International business ethics global survey interview with CIMA

Following their second global survey on business ethics, we chatted to Tanya Barman, Ethics Manager of the Chartered Institute of Management Accountants (CIMA), about the findings of the survey and the pressures and contentions of ensuring good corporate governance.

What prompted CIMA to carry out the survey?

It is in follow up to a 2008 Survey with the Institute of Business Ethics. As CIMA?s global footprint has grown in the last few years, as well as our new Joint Venture with the AICPA (the CGMA designation) we felt it was a good time to try and understand how our members are influencing corporate ethics.

Your survey revealed a 10% -15% increase in organisations providing both statements of ethical values and a code of ethics as well as related training, provision of hotlines and incentives such as performance-based rewards. In contrast, researchers at Middlesex University found that 69 of the FTSE 100 companies are failing to display any information at all referring to whistleblowing or reporting wrongdoing on their websites. Why do you think the FTSE companies are under-performing in this area?

It is hard to generalise around a wide range of organisations and sectors.? One would hope there is no intent in making the helplines obtuse. It may be back to one of the key themes we identified in the report and the gap between lip service and embedding practices. Obviously embedding processes, and critically values and behaviours, takes time. But more than time it takes concerted effort from the leadership all the way through consistently to ensure engagement. It?s not enough to have a code, a hotline, an annual training course or the CEO make 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.

(Fig 1 ? below) Does your organisation provide..

How do you think the process of investigations for serious financial malpractice could be strengthened and what can the board and senior management do to support the investigative process?

The Board and Senior Management should engender a culture of openness and transparency of reporting both internally and externally. Currently our national regulatory architecture is changing in response to the need for greater agility and powers to investigate major financial transgressions, to secure stability and protect consumers. Related to this, UK corporate governance code is regularly reviewed to ensure ongoing Board effectiveness and all Boards should ensure they evaluate themselves against requirements and review how they match up.

In your study you say, ?the majority of those who observe unethical conduct report it.? In contrast, a recent Ernst & Young survey states that the number of top executives at leading firms who said they would be willing to pay cash to secure business ? particularly as they expand into new markets ? had risen to 15% from 9% this year. ?Though they are in the minority do you believe that this trend could percolate throughout business structures and infiltrate the majority?

Our study found that globally 69% of our members and students reported unethical conduct. Of those who didn?t it was either fear of repercussions, or equally worrying, that nothing would happen. The Ernst & Young findings are of concern and show the competitive pressures business is under may result in malpractice. I would also presume for those individuals to state that if they would pay cash to secure business, the culture they operate in would already be at risk. If these are leaders, then their attitudes absolutely will have a negative effect on the business. If any are members of CIMA or AICPA their activities should be reported to us and they would face disciplinary action which could include fines and being stripped of their professional standing. Acting with integrity, fair dealing and truthfulness is a key principle for CIMA.

In terms of encountering and dealing with unethical behaviour, what are the key risks that management accountants face when dealing cross-departmentally?

Management accountants increasingly work in the heart of the business and there are many who have roles as finance business partners. One of the key expectations of our members is to act with an independent view ? to take into account the interests of the business as a whole. So when working with a specific function they have to be sure they do not get drawn into making decisions based on the interests of that unit alone, or the wishes of a particular manager. They also need to be able to gain trust and respect in order to influence their colleagues to do the right thing. As one participant involved in our research around this issue said ?it is being a brake. But being a brake that in the long run allows (them) to go further, run faster. The right business partner helps guide the business on the right path?. What we found is having a direct reporting line up to finance, gives additional support, and helps individuals apply that brake and challenge potential unethical behaviour. That, of course, if your CFO is not one of the 15% identified in the E&Y research!

(Fig 2 ? below) Does your organisation provide a code of ethics or similar documents to guide staff about ethical standards in their work?

Your survey found that fewer now believe that business has a moral imperative to help address global issues, with a decline from 84% to 77% since 2008. Why do you think there is a such a decline considering the increase in awareness of ethical and moral issues within the business world through the proliferation of social media, corporate communications and events, legislative initiatives and the mainstream media at large?

The decline was partly due by including data from the US which ranked this far lower than other markets. When you take the US responses out the decline is to 82%, with the UK rating at 75%. In the emerging economies, interestingly, it was consistently ranked very high which seems to show that within these markets there is an understanding of the importance of social capital and impact of business on the wider community. When one considers the roots of much corporate responsibility, this has often just been business as usual in some countries. Say for example in some of the long establishes business houses in Asia, Tata for example, reaching out to the wider community via their workers with education and health initiatives. Often business plays a much more important role in wider society because of a lack of state services. If you contrast with a US view perhaps there is something between the emphasis on the individual and the community, the differences that are often cited between East and West. But we should also recognise different drivers between Europe and the US.

Did you feel that the response from the survey was sufficient to get a true feel of the subject and community mood and will you be undertaking future surveys?

The survey was just one indicator of what might be faced by our community globally. What was interesting was comparing trends to 2008. For example in the UK, where we have the strongest response in reflection of our strong presence here, we can see a pattern. In the UK there was slightly less pressure to compromise ethical standards. So that was a good sign. We have also conducted focus groups globally and have a report due out later in the summer which drills down slightly on the types of pressures management accountants face and how they can respond by market. I hope we will repeat the CGMA survey in another couple of years to see what?s changed. Unfortunately the global markets do not bode well and what effect that will have on ethical practice in an even more competitive landscape is yet to be seen. The tussle between the best intentions to act ethically and the pressures to cut corners may become stronger.

Did the results differ from your expectations and if so what pre-conceptions did you have?

I think we were surprised to see how similar the results were around companies having codes around the world ranging from 74% to 84% with an average of 80, and then such a huge disparity in pressures to act unethically from 18% to 60%. Another surprise was that whilst in some markets there was very clear emphasis for the organisations to be ethical ? not only having codes and other supporting architecture, but respondents seeing their management as ethical ? there were very high numbers who would feel under pressure to compromise standards. This may need further exploring ? where are these pressure points coming from and why can?t the leadership tackle it?

Full report and summary video

For more information about CIMA

If you enjoyed this article try our?interview with Philippa Foster Back OBE of the Institute of Business Ethics?; Prof David Lewis of International Whistleblowing Research Network,?Jim McKenna, Head of Group Security at Travis Perkins

More articles on business ethics?and?whistleblowing?

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