Ethics news & articles

The Organisation for Economic Co-operation and Development (OECD) published policy measures to avoid corruption and bribery in the COVID-19 response and recovery in May 2020. The focus of this brief is to help policy makers, donor agencies, law enforcement officials and the private sector ensure that the global response to the crisis is not undermined by corruption and bribery. The document highlights five important measures including: Respecting the rule of law: For example, Compliance with the OECD Anti-Bribery Convention and the related 2009 Recommendations ( Internal controls, ethics and compliance and foreign public officials), the OECD Recommendation on Public Integrity, and other key instruments such as the 2016 Recommendation of the Council for Development Co-operation Actors on Managing the Risk of Corruption.   Address immediate risks in emergency procurement: Whilst remaining cautious of urgent needs, corruption risks should continue to be identified, assessed, and actively mitigated on an ongoing basis, including by raising awareness of mitigation strategies. Ireland’s Office of Government Procurement is called out as an example of good practice for developing an information note on good practices for contracting authorities during the COVID-19 outbreak.   Accountability and control of the economic recovery measures: Anti-corruption risk assessments should be integrated throughout programme design and delivery phases. Actual instances of corruption and bribery should be addressed comprehensively, using a whole-of-government or organisation approach where possible.   Business ethics, internal controls, and compliance: Ensure a risk-based approach to good governance, business integrity and internal controls. The use of business intermediaries should be carefully considered.   Enforcement of corruption and bribery cases: In particular, whistleblowers are critical and must be protected.The use of existing reporting mechanisms should be encouraged, and reports of misconduct taken seriously and investigated   Further guidance on each measure is available in the brief.

International Ethics Standards Board for Accountants (IESBA) published a list of considerations for ethics and independence arising from Covid-19. In the foreword, IESBA Chairman, Dr. Stavros Thomadakis, highlights “being honest, competent and objective are virtues heavily valued for all professionals, particularly in adversity. Professional accountants are advantaged by having a highly developed, clear and well-structured international Code of Ethics guiding their judgement and behaviour”. The considerations, presented in a Q&A format in the document, include: Considerations for all professional accountants: Threats to the fundamental principles of the Code of Ethics – i.e. Objectivity, integrity, professional behaviour, professional competence and due care, and confidentiality. Safeguards against threats to the fundamental principles. Pressure arising from Covid-19 related issues. Preparing and presenting information. Non-compliance with laws and regulations (NOCLAR)    2.  Considerations for auditors and other professional accountants in public        practice: Fee considerations, including overdue fees, in the Covid-19 environment. Provision of non-assurance services, including providing advice and assistance. Long association, including partner rotation. Communication with those charged with governance.

The new Insolvency Code of Ethics has now been approved by IAASA and will be effective from 8 June 2020. The Insolvency Code of Ethics constitutes Part 5 of the Code of Ethics for members of Chartered Accountants Ireland and replaces Part D of the previous Code of Ethics.  Parts 1 to 4 of the revised Code of Ethics are effective since 1 March 2020.  The full Code of Ethics (Parts 1-5) are available to read in the Ethics Resource Centre. The code has been updated following a consultation on possible revisions and to adopt the drafting format used by the International Ethics Standards Board for Accountants (IESBA). The accountancy Recognised Professional Bodies (RPBs) use the IESBA approach in their main ethical codes. What is different? The new format differentiates between requirements (identified by an R) and application material (identified by an A). There is an entirely new section on the insolvency practitioner as an employee which emphasises that an insolvency practitioner is required to comply with the Insolvency Code of Ethics irrespective of their status within a firm. The sections on obtaining specialist advice and services, agencies and referrals, referral fees and commission and inducements have all been expanded. There is a new section on Responding to non-compliance with laws and regulations based on IESBA material. There are new examples specific to the Republic of Ireland. Although the new Insolvency Code of Ethics does look a little different, the fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behaviour remain as the key concepts in the code.

Karen Flannery and Níall Fitzgerald consider the critical points in the revised Chartered Accountants Ireland Code of Ethics, which came into effect on 1 March 2020. The revised Chartered Accountants Ireland Code of Ethics took effect on 1 March 2020. The revised Code was necessary to increase alignment with the International Ethics Standards Board for Accountants (IESBA) Code of Ethics, which underwent a significant restructure in recent years. While there are no changes to the fundamental principles, Chartered Accountants familiar with the previous Code of Ethics (effective September 2016 to 29 February 2020) will find the look and feel of the revised Code significantly different. While additional sections and emphasis were included, others were removed. This results in greater clarity and ease of navigation. Figure 1 provides an overview of the revised Chartered Accountants Ireland Code of Ethics. Added emphasis on fundamental principles The five fundamental principles of the Code of Ethics remain unchanged. These include integrity; objectivity; professional competence and due care; confidentiality, and; professional behaviour. The conceptual framework that describes the approach used to identify, evaluate and address threats to compliance with the fundamental principles also remains the same. However, there is now a heightened emphasis on the fundamental principles and the use of the overarching conceptual framework underlying each section of the Code. Before, much of the narrative was contained in a single section of the Code. Responding to non-compliance with laws and regulations New sections were added concerning non-compliance with laws and regulations (NOCLAR) for professional accountants in practice (Section 360) and professional accountants in business (Section 260). These bring the NOCLAR provisions of the IESBA Code of Ethics into the Institute’s Code. A vital feature of the NOCLAR provisions is the specific in-Code permission to breach the principle of confidentiality in the public interest. This permission has been explicit in the Institute’s Code for several years and so, the NOCLAR provisions can be seen as a change of detail rather than of substance. The new sections outline the required actions when NOCLAR is discovered and provide additional guidance in this area. Key points to note concerning the NOCLAR provisions are: The first response to identified NOCLAR is to raise the matter, and seek to address it, at the appropriate level within the relevant organisation (internally); Where NOCLAR is not dealt with appropriately internally, the professional accountant considers whether to report to an external authority in the public interest. The decision to report externally is (as it always has been) a