Compliance

Entry provides a concise description of obligations prescribed by laws and regulations, or procedural rules met by individuals or organisations. In the event of noncompliance, penalties are imposed. A conceptual overview, critical commentary and future directions on compliance provide the framework for this entry. The International Encyclopedia of Organization Studies is a definitive description of the field, spanning individual, organizational, societal, and cultural perspective in a cross-disciplinary manner. The Encyclopedia is thoroughly cross-referenced and entries are based around a series of broad themes. Key Features- Offers a comprehensive overview of many of the major ideas, concepts, terms, and approaches that characterise this diverse field of organization studies - Illustrates the fluidity, dynamism, and innovation that now occur in organization studies-internationally - Brings together a team of international contributors from the fields of: Management, Psychology, Sociology, Communications, Education, Political Science, Public Administration, Anthropology, Law and other related areas. - Examines how organizations are devices for structuring life and lives are structured by organizations

Corporate governance and compliance : preventative measure or just another fad?

In the wake of recent corporate collapses, 'corporate governance' has received unprecedented levels of attention. It can be narrowly defined as how a company is directed and steered. The responsibility of steering a company is entrusted with the board of directors, who become the focus of governance mechanisms.Yet this is not as straightforward as it appears - Australia has experienced massive shifts in business regulations over the past two decades. One innovation in Australian business regulation is 'enforced self-regulation' which combines the benefits of voluntary self-regulation with the coercive power of the State, implemented via a compliance program. A possible hazard of compliance system is that management might treat this responsibility as a 'box ticking' exercise. Therefore effective governance and compliance entails more than setting up internal and regulatory mechanisms; the willingness of various stakeholders to collaborate is crucial. This suggests that managing relationships between stakeholders of an organization is the key to averting corporate collapses.

Motor conflict in Stroop tasks : direct evidence from single-trial electro-myography and electro-encephalography

Several brain imaging studies have assumed that response conflict is present in Stroop tasks. However, this has not been demonstrated directly. We examined the time-course of stimulus and response conflict resolution in a numerical Stroop task by combining single-trial electro-myography (EMG) and event-related brain potentials (ERP). EMG enabled the direct tracking of response conflict and the peak latency of the P300 ERP wave was used to index stimulus conflict. In correctly responded trials of the incongruent condition EMG detected robust incorrect response hand activation which appeared consistently in single trials. In 50–80% of the trials correct and incorrect response hand activation coincided temporally, while in 20–50% of the trials incorrect hand activation preceded correct hand activation. EMG data provides robust direct evidence for response conflict. However, congruency effects also appeared in the peak latency of the P300 wave which suggests that stimulus conflict also played a role in the Stroop paradigm. Findings are explained by the continuous flow model of information processing: Partially processed task-irrelevant stimulus information can result in stimulus conflict and can prepare incorrect response activity. A robust congruency effect appeared in the amplitude of incongruent vs. congruent ERPs between 330–400 ms, this effect may be related to the activity of the anterior cingulate cortex.

Truth, obligation and ethics in the propagation of democracy

In this paper I present an analysis of the language used by the National Endowment for Democracy (NED) on its website (NED, 2008). The specific focus of the analysis is on the NED's high usage of the word “should” revealed in computer assisted corpus analysis using Leximancer. Typically we use the word “should” as a term to propose specific courses of action for ourselves and others. It is a marker of obligation and “oughtness”. In other words, its systematic institutional use can be read as a statement of ethics, of how the NED thinks the world ought to behave. As an ostensibly democracy-promoting institution, and one with a clear agenda of implementing American foreign policy, the ethics of NED are worth understanding. Analysis reveals a pattern of grammatical metaphor in which “should” is often deployed counter intuitively, and sometimes ambiguously, as a truth-making tool rather than one for proposing action. The effect is to present NED's imperatives for action as matters of fact rather than ethical or obligatory claims.

A Knight without a Sword? The Effects of Audit Courts on Tax Morale

The intention of this paper is to analyse how audit courts affect tax morale, controlling in a multivariate analysis for a broad variety of potential factors. Switzerland, with its variety of audit-court competence among the cantons, has been analysed. With data from the ISSP [1998] (Swiss data 1999), evidence has been found that higher audit-court competence has a significantly positive effect on tax morale. Thus, the results in Switzerland suggest that in the cantons where audit courts are not just knights without swords; they help improve taxpayers' tax morale and thus citizens' intrinsic motivation to pay taxes.

