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BEHAVIORAL RESEARCH IN ACCOUNTING American Accounting Association

Vol. 22, No. 2 DOI: 10.2308/bria.2010.22.2.27


2010
pp. 2749

Why Business Unit Controllers Create Budget


Slack: Involvement in Management, Social
Pressure, and Machiavellianism
Frank G. H. Hartmann
Erasmus University
Victor S. Maas
University of Amsterdam
ABSTRACT: This paper investigates business unit BU controllers inclination to en-
gage in the creation of budgetary slack. In particular, we explore whether controllers
who are involved in BU decision making are more susceptible to social pressure to
engage in slack creation than controllers who are not. We expect, and find, a crucial
role of the controllers personality. Results from an experiment among 136 manage-
ment accountants suggest that the personality construct Machiavellianism interacts
with involvement to explain controllers responses to social pressure to create budget-
ary slack. Controllers scoring high on Machiavellianism are more likely to give in to
pressure by BU management to create budgetary slack when they have been involved
in decision making. In contrast, controllers scoring low on Machiavellianism are less
likely to give in to pressure to create slack when they have been involved in decision
making.
Keywords: controllers; budget slack; ethics; social pressure; conflict of interest;
Machiavellianism.

Data Availability: Data used in this study are not publicly available due to confidenti-
ality agreements with the participants.

INTRODUCTION
he role of business unit BU controllers typically comprises two sets of responsibilities.

T On the one hand, BU controllers contribute to corporate control by reporting about the
activities and performance of their unit to higher-level management. On the other hand, BU
controllers contribute to their units performance by supporting BU managers strategic and op-

Frank Hartmann is at the Rotterdam School of Management, Erasmus University. This paper has benefited from comments
and suggestions from the two anonymous reviewers and the editor, and from seminar participants at the 5th Conference on
New Directions in Management Accounting, the 2007 AAA MAS Midyear Meeting, the 2007 EAA Annual Conference,
the 2009 AAA Annual Symposium on Ethics Research in Accounting, and seminars at the University of Amsterdam and
Pablo de Olavide University. We also thank Jim Hunton, Michal Matfjka, Ken Merchant, David Naranjo-Gil, Paolo
Perego, Marcel van Rinsum, Mike Shields, Roland Spekl, and Marty Stuebs for help and/or comments on earlier drafts of
the paper.

Published Online: September 2010

27
28 Hartmann and Maas

erational decision making Indjejikian and Matfjka 2006; Maas and Matfjka 2009. The literature
suggests a limited compatibility of these two sets of responsibilities, as controllers involvement in
their BUs strategic and operational decision making may reduce their independence from unit
management, which could weaken corporate control e.g., Sathe 1982. Consistent with this view,
Indjejikian and Matfjka 2006 provide survey evidence, which suggests that organizational slack
is higher in firms in which BU controllers focus relatively more on providing decision-making
information to BU managers than on providing information for corporate control to higher-level
management.
Despite this potential downside to BU controller involvement in managerial decision making,
there is evidence that such involvement is increasing e.g., Siegel and Sorenson 1999; Jrvenp
2007, which in turn suggests that the downside risk of controller involvement in management
may also be increasing. We perform an experiment among 136 professional management accoun-
tants to explore whether and when BU controllers involvement in their units management affects
their inclination to allow slack in BU budgetary reports.
We propose that controllers are faced with a conflict of interest when they see a possibility to
create budgetary slack, as slack creation may be beneficial to their unit but run against the interests
of the organization as a whole. We expect and find that involvement in BU management influences
the extent to which BU controllers perceive this conflict of interest to constitute an ethical di-
lemma, but that involvement does not necessarily increase the likelihood that BU controllers
engage in budgetary slack creation. Instead, our results suggest that involvement in management
influences BU controllers reactions to social pressure from other unit managers to create budget
slack in a way that depends on their personality. More specifically, it appears that the personality
construct Machiavellianism, the tendency of an individual to detach from considerations of ethics
and perform actions that profit the self Schepers 2003, 341, determines controllers reactions to
various combinations of involvement and pressure. Whereas controllers scoring high on Machia-
vellianism are more likely to give in to pressure to create budgetary slack when involved in
decision making, less Machiavellian controllers are less prone to create slack under this condition.
Our findings contribute to the literature in at least three ways. First, we contribute to a recent
stream of studies that examine the design of the controllership function in organizations Indje-
jikian and Matfjka 2006, 2009; Maas and Matfjka 2009 by showing that social pressure and
personality differences interact with functional design in determining controller behavior. Second,
we contribute to the literature on budgetary game playing by extending the findings of Davis et al.
2006 regarding the role of management accountants in budgeting processes and slack creation.
Finally, we contribute to the literature on accounting ethics by examining Machiavellianism as a
predictor of management accountants ethical decision making, thus building on earlier work by
Wakefield 2008, Ghosh and Crain 1996, and Ghosh 2000.
The paper proceeds as follows: In the next section, we introduce the constructs, which are
central to our analysis, and we develop our hypotheses. In the third section, we present the design
of the experiment. The results of the study are presented in the fourth section. In the fifth section,
we discuss our findings, their limitations, and their relevance for future research and for business
practice.

HYPOTHESIS DEVELOPMENT
BU Controllers and the Creation of Budget Slack
Following Webb 2002, 361, we define budget slack as the intentional biasing of perfor-
mance targets below their expected levels. A common concern in budgeting is that BU managers
have incentives to create budget slack to maximize the expected value of the payoffs from budget
target achievement Webb 2002; Nouri and Parker 1996, while it is in corporate managers and
owners interest that budget proposals reflect the units performance potential as accurately as

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Why Business Unit Controllers Create Budget Slack 29

possible Fisher et al. 2000; Indjejikian and Matfjka 2006. To mitigate such budget-related
agency problems, organizations typically engage BU controllers to act as independent monitors in
the process. Controllers are made responsible for collecting, organizing, and reporting the data that
are used in budget negotiations and performance evaluations. These tasks require substantial
professional judgment, for example when assumptions are to be made about future developments,
or valuation methods have to be selected to produce budget proposals Maines et al. 2006; Collins
et al. 1987. As a consequence, unit controllers have considerable discretion in representing the
economic reality of their BU. They may use this discretion to represent the economic situation of
the BU to higher-level managers fairly and objectively, but may also abuse this discretion to
provide higher-level managers with biased judgments, which help the local unit and its managers
achieve their budgetary goals.
There is little systematic evidence on the factors that cause unit controllers to engage in the
creation of budget slack. Indjejikian and Matfjka 2006 and Maas and Matfjka 2009 both
suggest that budget slack depends on the position of the unit controller in the organizational
hierarchy. Davis et al. 2006 mention pressure from the superior as a causal antecedent of slack
creation. Although we will argue that both factors play a role, we propose that controllers en-
gagement in the creation of budget slack can also be understood as a reaction to an ethical
dilemma. The available discretion, which controllers canbut should notabuse to the benefit of
their BU, provides such a dilemma, since it forces them to make a trade-off between local and
corporate loyalties. While some studies have looked at the behavior of accountants in ethical
dilemmas Stevens 2002; Shafer et al. 2004, little is known about how BU controllers deal with
such trade-offs. We propose that controllers engagement in slack creation is the outcome of a
three-way interaction between involvement in management, pressure from BU managers, and the
personality factor Machiavellianism. Below, we first discuss the relevance of these three factors
for understanding slack creation. Then we demonstrate the importance of considering these factors
simultaneously.

