Ethical burden: Can you teach ethics?

The mutiny of The Crimson Permanent Assurance accounts clerks against their tyrannical and unethical corporate employers in Monty Python’s The Meaning of Life is unparalleled in the history of film. Dressed like pirates, the once timid and pale back-office staff defeat their evil corrupt bosses armed with staplers, filing cabinets and sheer aplomb.

While it may be true that the accounting profession is an easy target for comedians, the satire wouldn’t have worked nearly as well if the mutineers had been lawyers or human resources staff.

The lengthy sketch taps into a global subconscious – that accountants have integrity. Justice, in reality, may not involve firing staples at an unscrupulous executive, but a corporation’s ethical health is very much in the hands of the finance function.

But following Enron’s collapse, the profession’s reputation seemed as shredded as the energy giant’s audit working papers. It’s dramatic failure coincided with increasing public interest in corporations. Ethics, good governance, leadership, transparency and accountability became the focus of shareholders, stakeholders, and legislators alike. Meanwhile, the accounting profession crawled away, licked its wounds and thought very hard about what had happened.

Professional cynicism

Some academics argue that Enron, WorldCom et al didn’t mark the profession’s sudden fall from grace. In an Institute of Chartered Accountants of Scotland publication – Ethics and the Individual Professional Accountant: A Literature Review – the author cites studies, which suggest that accountants were exhibiting “lower levels of moral reasoning” as far back as the early 1990s. Other professional groups were also suffering a crisis of public trust, confirming that the cynicism against “big business” was growing more intense. A decade later it would reach its zenith.

The publication, which explores ethics and the accountant from a philosophical and sociological perspective, suggests that ethical dilemmas will always be dealt with differently depending on gender, geographical location and the issue itself. But it is the growing influence of corporate responsibility, which the author claims really “challenges” the long-established notion that accountants serve the public interest. This, combined with large-scale corporate failures, has led to an intense analysis of what ethics actually means to the profession and the individuals operating within it.

Under the spotlight

The reality of working under a spotlight, combined with the ever-increasing complexity of the job and commercialisation of the profession, have spurred the main accounting professional bodies to reassess their training and support. Although the teaching of ethics can be traced as far back as the 1960s, with an increased focus in the 1980s, it is now enjoying somewhat of a renaissance. Instead of how to, trainee accountants are now taught in a climate promoting ethical discussion, awareness and analysis.

But simply teaching ethics is not enough. As Bill Connell, chairman of the Professional Accountants in Business Committee of the International Federation of Accountants (IFAC), and chairman of CIMA’s influential International Committee says, support and access to thought leadership and information is essential.

The former BOC director of risk embraces the widely accepted view that the finance profession tends to attract people with a very distinctive disposition. As he succinctly puts it – crooks would find life in such an intensely scrutinised environment more stressful than opportune. He also is forceful in pointing out that integrity is fundamental to accountants' professional duty – something that they have been shy to admit.

“Five years ago it was taken for granted that accountants were ethical, and it was something that was rarely discussed,” he says.

“That has changed. Ethics, and what accountants think about it, is a big issue. If an accountant is alleged to have behaved inappropriately, they could be fined or have their membership rights removed from professional organisations.”

He adds that while the profession took a battering post Enron, the majority of CFOs in the most recent global corporate failures were not from an accounting background.

“None of the CFOs involved in the recent big US failures were chartered professional accountants – they were all MBAs. Around 70% of CFOs in the top 1,000 US firms are not from an accounting background. While there is some viability in the argument that MBAs are much more focused on strategy and planning, management accountants have always been forward looking,” says Connell.

But being ethical has its drawbacks. “It can be very stressful,” he says. “While you know that someone’s inappropriate behaviour must be tackled, there is always the concern that there will be uncomfortable consequences. This is why CIMA launched the Ethics helpline, which offers impartial advice to help accountants with their decision on how to deal with the situation.”

