With respect to the position of the CFO, attention has focused on the tension in the relationship between the CFO and the CEO on the one hand and between the CFO and the audit committee on the other. It has been suggested that by improving the financial literacy of the audit committee and enhancing its responsibility, one can neutralise the possibility of an errant CFO embarking on aggressive earnings management schemes to satisfy the demands of his/her CEO.
Wiser counsel dictates that rebalancing the various elements of corporate governance is only part of the solution, and that attitudes and behaviour have to change as well, not just at the top of an organisation, but throughout.
It follows therefore that, to be effective, a code of conduct or ethics should be auditable.
How to make codes of conduct effective is the $64,000 question. There is a saying that a fish rots from the head down and this brings us back to the concerns raised by Enron and others and underlines the importance of the Sarbanes-Oxley Act in putting the spotlight on senior management.
Directors need to lead by example.
Having a code is one thing. Living it is another. Bosses can show their commitment to high ethical values and ethical codes by involving themselves and staff in a self-assessment programme.
It is interesting that, amidst the plethora of reviews being conducted by governments and regulatory authorities worldwide, little attention has been paid to the central issue of how to change corporate culture and values for the better. One must go back to those who actually do the business – the executive directors and the employees – and influence them so that they do the right thing, every time.
- Roger Adams is executive director, technical, at the ACCA.