Controller Involvement in Management


Controller involvement in management is the extent to which controllers are active partici-
pants in the units operational and strategic decision-making processes and share responsibility for
the outcomes of these processes Sathe 1982; Hopper 1980. The costs and benefits associated
with controller involvement in management have been discussed quite extensively in the literature.
It is generally accepted that the quality of managerial decisions will improve by active engagement
of unit controllers in decision processes Regel 2003; Colton 2001; Sathe 1983. The reason is that
local controllers can bring to bear a unique combination of specialist knowledge in the fields of
finance and accounting, and detailed knowledge of the BU and its activities Chenhall and
Langfield-Smith 1998; Sathe 1982. The literature has also pointed to a downside to involvement,
however, emphasizing that involvement is likely to strengthen the ties between the controller and
the unit and its managers, providing a potential threat to the integrity and objectivity of unit
reporting San Miguel and Govindarajan 1984; Hopper 1980; Simon et al. 1954. This threat can
be explained by social identity theory, which suggests that participation in a group decision-
making process increases individuals identification with this group and with the groups outcomes
Tyler and Blader 2003; Tajfel 1969. Involvement in management will make BU membership a
more salient aspect of BU controllers identity. This may in turn reduce these controllers com-
mitment to their identity as an independent professional Stryker and Burke 2000. As Gunz and
Gunz 2007, 856 argue: The more involved professionals are in the firms strategic decision-
making process, the more salient their organizational identities are likely to be by comparison with

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30 Hartmann and Maas

their professional identities. Consequently, BU controllers who have contributed to the units
courses of action will more likely feel that building slack into the budget to benefit the unit is an
action that is in their own personal interest as well.
This does not mean, however, that unit controllers will necessarily be more inclined to pro-
duce budget proposals that underestimate their units performance potential when they have been
involved in managerial decision making. The reason is that allowing slack in the budget of their
own unit may be considered as more unprofessional and unethical than allowing slack in the
budget of a unit at arms length. While uninvolved unit controllers might argue that the creation of
budget slack should be considered, at least to some extent, to fall within the rules of the budget
game Hofstede 1967, for involved controllers there will be a salient conflict of interest. Con-
sequently, involvement in management may make unit controllers even more reluctant to allow
slack in the units budget. Well aware of the temptation, and the fact that they have been entrusted
to resist it and remain independent, involved controllers may thus prove to be more strict in
observing professional guidelines and codes of conduct than uninvolved controllers Maas and
Matfjka 2009; Shafer et al. 2002. We will argue further below that the overall effect of controller
involvement in management on slack creation depends on social pressure and the degree of
Machiavellianism.

Social Pressure
In their review of social pressure research in accounting, DeZoort and Lord 1997 distinguish
between three forms of social pressure. Compliance pressure is pressure to go along with explicit
requests of individuals at any level. Obedience pressure refers to pressure to submit to the direc-
tions of an authority figure. Conformity pressure refers to pressure in groups of peers on individual
members of these groups. Pressure from BU managers on BU controllers to deliberately bias
performance targets lies at the intersection of these three types of pressure since it is pressure from
both a superior and peers to go along with an explicit request.1
Davis et al. 2006 show that management accountants are more likely to create budget slack
when faced with obedience pressure from an immediate superior the corporate CFO in their
study. This result confirms earlier findings in the social psychology and auditing literatures that
social pressure induces conformance, as individuals want to avoid the negative consequences of
appearing deviant in a peer group, or of disloyalty to someone in an authority position Lord and
DeZoort 2001. The social psychology literature, however, also points out an opposite effect of
social pressure. Psychological reactance theory Brehm 1966; Brehm and Brehm 1981 in particu-
lar posits that attempts to persuade individuals to act in a specific manner are often counterpro-
ductive, because they constitute a threat to individuals sense of freedom and control. According to
this perspective, individuals who are pressed to act in a certain way perceive their behavioral
freedom to be reduced. This pressure arouses reactance, which is a motivational state aimed at
reestablishing a sense of freedom of choice and personal responsibility for decision outcomes.
Individuals experiencing reactance refuse to go along with the requested behavior, and often
decide to act in an exactly opposite way a boomerang effect Brehm and Brehm 1981, 38.
Such an effect is particularly likely to occur in reaction to being pushed to violate professional
guidelines or moral principals Brehm and Brehm 1981; Grover 1993.
Existing studies on professionals in organizations indeed indicate that pressure from managers
to deviate from professional guidelines sometimes causes individuals to firmly oppose the re-
quested behavior and to place a renewed emphasis on their role as an independent professional

1
While conceptually distinct, the three types of pressure are not orthogonal and may coincide and overlap in reality e.g.,
Cialdini and Trost 1998.

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Why Business Unit Controllers Create Budget Slack 31

Tuma and Grimes 1981; Van de Vliert 1981. Overall, therefore, the ultimate effect of slack-
inducing social pressure from BU managers on BU controllers and the effect of involvement in
management are not unambiguous.2 We will argue further below that the ultimate effects of
pressure and involvement depend on the controllers personality.

