Professionalism and ethics - Pillars of corporate governance
It is such a luxury to set out to review corporate failures from a purely academic angle. This is because one looks mainly at the cause and effect factors with clinical detachment.
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It becomes easy to just focus on textbook principles of corporate governance and write copiously on post-mortem analysis.
However, when such corporate failure affects an investor close to you and more important when such an event casts a death knell on promising young professionals who suddenly lose their jobs, it becomes difficult to suppress one’s emotions.
Thus, I was glued to my professional whatsapp platform after I read the comments that ensued from a colleague’s newspaper article recounting her experiences after the collapse of the Bank for Housing and Construction.
A few days later, I bumped into this brilliant young banking and accounting executive who had also lost his job as a departmental head in one of the now defunct banks.
I could not help but ask myself “what happened to professionalism and ethics involving all those stakeholders whose actions and omissions caused the collapse of this bank and the UT Bank?’’.
My sympathies go to all the staff who may lose their jobs, especially when one considers that these are typical Africans (Ghanaians, for that matter) who are bread winners for not only their nuclear families but extended relations, friends and others as well.
What does it feel like to admit that one contributed to the collapse of an institution which one is paid to ensure its growth for the sake of not only one’s self but for other stakeholders? Is it possible to be competent in one’s field of endeavour and not ensure that such competence inures to the growth and sustenance of one’s establishment?
The search for answers to these seemingly rhetorical questions pushed me to find out who is a professional.
The Merriam Webster’s dictionary defines a professional as (1) characterised by or conforming to the technical or ethical standards of a profession (2): exhibiting a courteous, conscientious, and generally businesslike manner in the workplace.
This connotes that a professional must exude certain characteristics common to the profession one belongs to.
In many professions, however, intricate or otherwise and irrespective of the number of years one undergoes to qualify, there is usually an initiation rite before entry.
A person usually swears to abide by the code of practices relevant to the particular profession.
During the course of imbibing the nuances related to the profession, one under-studies senior person’s their dexterity, honesty, integrity, human relations among other core traits.
Chances are that one may be influenced positively or negatively by the experiences one goes through during the period of tutelage. After a number of years of training, there is yet another round of initiation ceremonies; this time, to accept a candidate as a fully fledged member of the profession.
It is at this moment that one usually swears the oath of office, usually with pomp and circumstances and is required to exhibit the expected competencies and behaviours associated with the professional body he/she has been accepted into.
Growth in organisations
The growth in organisations, propelled by the need for increased production of goods and services to satisfy man’s insatiable quest for comfort led to the emergence of joint stock companies.
Investors pooled their resources together to create bigger organisations to take advantage of the ever expanding consumer needs.
The Industrial revolution started on this note. Over time, the need for more and more resources to sustain large-scale production of goods and services led to situations where ownership of organisations had to be separated from management on account of the sheer breadth and depth of skills needed to propel modern organisations.
This called for codes of practices designed to delineate the respect responsibilities of both owners and managers of organisations; with owners eager to provide incentives necessary to attract the right caliber of personnel to run the organisations to add value to original investments .
Management of these organisations, endowed with requisite professional competencies, also have the fiduciary duty as agents of the owners to run their organisations and ensure accountability to the appointing authorities while promoting mechanisms that align with shareholder aspirations towards incremental value creation.
Over the same period, individuals realised the need to relinquish some of their power to governments elected to see to their interests. A social contract Hobbes, Jean Jacques Rosseau, John Locke, as postulated by Thomas and other thinkers came on stream.
Similarly, elected governments were given power through constitutions endorsed by the citizenry such power through the three arms of government (the Parliament, Judiciary and Executive) in the interests of the citizenry which elected them in to use to office.
The press plays their watch dog role in ensuring transparency and accountability to the citizens.
In all these, the interplay of interests and other forces converge on the point where private and public institutions owe duties to diverse stakeholders.
Hobbes, for instance avers from his mechanistic theory of human nature that humans are necessarily exclusively self-interested.
He posits that all men pursue only what they perceive to be in their individually considered best interests own they respond mechanistically by being drawn to that which they desire and are repelled by what they consider to be averse to their interests.
Such thinking underlies the strong need for codes of conduct for all professionals to minimise incidence of abuse of power and privileges.From the government’s perspective, regulatory bodies are also set up with the primary objective of ensuring that the quest for profit by owners and managers of businesses does not endanger the lives, liberty, security and comfort of the population.
Public interest and accountability
To promote public interest and accountability, governance rules are set for various organisations, private or public to comply. A variety of definitions exist for corporate governance.
For brevity, I choose the OECD’s (2004; 2010) definition which considers corporate governance as involving “a set of relationships between a company’s management, its board, its shareholders and other stakeholders.
