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Ethics and Governance

Francis McGeough reports on a study of governance practices in fifty of the largest charities in Ireland which reviewed the information contained in their annual reports.   The importance of good governance in charities was highlighted by shortcomings in two well-known charities last year (Rehab and the Central Remedial Clinic). Bad publicity from these events had a serious impact on the fundraising efforts of all charities with many reporting a substantial drop in donations. Donors to charities need to be assured that their funds are being used appropriately and the requirement for increased accountability highlights the importance of governance practices in charities. Charities must not only apply the highest standards but must also be seen to be behaving appropriately.   A key task of the recently established Charities Regulatory Authority (CRA) is to increase public trust in the charitable sector. The legal framework under the Charities Act 2009 gives the CRA legal tools to do this. However, the essence of good governance lies in the culture of an organisation rather than following the letter of the law.  Governance The word governance originates from the Latin word meaning to steer or to give direction. While, there is no all-embracing definition of governance, there is agreement that governance involves taking responsibility for managing the organisation, balancing the needs of stakeholders, ensuring accountability to stakeholders, and ensuring that the organisation achieves its objectives. Therefore, the Board should have a strategic focus; with a focus on organisational performance, and a clear division of responsibilities between the board and managers.   Charities have a valued status in society due to their good deeds. Consequently, charities are likely to be held to a higher set of standards. Thus, when things go wrong, they are particularly susceptible to public disillusionment. Therefore, charitable organisations must ensure that they maintain their reputation. Good governance practices can help in this process by underpinning public confidence in the charity, and reduce the likelihood of scandal.  Complexity of governance in charities  In publicly quoted companies, the Board represents shareholders and they hold the management to account for their performance (measured by profits and share price). However, for charities, there are a number of complications: Firstly, there may be many stakeholders with conflicting views on how the organisation should be run; secondly, there may be no agreed measure of performance and stakeholders may have different views on what is good performance which increases the difficulty for the board in holding the managers to account; thirdly, many charities rely on the goodwill of their volunteers and managers who may become resentful if their actions are constantly questioned by the Board.    Therefore, charities must find the right balance between trust and control. Too much control can lead to distrust and poor relations with the board. On the other hand, too much trust can lead to complacency and potentially bad behaviour. Survey The annual reports of fifty of the largest charities in Ireland were reviewed to determine the level of disclosure of the key elements of governance. The charities were identified from the Boardmatch Ireland listing of the hundred largest charities in Ireland. The annual reports were downloaded from the charities’ websites in October 2014. Therefore, it would be expected that the latest reports would be for 2013; however, 30% of the charities had annual reports relating to 2012 or earlier (Table 1). While there may have been a delay in uploading the accounts onto the websites, it is surprising -- given the importance of the website as a communications tool -- that the websites did not have the latest annual reports.    In relation to the disclosure of the key elements of governance, Table 2 sets out twelve elements of governance are derived from governance codes such as Boardmatch Ireland and the UK’s Charity Commission’s Statement of Recommended Practice (SORP) and shows the number of organisations which reported each element in its annual report.    Most of organisations examined provided the names of the board members in their annual report (forty three organisations representing 86% of the sample).     In relation to the elements that could be used as proxies to determine the effectiveness of the board, the level of reporting by the organisations examined is mixed (the percentage of organisations disclosing these details is outlined in brackets following the element). Board effectiveness can be measured through the recruitment process for board members (26%) biographical details of the board members (6%); length of time on the board (6%); the existence of induction processes (16%); the number of board meetings (24%); and the existence of sub-committees (52%). Therefore, readers of the annual reports would have difficulty in assessing board effectiveness in managing the organisation.    Notwithstanding the recent controversy about pay levels for managers in some charities, only fourteen organisations (28%) disclose the pay levels for their senior managers.    In relation to resource management, the level of disclosure is again quite low, with 44% of organisations identifying their key risks and outlining how they manage these. In addition, only 20% of the organisations outline what their policy in relation to reserves is.   In relation to the disclosure of non-financial information, a majority (58%) disclose some information. The study does not attempt to evaluate the quantity or quality of the non-financial information disclosed but simply examines the existence of non-financial information.    The final element examined is whether a statement of compliance with a governance code is made. The research finds that just 22% of organisations disclose such a statement. This may be due to the relative newness of a governance code and as such, it is expected that this will improve in the future.   