Ethics and Governance

Ethics and Governance

At a recent event entitled, ‘Navigating a Successful Career as a Non-Executive Director’, an expert panel of experienced NEDs and corporate governance advisors answered questions such as: What role do NEDs play in organisations today? How can Chartered Accountants prepare to become a NED and how do interested Chartered Accountants find non-executive directorships?  Launching the event, David W. Duffy, author of A Practical Guide for Company Directors, warned the 200+ audience that “no board is risk-free”. Emphasising the need to carry out due diligence before accepting a non-executive directorship, he advised the audience to consider what ratio of risk to reward they would be prepared to take. Listing important questions to ask before becoming a NED, David recommended that prospective directors should query the organisation’s structure and budgeting practices in particular.  Sean Casey, NED and Risk Committee Chair at Allianz Ireland, advised attendees on how to find a directorship that best suits them, and recommended that they update their professional profiles with relevant experience, skills and governance qualifications, such as a diploma in corporate governance. Urging the audience to build a strong network of people whom they have assisted and supported in the past, he reminded them that they will “get repaid many times over if you have a good network”. Marie O’Connor, former PwC audit partner and experienced NED, explained that boards are looking for people with genuine interest in their business and who think strategically. NEDs should have good, sound judgement and some previous board expertise. Energy, curiosity and confidence are also important to becoming a NED, Marie said. Finally, Anne McFarland, corporate governance advisor, stressed the need for, and importance of, independent NEDs on boards to improve the accountability of organisations, despite recent negative press. NEDs, Anne advised, should look at the strategy of an organisation, and should make sure that appropriate goals have been set for management and that the board is being properly evaluated. It is imperative for NEDs to understand the financials of the company, to assess all risks, and to consider whether the remuneration of the executive and management is proportionate and appropriate. “I do not believe the time is up for non-executive directors,” Anne added. 

Aug 01, 2018
Ethics and Governance

Would you, as a person in a position of responsibility, know what to do if you received a protected disclosure?   As a senior financial officer, an external auditor, internal auditor, chair of an audit committee or in the myriad of roles that Chartered Accountants fill, it is possible that you will be asked to act as a screener,  investigator or advisor in a case of protected disclosure. Your training and experience are likely to have given you many of the competencies necessary to act in an independent and skilled manner, which should make you a trusted professional in this area. Before you undertake such a task, however, there are several things you should ask yourself. Do I understand the fundamental principles of protected disclosure? The three principles of effective protected disclosure are as follows: Disclosures of wrongdoing in the workplace should be screened and/or investigated; The identity of the person disclosing should be adequately protected; and The discloser, if disclosing based on a reasonable belief, should not be penalised for disclosing. If all these elements were in place, there would not be a need for detailed procedures and policies. Sadly, experience has shown that there have been failings on all three essentials, so you should be familiar with the law, policy and procedures which have proved necessary. Am I familiar with the 2014 Act and the organisation’s policy? Most organisations now have a policy, among its suite of governance policies, dealing with protected disclosures. This policy should derive from the board’s commitment to its culture, which should drive its strategic plan, which in turn gives rise to a business plan that is supported by its policies and procedures. Many organisations have had precursor policies such as, a whistleblowing or speaking-up policy. The 2014 Act refers to “protected disclosures” and so that is now the common nomenclature. The Department of Public Expenditure and Reform and the Workplace Relations Commission have issued guidelines as to what should be included in protected disclosure policies for public and private entities respectively. So, the first thing you need to do is to read the Protected Disclosures Act 2014 and the organisation’s policy. What major provisions do I need to understand? As you read the documentation, it should become clear that the main requirements you need to appreciate are as follows: An entity cannot prohibit or restrict the making of protected disclosures; The 2014 Act applies to all workers – employees, contractors, agency workers and people on work experience schemes. It includes workers in the public and private sectors (including members of An Garda Siochána). Although volunteers are not specifically mentioned, it is recommended that they be included; A worker, having a reasonable belief of wrongdoing in the workplace, can make a protected disclosure to the employer. A designated recipient will normally be mentioned in the policy and there will usually be provision for reporting further up the line if the belief of wrongdoing extends to the designated recipient; Wrongdoing in this context means information that comes to a complainant during his or her employment about a criminal act, failure to comply with a legal obligation, miscarriage of justice, endangerment of any individual’s health and safety, the endangerment of the environment, improper use of public funds, an