Helen Brand, CEO, ACCA, discusses the role of ethics, corporate governance and the global issue of skills gap.
Question: Aren’t corporate governance and business ethics two distinct parts of what makes corporate culture?
Helen Brand: Well, I think they are two distinct parts though not the only parts of what makes corporate culture. There are many different aspects but these are the two absolutely critical ones.
Corporate governance is more about the system and how you govern a business. Business ethics is how you execute on that corporate governance and the behaviour that is exhibited within the organisation. I think both have best practice elements. Both can be codified and you can hold people to account for good corporate governance and good business ethics.
At ACCA, the business ethics piece is played very heavily through all ethics and professional skills training, and how we hold our members to account through our regulatory and disciplinary processes for the rest of their career, for all the time they are professionals in terms of their ethical behaviour. I do think that the public sometimes is not fully sighted on the ethical competence that lies at the heart of being a professional accountant and also the redress that is available, should you feel that a professional accountant is not conducting himself according to those ethical principles and in the public interest.
Question: The emphasis on corporate governance is a recent phenomenon. Earlier businesses were governed by internal ethical policies and practices. How have the two converged and what role does ethics play in designing the framework of corporate governance in the company?
Helen: One of the reasons why corporate governance has risen up the agenda in recent years is really driven by the need for public trust and confidence in business. And good corporate governance practices allow an organisation to be transparent and to build that confidence with the public. So, we can see that elements such as independence, due process, internal audit, dealing with external auditors-- all of those elements of corporate governance--people need to know now that they’re in place. It needs to be reported and there needs to be a system of corporate governance. Hence, we’ve seen various corporate governance codes emerging around the world.
As I said earlier, ethics is about the execution of that. You can have the best system in the world but if the people in it aren’t behaving properly, it’s not going to work. So you need individuals who demonstrate by their behaviour that they are upholding those principles, that they are using the corporate governance processes appropriately and in the interests of their stakeholders and the wider community.
Question: Should there be certain individuals in the company to manage ethics?
Helen: Well, I think everybody in an organisation needs to understand the need to behave ethically. That’s part of the sustainability of organisations. A business can fold overnight if its reputation is damaged, and reputation is mostly damaged by bad corporate governance practices and unethical behaviour by individuals or groups of individuals. So, I think that there needs to be ethical training throughout a business but, of course, leadership will play a very important role in that because if leaders don’t walk the talk, it is unlikely that the rest of the organisation is going to follow.
Question: Is ethics a top-down approach which is passed on or set forth by the top management? Or is ethics something which comes with the individuals who join the organisation?
Helen: ACCA has done a lot of research about ethics and trust and behaviour. One thing we’ve found consistently is that the tone from the top is absolutely critical. Even if you bring ethical individuals into the organisation at different levels, if the tone at the top isn’t right, it’s unlikely to impact the entire organisation in a positive way.
But the issue about the tone at the top is that it can’t be just words. So, a lot of corporate leaders say the right words and then do the wrong thing. It is very much about putting those words into action. Even the smallest things can set the wrong tone for the people who work within the organisation. Whether it’s about using company resources for your family or for your own benefit, which are on the margins, if people see that happening, then it undermines everything you’re going to say about the code of ethics and good corporate governance. Particularly the CEO and the chairman, as well as all the other members of the leadership team, have to be walking the talk or it completely undermines the ability of the entire business to behave appropriately.
Question: In light of the recent scams rocking the corporate sector, do they point to an absence of ethics within companies?
Helen: Yes, I think it is ultimately individuals, personal behaviour and bad ethical practices, coupled with poor corporate governance, the mechanisms that would objectively have assessed such behaviour and held people to account. Let’s stick with corporate governance rather than out-and-out crime here, but there is a choice. People have a choice. And it’s that moment you have a choice where you can act in the greater good and you can think long term, or it is quite often narrow personal greed and benefit that brings about those kinds of decisions.
So, first of all, we have to have people in positions of power and leadership, who understand the ethical dimension. It’s interesting that some people who lead organisations have not been trained or they’re not exposed to those concepts, which is incredible but true. So, you have to have that and then you have to have the mechanisms to hold people to account.
