The most significant challenges to an ethical company’s culture are balancing
business needs with ethical practice and the time and effort involved, according
to a ACCA survey of 530 CFOs in Asia Pacific, the US and Europe, found. Should
we be concerned?
In 1968, Albert Carr argued in the Harvard Business Review that business
ethics are a far cry from those of private life. He likened business to a game
of poker where a mutual acceptance of distrust is required. He accepted that
standards of right and wrong in business differ from the traditions of morality
Perhaps it was that kind of mindset that pervaded in the 1990s culminating in
nefarious activities at Enron and the fall of Andersen.
Enron was not just an accounting or auditing problem. The banking community
was also involved in what the US SEC described as helping Enron ‘mislead its
investors by characterising what were essentially loan proceeds as cash from
Although no liability was admitted, JP Morgan Chase and Citigroup in 2003
agreed to pay $300m in fines and over $4bn in settlements to former Enron
shareholders three years later. Other banks, including Barclays and Royal Bank
of Scotland, have also made or are in negotiations over multimillion-pound
In a bizarre twist last month, William Lerach, the attorney who negotiated
around $7.2bn (£3.5bn) in settlements with Enron’s former lenders, accountants
and lawyers, pleaded guilty to secretly paying clients of his former law firm to
file shareholder suits. He is likely to serve two years in prison and pay an $8m
With news like this still emerging, there should be little surprise that over
80% of CFOs in our research said that ensuring an ethical culture is more
important to their company now than it was five years ago.
We asked CFOs what was the key benefit of having a strong ethical culture.
Predictably, some cited things such as ‘avoiding another Enron’ and limiting
risk of fraud. Many responses described benefits to staff morale and motivation.
A sizeable minority see an ethical culture as fundamental to a successful
business. One American said ‘the key benefit of an ethical culture is building a
solid foundation for a successful company’. One European said ‘ethics are the
moral fibre that hold the values of the organisation together’.
The last words go to another European respondent: ‘You can do well by doing
right. It is that simple!’
Paul Moxey is head of corporate governance and risk management at
Mark McMullen joins the private client services team from Smith & Williamson
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