ICAEW.com works better with JavaScript enabled.

Is your firm building actionable ethics?

Author: ICAEW Insights

Published: 08 Nov 2023

While the tone for ethical systems and processes must come from the top, personal integrity is a matter for everyone in an organisation, a special ICAEW event has heard.

Ambivalence in regulatory decision making and enforcement. A lack of candour and transparency on the part of professionals and service providers. A failure to provide relevant information (including about risk) or to handle potential conflicts of interests appropriately. A perception that any lessons learned from mistakes made in the past have not been fully implemented. All of these contribute to a decline in trust, which can have devastating consequences for an organisation.

In this context, it is important that chartered accountants and employees across sectors all play their part by acting with integrity and reinforcing the ethical architecture of the organisations and sectors in which they work. This was the take-away message of a wide-ranging seminar held at Chartered Accountants Hall on 18 October, to mark Global Ethics Day.

The event included an address from the Rt. Honourable Dame Margaret Hodge MP, former chair of the Parliamentary Public Accounts Committee and current chair of the All Party Parliamentary Group on Anti-Corruption and Responsible Tax, who has extensive experience of researching public accounts and is well known for focusing squarely on ethical issues in the context of finance. “When I began that work around 12 years ago, many companies and high-net-worth individuals considered it ‘cool’ to avoid tax. But while that attitude is now muted, I’m not sure that actual behaviours have changed.”

Bringing together a diverse array of speakers and attendees, including senior figures from the worlds of accountancy, finance, law, healthcare, regulatory policy, ethical advocacy and politics, ICAEW facilitated a cross-sectoral approach to a common issue: how best to maintain the trust of stakeholders? 

Protection and support

A distinguished opening panel discussed a powerful selection of case studies highlighting major ethical challenges in different sectors, and the lessons learned.

On the ambivalence of successive UK governments towards tackling bribery and corruption involving UK companies abroad, a leading international lawyer pointed out that the failure-to-prevent fraud offence in the new Economic Crime and Corporate Transparency Bill will be restricted to just the top 1% of the nation’s companies. “Another negative,” he said, “is that we are the sixth-largest economy in the world – yet we spend something like 0.042% of GDP on law enforcement around economic crime. Meanwhile, the Serious Fraud Office has a staff of only 450 people and a budget of just £78m, lacking critical mass.”

The event’s attendees heard how the 2001 report on the children’s heart surgery scandal at Bristol Royal Infirmary had exposed a fatal lack of institutional candour, sparking legal reforms. For the case study’s presenter, “Nothing is more corrosive to trust than concealing, obfuscating or failing to tell the truth. It’s lack of candour, often more than the initial event, that causes trust to be lost.” The speaker recommended the establishment of an individual or body to act as a trust restorer, with a specific remit to ensure that learnings from various individual inquiries were promoted sector-wide, and that recommendations were followed through.

Further discussion of organisational culture emerged as the case studies explored topics around finance. Delving into a recent high-profile case in which a junior auditor had furnished audit quality inspectors with misleading documents, a regulatory lawyer quoted the president of the ensuing tribunal’s verdict: “No accountant should require any education or training to realise that deliberately misleading anyone, especially a regulator, is at least incompatible with integrity and is, in special circumstances, dishonest.” That assessment, the lawyer said, underlines regulatory expectations that personal integrity should flow throughout an audit team at all levels of seniority.

A senior figure from a major development bank explained how, in response to a crisis, the organisation had built itself a whole new ethical architecture, the cornerstone of which is a special ethics committee within the board of governors, designed to provide senior staff with a “strong, robust focal point” for all ethical issues. 

Crucially, to ensure the committee would have genuine teeth, it was equipped with a dedicated whistleblowing channel. “How do you measure what is underreported?” the speaker asked. “Unless you have an enabling environment that takes reports up to the top crust – especially with all the safeguarding issues going on in the world – and unless that channel has the power to provide interim protection and support, you just won’t get enough reporting. All you’ll be doing is playing catch-up in your next crisis.” 