act of a public body that is oppressive, discriminatory or gross negligence or mismanagement, and destruction of information regarding the above; It is not a protected disclosure if the disclosure concerns personal complaints such as personal employment complaints or allegations of bullying or normal day-to-day operational reporting; The worker must provide information tending to show wrongdoing. The complaint must not be based on a suspicion without tangible foundation. However, the complainant is not expected or entitled to investigate and find proof. The complainant should frame the complaint in terms of information giving rise to reasonable belief of wrongdoing and should not seek to draw conclusions about particular individuals or specific offences; The principles of natural justice and fair procedure must apply to a person against whom a disclosure is made. Any disclosure made in the absence of a reasonable belief will not attract the protection of the 2014 Act and may involve a disciplinary action against the discloser. However, if there is reasonable belief, a discloser cannot normally be sued for defamation; The motivation of the discloser is not relevant. So, even if the discloser will benefit in some way from the disclosure of the information, it does not matter. All that matters is that there is prima facie information about wrongdoing; Anonymous disclosures should be investigated as far as possible, but it can be difficult in the absence of the ability to seek out further details; The wrongdoing does not have to have happened in the State; There is an obligation to protect the complainant’s identity except in circumstances where the recipient shows that all reasonable steps were taken to protect identity, the investigator believes the discloser does not object, disclosure is necessary to effect a complete investigation, or to prevent a serious risk to the State, public health, public safety and so forth; and The complainant must not suffer any penalty for disclosing, such as any suspension, lay-off, demotion, loss of promotion opportunity, transfer of duties, unfair treatment, harassment, etc. What might I be asked to do? You might be asked to do any one of four tasks. First, you might be asked to receive a protected disclosure and conduct an initial screening. This would involve receiving the protected disclosure from the complainant, either in writing or orally. You should take careful notes where the complaint is oral only and ensure that the complainant agrees with your record. You will need to listen carefully and satisfy yourself that the complainant has a reasonable belief of wrongdoing, as defined. You may need to separate out elements of what is being said between personal complaints and protected disclosure. This screening process simply determines whether the matter is a protected disclosure or, in the case of a combination, which issues need to be investigated as a protected disclosure and which issues should be referred back to the complainant to pursue under the dignity at work or other HR policies. You should recommend the form an investigation should take – an informal approach if reasonably straightforward; a detailed and extensive investigation if the wrongdoing is of a serious nature; an external investigation if the matters are so grave; or a report to An Garda Siochána if the matters indicate a contravention of the law. You should set out the terms of reference for the investigation based on your findings of the matters to be investigated. Second, you might be asked to conduct an investigation – for example, as a member of senior management, of the board, chair of the audit committee or an independent external professional. This will necessitate setting up a framework appropriate to the screener’s recommendations and terms of reference. It may involve an informal establishment of facts, or a more formal process to take evidence from the complainant and such other persons as can provide information concerning the matters under investigation. During the course of your investigation, you should give appropriate feedback to the complainant and you should advise him or her when you have completed your consideration, although there is no need to give a complete account or to inform the discloser of any disciplinary action to be taken. Third, you may be asked to undertake a hearing into an allegation of penalisation by the complainant arising from, and attributable to, the protected disclosure. Since such a penalisation is specifically provided for in the 2014 Act, it is possible that the complainant may seek recourse to the courts. And fourth, following the screening and the investigation, the complainant may seek a review of the decision to disclose his or her identity, or of the outcome of the investigation of the complaint, or of the outcome of the investigation into any penalisation complaint. This review must be conducted by a person not involved in the initial screening, investigation or decision and would entail an independent, unbiased review of the policies, procedures followed and outcomes. You may be asked to conduct this review. There is no entitlement to two reviews of the same issues. What skills do I need to deal with a protected disclosure? To handle a case of protected disclosure, the skills and competencies that you should have, in addition to your professional competence, include: Technical skills such as knowledge of procurement policy, payroll legislation, accounting principles, taxation law and so on, depending on the nature of the disclosure; Good emotional intelligence; Listening skills. Often, people who make protected disclosures have been trying for some time to be heard and feel frustrated by the way they perceive they have been treated. They are often very independent and persistent people, but may be disengaged from the