Table 2 shows that only three of the twelve elements are disclosed by more than half the organisations. Overall, this suggests that the level of disclosure is limited and this is further emphasised by Table 3 which outlines the range of elements disclosed by the organisations examined. Table 3 shows that thirty of the organisations (60%) disclosed three or less of the twelve elements. While, only four organisations (8%) disclose ten or more elements. Conclusion The research suggests that there is considerable room for improvement. In relation to the dates of the annual reports, it is a matter of concern that fifteen organisations did not have their latest accounts available on their websites. The research suggests that organisations are publishing a very limited amount of information. Thirty organisations (60%) disclose three elements or less, while four organisations (8%) close nine or more elements. Furthermore, only three elements are disclosed by more than half of the organisations.    In overall terms, it would be difficult for the readers of the annual reports to be able to assess the effectiveness of the board. Furthermore, given the recent controversies about remuneration levels in two Irish charities, it is somewhat surprising to see that only 28% of the organisations surveyed disclosed remuneration details of their senior managers.    The annual report provides a window into what is deemed important by the organisation and is also an opportunity for the organisation to account to its stakeholders for its stewardship. If that is the case, the evidence presented here would suggest that Irish charities place limited emphasis on presenting information on governance and performance. In today’s environment, this is a missed opportunity. However, this does not imply that there is a problem with governance standards in Irish charities but it does suggest that charities must review the information provided because they should not only apply the highest standards but must be seen to do so. In this regards, there is much room for improvement.    Francis McGeough PhD lectures in Accounting and Finance at the Institute of Technology, Blanchardstown. This article is a shortened version of a paper to be presented at the British Accounting and Finance Association annual conference in Manchester in March 2015.  

Sep 13, 2019
Ethics and Governance

Justin Moran explains why private sector boards need a sharper focus if they are to perform optimally in the best interest of the company. The benefits of effective governance for private sector companies includes more strategic thinking, improved decision making processes, proactive risk management and, ultimately, leveraging investment and capital at more competitive rates. Yet many private sector companies, which are not subject to regulation, operate outside any mandatory governance codes and are typically reliant upon a smaller governance structure to help direct and control the activities of the company. For small- to medium-sized (SME) and large companies, this places a significant burden on the board of directors. The present business environment also means that the board must: Be more proactive in the establishment and monitoring of strategy, including those objectives which underpin growth; Assess how well the organisation is positioned to attract and retain the skills and resources necessary to deliver the strategy; Remain alert to developments in competition and innovation; Be aware of new and emerging trends in the use of technology and data, digital marketing and social media; and Identify and monitor risks as they develop and emerge, including financial, operational and compliance-based risks. Overall, board effectiveness plays a key role in ensuring that companies are adequately positioned to face these challenges and opportunities. Improving board performance and outcomes To enhance board effectiveness and outcomes, private sector companies should start by considering the following elements of an overall governance framework: Aligning the governance structure with the growth of the company: Identifying where the company is positioned within the corporate life-cycle is key to determining its governance needs. However,it is something that is commonly overlooked. It is imperative that companies strike a balance between what has been effective in achieving their success so far, and what strategies can sustain longer-term success. If the governance approach results in too much bureaucracy, organisations will inadvertently create a potential downside risk. Identifying and promoting the intangible asset of culture: One of the significant challenges facing boards is identifying how to strike the right balance when seeking to understand and develop the intangible asset of culture. It is informed by the levels of support and challenge around a boardroom table. It has also been recognised as serving a key role in determining the effectiveness of the board in leading and directing the business and its ability to achieve its full potential. Boards can start by asking: what are the vision, mission and values of the organisation and how well is this articulated? What behaviours are desired and undesired within the organisation? And how is the ‘tone at the top’ set and is it permeating throughout the organisation? When considering these questions, the board should assess the type of culture that is desired and suited to their implementation of governance measures relative to their position in the corporate life cycle. Board composition and structure It is well recognised that not having the correct people with the necessary skills is a huge impediment to development as a board. While its effect on boardroom behaviour and culture should not be underestimated, any private sector enterprise seeking to grow new markets, build wider networks and harness experience based on a proven track record must carefully evaluate whether the board has the necessary skills in place. To develop and build upon the capabilities of the board, a key step is the decision to invite external directors (non-executive directors) onto the board. A more diverse board composition generates a significant impetus towards better governance and is likely to have a significant impact on the culture of boardroom decision-making. In terms of overall structure, the vital relationships that must function efficiently include the chair and the CEO, and the CFO and the audit committee. The implementation of Companies Act 2014, including the requirement for directors of all large companies to establish an audit committee (or disclose otherwise), will further highlight the importance of developing these structures and relationships. Similarly, board dynamics are complex and ever-changing. Board changes can affect relationships; therefore the need for succession planning remains strong. Maintaining the appropriate balance of formal processes It