Why controllers compromise on their ﬁduciary duties: EEG evidence on the role of the human mirror neuron system – Philip I. Eskenazi, Frank G.H. Hartmann & Wim J.R. Rietdijk. Accounting, Organizations and Society 50 (2016): 41-50.
Business unit (BU) controllers play a fiduciary role to ensure the integrity of financial reporting. However, they often face social pressure from their BU managers to misreport. Drawing on the literature on the human mirror neuron system, this paper investigates whether controllers’ ability to withstand such pressure has a neurobiological basis. We expect that mirror neuron system functionality determines controllers’ inclination to succumb to social pressure exerted by self-interested managers to engage in misreporting.
We measure mirror neuron system functionality using electroencephalographic (EEG) data from 29 professional controllers during an emotional expressions observation task. The controllers’ inclination to misreport was measured using scenarios in which controllers were being pressed by their manager to misreport.
We find a positive association between controllers’ mirror neuron system functionality and their inclination to yield to managerial pressure. In line with our expectation, we find that this association existed specifically for scenarios in which managers pressed their controllers out of personal rather than organizational interests. We conclude that BU controllers’ neurobiological characteristics are involved in financial misreporting behavior and discuss the implications for accounting research and practice.
Hypothesis: For BU [Business Unit] controllers, we expected that hMNS [human mirror neuron system] functionality predicts controllers’ vulnerability to the social pressure to misreport exerted by BU managers.
An important characteristic of the role of BU controllers is the combination of local (to support their BU managers in operational and strategic decision making) and functional (fiducary duty) responsibilities.
Method: N=29 study with 3 scenario’s x 2 contexts (managers’ personal/ self-interest, or organizational interest).
EEG: Individual levels of hMNS functionality can be observed in electroencephalogram (EEG) recordings of brain activity (…) The associated weakening of the EEG signal is called mu suppression. Mu suppression has been shown to be a robust and valid indicator of hMNS functionality (…) lower values indicate more “mirroring”, associated with higher levels of sensitivity to others’ emotions.
For example scenario below, correlation between cooperation and MU: r = –.406, p = .029
Result: Our findings indicate a strong association between hMNS functionality and controllers’ inclination to yield to BU managers’ pressure to misreport when this pressure stems from BU managers’ personal interests rather than from managers’ concerns with organizational interests.
our study suggests that emotional influence may cause excessive alignment between the interests pursued by the BU manager and those served by the reporting behaviors of the BU controller. In designing internal control structures, organizations need to be aware of the reporting risks associated with the expansion of “business partner” controllers.