Using Regulatory Focus and Moral Disengagement Theories to Understand Budgetary Slack as Unethical Behavior

• In Event: Emerging and Innovative Research Session I

Abstract

The issue of budgetary slack has been studied by researchers for years, primarily through the lens of agency theory. Studies using agency theory predict that individuals will maximize their self-interest, thus maximizing the slack in their budgets. These studies have provided mixed evidence, however, leaving many to recommend that an individual’s ethics may help explain why individuals do not always maximize the amount of slack in their budgets when given the opportunity to do so. A few studies have since provided evidence that support this ethical perspective within the stream of budgetary slack research. This study extends their findings to make additional theoretical connections between budgetary slack and two prominent psychology theories – Regulatory Focus Theory and the Theory of Moral Disengagement. In the process, we set forth several propositions that, once tested, may allow researchers and practitioners, alike, the ability to both better understand what conditions set the stage for budgetary slack as well as some new individual characteristics that relate to slack. Armed with this additional awareness, managers can effect change within their organizations to better align employees and systems for increased employee satisfaction and, ultimately, better organizational performance.

Authors

• Roopa Venkatesh, University of Nebraska at Omaha

• Amy Fredin, St. Cloud State University