Machiavellianism
The third factor in our study is the personality characteristic Machiavellianism, which is
characterized by cynicism and a general belief that ends sanctify means Wakefield 2008; Cristie
and Geis 1970. Machiavellianism has been recognized in personality research as a reasonably
stable personality trait Paulhus and Williams 2002; McHoskey et al. 1998. Individuals high in
Machiavellianism high Machs have a stronger tendency than individuals low in Machiavellian-
ism low Machs to detach from ethical considerations and to opportunistically take actions that
benefit themselves. When faced with an ethical dilemma, high Machs are more calculative, and
rely less on ethical principles or social conventions than low Machs in deciding about their actions
Corzine and Hozier 2005; Cristie and Geis 1970. Thus, while high Machs resemble true hom-
ines economici driven by a cognitive and rational approach to problems Sakalaki et al. 2007,
1183, low Machs are known to react to problems more emotionally and to be driven by social
incentives and ethical considerations.
Machiavellianism has been studied extensively, both in psychology and in other fields such as
marketing e.g., Hunt and Chonko 1984, business ethics e.g., Schepers 2003, and economics
e.g., Gunnthorsdottir et al. 2002. In accounting, Ghosh and Crain 1996 found that high Mach
taxpayers were more likely to underreport taxes and that this effect was stronger if there was a
smaller perceived audit probability. In addition, Ghosh 2000 found that high Machs were able to
negotiate more profitable transfer prices in settings characterized by a conflict of interest between
divisions. Finally, Wakefield 2008 conducted a survey of 198 accountants almost exclusively
CPAs and found that accountants were on average less Machiavellian than individuals in many
other professions. However, she also found a variance in Machiavellianism in her accounting
sample that was in line with the variance found in prior studies in non-accounting settings, which
suggests that Machiavellianism scores vary largely across practicing accountants.
Thus far, no evidence exists about the effect of Machiavellianism on management accoun-
tants engagement in dubious accounting practices. However, the available research on Machia-
vellianism in other settings suggests that this is not a straightforward effect. On the one hand, high
Machs are likely to feel less restricted by standards of professional ethics, and may therefore be
more inclined to bias budget estimates. On the other hand, however, high Mach unit controllers
will only do so, if they perceive such behavior to be clearly in their own interest Sakalaki et al.
2007. For low Machs, the decision whether to engage in slack creation will reflect their emotional
reaction to the social setting and their negative predisposition toward behavior that conflicts with
professional and moral principles.
In sum, our discussion suggests the importance of each of these three factors for understand-
ing BU controllers engagement in the creation of budgetary slack. Our arguments for involvement
in management suggest that it, on the one hand, enhances the benefits that controllers perceive to
obtain from building slack into the budget, while on the other hand it makes the creation of budget
slack a more severe violation of trust and professional responsibilities. For social pressure, our
arguments suggest that it might cause either conformance or reactance. Finally, we argue that
Machiavellianism determines the way in which controllers will decide about their actions, which

2
Notably, in the experimental study by Davis et al. 2006, more than half of the participants in the high-pressure
condition resisted this pressure and reported truthfully.

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32 Hartmann and Maas

could be either in a cold, calculative way, trading off personal costs and benefits, or in a more
intuitive way, responding to social and ethical pressures. We propose that a clear pattern of
expectations regarding BU controllers behavior only emerges when the interaction between these
factors is considered.

Interaction between Involvement, Social Pressure, and Machiavellianism


Social pressure by managers to engage in the creation of budget slack constitutes a threat to
controllers freedom and professional independence Shafer 2002. Pressure may therefore evoke
either conformance or reactance. We expect the response to depend on controllers Machiavellian-
ism and their level of involvement in BU management. First, there is substantial evidence that
individuals differ in their susceptibility to social pressure Brehm and Brehm 1981; DeZoort and
Lord 1997 and that this difference is partly explained by Machiavellianism. Cristie and Geis
1970, 312 argue that one consequence of the high Machs lack of susceptibility to emotional
involvements in general is a lack of susceptibility to sheer social pressure urging compliance,
cooperation, or attitude change. Empirical studies in social psychology indeed support that low
Machs are more sensitive to social pressure than high Machs Lamm and Myers 1976; Blumstein
1973. This seems to suggest that pressure by unit managers to engage controllers in the creation
of budget slack will be more effective for low Mach controllers. However, this reasoning ignores
that deliberately biasing performance estimates might be considered unethical or unprofessional
by the controller. While it may be true that low Machs find it harder to resist social pressure than
high Machs, they will also be more concerned about the violation of professional and moral norms
implied by the requested act Kleinman et al. 2003; Schepers 2003; Reiss and Mitra 1998. To
understand the effect of pressure on low and high Mach controllers, we therefore have to look at
the relationship that the controllers have with the BU they are working for.
For low Mach controllers, we expect that involvement in management will have the primary
effect of increasing the salience of conflicting interests and amplifying the extent to which slack
creation feels like a violation of trust and professional guidelines. Ceteris paribus, pressure to
engage an involved low Mach controller in the creation of budget slack is therefore more likely to
arouse reactance than pressure to engage an uninvolved low Mach controller in such acts.
Involvement in management also changes the effects of pressure for high Mach controllers,
but in a fundamentally different way. For high Mach controllers, the primary effect of involvement
is that it makes them perceive the outcome of the budgeting process as something that is in their
own interest. Because of the opportunistic and calculative nature of their decision making, high
Machs will be relatively easily persuaded to act in unprofessional or unethical ways, but only if the
personal benefits of acting in such a manner are clear Sakalaki et al. 2007; Cristie and Geis 1970.
High Mach controllers will thus be more susceptible to pressure if they are active participants in
their units operational and strategic decision making. In absence of involvement, the lack of
apparent personal benefits of filing a biased estimate and their ability to resist social pressure will
make high Mach controllers relatively insensitive to the efforts of line managers to engage them in
the creation of budget slack.
In conclusion, we hypothesize that only relatively Machiavellian BU controllers will be easier
to persuade to create budget slack if they are involved in management. This is reflected in the
following hypotheses:
H1: The effect of social pressure on high Mach BU controllers engagement in the creation of
budget slack will be more positive for BU controllers who are involved in management.
H2: The effect of social pressure on low Mach BU controllers engagement in the creation of
budget slack will be less positive for BU controllers who are involved in management.

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Why Business Unit Controllers Create Budget Slack 33

Together, H1 and H2 predict a three-way interaction between social pressure, involvement in


management, and Machiavellianism affecting unit controllers engagement in the creation of bud-
get slack. Our expectations are graphically depicted in Figure 1, which focuses on the different
expectations for high Mach and low Mach controllers. In terms of the coding used in Figure 1, the
two hypotheses above predict that the slope of the line CH DH is more positive than the slope of
the line AH BH and that the slope of the line CL DL is less positive than the slope of the line
A L B L.

RESEARCH METHOD
Research Design
To examine the hypotheses we conducted an experiment using a 2 2 between subjects
factorial design. Involvement in management and social pressure to engage in slack creation were
manipulated by varying the experimental case scenarios. Machiavellianism was measured using
the Mach IV scale developed by Cristie and Geis 1970, which was included in an exit question-
naire. This scale contains 20 items and asks participants to what extent they agree with statements
that are indicative of a Machiavellian personality. Examples are: The best way to handle people is
to tell them what they want to hear and It is safest to assume that all people have a vicious streak.
All 20 items of the Mach IV scale can be found in Appendix B. The items were scored on a
five-point Likert scale Strongly disagree to Strongly agree, in line with recent psychology
research Paulhus and Williams 2002; McHoskey et al. 1998. The validity and reliability of the
Mach IV scale is well established in the extant literature Wakefield 2008; Gunnthorsdottir et al.
2002; Fehr et al. 1992.

