The Woolf report (issued in May 2008) highlights the importance of ethical behaviour. Ethical behaviour in business is critically important for maintaining confidence in markets.
This summary outlines some of ICAEW's work on ethical behaviour.
Integrity in business
The Woolf recommendations include the need to establish and apply a global code of ethical business conduct.
As part of ICAEW's thought leadership work, Reporting with integrity was published in 2007. This highlights the need to instil integrity at all levels, from leadership tone, through strategy, policies, information and culture. This was followed up by Instilling integrity in organisations (PDF 227KB/4 pages), which provides guidance to directors and management to assist them in instilling integrity in their organisations. Work is continuing in this area as part of the Market Foundations programme.
ICAEW's Code of Ethics applies to all members in their professional and business activities, whether in practice, business, or elsewhere. It and other material on ethics are available at icaew.com/ethics. Following on from ICAEW's thought leadership on integrity mentioned above, FEE (PDF 442KB/21 pages) has issued a discussion paper to encourage debate in this area.
As part of the follow up work on this, ICAEW has input into developments such as the Global Reporting Initiative. This is a framework which sets out principles and indicators that organisations can use to measure and report their economic, environmental, and social performance against. ICAEW is currently scoping out work to look at the impact the framework has had on its members. Results of the study will be published on our website in the winter. A summary of our work in these areas is available at icaew.com/sustainability.
ICAEW has launched a comprehensive five module e-learning package to raise awareness of the business case for corporate responsibility and the issues that companies face both now and in the future. The Business Sustainability programme tackles various issues that have now been highlighted by Woolf, from stakeholder management to the importance of top management involvement.
Woolf notes that the effective management of ethical and reputational risks has become a critical element of corporate governance.
The New Challenges thought leadership initiative will focus on issues of significance to listed company boards and identify major changes affecting listed companies in response to pressures in competitive capital markets. It will be designed to produce outputs that help listed company board members deal with the governance challenges presented by changing capital markets.
Woolf recommends the commissioning and publishing of an independent external audit of ethical business conduct and the management of reputational risk.
One of the major challenges for qualitative validation of non-financial reporting is the setting of standards or other criteria against which to give assurance. As well as the initiatives referred to above, ICAEW's Audit and Assurance Faculty is looking at the whole area of assurance on non-financial reporting. This builds on Perspectives on Assurance: Engaging Business (PDF 153KB/16pages) which aims to help businesses and their stakeholders to understand the nature of external assurance, to identify business needs and expectations that could be met by external assurance and to solicit feedback based on practical experience. Further information on ICAEW projects on assurance is available at www.icaew.com/assurance.
ICAEW's internal auditing committee has also been considering the internal and external assurance needs boards of directors. We will be producing a document which considers assurance in a number of the areas highlighted by Woolf.
Woolf highlights the widespread concern with the current state of UK law on bribery and corruption and the need for reform.
The reputational damage and other harm done to the UK and its businesses by instances of perceived corruption is compounded by the fact that the law on corruption in the UK is outdated and unclear in a modern environment, still being largely based on a number of statutes passed over ninety years ago. ICAEW has been making formal and informal representations about this for many years. A note of some of our work in this area is available from the Business Crime and Misconduct section.
Corruption is interrelated with a number of other business crimes, including fraud (corrupt payments will frequently be fraudulently recorded, for example) and money laundering (the possession of, or transactions involving, the proceeds of corruption including increased sales and profitability, fall into the definition of money laundering). More information on ICAEW's work in these areas is available from Business Crime and Misconduct.
ICAEW established and continues to support the Fraud Advisory Panel, which has highlighted that ethical behaviour is the best defence against fraud.
Woolf stresses the responsibilities of individual directors and the board as a whole for ensuring and assuring high standards of ethical business conduct.
ICAEW's Finance and Management faculty is undertaking a thought leadership programme FinanceDirection which will be looking, amongst other things, at non-financial information needs of boards.