The power of ethics: Leadership lessons for professionals

The first lesson is the importance of “tone at the top”, says O’Connell in a recent episode of CPA Australia’s INTHEBLACK podcast.

At Wells Fargo bank in the US, for example, between 2011 and 2016, senior leadership create a high-pressure sales environment that “pushed employees to meet quite unrealistic cross-selling targets”. As a result, employees resorted to unethical conduct to meet these goals.

“The tone at the top was at fault because leadership created an environment where achieving targets was the key focus.” 

Financial reporting is another pressure point. O’Connell points to aggressive earnings management — or “cooking the books” — as a serious ethical concern. “It’s often driven by senior executives,” he says, “but unfortunately, accountants often get blamed.”

Not all questionable behaviour is against the law. For example, overly optimistic revenue recognition might comply with accounting rules, but can still be misleading. “It’s important to recognise that because something is legal, doesn’t mean that it is actually ethical,” says O’Connell.

Ethical decision-making in practice

Accountants are “expected to uphold the key ingredients of the code of our ethical conduct, which of course is APES 110 in Australia”. O’Connell says the five fundamental principles within the code form a “decision-making framework” that helps identify the particular ethical issue.

Next, assess any threats, such as self-interest, that could compromise judgement, and apply safeguards to reduce or eliminate those threats.

 

"It’s important to recognise that because something is legal, doesn’t mean that it is actually ethical."

 

The final step is to use professional judgement, consult when needed and document the process. In serious cases, the Non-Compliance with Laws and Regulations (NOCLAR) provisions may apply — these are guidelines for reporting suspected breaches of the law, he notes.

Quiet wins

While ethical failures grab headlines, O’Connell highlights the successes that often go unnoticed. “Some businesses have chosen to act ethically even when they weren’t actually legally or professionally required to do so,” he says.

O’Connell points to Patagonia, whose founder transferred ownership to a trust to fund climate action, and BHP, who voluntarily disclosed climate risks long before it was mandated. “They actually front-footed climate risk as a governance and investment issue within their organisation — and that influenced others.”