organisation and feeling stressed. They need to be heard actively and respectfully; Clear analytical skills. This involves an ability to extract the key details from what can be a lengthy and complex narrative; Good personal ethical values including independence, confidentiality and trustworthiness; An ability to read law and regulation, and apply it to different situations; A deep understanding of the organisation’s essence – its culture and ‘how things are really done around here’; and Patience. Who carries out the work of screening, investigation and review? This work is currently carried out by a range of internal disclosure recipients, supported by legal and accounting professionals. Entities may be nervous of internalising the process and some favour outsourcing it, seeking to protect themselves by putting the investigations into independent, outside hands. For example, the Office of Government Procurement has a list of firms approved for such work. However, although experience is building in the area of protected disclosure professional consultancy, it is still relatively new and many professionals are being very careful and fastidious in their work in this area as they build expertise. It can therefore be expensive, and organisations sometimes find that the amount budgeted and approved for this cost is inadequate to cover the final cost of screening, investigation and possible reviews. Time to review? The 2014 Act made provision for a review of the working of the legislation. The outcome of that review is due in August 2018 and it will prove interesting to see the outcome of the evaluation. In my own humble opinion, I feel that there is a risk that we have taken a very legal and/or compliance-focused approach to protected disclosures, focusing on defined events without really coming to grips with the communication, emotional and nuanced aspects that often underpin protected disclosures. It would probably be better if entities could take as much of this protected disclosure work as possible in-house, building trust in a process that is founded on a clear culture of real openness and respect. This would require shifting the lens from protecting from harm people who speak up to rewarding people who speak up if they unearth toxic behaviour that is contrary to the organisation’s culture. The Financial Reporting Council has urged us to spend time reflecting on our culture and examining how it should be embedded into our organisations. This area of protected disclosure is one festering vesicle that provides evidence of a culture which, while it may look great on paper, is not systemically flushing through the body corporate. An open environment with a strong and deeply embedded culture of doing the right thing should lead to fewer protected disclosures if people are listened to. Where someone spots a need to speak up, the culture should be one of naming and rewarding the early identification of potential wrongdoing. This approach is profoundly to be preferred to one of engaging an overly adversarial, legalistic and compliance-focused approach after the event, hiding the complainant and cushioning him or her from an expected backlash. It would be healthy for us, as a profession that has had some exposure to these protected disclosure cases, to share our experiences (on a no-name basis) with each other and engage with Government in reviewing the whole area. I commend such a debate and a contribution to the statutory review. Prof. Patricia Barker FCA is Adjunct Professor of Accounting at DCU and a former member of Council at Chartered Accountants Ireland.

Aug 01, 2018
Ethics and Governance

There is an oft used, simple, but valid summary that “ethics is about doing the right thing”. However, what action to take in an ethical dilemma is not always so simple. What we consider to be right and wrong is influenced by what we know. What we do is influenced not only by our knowledge, but our instincts and the specific circumstances in which we find ourselves. To help you prepare for the day you encounter a difficult ethical dilemma, Chartered Accountants Ireland has launched an ethics quick reference guide, Five Fundamental Principles, Five Practical Steps. The concept of the guide is simple: it contains a summary of the five fundamental principles contained in the current Chartered Accountants Ireland Code of Ethics and includes a unique five-step ethical thought process to guide you in your decision-making. While the five fundamental principles form only one part of the 182-page Code, they are a core part of the conceptual framework that is embedded throughout the entire Code. Many Chartered Accountants will be familiar with these principles from either their days as a trainee accountant or from their most recent bout of Continuous Professional Development (CPD) referencing ethics in the accounting profession. While many Chartered Accountants will be familiar, we hope the principles summarised in the guide will resonate with all of you. The five practical steps outlined in the guide are designed to get you thinking about how you might behave in response to an ethical dilemma. Well-constructed codes are always useful and should be referenced at some stage in your ethical thought process. However, rather than basing the five steps on any particular code of ethics, they are based upon practical considerations of how one can respond to an ethical dilemma. Dealing with a front-line ethical dilemma is not always simple. The first challenge can often be to recognise that you are experiencing an ethical dilemma. We won’t right all the wrongs with one simple guide but if we succeed in getting professionals and business leaders thinking, we have a chance of righting some wrongs – or at least avoiding others.  The guide can be downloaded from the Ethics Resource Centre on  www.charteredaccountants.ie.

