Building More Ethical Organizations Begins At The Top


By Jeff Thomson

https://www.forbes.com/sites/jeffthomson/2020/10/20/building-more-ethical-organizations-begins-at-the-top/?sh=714494c918a6

On October 21, 2020, IMA (the Institute of Management Accountants), the global organization of finance professionals of which I am CEO, will observe the seventh annual Global Ethics Day (an observance established by the Carnegie Council for Ethics in International Affairs) amid global distrust in business and other societal institutions. The 2020 Edelman Trust Barometer, a quantitative measure of public trust, finds global trust levels in business are at 58%, relatively flat year over year. But it means in aggregate, 40% of the citizens in the 28 countries that comprise this index distrust business. Inequality of economic outcomes and fear for the future underlie this distrust, according to Edelman’s research. CFOs have an important role to play in re-establishing and maintaining trust in business because finance is ultimately responsible for protecting stakeholders’ interests, including shareholders, employees and society at large.

When finance walks back from these responsibilities, doors that lead to fraud or financial malfeasance open. That is why finance owns risk management and internal controls. Every business and operating decision benefits from the holistic lens finance brings to the picture, and effective internal controls are good for business. For this reason, IMA is a founder of COSO (Committee of Sponsoring Organizations of the Treadway Commission) and its two frameworks, Internal Control Integrated Framework (ICIF) and Enterprise Risk Management Integrated Framework (ERMIF). 

Governance and culture lie at the heart of these two frameworks. Identifying, treating, controlling and monitoring risks all fall within the purview of finance. IMA is a proponent of finance’s use of both COSO frameworks and their integration into ongoing management activities. Though there are many elements to these frameworks, “tone at the top” is one that stands out to me. This is the tone set by the board of directors and top management, who are ultimately responsible for risk management. A board with a majority of independent directors should regularly seek executive management’s responses to these questions: “What are the company’s top risks?”; “What is their time horizon?;” and What is being done to manage them?”

Inclusive of “tone at the top” are well-defined and established codes of conduct and ethics training for all employees. CFOs and the board have an opportunity to create a culture of ethics and trust through detection, prevention and continuous monitoring of fraud.

I consider what may have been the fate of CFO, Joseph O’Malley, or Arizona health care company Hacienda HealthCare, if a culture of ethics and governance had been properly established. In the case of Hacienda, O’Malley was recently indicted on several felony charges of fraud and racketeering in connection to an alleged scheme involving improper state billing and accounting which cost taxpayers in excess of $10 million. Unfortunately, there are too many stories of unethical behavior by top ranking executives, and these events shake everyone’s sense of trust.

Boards and finance leaders must take an active, ongoing interest in ensuring their organizations incentivize ethical behavior. Punishing individual transgressions, without looking at the larger role organizational culture plays in ethical lapses, is counterproductive and short-sighted. CFOs in particular have a number of ways to create a culture of ethics, three of which I have outlined here:

1. Set a good example. As in any organization or hierarchy, the tone is set at the top. If CFOs exhibit unethical behavior in any way, staff in subordinate positions will feel free to engage in such behavior themselves. CFOs should make reference to ethical practices in all internal communications with staff, while also setting clear guidelines about what constitutes a violation of those practices, and what the penalties will be for not living up to organizational standards. Most importantly, the CFO who “talks the talk” must “walk the walk,” and never appear to be in breach of ethical guidelines.

2. Emphasize the distinction between ethics and compliance. Many ethical lapses also involve legal violations. But what’s important for CFOs to remember is that ethics is not the same as compliance. Just because something is legal does not mean it is the right thing to do. Any financial reporting that misleads shareholders (which can include omission of information, not just blatantly false information) constitutes an ethical lapse. Like doctors who take the Hippocratic oath of “do no harm,” CFOs must first and foremost seek to protect stakeholders and the wider public.

3. Incorporate ethics into professional training. Today’s CFOs need to ensure that staff are constantly upskilling and learning the evolving competencies of the profession, but ethics training should occur alongside skills training. Emerging technology has made upskilling and professional development a priority of organizations, but there are myriad ethical questions that are evolving alongside it as well. As algorithms and data analytics become a driver of finance, ethical questions around bias and discrimination also emerge. As CEO of IMA, I emphasize “leading with ethics.” Every IMA member in our global professional association takes an ethics pledge and promises to adhere to a “Statement of Ethical Professional Practice.” This statement provides clear guidance on what it means to be an ethical finance professional. Additionally, every IMA member can receive free continuing education in ethics.

I believe now, perhaps more than ever, those who work in the finance profession want to make a difference in their organizations, for the better. Ethics is at the cornerstone of this shift in mindset. Profit is meaningless if it comes at the expense of reputation and trust.



Última modificación: martes, 17 de agosto de 2021, 13:36