Psychopathy and Accounting Students’ Attitudes towards Unethical Practices Charles D. Bailey The University of Memphis American Accounting Association Annual Meeting Atlanta August 2014

Why study psychopathy? Business scholars have been slow to embrace the “Dark Triad” of personality variables: Psychopathy Lack of conscience and empathy for others Possess superficial charm Machiavellianism Manipulation of others for own purposes; opportunistic and acting consistent with the economic theory of self-interest. Not without conscience, not a clinical mental disorder. Murphy, “Attitude, Machiavellianism and the rationalization of misreporting” AOS 2012 Narcissism Grandiosity, entitlement, dominance, superiority Johnson et al., “Auditor perceptions of client narcissism as a fraud attitude risk factor” Auditing Feb 2013

Potential of psychopathy for understanding and preventing a variety of business problems Fraud Antisocial behaviors Unethical behaviors A rare but still potent factor: About 1% of population clinical psychopaths About 4% of CEOs (Babiak et al. 2010) Subclinical psychopathy is measurable

Characteristics of psychopathy Psychopaths are individuals who lack a conscience and lack empathy for others, who therefore will use any means to satisfy their desires (Cleckley 1941, Hare 1993). Many are successful in business careers (Babiak and Hare 2006; Babiak et al. 2010). At least two factors: “Primary” psychopathy is highly conducive to ill-gotten “success.” Reflects selfish, uncaring, and manipulative posture toward others. “Secondary” psychopathy predisposes one towards violence and incarceration. Reflects impulsivity and a self-defeating lifestyle.

How would psychopathy affect propensity to commit fraud? Image from

Research Questions RQ1: How do accounting majors’ scores on Levenson’s Self- Report Psychopathy Scale (LSRP) compare with samples from past studies of students, accounting faculty, the general public, and prisoners? RQ2: Do Accounting majors’ scores differ across junior, senior, and graduate students? RQ3: How highly do the LSRP scores correlate with acceptance of questionable or blatantly unethical practices? RQ4: At the highest measured levels of nonclinical psychopathy in this sample, what specifically are respondents saying about their values and attitudes? I.e., in concrete terms, what acts do they deem acceptable, and what attitudes permit such acceptance?

Design of the study Participants and Procedures I asked faculty colleagues at several universities throughout the US to invite their accounting majors (junior, senior, or graduate) to respond to a web- based questionnaire. Responses were completely anonymous and voluntary. One in every twenty entrants received a $100 cash prize in a lottery.

Questions asked ….about [un]ethical actions:

… about [un]ethical actions

Questions about [un]ethical actions, continued…

Levenson’s self-report psychopathy scale

Levenson’s scale cont’d

Sources of responses Note: There were 256 responses, so 34 participants did not enter the prize lottery.

Descriptive statistics: Scale variables NMinMaxMeanSD Age PSYCHOPATHY Religiosity DISAPPROVAL Work OT to maximize year-end Bury scrap to avoid scrutiny Customer delay billing Postpone inventory write-down Keep $500 overpayment Skimming fraud Claim duplicate reimbursement Sell employer’s client list

Descriptive statistics: Categorical variables nPercent ClassJunior Senior Graduate/ earned UG Total valid Missing1.4 Total SponsorshipPublic Private secular Private religious1.4 Total Gender Female Male Total valid Missing2.8 Total

How do accounting majors’ scores compare with samples from past studies? (RQ1) Levenson et al. (1995) 487 univ. students Glenn et al. (2010) 2157 adult volunteers 26.6 McHoskey et al. (1998) l25 univ students 33.9 Brinkley et al. (2001) 549 minimum-security state prisoners Bailey (2014) accounting academicians The current paper: national sample of 253 accounting majors Bailey (2014; data collected through Spring 2014) similar national sample of 292 accounting majors 26.9 Walters et al. (2008) 1972 male and female federal prison inmates 28.70

How do accounting majors’ scores compare: Statistical tests SourcePopulationNMeanSDtp(t) Bailey (2013) Accounting professors, US and Canada Glenn et al. (2010) Adult volunteers at yourmorals.org Current study Accounting students Walters et al. (2008) Male and female federal prison inmates Levenson et al. (1995) Students, University of Calif. Davis Brinkley et al. (2001) Minimum-security state prisoners McHoskey et al. (1998) Students, Clemson Univ. (psychology) Gummelt et al. (2012) Students, Intro psychology, SE US Univ Notes: Samples are listed in ascending order of means. The t tests compare the current study against each of the other samples; p-values are two-tailed.

