CFOs in Asia Pacific region demand strong ethical code
A large majority - 86% - of CFOs in China, Malaysia, Hong Kong and Singapore say that cultivating and maintaining ethical practice in business is much more important than it was five years ago, a new research report reveals today from ACCA (The Association of Chartered Certified Accountants) and CFO Asia Research Services.
Called Corporate Governance, Business Ethics and the CFO, the report explores the influence of the Asia Pacific CFO on building an ethical culture in companies, looking at subjects as diverse as the importance of ethics today to the barriers to their implementation, especially in the light of increased global regulation.
The report suggests the role of the CFO is still evolving, with many CFOs seeking clarity on the role they should be playing with regards to responsibility for ethical behaviour in the workplace. Nearly 70% said that they should set a good ethical example, while more than half feel they should drive the integration of ethical values into board and senior management decision-making. 18% said that ensuring an ethical environment is vital to them personally and a further 52% said this is very important to them.
Allen Blewitt, Chief Executive of ACCA, said: “Good ethics are vital to good corporate governance and many company boards are increasingly aware of the need to have the right ethical culture. These factors are certainly borne out in this research. I am particularly encouraged to see that CFOs in the Asia Pacific region share the belief in the growing importance of ethics in the workplace, and that CFOs in this region are playing an integral role in driving good practice.”
Tom Leander, Editor of CFO Asia magazine, said: “It’s commonly assumed that the Asian growth story has put ethics on the back burner. In fact, the research shows that CFOs in Asia’s companies see building an ethical culture as a fundamental aspect of their job. But the research also suggests that this process is still largely intangible, and that providing systems of accountability for ethical practice should be the next step in an evolutionary journey that has already begun.”
Key findings show:
1. The importance of ethics today
- Some 16% of survey respondents report their company is still without a code of conduct or ethics, although they expect the issue to be addressed in the coming year.
- More than two thirds (68%) of CFOs say that creating a culture of integrity is still among the three most important ethical issues facing their company. The remaining 32% saying this is a top priority.
- Tackling actual or suspected fraud or theft is cited as the top concern by only 5% of respondents, and tackling bribery by only 4%. More CFOs are concerned with preventing fraud in the first place.
- 28% of CFOS say that resolving or removing conflicts of interest in business relationships remains a top-three cause for concern. For 18% of respondents, finding common ground among the different standards and values in different cultures or geographic locations is a challenge.
- CFOs are charged with strategic responsibility in just 19% of companies – ranking them below company secretaries (35%) and chairmen (32%). Barely a third - 30% - say that as CFO they hold overall day-to-day responsibility for ensuring ethical practice.
- However most CFOs believe their role is recognised at a corporate level. Over half (56%) say their company considers their role to be very important, and a further 21% claim that their title is seen as vital. Only a small minority - 3% - feel that the role of the CFO on ethical issues is “fairly unimportant”.
- More than half of CFOs consider they should be the driver of key measures such as helping to establish a code of ethics, the integration of ethical values into board and senior management decision making, and providing protection for staff who raise ethical concerns.
- Three quarters of CFOs say their companies have instituted a written code of ethical policies – meaning one in four lack even a general mantra for ethical behaviour.
- 70% of companies require senior staff members to certify adherence to an ethics policy / code of ethics, and three out of four CFOs demand that ethical matters are routinely taken into account when the board and senior management make decisions.
- 50% of the companies surveyed still do not have proper mechanisms in place to protect whistleblowers, although 65% of respondents said procedures are in place for looking after staff that raise ethical concerns
- Nearly 60% of respondents said that time and effort involved in developing and improving ethical practices inside their company is the biggest hurdle, indicating the intensifying pressure on the CFO role, while only 6% of CFOs blame the concentration of share ownership in family-controlled companies or the transparency of the ownership structure - 14% - as a barrier to ethical practices.
- When asked about the key drivers for change for the development of good ethical practices, 47% of respondents cited government, then corporate governance institutes came a close second at 46%, then professional accounting bodies, peer pressure from the example set by the global 500 multinational companies.
- Investor activism is still on the nascent in Asia, with just 7% of respondents saying they feel pressure from investors above all else, which suggests governance and ethical issues pale in comparison to traditional shareholder concern fro profit and dividends
- CFOs turn to a variety of sources for advice and guidance – 22% say they turn first to their external auditor as a trusted guide. Only 7% of companies turn to a Big Four firm that is not the external auditor.
- Only a fifth of CFOs surveyed work for companies that are based or listed in the USA. Yet almost half (47%) of those surveyed believe that Sarbanes Oxley has had a positive global effect on business ethics.