Participants
The participants in our study are students enrolled in a two-year part-time executive educa-
tional program in finance and control.3 Students in this program, which is offered at different
universities in The Netherlands, have previously obtained a Master of Science in an accounting- or
finance-related field, and are required to have at least three years of relevant work experience. In
total, 169 students from three different universities participated in the study. Of these 169 students,
25 indicated they were not currently employed in a management accounting position.4 Since our
hypotheses are about the decision processes of management accountants, these participants were
excluded from the analyses. Furthermore, as is discussed below, eight of the remaining partici-
pants failed to provide a correct answer to one of the manipulation checks and their scores were
excluded as well. The final sample therefore consists of 136 students. Demographics of the par-
ticipants in the final sample are in Table 1. This table shows that the mean age of the participants
is 31.5 years old. The majority is male 86.0 percent. The average participant has 4.4 years of
experience in management accounting/control functions, has worked 3.5 years for their present
employer, and has been in their present position for 2.2 years.

Research Instrument and Procedures


The students participated in the experiment during class hours. In total we organized seven
sessions across the three different universities. All sessions proceeded according to the same
schedule. One of the authors entered the classroom at an agreed upon point of time and introduced
himself and the research project without specifying the exact purpose of the study. The students

3
The program awards the title of Register Controller Certified Controller, which may be considered as the Dutch
equivalent of the U.S. CMA. Students tend to be full time employees of medium and large firms. Their employers
generally pay the program fee.
4
Most of these 25 students were working as internal auditors, consultants, or general managers.

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34 Hartmann and Maas

FIGURE 1
Hypothesized Relationships
High Machs
Slack
creation DH
Involvement high

CH
Involvement low
AH BH

Low Machs
Slack
creation BL Involvement low

AL
Involvement high

CL DL

Point A: Pressure = low, Involvement = low


Point B: Pressure = high, Involvement = low
Point C: Pressure = low, Involvement = high
Point D: Pressure = high, Involvement = high
L subscript denotes low Machiavellianism, H subscript denotes high Machiavellianism.
H1 predicts that BH AH DH CH (i.e., that the slope of the line AHBH is less positive than the slope of the
line CHDH).
H2 predicts that BL AL DL CL (i.e., that the slope of the line ALBL is more positive than the slope of the
line CLDL).

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Why Business Unit Controllers Create Budget Slack 35

TABLE 1
Participant Demographic Data
Gender: Male: 117 (86.0%), Female: 19 (14.0%)
Mean SD Min. Max.
Age 31.46 4.92 25.00 51.00
Years in current position 2.23 1.59 0.20 10.00
Years worked for current 3.51 2.66 0.20 18.00
employer
Years of experience in 4.42 3.05 0.50 19.00
management accounting
functions

were then asked to participate in the study by filling in two questionnaires. It was emphasized that
participation was voluntary. Only one student chose not to participate and left the classroom. The
participating students were asked not to communicate with each other while they were filling in
the questionnaires. Subsequently they were provided with the research instrument and an exit
questionnaire, which they filled in successively. Participants were randomly assigned to treatment
conditions, as different versions of the experimental materials were randomly distributed. In this
process, care was taken to allocate treatment conditions equally over sessions.
The research instrument contained a case scenario that was specially developed for this study.
The scenario describes a situation in which a BU controller needs to decide whether to deliberately
underestimate the units expected performance in a budget proposal to increase the expected
payoff from reaching the budget target. The BU in the case scenario is a division of a large firm.
The units management team receives a bonus based on the extent to which BU Return on
Investment ROI exceeds a target level. The BU controller, although a member of the manage-
ment team, is excluded from this incentive system. The ROI target is established on an annual
basis through a process of participative budgeting. The case describes how the BU has changed its
strategy recently and continues to remark that the results of this change are disappointing and that
it is highly unlikely that the unit will meet its ROI target this year. In October of the present year,
the management team of the BU has a meeting about the budget proposal for the next year. At this
meeting the BU general manager suggests proposing a budget that shows an unrealistically low
ROI prediction of 11 percent for the next year, because he does not want the unit to miss its target,
and the BU managers to miss their bonus, two times in a row. The controller needs to decide
whether he will accept this and will produce a report that contains unrealistically low estimates of
revenues and unrealistically high estimates of costs. The full research instrument can be found in
Appendix A.5
The manipulations of involvement in management and social pressure were embedded in the
scenarios. In the scenarios, Splash was the name of the BU, Wouter Simons was the name of

5
A number of potentially relevant factors were controlled by making them explicit in the case scenario. First, the case
mentioned that the controller reported to both the BU general manager and a corporate controller and that the BU
manager was not in a position to officially file sanctions on the controller in case he would choose not to produce the
slack inducing report. Second, it was mentioned that BU controller Wouter Simons was aware that the chance that
corporate headquarters will find out that the ROI proposal of 11 percent is founded on unrealistically low estimates is
negligible. Finally, the case specified that the company and business unit were Dutch and were active in the food and
beverage industry and that the company was not listed on a stock exchange.

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36 Hartmann and Maas

the BU controller, and Gerard van Dinkel was the name of the BUs general manager. In
addition to the common part of the case, participants in the high involvement conditions read the
following statement:
BU controller Wouter Simons has always been very actively involved in the BUs strategic and
operational management. He has also contributed substantially to the initiation, development and
implementation of Splashs new strategy.
Participants in the low involvement conditions instead read:
BU controller Wouter Simons has never been actively involved in the BUs strategic and opera-
tional management. Neither has he contributed in any way to the initiation, development or imple-
mentation of Splashs new strategy.
Similarly, participants in the high social pressure conditions read:
Gerard van Dinkel and the other two members of the BU management team put severe pressure on
BU controller Wouter Simons to agree to a ROI proposal of 11%.
Participants in the low social pressure conditions instead read:
Gerard van Dinkel and the other two members of the business units management team do not push
BU controller Wouter Simons in any way to agree to a ROI proposal of 11% but instead leave the
decision for him to make all by himself.
The dependent variable was measured by asking participants to indicate the likelihood that
Wouter Simons, the BU controller in the case, would go ahead and produce a report that would
provide the foundation for an unrealistically low ROI estimate of 11 percent. The participants
indicate their assessment of the likelihood in percentages between 0 percent certain not to do it
and 100 percent certain to do it.6 In the last of the seven sessions, the students, after having
indicated their likelihood scores, were also asked to describe in their own words the way they
chose the likelihood score for Wouter Simons.
The research instrument was pre-tested in a separate group of 20 part-time students enrolled
in a Master of Science in Accounting and Control program, most of who were working in a
management accounting position. This pilot test confirmed that there was substantial variance in
the dependent variable and that a significant amount of this variance could be explained by the
studys independent variables. Moreover, the pilot test showed that participants found the case
realistic and interesting.

