Ethical performance moves up on the corporate agenda

Businesses are placing increasing emphasis on ethics and compliance, and the area is set to gain further importance in the near future. 

The demand for greater transparency from consumers and stakeholders across the world has pushed the areas of ethics and compliance up the corporate list of priorities in recent years. In addition, the risk to reputation and potential damage that can be done if evidence of unethical practice is discovered have increased significantly with the advent of social media.

A survey of 1,699 CGMA designation holders in 99 countries provides insight into the status of ethics in the workplace. Here are some of the key findings:

• Fifty-one per cent of respondents said ethical performance is a bigger focus for senior management in their company than it was three years ago, and 55% believe its importance will grow further in the next three years.
• Seventy-six per cent of CGMA designation holders stated that their employers value or highly value their commitment to a code of ethics.
• Safeguarding reputation is the primary motivation when companies seek to establish and embed ethical standards. Amongst those polled, 80% cited the reputational views of stakeholders (customers, investors, and employees) as one of the main drivers behind their decision. Regulatory or legal compliance was one of the three most important factors for 73% of respondents, and brand image for 47%.
• Ten per cent said financial return was a driver of ethical performance, perhaps because some consumers are willing to pay more for products from companies they see as generating a positive social and environmental impact.
• In practice, the most common means of embedding an ethical culture is by simply “conforming to regulations” (78%). Ethical issues were given priority by the leadership of 76% of respondents’ companies, and 63% said their organisations created an environment that promoted and instilled confidence and trust.
• Many of the companies represented in the poll have yet to explain their codes of ethics effectively or provide staff with the training required to implement those policies. Forty per cent of respondents said their organisations had yet to create appropriate channels (such as training) to raise ethical standards. Furthermore, 36% said their organisation communicated ethical policies to staff occasionally, and 3% said they never communicated them.

Focus on training

Training staff and communicating the ethics policy regularly are key steps in improving ethical behaviour. For the workforce to internalise these principles, the content of training sessions and communications must be focused and relevant to the audience. Seeing the principles of integrity and responsibility reflected in the conduct of senior management can also help cement an ethical culture.

The need for greater training and communication also applies to anti-corruption efforts. Policies of zero-tolerance on corruption and fraud operate in 76% of respondents’ companies, and 81% of the organisations represented offer specific channels for reporting suspected fraud or violations of company policies on ethical behaviour.

Though policies aimed at preventing conflicts of interest, bribery, and other forms of corruption are in place in 82% of respondents’ companies, just 46% of these organisations provide all staff members with training on them. 

Opportunities for action

The survey suggests that some organisations could be doing more to actively promote responsible and accountable business. Opportunities for action arising from the findings are laid out in the CGMA briefing Ethical Performance: Driving Value From an Ethical Culture.

Related CGMA Magazine content:

“Implementing an Effective Corporate Ethics Policy”: These steps can help companies ensure that their ethics policy becomes embedded in the company culture.

—Samantha White (swhite@aicpa.org) is a CGMA Magazine senior editor.