Jun 01, 2018
Ethics and Governance

With the Gender Recognition Act 2015 now in place, boards must ensure that robust, employee-focused policies are developed. Good corporate governance is now widely recognised as being sited in a sound corporate culture which includes, among other things, real respect for all persons. Most companies have a suite of policies on equality and diversity and although the human resources department is normally responsible for managing these policies, boards have an oversight role in ensuring that written policies are genuinely embedded in the practices, behaviours and reward systems of the organisation. This should include policy and procedures to cover situations where employees are gender transitioning. The Gender Recognition Act 2015 A human rights case in 2007, taken by Dr Lydia Foy, found that Ireland had an obligation to adopt a system to recognise the preferred gender of its citizens. It took until 2015 to introduce such legislation and several unfortunate clauses were removed from the Bill in its slow movement towards enactment. It was originally drafted so that gender identity would have to be established following a “medical evaluation” model. Good sense prevailed and the Act allows for a process enabling trans people over 18 years of age to achieve full legal recognition of their preferred gender and allowing them to obtain a new birth certificate reflecting the change. This preference is based on “self-determination” rather than certification by medical practitioners. It was originally proposed that married people could not apply, which would have required a “forced divorce”, but following the same-sex marriage referendum this requirement was removed. There are very restrictive provisions for persons of 16 and 17 years of age to apply for gender recognition, but there are no provisions for anyone younger than 16 to apply. Although there is no specific reference to intersex persons or to non-binary persons, it is widely assumed that the Act covers such persons. In the period between 4 September 2015 and 31 December 2015, 198 people were legally recognised under the Act, of whom eight were 16 or 17 years old.  At the time of writing, the Government had undertaken to commence a review of the workings of the Act in September 2017 and to report before September 2018. Implications for the person The main implications for a person whose preferred gender is recognised include: For all purposes, his/her gender becomes the preferred gender; She/he shall not be required to produce the certificate of gender recognition (unless by his/her own choice); His/her rights and liabilities and consequences of actions taken in the original gender remain unaffected; There will be no change to his/her parenthood status; There can be no effect on a property to be willed where the will was drawn up before the change; If desired, the marriage status can remain unchanged; and The change cannot interfere with any pursuit of an alleged sexual offence or an attempted sexual offence against him/her. Implications for the workplace Organisations need to enhance their suite of equality policies by having a specific policy covering transitioning by anyone in the organisation. While there may not be many such situations each year, it is important that a policy is thought out, discussed and agreed before a live case is presented. This policy should include: a basic statement of support; a statement of the understanding of the definitions of terms used in the policy; and an agreed procedure to support anyone who is transitioning. Statement of policy The policy should fit with the lived culture within the organisation, but might look something like: “As part of our suite of policies on equality and diversity, the board has approved this policy on gender transitioning to amplify our culture of welcoming and respecting diversity. We undertake to provide appropriate support to any person who is transitioning either with or without medical/surgical intervention. We will not tolerate any behaviour which disrespects or damages the dignity of any such person or engages in any form of bullying, sexual harassment or harassment. “We recognise that, while most people’s gender identity matches their sex assignment at birth, there is a small number of people for whom the sex assignment at birth does not match their innate feeling of being male or female. For those people who wish to transition, i.e. to align their life and physical identity with their gender identity, we undertake to be a safe and respectful workplace in accordance with our culture but also in compliance with the requirements and the spirit of the Gender Recognition Act 2015. The most commonly acceptable term used to describe people who wish to transition is “trans” and that term will be used in this policy. “Just as gay, lesbian and bisexual employees are welcome here, so also are employees who are trans. We recognise that a transitioning employee must come out to us, as his/her employer, so that she/he can live consistently with their preferred gender identity and we undertake to become fully involved to support this process. We