complex one; and Where a report is made in the public interest and good faith, there is no breach of the confidentiality requirements of the Code of Ethics. However, there may be legal implications for the professional accountant to consider. Revised layout The most obvious change is the revised layout of the Code of Ethics, which now mirrors the structure of the IESBA Code of Ethics with additional material for members of Chartered Accountants Ireland. A new paragraph numbering format was introduced and as a result, sections were restructured (e.g. what was “Part C” (Professional Accountants in Business) is now “Part 2” in the revised Code).The revised layout facilitates more natural referencing and distinguishes between the Code’s requirements (in bold text and denoted by the letter ‘R’) and application material or guidance (indicated by the letter ‘A’). Complexity has been reduced by simplifying sentences and language in parts. Also a new ‘Guide to the Code’, explaining how it works, has been included. Other content changes Table 1 highlights other notable developments in the revised Code of Ethics and suggests where you might focus your attention depending on whether you are a member in practice or business. Retained Institute ‘add-on’ material Where existing Institute ‘add-on’ content created important additional requirements beyond the IESBA Code, these ‘add-on’ requirements are retained in the revised Code of Ethics. Such requirements include: Specific requirements regarding communicating with the predecessor accountant (Section 320); Particular obligations regarding transparency around the basis for fees and dealing with fee disputes (Section 330); and Agencies and referrals (Section 331). No new ‘add-on’ material was created. Additional support for members The Institute’s online Ethics Resource Centre is updated regularly with a range of supports and guidance for members. Additional information included in the old Code of Ethics, but removed in the revised Code and still considered useful, has been reproduced in a series of new Ethics Releases. The Ethics Releases are not a substitute for the requirements of the Code, but they do provide additional support for members in particular scenarios, including: Code of Ethics and changes in professional appointments; Code of Ethics and confidentiality; Code of Ethics and marketing of professional services; and Code of Ethics and corporate finance advice. Future updates The last substantial change to the Institute’s Code of Ethics was in 2016. While the Code does not change regularly, there is a significant body of work happening behind the scenes to ensure it remains appropriate, precise and effective in the context of the issues affecting the accounting profession. Members can, therefore, expect amendments from IESBA in the coming years; for example, considerations addressing the impact of technology-related ethics issues on the accounting profession. For members who are insolvency practitioners, a new Insolvency Code of Ethics is imminent. The current Code of Ethics for Insolvency Practitioners, appended as Part D of the Institute’s old Code of Ethics for members, remains in effect until then.  Actions speak louder than words It was evident from the Ethics Research Report, published by the Institute in January 2019, that members hold their professional and business ethics in high regard. While the Code of Ethics does not change regularly, it is a hallmark that establishes a minimum standard which is signed up to and shared by all members of the profession. It is useful to be familiar with its requirements and to remember that it is individual member actions that express commitment to the Code of Ethics in addition to a member’s personal ethics. The revised Code is available via the Institute’s Ethics Resource Centre.   Níall Fitzgerald FCA is Head of Ethics and Governance at Chartered Accountants Ireland.  Karen Flannery FCA is Head of Professional Standards Projects at Chartered Accountants Ireland.

The Institute’s Code of Ethics for members has been revised and restructured and this revised Code will take effect from 1 March 2020 replacing the current Code of Ethics (effective September 2016). The revised Code of Ethics is available to read here. The Institute’s Code of Ethics has been closely aligned for many years to the Code of Ethics issued by the International Ethics Standards Board for Accountants (‘IESBA’).  In 2018 IESBA finalised a significant project to clarify and restructure its Code of Ethics.  IESBA’s primary intention behind this restructuring of the Code was not to fundamentally change the substance of the Code, but to improve clarity and navigation.  Some key features of the restructuring include: a more consistent approach to each section, including separating out material into requirement paragraphs and related application material; reordering material, dividing larger sections and including more sub headings; simplifying the more complex sentences; changing numbering to clarify the intent of each paragraph, and to allow for further changes without having to renumber existing material; and Introducing a “Guide to the Code” to explain how it works. The Institute’s Code of Ethics has now been revised to align with the restructured IESBA Code and so the format and layout of the revised Institute Code of Ethics will look completely different to members.  To help members become familiar with the revised Code of Ethics we have made available a table of destinations which shows where each paragraph in the 2016 Code appears in the revised 2020 Code.  This table of destinations can be accessed here. The new structure, compared to the old structure, is as follows: Revised Code of Ethics for members of Chartered Accountants Ireland (effective 1 January 2020) Extant (‘old’) Code of Ethics for members of Chartered Accountants Ireland (effective 30 September 2016) Guide to the Code This is a new section in the revised Code of Ethics Part 1 – Complying with the Code, Fundamental Principles and Conceptual Framework Sections 100–120 Part A – General application of the Code Sections 100-150 Part 2 –Professional Accountants in Business Sections 200-299 Part C – Professional Accountants in Business Sections 300-350 Part 3 –Professional Accountants in Public Practice Sections 300-399 Part B– Professional Accountants in Public Practice Sections 200-280 Part 4A – Independence for Audit and Review Engagements* Sections 400-800 Part B – Professional Accountants in Public Practice Sections 290 Part 4B – Independence for Assurance Engagements other than Audit and Review Engagements Sections 900-990 Part B – Professional Accountants in Public Practice Sections 291 Part 5** - Applicable to Insolvency Practitioners Part D – The Practice of Insolvency Section 400  *        The Institutes’ Code of Ethics does not apply to the performance of statutory audit work.  Independence and other ethical requirements for auditors are contained in the Ethical Standard for Auditors issued by the FRC and IAASA in the UK and Ireland respectively. **     The revision of the part of the Code of Ethics applicable to the practice of insolvency is still ongoing and is expected to be published in the first half of 2020.  Non- IESBA content – ‘add-on’ material The Institute’s Code of Ethics has historically contained ‘add-on’ material (shown in italics in the Institute’s Code) over and above the provisions of the IESBA Code of Ethics.  Where the revised IESBA Code of Ethics now addresses the matters included in Institute ‘add-on’ material or where the add-on material has been assessed to be descriptive in nature rather than core to the Code of Ethics,  such ‘add-on’ material has been removed as part of the revision project.  