OMM 640 Business Ethics and Social Responsibility
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business-ethics-and-compliance.htm
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Ethics, reputation, and compliance gain as corporate priorities
By Jack Hagel Related TOPICS
Illustration by pingebat/iStock
Businesses are placing increasing emphasis on ethics and compliance, and the area is set to gain further importance in the near future.
The demand for greater transparency from consumers and stakeholders across the world has pushed the areas of ethics and compliance up the corporate list of priorities in recent years. In addition, the risk to reputation and potential damage that can be done if evidence of unethical practice is discovered have increased significantly with the advent of social media.
A survey of 1,699 CGMA designation holders in 99 countries provides insight into the status of ethics in the workplace. Here are some of the key findings:
Fifty-one percent of respondents said ethical performance is a bigger focus for senior management in their company than it was three years ago, and 55% believe its importance will grow further in the next three years.
Seventy-six percent of CGMA designation holders stated that their employers value or highly value their commitment to a code of ethics.
Safeguarding reputation is the primary motivation when companies seek to establish and embed ethical standards. Among those polled, 80% cited the reputational views of stakeholders (customers, investors, and employees) as one of the main drivers behind their decision. Regulatory or legal compliance was one of the three most important factors for 73% of respondents, and brand image for 47%.
Ten percent said financial return was a driver of ethical performance, perhaps because some consumers are willing to pay more for products from companies they see as generating a positive social and environmental impact.
In practice, the most common means of embedding an ethical culture is by simply “conforming to regulations” (78%). Ethical issues were given priority by the leadership of 76% of respondents’ companies, and 63% said their organizations created an environment that promoted and instilled confidence and trust.
Many of the companies represented in the poll have yet to explain their codes of ethics effectively or provide staff with the training required to implement those policies. Forty percent of respondents said their organizations had yet to create appropriate channels (such as training) to raise ethical standards. Furthermore, 36% said their organization communicated ethical policies to staff occasionally, and 3% said they never communicated them.
Focus on training
Training staff and communicating the ethics policy regularly are key steps in improving ethical behavior. For the workforce to internalize these principles, the content of training sessions and communications must be focused and relevant to the audience. Seeing the principles of integrity and responsibility reflected in the conduct of senior management can also help cement an ethical culture.
The need for greater training and communication also applies to anti-corruption efforts. Zero-tolerance policies on corruption and fraud operate in 76% of respondents’ companies, and 81% of the organizations represented offer specific channels for reporting suspected fraud or violations of company policies on ethical behavior.
Though policies aimed at preventing conflicts of interest, bribery, and other forms of corruption are in place in 82% of respondents’ companies, just 46% of these organizations provide all staff members with training on them.
Opportunities for action
The survey suggests that some organizations could be doing more to promote responsible and accountable business. Opportunities for action arising from the findings are laid out in the CGMA briefing, Ethical Performance: Driving Value From an Ethical Culture, which is available at tinyurl.com/CGMAEthicalPerformance.
The original version of this article, “Ethical Performance Moves Up on the Corporate Agenda,” by Samantha White, is available at tinyurl.com/mqs7vh3.
—Jack Hagel, editorial director, CGMA Magazine
Also at cgmamagazine.org
More requests for raises
Forty-three percent of CFOs said pay increases and promotion requests have increased from two years ago, according to a survey by Accountemps, and 44% said requests have remained the same. The survey took the responses of more than 2,100 U.S. CFOs.
Compensation and pay was rated as more important than any other aspect of job satisfaction in a 2013 survey of U.S. workers by the Society for Human Resource Management.
Employers must pay close attention to compensation levels to stay competitive and retain good workers, Bill Driscoll, an Accountemps district president, said. “It’s better to be prepared than surprised by an employee’s request for a raise or promotion,” he said. “Now’s the time to proactively connect with key team members to identify advancement opportunities and discuss viable career paths.”
The full article, “CFOs Getting More Requests for Pay Increases and Promotions,” by Neil Amato, is available at tinyurl.com/o58229k.
Corporate cash supplies grow
War chests of surplus cash, expanded during the global financial crisis to buffer against revenue shocks, continue to grow, according to SunGard’s Corporate Cash Investment Report 2014.
Forty-nine percent of companies participating in the 2014 poll increased their cash balances, up from 37% of companies participating in 2012, the report said. The cash has been used in some cases to fuel an M&A boom.
M&A deals totaled $2.49 trillion in value globally in the first three quarters of 2014. That didn’t quite reach the $2.93 trillion in deals done worldwide in the first three quarters of 2007, but it exceeded annual totals for each of the past six years, according to corporate financial analysis by Mergermarket.
The full article, “Cash Management Shift Boosts M&A,” by Sabine Vollmer, is available at tinyurl.com/mtfnv68.
VISIT CGMAMAGAZINE.ORG
CGMA Magazine is published in conjunction with the Chartered Global Management Accountant designation, which was created through a partnership between the AICPA and CIMA. The magazine offers news and feature articles focused on elevating and emphasizing management accounting issues.
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