RESULTS
Manipulation Checks and Descriptive Statistics
The manipulation of social pressure was checked with the following post-experimental ques-
tionnaire item scored on a five-point Likert scale 1 Strongly disagree and 5 Strongly
agree: Business unit controller Wouter Simons was under strong pressure from the other mem-
bers of the business unit management team to build slack in the units ROI budget target. The
mean score in the high-pressure conditions was 4.26, while the mean score in the low-pressure
conditions was 1.92. The difference between the scores is significant t 15.58, p 0.000. The

6
The dependent variable was framed in terms of the likelihood of someone elses behavior to control for the effects of
social desirability. Asking questions in terms of likelihood of behavior is a common practice in experimental account-
ing ethical dilemma studies e.g., DeZoort and Lord 1994; Jones and Kavanagh 1996; Tsui and Gul 1996, as is framing
questions in the third person to prevent social desirability bias Ponemon and Gabhart 1990. To see if framing the
dependent variable in the third person affects the results we also asked participants to indicate the likelihood that they
themselves would produce the report if they were in the position of the business unit controller. The results with regard
to this version of the dependent variable are qualitatively similar to the ones in the third person version and are not
reported here.

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Why Business Unit Controllers Create Budget Slack 37

manipulation of involvement in management was checked with the following item scored on a
five-point Likert scale 1 Strongly disagree and 5 Strongly agree: Business unit con-
troller Wouter Simons was actively involved in strategic and operational decision making at the
business unit. The mean score in the high-involvement conditions was 4.24, while the mean score
in the low-involvement conditions was 1.65. This difference is also significant t 22.20, p
0.000
Descriptive statistics regarding the dependent variable in our experiment are in Table 2. This
table contains the number of participants and dependent variable mean scores and standard devia-
tions for all four treatment conditions in the experiment. In addition, it shows cell sizes, means,
and standard deviations for the eight cells that result when Machiavellianism is split at the median
value of 2.75 to produce a high Mach and a low Mach subgroup.
We calculate individuals Machiavellianism scores as their average scores on the 20 items in
the Mach IV scale ten negatively worded items were reverse coded. The Machiavellianism
scores in our sample range from 1.75 to 3.55 with a mean of 2.76 SD 0.36 and a median of
2.75. The mean score of 2.76 is slightly below the scale mean of 3, which indicates that on average
the management accountants in our sample tended to somewhat disagree with the statements

TABLE 2
Descriptive Statistics Dependent Variable
Full Sample
Involvement
High Low Overall
n Mean SD n Mean SD n Mean SD
Pressure
High 36 54.44 26.207 36 52.22 27.109 72 53.33 26.497
Low 31 40.00 23.381 33 42.45 29.539 64 41.27 26.553
Overall 67 47.76 25.795 69 47.55 28.514 136 47.65 27.108
High Mach Subgroup
Involvement
High Low Overall
n Mean SD n Mean SD n Mean SD
High 16 68.44 22.783 15 54.00 26.873 31 61.45 25.501
Low 16 35.31 19.619 19 52.16 27.144 35 44.46 25.147
Overall 32 51.88 26.843 43 52.97 26.629 66 52.44 26.532
Low Mach Subgroup
Involvement
High Low Overall
n Mean SD n Mean SD n Mean SD
High 20 43.25 23.635 21 50.95 27.866 41 47.20 25.861
Low 15 45.00 26.592 14 29.29 28.342 29 37.41 28.113
Overall 35 44.00 24.579 35 42.29 29.663 70 43.14 27.056

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38 Hartmann and Maas

indicative of a Machiavellian personality.7 The reliability of the Mach IV scale was assessed using
Cronbachs alpha. Cronbach alpha is 0.69, which indicates acceptable scale reliability. A one-way
ANOVA with Bonferroni corrected post hoc tests confirmed that Machiavellianism did not differ
significantly between experimental conditions.
Dependent variable scores range from 0 percent to 100 percent and there is considerable
variance in all four experimental conditions and all eight cells in a model with Machiavellianism
split at the median. The overall mean score is 47.65 SD 27.11. The highest mean score is
found in the cell with both experimental manipulations high and participants with above median
Machiavellianism scores mean 68.44, SD 22.78 while the lowest mean score is for low
Machiavellian participants in the condition with both manipulations at the low level mean
29.29, SD 28.34. The only other cell, besides these two, in which the value of the dependent
variable is significantly different from the scale midpoint of 50 percent, is the high involvement,
low-pressure situation for high Mach controllers mean 35.31, SD 19.62.

Hypothesis Tests
We test our hypotheses using moderated regression analysis. We use regression analysis
because it allows us to examine the interaction between the experimental manipulations and a
continuous variable Machiavellianism without the loss of information that would result if we
dichotomized the Machiavellianism scores Cohen et al. 2003; Hartmann and Moers 1999. Before
calculating the interaction terms, we standardized the Machiavellianism scores to facilitate inter-
pretation of the results. A hierarchical regression procedure was run with SOCIAL PRESSURE,
INVOLVEMENT, and MACHIAVELLIANISM, the two way-interactions and the three-way inter-
action as predictors of engagement in slack creation. Using a hierarchical regression allows us to
separately evaluate the significance of the two-way and three-way interaction effects and the
contribution of including the interaction coefficients in the regression model to the explanatory
power of the model. The results are in Table 3.
The results in column 1 of Table 3 show that the main-effects-only model is significant and
that there exist main average positive effects of SOCIAL PRESSURE and MACHIAVELLIANISM
on SLACK CREATION. As can be seen in column 2 of Table 3, introduction of the two-way
interactions column 2 does not improve the predictive ability of the model. However, the intro-
duction of the coefficient for the three-way interaction does result in a higher adjusted R2. An
F-test Cohen et al. 2003 confirms that this increase in R2 is significant F 4.543, p 0.05.
The results for the full model are in column 3 of Table 3. The results for this full model confirm
that there is a significant three-way interaction effect between INVOLVEMENT, SOCIAL PRES-
SURE, and MACHIAVELLIANISM p 0.05, as was predicted by H1 and H2. Also notice that
the main effect of SOCIAL PRESSURE is not significant in the models with interaction terms,

