By John L. Guerra
Editor, GRC & Fraud Software Journal
In 2016, the United States was viewed as a leader in finding and halting illegal transactions hidden in the world’s financial systems. The world saw America as a dedicated foe of international corruption, bribery and global financial crimes.
Donald Trump’s alleged links to Russian money laundering in New York City and his children’s post-inaugural business agreements and other seemingly unethical behavior has turned America into an ethics “laughingstock,” says Walter M. Shaub Jr., the former head of the Office of Government Ethics in Washington, D.C.
Shaub resigned his office after the Trump White House attacked Shaub each time the OGE chief pointed out the Trumps’ ethical lapses. Shaub didn’t sulk away; he joined the nonprofit Campaign Legal Center, which roots out unethical behavior in politics and government.
Shaub’s move raised a question that management accountants, such as chief auditors and chief financial officers, sometimes face: Should a management accountant resign if the company CEO or other boss repeatedly ignores ethics laws or norms? Or should the management accountant stay and fight to change the culture at the top of an organization?
Verschoor: IMA offers guidance for conflicted accountants
Curt Verschoor, chair emeritus of the Institute of Management Accountants’ Committee on Ethics, spoke with GRC & Fraud Software Journal about the choices accountants face when higher-ups aren’t ethical.
Globalization of the management accounting profession as well as changes in the regulatory environment and emergence of whistleblowing motivated a multi-year effort by the IMA to update its Statement of Ethical Professional Practice to provide additional guidance for accountants who are faced with Shaub’s dilemma.
“Management accountants help create the ethical tone at the top,” said Verschoor, who served as a top financial executive in some of America’s largest corporations. “It has to be the proper tone and permeate the organization. Ethics have to be part of every department’s operation. The first change we made to the IMA ethics code goes even further. It says people should behave ethically in every aspect of their lives, not just the business portion.”
Though the original IMA statement was still valid in many respects, Verschoor and his IMA colleagues “spent quite a bit of time revising the section on Resolving Ethical Issues,” he said.
So what should accountants do when they find themselves in a position similar to Shaub’s?
Here’s what IMA’s Statement of Ethical Professional Practice says:
Resolving Ethical Issues
In applying the Standards of Ethical Professional Practice, the member may encounter unethical issues or behavior. In these situations, the member should not ignore them, but rather should actively seek resolution of the issue. In determining which steps to follow, the member should consider all risks involved and whether protections exist against retaliation.
When faced with unethical issues, the member should follow the established policies of his or her organization, including use of an anonymous reporting system if available.
If the organization does not have established policies, the member should consider the following courses of action:
The resolution process could include a discussion with the member’s immediate supervisor. If the supervisor appears to be involved, the issue could be presented to the next level of management.
The member should consider consulting his or her own attorney to learn of any legal obligations, rights, and risks concerning the issue.
If resolution efforts are not successful, the member may wish to consider disassociating from the organization.
“What the changes say is members should actively work to solve ethical issues and that standing by and saying nothing and being quiet is no longer a position to be in,” Verschoor says. “This is about putting the integrity of the management accounting profession above personal interests, such as one’s job.”
“Where the public interest is involved, management accountants can’t act in terms of personal interests because that is a conflict with IMA’s overarching principles of honesty, objectivity, responsibility, and fairness.”
Long institutional memory
Verschoor says with a laugh that he has lived three different lives: As an accountant with Arthur Andersen, Deloitte and Touche Ross. He then served as chief audit executive with the Singer Co., where he inaugurated that company’s internal auditing function. He also served as corporate controller at Colgate-Palmolive and at Baxter. He then spent 20 years as a business and accounting professor at DePaul University in Chicago.
“I was involved in ethics research in the 1980s, in which we found that companies that put a reference to ethics in annual reports to shareholders were substantially better financial performers than those companies that didn’t include an ethics statement,” he said. “A financially successful business is run ethically.”
Can ethics lead us away from dystopia?
Verschoor, a man with a long institutional memory, is troubled by a seeming lack of ethics in the White House and what he sees as cavalier voting by some members of Congress. He doesn’t like the way cabinet members are undermining the very government agencies they were appointed to lead.
“I would say this is certainly unique and dangerous territory that we are in today,” he said. “This anti-media, anti-government, anti-account management culture at the top can lead to worse things. There is a worry that people are going to be purposefully left behind by society.”
“There has been a significant change in the ability of the general population to trust our institutions, whether government, media, business or non-government organizations,” he said. “This constant drumming of ‘fake news, the media is the enemy of the people’ is dangerous. Such unwillingness on the part of our leaders to act in the best interest of the people – a lack of ethical support for society, in other words – can lead to unrest. When we act unethically, we are taking risks we shouldn’t have to take.”
Financial professionals can call the IMA hotline toll-free at 1-(800) 245-1383, or send their inquiry via e-mail to firstname.lastname@example.org.