CGMA report reveals gap in rhetoric, reality on business ethics

New York and London: Four out of five businesses worldwide have committed to ethical performance, but rhetoric does not always match reality, according to a new report from the American Institute of CPAs (AICPA) and CIMA.

The report found a weakened ‘tone from the top’ and more pressure on financial professionals – especially in emerging economies – to act unethically.

‘Managing Responsible Business’, a global survey of almost 2000 chartered global management accountants (CGMAs) in nearly 80 countries, found that 80% of organisations provide a code of ethics to guide employees about ethical standards in their work, up from 72% in 2008.

However, only 36% collect ethics information such as the number of employees attending ethics training and actions taken on hotline reports. Since ethical performance can only be managed with the right information, this suggests ethical practice falls short of stated policy, according to the report.

What’s more, neither senior management nor boards of directors seem to be reviewing, analysing and monitoring ethics information at the level recorded four years ago. In 2008, 86% of senior management and 68% of boards reviewed ethics data, according to the report. In 2012, it was 78% and 56% respectively.

This ‘weakened tone from the top’ comes as more than a third of those surveyed (35%) said they sometimes or always feel pressured to compromise their organisation’s standards of ethical conduct. This compares to 28% of respondents in 2008.

The pressure is most pronounced in developing economies such as Malaysia (54%) and India (51%), and lowest in the UK and US, where 18% of those surveyed feel pressure.

‘Positive steps have been taken to build the architecture for ethics through codes and policies, but pressure to act unethically persists and companies across the globe continue to be faced with the challenge of strengthening ethical culture from the top,’ said AICPA president and CEO Barry Melancon, CPA, CGMA.

‘CGMAs can play a key role in guiding companies in how to better collect and report ethical information by drawing on their training and understanding of professional ethics, as well as their skills in obtaining, analysing and acting upon management information.’

The report is a follow up to one conducted by CIMA in 2008 and is the first time responses from the US have been included. Geography and company size are key factors in the findings, with larger companies from more developed economies generally having more advanced ethics programs. US companies, for instance, are most likely to monitor or evaluate ethical standards, according to the report.

Charles Tilley, FCMA, CGMA, chief executive of CIMA, commented: ‘Management accountants play a critical role in linking the objectives of the organisation across the whole business and are therefore well-placed to constructively challenge how things are done and offer an objective view. They are in an excellent position to be the ethical conscience of their organisation.’

Other key areas in the report include:

• ethical performance: more than half of companies, or 57%, now provide training on ethical standards, 49% provide a hotline for reporting conduct that violates the organisation’s standards of ethics and 25% provide incentives for staff to uphold the organisation’s standards of ethical conduct, according to the report  

• CGMAs and ethical performance: The main ways CGMAs say they contribute to management of ethical performance are by upholding their professional code of ethics (86%); ensuring the integrity of management information (83%); and leading by example, 80%  

• pressures to act unethically: Asked how likely various situations were to result in pressure to compromise standards of ethical business conduct, those surveyed identified the top situations as working with colleagues from different functional areas within the organisation; meeting reporting deadlines; compiling management accounts; and dealing with customers  

• business issues: When asked how relevant various ethical issues were to their organisations, the top issues cited by respondents were security of information (91%), safety and security (88%), bribery (78%), discrimination (75%), conflicts of interest (74%), environmental (73%) and supply chain (72%).