is important that the board implements a combination of both formal and informal processes, which are reflective of the maturity and culture of the organisation. Examples of key formal processes include setting a board agenda that does not focus purely upon short-term objectives. The agenda should be set by the chair and should also be informed by input from non-executive director(s) where required. Risk and opportunity management (ROM) should be embedded within the board agenda to promote engagement and discussion on scenarios that impact upon organisational strategy and objectives. Attention should be paid to the conduct of board meetings to ensure that meetings are adequately chaired, engaging and ultimately adding value to the organisation. It is hugely counterproductive if meetings evolve into ‘talking shops’ without effective decision-making processes. The distribution of the agenda should also allow adequate time for board members to consider the agenda and review the supporting board pack. Doing so will maximise the effectiveness of the meetings. High-quality and up-to-date management information, which helps the board understand and analyse key performance data and indicators, should be used. The development of board-level management information should be agreed with the CEO and/or senior management so that there is a clear understanding of board needs and what existing information and data can actually be provided. This is an important area that is often overlooked and can cause significant tension between the board and management. Such tension may arise from a perceived view of the board of not receiving the full picture. A clear understanding and focus upon performance data can also underpin the board’s role in setting and monitoring CEO and executive-level performance objectives and the approach to remuneration. The importance of informal processes Many boards often overlook what may be considered ‘informal processes’ when seeking to improve board effectiveness. It should be remembered that board conduct, decision-making and effectiveness are dependent on a combination of factors including relationships, teamwork and communication. In this context, any investment of time and commitment in building strong relationships among board members will normally lead to improved outputs and performance. Examples may include structured away days, planned visits by non-executive board members to different parts of the business, or making use of time away from the formality of board meetings to get to know each other. Private sector governance codes The UK Corporate Governance Code is primarily aimed at listed companies rather than SME or larger unlisted companies. While it is recognised as the leading corporate governance framework, it may not always be suited to organisations that require different considerations to function cohesively. The NSAI Swift 3000 code provides an alternative governance framework and involves rigorous assessment of the board in areas including appointment, composition, competence, independence, remuneration, information, reporting, accountability and audit. In making use of any governance code to facilitate benchmarking or the review of governance processes, the board must avoid a ‘tick-the-box’ approach and should carefully consider what may be described as the softer elements, as outlined above. Conclusion As companies begin to challenge their existing governance processes and systems, the benefits should become evident. If implemented correctly, improved board effectiveness and outcomes will have positive impacts on the long-term sustainability and growth of the company. Justin Moran is Director, Governance, Risk & Internal Controls Division, Mazars.

Sep 13, 2019
Ethics and Governance

Penelope Kenny outlines the ethics and governance issues that will likely be under the spotlight in 2017. As the new year takes off, social media is overflowing with reflections on the past year and learnings for 2017. Thoughts on governance and ethics take the long view and it is so delightfully tempting to make predictions. I propose to look at trends for 2017 based on recent developments, with consideration on where the trends may lead our thinking in 2017. This article addresses corporate governance and the ethics agenda. It attempts to identify trends and issues which professionals are likely to see unfold in 2017. Observations from the business of corporate governance Intense activity from legislators and enforcers continues apace. There have been recent updates to legislation; publications on corporate culture, corporate governance and stewardship; and Government requests for corporate governance reform. Of high impact and concern for individual directors and boards are:   The broadening of directors’ responsibilities; The roles and duties of directors being more thoroughly defined; The inclusion of ethics and culture in more corporate governance conversations; and The conversation between corporation and the State. These observations are based on new Irish legislation codifying directors’ responsibilities and recent reports from the Financial Reporting Council (FRC) in the UK. There is also heightened interest in ethics at the core of corporate governance conversations and this is evidenced in the observations contained in the FRC’s 2016 report entitled Corporate Culture and the Role of Boards, which is discussed further below. Directors are now more specifically accountable than before following the codification of directors’ duties and responsibilities in the Companies Act 2014. The new Code of Practice for the Governance of State Bodies, which was published in August 2016, makes directors specifically responsible for all internal controls: financial, operational, compliance and risk management. Previously, directors specifically reported only on the financial controls and the broader responsibilities were implicit. Corporate culture is also being defined as an area of specific responsibility for directors. Last July, the FRC published Corporate Culture and the Role of Boards and this interesting document comments that strong governance underpins a healthy culture. It also states that boards should demonstrate good practice in the boardroom and promote good governance throughout the business. The report examines some thought-provoking questions: How can the board influence and shape culture? How does the board bring corporate values to life? How can the board build trust with stakeholders? How can boards assess, measure