Service employee behaviour : the role of compliance and risk taking

This paper looks at the decision-making process that determines the amount of effort frontline service employees will expend in delivering a service in a business-to-business context. Using theories in behavioural economics and interactional and social psychology, the paper develops and presents a model of employee decision-making. Managerial implications, which have the potential to enhance the marketing of business-to-business services and directions for future research in this area, are indicated.

Socially responsible investment in market downturns : implications for the fiduciary responsibilities of investment fund trustees

This paper investigates whether Socially Responsible Investment (SRI) is more or less sensitive to market downturns than conventional investment, and examines the legal implications for fund managers and trustees. Using a market model methodology, we find that over the past 15 years, the beta risk of SRI, both in Australia and internationally, increased more than that of conventional investment during economic downturns. This implies that companies acting as fund trustees, managed investment schemes and traditional institutional fund managers risk breaching their fiduciary or statutory duties if they go long - or remain long - in SRI funds during market downturns, unless perhaps relevant legislation is reformed. If reform is viewed as desirable, possible reforms could include explicitly overriding the common law to allow all traditional funds to invest in SRI; granting immunity to directors of trustee companies from potential personal liability under sections 197 or 588G et seq of the Corporations Act; allowing companies acting as trustees, managed investment schemes and traditional institutional fund managers and trustees to invest in SRI without triggering a substantial capital gains tax liability through trust resettlement; tax concessions for SRI (eg. introducing a 150% tax deduction or investment allowance for SRI); and allowing SRI sub-funds to obtain “deductible gift recipient” status or the equivalent from relevant taxation authorities. The research is important and original insofar as the assessment of risk in SRIs during market downturns is an area which has hitherto not been subjected to rigorous empirical investigation, despite its serious legal implications.

On democracy

If one clear argument emerged from my doctoral thesis in political science, it is that there is no agreement as to what democracy is. There are over 40 different varieties of democracy ranging from those in the mainstream with subtle or minute differences to those playing by themselves in the corner. And many of these various types of democracy are very well argued, empirically supported, and highly relevant to certain polities. The irony is that the thing which all of these democratic varieties or the ‘basic democracy’ that all other forms of democracy stem from, is elusive. There is no international agreement in the literature or in political practice as to what ‘basic democracy’ is and that is problematic as many of us use the word ‘democracy’ every day and it is a concept of tremendous importance internationally. I am still uncertain as to why this problem has not been resolved before by far greater minds than my own, and it may have something to do with the recent growth in democratic theory this past decade and the innovative areas of thought my thesis required, but I think I’ve got the answer. By listing each type of democracy and filling the column next to this list with the literature associated with these various styles of democracy, I amassed a large and comprehensive body of textual data. My research intended to find out what these various styles of democracy had in common and to create a taxonomy (like the ‘tree of life’ in biology) of democracy to attempt at showing how various styles of democracy have ‘evolved’ over the past 5000 years.ii I then ran a word frequency analysis program or a piece of software that counts the 100 most commonly used words in the texts. This is where my logic came in as I had to make sense of these words. How did they answer what the most fundamental commonalities are between 40 different styles of democracy? I used a grounded theory analysis which required that I argue my way through these words to form a ‘theory’ or plausible explanation as to why these particular words and not others are the important ones for answering the question. It came down to the argument that all 40 styles of democracy analysed have the following in common 1) A concept of a citizenry. 2) A concept of sovereignty. 3) A concept of equality. 4) A concept of law. 5) A concept of communication. 6) And a concept of selecting officials. Thus, democracy is a defined citizenry with its own concept of sovereignty which it exercises through the institutions which support the citizenry’s understandings of equality, law, communication, and the selection of officials. Once any of these 6 concepts are defined in a particular way it creates a style of democracy. From this, we can also see that there can be more than one style of democracy active in a particular government as a citizenry is composed of many different aggregates with their own understandings of the six concepts.

