The issue of reputation has fuelled the drive for ever-increasing governance of our business conduct. Recent events have left little doubt of the need for action. There are, however, genuine concerns about how this issue is best tackled.
The drive for increased governance is undoubtedly delivering improvements in the way we work. However, the bureaucratic approach that accompanies it is in danger of killing the entrepreneurial approach on which business thrives.
Management, encouraged by auditors in some cases, is focusing on the avoidance of risk and litigation. The concept of materiality seems to have been relegated to a much lower priority, and the cost/benefit analysis of controls regarded as no longer relevant.
In our justifiable search for the protection of reputation and for better governance, we are in danger of fostering a zero-tolerance culture. There’s a great danger that we lose sight of the difference between innocent error and malfeasance – the danger of establishing a ‘blame culture’.
I worry about snuffing out entrepreneurial spirit through the assumption that there can be no such thing as innocent misjudgment of the commercial outlook. I worry that the profession is forced to spend more time concentrating on the avoidance of litigation than working to further the clients’ commercial success. I worry that the advice given by the profession to clients is, of necessity, insipid and aimed at risk avoidance.
I offer no support to those who set out to deceive or mislead or are reckless or negligent. But I have sympathy for those who made an honest effort, found their honest judgement wanting, and are now pursued by those who forget that the very ‘risk’ for which they now want retribution is the one that made possible the opportunity of return on their money in the first place.
So when we come to look at what should be done in the future to enhance reputations and safeguard public interest, I would ask for one thing above all: a sense of balance. Let’s ensure we encourage entrepreneurial spirit – not kill it off in the search for blame.
Ian Robertson is president of The Institute of Chartered Accountants of Scotland.