Ethics in action: Confidentiality

The modern workplace can be an ethical minefield. This monthly column helps you tackle the thorny, but very real, challenges that management accountants face in the workplace.

Written by the CIMA professional standards team and based on realistic situations, the following is a practical guide to using the CIMA Code of Ethics to guide good decision-making.

The scenario

A month ago you started a new job as finance director of a small company, HypotheticalMarketing. Your previous job was at a large office supplies company, Paperclips123, where you worked in the finance department and were involved in developing strategy and producing the annual report.

HypotheticalMarketing has a contract with Paperclips123 to supply all office supplies, and the contract is up for renewal. The head of procurement, Sofia, asks you for a meeting to discuss the contract renewal. This isn’t out of the ordinary — you know that part of your new role is to discuss any important contract renewals with Sofia to ensure you’re on the same page on budget and key contract clauses.

In the meeting, Sofia asks you for your take on Paperclips123’s current financial performance and strategy. She thinks that the company might be willing to compromise on price in return for better payment terms — there has been a rumour that Paperclips123 has cash flow issues and needs to get some cash into the business quickly.

She reminds you that HypotheticalMarketing is struggling a bit at the moment and saving some money on this contract could be really helpful for the company. She also tells you that it would be beneficial for you if you could help the company save some money so early in your employment. You know lots about the situation at Paperclips123 — you wrote its financial strategy just a couple of months ago!

Can you share with Sofia some information about Paperclips123?

Ethical issues and guidance

You are in a unique position of knowledge, having been involved in setting strategy at Paperclips123 and recently having left. Sofia has put you in a difficult position by asking you for this information and has applied pressure by telling you about the struggles faced by Paperclips123. There is also a self-interest threat; there is a potential personal gain if the information you possess is helpful to company performance.

You need to consider the CIMA Code of Ethics, your contracts from both Paperclips123 and HypotheticalMarketing, any relevant laws and regulations, and policies and procedures at HypotheticalMarketing when deciding what you might be able to disclose.

The Code of Ethics is clear under the fundamental principle of confidentiality that an accountant must not “use or disclose any confidential information, either acquired or received as a result of a professional or business relationship, after that relationship has ended”.

The Code goes on to state that “a professional accountant shall continue to comply with the principle of confidentiality even after the end of the relationship between the accountant and a client or employing organisation. When changing employment or acquiring a new client, the accountant is entitled to use prior experience but shall not use or disclose any confidential information acquired or received as a result of a professional or business relationship.” It is clear from the CIMA Code of Ethics that you must not share any confidential information you have as a result of your employment at Paperclips123 with your new employer.

You would not be in breach of the ethics code were you to share information about Paperclips123 that is in the public domain, or to use general experience gained in your previous employment.

You should explain to Sofia that as a chartered management accountant, you are obliged to follow the Code of Ethics and could lose your professional status should you breach the Code and share the confidential information you have. You may also find that there are clauses in your employment contract from Paperclips123 which forbid the sharing of confidential information after leaving the organisation — again this would be helpful in explaining your position to Sofia.

You may wish to give Sofia a very general overview of Paperclips123, all based on information in the public domain. You could, for example, point out to Sofia that some financial information about the business is available publicly online and she would be able to use this. She could also consider putting the contract out to tender to see if HypotheticalMarketing can get a better deal elsewhere. You must be very careful that you do not use any knowledge you gained due to your position at Paperclips123 when talking with Sofia. The line can be very fine, and as such it may be safest to state that you are not comfortable discussing Paperclips123, and ask another member of the team to meet with Sofia instead.

— Bryony Clear Hill is the associate manager–Ethics Awareness for CIMA and is based in the UK. 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.