and monitor culture? The report suggests that the tone from the top determines organisational culture and furthermore, boards should assess the culture and determine indicators thereof. The board is therefore responsible for the culture, values and ethical standards in their organisations. This gives directors the very broad responsibility of not only setting the culture and values, but also of measuring and assessing organisational culture. The report requests that investors and other stakeholders engage constructively to build respect and trust, and work with companies to achieve long-term value. Investors therefore need to consider carefully how their behaviour can affect the behaviour of the company and understand how their motivations drive company incentives. As board members, a brighter light is being shone on our broad responsibilities to the organisation and its stakeholders. We are also charged with the ongoing quest for effective measures of corporate culture and the implementation of corporate values throughout the organisation. Corporate and individual ethics In practice, the role of the board in “bringing values to life” is problematic. 61.5% of boards do not regularly make ethics and culture a full board agenda item according to the FRC’s report. Corporate values and ethics have been keywords in lamenting the recent large corporate scandals, which continue unabated at home and abroad. Media reporting focuses not only on corporate governance and the board, but on the ethical standards of the board and the individual directors. In an article published by Reuters last September entitled “Wells Fargo scandal reignites the debate about big bank culture”, it was reported that two former Wells Fargo employees filed a class action in California seeking $2.6 billion or more for workers who tried to meet aggressive sales quotas without engaging in fraud and were later demoted, forced to resign or fired. “Wells Fargo knew that their unreasonable quotas were driving these unethical behaviours that were used to fraudulently increase their stock price and benefit the CEO at the expense of the low level employees,” the lawsuit said. All this was reported in The Guardian in September 2016. Closer to home, Fintan O’Toole expressed his outrage in the Irish Times on 2 January 2017: “The appalling scandal in which the banks deceived at least 15,000 of their customers into moving from tracker mortgages to considerably higher interest rates, often at dreadful personal as well as financial cost. It is clear that this defrauding of customers was systematic and deliberate. It operated in 15 banks – essentially the entire Irish system – and so far as we know there is not one case of a “mistake” favouring the customer. It raises in the starkest way exactly what [Matthew] Elderfield was talking about: individual accountability for misselling and overcharging”. Apart from the human misery which we as a society are accepting, what this means for Ireland is that – despite our high levels of compliance and regulation – we have not created corporate and individual accountability nor a culture of ethical behaviour in our institutions. There is much to be done to align corporate culture and individual ethical standards. In Leading with Integrity: A Practical Guide to Business Ethics, Ros O’Shea firmly positions corporate ethics as the responsibility of the individual directors on the board. She links individual leadership values to the values which filter down through the organisation. This conversation is likely to gain momentum in 2017 with ongoing lawsuits and as we continue to further review, question and discuss our ethical guidelines and our own professional ethics. Corporate governance reform We can expect further corporate governance reform from the UK. Prime Minister Theresa May states that: “for people to retain faith in capitalism and free markets, big business must earn and keep the trust and confidence of their customers, employees and the wider public”. This quote is part of her introduction to Corporate Governance Reform: Green Paper 2016, which sets out a new approach to strengthen big business through better corporate governance. In the foreword, the UK Secretary of State, Greg Clark, summarises that “the green paper seeks views on three areas where we want to consider options for updating our corporate governance framework: first, on shareholder influence on executive pay, which has grown much faster over the last two decades than pay generally and than typical corporate performance; second, on whether there are measures that could increase the connection between boards of directors and other groups with an interest in corporate performance such as employees and small suppliers; and third, whether some of the features of corporate governance that have served us well in our listed companies should be extended to the largest privately-held companies at a time in which different types of ownership are more common”. Certainly the thinking in the UK, surmised from this report, indicates that Adam Smith’s Wealth of Nations is left far behind, and society and democracy are not separate from, but are an integral part of, the values and actions of corporations. The wider societal responsibilities of companies and boards are under scrutiny. There is a recognition, certainly in the UK, of companies’ responsibilities to employees, customers, suppliers and wider society. Diversity Diversity on boards remains an area of huge interest for researchers and policy-makers. We are starting to accept the causal link between board diversity and better profitability. The green paper referred to above suggests that board composition should better reflect the demographics of employees and customers. Implicit in that statement is a board more representative of the community it serves. According to a McKinsey report published in September 2016, workplace diversity would improve gross domestic product (GDP) in the UK: “Bridging the UK gender gap in work has the potential to create an extra £150 billion on top of business-as-usual GDP forecasts in 2025, and could translate into 840,000 additional female employees. In this scenario, every one of the United Kingdom’s 12 regions has the potential to gain 5-8% incremental GDP”. Robert Swannell, Chairman of Marks & Spencer, is quoted in the Hampton-Alexander Review of FTSE Women Leaders as saying: “I certainly believe having more diverse boards and senior teams is right and brings better perspectives, challenge and outcomes. It