Home Accounting and Auditing Proven ways to instill ethics in companies

Proven ways to instill ethics in companies


Many corporate scandals can be cited as examples of business leaders allowing (knowingly or not) unethical behavior to take root in their organisation’s culture.

The public fallout from these scandals reinforces that acting ethically is as important and material to a company’s performance as ensuring the financials are unequivocally accurate.

In no department is it more important to instill ethical behavior than accounting and finance, says Prof. Curtis C. Verschoor from DePaul University and Chair-Emeritus of the IMA’s Committee on Ethics. “The nature of the work carried out by accountants requires it. Management, shareholders and potential shareholders, and creditors and potential creditors rely on their work to present a true and fair view of the company. Incorporating ethics guidelines in an employee handbook, as is the common strategy, is insufficient.” The key according to Verschoor is proper teaching of ethics is the key.

He suggests the following ways for accounting and finance leaders to ensure their employees act with the utmost integrity.

Set an example

Possibly the most crucial way to instill ethics in an organisation is to lead by example—confirming that the expectation of good conduct is followed at all levels. How you, as a leader, express these policies and procedures depends on the size of the company, but it is everyone’s job to communicate when something does not look or feel right. With a strong ethical culture, no one should fear retaliation for speaking up.

While there are many consultants and so-called ethics experts, nothing beats the CEO as the best person to lead and teach employees about the importance of ethics, and more importantly, how ethics relates specifically to your company.

In practice this can mean involving the CEO or finance leader in ethics workshops covering actual circumstances that affect your company or industry. This works especially well in small to midsize companies but can also work in larger firms.

Reinforce core principles and values

An explanation commonly cited after ethical scandals are uncovered is that the guilty party simply did not know they were expected to conduct themselves ethically. For example, in the Wells Fargo “fake accounts” scandal, employees creating the accounts believed their highest priority was making their quotas versus acting ethically. The IMA Statement of Ethical Professional Practice sets forth four ethical principles to guide any company’s methods of operation: honesty, fairness, objectivity and responsibility. These principles should be written with more specific examples in the form of a “code of conduct,” widely circulated to employees, investors (if any), creditors, suppliers and the local community and continuously reinforced by senior leadership teams.

Establish the right tone

While finance leaders can ensure all stakeholders are acting ethically, it is also critical to communicate ethical beliefs and expectations in the appropriate tone.

Building trust is critical, and communication helps achieve that goal. However, this approach only works if the leadership team really believes in ethics, lives it and embeds the practices, which implies the organisation has invested the time and energy in developing core values. For this reason, the urgency behind the leadership team embodying ethical practices cannot be stressed enough.

A seed of unethical behaviour can grow and eventually upend or destroy a company. To avoid scandals and misconduct, finance professionals must embrace ethical practices, and then communicate their vision to the rest of the company.