The speaker recommended the use of data analytics to produce heat maps to track emerging ethical risk issues as they arise, and to enable proactive intervention before such issues come to a head.

A representative from a prominent body in the legal sector noted: “People who whistleblow do it at huge personal cost. Their experience is often so awful that anyone who witnesses it would be discouraged from doing the same.”

However, junior professionals are increasingly setting the tone. “One of the points we try to make is that ethics are good for business. More and more clients are asking about firms’ ethical positions,” the fifth speaker said. “There’s a whole tranche of new lawyers wanting to know about their employers’ practices and ESG stances. If you want to retain them, you must show not just that you have good policies, but that you are acting upon them.”

Talking about values and behaviours is not enough, she said. They must be built into the DNA of how organisations operate and must be led from the top. The speaker also highlighted the importance of regulatory bodies producing ethical guidance on current issues, to assist professionals in navigating dilemmas.

Enlarged thinking

A second panel discussion featured keynote addresses from senior Parliamentary figures and a specialist ethics adviser.

“If you don’t have clarity from the top of an organisation, you’ve got problems,” said a peer with a close, working interest in public-sector ethical conduct. In their view, a key question for leaders of every stripe is: how do we ensure that our organisation is conducive for doing the right thing – rather than forcing people to comply? “Should you be assessing values at the point of recruitment? Should you be thinking more about what to do in the areas of induction, performance management, continuing professional development, promotion and even exits?”

Hard information, the peer noted, would drive sound decisions. “Try to get triangulated data on your hotspots. If there’s whistleblowing over here, why? If there isn’t much over there, why? Think of that as part of the data you’re regularly reviewing in your governance role.”

Decision-making models also came up in the speech from the adviser – who pointed out that ethical challenges are typically accompanied by a sense of exceptionalism. “When your people are facing a genuine issue, encourage them to think about it from certain viewpoints,” she said. “For example, how would you feel if this hit the front page of the newspapers? Or, would it be OK if everyone behaved like this?”

Do what is morally right

In the closing statement, Dame Margaret cited a report from TaxWatch concerning seven leading US tech firms that had paid around £750m in tax on their UK activities in 2021, but which, according to the think tank, should have paid a sum closer to £2.8bn. Echoing the ethics adviser, Dame Margaret asked: “What would happen to our public services, public expenditure and the Exchequer’s income if everyone chose to do that?”

Dame Margaret referred to the need for greater transparency, smarter regulation, tougher enforcement and proper accountability. Addressing attendees – and the accounting profession – directly, Dame Margaret noted: “There is a moral dimension to the debate around the work that accountants do. It’s not just about doing what’s legal. It’s about doing what’s moral. 

“We all benefit from public services, so we should all contribute to them from the means we have. There’s a role for advisers here, and this is where I come to you. In fact, not just you, but lawyers, bankers, state agencies, companies and service providers: every group that operates in the financial field.”

Trust & Ethics

ICAEW guidance and resources on key issues, including economic crime, business law, better regulation and ethics.

Aligning with Global Ethics Day on 18 October, ICAEW is exploring the vital importance of ethics to the accountancy and finance profession. Hear from CFOs and ethics experts on the key issues.

Discover more from ICAEW Insights

Insights showcases news, opinion, analysis, interviews and features on the profession with a focus on the key issues affecting accountancy and the world of business.

Podcast icon
Insights Podcast

Hear a panel of guests dissect the latest headlines and provide expert analysis on the top stories from across the world of business, finance and accountancy.

Find out more
Daily summaries
Three yellow pins planted into a surface in a row
News in brief

Read ICAEW's daily summary of accountancy news from across the mainstream media and broader financing sector.

See more
A megaphone
Stay up to date

You can receive email update from ICAEW insights either daily, weekly or monthly, subscribe to whichever works for you.

Sign up