is right for business to reflect the world in which we operate and so we should just get on and do it”. Adam Smith’s support for maximising profits by harnessing employee expertise is replaced by boards, executives and management addressing and including the concerns of all stakeholders in the corporate world. Stakeholder engagement Considering the FRC statement below, directors are being charged with aligning the interests of business and society as part of their corporate governance responsibility: “We share the objective of wider stakeholder engagement by companies and are considering how corporate governance principles can best meet the demands of all stakeholders or be amended to do so. We look forward to responding to the Government’s consultation later this year and will propose measures to realign the interests of business and society… the FRC supports the need for change in the relationship between business and society. As the guardian of the UK Corporate Governance and Stewardship Codes, the FRC is keen to explore how it can ensure governance and investment are more closely aligned with the broad public interest”. This statement goes way beyond the corporate social responsibility (CSR) programmes which corporations heretofore were content with. Corporations are now charged with holding obligations to all stakeholders and being accountable to society as a whole. Similarly, directors are therefore held to account in relation to their obligations to all stakeholders. The UK Stewardship Code, while not updated since 2012, is under continuous review for its impact and implementation. Directors: some key concerns The broadening and better definition of the role and responsibility of directors is a likely interest area for the future as directors are increasingly responsible for a much wider range of legislation and compliance. Recent surveys show that role clarity, complexity, sustainability, changing business models, corporate culture and business reputation in the community are key concerns. Recent research undertaken by Chartered Accountants Ireland, published in the October 2016 edition of Accountancy Ireland and written by Mary Halton, suggests that role clarity in the boardroom is a driving factor in board effectiveness. It states: “In theory, this should be a relatively straightforward issue, particularly in light of the significant legal, regulatory and good practice guidance available. In practice, however, boards and their members face a number of challenges in delineating roles and ensuring that these are consistently understood by all”. Increasing complexity and the time commitment involved in non-executive directors’ roles is the key finding from a survey by the Institute of Directors in Ireland of 385 of its members in 2016. The Institute of Directors surveyed non-executive directors from private state and public boards. The Australian Institute of Company Directors, meanwhile, surveyed its members in December 2016 on the issues most likely to keep them “awake at night”. The results were identified as follows in order of importance:   Sustainability and long-term growth prospects; Structural change or changing business models; Corporate culture; Business reputation in the community; and Legal and regulatory compliance. Directors are not only showing interest in the business environment which delivers profits, but also showing an increased self-consciousness about themselves as directors and their roles and responsibilities. Formalising this trend, the board self-assessment questionnaires mandated by the Code of Practice for State Bodies 2016 requires boards and the audit and risk committees of state boards to self-assess for effectiveness. Corporation and the state In 2016, we saw the rise of a populist, anti-establishment voter. In Ireland, the water charges were an example. The tussle between states and corporations was exposed with the Apple Inc’s taxes and Deutsche Bank’s fines, both of which resulted in a dialogue between European and American legislative and tax authorities. As our corporations change their goals and purpose and our governments struggle with the corporate environment, this tectonic abrasion between corporations and governments looks set to continue. Conclusion Corporate governance reform is under way in the UK, and indeed in Ireland, against a background of government-led reforms. There is a corporate interest in being more responsible and more state-like. This suggests that the lines between corporation and state may be blurring. Boards are under pressure to represent a more diverse opinion and to mirror the communities which they serve. Meanwhile, these communities are becoming more vocal. Peter Cosgrove of CPL showed the recent Chartered Accountants Tech Forum how employees at Mozilla effectively fired their CEO, Brendan Eich, through social media pressure, which looks remarkably similar to a form of popular voting. (Eich maintained a public stance against gay marriage in 2014, and employees disagreed). Similarly, the US elections were beleaguered with accusations of corporations wielding influence on the outcome via large funding for the candidates. Certainly the future lies in greater regulation of corporations and greater expectations of corporate governance standards. This is occurring at a time when corporations are gathering more power, money and influence than sovereign states and at a time when the workplace is becoming more transparent and more democratised. Chartered Accountants are charged as professionals and often as board members to navigate in this increasingly political space – not just to direct and govern, but also to influence, guide and comment on compliance and regulation. The duties and responsibilities of board directors require more professionalism and more knowledge. We know our responsibilities do not increase or decrease with the size of the organisations we direct and govern, nor with remuneration for these roles, yet those responsibilities are expanding. The boundaries of the study and discipline of corporate governance itself are widening and shifting. We have seen from the UK Prime Minister’s comments on the reform of corporate governance that better corporate governance is seen as a driver for such issues as corporate responsibility, improved profits and more stakeholder engagement to name but a few. Interesting opportunities abound. Penelope Kenny FCA is author of ‘Corporate Governance for the Irish Arts Sector’, published by Chartered Accountants Ireland. 

