Putting ethical business into practice
The challenges of walking the talk
By Tanya Barman, CIMA head of ethics | CFO UK | Published 15:17, 28 June 12
Does your employer have a code of ethics? An emphatic 80 percent of those polled in a recent survey we carried out acknowledged their organisation did. The survey showed a 10 to 15 percent increase in companies providing both statements of ethical values and a code of ethics.
This reflects the growing attention on ethical practices. Recent experiences of corporate behaviour show that ethics and finance are at the centre of many scandals, and ultimately corporate failures with far-reaching effects on the economy and society.
As CIMA’s global footprint has grown in the last few years we thought it was a good time to try and understand how our members are influencing corporate ethics across the globe.
Despite this rise in those that have a code of ethics, one theme in the report kept cropping up was that of the gap between lip service and practice. Embedding processes, values and behaviours takes time. But more than time, it takes a concerted effort from the leadership to ensure both understanding and engagement at different levels and across geographies and functions.
The tone from the top is critical and although all employees have a role in upholding ethical practice, the buck stops with the leadership.
It’s not enough to simply have a code, a hotline, an annual training course - or a chief executive who is making grand speeches on high profile platforms that most staff will never be party to. It is the day-to-day actions and activities deep in the business that matters. And that takes strategy, investment and time.
Leaders may be falling short in this regard. Just because they said something or sanctioned something - it is not enough. That is why the assessment of ethical activities and subsequent reporting and evidence matters. The board and senior management should engender a culture of openness and transparency of reporting both internally and externally and this may need strengthening.
The need for a stronger ethical culture is illustrated by findings that around a third of respondents had been under pressure to compromise their company’s ethical standards.
Pressures to act unethically, and the gap between an company’s stated values and what is actually been done within the business can pose a significant risk to an company’s reputation.
This is not only in terms of a loss of credibility for employees, but also in relation to other stakeholders, including customers, suppliers, investors and society at large. The potential negative consequences, such as declining share price and loss of customers, should not be underestimated and there are numerous examples of companies attracting negative coverage for ethical failings – with a consequent impact on the bottom line.
The widespread use of the internet and social media casts a harsher spotlight than ever before. Management accountants are well placed to bring their skills, insight and influence to encourage ethical performance, and the survey shows they recognise this, too.
The problem is they may not always be supported by the wider company, and as the survey found they may also come under pressure to act unethically. When we explored the different situations where respondents may feel under pressure to compromise ethical standards, over one in five (22 percent) sometimes felt pressured by “working with colleagues from different functional areas of the organisations”.
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