The revised Institute Code of Ethics is now closer than ever to the IESBA Code of Ethics.   Removed ‘add-on’ material which is considered useful but not core to the Code has been made available for members in a series of Ethics Releases on the following topics: Code of Ethics and changes in professional appointments; Code of Ethics and confidentiality; Code of Ethics and corporate finance advice; Code of Ethics and marketing.  These Ethics Releases are available in the Institute’s online Ethics Resource Centre. Key developments in the revised Code As well as the significant restructure there have been some enhancements of the content in the revised Code of Ethics although there is no fundamental change to ethical requirements.  These include the following: “Guide to the Code” This new introductory section does not form part of the Code but provides some useful information on the purpose of the Code, it’s structure and how it is to be used. Enhanced and overarching conceptual framework There is a clear emphasis on the fundamental ethical principles and the use of the conceptual framework for applying those principles underlying every section of the Code.  In this context there is also new guidance to emphasize the importance of understanding facts and circumstances when exercising professional judgment and new guidance to explain how compliance with the fundamental principles supports the exercise of professional skepticism in an audit or other assurance engagements. Safeguards Revised ‘safeguards’ provisions better align to threats to compliance with the fundamental principles.  A new definition of ‘safeguards’ clarifies that ‘safeguards’ are specific actions (no longer ‘actions or measures’) to be taken to reduce threats.  Additional guidance is provided in the revised Code of Ethics in relation to example ‘safeguards’. Application of relevant Code provisions to all professional accountants Clear guidance that relevant provisions for professional accountants in business are also applicable to professional accountants in practice, in the context of their role other than when providing professional services to clients.  The converse also applies where appropriate.  This is not a change to requirements of the Institute’s 2016 Code of Ethics but rather provides clarification as to how the provisions of the Code apply. Professional accountants in business (‘PAIBs’) New and revised sections dedicated to PAIBs relating to: preparing and presenting information (extended new section 220); and dealing with pressure to breach the fundamental principles (new section 270) These changes add additional explanation to existing requirements in the Institute’s 2016 Code of Ethics and have, for the most part, been regarded as implicit in the 2016 Code.   Non-compliance with laws and regulations (‘NOCLAR’) Dedicated sections on non-compliance with laws and regulations (‘NOCLAR’) (new sections 260 and 360).  The 2016 Code of Ethics includes specific permission to breach confidentiality in the public interest and so the NOCLAR provisions can be seen as a change of detail, rather than of substance.  The new sections provide additional guidance in this area. Inducements Additional guidance is provided in relation to the threats posed by gifts and hospitality and more broadly now referred to as inducements.  The revised Code of Ethics introduces an ‘intent’ test.   The acceptance of any inducement which is offered with an intent to influence inappropriately is prohibited whereas there may be possible safeguarding actions to take in relation to inducements where there is no intent to influence inappropriately.

To create a culture free of groupthink, leaders must first make themselves vulnerable, writes Dr Annette Clancy. Have you ever wanted to speak up in a group, but decided that it was better not to? Or have you ever been sure that your co-workers were making a huge mistake, but felt that you couldn’t intervene to voice a dissenting view? If either scenario sounds familiar, you may have been affected by groupthink. The term was coined in 1971 by the psychologist, Irving Janis, who wanted to understand the systematic errors made by teams involved in collective decision-making. Groupthink occurs when people’s desire for cohesiveness and harmony results in faulty decision-making. Two well-known examples of groupthink are the Bay of Pigs invasion in 1961 and the Challenger Space Shuttle disaster in 1986. In the Bay of Pigs example, Janis describes the men surrounding John F. Kennedy as “one of the greatest arrays of intellectual talent in the history of American government”. There were individual dissenting voices among those men when President Kennedy gave the order for the invasion. Yet, when brought together, the group dynamic prevented them from disagreeing. The formal investigation into the Challenger Space Shuttle identified a technical fault in the o-ring, which led to the disaster. However, it also referenced “a serious flaw in the decision-making process leading up to the launch”. Concerns about the o-ring had been circulating in NASA months before the accident, but nobody took action. So, how can you spot groupthink in organisations? Janis outlined the following symptoms: 1. Invulnerability Members of the decision-making group share the illusion that they are invulnerable. This leads them to become overly optimistic and to make risky decisions. They don’t pay attention to warning signs. In the case of the Bay of Pigs Invasion, Kennedy was under the illusion that he could keep secret the fact that Cuba had been invaded by the United States – even after the news leaked to the media. 2. Rationalisations Victims of groupthink ignore warnings and begin to create a rationale to defend why they ignored the warning in the first place. This entrenched position reinforces the group’s illusion of invulnerability. 3. Morality Victims believe that they are behaving morally and doing the right thing. This allows the group members to ignore the ethical or moral consequences of their decisions. They create, therefore, a new morality out of their groupthink position. 4. Stereotypes The group splinters and the victims of groupthink stereotype those who are not in their group by denigrating them as stupid or not as good as them. In doing so, they reinforce their own identity. 5. Pressure Victims apply direct and indirect pressure to any member who expresses doubt about the group’s illusions. Uncertainty, individuality and questioning are extinguished. 6. Censorship Members censor their views to conform. 7. The illusion of unanimity Because nobody speaks out, everybody believes that there is unanimous agreement. How to avoid groupthink Janis’s optimal solution was that members of senior teams should rotate the role of critical evaluator. He also added that the director should accept the frank exchange of views. The best way to avoid groupthink is to welcome healthy dissent and disagreement. Conflict isn’t always a bad thing. Assigning somebody to be devil’s advocate can often introduce a welcome alternative perspective. Leaders who want to change a groupthink culture must lead from the front. Nobody is going to make themselves vulnerable or step out on a ledge because a leader has decided that “we’re not doing groupthink from now on”. Changing a culture of groupthink requires deft and sophisticated leadership that is tuned into the emotional tone of the organisation. A leader who makes themselves vulnerable first, who is willing to hear criticism and act upon it, and who makes it safe for others to do so without retribution or punishment will go a long way towards making their organisation groupthink-free.   Dr Annette Clancy is Assistant Professor at UCD School of Art, History and Cultural Policy. Annette’s research focuses on emotions in organisations.