Sep 13, 2019
Spotlight

While diversity is the buzzword of today, it will soon be replaced by inclusion. Dawn Leane explains how both diversity and inclusion can be integrated in organisations of all sizes. It is virtually impossible to write an article on workplace diversity without referencing equality and inclusion. If diversity is the current hot topic in the workplace, then equality was its predecessor and inclusion will be its successor.   In a workplace context, equality is often associated with compliance. It suggests that as a society, we must legislate for our differences and sanction transgressions. The term “equality” is synonymous with the nine grounds on which discrimination is outlawed.   Diversity is a different concept. It is about valuing our differences, and it has a broader frame of reference than equality, including matters such as personality, cognitive style, education and socio-economic status.   Inclusion, while closely related, is still a different concept. The Society for Human Resources Management defines inclusion as “the achievement of a work environment in which all individuals are treated fairly and respectfully, have equal access to opportunities and resources, and can contribute fully to the organisation’s success”. It is the deliberate act of welcoming diversity and creating an environment where all different kinds of people can thrive and succeed.   But diversity is the buzzword of the moment. Employers have progressed from complying with equality legislation to recognising that a diverse workforce brings many benefits: innovation; balanced decision-making; reduced group-think; retention of key staff; and improved risk management among others.   Perhaps unsurprisingly, the technology sector is leading the way in creating workplaces that are genuinely diverse. While Apple contends that “the most innovative company must also be the most diverse”, Intel declares that “innovation begins with inclusion”. It’s easy to see how the technology sector readily benefits from diversity but other areas, including the professions, are also embracing the fact that diversity is good for business.   Nonetheless success rates for diversity initiatives are still low. A report published in January by the ESRI highlights the fact that the unemployment rate for the Travelling community is 82%. None of the community is employed in a profession and just 3% are employed in managerial or technical roles compared to 28% of the general population.   In March, the Central Bank of Ireland published a report which analysed the gender breakdown of applications for pre-approval as part of the fitness and probity regime. Of the pre-approval applications received by the Central Bank since 2012, over 80% have been from male applicants.   Why is it that so many diversity initiatives fail to deliver the desired outcomes? One reason is that many organisations take a ‘top down’ approach to diversity initiatives. While tone at the top is crucial to ensuring success, the top down approach can often manifest as policies and procedures that attempt to redress balance rather than encouraging a change in attitude.   A recent Harvard Business Review article outlined the negative impact of such policies, claiming that they are often counter-productive. The article suggests that the reason most diversity programs aren’t increasing diversity is because organisations are still utilising the same approaches that they have always used and relying on diversity training, hiring tests, performance ratings and grievance systems to support the diversity agenda.   Creating a diverse and inclusive workplace can mean changing the culture of an organisation. The best results are achieved when the focus is less on control and more on challenging existing attitudes, providing supports and encouraging accountability to ensure that good practice becomes embedded in the organisation. The following outlines specific initiatives that are delivering results. Accountability This is the most fundamental change an organisation can make. Without it, the other initiatives can fail to have any impact. It’s the old maxim – what gets measured gets done. For many organisations, publicly committing to diversity and publishing results – whether positive or negative – is driving change. Apple is among a number of organisations that publishes its hiring trends, highlighting areas such as representation among ethnicities and pay equity. While Intel also publishes its hiring rates, exit rates, promotion rates and pay equity, it goes a step further and ties a portion of its executives’ pay to achieving the organisation’s diversity goals. Education versus diversity training Organisations continue to provide diversity training, although it has been proved that such training doesn’t make people discard their biases – at best, it ensures that they are compliant. No-one is immune to unconscious bias; it is a manifestation of our life experiences. However, it often leads the best and brightest to feel unwelcome and not part of the success of the