recognise that each person will have different needs and so, this policy is as flexible as possible to tailor support as appropriate.” Definitions For the purpose of clarity, the policy should state the definitions of terms that should underpin the organisation’s policy. These might include: Gender identity: this means a person’s innate, deeply-felt psychological identification as male or female. This may or may not correspond to the person’s body or designated sex at birth and included on the original birth certificate. This term is not the same as ‘sexual orientation’, which is the preferred term used to refer to an individual’s physical and/or emotional attraction to people of the same or opposite gender. Gender expression: this refers to the observed signs and behaviours that are socially associated with the masculine or the feminine. So this includes dress, manner of speaking, moving, wearing make-up, hairstyles, social interaction and so on. Of course, this can vary from culture to culture. Some trans people feel very strongly that they need to live in their real identity and this can involve a transitioning journey including steps such as changing their names, having hormone therapy or undergoing surgery. Not all trans people want to transition in this way. Some don’t clearly identify as either male or female, but see themselves as being on a gender spectrum between male and female and would consider themselves as being both. Trans: trans people are those whose gender identity does not match the gender assigned. This is an umbrella term that includes people of different gender identities and gender presentations. It includes people who are transsexual, cross-dressers or gender non-conforming in other ways. Non-binary: again, this is an inclusive term that covers all identities that fall outside the clear male/female identity. This includes people who identify as neither completely male nor female; people who identify as both male and female or in any way between or beyond genders. People in this category may describe themselves by a variety of terms such as gender fluid, or bi-gender or gender neutral. Transitioning: this is the journey travelled by those who wish to change from the gender assigned to the gender with which they identify. It might include social, physical or legal changes. It can involve a range of actions including coming out to family, friends and colleagues at work. It can include changing appearance, changing sex designation on legal documents and asking to be referred to a ‘he/him’ instead of ‘she/her’ or vice versa. It may or may not involve medical and/or surgical assistance. Transsexual: this term is limited in its use as it focusses on the polar identities of male and female. It has been confused with sexuality or sexual orientation rather than gender identity. It is a term we will avoid. Cross-dressers and transvestites: a transvestite or cross-dressing person is someone who sometimes wears clothing, make-up and accessories which are not traditionally associated with his/her assigned gender. Usually, this is not associated with any desire to change assigned gender identity and it has nothing to do with sexual orientation. Intersex people: an intersex person was born with one of a range of conditions whereby their reproductive organs do not fit the typical definitions of female or male. They may have surgery to assign gender (i.e. as opposed to trans people who may have surgery to re-assign gender). Sexual orientation: this is the term used to refer to a person’s attraction to the same and/or the opposite gender. Homosexual, heterosexual and bisexual are all descriptions of a person’s sexual orientation. It is not the same as a person’s gender identity. Transphobia: this is the fear, dislike or hatred of a trans person/trans people. People who experience transphobia assume that there is a normal way for men and women to look and behave and diverging from that is ‘abnormal’. Often, derogative and offensive language can be used such as ‘sex change’. ‘she-male’, ‘gender bender’, ‘hermaphrodite’ etc. Policy In writing a policy suitable for your organisation, it will be important to engage in organisation-wide consultation. There is no template for such a policy, but it might be useful to include the following headings and populate each section with procedures: A basic statement of assurance that trans employees and stakeholders will be treated with respect and dignity; A basic statement that all other employees are required to comply with the policy and failure to comply will result in disciplinary action, up to and including termination of employment; An undertaking to take action should customers, suppliers, contractors or other stakeholders discriminate against our employees because of their gender identity; A statement that the policy is dynamic and will be amended as experience is gained in the area. It should include a hope that trans employees and other stakeholders will assist the organisation in reviewing and improving these guidelines; Guidelines for employees should be included, inviting them to make contact in advance of transitioning to discuss