A recent ICS survey has identified a serious gap in board members’ oversight of cyber-resilience. Bob Semple analyses the data and explains the practical steps board members can take to better protect their organisations. When it comes to cyber resilience, boards members’ lack of capability and confidence is undermining their ability to do their core job: directing and overseeing. That is the conclusion of a recent Irish Computer Science (ICS) survey of board members of Irish organisations (many of whom are Chartered Accountants). And when cyberattacks today are potentially as destructive as major natural disasters, that’s bad news. The ICS survey was undertaken to determine how well-protected Irish organisations are. What was found makes for sobering reading: one in three board members have received no cyber training in the last year; less than two in five have been properly briefed on cyber developments; an alarming three quarters have never participated in a test of their board’s cyber incident response plan (if it even exists); as many as one in six had no Statement of Risk Appetite at all, let alone one that properly reflected the board’s attitude to cyber-resilience; and one in ten respondents confessed they had never briefed staff on the importance their board attaches to cyber-resilience. 'Noses in, hands-off' (but check!) Good governance requires boards to adopt a 'noses in, hands-off' approach. But, as case law has reminded us, this does not absolve the board of its responsibility to ensure that tasks delegated to management are completed to their satisfaction. For their part, management must be able to identify: the assets they are trying to protect; the key risks affecting them; the controls that appropriately mitigate those risks; and the plans that enable the organisation to bounce back from an attack. The smartest organisations realise that they are past the point of being always able to repel the bad actors. Instead, the goal is to ensure that companies can recover quickly and effectively from a successful breach of defences. The ICS survey revealed serious gaps in each of these links in the chain of defence against cyberattacks. Assurance Increasingly, board members are asking: Where am I getting assurance about risks, controls and resilience? How valuable is that assurance? Is it sufficient for me as a board member? What other assurance should I be seeking? The ICS survey revealed that one in three respondents have never obtained formal assurance from management on these issues. Furthermore, only half of respondents said that they had obtained assurance after independent testing by a third-party. Practical guidance Cyberattacks are increasing in number, sophistication, and impact. Board members need to ask more questions, strengthen their defences, and get more assurance to ensure that their organisations are cyber-resilient. You can find the report – with details of the practical steps board members can take - here: www.ics.ie/cyberresilience. Bob Semple is a Director and Governance Consultant.

Kieran Moynihan explains how boards, and non-executive directors, in particular, can optimise decision-making during times of crisis.A veteran non-executive board director (NED) recently shared valuable insights into the workings of an experienced board dealing with the severe impacts of COVID-19 on the organisation. While this is quite an experienced board with battle-hardened veterans in both the executive and non-executive ranks, he indicated that they collectively struggled with the enormity of the challenge facing the organisation.While the board was quite mature in terms of risk management and business continuity planning, several significant decisions were required in a very short time frame. He was extremely complimentary of the efforts, understanding and commitment of the employees to the organisation as well as the outstanding leadership shown by the CEO and executive team. He also highlighted how much the NEDs “rolled up their sleeves” and provided great support in reviewing, challenging, and providing valuable input to the crisis management plan. He highlighted that the CEO witnessed a “new side” to the board whereby it demonstrated a huge commitment not only to the organisation, but in supporting the CEO and executive team as they implemented an elaborate crisis management plan under severe pressure.Unfortunately, some boards have not performed as well during the crisis. The core problem, I believe, is often the calibre of board members. Some are not strong enough to cope well in an emergency to add any strategic value to the executive team. This scenario continues to play out in boards across the world where, in some cases, board and executive teams have faced existential challenges in terms of their organisation’s survival. Amid the devastating impact on employees, an organisation’s financial health, and its shareholders and stakeholders, boards must stand up and be counted like never before.The following definition of crisis management from Deloitte caught my eye recently: “Crisis management is a special, strategic discipline that enables an organisation to leave ‘business as usual’ behind, and to enter a different mode of governance and operations, designed to get decisions made, implemented and communicated quickly, with clear – but different – designated authorities.” While a board has many broad types of responsibilities, the fundamental duty of a board is to make significant decisions. At a time of extreme crisis management, this acute responsibility comes to the fore. It represents a real test of a board of directors in terms of its calibre, decisiveness, effectiveness, judgement, and performance. The following factors can help a board optimise decision-making in the eye of a storm.Quality informationThe brutal reality of the COVID-19 crisis is that major decisions must be made in compressed time frames of days or, in extreme cases, hours. Many of these decisions have serious consequences for the organisation and its employees, customers, shareholders, and stakeholders. Board chairs have a critical role in enabling the board to overcome these compressed review/decision cycles and drive coherent and decisive decision-making.In normal times, quality information is the lifeblood of a board in terms of significant decision-making. In times of crisis, however, it is challenging for the CEO and executive team to create comprehensive board packs when you may have just 24 hours before the next virtual board meeting. In this context, quality is more important than quantity in terms of helping the board understand the logic behind significant proposals from the CEO and executive team.While not ideal, firefighting CEOs and executive teams rely heavily on gut instinct to choose from what appear to be radically different options. It is essential to provide the NEDs with your gut instincts and blunt assessment of the pros and cons of each option.Challenge, debate, and oversightWhen the stakes are high for significant board decisions, the board must maintain the highest standards of challenge, debate, and oversight. A CEO and executive team under severe pressure could undoubtedly get a big call