organisation. Rather than diversity training, progressive organisations such as Adobe are delivering enhanced awareness programmes to help eliminate hidden biases. These programmes cover topics such as how to identify bias, strategies and tactics for better decision-making, and how to speak up. Individualised development Most women say a clear path to career progression is important at work and, in response, organisations are now developing personalised, modular development plans to foster future leaders and improve gender diversity in leadership roles. Sponsorships Organisations are evolving beyond mentoring programmes towards sponsorship as a means to help level the playing field for under-represented groups. Sponsors serve a different purpose to mentors or coaching – they advocate for the advancement of people in the workplace, championing their work and potential with other senior leaders, helping them to secure optimal work allocation and opportunities to be more visible. Sponsorship is of particular help to women in the workplace and many relationships focus on women helping other women to gain profile at work. Returnships Returnships are a relatively recent development. Essentially, it is a professional internship designed specifically for people, most often women, returning after an extended career break. The position is relatively short-term, usually six months or so, and it allows the returner to refresh their existing skills and experience while deciding whether they want to return permanently to such a role. Returnships provide the returner with an opportunity to build their confidence and gain recent experience for their CV, while employers benefit from gaining access to the skills of experienced professionals. Inter-generational networks While many organisations were fearful of the impact millennials would have in the workplace, the more forward-thinking embraced the change and developed programmes to integrate existing and new generations. Such programmes include reciprocal mentoring, where younger people partner with longer serving ones to achieve specific business objectives. Generally, the younger person teaches the older person about the power of technology to drive business results while the longer serving person shares their experience and organisational capital. Over time, millennials will become a demographic bridge between Generation X and subsequent, more diverse generations at work. The ability of millennials to advocate and become accepted will be key to the successful transition from diversity to inclusiveness. Accessibility Trinity College Dublin established the first third-level programme for people with an intellectual disability in Ireland. The Trinity Centre for People with Intellectual Disabilities provides access to education and ultimately to the workplace to people who previously would have been excluded from both. Employers such as Bank of Ireland have recognised the contribution that can be made by those from such marginalised groups. Promoting family-friendly policies Most fathers in the workplace belong to a generation of men who place more value on work-life balance and taking time off with their children. Yet most family-friendly policies tend to be aimed at women and it is usually women who end up leaving the workforce to care for children or ageing parents. President and CEO of New America, Anne-Marie Slaughter, and Facebook COO, Sheryl Sandberg, agree that, in order to support women’s progression in the workplace, men must be allowed to take more responsibility at home. Organisations are beginning to encourage male employees to avail of family-friendly practices by “normalising” such practice. In the US, Facebook offers four months of paid leave to both male and female employees. Its CEO, Mark Zuckerberg, made a very public statement by taking two months’ paternity leave when his daughter was born. Conclusion The key to creating a diverse workplace is really quite simple. The starting point is to look beyond compliance and do what is right, rather than what is required. The role of senior management is to set the tone, to educate people and empower them to act; to make them accountable and trust them to do the right thing. Then, pay real attention to the results.   Intel’s Chief Diversity Officer, Danielle Brown, suggests that, “For diversity and inclusion work to really be successful and really break through, it absolutely can’t be an initiative that is buried in HR. Diversity and inclusion absolutely has to be an integral part of culture and part of everything that we do.”   With the implementation of such positive initiatives and future generations shifting attitudes and expectations, workplaces are being reshaped to become not just diverse but inclusive, closing the circle so that the term ‘equality’ reclaims its real meaning – the state of being equal, especially in status, rights or opportunities.ty and inclusion can be integrated in organisations of all sizes.  Dawn Leane is Director of People and Resources at Chartered Accountants Ireland.