intentions, needs and concerns; Provision should be made for a support team and its procedures; Some consideration of how the dress code will operate and assurance that the gender identity preferred will be respected within the provisions of the normal code for employees of that gender; Procedures around the rights to use gender-segregated bathroom facilities. Where necessary, single-occupancy facilities will be provided consistent with the preferred identity; A statement on the eligibility of a trans employee to all welfare rights available to staff; Clarity around the right to confidentiality and the manner in which the change of identity is to be disclosed to colleagues; Guidelines for managers to whom an employee’s intention to transition is disclosed. This should include all the issues referred to above and practical issues such as name change, pronoun change, email nomenclature and the availability of sick pay, if appropriate; and Guidelines for the process of disclosing to colleagues, taking into account the wishes of the person who is changing. This might include a general meeting or may be done on a person-by-person basis. Overriding requirement The most important issue is to ensure that colleagues who have decided to transition, whether surgically, medically or without such intervention, should know that they are valued in the organisation; that their decision is respected and that they will be supported in the manner in which they would like to transition in the workplace. Prof. Patricia Barker FCA is Adjunct Professor of Accounting at Dublin City University.

Oct 02, 2017
Ethics and Governance

The country owes a great debt to whistle-blowers but for a company, a revelation can be a corporate earthquake writes Ita Gibney. Psychologists have a saying that “you are only as sick as your secrets” and psychotherapy has taken off as people deal with their issues through counselling, confessional memoirs, forgiveness and going public. Even the most admired and healthy-looking individuals (Bruce Springsteen, for example) are surprising us by telling us about their vulnerabilities. But that’s therapeutic, inspiring and part of the recovery process. It usually happens when the person is able and ready to face particular issues or problems. But consider this: if someone else – someone within the family, for example – were to ‘out’ your secret or your wrongdoing without warning, how could you then deal with it and the trauma that would inevitably arise? The corporate analogy is whistle-blowing. In any game, it is up to the referee to blow the whistle. Can you imagine if a player on the Mayo team had one of their own team blowing the whistle when he saw a foul by his teammate? It would upend the game. In corporate entities, the act of whistle-blowing runs completely counter to how organisations work – be it a bank, church, police force, or political party. They are all systems where, when something goes wrong, the default dynamic is to close ranks and defend the side. Whistle-blowing turns such systems on their heads. It blows the lid off the game, the organisation, its leader and its entire structure and culture. Exposed and alone Maybe we have reached this stage in corporate Ireland because the various referees have been seen to be silent and blind. The public attitude is therefore akin to “fair dues to the whistle-blower”, recognising the courage it takes to act outside the system but also ignoring the isolation, scapegoating, character assassination, criminal investigation and future unemployability he or she may have to endure. Even the real referee will likely not befriend the guy who blew the whistle. Cheering on the whistle-blower is fine, and the media and politicians do so given the feast of information he or she can provide. Giving legal protection in the form of protected disclosures is progress, but being exposed and alone as the corporate ‘snitch’ when the earthquake happens can be a lonely and dangerous place to be – as history shows. Ireland is too small a country to have a witness protection programme, but maybe we could look at the citizen enforcement action provisions in the US. Whistle-blowers risk retaliation if they challenge abuse of power or any other misconduct that betrays the public trust, and numerous studies have confirmed this. To ensure the effectiveness of a disclosure, the US False Claims Act enfranchises whistle-blowers to file suits in court against illegality exposed by their disclosures. These types of suits are known as “qui tam” actions in a reference to the Latin phrase “he who sues on behalf of himself as well as the king”. These statutes can provide both litigation costs and a portion of money recovered for the government to the citizen whistle-blower. It is the nation’s most effective whistle-blower law in history for the difference it has made, increasing civil fraud recoveries in government contracts from $27 million annually in 1985 to over $1 billion annually since 2000. Cases in point Aside from the WikiLeaks initiatives and alleged hacking that impacted on the most recent US election, consider the most controversial corporate whistle-blower