Does your business have an ethical code?
Why does your business need an ethical code? In the famed words of the popular TV character Father Ted; “That money was just resting in my account!”
All businesses need ethics at the heart of their operations to help them to avoid a myriad of issues, and ultimately reduce the risk of persons within the organisation acting unethically.
Unethical behaviour could in certain circumstances ultimately lead to the collapse of the business. If your business does not already have an ethical code in place, then it is proactive to add this task to any transformational objectives, and to endeavour to become a leader and role model for peers, or even rival organisations and practices.
Why is an ethical code essential?
Once a business is rocked by scandal or ‘financial irregularities’ it can be hard to restore customer and client faith in your core activities. Retrospectively creating one can give the impression of a 'sticking plaster' approach.
A preventative approach is always better. Having a code does not guarantee that a business will not suffer from unethical behaviour, but a code that is properly embedded within an organisation does help to mitigate that risk.
How long does a code need to be, and what should it include?
This would entirely depend on the business and its needs – if you work for a large business and are unlikely to wield the power of decision over implementation, then it’s a great idea to suggest solutions to management, or even volunteer to sit on any internal committees that will hold the deciding vote.
The ICAS code of ethics (which is substantively based on the Code of Ethics for Professional Accountants published by the International Ethics Standards Board for Accountants) can be integrated into any existing codes that you practice, or used as a basis for your own designs.
It details the standards that are expected of a CA and adopts a conceptual framework approach. Adherence to the five fundamental principles of the Code ensures integrity, objectivity, professional competence and due care, with a strong focus on confidentiality and professional behaviour, all of which are absolutely key.
Once a business is rocked by scandal or ‘financial irregularities’ it can be hard to restore customer and client faith.
The Consultative Committee of Accountancy Bodies (CCAB), of which ICAS is also a member, published guidance entitled ‘Developing and Implementing a Code of Ethical Conduct’ in 2014 which provides useful advice.
Ethics are also fundamental because external / internal influences and pressures have the potential to influence behaviour, and expose the business or your practices to financial irregularities, fraud and other illegal activities.
Employees and owners are under increasing pressure to deliver financial goals, and tweaking an analytical report for the sake of one meeting could trigger a series of unfortunate (and potentially, in certain scenarios, arrestable) offences.
At the 2016 ICAS conference, members heard from Nick Leeson, the infamous rogue trader who brought down Barings Bank after his unauthorised trading led to its collapse and landed him in a Singapore jail.
Today, he emphasises the unequalled importance of ethical standards in finance, business and accounting, lest anyone forget that an initial error of judgement can snowball into a global issue that is still affecting lives to this day.
He also emphasises the need for large organisations to have robust corporate governance mechanisms in place along with appropriate checks and balances, to mitigate the risks of lone wolves and deviant subcultures.
The culture of an organisation and the type of behaviour which it encourages or discourages is key, and that is why the Financial Reporting Council’s ongoing work in this area is to be welcomed.