Calling out the gatekeeper
If you’re going to cheat at something, you might as well cheat at an ethics exam. But who would be mad enough to do that? Oh, wait…
The Securities and Exchange Commission, the US financial watchdog, announced this week that EY in the US, one of the Big Four audit firms, had been fined $100m after staff were found to have cheated on a CPA ethics exam and the firm was found to have withheld evidence.
EY was not only fined, but must hire independent advisers to help sort its unethical ethics.
Gurbir S. Grewal, leader of the SEC enforcement division, said: “This action involved breaches of trust by gatekeepers within the gatekeeper entrusted to audit many of our nation’s public companies. It’s simply outrageous that the very professionals responsible for catching cheating by clients cheated on ethics exams of all things.
“And it’s equally shocking that Ernst & Young hindered our investigation of this misconduct,” he said. If you ever wondered what ethics were for, it’s this.
A duty to turn the tide
Retail doyenne Mary Portas has thrown her weight behind a campaign to reform Section 172 of the Companies Act, to ensure company directors focus on company “purpose”.
Portas used her speech at the annual conference of the British Chambers of Commerce this week to support the Better Business Act Campaign, a project to reform directors’ duties. Currently, section 172 gives directors a first duty to promote the “success” of companies; draft legislation from the campaign suggests that should be changed to promoting the “purpose of the company”.
Portas said: “I don’t want to leave a legacy that to be a good businessperson you have to be uncaring. I want a legacy that says the class of 2022 turned the tide. I want us to be able to say that it was businesses that changed and helped make the world better.”
Governance undermined?
More on government proposals to change the rule for paying non-executives. Roger Barker, the Institute of Director’s governance guru is unimpressed. In a post on LinkedIn, Barker says performance-related pay would be “would hugely detrimental to the functioning of UK corporate governance. It would undermine their objectivity, independence and ability to properly scrutinise the performance of company management.”
He adds: “In reality, it would undermine the respected framework of corporate governance which the UK has played a leading role in developing.” Enough said.
Animated board
You may remember Board Agenda’s article on Disney CEO Bob Chapek’s clash with Florida governor Ron DeSantis. In short, Chapek supported LGBTQ rights and DeSantis responded by removing the special administrative status enjoyed by the Disney World theme park.
Some may have thought Disney’s board would react with consternation. Not so: the board has thrown its weight behind its CEO, extending Chapek’s contract by three years.
“Bob is the right leader at the right time for The Walt Disney Company, and the board has full confidence in him and his leadership team,” the board said. Anti-woke politics is some way from winning this Mickey Mouse spat.
Capital idea
A group of academics has asked US regulators to compel companies to publish information on how much they invest in their workers.
Writing for the Harvard governance blog, they argue that the US has seen an “explosion” of “human capital firms”, companies that derive their value from the knowledge and skills of their staff. And yet accounting in the US, and its ability to reflect that value, lags behind.
The group says: “We differ in our views about the regulation of firms’ relationships with their employees generally. But we all share the view that investors need additional information to examine whether and how public companies invest in their workforce.” Agreed. It’s only human.
A well-grounded “social value” plan
Mining giant BHP this week unveiled a plan for doing more good for the economy. It includes a “scorecard” showing the metrics it will measure itself against. These metrics include pursuing a healthy environment by turning 30% of BHP’s land and water over to conservation, cutting carbon emissions by 30%, improving relationships with indigenous peoples, and reducing sexual assault and harassment among its workforce.
BHP’s chief legal, governance and external affairs officer, Caroline Cox, said: “By embedding social value into the way we do business, we believe we will further strengthen our relationships and access to the best resources, partners, markets and talent to discover and produce the minerals required for global economic development and decarbonisation, which will in turn create competitive advantage.” Nice to see a miner digging deep to save the planet.
Fair comment
At a time of high inflation, business leaders could soon be hearing customers’ claims are not “fair”, according to Chris Cowton , associate director of the Institute of Business Ethics (IBE).
Reflecting on the IBE’s recent attitudes survey, Cowton reckons it found early evidence that people will be calling “unfair” when it comes to price rises.
“In some ways, this will bring us back to business ethics basics,” he writes. “For centuries, apart from the charging of interest (or usury), the big moral question around economic transactions was what constituted a fair or just price, of which fair or just wages (the price of labour) were a particular case.
“As prices and pay enter a period of turbulence, are you prepared for the fairness challenge? It never really went away, but my suspicion is that we are going to be hearing a lot more of it.” Board Agenda’s megaphone order is in.