7
Following recent literature in personality psychology McHoskey et al. 1998; Paulhus and Williams, 2002 we measured
Machiavellianism on a five-point Likert scale. This provides a deviation from the original instrument of Cristie and Geis
1970, which used a seven-point scale. Moreover, Cristie and Geis 1970 calculated an individuals Machiavellianism
score as the sum of the item scores plus a constant of 20. The idea behind this scoring method is that an individual who
is perfectly neutral when it comes to Machiavellianism will have a score of exactly 100 20 times the scale mean of 4
plus the constant of 20. Note that if a respondents Machiavellianism score is calculated as the mean item score on a
five-point scale as in our study, an individual who is perfectly neutral about the Machiavellianism statements will have
a score of 3. Wakefield 2008 used Cristie and Geis 1970 original measurement and scoring method. Assuming equal
distributions, the mean Machiavellianism score in the Wakefield sample 80.9 corresponds to a mean score of 2.363 on
a five-point scale. To calculate this score we first calculated the mean score of the 20 Mach-IV items on the seven-point
Likert scale 80.9 minus 20, divided by 20 3.045. Then we calculated the corresponding score on a hypothetical
five-point scale, using a linear transformation 3.045 times 2/3 plus 1/3 2.363. The results indicate that in both her
and our study, the average respondent tended to somewhat disagree with the statements indicative of a Machiavellian
personality i.e., has a score that falls slightly below the theoretical mean of the scale.

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Why Business Unit Controllers Create Budget Slack 39

TABLE 3
Hierarchical Regression Coefficients
(p-values between brackets)
(1) (2) (3)
Intercept 35.411* 37.049* 36.240*
0.035 0.033 0.036
INVOLVEMENT 1.638 2.577 1.606
0.722 0.702 0.810
SOCIAL PRESSURE 12.380** 11.541 11.246
0.008 0.080 0.084
MACHIAVELLIANISM 19.205** 23.945* 35.849**
0.005 0.032 0.004
INVOLVEMENT PRESSURE 2.142 1.634
0.818 0.858
INVOLVEMENT MACHIAVELLIANISM 7.393 36.866
0.581 0.057
PRESSURE MACHIAVELLIANISM 3.083 27.576
0.815 0.116
PRESSURE INVOLVEMENT MACHIAVELLIANISM 55.096*
0.037
Adjusted R2 0.072 0.053 0.079
F 2.477 1.744 2.037
p 0.020 0.078 0.030

* Coefficient is significant at the 0.05 level two-tailed


** Coefficient is significant at the 0.01 level two-tailed
Dependent Variable SLACK CREATION the indicated likelihood, in a percentage between 0 percent and 100 percent,
that the controller in the case will create budget slack. In running the regressions we control for participants age, tenure
in present position, years of experience as assistant controller and university. None of the control variables has a
significant effect on the results.
Variable Definitions
INVOLVEMENT experimental manipulation of whether involvement in management is high or low;
SOCIAL PRESSURE experimental manipulation of whether social pressure to create slack is high or low; and
MACHIAVELLIANISM score of participants on Mach IV scale measuring the personality trait Machiavellianism.

providing an indication that the positive effect of SOCIAL PRESSURE on SLACK CREATION is
not equally strong for all combinations of INVOLVEMENT and MACHIAVELLIANISM.
To shed more light on these results and to add some intuition to this three-way interaction, we
analyze our experimental data separately for subgroups of high and low Machiavellian participants
using factorial ANOVAs and plot the results. The results show that INVOLVEMENT and SOCIAL
PRESSURE interact differently for high Machs and for low Machs. The findings are illustrated in
Figures 2 and 3.
First, considering the high Mach subgroup, H1 predicts an interaction between SOCIAL
PRESSURE and INVOLVEMENT. The results indicate that this effect is indeed significant at the
0.05 level F 5.955, p 0.018. Figure 2 shows that the findings for high Mach controllers
follow a pattern that is consistent with our H1. While for involved controllers, pressure strongly
increases engagement in slack creation the likelihood score increases from 35.31 percent to 68.44
percent, the increase is insignificant for uninvolved controllers. As is clear from Figure 3, the
results from a factorial ANOVA for the low Mach group on the contrary show that pressure only

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40 Hartmann and Maas

FIGURE 2
Results for High Machs
Slack creation

80.0

70.0 Involvement
DH high

60.0

BH Involvement
low
50.0 AH

40.0

CH
30.0

20.0

10.0

0.0
Pressure low Pressure high

Point A: Pressure = low, Involvement = low


Point B: Pressure = high, Involvement = low
Point C: Pressure = low, Involvement = high
Point D: Pressure = high, Involvement = high
H subscript denotes high Machiavellianism.
Results are consistent with H1 because BH AH DH CH (i.e., the slope of the line AHBH is less positive than
the slope of the line CHDH).

increases slack creation for uninvolved controllers from 29.29 percent to 50.95 percent. Involved
low Mach controllers are not affected by pressure. This interaction effect of pressure and involve-
ment is marginally significant in this subsample F 3.518, p 0.066.
Overall, the results suggest that while on average Machiavellianism and social pressure in-
crease BU controllers engagement in the creation of budget slack, pressure is not equally effective
in all conditions. Involvement in management increases the effectiveness of pressure on high
Mach controllers; however it decreases the effectiveness of pressure on low Mach controllers. We
argued this is because high Machs and low Machs have different decision-making styles and are

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Why Business Unit Controllers Create Budget Slack 41

FIGURE 3
Results for Low Machs
Slack creation

80.0

70.0

60.0

BL
Involvement
50.0
low

DL Involvement
CL high
40.0

30.0 AL

20.0

10.0

0.0
Pressure low Pressure high

Point A: Pressure = low, Involvement = low


Point B: Pressure = high, Involvement = low
Point C: Pressure = low, Involvement = high
Point D: Pressure = high, Involvement = high
L subscript denotes low Machiavellianism.
Results are consistent with H2 because BL AL DL CL (i.e., the slope of the line ALBL is more positive
than the slope of the line CLDL).

influenced by different aspects of the situational circumstances. Finally, an important finding is


that involvement in management does not have a main effect on engagement in the creation of
budget slack. This indicates that it is crucial to consider pressure and the personality of the
controller to understand whether involvement of controllers in strategic and operational decision
making poses a threat to the objective reporting of performance estimates.

