“In their own words”…Context matters – Industry and commerce
In the following extract from the ICAS research publication “Speak up? Listen up? Whistleblow? In their own words – Insights into the ethical dilemmas of ICAS members” we hear from ICAS members about their real-life experiences of ethical challenges, “In their own words”.
"If the owners of the business are behaving in a certain way that creates a very difficult… especially when you have professional duties, it creates a very difficult kind of tension and a point by which you, the whistleblower, will ultimately have quite a difficult decision to make if on the one hand the concerns aren’t being listened to but also that professional judgement isn’t being listened to." (Extract from interview with Robert)
6.2 Industry and commerce
8% of ICAS trainees and 46% of qualified members work in industry and commerce (FRC, 2018). This is therefore a very important sector for ICAS members. Interviewees who had worked in both the profession and industry were able to compare the sectors. Laura, who referred to moving into industry as a “shock”, attributed this to professional practice having clear structures and procedures with “a clear sense of accountability” and review processes “set up to be fairly collaborative”. She had found that in the companies where she had worked since leaving professional practice:
"When you get into industry there’s not that same collaboration, there’s not that same review process. So any kind of review, rather than seeing it as helpful or contributory, it’s seen as meddling and then there is not the same focus on quality because nobody has reviewed it. So you’re putting something in front of a client whether it’s an internal client or an external client, it hasn’t been reviewed, it’s not the same quality standard so I do think there is a huge difference."
Belinda had worked in financial services in the period leading up to the financial crisis of 2007 and had been concerned about the loans being made to people “who were unemployed, to people who wanted the money for cosmetic surgery” and had been surprised to hear this justified because “we charge them a lot of money on their payment protection insurance and we also charge them a high rate of interest”. For her, the whole business model was of concern because “the structures of rewarding the sales people – people selling the loans – the structures were ridiculous” in that “they all got their bonuses from selling us dodgy loans”. She was quite shocked by the atmosphere:
"…because the atmosphere there was brutal. They had their balanced scorecard which they used for performance management. And in every team, someone had to be a one, two, three, four or a five. No matter how big the team was or how good you were at your job, they needed that bell curve. You might have had five people in your team who were all good performers – 3s – but …you had to show that curve. It was just ridiculous”."
This happened in a regulated environment within a large publicly-owned company. Likewise, Joshua’s experiences had occurred at a large multinational that had all of the ethics policies and procedures that would be regarded as best practice:
"They have a world class whistleblowing, ethical, programme and 5 years’ worth of ethics training in less than 3 months there. I did all the training and yet my circumstances showed that it is not perfect….And I trusted that process and it failed me."
Joshua had used the whistleblowing process (though not the dedicated whistleblowing helpline) at the company and it initially looked as though it was working as “I went through the whistle blower process, I knew who my contact was, I spoke to that individual, they spoke to the divisional legal counsel based in the same office, my complaint was investigated” but three weeks later matters took an unexpected turn:
"They said they appreciated that I had brought it to their attention but that there wasn’t an issue and I was fired 3 weeks later. So it is the cause and effect aspect of it that is quite stark in my case."
A key principle behind effective speak up / whistleblowing policies is the assurance of non-retaliation and no detriment, yet Joshua had lost his job. In another case at another multinational, Jill had not lost her job altogether but she is now working in a different part of the firm, in a lower grade post and earning a lower salary. Jill’s experiences related to raising issues of concern including bullying, inappropriate behaviours and conflicts of interest. Her firm was also a large multinational company that, like Joshua’s employer, had a wide range of ethics policies and a speak up helpline. In her case, she had faced retaliation and a demotion after using the firm’s external helpline despite being assured that there was a “zero tolerance on retaliation” so her view was quite simple: “I would never recommend anybody using it”.
Nor had she found Human Resources to be able to provide support. In her words, instead of helping her, “they were helping him (i.e. the person she had complained about) manage himself out of that situation”. Elizabeth, whose organisation works in the field of business ethics, agrees that “HR’s priority is protecting the business”. Thus, the mere existence of such policies and procedures is no guarantee that they will work effectively to the satisfaction of those who use them in practice. Elizabeth therefore prefers to see ethics separated from human resources departments so that there is more independent oversight. In Harry’s view, policies and procedures are “a box-ticking exercise”. He continued, “To be frank, are companies more ethical now than they were before they had these policies in place? Probably not.”
Another issue was raised by Jill because, whilst her firm had a universal set of policies and procedures, all of the experiences she described had occurred in one section of the firm. Over the course of her career at the firm, she had worked in four different functions, three of which she enjoyed working in. She summed this up as saying that within the organisation there were “very different cultures”. Thus different sub-cultures can operate in practice despite universal policies and procedures.
A similar view was expressed by Mark who had worked in a variety of industries across several countries. In his view, how an issue plays out “depends sometimes on the person. It’s not necessarily the organisation or the country”. He continued that:
"I think it very much depends on the management structure and the people at the top, you know, the so-called tone at the top is very important in terms of how people act or how people believe they should act."