ON SKILLS GAP…
Question: Countries like India, with a burgeoning youth population, are facing a crisis of skill gap. How do you think governments can work on closing this gap?
Helen: Many countries are facing this issue, particularly within the context of digital advancements and artificial intelligence, etc. I think, first of all, the education system has to talk to the employment system. So, closing the gap is quite often between what young people spend in 15, 18 years of their lives learning and how applicable that is within the modern work environment and is it matching the skills with the employment market. Employers are asking for a higher level of skills. They’re asking for people who can be strategic and add value.
The economy would also benefit from vastly greater opportunities for entrepreneurs as well as the people who create wealth and create new businesses. We know that SMEs are the lifeblood of most economies, but are people really being given the education training that will make those SMEs a success? I don’t mean once they have emerged from the educational system, I mean whilst they are in the education system. So, I think governments need to look at that total value chain in terms of what it is that the other people are learning and how that is going to be applied outside. That can mean quite a radical change in terms of the content, the syllabuses and examinations. It’s a huge programme but if the challenges that unemployment might bring grow, there will be a social challenge and then you have a whole different dynamic in terms of governing countries, if we’re talking about governments.
So, employability is absolutely the key. And I have to say that wherever I go in the world, employability is at the top of the agenda for universities and educators. Of course, you need pure academic pursuit for the sake of knowledge but for the vast majority of people, that is not going to make them employable. So, you have to start right at the beginning of education.
Question: A recent survey found that the youth in India are not very willing to go into these vocational courses and for skill development. And a vast majority said that they wanted to complete their graduation or post-graduation and go for higher studies.
Helen: Well, there’s an expectation of gap there. So these are the expectations quite often of the parents and of the individuals themselves. The advice that young people are getting very rarely is coming from careers advisors or people who actually are knowledgeable. Their choices around their education careers are from people who actually don’t understand the system very well but have maybe a perception rooted in 20 or 30 years ago, about what is actually going to be useful to that child. I think there needs to be more education for parents and for children about the choices that they’re making. We’re talking about India but that goes for many other countries as well.
The other cultural issue is for a society to value a vocational qualification or a technical qualification as much as an academic one. The social status that is given to individuals now, you can’t change overnight, but it is critical because otherwise people continue to make the choices that they think give them higher status but won’t actually give them a job. Many young people are emerging with academic qualifications from university systems that have vastly expanded throughout Asia, Africa and Europe but they are actually unemployable. They don’t have the practical, applicable skills.
And this is where professional bodies, professions in general and ACCA can come in to bridge that gap. The work that we’re doing is trying to turn that knowledge into applied skills that make people useful in a business context. All of our examinations are applied, so it’s how you use this knowledge. And, then of course, you need practical experience and ethical competence in order to become a member.
Working with universities and schools to get young people thinking in that way early and actually taking some of those kinds of practical examinations before they hit the workplace is necessary. When you talk to employers, they want people who are work ready. They don’t have to start again, start from scratch, and train somebody the whole way to make them useful. They want to bring them into the workplace and then add value straightaway. So, there’s a lot of work to be done. But I think quite a lot of it is a cultural perception about what gives you status and that would need a lot of work from governments and citizens.
Question: The recent crisis in the information technology sector brought to fore the importance of reskilling and upskilling for professionals. Why has this become a demand of the current environment?
Helen: I think that’s true with a lot of deep technical areas now. But when you look at the career path, professionals tend to start as generalists, become specialists, but they don’t have to become generalists again. And if you get stuck in that specialist mode, you can become irrelevant or not needed at that particular time. The challenge for individuals and for businesses is to give people the right breadth of experience while they are specialists, so that they are able to go back into leadership roles and management roles, driving the business forward. I think we have to understand the very different career patterns that exist now. We now have career lattices rather than career ladders, meaning you have to go across.
So, I think that the employment lattice is the challenge. What professional bodies, governments and educators have to do is to understand that it is not about educating people from the age of 18 to 21. It is creating those intervention opportunities all the way through to keep building the capability of the individuals.
Within ACCA, it is important to develop individuals even if they are not being given a new job title or they’re not moving up the hierarchy. They are developing their capabilities by being in a different project, leading a totally different part of the organisation for a while, going to live in a different city or a different country-- the kind of breadth of experience that is going to enable you to be flexible and adaptable to the circumstances when they change. A job for life does not exist anymore and, so, we all have to take responsibility for building capability and as employers shape that lattice and look for the opportunities for people to develop themselves.
