The shifting shape of ethics

Today’s global and highly competitive markets keep piling on the pressure on management accounting professionals striving to perform to the highest standards of ethics and transparency. We chatted with CFOs from different areas of the world who shared their thoughts on the challenges, changes, and future of ethics.

Dhianendra Laksmana, ACMA, CGMA
CFO
PepsiCo (Indonesia)

Q. What do you see as the biggest ethical changes in the past few years?

A. The main change in ethics today, compared to, let’s say, ten years ago, is driven by the market pressure itself. If I look at my own company, PepsiCo, the demands to deliver a certain performance are very high. Previously, it was an annual target; that turned into quarterly performance being measured, with forecasts very closely tracked. That has an impact because then the grey areas of ethics come into question. Something may still be within the legal boundaries, but whether or not it’s ethical — that’s the question. It becomes even more crucial for professionals delivering top performance to do it in an ethical way.

Q. Do you think there is a misunderstood aspect of ethics?

A. I think that people confuse the fields of ethics and the law. In most cases this is true, but I feel that ethics is broader. Even if something is within the law, you still have to consider whether it is morally acceptable, or good for the community, for example. The company may not face legal sanctions, but its reputation might be tarnished, which could have far-reaching consequences.

In this respect we are in a better position than other professionals because we function in a heavily regulated field. Business looks up to finance as the safeguard. CGMAs, as part of their certification, acquire a broader knowledge of ethics. This enables them to combine flexibility and insight regarding the market and the environment in which the company operates to provide the right stewardship. Ethics is a very broad subject, and at the end of the day it comes down to people.

Q. What is an example of a step that your company takes to create an ethical culture?

A. We have a very strict code of conduct that every new hire must be familiar with, and from then on, we get frequent refreshers that you can do online or on your phone — it’s very convenient. And it’s not just limited to our employees; we expand it to our business partners — suppliers, vendors, third parties — and make it clear that we expect them to behave accordingly. Because if a third party operating on behalf of PepsiCo does something unethical, it will reflect on us.

Kate Grangard, CPA, CGMA
CFO and COO
The Gehring Group (USA)

Q. What is the most misunderstood part of ethics in your view?

A. The most misunderstood part of ethics is that everyone measures “ethics” the same and defines them the same. How to exhibit ethics is defined by an individual but judged by others, creating misunderstandings and ideology differences among people. Throughout our growth and into our professional lives, we evolve from different cultures, backgrounds, dynamics, upbringings, educations, and leadership and mentor influences — yet we measure other people’s ethical behaviour from our own perspective, although clearly within the guardrails of the law. In my career, I have encountered differences in what I defined as ethical behaviour versus how others I worked with defined ethical behaviour. Our differences (not a concern of legal versus illegal, rather what was the “right thing to do”) often came down to perspective, which was shaped through our life and professional experiences. So it’s very important when hiring or interviewing that behaviour-related questions are inserted to better understand how parties’ ethical perspectives align, and to have honest discourse and expectation-setting when they don’t.

Q. What are the keys in nurturing an ethical culture?

A. It starts with leadership and must be carried through to every team member throughout the company, as well as be expected in all business partners from vendors to clients. A number of companies have relied on mission statements, value statements, and the employee handbook to set a vision and provide guiding principles. And although a code of conduct can clearly define the do’s and don’ts — it is best matched with defined behaviours, leadership by example, a culture of accountability, a communication on the “why” of the company, a culture that supports team members doing the right thing even at a cost to the company, and perhaps most importantly, a culture that allows for growth through mistakes. I believe the latter is perhaps the most misunderstood in an organisation. Having worked in a not-my-fault culture and, alternatively, having helped develop a culture of blameless problem-solving that supports rather than blames people who make errors (provided you have the right people, they will already feel awful and accountable for their error), [I know] the latter encourages team members to own up to errors rather than unethically shift blame or try to hide them. From experience, when you are able to find the right people who are attracted to being empowered to do the right thing, then they in turn will help to nurture and develop an ethical culture in your workplace. And again, ethical behaviour must be exhibited by leadership example and advocacy in order for it to become a tenet of any organisation.

