Ethics in action: Employing family members

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

You are a manager in the finance division at a company with around 2,000 employees. The business has not been too badly affected by the coronavirus pandemic, and a new junior financial analyst role has come up in your team. Your daughter has just been made redundant due to financial struggles at her company. She is stressed about money and needs to find a job as soon as possible. She’s CIMA-qualified and has most of the skills needed for the role in your team. Can you employ her? Is there anything you need to consider?

Ethical issues and guidance

It is important to recognise that attitudes towards employing family members and friends vary by country and culture. In some areas, it may be normal practice and completely accepted to employ someone you know. In others, it may be considered unethical and may have legal implications. You should consider this situation from the specific context of your country and take legal advice if necessary.

It is also vital that you understand your employer’s policy on hiring family members. Many organisations have a specific policy which advises on when this is acceptable and any safeguards which should be put in place.

If no company guidance is available, you should still give the issue due consideration. As your daughter is also a CIMA member, she should also consider the situation. The CIMA Code of Ethics can offer guidance.

The principle of objectivity states that accountants must not “compromise professional or business judgment because of bias, conflict of interest or undue influence of others”. Your daughter applying for the role would likely constitute a conflict of interest — you have an interest in her financial wellbeing and success, which could lead you to offer her the job when she may not be the best candidate. The Code requires that when a conflict of interest is identified, the member should apply safeguards.

Common safeguards during the hiring process could include ensuring that the position is advertised to internal and external candidates, as well as ensuring that another manager conducts interviews and makes the final decision to ensure that you are not biased against other candidates.

If she were given the position, there would be an ongoing conflict of interest were you to line manager her and be involved in decisions around promotions and pay. This could be managed by ensuring any performance and pay decisions made about your daughter are made by someone else. Many companies explicitly forbid employees from managing family members, so again you should consider company policy and consult with relevant colleagues such as those in HR.

If you do end up working with a family member, you should remain alert to the situation and monitor any ongoing threats to your compliance with the Code.

There is the potential for a “familiarity threat”, which would manifest as the professional accountant being “too sympathetic to [the] interests [of another party] or too accepting of their work”. Whilst the Code does not specifically refer to employing family members in this case, the principle remains relevant. For example, you would need to ensure that you remain completely objective when considering any work completed by your daughter and make sure you remain as alert to mistakes or poor-quality work as you would with any employee.

You may also have a “self-interest threat”, where your judgement is affected by your personal interest in your daughter’s success. Again, you should remain impartial when working with her and evaluating her performance and, if needed, defer any decisions about performance to an unbiased third party. Most companies will require employees to declare conflicts of interest and to revisit these with management periodically to ensure that the conflict remains effectively managed.

The key is that you remain objective and transparent about the situation to those around you. If it were perceived by any other parties that you are biased towards your daughter, this could have negative consequences for both of you.

— 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.