Question: What according to you is the skills gap in India’s workforce vis-à-vis the global workforce?
Helen: Well, some of the issues are similar. I guess that the sheer scale of India, the youth population and the number of people entering the labour market every year make a particular challenge. I think I heard that 10 million people enter the labour market each year. I won’t repeat everything I said but I think it does go back to that education system. Is it really changing at the rate that the employment market requires it to? The skills gap will only be narrowed if that happens, but my sense is that the rate of change though is not the same as the rate of change in the dynamic of business and in the employment marketplace.
Question: How is ACCA working to bridge this skills gap in India and elsewhere in the world?
Helen: We are working to make young, professional accountants work-ready. We’re working with many universities here in India and around the world to embed our examinations and our applied learning within the syllabuses of the universities. This double advantage of academic qualification and professional qualification, at least part of it, provides individuals the stepping stone into the workplace that they might not have had before.
We have done a lot of research about professional accountants in the future where we’ve looked at the skills and knowledge needed for the future; we call them the seven quotients for success. These quotients are what professional accountants are going to need in the future and we’ve developed our qualifications to meet those seven quotients.
As you would expect, we have the ethical and technical quotients. We’re also embedding strategic quotient, emotional intelligence and creativity, things you would not normally associate with professional accountants. But if they’re going to climb that lattice or go further across the lattice, those are the things that are going to be very important.
So, we are constantly revising the qualification, making sure we’re listening to employers to understand what they need in the marketplace and responding to that through either the core qualification itself or continued professional development. All members know that they’re not qualified for life, and that they have to keep retraining, relearning adding new skills to their skill set. So, I think all of that added together helps bridge the skills gap.
We have a big roundtable in India with employers and universities, where we have been discussing why the graduates are not employable today.
Employers have been saying that graduates have knowledge but they lack application skills, and that they’re not work ready, which resonates well with the outcome of the research we have carried out with employers.
With our qualification, of course, we are bridging that gap. We are working with the top universities and colleges in India and many of them have been offering our qualification. They see the ACCA qualification as the best way to bridge this gap because academic qualification cannot take care of the practical application part and make them work-ready.
We have a new Ethics and Professional Skills module, which integrates these skills into our qualification. These are the skills which employers are looking for. We’ve ensured that not only do we develop those skills through our examination and qualification but we also have a module to further give them a chance to apply this and see how it works.
Question: Can you explain what the Ethics and Professional Skills module of ACCA is about?
Helen: When we were talking to employers it became clear that they wanted that rounded professional. ACCA has had an ethics module as part of its qualification since 2007. This is a kind of expansion and refreshes those professional skills as well, such as skepticism, communication in the workplace, technical knowledge and professional behaviour. This is an interactive online module that challenges people with ethical dilemmas, and they have to use their work experience or real-life situations to talk about how they would resolve those ethical dilemmas. It’s quite an intensive piece of learning and interaction. But at the end, anybody who’s going to qualify has to complete this Ethics and Professional Skills module.
And interestingly, our already qualified members are also taking the module because they are using it to refresh their ethical thinking. They’re using it as CPD. Employers are also telling us that they would like to use the module for non-professional accountants because that ethical and professional piece is so important right across their teams.
“ I’ve heard CFOs described as the ethical guardian of a business and if ethics and reputation are as important as we just said, then the role of the CFO is absolutely critical to the business in providing leadership, the understanding of due process and ensuring that all aspects of information that’s provided to public and to investors and stakeholders is accurate and provides a real sense of value that the organisation is creating and that he or she can build the trust and confidence in that business."
Question: What kind of reskilling or upskilling do you think finance professionals require?
Helen: I think a lot of it does come down to the wider piece around emotional intelligence, impact, creativity in solutions and looking for ways for the organisation to flourish going forward. You can’t be in the background, and quite often, finance professionals are in the background. They can keep their heads down and manage the figures, but that’s not what’s going to add value anymore. So, it’s the interpretation, analysis, and communication of that analysis to help your business grow, that is going to make the difference.