wrong or struggle to create a coherent proposal for consideration by the board. Despite the challenging time frames for decision-making, NEDs must prepare for board meetings, ask hard questions, and add genuine value (in some cases, by identifying additional options or variations/combinations of options that will help the executive team see the wood from the trees).The board chair has a vital role in balancing the level of challenge, debate, and oversight with supporting the CEO and executive team. Genuine board diversity has been a very positive strength for boards as the broader range of thinking styles has enabled greater left-field thinking and more creative problem-solving, while significantly reducing the potential for group-think. At such a crucial time, shareholders, employees and stakeholders rely heavily on NEDs to provide such critical challenge, debate, and oversight to reach the best decisions.The trust equationThe COVID-19 crisis is testing the bonds in many board teams. In such fraught times, tensions can morph into damaging conflict, which boards can do without. While some high-performing board teams have managed this challenge in their stride, this crisis has also galvanised many board teams around a common purpose.A crisis of this magnitude shines a bright light on the ‘trust equation’ of a board. It can be challenging in such a volatile landscape, with so much uncertainty in each sector, to make concrete decisions. Decisiveness, however, is nevertheless a vital trait for a board in crisis management situations, and it is much more effective when the trust quotient is high. In order to strengthen trust, boards can extend a greater degree of latitude than normal to the CEO and executive team, enabling them to provide timely, insightful updates back to the board on the progress of major decision implementation.Changing courseOne of the most challenging aspects of the crisis for many company boards has been facing up to the requirement in specific sectors to make significant changes to the company’s business model and strategy. For companies that had a dominant market position for many years, it can be challenging to face up to the reality that the market has changed, customer requirements have changed, and in some cases, barriers to entry have been lowered with disruptive new technologies.'Independence of mind' is a critical quality in a NED whereby the board director who is not involved day-to-day is able to step back, take a cold, objective view on the organisation’s position, assess the options and implications of a major proposal being put forward by the CEO and provide a sound independent judgement. In this scenario, where an organisation is facing severe challenges to its existing strategy and business model, independence of mind in the NEDs plays a critical role as it can help the board and executive team face up to and address severe challenges to the existing strategy. Some boards might hope that everything will go back to normal but, for most sectors, things will never be the same. As a result, the organisations that adapt will stand a much higher chance of thriving in the years ahead. Throughout the crisis, I have seen several progressive NEDs utilise this time as an opportunity to evolve the overall mindset and level of ambition in the organisation. NEDs are ideally placed to catalyse this evolving growth mindset as in the majority of cases, the CEO and executive team are in firefighting mode and struggle to have the bandwidth to think strategically and grasp the growth opportunities that the organisation could be presented with.External expertiseWe are in uncharted waters in terms of crisis management. As a board gears up to make big decisions, it is vital that, where appropriate, key shareholders and stakeholders are consulted. They will be forced to live with the consequences of the board’s decisions for years to come.Besides the fact that this is the right thing to do, engagement builds support and is formally required in some instances. It will also provide valuable feedback that, in specific scenarios, may be incorporated into the board’s thought processes.It is also vital that, where needed, external expertise is sought to assist with significant decisions. This might be an existing advisory partner who understands the organisation and sector, or an independent sector expert who could provide an objective assessment of the options.Avoid ‘all-in’ decisionsI play chess at a competitive level, and one of the things you learn as you get more experienced is to avoid, wherever possible, making very committal decisions. This is particularly important when the chessboard is ‘on fire’ with severe complications, and it is simply not possible to calculate the variations. Instead, you seek to stay in the game and get through the next few moves. As the board position becomes clearer, you then make a more committal decision as you execute your plan.The COVID-19 crisis is changing by the hour. As governments struggle to balance the resumption of normal life with the associated public health risks, it is tough for the majority of boards to accurately predict how their sector will look in three months, not to mention one year from now. In some cases, companies are being forced to consider severe changes to their business model. Boards should avoid making premature decisions based on assumptions about how the COVID-19 crisis will influence customer behaviours, business models, and the overall business landscape. Like a game of chess, boards would be wise to develop a range of scenarios linked to the public health and associated economic impacts with appropriate trigger points.Understand the broader impactsAt the start of the year, many boards had made significant progress in increasing their focus on environment, social and governance (ESG) goals, employee engagement, and ‘doing the right thing’ in terms of focusing on the long-term, sustainable wellbeing of the organisation. This has since been severely tested in how boards signed-off on significant decisions impacting their employees, customers, and stakeholders.In some cases, the COVID-19 crisis is undermining much of the significant progress made with decisions favouring short-term shareholder interests at the expense of employees, other stakeholders, and the long-term sustainability of the organisation. Throughout the world, employees have demonstrated incredibly strong commitment and understanding to their organisations and customers. How boards respond to this commitment says a lot about the character, culture, integrity, and values of an organisation. It is encouraging to see a significant number of institutional investors highlight the importance of this for their portfolio of listed companies. In many respects, we saw ESG at its very best in the first few months of the crisis with so many employees and organisations stepping up to help society in its time of need.I strongly believe that the organisations that commit long-term to the core ESG principles of sustainability, partnering with their employees, going the extra mile for their customers and “doing the right thing to ensure the longer-term interests of the organisation” will be the