Compliance with international financial reporting standards (IFRS) and the value relevance of accounting information in emerging stock markets : evidence from Kuwait

Since the 1960s, the value relevance of accounting information has been an important topic in accounting research. The value relevance research provides evidence as to whether accounting numbers relate to corporate value in a predicted manner (Beaver, 2002). Such research is not only important for investors but also provides useful insights into accounting reporting effectiveness for standard setters and other users. Both the quality of accounting standards used and the effectiveness associated with implementing these standards are fundamental prerequisites for high value relevance (Hellstrom, 2006). However, while the literature comprehensively documents the value relevance of accounting information in developed markets, little attention has been given to emerging markets where the quality of accounting standards and their enforcement are questionable. Moreover, there is currently no known research that explores the association between level of compliance with International Financial Reporting Standards (IFRS) and the value relevance of accounting information. Motivated by the lack of research on the value relevance of accounting information in emerging markets and the unique institutional setting in Kuwait, this study has three objectives. First, it investigates the extent of compliance with IFRS with respect to firms listed on the Kuwait Stock Exchange (KSE). Second, it examines the value relevance of accounting information produced by KSE-listed firms over the 1995 to 2006 period. The third objective links the first two and explores the association between the level of compliance with IFRS and the value relevance of accounting information to market participants. Since it is among the first countries to adopt IFRS, Kuwait provides an ideal setting in which to explore these objectives. In addition, the Kuwaiti accounting environment provides an interesting regulatory context in which each KSE-listed firm is required to appoint at least two external auditors from separate auditing firms. Based on the research objectives, five research questions (RQs) are addressed. RQ1 and RQ2 aim to determine the extent to which KSE-listed firms comply with IFRS and factors contributing to variations in compliance levels. These factors include firm attributes (firm age, leverage, size, profitability, liquidity), the number of brand name (Big-4) auditing firms auditing a firm’s financial statements, and industry categorization. RQ3 and RQ4 address the value relevance of IFRS-based financial statements to investors. RQ5 addresses whether the level of compliance with IFRS contributes to the value relevance of accounting information provided to investors. Based on the potential improvement in value relevance from adopting and complying with IFRS, it is predicted that the higher the level of compliance with IFRS, the greater the value relevance of book values and earnings. The research design of the study consists of two parts. First, in accordance with prior disclosure research, the level of compliance with mandatory IFRS is examined using a disclosure index. Second, the value relevance of financial statement information, specifically, earnings and book value, is examined empirically using two valuation models: price and returns models. The combined empirical evidence that results from the application of both models provides comprehensive insights into value relevance of accounting information in an emerging market setting. Consistent with expectations, the results show the average level of compliance with IFRS mandatory disclosures for all KSE-listed firms in 2006 was 72.6 percent; thus, indicating KSE-listed firms generally did not fully comply with all requirements. Significant variations in the extent of compliance are observed among firms and across accounting standards. As predicted, older, highly leveraged, larger, and profitable KSE-listed firms are more likely to comply with IFRS required disclosures. Interestingly, significant differences in the level of compliance are observed across the three possible auditor combinations of two Big-4, two non-Big 4, and mixed audit firm types. The results for the price and returns models provide evidence that earnings and book values are significant factors in the valuation of KSE-listed firms during the 1995 to 2006 period. However, the results show that the value relevance of earnings and book values decreased significantly during that period, suggesting that investors rely less on financial statements, possibly due to the increase in the available non-financial statement sources. Notwithstanding this decline, a significant association is observed between the level of compliance with IFRS and the value relevance of earnings and book value to KSE investors. The findings make several important contributions. First, they raise concerns about the effectiveness of the regulatory body that oversees compliance with IFRS in Kuwait. Second, they challenge the effectiveness of the two-auditor requirement in promoting compliance with regulations as well as the associated cost-benefit of this requirement for firms. Third, they provide the first known empirical evidence linking the level of IFRS compliance with the value relevance of financial statement information. Finally, the findings are relevant for standard setters and for their current review of KSE regulations. In particular, they highlight the importance of establishing and maintaining adequate monitoring and enforcement mechanisms to ensure compliance with accounting standards. In addition, the finding that stricter compliance with IFRS improves the value relevance of accounting information highlights the importance of full compliance with IFRS and not just mere adoption.