RBS Professor and PhD student receive 'Best Paper in Ethics Award' at the American Accounting Association Annual Meeting

Friday, August 20, 2010

Professor of Management & Global Business Michael A. Santoro and PhD student Ronald Strauss received the "Best Paper in Ethics Award" at the American Accounting Association. The article, entitled ‘Cash-Based Executive Compensation and Net Earnings – Ethical Analysis in Light of the Financial Crisis of 2008,’ analyzes cash-based executive incentive compensation, a compensation practice susceptible to particular forms of moral hazard and conflict of interest.

Beginning in 2007 and continuing throughout 2008 and 2009, many firms in the financial services industry incurred enormous losses while in the years immediately preceding this deluge of losses many executives received substantial cash-based compensation. This substantial divergence of economic outcome between shareholder and executive is the focal point of the analysis. Several forms of moral reasoning are applied to the payment of cash-based incentive compensation and in each case there is an absence of moral justification for such practices. Further, such practices create moral hazard, conflicts of interest, and unjust outcomes. Cash-based incentive compensation is largely based upon measures of short-term earnings; earnings which may not fully reflect substantial risk taking, the outcome of which remains uncertain at the time that risk-free cash bonuses are paid.

Professor Michael A. Santoro is a world-renowned business ethics teacher, scholar, and consultant. He focuses his research on business ethics, ethics in government, and business and human rights in developing nations, particularly China and Southeast Asia. Visit michaelasantoro.com.

Ronald Strauss is a 4th year doctoral student at Rutgers Business School where his research focus is accounting and business ethics. Specifically, Ron’s current research is directed at applying ethical reasoning to various aspects of the financial crisis including the role of executive incentives and the governance of the financial system. Prior to joining the Rutgers Ph.D. program, Ron, who is a CPA, worked in the financial servicers industry. He began his career at Peat, Marwick, and Mitchell in New York, where he worked for 6 1/2 years in the financial institutions practice and as a computer audit specialist. Ron joined Merrill Lynch in 1983 as head of SEC and corporate reporting and during his 20 year career at ML Ron held a number of financial and operating management positions. Ron spent approximately half of his ML career working and living overseas in Japan and Hong Kong.

RBS Congratulates Professor Santoro and Ronald for this great achievement!

Hannah Redmond

TAGS: Accounting Awards Michael Santoro PhD Research