organisations that flourish and thrive going into this uncertain future. The board has a critical leadership role in this. We are moving into an era where progressive boards are evolving into a far more thoughtful balancing of the interests of shareholders, employees and stakeholders. The COVID-19 crisis has crystallised the importance of this multi-stakeholder engagement model and is now firmly in the mindset of customers, prospective employees, partners and investors when they consider engaging with organisations.ConclusionSeven months on, boards continue to grapple with COVID-19 and struggle to make some of the most significant decisions ever made in the history of their organisation. Even the strongest, most high-performing boards struggle to get this right, so for any board members struggling right now, you are not alone.This is a time for board teams to pull together and work closely with the CEO and executive team. Through challenge and debate, you will collectively make the best decisions possible and help your employees, shareholders, and stakeholders envision a path to better days ahead.Key takeaways for boards and non-executive directorsAt a time of such crisis and volatility, it is vital for the board to regularly discuss what is happening with your customers, how the crisis is impacting them, how their requirements are changing both short-,  medium-and longer-term and how the organisation needs to adapt to support your customers.It has never been more vital for the executive reporting to the board to be high-quality, succinct and utilising executive summaries to enable the board members to prepare effectively for the board meeting and assist in the creation of a meeting that can focus on strategic and “move-the-needle” type discussions.Balance cost-cutting, productivity and risk mitigation with supporting innovation-led growth and strategy and business model shifts where needed.Be aware that boards are moving to agile approaches to strategy and budgeting using scenario planning and triggers that work better in situations of high uncertainty such as the ongoing COVID-19 crisis.Organisations, as they facing their greatest crisis, have never had such a strong requirement for board members to demonstrate a great work ethic and commitment to the board and organisation.Kieran Moynihan is Managing Partner at Board Excellence, which supports boards in Ireland, the UK and mainland Europe.

Níall Fitzgerald explains how boards can use the current crisis to take stock and, where appropriate, reflect new priorities.While the COVID-19 crisis continues, organisations are preparing for the uncertainty ahead. This process presents an opportunity for organisations to rethink their priorities, how they deploy resources, and the way they do things.In the months ahead, boards will face new challenges that can give rise to major concerns. This article examines some of those challenges, the responsibility of boards in facing them, and questions board members can ask to help focus on what is important.Going concernIrish and UK company law requires directors to act in the best interests of the company, which includes promoting its success and ensuring that it continues as a going concern. Past corporate collapses have revealed instances where directors failed in this duty. Failures attributed to directors include having unquestioning optimism rather than a challenging mindset and succumbing to groupthink.Given the current uncertainty, threats to going concern are more likely to feature higher on the risk register in many organisations. Oversight is a key role of the board, and this requires directors to have a questioning mindset, apply their skills, experience and knowledge to challenge management appropriately on their judgements, and ensure that they have sufficient evidence to support those judgements. Having a range of skills, experience and knowledge (in addition to diversity in other forms) on a board will help ensure that a range of perspectives and practicalities are considered. Basic good governance practices such as reviewing meeting papers in advance, arriving to meetings prepared, and an effective chair who allows sufficient time for discussion will make a big difference to the quality of the decisions or actions arising.In June 2020, the Financial Reporting Council (FRC) published COVID-19 – Going Concern, Risk and Viability: Reporting in Times of Uncertainty. The paper highlights how challenges that would normally relate to building resilience and flexibility (e.g. sourcing short-term cash resources) have pivoted as a result of the pandemic to threats relating to survival and, therefore, going concern.Other examples of current threats and challenges to going concern include:further restrictions that limit the return to normal operations;restrictions placed on government (or other) capital;timing and continuation of government schemes and support packages;short-term impacts of pricing changes to revenue and expenses; andimpacts on human capital.An Institute article titled Going Concern Considerations for Members Preparing or Auditing Financial Statements in the Context of COVID-19 is available on the COVID-19 Hub on Chartered Accountants Ireland’s website.Social responsibility, and public and employee welfareDirectors have a duty under company law to have regard to the interests of employees and will therefore be involved in making important decisions in relation to workforce policies and practices. In addition, corporate governance codes (e.g. the UK Corporate Governance Code) and sustainability frameworks (e.g. an environmental, social and governance (ESG) framework) highlight how a board’s consideration of all stakeholder interests, including societal impact, is important to ensure the organisation’s long-term success.The COVID-19 crisis forced many organisations to rapidly transform the way they work. In many cases, anticipated obstacles to business continuity either did not arise or were overcome with adjustments to how work and people are managed, as well as investment in ICT infrastructure, connectivity and cybersecurity. In April 2020, The UK’s Office for National Statistics (ONS) released statistics revealing that 49% of adults in employment were working from home. In May 2020, an Irish survey of remote working during the COVID-19 crisis by the Whittaker Institute at National University Ireland Galway and the Western Development Commission revealed that 51% of respondents never worked remotely before the COVID-19 crisis. Of these, 78% would like to continue to work remotely.As public health restrictions are lifted, boards – or board chairs, at least – should engage with CEOs and executive management to support the restoration of operations and plan the safe return to the workplace of employees, suppliers and customers. Executive management and boards should be aware of, and follow, national and local government protocols issued on returning to the workplace.No plan survives the battlefield, so expect adjustments along the way. Updating the board and seeking direction at every turn is not practical, however. It might, therefore, be wise to establish an oversight working party with regular executive