Sep 12, 2019
News

The inversion of the US Treasury yield curve made headlines last month. In Sonal Desai's opinion, the yield curve means nothing about the future of the world's economies. There is a glaring contradiction in the fact that so many market participants and commentators emphasise the heightened level of economic uncertainty and, at the same time, seem to consider flat or inverted yield curves as fool-proof predictors of a recession. This is misguided – I don't think the yield curve tells anything about what lies ahead for the real economy. A look at the evidence Yes, protracted uncertainty on trade is having some impact on business sentiment. However, we have lived with trade uncertainty for almost three years now, with very little economic impact. The US economy is holding up well, and now it benefits from a more dovish US Federal Reserve (Fed). China has shown a bit of weakness, but not a sharp slowdown, and the latest data shows that China’s lower exports to the US have been offset by stronger exports to the rest of the world. The weakness in Europe is more pronounced, notably in Germany as we’ve seen with recent gross domestic product data, but by no means a collapse. The US economy continues to create jobs at a robust clip, even with the unemployment rate already at a 50-year low. According to the US Bureau of Economic Analysis, employee wages and salaries grew at 4.7% in 2017, 5% in 2018 and 5.1% in the first half of this year. Household consumption powers the economy, and the household saving rate as of June this year is at a very healthy 8.1%. In short: the economic data shows no evidence that either the US nor the global economy is approaching a recession. Feeding the fear Government bond markets are still distorted by the major role that central banks continue to play. The Fed has cut interest rates and signalled the possibility of further reductions; the European Central Bank has opened the door to a resumption of quantitative easing. Major central banks are essentially inviting investors to ignore the economic data and bet on lower yields. So, I think fixed income markets are betting on the Fed, and the Fed has just taken a dovish turn – ignoring the economic data. However, this betting on the Fed gives no indication whatsoever on where the economy is going. In other words, I think the Treasury yield curve has no value whatsoever as a predictor of recession. It’s just a good predictor of Fed dovishness, for now, and a sign of some panic in the markets. The markets and the Fed seem to be looking at each other, feeding each other’s fears, and completely ignoring what’s actually going on in the real economy. Sonal Desai, Ph.D. is the Chief Investment Officer at Franklin Templeton Fixed Income. This article is sole opinion of the author. This article was originally published in The FM Report.

Sep 08, 2019
News

Gender pay gap reporting is coming to Ireland. Sonya Boyce explains how you can prepare for this essential step towards gender pay parity. The gender pay gap is the difference between what is earned on average by women and men based on average gross hourly earnings of all paid employees – not just men and women doing the same job or with the same experience of working patterns. The Gender Pay Information Bill 2018 will be enacted in Ireland imminently. It will require mandatory gender pay gap reporting for public and private sector companies. This Bill follows a European trend where other countries, including Germany, France and Spain, have introduced similar legislation requiring organisations to publish information about the pay awarded to colleagues based on their gender. Such legislative developments have arisen in response to the fact that women in the EU are paid, on average, over 16% less per hour than men. In Ireland, the average gender pay gap is 13.9%. The World Economic Forum’s Global Gender Gap Report 2017 states that, if enough measures are not taken to address the gender pay gap, it will take 100 years to close the gap in the 106 countries included in the study. The big picture Gender pay gap (GPG) reporting is not just about equal pay; it is an initiative to introduce gender pay gap reporting as part of a wider initiative to address female participation and employment gaps between genders. GPG reporting is seen as the first step in addressing parity in the employment market in terms of gender, particularly at the management level. It is hoped that the introduction of GPG reporting will provide organisations with an incentive to develop female-focused strategies and initiatives to build greater representation in their workforce, not only from a gender perspective but across the broader spectrum of diversity and inclusion. Encouraging a diverse and inclusive workplace is proven to strengthen the culture internally and develops an employer brand of choice to retain and attract the talent needed. It also enables organisations to deal with any inequities they have and show stakeholders a demonstrated commitment to diversity and inclusion. As Tim Cook, CEO of Apple, says, “Inclusion inspires innovation”. Diverse teams are smarter, more likely to generate new product ideas and enter new markets. Preparation In advance of the upcoming legislation, I advise all organisations to undertake a few key steps. First, you should review the employee data you hold about your workplace population. This data will include payroll and human resource information. Once data has been compiled, organisations can calculate your gender pay gap. After that, it is essential to building a narrative to explain and provide background information on the gender pay gap figure within your organisation. This narrative also serves to reassure employees, potential employees and other stakeholders as to why a gender pay gap figure exists. Lastly, organisations should develop and communicate an action plan on how it will work to reduce the gender pay gap figure. By outlining and delivering an effective action plan, it will ensure all stakeholders remain motivated and there is no reputational damage to an organisation. The bottom line McKinsey 2018 research suggests that companies in the top quartile for gender diversity on their executive teams were 21% more likely to experience above-average profitability than companies in the fourth quartile. Diversity and inclusion have a positive impact on the bottom line and profits, and GPG reporting is a critical and tangible metric that management can rely on to ensure that women are paid fairly, being considered for promotion and being promoted and attaining senior-level management positions. The introduction of mandatory gender pay gap reporting is an essential step towards ensuring gender parity and fairness about pay and progression. Sonya Boyce is a Senior Manager in HR Consulting in Mazars.

Sep 08, 2019