ETHICAL CONCERNS OF BUDGETARY SLACK CREATION

Abstract

The ethical concerns of budgetary slack are numerous. Within the context of this paper we discuss and research certain factors that cause and occur with slack creation. We also evaluate and analyze many of the theories that surround organizational behavior, ethical judgment, the agency theory, participative budgeting, the psychological contract period, and information asymmetry. We also evaluate similarities and differences of the cultural and ethical effects on budgeting of three different societies – United States, Japan, and China. Within this paper we show that the further a society moves away from morality and face, the more likely they are to move towards opportunistic self-interest, with a lapse in reputation and ethics. Lastly, we discuss the happiness and motivation in budget setting and how psychological capital is an important attribute to keeping employees motivated with pre-determined budgetary goals when they are involved with the process.