engagement and delegated responsibility for overseeing the implementation of plans to restore operations. Decision-making authority should be clearly defined to ensure issues are, where appropriate, referred to the board for a decision. As boards plan for the return to the workplace, directors should consider the following:what work can be done remotely?do certain internal policies need to be rewritten to support new or future ways of working?are there opportunities for automation or digitalisation?what impact could remote working have on organisational culture, and what changes are necessary to align it with the organisation’s mission, vision and values?Boards also have an opportunity to consider how their organisations can have a greater positive social impact. During the crisis, some organisations went further with social responsibility by redirecting their resources to provide support, services and products to the fight against COVID-19. Charities and other not-for-profit organisations excelled in meeting the social needs of many vulnerable people affected by the crisis. Many organisations incentivised staff to get involved in volunteerism to help with, or raise funds for, good causes. In fact, organisations such as Volunteer Ireland and the Royal Voluntary Service reported a surge in registrations, resulting in a surplus of volunteers.Sustainable ‘reset’An important principle set out in the UK Corporate Governance Code is for a board “to promote the long-term sustainable success of the company”. This involves considering how the organisation generates and preserves value, and contributes to wider society over the long-term. It also involves considering the sustainability of the business model – weighing up resilience with efficiency to achieve long-term success. In times of uncertainty, some efficiencies may be sacrificed to achieve resilience. A board’s macro perspective can make a significant contribution in helping the organisation achieve a balance between these two factors.As part of pre-recovery planning, many organisations will engage in horizon scanning to anticipate changes, sources of uncertainty, and future threats and opportunities. While the effect of the COVID-19 crisis on operations may dominate risk perception, organisations also have a unique opportunity to consider how they can rebuild better, greener, and for a more resilient, sustainable world. Boards are well-positioned to lead and encourage innovation on how organisations can adapt to expectations of sustainability from key stakeholders such as investors, customers and regulators. These expectations are apparent in changing social behaviour (e.g. support for global climate protests), investor conditions (e.g. ESG goals or investors’ adoption of Principles for Responsible Investment), and regulator mandates (e.g. the development of standards for ESG disclosures for financial market participants, advisers and products).The 17 UN Sustainable Development Goals (SDGs) provide a blueprint that can be used to define an organisation’s sustainability objectives. The World Economic Forum refer to this opportunity as the ‘great reset’. We all have a vested interest in averting further global crises. When boards are resetting their agenda to focus on new priorities, sustainability must be a key consideration in more ways than one.ConclusionOrganisations can expect further challenges in the months ahead. This is not ‘business as usual’ and boards are adapting as the situation unfolds. Whether an organisation is struggling or thriving in the uncertainty, key priorities for any pre-recovery strategy must include going concern, social responsibility, employee and public welfare, and sustainability.Níall Fitzgerald FCA is Head of Ethics and Governance at Chartered Accountants Ireland.

How can charities, especially smaller ones, deal with the many challenges they are currently facing? Kathya Rouse identifies key areas where accountants may be needed to help charity clients. Like everyone else, charities are struggling to come to terms with their new normal. The unprecedented situation we find ourselves in, and uncertainty around the short-term outlook, makes planning for the future exceptionally difficult. Some charities are continuing to provide ongoing services, while other charities are operating limited or no services due to the current government restrictions. It seems likely that some level of social distancing will be in place for some time and many charities will need to come up with new ways to continue/recommence providing their services while adhering to the relevant government restrictions. Amid all this uncertainty, how can we, as accountants, help? Many smaller charities do not have the expertise among staff or trustees to deal with many of the challenges they are being faced with. We are more than “just” accountants to these clients – we are their trusted business advisors who can be relied on to provide independent advice. I have identified a few areas where you may be needed to help your charity clients: Provide a sounding board and listen to their concerns Despite many similarities between charities, each one will have different requirements right now, so aim to provide a bespoke solution for each charity.   Encourage them to develop a contingency plan to guide them through planning for their organisation during the life cycle of the current pandemic There are various free templates and guidance issued by some of the main charity sector support organisations, such as The Wheel and The Carmichael Centre, which you can direct clients to. The contingency plan should be a live document which remains under regular review. Advise charities around their governance requirements and their AGM There is conflicting advice around whether AGMs can be held entirely virtually under company law except where specifically allowed by the company’s constitution. You can play a key role in helping the charity figure out its position re quorum and use of proxies to overcome this hurdle. Get involved in the budgeting process Budgeting has never been more important, and you can provide your expertise through assisting in, or reviewing, the budgeting process. Like the contingency plan, the budget should also be a live document updated regularly. Empower the trustees Empower the charity trustees to make decisions around whether they can use their current accumulated reserves to make up for a temporary deficiency in resources by assisting them to ascertain their restricted and unrestricted funds. Stay up-to-date Ensure you stay on top of the various funding streams available to charities, such as the Temporary Wage Subsidy Scheme and the new €40 million COVID-19 support fund, and make sure to keep your clients abreast of any available funding. Keep up to date with ongoing regulatory, professional and other guidance which may be of use to your clients. Chartered Accountants Ireland have collated a list of various guidance documents which are available on its website and is open to everyone, not just members. Make use of any reputable free resources available to you and your clients. Kathya Rouse is a Partner at McMoreland Duffy Rouse and a CA Support Board member.

