ETHICS IN FINANCE

ETHICAL AUDITING Ethical audit is a powerful technique, which has become more frequently used in recent years. Probably the best known example of its use in the UK is the Body Shop, which makes available detailed audit reports to the general public. Along with these reports which are largely produced by independent, external auditors, they include an explanation of their philosophy and methodology of audit. This is a company which is vales-driven in a way that very few commercial organizations can claim. It has much in common with voluntary organizations in that its formation was a consequence of a set of beliefs whereas most companies attempt to articulate their beliefs and values after many years of operation. Because it is founded on very explicit values, the Body Shop audit process can be carried out with a clear sense of purpose and determination to act on the findings. Before launching on an audit exercise, there are many points to be considered carefully. Seven of them are listed and discussed briefly here. 1. Purpose Be clear about the purpose, and therefore the scope, of the audit. Do you want to audit in order to obtain information which will help you steer the ethical development of the organization? Or to persuade critics that you are not as bad as they say? Or to follow a current fashion in management (sadly not uncommon with new methodologies)? Or to meet demands from a customer, or a client, or a regulator, or an owner? 2. Type and Topics What kind of audit do you want to carry out? The box below shows some of the options. If you have not clarified the purpose, you will not be able to choose rationally between these. How will you determine what topics to include and whether to start with a small subset the first time? Will you keep to auditing compliance with the rule book, or attitudes towards corporate environmental impact, or understanding of health hazards? Or do you want to explore in-depth the values of your people relative to all your major categories of stakeholder? 3. Context In what managerial context is it being carried out? Is the organization accustomed to audits for other purposes? Is there commitment from the top to act on the findings? What pressures are there, and will there be, to do so? 4. Process What process will you use? Will it be paper-based using questionnaires? If so, do you have access to expert questionnaire design skills? Will it include technical assessments and do you have access to the skills and equipment needed? Will it include face-to-face interviews? Especially for sensitive topics and areas of operation, do you have experienced interviewers? 5. People Be careful not to use only specialists in ethics. You need people who can communicate in language intelligible to the people they are working with. If you have carried out employee attitude surveys and climate studies in the past, you probably would have people with the necessary experience. If you have organization and management development specialists, they would probably be at the heart of this exercise as it could need to lead to substantial change programmes. If you use consultants, decide whether you want technicians to produce measurements and assessments, or change catalysts to help you transform the organization. Try

not to use ethicists without human-factor audit experience and auditors without adequate background in ethics (unless of course, for a particular technical facet of ethical performance such as specialist aspects of environmental or health and safety ethics). 6. Analysing and Reporting Do you have the capacity to process the data yourself? Or will you use an outside agency? How will the various levels of reports be produced, approved and published? 7. Follow-up What follow-up do you intend? Clearly, you cant know exactly what will be required but do you have at least outline plans for discussing and developing action programmes? To conduct an audit, raises expectations. If you have accepted peoples cooperation in the conduct of the audit, you will be betraying a trust if you subsequently do nothing about the findings.

Ethical Audit Many Varieties Make Sure you know what you want / need Audit of policies and procedures (existence) Audit of policies and procedures (compliance) Audit of actual performance (external impact) Audit of staff perceptions Audit of staff aspirations / concerns Audit of customer and other stakeholder perceptions Audit of customer and other stakeholder aspirations / concerns Audit of specific issues or problem areas Audit of legislative / regulatory compliance Audit of comparisons with reference scales, peer or benchmarks.