Supplemental Analysis
To supplement our statistical analysis, we asked 27 participants in the final session of our
experiment to explain in their own words how they had chosen their likelihood estimates. This

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42 Hartmann and Maas

question was asked in the debriefing that was handed out after the experimental scenario had been
finished. Of these 27 participants, 13 48 percent explicitly mentioned the lack of involvement
of the controller in the BUs strategic and operational management as an important factor that
influenced their estimate of the controllers subsequent behavior. In particular, in the experimental
conditions in which involvement in management was manipulated as high, many participants 7
out of 12 mentioned this as a factor that influenced their judgment. A typical response for
participants in the high involvement, low-pressure condition was: Normally, I expect controllers
to make estimates objectively. However, because the controller in this case has been so actively
involved in managing the BU he will feel that reaching the target will also be his responsibility
he will be more inclined to make a very low estimate.
Pressure from the BU manager was spontaneously mentioned by nine participants 33 per-
cent, often in combination with involvement in management. One participant in the low involve-
ment, high-pressure condition mentioned for example: The controller has no direct interest in
the outcome of the budgeting process and does not care if the target is high or low. On the other
hand, people in general like to conform to the wishes of their colleagues/superiors and therefore
probably tend to do what they are told to do.
As regards our third antecedent variable, Machiavellianism, many participants mention that
they believe it is ultimately personal ethics, the controllers professionalism or the persons char-
acter that determines what controllers do in situations like this. An example of a clear formulation
as given by a participant in the high involvement, high-pressure condition is as follows: For me,
integrity and trustworthiness are paramount. Whatever the situation, I would not allow this to
happen.

DISCUSSION AND CONCLUSION


This paper set out to examine how BU controllers respond to the ethical dilemma that arises
if they can spur the interests of their own unit by deliberately biasing budget estimates to create
slack. We were particularly interested in increasing our understanding of how, if at all, involve-
ment of controllers in operational and strategic management decisions affects their ability to resist
pressure to engage in slack creation. We expected and found that the three factors, involvement in
management, pressure from BU managers and personality, should be considered together to un-
derstand controllers engagement in the creation of budget slack. More specifically, we found that
only high Mach unit controllers become more susceptible to pressure if they are involved in
management. Low Mach unit controllers actually became less willing to give in to slack-inducing
pressure if they had been involved in managerial decision making.
The results of our study are important for management accounting research as well as for
business practice. First, our study contributes to the extensive literature on budgetary participation
and the creation of budget slack by focusing on the, until recently, neglected role of the BU
controller in the budgeting process. Most existing studies have treated budgeting and performance
reporting as a process involving only two parties, a higher-level manager and a lower-level man-
ager see Covaleski et al. 2003. Our study complements recent work by Davis et al. 2006,
Indjejikian and Matfjka 2006, and Maas and Matfjka 2009 and shows that a focus on the
personality of the BU controller can enhance our understanding of management accounting and
budgeting practices cf. Naranjo-Gil et al. 2009 and in particular of the budgeting games people
play Collins et al. 1987.
Our results also provide an explanation for why prior studies e.g., Sathe 1982 have failed to
find a relationship between controllers involvement in management and budget gaming. We show
that the relation between involvement in management and the creation of budget slack can be
either positive or negative and that it depends on the personality of the BU controller and the level
of pressure how involvement changes controllers gaming behavior. In addition, a focus on indi-

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Why Business Unit Controllers Create Budget Slack 43

vidual differences in Machiavellianism might help explain why some management accountants
consider the creation of slack and other forms of budget gaming more unethical, unfair, and
unacceptable than others Elias 2002; Kaplan 2001; Merchant and Rockness 1994. In particular,
it might also provide an explanation for the finding of Davis et al. 2006 that not all their
participants indicated that the situation of being pressured to engage in the creation of slack
provided them with an ethical dilemma which would be a typical reaction for a high Mach
participant.
Finally, our study contributes to the literature by experimentally examining a potential trade-
off between the two different basic functions of management accounting: decision facilitation and
decision influencing i.e., control Sprinkle 2003; Demski and Feltham 1976. BU controller
involvement in management is motivated by expected improvements in controllers ability to
perform well in their decision-facilitation role Pierce and ODea 2003; Granlund and Lukka
1998. It is generally believed to come at the cost of reduced corporate control however, as
involved BU controllers are supposed to be less independent and objective Indjejikian and Matf-
jka 2006; San Miguel and Govindarajan 1984. Our results, however, show that a trade-off be-
tween decision-facilitation and decision-influencing benefits in designing the organizational con-
troller function is not inevitable. What seems crucial instead, is staffing the controller positions
with individuals with the right characteristics. In this sense, our study also has important practical
implications, as our findings suggest that where an involved strong controller is needed,
organizations should seek people who score low on Machiavellianism. For unit controllers who
are not going to be active participants in management decisions however, organizations would do
better to attract relatively Machiavellian controllers, as they are less sensitive to social pressure in
situations where the ethicality of slack creation is more ambiguous and budget gaming not in their
self-interest.
In interpreting this studys results, some limitations should be considered. First, it should be
recognized that while we find support for our hypotheses, our model only explains a relatively
limited amount of variance in controllers engagement in slack creation and other factors likely
play an important role as well. Next, the data for this study were acquired through an experimental
survey in a classroom setting. Although the controlled setting contributes to the internal validity of
the study, it may have come at some costs to external validity. Furthermore, the fact that the study
followed the existing literature on accounting ethics and used a case-based experiment with the
manipulations embedded in the case scenario provides typical concerns with respect to construct
validity. For example, it has been argued that cognitive limitations sometimes make it difficult for
participants to determine what their behavior would be in situations described in case scenarios
Grover 1993.
Although much effort was made to ensure a realistic scenario, participants answers might still
have been influenced by the artificial setting imposed on them. However, we believe that the fact
that actual management accountants were involved, who also judged the task as realistic, adds to
both the internal and external validity of the study. Moreover, the responses that participants gave
when asked to explain their likelihood estimates do not suggest that the results are driven by the
typical limitations associated with our method.
Finally, considering our participants, it should be noted that although our participants were
employed in a management accounting function, they were also still studying. The findings of our
experiment might therefore be biased toward relatively inexperienced controllers and moreover,
because all participants were working in The Netherlands, toward the Dutch cultural and institu-
tional setting. Also, the generalizability of our findings is limited by the fact that our participants
were relatively young and predominantly male. This is especially important because some studies
have found that males score higher on Machiavellianism than females and that Machiavellianism
decreases with age e.g., Mudrack 1993; Wilson et al. 1996. Despite these limitations, we believe

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44 Hartmann and Maas

our study provides some new and valuable insights into the mechanisms through which BU
controllers become engaged in budget games and biasing performance estimates.
Our study points toward a number of avenues for future research. First, future studies should
continue to investigate how BU controllers and management accountants in general, influence
budget negotiations and performance reporting. Next, researchers should examine how social
factors, such as pressure, influence management accounting practices. In particular, a focus on the
interplay between economic and social incentives is warranted Brggen and Moers 2007; Maas
and Matfjka 2009. Also, more research is needed on how personality characteristics and other
individual differences influence reporting decisions Maroney and McDevitt 2008. A focus on the
concept of Machiavellianism seems particularly fruitful, because its validity has been well estab-
lished in the psychology literature and because the construct has been proven to have substantial
predictive ability in a wide variety of areas and with regard to many different types of behavior.