Yamen Fakhreddine
Head of Finance, Middle East
Valentino (United Arab Emirates)

Q. What do you see as the biggest ethical challenges facing the profession?

A. On the accounting side, guiding ethical principles remain constant in regard to fraud, performance reporting, insider trading, compliance, and issues along those lines. The aspects that have evolved mainly have to do with the new technology and the online world, such as cybercrime, privacy issues, and data mining and privacy. Obviously, there is a high responsibility to manage the customer’s data exceedingly carefully. The field has exploded in the past couple of years, and while we work on building business intelligence systems to ensure that we come up with accurate data conclusions, it is important that ethical issues are taken into account at every step. Ethics don’t change in essence, but the realm of application does with new technologies and new fields of application that come up.

Q. What steps does the company take to create an ethical culture?

A. At its core, ethics remains an enterprise-driven initiative, and it has to go all the way from the top to the bottom of the company. At the onboarding stage, we instil our values as to where we stand ethically as a company and our responsibility to our customers, to society, and to our employees, but even before that, we “recruit for ethics”. We are looking at how a candidate acts in day-to-day life, and when they are faced with an ethical dilemma, what are the actions they take. In regard to decision-making, we are continuously looking at our everyday business decisions. In luxury [goods] you are dealing with damaged goods, ethically responsible suppliers, animal rights, human rights, making sure as we remain competitive that our production sites are ethically compliant. Even though some markets may have less stringent standards than our European market, we hold all of them, and ourselves, accountable to the same standards from a business and ethics standpoint. Additionally, we encourage everyone internally to voice their concerns, and report any kind of unethical behaviour, and have channels to enable them to do so without hesitation.

Q. Do you find that dealing with ethical values can be extra-challenging working across different cultures?

A. That’s a very good point. Here in the Middle East, and I think it applies to South-East Asia as well, we have a culture that nurtures personal relationships and mutual gifting. It’s a very fine line to walk for foreign companies doing business in this part of the world because, on the one hand, they don’t want to antagonise or go against local customs, but also they want to make sure they are not crossing an ethical line. It requires personal maturity from the leader to marry those cultures because personal relationships, beyond what’s on paper, are extremely valuable. We hire local talent who understands the nuances. In my case, for example, I’ve worked in Europe, I’ve worked in the Middle East, I speak the languages, which helps a lot, and I’m coming from the culture itself, which puts me in a better position to understand where the line is that can’t be crossed, without jeopardising relationships. It comes down to people.

Kathryn Sherratt
CFO
Financial Services Compensation Scheme (FSCS) (UK)

Q. What do new finance executives need to know about ethics and the changing workplace?

A. It is simple and complex. On one level, you could argue that ethics, when viewed as doing the right thing, should not have changed over time. What has changed, I believe, is the number and complexity of factors which should be balanced when considering what is the right course of action to take. Both external and internal pressures are increasing from all sources, and the advent of social media results in very fast judgement decisions from audiences, often based upon little information or indeed with a degree of supposition. Balancing all this, in a way where you can look at yourself in the mirror at the end of day and feel you’ve done the right thing, is an increasing challenge. Having a strong grounding, sense of self, fairness, and integrity are all attributes which I find helpful in making the right choice.

Q. What are the keys to creating an ethical culture?

A. As with many things, tone is set from the top. Fairness, honesty, facing into difficult questions all promote a culture which nurtures ethical behaviour. Incentive plans should be carefully thought through as to prevent conflicts of interest. Having and making the time to think, pause, and balance options carefully and not succumbing to what is thought to be popular.

— Sylvia Edwards Davis is a freelance writer based in France. To comment on this article or to suggest an idea for another article, contact Drew Adamek, an FM magazine senior editor, at Andrew.Adamek@aicpa-cima.com.