stories. One of the most famous was the Hoffman La Roche case. The company is the world’s largest producer of bulk vitamins for the pharmaceutical, human nutrition and animal nutrition sectors. In 1973, senior executive Stanley Adams discovered documents which suggested that the company was engaging in price-fixing activities to artificially inflate the price of vitamins. He passed the documents to the competition commission of the European Economic Community (EEC) in the knowledge that Switzerland – while not part of the EEC – had a free-trade agreement with it. The EEC failed to keep his name confidential during its investigation, passing documents containing Adams’ name to Hoffman La Roche. Adams was arrested and charged with industrial espionage and theft, and his wife committed suicide when she was told that he faced a 20-year jail term. In the end, Adams served six months in a Swiss prison. Adams later attempted to recover compensation from both the Swiss government and the European Union. In 1985, the European Union agreed to pay Adams £200,000 – about 40% of his total costs. The story of General Motors (GM) in 2003, meanwhile, has echoes of today’s Volkswagen crisis. Courtland Kelley, head of GM’s inspection and quality division, reported faults to management in the Chevrolet Cavalier and Cobalt. The cars had faulty ignition switches, which cut power in moving cars and were eventually linked to a number of fatal crashes. As his reports were ignored, Kelley brought an action against the company. US law allows a private individual or “whistle-blower” with knowledge of past or present fraud committed against the federal government to bring suit on its behalf. This suit was unsuccessful and Kelley was forced out of the company. In May 2014, the company was fined $35 million for failing to recall cars with faulty ignition switches for a decade, despite knowing there was a problem with the switches. Thirteen deaths were attributed to the faulty switches during the time the company failed to recall the cars. A corporate earthquake Undercover news gathering, even by one’s own customers or employees, has become easy with the rise of the smartphone. Of course, most well-run entities with strong corporate governance codes and a culture of doing things right have little to fear. They know and manage the risks to their reputations; they have crisis management plans; their ethos protects them; in their corporate DNA, people know instinctively what will pass and what will not. But if you don’t fall into this category and the whistle is blown, you face a sudden and immediate crisis. It is a corporate earthquake, a test of leadership like no other. It can start with a leak and finish in the High Court or, tragically, with loss of life. All the experts in the world will advise that it is easier to prevent a crisis than to handle one. Do no harm and you won’t have to worry about whistle-blowing. In other words, run a good ship. The corporate governance industry has taken off with this laudable ambition and people are making a good living lecturing on corporate ethics. But as financier Paul Coulson said at a recent Institute of Directors’ event, corporate governance is also good common sense. Whistle-blowing is not the only threat; at least those allegations have to be true. We live in an age of soundbite reporting and blogging, with unverified stories posturing as news on social media. In addition to the normal corporate vulnerabilities for which enterprises have planned responses and action plans (or should have), we now have unprecedented risks from inside information, secrets and wrongdoing – be that through whistle-blowers, data breaches, leaks, hacking or carelessness. Enterprises need to be very assured in their handling of the fallout; their mistakes, thanks to Google, will stay with them forever. In terms of crisis prevention, some wise chief executives now have corporate counsellors, a trusted senior independent person to whom they turn and who acts as their independent conscience before they make a decision to go down a particular path. Their lawyer is not always the one they ask – a decision can be legal but might not be moral or ethical or might not withstand the test of public interest or scrutiny. The road to rehabilitation Some people survived the recent earthquake in Italy by crawling under the bed. That is not a corporate strategic option when a crisis happens. Nor, of course, is recklessly going out in the storm to shout at the gods. Enterprises who deal well with these kinds of issues often come out stronger in the end. Corporate therapy requires honesty and communication as a prelude to full recovery; a lot of work goes into containing the damage, stabilising the situation, restoring normality (maybe even a new normality) as soon as possible and then dealing with the process of repair and rehabilitation which is so often necessary. And in the end, if the enterprise has survived, it can learn the lessons. Sometimes, tragically, the whistle-blower by that stage can often be left alone, whistling in the wind. Ita Gibney is Executive Chairman at Gibney Communications.

Apr 01, 2017