Take nothing for granted

Neither is an accountant’s ethical integrity simply assumed. Over the past five years, the ethical conduct of an organisation and individuals working within it have been increasingly codified outside of mandatory duty. There are now more than 1,000 company codes of conduct, which are essential in measuring a business’s impact. In addition, there are around 100 regulatory guidelines and standards, and 20 charters, codes and principles offered by industry sector groupings for self-regulation. These are increasingly going beyond the parameters of mere regulatory compliance and good governance, to include environmental and societal measures.

“It’s no good having a code if no one adheres to it, or picks and chooses when it should be applied,” says Connell. “It should have full CEO backing and be communicated effectively across the organisation.”

Having a workable and effective code of conduct/ethics and ensuring that employees and future staff members bring like-minded values to their place of work is essential for running a good business and making positive business decisions says Patrick Dunne, communication director at private equity firm 3i.

Dunne believes it’s not so much a question of teaching ethics, but training and educating people in the right values. “We divide ethics into two perspectives. One is having the right attitude the second is ensuring that the organisation has the right plumbing. This is the framework of guidance and leadership within which people can deal with difficult situations.”

And he argues that although a sense of ethical behaviour is inherent to accountants, it is not exclusive. “While the accounting profession does attract honesty, other professionals equally have ethical integrity,” he says.

Grey areas

But Dunne stresses that the issue of ethics is not black and white. He argues that it throws up grey areas that have much wider implications. Navigation through these issues, he claims, is now largely achieved through the creation of risk and corporate responsibility committees, which have a vital role in maintaining ethical integrity.

“People are coming into industry wanting to work for a company that has good values,” says Dunne. “Attracting the right people with the right values is essential. Therefore, ethics is vital to our long-term sustainability.”

In fact, research by the Institute of Business Ethics shows that companies with a code of ethics experienced far less price-earnings ratio volatility over a four-year period from 1997 to 2000 than those without them. Companies with a code of ethics also generated more economic-added value and market-added value in the same period than those without codes.

It’s not an easy task, however, and ensuring enterprise-wide ethical behaviour is a significant challenge. This is reflected in the growing number of whistle-blowing policies, so employees who are upset or concerned over unethical behaviour, have the opportunity to impart their knowledge with impunity. For many, not having such a policy in place is unethical.

As far as the finance professional is concerned, enforcing ethical codes is increasingly their business, meaning the role now stretches beyond the fiduciary. As a result, the profession has seen the creation of splinter sub-groups, such as environmental accountants, which bring their own set of ethical challenges and training needs. In addition, companies operating within different sectors and geographies have their own unique ethical challenges – there is no ‘one-size-fits-all’ approach to accountability. According to Connell, professional bodies such as IFAC and CIMA have acknowledged this.

“You cannot achieve sustainability without integrity,” he says. “As the finance professional is widely regarded as having this, it means an increasing number are moving into general management. The main accounting professional bodies now reflect the finance professional’s changing role, offering not only support and advice, but knowledge capital and training to enable them to carry out their duties.”

With such value placed on ethics and ethical behaviour, it has adopted somewhat of a celebrity status. It stretches from statutory duty to corporate responsibility and professional conduct, to project management. It is firmly on most degree syllabuses and is an MBA in its own right.

So, if someone comes for a job interview armed with ethical qualifications, does it mean they are the right person for the job? It seems that teaching ethics is an on-going and relentless task. As pressures within the workplace increase and the demand for greater transparency and sustainable shareholder value grows, the ethical development of staff and business leaders alike is some thing that needs constant nurturing. The agenda is constantly evolving, attracting every aspect of business. Clearly, merely having a code of ethics is not enough. Organisations need to be able to walk the walk, not just talk the talk. And this, in itself, could prove challenging.

What is indisputable is that the finance profession is working hard to meet these challenges, which, in turn, are presenting interesting opportunities to a profession that has had to take stock of its image in a very public arena.