Ethics, Governance and Professional Standards
Ethical principles in practice
Professional codes rest on integrity, objectivity, professional competence and due care, confidentiality and professional behaviour. Questions usually present a dilemma and ask what a member should do. Apply a disciplined sequence: identify the facts, the stakeholders and the ethical issue; consider the applicable rule and internal policy; evaluate alternatives; act, and escalate to the compliance function or board where required. Confidentiality is breached only with client consent, a legal duty or a regulatory requirement. Independence must exist in fact and in appearance - the test is whether a reasonable, informed observer would question objectivity.
Governance
Corporate governance allocates rights and responsibilities among shareholders, the board and management. Key features: an effective independent board with separation of chair and CEO, audit and risk committees composed of independent directors, adequate disclosure, internal control and segregation of duties, an internal audit function reporting to the audit committee, and whistleblowing channels. The agency problem arises because managers may pursue personal objectives at shareholders' expense; monitoring, incentive alignment and transparent reporting mitigate it.
Traps
- Accepting a gift that creates a self-interest threat and then claiming it is immaterial because of low value - the test is influence, not amount.
- Disclosing client information to a friend or family member as if that were permitted.
- Assuming a non-executive director is automatically independent.
- Confusing the auditor's duty (shareholders) with management's duty (running the business).
Rule of thumb
If you would be uncomfortable explaining the decision publicly, or if you must hide it, do not do it - and document your reasoning.