Archive of Journal - Financing

Financing – scientific magazine for economy

ISSUE 2019, No. 2, Article 1, Year of publication: 10, March, 2019

Tone at the top – a powerful tool and double-edged sword in the hands of corporate


Tamara Stojanović*

*PhD Assistant Professor, University in Banja Luka, Faculty of Agriculture, Department of Finance and Accountancy



Tone at the top is a metaphor for business environment built on values affecting the activities and behavior of whole organization. A number of researches, conducted by academics and professional institutions, has shown that tone at the top, because of its pervasive influence, may have signifi cant positive, but also negative, implications on the quality of total corporate governance including: systems of internal control, risk management, fi nancial reporting integrity and the overall business effectiveness and success. The aim of this paper is to highlight the signifi cance and ‘double-edged’ nature of tone at the top, and to explain what is its power built on, which implies the understanding of motivational drivers of individual and group human behavior. The comprehension of behavioral mechanisms is the prerequisite for the effective management of the tone at the top encompassing: taking the responsibility at all organizational levels, defining core values and establishing value-based practices, regular audits of the tone at the top and related risks, and finally, empowering and promoting ‘tone at the top’ until it becomes ‘mood in the middle’. This would enable tone at the top to became the ‘unseen hand’ available, even though formal policies and procedures may not be, and consequently enable employees to make decisions and act in a totally novel situations. However, the risks that these actions would deviate from the organizational values, in this case, would be minimal.

Keywords: tone at the top, formal controls, organizational culture, audit, corporate governance

DOI: DOI: 10.7251/FIN1902003S

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