APPENDIX A
RESEARCH INSTRUMENT
Below you find a description of the company VeMaCo NV and a situation at one of its
business units: Splash. Please read the story carefully and answer the questions at the end as if this
was a real situation. Please note that there are no correct or incorrect answers.
VeMaCo NV is a company that is active in the food and beverage industry and has about
3,500 employees divided over five business units. VeMaCos home and headquarters are in The
Netherlands. The company is not listed on a stock exchange.
The control function at VeMaCo is organized as follows: every business unit BU has its own
control staff, which is headed by a BU controller. The BU controller is a member of the BUs
management team. He/she reports to both the BU general manager and VeMaCos CFO.
All BUs are investment centers. Every year, BU and corporate managers together decide
about an annual budget for the BU. The main target for the BUs is defined in terms of Return on
Investment ROI BU net earnings divided by BU capital invested.
All BU managers receive an annual bonus dependent on their BUs realized ROI for that year.
If realized BU ROI meets the target level, the managers receive a bonus equal to about 10 percent
of their fixed salary. This bonus gets higher for higher levels of realized ROI over the target level
with a maximum that is equal to about 25 percent of annual fixed salary. The BU controllers are
excluded from this bonus system.
Splash is the smallest of the five BUs and has about 400 employees. Splash produces sodas,
lemonades, and ice cream. Gerard van Dinkel has been the general manager of Splash for three
years. Wouter Simons has been Splashs BU controller for five years. Apart from these two, the
Splash management team also consists of an operations manager and a marketing and sales
manager.
Over the years 2002 to 2004, Splash has gradually divested its activities in the soda market.
Instead, it has changed its focus to ice cream and desserts. This change of focus also implies a
change from customer products to intermediate products sold to restaurant chains and other com-
panies in the food and beverages industry.
In October 2004 it becomes clear that the results of this strategic change are somewhat
disappointing and the chance that Splash will be able to reach its 2004 ROI target is very small
see Table A1.

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Why Business Unit Controllers Create Budget Slack 45

Table A1
Splash ROI Target and Realization over the Years 20002004
Year ROI Target ROI Realization
2000 10% 9%
2001 12% 12.2%
2002 12.5% 13%
2003 13% 13.6%
2004 14% 13.3% expected

In October 2004, the Splash management team has a meeting to decide about the 2005 budget
proposal. Gerard van Dinkel, Splashs general manager, suggests basing the proposal on
conservative estimates. Both he and BU controller Wouter Simons believe Splash should be able
to make a ROI of 13.5% in 2005. However, Gerard van Dinkel asks Wouter Simons if he can come
up with a proposal of a ROI target of 11%, because he feels it would be bad for the business unit
to miss its targets two times in a row and he therefore does not want to take any risks. He also
mentions that it would be undeserved if Splashs managers miss their bonus again next year.
BU controller Wouter Simons realizes that the only way to come up with a ROI proposal for
2005 of 11% is by making unrealistically low sales estimates and unrealistically high cost esti-
mates. He also knows that Gerard van Dinkel does not have the formal authority to order his
participation in making such estimates. He therefore needs to decide for himself whether or not he
wants to go ahead with it.
We would like to know how likely you think it is that Wouter Simons proceeds to develop a budget
proposal that contains the unrealistically low ROI target of 11%.
In making your assessment of this likelihood please also note the following:
BU controller Wouter Simons is aware that the chance that corporate headquarters will find
out that the ROI proposal of 11% is founded on unrealistically low estimates is negligible.

Conditions with Involvement in Management High


BU controller Wouter Simons has always been very actively involved in the BUs strategic
and operational management. He has contributed substantially to the initiation, development, and
implementation of Splashs new strategy.

Conditions with Involvement in Management Low


BU controller Wouter Simons has never been actively involved in the BUs strategic and
operational management. Neither has he contributed in any way to the initiation, development, and
implementation of Splashs new strategy.

Conditions with Social Pressure High


Gerard van Dinkel and the other two members of the BU management team put severe
pressure on BU controller Wouter Simons to agree to a ROI proposal of 11%.

Conditions with Social Pressure Low


Gerard van Dinkel and the other two members of the BU management team do not push BU
controller Wouter Simons in any way to agree to a ROI proposal of 11% but instead leave the
decision for him to make by himself.
Please answer the following questions:
1. How likely do you think it is that Wouter Simons chooses to proceed with developing a
budget proposal that is based on a ROI estimate of 11%? (Please indicate a chance

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American Accounting Association
46 Hartmann and Maas

between 0% and 100%.)


____ %
2. Imagine that you would be in the same situation as Wouter Simons. How likely would it
be that you proceeded with developing a budget proposal that is based on a ROI estimate
of 11%? (Please indicate a chance between 0% and 100%.)
____ %

APPENDIX B
Mach IV Scale Developed by Cristie and Gies (1970)
1. Never tell anyone the real reason you did something unless it is useful to do so.
2. The best way to handle to people is to tell them what they want to hear.
3.* One should take action only when sure it is morally right.
4.* Most people are basically good and kind.
5. It is safest to assume that all people have a vicious streak.
6.* Honesty is the best policy in all cases.
7.* There is no excuse for lying to someone else.
8. Generally speaking, men wont work hard unless they are forced to do so.
9.* All in all, it is better to be humble and honest than to be important and dishonest.
10.* 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.
11.* Most people who get ahead in the world lead clean, moral lives.
12. Anyone who completely trusts anyone else is asking for trouble.
13. The biggest difference between most criminals and other people is that the criminals are
stupid enough to get caught.
14.* Most men are brave.
15. It is wise to flatter important people.
16.* It is possible to be good in all respects.
17.* Barnum was wrong when he said that theres a sucker born every minute.
18. It is hard to get ahead without cutting corners here and there.
19. People suffering from incurable diseases should have the choice of being put painlessly
to death.
20. Most men forget more easily the death of their father than the loss of their property.

* Reverse-scored item.

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