Our conference Ethics by Design: Fostering Ethical Culture in Organisations draws on key insights from our evolving Future Firm Framework, which is a multi-dimensional map of key issues we think firms will face in the future, organised by three different perspectives (the firm, employees and society). Based on in-depth research, our evolving map aims to stimulate a debate among accounting professionals about the organisational dimensions (e.g. governance, structures, culture, technology) and respective sub-dimensions that need to change in order to survive and thrive in the future.
Our approach focuses not simply on leadership at the top but the key formal and informal elements that form the ethos and culture of the firm at all levels. Through this conference, we aim is to bring a different perspective through emphasising these interdependencies and complexity of factors that manifest in forming the ‘culture’ of an organisation.
How to Use Nudges, Norms and Laws to Improve Business Ethics
Ethical systems design is based on the principle that behavior in organizations must be understood by examining the interaction of many factors and forces.
Ethical Systems, a US non-profit organization housed in NYU Stern, has a mission to bridge research by leaders in academia and the corporate world and brings in interdisciplinary research to understand how to better design ethical organisations.
Ethical Systems has held its first conference, Ethics By Design, on June 3, trying to answer: How can ethical systems design make companies more profitable, productive and positive?
Ethical Systems have designed a culture measurement tool though Ethical Culture Survey that aims to help executives and managers understand employee perceptions of the firm’s culture with respect to various behaviors that researchers and academics believe constitutes an ethical corporate culture.
Read some of their insights to understand the informal and formal elements that foster Corporate Culture – http://ethicalsystems.org/content/corporate-culture
The importance of investing in character and virtues in business and finance professions
As one of three projects exploring the ethics of professionals, the Jubilee Centre for Character and Virtues is undertaking research into the virtuous character in business and finance. Their project opens up space for renewed debate, discussion and dialogue about the place of character, virtue and practical wisdom in professional practice:
- To clarify and re-a rm the aspiration to ‘professional’ status of a wide range of human occupations (such as medicine, law, nursing, teaching, social work, armed forces, business) in terms of their signi cant potential contribution to public good and service;
- To reinforce the view that such professionalism or professional status should be normatively construed as a matter of moral practice;
- To argue that the normative or moral dimensions of professional practice are not entirely or best captured by formal codes of practice but, rather, call for the cultivation of personal qualities of character or virtue;
- To give some account of such personal qualities and their place in professional conduct, with speci c focus on the professional value of phronesis or practical moral wisdom as a model for sound professional judgement;
- To suggest some ways in which education and training for professional practices might be improved to accommodate the development of phronesis and the cultivation of virtuous character.
Respublica recently launched the report, Virtuous Banking: Placing ethos and purpose at the heart of finance which argues that regulators and the industry must make it a first priority to restore the civic purpose of our banking institutions.
Educating for moral motivation and professional judgment
AuditFutures has piloted a university programme within leading UK business schools to build moral motivation and professional commitment in accountancy & finance students. The action-research has emphasized the need for education and training to impact the development of professional identity in such a way as to bring out capacities of judgment in combination with ethical orientation to practice. By making ‘professionalism’ explicit and unpacking key elements through philosophical inquiry, P4A sessions contextualize technical knowledge and open up a democratic space of reason where students and young professionals are encouraged to consider the purpose and greater public good of their profession.
Promoting the right values and behaviours across organisational culture
A report by the Chartered Institute of Internal Auditors examines cutting-edge developments in the auditing of culture.
Internal audit is one of the assurance providers that boards and senior management have turned to with some success; but there is still a long way to go. The positioning and reach of internal audit and the ability to ‘tell it how it is’ are as important as the ability to audit cultural issues. Its role as the inside-outsider is the key to success when providing culture assurance. But audit committee members and senior executives must be open to the idea that, at present, there may be less hard evidence compared to more traditional audits and accept the likelihood of grey areas with differences of opinion. This may entail a change in culture and behaviour at the audit committee itself.
Individuals, Systems and Cultures
Ethicality is both a systemic and individual phenomenon. A recent report by Richard Moorhead, Centre for Ethics and Law, maps the moral compass of in-house lawyers to understand the relationships between in-house lawyers’ role, professional orientations, team cultures, organisational pressures, ethical infrastructure and ethical inclination.
We think the systemic lesson is important: there is too much emphasis in legal circles on thinking that ethics is about being the right sort of individual. That kind of thinking is complacent and dangerous. As we show here, individuals, systems and cultures mesh together in meaningful and measurable ways to increase or reduce ethical risk. As numerous corporate scandals have shown, such ethical risk puts individual lawyers at risk of professional misconduct but it also encourages poor quality decision-making for the organisations that employ in-house lawyers: short-termism and sharp practice can lead to catastrophic error.
A new report by EY explores The route to risk reduction: better rules or better decisions? – the role of an organisation’s culture in helping to mitigate risk. It explores decision-making influencers, identifying where culture could create risk, new tools and technologies that indicate areas of concern, and implementing these approaches.
Rules aren’t enough to prevent scandals. While they can help guide decision-making, human behaviours are also shaped by individuals’ experiences of an organisation’s environment.
Even the best rules won’t eliminate risk where human behaviour is involved. New tools and techniques that focus on culture can help safeguard and add value to businesses driven by people.
The value of intangibles
Recent studies indicate that intangible assets can represent up to 80% of a company’s value. Culture is a key intangible asset, one that can help organisations reduce risk and deliver long-term, sustainable growth. For business leaders, regulators and investors alike, confidence that organisational culture is fit for purpose is crucial.
To explore this further, FT Remark, on behalf of EY, interviewed 100 FTSE 350 board directors of UK-based companies, drawn from a wide range of sectors, and including chief executive officers, chief financial officers, chairs and non-executive directors.
The EY report “Is your board yet to realise the true value of culture?” presents three clear messages:
1.Culture is vital to overall strategy and performance
2.Boards still need to take more responsibility for defining, shaping and monitoring culture
3.Investors need more information on organisational culture to support long-term performance measurement.
Responding to future trends and global risks
The board’s distinctive role is to decide what risks it is willing to take and properly assess the level of global risks with three most unwelcome scenarios being: ‘a generation lost’ due to social and economic strains on young people; ‘digital disintegration’ as a result of an increasing reliance on the internet; and ‘instability in an increasingly multipolar world’.
PwC publication on “Responding to global risks: a practical guide for business leaders” aims to assist leaders, in both large and small organisations, to understand how interdependencies between risks evolve, offering them fresh thinking and practical advice to supplement traditional risk management tools.