New code will bolster profession, says Tilley

Ethics is ‘at the heart of what we do’. By Tim Cooper, editor, email newsletters, CIMA.

Picture: Charles Tilley

CIMA has reinforced the good reputation of its members and students by introducing a new code of ethics. The code, which will replace the previous ethical guidelines, came into force on 1 January 2006. Insight asked Charles Tilley, chief executive, CIMA, why we need a new ethical code.

Why is CIMA adopting a new code of ethics?

The ethical guidelines were last amended in 1992 with minor changes since, so an update was due. The world has moved on in the areas of governance and ethics, particularly in the last three to four years. After cases such as Enron in America and Shell in the UK, the importance of integrity has never been greater.
 
The definition of ethics has never changed – it is about being honest, open and professional. But there are now a greater number of different situations where members might need assistance.

Because the new code is a framework of principles it covers many more situations than the previous guidelines. It gives members more control because we provide a framework of principles that members can apply. We also help them identify threats and safeguards.
 
The principles-based approach is consistent with standards in the UK and around the world. The one possible exception is the States, which tends to be rules-based.

The code of ethics is fundamental to the role of a professional body – it’s at the heart of what we do. The difference between qualifying for and remaining a member of a professional body, and getting a university degree or MBA, is that you are committed to two things - continuing professional development and a code of ethics.

Companies whose management is open and trusted have a higher stock market value than those with a smell around them. Transparency, honesty and integrity are crucial. Likewise, the better the reputation of a professional body - reflected in a comprehensive, up-to-date code of ethics - the stronger the value of its designation.

What is the advantage of a principles-based approach?

Principles are much harder to get around than rules. They encourage compliance within the spirit of the law rather than the letter. With rules the tendency can be to circumvent them, unfortunately.

For example, when preparing a balance sheet, a rule might say you must be accurate to within one per cent. Some people could get the numbers right to within 99 per cent, but not within the spirit of the rules. What you really want is to reflect the position of the business as accurately as possible.

What other differences are there between the old ethical guidelines and the new code?

There have been so many revisions that it is hard to talk about specifics. The approach is what is really different. There were principles in the previous ethical guidelines. However, the principles in the new code are in a much more comprehensive framework. There is a lot more explanation and examples to show what the principles mean and how to interpret and apply them.

Also there is now specific guidance for accountants in public practice and those in business, although the whole code applies to all members and students, whatever their role. There is an important section on resolving ethical conflicts. It provides advice on who to approach if you are not sure about how to deal with a problem.

Is it harder or easier to comply with and/or enforce the new code?

It is more difficult to enforce because it is principles-based. But that doesn’t matter. What is important is doing the right thing. Many of these instances are far from black and white, there are many shades of grey. That is why the principles-based approach is the right one.

Former CIMA president, Claire Ighodaro, has said that having a code of ethics once helped her out of a tricky ethical situation. Has that ever happened to you?

I can’t think of a specific example. But I can say that a range of things - including the code of ethics, the combined code on corporate governance and the Financial Reporting Council’s review of internal controls - help the finance director drive the business forward, while also providing a balanced view. This fits in with their strong governance role and their role as a member of a team which must drive the business forward.

The role of a finance director is very challenging. I don’t want the finance director to be saying the pot is half empty instead of half full. Nor do I want him to say it is three-quarters full when it is only half full.

Members contact us in difficult situations - particularly those in business, where a senior colleague may be asking them to do something they do not agree with. Sometimes they approach us so that they can go back to their manager and say ‘I can’t do this because it is against my institute’s code of ethics’. The code can support them to maintain their own ethical stance and help them do what they wanted to do anyway.

In my experience, people who take the right decisions and are respected for their professionalism, integrity and honesty are the ones who have successful careers and move to exciting roles.

What else will CIMA be doing to promote ethics and the new code?

While having a comprehensive code of ethics is crucial to ensuring the high ethical standards of our members and students, it is not enough on its own. In order to be effective, the code has to be promoted to members and students in a way that makes it accessible, and they must be supported in complying with it.

CIMA will be promoting the code with a series of road shows in the UK in the middle of 2006, and then internationally. We will also increase the amount of ethics information that is available and set up a range of support services to provide guidance to any CIMA member or student who thinks they may be facing an ethical conflict. Further details about these initiatives will appear on the CIMA website.

Read the CIMA code of ethics.
For more information or if you have a query on ethics contact ethics@cimaglobal.com or call Danielle Cohen on +44 (0)20 8849 2318.

January 2006