Corporate governance also provides the structure through which the objectives of the company are set and the means of attaining those objectives and monitoring performance are determined.
Good corporate governance should provide proper incentives for the board and management to pursue objectives that are in the interests of the company and shareholders and should facilitate effective monitoring, thereby encouraging firms to use resources more efficiently”.
It is estimated that up to 70 per cent of all threats to a company’s integrity originates from within the company.
In today’s business environment ,therefore, firms must prove and maintain a strong foundation of trust of their employees, their investors, the regulators and the general public, in order to be successful.
A key to ensuring such success is to conduct the business of the firm (both internal and external) in a professional, fair, legal and ethical manner; and this devolves on the human capital for compliance.
Can there be professional conduct that is not rooted in ethical behaviour?.
This simple question can have varied answers. This is because the very definition of ethics or ethical behaviour is underlined by one’s value systems- of what constitutes right or wrong and the morality of motives.
One’s perception of ethical behaviour may be derived from one’s socialisation, peers, a respected authority or role model, and typically one’s religious inclination.
A long period of employment in a corruption endemic organisation may lead one to accept such behaviour as acceptable, particularly in the absence of sanctions.
It goes without saying ,therefore, that moral principles would differ from one person/group/society to the other.
As alluded to earlier in this piece, however, it is expected that anyone calling himself/herself a professional, having undergone structured training in their field of endeavour would owe a sense of obligation to the larger society, rather than the animalistic instinct of self-preservation to the detriment of others.
It is safe to presume that in many professions now, there are efforts to instill not only the proper ways of executing functions, but also norms for appreciating the concerns, interests and rights of other stakeholders.
Thus, the accounting, banking, medical professions among others have detailed sections in their syllabi to inculcate in their members a moral duty to uphold honesty, integrity, objectivity, transparency, accountability, among other desirable characteristics of their professionals.
In the absence of clearly defined ethical standards, however, one’s religious inclinations, if deep rooted, should convince one to always uphold the good of the larger society instead of their parochial self-interest.
It comes as a pity therefore to learn that Ghana as a country with over 80 per cent constituted by Christians and Muslims together should be so steeped in corruption and other unethical practices.
What stops adherents of these two great religions from espousing the core values/ideals in our professional and social lives?” Or the ills of corruption, embezzlement and conflict of interest plaguing this country’s corporate space are perpetrated by unbelievers? Where have we buried our collective conscience?
Apply ethical standards
It is sad to observe that individuals would not by themselves always apply ethical standards in the performance of their functions without strict corporate sanctions for unethical behaviour. A fish rots from the head.
The board and management of a company must therefore lead in setting and upholding of ethical standards and values, through disciplinary measures devoid of partiality, nepotism and other influence peddling.
Financial institutions would continue to be catalysts for development. In spite of competition and the profit motive, they must still recognise social and ethical responsibilities.
Modern developments have created the imperative for these mostly private sector vehicles to appreciate the extent to which their operations ultimately inure to the benefit of the banks’ customers and other stakeholders, including the continuity of the banks’ own business and its profitability.
By inference, this modern paradigm recognises both professional and ethical imperatives that must be embedded in modern corporate governance mechanisms. The quest for profits must not cloud the vision of the board and management to the dangers of their strategies and operations on the larger society.
Ethical and social considerations must permeate board decisions on what to invest in, irrespective of profit prospects. It is helpful to understand that even the IFC (the private sector arm of the World Bank), while recognising the pursuit of profit still has the Exclusion List which details firms or projects that financial institutions which borrow from this body must not engage in.
The prohibition extends to production or trade in any product or activity deemed illegal under host country laws or regulations or international conventions and agreements, or subject to international bans, such as pharmaceuticals, pesticides/herbicides, ozone depleting substances, wildlife or products regulated under CITES.(Convention on International Trade in Endangered Species).
It also covers production or trade in weapons and munitions, production or trade in alcoholic
beverages (excluding beer and wine) equivalent enterprises. This list obviously has social and ethical and undertones.
To instill the right professional and ethical behaviours in a company requires the existence of a strict and enforceable code of conduct that cuts across the entire spectrum of the organisation. Junior staff should not be the target of corporate malfeasance, while senior staff are shielded.
A properly coordinated whistle blowing mechanism must be instituted with appropriate anonymity and incentives to ensure that the right behaviours are cultivated and maintained. Former President Barrack Obama is reported to have been incensed during the aftermath of the American financial crisis that not many top executives of the firms that floundered from poor corporate governance practices in the US had been jailed.
*The writer is a Fellow of the Chartered Institute of Bankers and an adjunct lecturer at the National Banking College, a farmer and author of "Risk Management in Banking" textbook.*
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