Four out of five businesses worldwide claim to efficiently list out ethical standards. Not many follow them. This was divulged in a new report from the Chartered Institute of Management Accountants (CIMA) and the American Institute of CPAs (AICPA). The study which was started late 2011, concluded only early this year.
The findings of the report make particular sense to b-schools because globally, ethics as a subject has been increasingly taking centre stage in curriculums and subsequently in the boardrooms. In India, it matters even more, thanks to the recent spate of corporate and political (corporate in a way) scams.
The study titled Managing Responsible Business , surveyed almost 2,000 Chartered Global Management Accountants (CGMA) in nearly 80 countries. The key finding was that while 80 per cent of organisations provided a code of ethics to guide employees about ethical standards in their work, few took care to ensure that the guidelines were implemented.
The study in short
The report found that in many companies, the ethics pitch from the top was enfeebled and that put all the pressure on professionals lower down especially in emerging economies, to act unethically. While 84% of the people surveyed in India felt that their organisation provided a detailed code of ethics to guide staff, 51% of them said they felt pressurised from their peers or supervisors to compromise on ethical business conduct.
The culture of an organisation is set by the tone at the top, noted the study, be it senior management, or branch managers, or team leaders. Doing business ethically is not just something which is handled by someone in compliance or legal, it should be part of the way everybody works within an organisation. The study added that however, it was heartening to see that a significant majority of management accountants who responded to the survey recognised that their role contributes to managing ethical performance.
The widespread use of the internet and social media casts a harsher spotlight now than before. Management people are well placed to bring their skills, insight and influence to encourage ethical performance, and the survey shows that they recognise this. The problem is that they may not always be supported and enabled to do so by the wider organisation and in some cases, may even come under pressure to act unethically. This creates what the study terms as 'ethics divide', where a strong stated commitment to ethical standards and codes is accompanied by pressures on individuals to act unethically.
The study concluded that there has been a positive development in terms of building the architecture for ethical codes and policies, the translation of these into actual practice and everyday business processes has lagged behind. Organisations need to continually strive towards building ethical businesses, while not losing sight of the very real demands this makes on them.
Some questions asked in the study
Does your organisation provide a code of ethics? (Most Indians said yes)
South Africa: 74%
Sri Lanka: 77%
Does your organisation publicly report to corporate social responsibility?
For the companies which have employee strength of up to 250, 17% employees report for CSR activities.
For the companies which have employee strength of 251 to 5000, 36% employees report for CSR activities.
For the companies which have employee strength of more than 5000, 59% employees report for CSR activities.
Did employees compromise on their organisations ethics and if they were pressurised by their colleagues or seniors?
61% of the employees sayid that they never came across anything like this.
32% of the employees said sometimes they were at times.
3% said that they always are the ones suffering.
Interview with Mr Andrew Harding, MD CIMA
How did Indian companies fare in the survey?
In India we saw that despite a high number of organisations having codes of ethics and related training and hotlines, there is a lot of pressure to act unethically in some instances. This could be for a number of reasons, perhaps related to the wider operating environment.
What was the most startling revelation of the study?
We were surprised to see how similar the results were regarding companies from around the world having ethical codes, ranging from 74% to 84%, and then such a huge disparity in pressures to act unethically, ranging from 18% to 60%. Another surprise was that, whilst in some markets there was a very clear emphasis for organisations to be ethical not only having codes and other supporting architecture, but respondents seeing their management as ethical there were very high numbers who would feel under pressure to compromise standards. This may need further exploring where are these pressure points coming from and why cant the leadership tackle them?
Has 'ethics' been an issue from the beginning in Indian firms or is it a recent phenomenon?
I think it depends on which firm. For many it is indeed part of their DNA, for others it may just be lip-service, like anywhere else in the world. However in both our research and in other work, it would seem that major Indian companies now have a focus on these issues. Certainly a lot of the multinational companies operating in India will be very conscious of, for example, on areas of bribery and corruption, with increasing scrutiny and eye-watering fines for any legal transgressions.
Corporate responsibility has always been business as usual for some organisations. For example in some of the long established business houses in India. Tata is a good case study, reaching out to the wider community via its workers with education and health initiatives, as well as having a strong position on fighting corruption.
Can ethics be taught at all, in b-schools, is it not a home teaching?
I believe it should be a focus throughout the system, from school onwards. Of course it also matters what values are taught from home, but acting fairly and with integrity, why should these behaviours be different in your social and professional life? Does one park ones values at the door when entering the office? I dont think you should and instead we should be encouraging students and those at all levels to consider their actions and their effects. The spotlight on corporate ethics is higher than ever and it is likely to increase.
Is there a gender and age differentiation in the findings?
We havent cut the data by gender; however we have seen that many of our students view managing ethical performance as part of their role perhaps as it is a more explicit part of the curriculum now. Conversely, and maybe because of their level of perceived influence in the organisation, nearly twice the number of students than members observed conduct that violated their organisational ethical standards. In relation to a company's obligations including issues such as fighting poverty and climate change, there was also a difference. 26% of members recognised this obligation compared with 38% of CIMA students.
Ethics and corporate success are often not seen in the same light?
Well, increasingly they should be. You can have corporate success in the short term by acting in an underhand and unethical way. But many firms who have achieved long-term sustainable success are trusted and known for their ethical practices. Unfortunately the global markets do not bode well, and what effect that will have on ethical practice in an even more competitive landscape is yet to be seen. The tussle between the best intentions to act ethically and the pressures to cut corners may become stronger. Yet as recent news stories have shown, companies found to act unethically suffer huge reputational costs. Cases such as Enron, Lehman and Satyam show that these costs can be disastrous.