Do accounting majors’ scores differ across junior, senior, and graduate students? (RQ2) Source Type III Sum of SquaresdfMean SquareFSig. Corrected Model Intercept Age [older are lower] Gender [ F are lower] Class Error Total Corrected Total Table 5: Analysis of Covariance, PSYCHOPATHY by Class, with Gender and Age [Also NS in simple ANOVA.]

How highly do psychopathy scores correlate with acceptance of unethical practices? (RQ3) BSEBetatSig. Partial Correl Toler- anceVIF (Constant) PSYCHOPATHY Gender, 1=M 0=F Age Religiosity Graduate Senior Public University *The hypothesis says “acceptance,” but the scores here increase with condemnation (are lower if more accepting). I need to clarify in next draft! DV = Judged Severity of the Acts.*

PSYCHOPATHY vs. DISAPPROVAL This relationship of mean data points appears linear, and a simple regression analysis is of all 253 observations is significant (p <.001), with PSYCHOPATHY explaining about 17.8% of the variance in DISAPPROVAL.

At the highest measured psychopathy levels, what are respondents saying? (RQ4) Male junior, age 19, PSYCHOPATHY score 63. I agree strongly that … Success is based on survival of the fittest; I am not concerned about the losers. For me, what’s right is whatever I can get away with. In today’s world, I feel justified in doing anything I can get away with to succeed. My main purpose in life is getting as many goodies as I can. Making a lot of money is my most important goal. I let others worry about higher values; my main concern is with the bottom line. People who are stupid enough to get ripped off usually deserve it. Looking out for myself is my top priority. I tell other people what they want to hear so that they will do what I want them to do. I often admire a really clever scam. I enjoy manipulating other people’s feelings. I disagree strongly that… I would be upset if my success came at someone else’s expense. I make a point of trying not to hurt others in pursuit of my goals. I feel bad if my words or actions cause someone else to feel emotional pain. Cheating is not justified because it is unfair to others. I disagree somewhat that… Even if I were trying very hard to sell something, I wouldn’t lie about it. Acts I consider completely acceptable include… Keeping $500 erroneously included in my paycheck. Acts I consider moderately acceptable include… Claiming duplicate travel reimbursement. Selling the company’s client list to a competitor. Views based on responses to questionnaire items.

Male senior, age 22, PSYCHOPATHY score 46: I agree strongly that… My main purpose in life is getting as many goodies as I can. Making a lot of money is my most important goal. Looking out for myself is my top priority. I agree somewhat that … Success is based on survival of the fittest; I am not concerned about the losers. For me, what’s right is whatever I can get away with. In today’s world, I feel justified in doing anything I can get away with to succeed. I let others worry about higher values; my main concern is with the bottom line. I tell other people what they want to hear so that they will do what I want them to do. I disagree somewhat that … I would be upset if my success came at someone else’s expense. I make a point of trying not to hurt others in pursuit of my goals. I feel bad if my words or actions cause someone else to feel emotional pain. Acts I consider moderately acceptable include… Burying scrap expense to avoid scrutiny. Having a supplier delay billing for a large amount of completed work. Acts I consider [only] moderately unacceptable include… Keeping $500 erroneously included in my paycheck. I am unsure about the acceptability of postponing the write-down of worthless inventory.

Female junior, age 19, PSYCHOPATHY score 42 I agree somewhat that … Success is based on survival of the fittest; I am not concerned about the losers. Making a lot of money is my most important goal. I let others worry about higher values; my main concern is with the bottom line. People who are stupid enough to get ripped off usually deserve it. Looking out for myself is my top priority. I tell other people what they want to hear so that they will do what I want them to do. I disagree somewhat that… I would be upset if my success came at someone else’s expense. Acts I consider [only] moderately unacceptable include… Burying scrap expense to avoid scrutiny. Having a supplier delay billing for a large amount of completed work. Postponing the write-down of worthless inventory. Keeping $500 erroneously included in my paycheck I am unclear about the acceptability of keeping $500 erroneously included in my paycheck.

Conclusions The mean PSYCHOPATHY of accounting students is lower than past samples of students. As expected, psychopathy, with its known antisocial nature, is related to acceptance of unethical practices. The scores are consistent across class levels, indicating no selection or winnowing-out during school, so that the characteristics may persist into the professional arena. Examples of the attitudes that higher-scoring students express in the survey are offered to aid in understanding the relationship and some of its concrete implications.

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