Do sources of occupational community impact corporate internal control? The case of CFOs in the high-tech industry
Bibliographic record
Abstract
Purpose The Chief Financial Officer (CFO), despite being a critical organization member responsible for ensuring quality of financial reporting, audit and compliance, is under-researched. Grouped as a member of top management teams (TMS) in studies, factors influencing decision making in this group rely on static measures of characteristics without regard for dynamic and longitudinal influences of career trajectories and industry occupational group memberships. The relationship between the high-tech industry as a site of notable reported internal control (IC) weakness and influences on CFOs requires closer examination. The paper aims to discuss these issues. Design/methodology/approach The study draws together the upper echelons theory and occupational communities (OCs) to explore the impact of shared values and behavioral norms from different sources on executive decision making. Internal and external sources of OC are proposed and their influence on activities with respect to corporate IC is tested. The sample of 1,573 firm/year observations includes high-tech firms listed on major US exchanges was developed using data from five distinct databases. Executives’ biographic information was manually collected. Findings Results indicate that senior financial executives belong not only to their firm and its culture but also to OCs that extend beyond the firm. Membership in professional credential granting occupational groups has less impact on effective IC than experience in the high-tech industry. In combination, multiple OCs show evidence of compound and counteracting effects on IC. The OC that arises in the high-tech industry makes a measurable positive difference in the quality of IC in sample firms, in contrast with the OC among credentialed accounting and financial professionals. Research limitations/implications This quantitative study of OC reveals the differential impact of different sources of OC and contributes to the literature on TMS a new framework for examining decision making. OC is typically studied through qualitative methods and, thus, potential exists to further explore the specific nature and dynamics of the OCs identified in this study. Practical implications The study highlights the role of broad affiliations and networks among senior financial executives which may have bearing on their ability to effectively manage IC. The role of these networks may also partially explain instances of CFO failure and thus dismissal. Knowledge of the role of OC may help boards of directors in the selection and promotion of senior financial officers of the firm. Originality/value The paper offers a different perspective on professional accounting expertise in one specific industry where incidence of IC weakness is high relative to other industries. Study results expand recent research on TMS to include sociological impacts of cohort groups. Despite generally weaker IC in the high-tech sector, this study demonstrates the value of exploring group membership within the industry as an important predictor of behavior. The result is a new perspective to CFO decision making which illustrates the relevance of OCs among upper echelons. The implications of findings for CFO recruitment and promotion are borne out in recent instances of senior financial executive failure in the sector.
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How this classification was reachedexpand
Full frame distilled prediction
Teacher imitationNot calibrated prevalence, not ground truth. Human validation pending. Learned from the 10,348 direct Codex labels and 10,348 direct Gemma labels. Candidate is the union of thresholded teacher heads; consensus is their intersection. These outputs are machine_predicted_unvalidated and are not human labels or direct frontier model labels.
Codex and Gemma teacher scores by category
| Category | Codex | Gemma |
|---|---|---|
| Metaresearch | 0.010 | 0.001 |
| Meta-epidemiology (narrow) | 0.000 | 0.000 |
| Meta-epidemiology (broad) | 0.001 | 0.000 |
| Bibliometrics | 0.000 | 0.001 |
| Science and technology studies | 0.001 | 0.000 |
| Scholarly communication | 0.001 | 0.002 |
| Open science | 0.001 | 0.000 |
| Research integrity | 0.000 | 0.003 |
| Insufficient payload (model declined to judge) | 0.000 | 0.000 |
Machine scores (provisional)
The two teacher heads of the student model, read on this work. A score orders the frame for review; it never asserts a category, and the validation status ships verbatim with every row.
Baseline scores from an immature model (maturity gate not passed, 7 training rounds). Scores rank; they never assert a category.
score_only:v0-immature-baseline · verbatim from the scoring run: score_only means the number may rank works, and no category label ships from itClassification
machine, unvalidatedMachine predicted; a candidate call from one teacher head, not a consensus.
How this classification was reached, model by model and score by score, is at the end of the page under "How this classification was reached".