I have worked with CFOs who leave the issue of ethical conduct to the HR and legal functions. But others have taken a different view -- they take a significant interest in ensuring that management and employees always behave in an appropriate fashion, consistent both with laws and regulations and the expectations and standards of the organization. They realize that not only can inappropriate behavior lead to compliance failures, fraud, and theft, but the consequences can adversely affect employee morale and the firm?s reputation. The bottom line is that ethical failures can affect operational and financial performance and share price.
These CFOs engage with HR, legal, and other functions to ensure the company is communicating its standards and expectations, training employees, and providing an effective mechanism for employees and others to report suspected wrongdoing, investigate potential violations, and monitor the ethics program.
The Ethics Resource Center recently a business ethics report, based on a survey of 4,800 employees. I was surprised by some of the statistics and suspect most CFOs will be too:-45% of employees have witnessed misconduct at work. While this figure is down from 49% in 2009 and 55% in 2007, it is still remarkably high. -Nearly two-thirds have reported misconduct, the highest level on record. Unfortunately, 22% of those who reported misconduct suffered retaliation as a direct result. -The number of companies with ?weak ethics cultures? rose from 35% in 2009 to 42% last year. However, 42% said ?their company has increased efforts to raise awareness about ethics.? -More people (now 13%) are feeling pressure to bend the rules, or even break the law. -Just over one-third of employees said their managers do not display ethical behavior (up from 24% in 2009). That can have a cascading effect through the organization, resulting in a company of employees who are more likely to violate the code of ethics.
The report recommends that executives:-Invest in ethics and compliance programs, and view ethics as a business priority. -Make ethical leadership part of all managers? evaluations. And communicate their personal commitment to ethical conduct. -Focus on their own behavior, because their actions and responses to reports of misconduct are at the heart of the matter.
I suggest CFOs go further and ask these questions: Is it time to revisit the HR-preferred ?talk to your supervisor? approach to potential problems, and replace it by encouraging employees to report independently of their supervisors? Shouldn?t an ethics program be risk-based, looking at the areas of greatest potential harm, ensuring policies and controls are sound, putting metrics in place, and then monitoring at regular intervals?
I also recommend bringing in internal audit to assess all or part of the program and assure the CFO and the rest of the executive team that the program is meeting expectations.
CFOs cannot, in my opinion, leave the issue of ethics to human resources, legal, compliance, or audit. CFOs can add great value by taking the lead. They should ask the questions that cut to the heart of the ethics program, being alert to any signs of inappropriate behavior, and setting an example for all to follow.
Norman Marks CPA is a vice president with SAP and a long-term internal audit and risk-management practitioner.
Asketh Juliet of Romeo, ıWhatıs in a name?ı Well, a lot. Those two committed suicide, you know, after the question was posed and answered and all hell broke loose.
An image of the tragic lovers invaded my brain today after I got a pitch from a digital-media firm that provides resources for businesswomen looking to advance their careers. Mostly it offers tips: How to ask for a raise. How to ıcommunicate up.ı How to invest in your career. Success secrets for women CEOs. Stuff like that.
This firm calls itselfı Little Pink Book.
Thatıs so easy to make fun of, I donıt think Iıll bother.
A press release accompanying the pitch suggested that the firm has a self-conscious ıI am woman!ı identity that extends beyond its name. The first line spoke of ıambitious, intelligent womenı who are actual or aspiring entrepreneurs. Would anyone ever characterize men in such pandering fashion? The phrase seemed to contain a subtle but unmistakable (to me) and somewhat defensive message that women too (!) can be ambitious and intelligent. Iım afraid I viewed that as demeaning to the very population that Little Pink Book means to support.
The release says ıhundredsı of women will convene in Atlanta next month for Little Pink Bookıs third annual ıSpring into Ownershipı event, and that among its many sponsors are noteworthy names like FedEx and Southwest Airlines. Thatıs great. But I ask you, might the made-for-women event be even more successful if the organizer were marketing a less-sexist brand name? Reasonable minds may disagree, but I believe it might.
The point, dear readers, is not about sexism but rather that what you call yourself matters. It matters to potential customers, business partners, your bottom line, and even your conscious or unconscious understanding of what youıre trying to accomplish.
Quick story: A number of years ago, there was an organization called the American Society of Association Executives ı to me a great name in that it clearly expressed what the group was all about. It then merged with another entity called the Center for Association Leadership, whereupon the combined organization took for its name ı its official name! ı ıASAE and the Center.ı All of a sudden the association community and the convention industry were abuzz, not over how the merger could improve services for association executives, but rather how confusing the new moniker was. A marginally better solution was later settled on, with the name changing to simply ıASAEı and ıThe Center for Association Leadershipı used as a tagline. An outsider may still reasonably wonder, ıWhatıs an ASAE?ı
Companies, too, might want to consider calling themselves something that suggests what they do. If it doesnıt insult anybody, so much the better.
Nearly half of corporate directors started using tablets or smartphones over the past year for reading their materials, according to PricewaterhouseCoopers' most recent survey of board members. And an additional 38% wish that their board would use them. At the same time, directors have been complaining that the information they receive is insufficient for them to provide effective oversight of both risk management and strategy-setting.
Some companies have chosen to send the directors the same information they have always received, but on a tablet. (I donıt believe it is practical to expect directors to read board materials on a phone.) The directors will be grateful that they wonıt have to carry a heavy board briefing book, and the technology exists -- and has for some years -- to ensure that the information is secure and only delivered to the directors' devices.
But is that practice sufficient? Will it meet the directors' needs for information so that they can not only provide oversight but share their wisdom when it comes to setting objectives and strategies, managing risk, and optimizing performance?
Executives can now obtain real-time information on their mobile devices, especially tablets, with ıdrill-downı capabilities to explore the reasons for trends and unexpected variances. CFOs may want to provide directors with similar, real-time financial, operational performance, and risk information that lets directors explore the details behind the data to satisfy their information appetites.
Balance is required. If I were CFO, I would first recognize that if they donıt already have tablets, all my directors will have the devices very soon and will expect to receive board documents on them. They will want the ability to search and drill down, and I would want them to do so - within reason. As it is, board meetings are usually strapped for time, and you'll want directors to focus on the data that matters most, away from the minutia of a few data points. So I would go further than simply sending board materials electronically and think about how to change the formatting of this information.
To begin, consider meeting with the board members and have a frank discussion about what they want, what the management team can provide and when, and agree on a plan for action. Have periodic follow-up meetings to discuss what is working and what is not, as well as options for further improving board effectiveness.
Norman Marks CPA is a vice president with SAP and a long-term internal audit and risk-management practitioner. He has been honored for his thought leadership by the Institute of Risk Management (honorary fellow) and the Open Compliance and Ethics Group (fellow). He regularly blogs and provides updates on Twitter, @normanmarks.