Being ethical in the face of wrongdoing

Complex accounting procedures and mastering new technology are not the only challenges that finance professionals face at work. The #MeToo movement, growing environmental awareness, the spread of social media, and a series of fraud scandals at major companies have thrown the spotlight sharply on business ethics in recent years.

FM magazine spoke to two experts about what steps financial managers can take to address — and prevent — unethical behaviour and activities in the workplace.

Evaluate the situation. If you feel that the organisation that employs you is working unethically, or otherwise encounter what you consider to be unethical conduct in the workplace, it is worth considering why you consider it to be unethical and the impact it is having.

“The definition of ‘unethical’ can be a personal, cultural, or professional thought process, or two or more of these,” said Cathy Monaghan, head of HR at UK-based employee benefits, HR, and wellbeing service provider PES. “We all have personal values which influence how we operate and our expectations of others, including our employer. If we work in an environment which we perceive as being unethical, then firstly we should evaluate what is happening. If you find the ‘unethical’ behaviour is against your personal, but not professional, values, then you should look to find a new employer.”

It is also worth considering whether the behaviour or activity is indeed unethical in its cultural context.

“Cultural influences should be taken into account in your evaluation, as what is acceptable in, say, Taiwan — which has a very strong culture of presenting gifts to people — may not be acceptable in the US,” said Monaghan.

Seek advice. “It can be difficult to know the best way forward, which will be affected by the culture of your organisation, your role, and so on,” said Monaghan.

If financial managers believe that unethical activities are taking place, a range of resources are available to offer support. The first port of call should be internal policies or procedures that might offer guidance. Alternatively, some companies have an ethics department, or HR may be able to help.

Another source of information and guidance is the CIMA Code of Ethics, which applies to all members and students. CIMA also offers a range of ethics resources and operates an ethics helpline and inbox where members and students can receive guidance relating to the Code.

Report it. If you believe that the behaviour or practices are unethical, there are procedures for reporting them, varying from country to country and organisation to organisation. This usually follows a scale of escalation, depending on the initial response when reported within the organisation.

“See if you can change it if it is a relatively small matter and not endemic,” said Monaghan. “Raise it with your manager or director to seek their support. Lots of organisations — although they tend to be larger ones — have a call line where you can report poor, unethical, or illegal behaviour or conduct in a confidential way; consider using it. And you can check your organisation’s whistle-blowing or ‘speak up’ policy to see what it suggests.”

If dealing with the issue internally has been unsuccessful, in certain circumstances it will be necessary to report to the appropriate external body, Monaghan said. These include a suspected criminal offence (including fraud), apparent danger to a person’s health or safety, risk of damage or actual damage to the environment, a miscarriage of justice, possible violation of a law by the company, or possible coverup of wrongdoing.

If you decide to report externally, there may be organisations that can support you through the process, including the charity Protect, which offers free expert advice on UK whistle-blowing law and processes.

Prevention is better than cure. Unethical activity is less likely in organisations that have a healthy corporate culture and a solid framework for prevention, and financial managers have a central role to play in this.

Antonino Vaccaro, associate professor of business ethics at Barcelona’s IESE Business School and academic director of the Center for Business in Society, has been an expert witness in several fraud and corporate malpractice cases. He has come to the conclusion that organisations need active control systems to detect fraud and misbehaviour such as sexual harassment and bullying.

However, effective prevention should go considerably beyond this. “Instead of just thinking about compliance, the whole approach of how to combat unethical practices in financial organisations should be based on the idea of integrity,” said Vaccaro. “Compliance is reactive and prohibitive. We need instead to educate people throughout the organisation about fundamental ethical values. This ethical dimension is often missing in organisations, in how they aim to both train and incentivise employees. Ethical incentives are much more powerful than people typically imagine. To discourage bad practice, the key is nourishing a culture of ethics, respect, and responsibility within the whole organisation.”

— Andrew MacDowall is a freelance writer and risk consultant 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.