A number of interviewees who had experienced a range of different working environments commented on those that they had found to be particularly effective or corrosive. Edward described his years at a large privately-owned company as “the most difficult period of my career” in an environment where the top level management, including the firms’ founders, set a good “message from the top” but where, underneath that level, the environment was “heavily pressurised” and:
"… it did bring me into conflict because my boss was quite supportive, but his boss and above that, I came into conflict with them because I sometimes felt, ‘Not sure about that, not sure we should be doing this’. And it was mainly around trading overseas, bids, tenders, tax."
It was then refreshing for him to move to a subsidiary of a listed company where the atmosphere “was fantastic, I really enjoyed it. It was a highly ethical really well-run company, fantastic people”, a company that “was in to compliance in a big way”.
Small and medium-sized firms
In Robert’s experience of assisting whistleblowers, small firms “are often quite tricky”:
"If the owners of the business are behaving in a certain way that creates a very difficult… especially when you have professional duties, it creates a very difficult kind of tension and a point by which you, the whistleblower, will ultimately have quite a difficult decision to make if on the one hand the concerns aren’t being listened to but also that professional judgement isn’t being listened to. I think that’s a really, that is often a really difficult… there is often only one really sensible option in that scenario which is for the individual to kind of remove themselves from that situation one way or the other, but trying to raise it if the whistleblower comes to us quite early on, it’s often, it might actually be how you raise it as well, could be quite key to how the family business then reacts and whether they take on the advice."
Daniel, who works as Chief Financial Officer for a small family firm, describes the challenges of working for such as firm as follows:
"I think in my experience here I suppose it has presented its challenges in that, you know, the owners want things their way and are more inclined to tell you the outcome they want. And try, and so saying, ‘We can’t do this, we can’t do that’, it isn’t necessarily their… They have got to be very convinced, you have got to convince them quite strongly, that if something is not doable or not acceptable... I suppose the characters can then be such that, they’re not thinking of… I am thinking of my own personal ethical standards and the standards the Institute and the profession will have. Whereas they are thinking of, ‘How is this going to benefit the business and therefore ourselves? I suppose. So that’s where there can be a conflict."
In these types of environments, Matthew held the view that communication was vital and that it would be helpful if accountancy trainees got specific classes in how to handle difficult situations since that is a “political skill” that can make a difference to the overall outcome. He felt that the first thing to be aware of when working in a family firm is the importance of relationships. It was not necessarily the case that these would be problematic. He described the two firms where he had worked that had the best culture that he had seen in his career. Both were family businesses where the owners had strong management skills, able “to be both hard and soft at appropriate times”, with “no feeling of blame” and where there was a welcoming, respectful organisational culture.
Daniel also stressed that communications require careful handling and tact:
"Once or twice I have picked up something I have been concerned about, something that has already happened and that has been done by directors, and I am trying to find a way through to address that without, I suppose, tactfully, you know trying to be tactful, trying to be… You know, not just about anyone in any job they are obviously thinking, ‘If I do this, is this going to compromise… am I going to be out on my ear tomorrow?’ So, there is always a little bit of an element of that. So, if you’re unhappy about something, obviously you don’t go banging the door, accusing somebody of wrong doing until you are a bit clearer about it. So, you know, I think … it requires a bit of thought and a bit of tact sometimes."
Sam currently works in a family-owned business where there is not a suitably qualified accountant in the latest generation of the family, hence his appointment. He remarks that relationships are extremely important in such an organisation and he regards himself as being fortunate that most family members are supportive – “so that’s how I can confidently operate on a daily basis”. However, he has found one family member to be particularly challenging, an individual who “chooses to operate in a particular way and communicate in a particular fashion, which isn’t altogether healthy”:
"I don’t work as closely with that individual as I did initially and, I won’t lie, when I was working with that individual initially I was at that point equally thinking, not for any ethical reasons, but just for day-to-day working, is this a pleasant environment in which to work? Then I was thinking about other opportunities, but if it was reversed and that was the majority of the leadership style being shown by the owners, I would absolutely consider my position."
One of the challenges that Sam has experienced as the business has grown is how to transform it from “a very autocratic organisation” to one that has a more open culture. He has promoted an open-door policy, and there is now an external helpline that employees can access. In a small firm, confidentiality can be difficult to assure but he believes this is important “because without it you will not get the numbers stepping forward”. Anonymity can be a bigger challenge but his view is that “there are six hundred eyes and ears in the business. You want them all to have the confidence to step forward even if they are ‘shopping a colleague’ ”.
In a series of extracts from the research hear from ICAS members about the real-life situations they have faced - “In their own words”.
Hear more about the key findings from the author of the research Catriona Paisey, Professor of Accounting, University of Glasgow