Think Tank

Ethics and Trust in a Digital Age

Helen Brand,
CEO, ACCA
Vinita Bali,
Independent
Director

Corporate scandals such as those at Enron and WorldCom and the triggers that set off the Global Financial Crisis demonstrate how, in a globalised, highly-connected world, the sustainability and long-term success of any business hinges on trust and integrity. Building a strong ethical foundation, both within and around the organisation, can be a key differentiating factor that attracts customers and talent. In an era where fake-news and the political manipulation of social media are inescapable realities, the most pressing question is, ‘Who and what can we trust?’ At a recent India CEO Forum session in Bangalore with ACCA CEO Helen Brand and Vinita Bali, who serves as an Independent Director on several Boards, shared their perspectives on this vital issue.


Ethical principles and behaviour are fundamental to building trust

Ethics: at the root of governance
Two recent global surveys, by Edelman and ACCA (‘Ethics and Trust in a Digital Age’), highlight the importance of corporate ethics and the key role that Finance and accounts plays here. According to the ACCA study, 95% of C-suite executives believe that the ethical behaviour of their accountants helps the organisation build trust with internal and external stakeholders. Meanwhile, 80% of accountants worldwide believe that strong ethical principles and behaviour is fundamental to trust in the business. As technology permeates every aspect of our lives, it is imperative for professionals to develop a well-rounded skill-set, which includes not just experience and intelligence but creativity, digital skills, emotional intelligence, vision and – most importantly – ethics.


Today’s workers value purpose and meaning in their work, and seek out ethical organisations


The ACCA survey underscores how strongly the current generation of workers and those now entering the workforce, value purpose and meaning in the work they do. This is clear from two key expectations they have of their employers: strong leadership and a strong code of ethics based on the organisation’s values. ‘Generation Z’ wants to be part of the complex web that decides ‘how things work’. They also want to ensure that the companies they work for are ethical in every respect, from sourcing to employee welfare. From their viewpoint, the best way to ensure ethical conduct is to foster a culture that supports and rewards the natural flow of ‘speak up’ behaviours, i.e. the reporting of unethical behaviour.


Three key responsibilities of Boards


The central role of Boards…
Boards have three key responsibilities in terms of building trust and upholding ethical standards. First, they must ensure that their companies have the right CEO and leadership team, who they must recruit for values and ethics, not just competence. Executives today face huge public scrutiny in terms of the top-line and valuations, and some fall into the trap of making decisions that are based on the wrong values. Eventually, this sends the wrong message down through the organisation. It is vital, therefore, to emphasise ‘doing the right thing’ rather than ‘doing the easy thing’.

Second, once the right people are in place, the Board must foster the right growth strategy. With ESG (Environmental, Social and Governance) criteria becoming prime indicators of business value, it is vital to embed such responsibility into core business values, decision-making processes and actions. Finally, the Board must take the lead in building a strong ‘governance cadence’. After all, the oversight of cybersecurity, digital strategy and of the guiding principles by which business is run cannot – and should not – be delegated to anyone.


Boards in India are evolving but perhaps not fast enough


…and ensuring their independence
Unlike many other countries, in India, the control and ownership of companies has tended to rest with promoters, their friends and family. This is changing, with strong external pressure to build more diverse Boards, with greater representation from women and Independent Directors. Increasingly, too, Board members have started to treat their roles as a profession – and not, as in the past, as a token position. However, there is much room for improvement, such as in terms of setting up rigorous selection processes and ensuring that the interests of Board members are aligned with company performance rather than with the personal interests of the Chairman. At the end of the day, only Boards that include truly independent professionals, who believe in and act with transparency, can drive a culture of trust and ethics.


Role models can come from nearly anywhere, and from any level


Building role models…
Globally and in India, there is a prevailing sense that not enough ‘role models’ occupy top-level positions in politics, government or business. However, the impetus for building trust and ensuring ethical behaviour actually lies across all levels of the organisation, and throughout society. When employees demand ‘better’ from their organisations, Boards will demand better from their managers, who in turn will demand more of their governments. Everyone is part of the same ecosystem and companies that prioritise the ‘big picture’ and longer-terms goals will be the driving forces for change. There is also a strong case for reverse mentoring within companies, with the younger generation leading the way in terms of fostering trust and authentic values.


Staying open and true promotes trust in the business


…and communicating openly
Transparency generates trust, both internally and externally, but it is culture that determines how transparently an organisation communicates. What is critical is how top managers share information with their teams and how they guide them. No organisation can or should be providing a set of ‘dos and don’ts’ to cover every scenario. Rather, they should rely on guiding principles – ones that encourage and support employees at every level to make decisions that match the values of the organisation. On a related note, companies will often, in order to avoid scandal, quietly remove a high-performing offender from their ranks. While this might save face, it sends the message that unethical behaviour will be tolerated in degrees, depending on one’s individual performance. Businesses that truly espouse honesty and integrity will deal with such situations openly and transparently, using them as an opportunity to reinforce their core values.


Today’s emerging technologies pose new sorts of risks, and demand new responses


Understanding new technologies…
Ultimately, trust is critical to governance, to management, to the way we live our lives, and to how we shape our society and communities. While ethics and trust must be the bedrock for every business anywhere, the complexities arising from this digital age add an extra layer to the issue. Specifically, with technology evolving at breakneck speed, the risk of ethical compromises has expanded greatly. Many emerging technologies will have unintended consequences but it is the organisation’s responsibility to openly and transparently manage any issues that arise. They must also be prepared to suffer short-term losses to preserve the trust of employees and customers. A key concern is the usage of personal data and whether consumers understand what they are consenting to sharing. The answers are not always clear-cut, but with data becoming so easily accessible, businesses must be guided by firm ethical principles.

Further, it is critical for both the current and the emerging generation of leaders to sufficiently understand technology, its uses and limitations. Embracing an agility mindset and committing oneself to continuous unlearning and relearning is thus critical. Any business that is unwilling to invest in and lend support to such training/re-skilling risks falling behind.


Gen-Z works and thinks differently, and takes a novel approach to careers


…and adapting to a changing workforce
The older ‘command and control’ hierarchies are giving way to dialogue and two-way processes. The profile of what one might call a ‘worker’ is also changing and so must the type of investments that companies make in them. Younger workers have different work-styles and thought-processes from earlier generations and they take a very different approach to their careers. To keep workers committed, engaged and loyal, companies will need to therefore put as much effort to understand the ‘Gen-Zs’ as they do with customers. The rewards from embracing change and learning from both ends of the workforce will be immense.



THINK TANK