[Begins]
“I would, at the outset, wish to express my appreciation to the President and Council of the Institute for inviting me here to open today’s Forum Ethics Today Hard Calls / Right Decisions. The themes for discussion by you and the distinguished panel are central to re-establishing an effective and functioning ethical framework - for both public and private governance in Ireland. You are to be congratulated for taking this initiative.
The accountancy - and in particular auditing profession – has found itself, on occasion, in the spotlight in analyses of the causes of the international financial crisis. Taking one example close to home, the Nyberg report on the causes of Ireland’s banking crisis describes bank auditors as the “silent observers” of the unfolding disaster.
Recent controversial proposals from the EU Internal Market and Services Commissioner Michel Barnier highlight the prevalence of the view that there have been serious weaknesses in the statutory audit of public-interest entities such as banks, insurance companies and listed companies. Yet alongside this backdrop, what is particularly noteworthy is that the accountancy profession - ahead of most, if not all, others operating in the business environment - has pioneered the development and implementation of strict codes of professional ethics - over an extended period of time.
In current times, a professional code of ethics - firmly in line with international standards for the profession - is a key feature of the regulatory arrangements for Chartered Accountants overseen by the (CARB) Chartered Accountants Regulatory Board.
This contrast is not, of course, in any way unique or exclusive to the accountancy profession. It can be said to traverse the whole spectrum of business, professional and public life in Ireland.
Interestingly the Nyberg Report into the banking crisis does not use either the term “ethics” or “ethical”. Its findings into the causes of the banking crisis, however, discusses at some length the “herding” and “groupthink” which fuelled national speculative mania, - the consequences of which has had such profound and potentially long-lasting adverse implications for our economy and on Irish society more generally. This tendency was symptomatic of what has become a deeper problem in society – and not just here in Ireland - that the benchmark for acceptable behaviour becomes the extent to which it is legal.
Reviewing what has happened in Ireland through the prism of ethical failure, it is clear that while more and stricter rules may be part of the answer, they are certainly not the whole answer. A renewed and intensified focus - on what is can variously be described as professional behaviour, integrity of business conduct or the application of ethics in decision-making - must become the cornerstone of our efforts to re-build credibility, regain lost trust and restore our tarnished international reputation.
A first essential step is an open and honest public conversation on the obstacles and impediments to such a change actually taking place. Clearly, a huge range and breath of issues are potentially relevant. Today’s forum does provide an opportunity to touch on some, of what I consider, as the most significant elements.
For example:-
- the substantial benefits – as measured in financial rewards, professional achievements status and prestige – that can often be sustained over a lengthy period of time from preferring a legal rather than an ethical approach to regulatory compliance;
- the long-standing and evident difficulty we experience in Ireland in accommodating, and engaging constructively and positively, with contrarian perspectives;
- the unease and discomfort often evident in asking people to reflect on ethical decision - making in their own personal business behaviour; and
- the risk that rules-based legal and regulatory frameworks governing ethical conduct create their own “compliance culture” - that does little to enable or engender the broader culture of integrity which the measures were actually designed to achieve.
The final point is particularly noteworthy – the flawed principles-led approach to prudential supervision of the Irish banking system was described by the Financial Regulator in 2004 to be achieved by the boards and top management of financial institutions committing fully to what the regulator termed a “culture of integrity”.
In seeking to orientate ourselves to these difficult issues, I believe there is a real value in examining and evaluating the work that has been carried out internationally in relation to these complex and multifaceted issues. We need to avoid the pitfall of assuming that there is some inherent national characteristic that makes the type of ethical failures we have seen in Ireland more prevalent than elsewhere.
Ethics management, which is also often also described as integrity management has been high on the agenda in many OECD countries over the past decade or so. In that context, a critical finding emerging from the international experience is the risk of an “implementation deficit” in integrity management – succinctly defined by the OECD:-
“’[H]ow to ensure that the lofty ambitions of integrity management are actually implemented and make a difference on the shop floor”
Otherwise, such initiatives are regarded as mere window-dressing; a way for senior managers to give the impression that they consider integrity as important but without being serious about actually acting on it. A key distinction highlighted by the OECD is the “rules” versus “values” based approach to ethics management in the public sector:-
- the former, prioritises formal and detailed rules embodied in codes of conduct – it also provides for systematic monitoring, enforcement procedures and sanctions for those who break the rules; and
- the latter, advocates codes of ethics focusing on a general framework of values which puts more emphasis on the responsibility and capacities of an organisation’s members for independent ethical reasoning.
Clearly, there is an important place for both approaches.
The OECD research highlights that an effective approach in practice does not require a trade- off between rules-based and value-based approaches but a thoughtful, considered and flexible balancing of both.
What also strongly emerges from the international assessments is the role that government can play in putting an effective legal framework in place in the public sector for helping to define, guide, monitoring and enforce ethical conduct.
It is worth noting that main building blocks of this framework recommended internationally are highlighted in the Programme for Government as key political reform priorities. These include whistleblowing legislation and regulation of lobbyists in respect of which work is ongoing by my Department. In addition, the steps proposed by Government for the reform of the legal framework for public service accountability reflected in the Public Service Reform Plan will have a pivotal role to play in reinforcing ethical conduct and public sector integrity management.
In conclusion, I would like to thank Chartered Accountants Ireland for the opportunity to address your forum this morning.”
ENDS
Note to Editors: Photos from this morning’s conference will be circulated to picture desks by Iain White, M: 087 2393563
Reference: Bryan Rankin, Communications & Marketing Manager, Chartered Accountants Ireland T: +353 1 637 7268 M: 087 2047905