Menu
How do CFOs grapple with the ethical dimension?

How do CFOs grapple with the ethical dimension?

Finance chiefs can rarely remain totally aloof from the ethical questions that pursue businesses. That's clearly the case in those areas where there is a direct links between ethics and financial probity - the Enron scandal being a case in point – but it's also true across a much broader range of business issues.

Take the still smouldering controversy over phone hacking at the News of the World, the now closed newspaper published by News International. On the face of it, the ethical issues under scrutiny here are purely editorial. Nevertheless, there is also a financial subplot. The fact that money was paid to private detectives and later to victims inevitably raises questions about authorisation. As such, questions of accountability of the executives at News Corporation - the parent of UK business News International - stretch from the editorial to the finance divisions.

Indeed, wherever you look within an organisation – from employment practices to policies on the environment and sustainability – there is usually a financial dimension. By extension that means that in cases where the ethical practices of a business come under scrutiny the CFO could well have questions to answer.

Finance chiefs often have a difficult balance to strike, says Gillian Lees, head of governance at the Chartered Institute of Management Accountants (CIMA). Accountants are bound by a code of conduct that requires them to act ethically at all times. In theory, this should mean that CFOs are ideally placed to provide an ethical centre of balance for their employers. But in practice they wear multiple caps, acting both as watchdogs and critical movers in driving a business forward.

"These days the CFO is seen as a business partner to the CEO and this makes it just a bit more likely that a conflict of interest will arise," says Lees. "On the one hand, they are expected to be objective. On the other, they are seen as business partners."

But perhaps there is a sense in which it has always been thus. Anyone on a board who stands out against the consensus view runs the risk of being labelled "not a team player". In that respect, the ability of finance professionals to live up to their professional bodies' own codes of conduct requires not only technical skills but also their power to influence.

"It is all about personal qualities," adds Lees. "Qualities such as communication skills and courage."

Nevertheless, Lees believes that CFOs are ideally placed to offer leadership on ethical and cultural issues, as part of a wider risk management process. "The CFO is one of the few people who is in a position both to perceive risk and get the board to listen,"she says.

David Bloom, founder of Finance Director Provider FDU and a CFO at Cultura Creative, agrees that finance chiefs can play a vital role in ensuring that companies operate on a sound ethical basis. Indeed, argues that the ability to do so is the characteristic that defines the quality of the chief financial officer.

"In my opinion it is ethics that separates world class CFOs from the rest," he contends.

A defining quality

Bloom's experienced lies mainly in fast-growth companies with a turnover of up to £100 million, a sector in which incoming CFOs often face ethical challenges as they get to grips with working practices that have been forged in the entrepreneurial hothouse of ambitious start-ups. Many of these businesses are looking forward to major corporate finance deals or a flotation, so establishing an ethical reporting framework is often a first priority.

Join the CIO Australia group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.

Join the newsletter!

Or

Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.

Tags risk managementgovernance

More about CIMACreativeEnronNews International

Show Comments
[]