How can charity trustees continue to safeguard charities during this tumultuous period? Michael Wickham Moriarty gives us three top tips on how to safely guide your charity through these uncertain times. The COVID-19 crisis has now been impacting Irish charities for at least two months. What should charity trustees be doing for their charities now and for the future? Keep meeting, but be flexible Board and committee meeting schedules may have been disrupted, or even paused, during the introduction of restrictions in March and April. This is entirely reasonably as management focused on facilitating remote working and core business continuity during the initial stages of the crisis. If meetings have been on hold, look to restart them now. All the governance functions of charity trustees are just as important during this crisis as they are during normal times. Undoubtedly, the agendas and board calendars will need to shift to focus on business continuity, crisis management and other COVID-19 related risks. All meetings should be remote rather than in-person. They may take place at different times to facilitate either board or management. Some meetings for board and committees may be called at short notice as the charity responds to a rapidly changing situation. The papers prepared by management may be less polished and punctual as the executive team focuses on crisis response. Going forward, charity trustees should continue to meet and focus on their core governance roles of strategic direction, oversight and risk management. Think of all stakeholders Given the serious impact of COVID-19, management may focus their energies and attention on specific stakeholders or critical areas. Charity trustees should ensure that all stakeholders are considered during the crisis. For example, the management team may be focused on serving and protecting their vulnerable beneficiaries without giving sufficient attention to staff welfare, including their own. In many charities, the funding and financial crises could take all the attention away from the critical work of the organisation. Institutional donors are a stakeholder that can dominate the attention of charities, but many of these funders are currently being flexible with their grants, allowing charities to focus on other stakeholders. Trustees should ensure due consideration is given to the needs of all stakeholders, as well as organisational sustainability. Be a critical friend to management Most charities are dealing with multiple complex risks with a high-level of uncertainty over the future operating context for funding, staff and beneficiaries. This level of uncertainty is likely to persist for the remainder of this year and beyond. Charity trustees must always balance their relationship with management between challenge and support. As a trustee, you may have access to networks, expertise and experience not available elsewhere within the charity. Use this information to test the assumptions that management use for their COVID-19 response plans. Examine the scenarios and decision points set out. This trustee perspective can really add value as you collaborate with management in agreeing how to chart your charity’s path through these unprecedented times. Good luck! Michael Wickham Moriarty FCA is a Governor and Vice-President of the Rotunda Hospital, and he is the Director of Corporate Services of Trócaire.

Aoife Newton assesses the prospects for gender pay gap reporting legislation as negotiations continue to form a new government. The outgoing Government made limited progress in introducing gender pay gap reporting legislation in the Republic of Ireland, and it remains to be seen whether the next government will echo the same commitment. Two separate Bills were initiated in the Houses of the Oireachtas in the past three years. First, the Labour party initiated a private members bill titled The Human Rights and Equality Commission (Gender Pay Gap) Information Bill 2017, and this was followed by the Gender Pay Gap (Information) Bill 2019. The latter progressed to the third committee stage of the Dáil, but as with the 2017 bill, it lapsed upon the dissolution of the Dáil in January 2020. Although the timing of this legislation is unknown, the next government will be under pressure to advance such legislation. The European Parliament passed a non-binding resolution on 30 January 2020, which called on EU member states to strengthen their efforts to definitively close the gender pay gap by strictly enforcing the equal pay principle and adopting legislation increasing pay transparency. The European Commission reports that the overall gender pay gap in the European Union is 16%. In her political guidelines for 2019-2024, Commission President Ursula von der Leyen committed to addressing the gender pay gap within the framework of the upcoming Gender Equality Strategy. The Commission has previously called on member states to close the gender pay gap and address barriers to the participation of women in the labour market.  As there is an emerging consensus from the European Union to close the gender pay gap, there is, therefore, a strong possibility that the next government will introduce gender pay gap legislation to comply with the proposals outlined at a European level. Against this backdrop, employers should start preparations at an early stage. Those who fail to act will find themselves addressing issues in the public domain under the scrutiny of the media, trade unions, their employees, and their customers. Organisations reporting a high gender pay gap may be viewed as being less than fully committed to pay parity, promotion, and development opportunities for women. Where a gender pay gap exists, this may negatively impact an organisation’s brand, employee relations, public reputation, and its ability to attract and retain talent. Organisations operating within a pyramid workforce structure when it comes to gender creates a pay gap, and if such a difference is greater than that of an organisation’s peer employers, it may have some uncomfortable explaining to do to its stakeholders. The all-important narrative The size of the gender pay gap is important, but the accompanying explanation could distinguish progressive employers from those who are merely observing a compliance obligation. Under the Bill, employers would have been required to publish – concurrently with the percentage results – the reasons for such differences and whether they had taken any measures to eliminate or reduce the disparities. This requirement must be replicated in any new legislation, as the mere reporting of data could lead to a compliance complacency while defeating the spirit of the legislation. In contrast, employers who take the opportunity to analyse and explain their gender pay gap are likely to benefit from such transparency. The narrative for any gap is a particularly important opportunity for employers who have a relatively large gender pay gap. The media and the public often confuse the issues of the ‘gender pay gap’ and ‘equal pay’, even though the two are very different concepts. Employers should use their narrative to minimise the risk of confusion and take the opportunity to explain the nuances or legacy issues in their organisation, which may have led to a gender pay gap. This should encourage a level of transparency that enables employees to question and challenge reward models and packages, and employers to highlight their efforts to achieve gender pay parity.   Aoife Newton is Head of Corporate Immigration and Employment Law at KPMG Ireland.