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Ethics in action: Financial struggles amid COVID-19

Ethics in action: Financial struggles amid COVID-19

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 the finance director at a company that supplies luxury food products to restaurants and hotels. Due to COVID-19 and government-imposed restrictions on restaurants, demand has all but disappeared and your company is facing severe financial difficulty. The company employs 3,000 people across head office, the delivery network, and sales.

Your CEO tells you that you need to find some savings and has asked that you produce a list of who in the finance team should be made redundant. A rumour has started amongst staff in head office that there are going to be major job cuts, and everyone in your team is emailing asking you whether their job is safe. Some team members are telling you about their financial struggles at home in the hope that it will persuade you to save their jobs over others.

What should you do?

Ethical issues and guidance

At the heart of this is a dilemma — should the company make people redundant in the hope that it might save the business in the long term? Or should the company try to protect as many people’s jobs as possible? It’s important to recognise dilemmas with an element of morality rarely have a clear answer, and there is little chance that everyone will agree on the best course of action. They can also provoke strong emotions, especially where people’s income and employment are on the line. It will be key here to demonstrate empathy, acknowledging that it is a difficult time for everyone.

An important step in this scenario will be to consider whether there might be government support available to help retain employees. In the UK, for example, a scheme is available which may pay a large proportion of salaries during the crisis. Support of this sort could mean you don’t need to choose between the options above — you can save the jobs in the longer term and reduce losses now. This could also mean you have staff on standby when demand does pick up again. The company could avoid being on the back foot because you don’t have enough staff to take advantage of a future economic upturn. As finance director, the CEO is likely to listen to your guidance on these types of issues.

If it seems that government support will not be enough or is not available, you will need to come to a decision on how to proceed. Although CIMA’s Code of Ethics does not offer any specific guidance on this situation, the fundamental principles can help guide your actions and decisions.

You should consider the principle of confidentiality and consult the CEO on what information can be shared with team members. This will need balancing with the principle of integrity, which requires “fair dealing and truthfulness”. Communication during these worrying times is absolutely key, so you should not keep employees in the dark longer than necessary. You should take a lead from communications specialists within the organisation where possible. This recent FM magazine article can offer guidance on communications amid a crisis.

The principle of objectivity states that you must “not … compromise professional or business judgment because of bias, conflict of interest or undue influence of others”. There is a risk that your judgement could be affected by members of the team attempting to influence your decision-making. You should recognise that this is a stressful time for everyone, especially people who are worried about future income. But you should also make it clear to the team that any job-related decisions must be made objectively so that they are fair to everyone.

To that end, it is very likely that HR professionals should be involved in the process from the start, as guidance on criteria for selecting people at risk of redundancy should be consistently applied. If you have any concerns that you are unable to make objective judgements about any particular individuals, you should be open about this.

COVID-19 has presented companies in all industries and geographies with an unprecedented set of challenges. Some sectors have been particularly hard-hit, where they have been forced to shut down operations and their income has disappeared. No one knows how long the situation is going to last and what the future holds, so it is natural that employees will be concerned about the impact on their jobs. Investigating your options and leading with empathy, objectivity, and integrity will set you in good stead when dealing with difficult dilemmas over the coming months.

Further resources:

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.