Ö R Özal ................................268, 269, 285, 287 Rawls ................................................. 24, 82 relativism ............................................... 118 religiosity ............................................... 118 P panopticon ..............................................139 349 Thomas Aquinas ...................................... 77 TMSK.................... 171, 172, 187, 228, 242 total quality management 28, 201, 202, 204, 206 Total Quality Management ..... 28, 194, 210, 211, 213 TQM ..... 193, 194, 195, 198, 199, 200, 201, 202, 203, 204, 205, 207, 208, 209, 210, 212, 213, 214 transparency.... 70, 151, 152, 174, 176, 177, 180, 182, 183, 184, 186, 188, 202, 268, 270, 283 Trust................. 19, 132, 201, 260, 275, 337 Turkish Accounting Standards Board... 171, 174, 175, 179, 187, 228 Turkish public administration265, 266, 267, 272, 285 TÜRMOB ..... 165, 166, 167, 169, 171, 184, 187, 227, 233, 241, 242, 243 resource based view of the firm ...............28 Responsibility .. 10, 17, 19, 51, 52, 133, 136, 162, 183, 189, 190, 201 Rousseau ..................................................24 S social accounting............159, 160, 185, 186 social responsibility.......13, 14, 41, 42, 119, 120, 159, 160, 161, 163, 165, 167, 169, 171, 173, 176, 178, 180, 181, 183, 185, 186, 187, 188, 194, 202, 275 social responsibility accounting ....159, 160, 163, 186, 187, 188 socio-competitive creativity .........41, 42, 44 SPK ................................................175, 188 stakeholder theory ..........17, 28, 88, 90, 196 Stakeholder theory ...........................29, 196 stakeholders... 10, 14, 15, 17, 18, 27, 30, 39, 40, 41, 43, 44, 45, 46, 82, 83, 85, 87, 88, 159, 165, 176, 177, 195, 196, 197, 202, 208 State-Owned Enterprise..........................224 strategic flexibility ...........38, 40, 42, 44, 45 Sumerbank..............................................224 surveillance ... 57, 59, 60, 62, 66, 68, 69, 70, 76, 130, 139, 141, 142, 144, 145, 148, 152, 242 surveillance society ..................................60 Surveillance Society....62, 63, 75, 137, 142, 157 Sworn-in Certified Public Accountancy161, 185, 224, 227, 256 Sworn-in Certified Public Accountant ..161, 244 U uncertainty avoidance .... 292, 294, 299, 301 Universalism/Deontological Theory...... 197 unquestionable state....................... 270, 271 UTILITARIAN........................................ 23 utilitarian. 8, 24, 31, 32, 33, 34, 35, 46, 197, 209 utilitarian ethics ..................... 24, 31, 33, 35 Utilitarianism/Teleological Theory ....... 196 V Values ..... 50, 133, 134, 201, 210, 211, 287, 335, 339 W T Watergate....................................... 143, 151 Weberian................................................ 268 Wilensky ........ 218, 220, 237, 246, 249, 264 TESMER...... 169, 170, 171, 187, 227, 239, 245, 256, 258, 259 The Law of Independent Accountancy ..161 The Prince ..............................................100 The Protestant Ethic ................................2 The Union of Certified Public Accountants and Sworn-in Certified Public Accountants of Turkey...............161, 165 The Urbaneye Project...............................63 Y Yevgeny Zamyatin................................. 139 Z Zamyatin ........................................ 139, 158 350 Buy your books fast and straightforward online - at one of world’s fastest growing online book stores! Environmentally sound due to Print-on-Demand technologies. Buy your books online at www.get-morebooks.com Kaufen Sie Ihre Bücher schnell und unkompliziert online – auf einer der am schnellsten wachsenden Buchhandelsplattformen weltweit! Dank Print-On-Demand umwelt- und ressourcenschonend produziert. Bücher schneller online kaufen www.morebooks.de VDM Verlagsservicegesellschaft mbH Heinrich-Böcking-Str. 6-8 D - 66121 Saarbrücken Telefon: +49 681 3720 174 Telefax: +49 681 3720 1749 info@vdm-vsg.de www.vdm-vsg.de

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