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Businesses need ethical decision-makers, says ACCA

Date

07 Jul 2010

 -Financial crisis exacerbated by ethical failings-

“The business world must focus more on its ethical responsibilities and on prioritising the recruitment of senior executives and financial staff with strong ethical compasses”, recent discussions revealed in a roundtable organised by ACCA (the Association of Chartered Certified Accountants).

The financial crisis that began in 2007 has put the spotlight firmly on how corporates, especially those in the financial sector; the crisis has also addressed issues such as risk, reward, governance and ethics. The difficulty lies in the balance to be struck. Now that the global economy appears to be climbing gradually out of downturn, it is timely to examine what needs to be done to try to prevent a recurrence of the problems we have seen in recent years.

This topical issue was the cornerstone of a lively debate - led by Dr Kay Swinburne, MEP, Coordinator of the ECON and CRIS Committees in the European Parliament, Eric Ducoulombier, Deputy Head of the Unit Company Law, Corporate Governance and Financial Crime at DG MARKT, Willem J.L.Calkoen, lawyer at NautahDutilh and Paul Moxey, ACCA head of corporate governance & risk management - during an ACCA breakfast meeting entitled "Corporate Governance: How to Balance Ethics, Risk and Entrepreneurship?” that took place recently.

The basis for discussions originated in the recently published European Commission’s green paper that looks at how corporate governance at financial firms could provide the necessary checks and balances to prevent bankers from taking the kinds of excessive risk that led to the crisis; and also a new ACCA report entitled ‘Risk and reward – tempering the pursuit of profit’, which examines where the financial system went wrong prior to the financial crisis, with a massive failure of ‘people risk’ being identified.

"Governance and remuneration are high on the political agenda", Eric Ducoulombier indicated. "The EU Commission has therefore recently published a Green paper accompanied by working documents that highlight the existing deficiencies of the governance system, such as for example conflicts of interest, principles, codes and recommendations not being sufficiently applied, lack of resources, time and diversity in boardrooms, remuneration structures, lack of shareholders engagement etc.

"The diversity of views expressed around this table, in particular between the proponents of 'principles' and those of 'rules', is very likely to be reflected as well in the answers to the green paper. But this diversity will assist the Commission in striking the right balance and find the right answers to these complex but crucial challenges" Eric Ducoulombier noted

"Albeit no real conclusions can be reached at this stage, there was a clear consensus on the need to change behaviours and culture of the organisation, but not necessarily through binding rules; a majority of participants indeed quite clearly indicated a preference for guidelines over regulation, stated Willem Calkoen.

Paul Moxey, one of the authors of the ACCA report - and head of corporate goverance at the global accountancy body - said: “The financial crisis has highlighted serious ethical failings; businesses of all kinds, including the banks, have been increasingly policed by reams of rules and regulations but we have seen during the crisis that, despite all these regulatory requirements, or perhaps because of them, individuals exploited gaps". "A strong commitment to ethical business conduct on the part of directors and key staff is a strong line of defence against reputational damage and should be an essential part of any risk management strategy”, he added.

"Institutions and companies need to consider not only risk at the individual company/shareholders level, but also their impact upon the wider economy and society at large", Dr Swinburne stressed, observing that "a lot of problems came from that fact that often risk had been taken off balance sheet - often for tax neutrality."

It is very hard at this stage to say precisely how good governance should look, because it also much depends on each case, no universal solution seems to work and we are all still learning. “A certain degree of flexibility is also needed”, Willem Calkoen concluded.

- ends -

For further information, please contact:

Cecile Bonino

tel:+32 (0) 2 286 11 37

mob: +44 (0) 7809595008

cecile.bonino@accaglobal.com

Notes to Editors

         1. The report can be downloaded from ACCA’s website at this link: http://www.accaglobal.com/pubs/general/activities/library/governance/cg_pubs/tech-afb-rar.pdf

         2. ACCA (the Association of Chartered Certified Accountants) is the global body for professional accountants. We aim to offer business-relevant, first-choice qualifications to people of application, ability and ambition around the world who seek a rewarding career in accountancy, finance and management.

         3. We support our 140,000 members and 404,000 students in 170 countries, helping them to develop successful careers in accounting and business, with the skills required by employers. We work through a network of over 80 offices and centres and more than 8,000 Approved Employers worldwide, who provide high standards of employee learning and development. Through our public interest remit, we promote appropriate regulation of accounting and conduct relevant research to ensure accountancy continues to grow in reputation and influence.

         4. Founded in 1904, ACCA has consistently held unique core values: opportunity, diversity, innovation, integrity and accountability. We believe that accountants bring value to economies in all stages of development and seek to develop capacity in the profession and encourage the adoption of global standards. Our values are aligned to the needs of employers in all sectors and we ensure that through our qualifications, we prepare accountants for business. We seek to open up the profession to people of all backgrounds and remove artificial barriers, innovating our qualifications and delivery to meet the diverse needs of trainee professionals and their employers.

Cecile Bonino

Public Affairs and Media Relations Officer-EU ACCA

CBI business house

14 rue de la Science

BE-1040 Brussels

tel:+32 (0) 2 286 11 37

mob: +44 (0) 7809595008

http://www.accaglobal.com

 

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