Measure Management and the Masses : How Acceptability of Operating and Reporting Distortion Varies with Deservingness, Demography, and Damage

Prior surveys have documented that elite US managers see operating distortions as more acceptable ways to hit benchmarks than reporting distortions (Bruns and Merchant 1990; Graham, Harvey, and Rajgopal 2005). To assess the generality of this difference and understand variation in attitudes toward distortion, we conduct three studies with over 5,600 participants who represent a broad range of American residents. Our first study uses a familiar business setting, and replicates that people see operating distortions as more acceptable than reporting distortions on average. However, the relative unacceptability of reporting distortions declines among those who see the distorter as more deserving of a bonus, and those of lower socioeconomic status. Our second study raises the moral stakes of distortion by presenting a healthcare setting in which operating distortion harms patients. Participants in this setting see operating distortions as far less acceptable than reporting distortions, particularly among those who are more socially liberal. Those who perceive the distorter as more deserving and those of lower socioeconomic status still see reporting distortion as relatively more acceptable, as in our first study. Our third study manipulates the facts of our first setting to make the distorter more objectively undeserving. While this manipulation dramatically reduces the acceptability of distortion, only participants' idiosyncratic perceptions are associated with a difference between operating and reporting distortion