Driving ethical behaviour from any level

Melanie Kanaka, FCMA, CGMA, vice-president of CIMA Council and the head of finance and administration at the World Bank in Sri Lanka and Maldives, and John Graham, FCMA, CGMA, finance director at Stockport NHS Foundation Trust
Melanie Kanaka, FCMA, CGMA, vice-president of CIMA Council and the head of finance and administration at the World Bank in Sri Lanka and Maldives, and John Graham, FCMA, CGMA, finance director at Stockport NHS Foundation Trust

When Melanie Kanaka, FCMA, CGMA, vice-president of CIMA Council and the head of finance and administration at the World Bank in Sri Lanka and Maldives, first heard about the accounting scandals in the late 1990s and early 2000s that led to the collapse of large public companies, she was a young professional with grand ambitions to ascend the corporate ladder.

The scandals, however, caused her to question the business environment she inhabited — what went wrong? “It was like a wave that hit so strongly,” she recalls. “It was as if there was no way out of it unless you start thinking about ethics, standards, fairness, and justice.”

But she doubted if she could effect any change as a young management accountant. Business ethics was taught and viewed as an individual’s value in her MBA classes, she remembers, not a standard. Without a standard, who is to say what is ethically right or wrong?

Similarly, John Graham, FCMA, CGMA, finance director at Stockport NHS Foundation Trust, remembers that daily work paying invoices at his first job at the UK’s National Health Service had little connection to the organisation’s ethical values and behaviour. But he has witnessed winds of change in the health system — the UK’s biggest employer with 1.5 million workers — from allocating funds into green and socially ethical investments to board-level conversations surrounding representation of Black, Asian, and minority ethnic (BAME) staff in leadership positions.

Business ethics today have become formalised with standards, frameworks, and tools in place, making ethics less cloudy and nebulous. Kanaka thinks that these structures have helped ethics become front and centre for many organisations.

Speaking to FM magazine, Kanaka and Graham share that more than ever, there is a role for any professional entering the workforce today to embrace and encourage ethical behaviours.

Business ethics then and now. What has changed?

Melanie Kanaka: When I was in business school in the 1990s, we looked at ethics as a value you inherently had. But I think subsequently, as businesses developed, there were so many scandals that caused companies to fail. People have different values, and so do cultures. Without a standard in place, it’s difficult to say what is right or wrong.

So institutions, governance bodies, and professional bodies started putting standards in place. When you look at it, there’s a lot of sense in it. Gradually, business ethics has become more formalised, more routine, more structured.

John Graham: It was nowhere near what we do now in our approach to ethics. If I think about my first role in the NHS, it was very much about paying invoices, managing debtors and creditors, and a little bit in audit. It was more about standard operating procedure. There wasn’t a link [of daily tasks] to ethics.

Now for example, we have something called a Better Payment Practice Code, and we’re supposed to pay our invoices within so many days, and we have to report on these and explain why we haven’t met our targets. The rationale behind it is because the NHS is a big contributor to the local and national economy. With COVID-19, if we start not paying our bills on time, it just adds to the cash flow burden for organisations.

What do you think is the most pressing ethical issue that needs to be addressed?

Kanaka: If I were to identify a big ticket item, it will be unethical leadership. Leaders who behave unethically will drive the corporation to its own death. It’s absolutely lethal, and it can take many forms. Examples include manipulating the numbers, having different sets of accounts, spending company money on nonofficial activities, accepting inappropriate gifts from suppliers, giving or receiving bribes to get the desired action, hiring or promoting the wrong persons based on favouritism, and overextending the use of corporate benefits to meet personal needs.

A common thing I see in many places is the use of a corporate vehicle and driver to do chores for oneself or for family members, which is not part of the formal benefit. Another is giving promotions based on favouritism and not on merit.

So the biggest issue that needs to be addressed is unethical leadership because from it stems a number of other things like discrimination and sexual harassment that can easily take over an organisation.

Graham: A big issue for us now is around Black, Asian, and minority ethnic [BAME] staff. Like a lot of healthcare organisations, we have quite a high percentage of BAME staff, certainly our medics. If you look at the incidences of COVID-19, you know they are disproportionately hit, and unfortunately, we still get abusive behaviour toward them. There was an instance in one of our wards of very unacceptable behaviour [from patients] toward our BAME staff. So, we’re reinforcing our zero-tolerance policy to address prejudice and discrimination.

In my previous roles, we would issue patients with letters saying we’re not treating them because of their unacceptable behaviour. Now there are massive ethical issues there. That’s one of the things we’re going to talk about as a board, of where do we draw the line. If we have persistent offenders specifically aimed at a group of staff, how far will we go to say that’s not acceptable, that it’s not consistent with our values and behaviours?

A huge area for many companies now is to provide equal opportunities in hiring and career advancement. But this is also where we’re seeing slow progress, especially for women and ethnic minority groups to advance to leadership positions. What do you see happening?

Kanaka: In some companies, there are favoured recruitments based on personal preferences and not driven on the business need or the skillsets required; discrimination and harassment of employees based on race, ethnicity, gender, age, or disability. In short, not providing an equal opportunity to all.

Very often you find organisations that say they hire for a “cultural fit”. But I have a different thinking on this. This hiring for cultural fit is often a smokescreen for discrimination. Organisations can be intensifying a toxic culture by populating a company with like-minded personalities who may also have toxic mentalities.

Graham: If you look at our board, our chief executive is a woman, but she is a white woman. I’m a white male, the medical director is a white male, the HR director is a white male, director of strategy is a white male, and our chief nurse is a white female. We don’t reflect our population.

Our workforce is changing and, depending on personal ambitions, some staff stay on for a long time. So how do we make sure that the organisation’s culture and engagement is right and proper [for career development]?

An interesting development is, just recently, every NHS organisation was asked to name an executive board member responsible for tackling inequalities, and we are to publish an action plan to show how in the next five years our board and senior staff will, in percentage, match the overall BAME composition of our workforce or the communities, whichever is higher.

Where do you think the demand for ethical leaders comes from?

Kanaka: There have been high-profile scandals which have placed scrutiny on the accounting profession. This has led to increasing public demand for transparency, good governance, and accuracy.

Companies for the past few decades were also mainly focused on profit. Now the focus is on the sustainability aspect. Companies are required to look at a triple bottom line — people, profit, and planet — and lots of young people I know are thinking about these issues. There’s a surge in social responsibility that has flowed from a lot of professionals in our field; they prefer to work for corporates that are more socially responsible, organisations that think of their people and the environment and safeguard the planet for future generations.

Also, I think lots of professionals have suffered because of poor ethics. Their contributions have often gone unrecognised because other favoured staff were given undue and unfair recognition. This form of unethical leadership is very prevalent. Professionals try to shun such companies and distance themselves from them because they truly believe such behaviours and practices are unhealthy.

Graham: I think society is more conscious and more aware of the decisions we make and their impact on communities. Our staff is also a big driver. New generations of leaders come through and their views change. We can’t keep on doing the same thing; otherwise we’ll get the same answers.

A lot of the BAME issues are driven by Black Lives Matter. A thing for me is, how do we respond to some of the issues raised on social media?

How then should the “tone at the top” be set?

Kanaka: Whatever flows throughout the organisation mirrors the standard that’s set at the top. So I think leaders should walk the talk.

Firstly, you need to have a set of clearly defined policies and processes that ensure good ethics in the organisation. And these policies and processes need to be clearly documented, disseminated, and made known throughout the organisation. They need to be acknowledged by each staff member that they can ensure ethical business practices are applied across the board.

Graham: The organisation’s values should be consistent with your personal values and behaviours; there shouldn’t be a conflict. It should be about living by example. It should be almost non-negotiable. So if you’re a CIMA member, for example, ethical values and behaviours are what CIMA is about; therefore, that should be what you’re about.

Leaders need to be open and receptive, seeking and receiving feedback. Feedback is a gift, isn’t it? To use that to self-reflect and know what you need to do to make sure you’re personifying those values and behaviours.

What other ways of encouraging ethical behaviour have you seen?

Kanaka: There needs to be a clear grievance process. The leaders are at the top, but their values have to cascade to the bottom of the hierarchy. If there’s a deviance from these processes, there should be some way of escalating it — for instance, a whistle-blowing process and the use of the corporate internal justice system. These have to be made known to each staff member so that they know there’s something they can lean on should there be a grievance in the workplace.

There should also be a reward system — a way to reward ethical behaviours — that’s aligned to the organisation. Like performance targets, employees’ commendable ethical behaviours should be rewarded the same way. Their performance review should have a section for ethics. For instance, there can be a point system that can translate into an increment in your reward mechanism, whether it’s the salary or other forms of recognition.

This will show that an organisation is not all about profit. It’s about sustainability. It’s about having a comprehensive value system.

What’s your advice to young management accountants figuring out the role ethics should play in their jobs?

Kanaka: For anyone just entering the workforce, there’s a tremendous role for them to play because the rules are there. It’s a question of knowing and understanding the rules.

Young professionals can start with CIMA’s revised Code of Ethics that focuses on five fundamental ethical principles — integrity, objectivity, professional competence and due care, confidentiality, and professional behaviour — and hold on to them closely.

Equally important is the correct choice of employer. Young management accountants should avoid being in the midst of unethical leaders, for they may soon begin walking in those same unethical steps. The choice of employer should not be made purely based on remuneration but also consider values and business ethics of the leadership and organisation.

Early in their careers, management accountants should familiarise themselves with the internal justice system, support helplines, and whistle-blowing avenues available to them in the organisation. This is important because very soon they will come across ethical dilemmas.

Lastly, my advice to those in junior positions is that they should identify a good role model or mentor either within or outside their organisation who could guide them when they encounter ethical dilemmas in their workplace.

Graham: As much as you can, understand the organisation that you choose to go with, what are its values and behaviours, and these should be consistent with your own values and ethics. It’s also about having the strength and character to say where things aren’t going so well.

Get involved in staff engagement exercises, to find out how much you can influence internally and how much you can change. Because you may not want to go and see the CEO [of your organisation] and say whatever that may compromise your career. It’s about understanding the mechanisms in the organisation and getting involved in it. Seek out colleagues who have the same mindset, talk to them, and get that support.

What do you say to those who are sceptical that there can be a positive change in business ethics in their workplaces?

Kanaka: If you feel that your organisation is fundamentally unethical, sometimes you can’t fight it because you can’t always change the organisation. In these cases, you need to move away and seek employment in another organisation.

Sometimes, to move forward you might need to take a step or two back. And that’s the time you might need to take a step back and probably exit from the organisation. It’s not necessarily a setback.

Graham: Leaders need to understand that there are some people with certain skills and specialties; you literally can’t recruit them for money alone. They can cherry-pick about where they go. So how do you differentiate yourself? Ethics, values, and behaviours is a massive positive, a differentiation, something that would make people say, “It’s an organisation I respect, that I want to be a part of”.

Alexis See Tho ( is an FM magazine associate editor.


Editor’s note: IFAC’s International Ethics Standards Board for Accountants (IESBA) sets ethics standards that influence accounting bodies globally. As member bodies of IFAC, CIMA and the AICPA agree to meet standards set by IFAC-supported boards, including IESBA.