The Code of Ethics adopted by a business organization reflects its approach to business. These sets of self-imposed rules originate from the corporate social responsibility of business corporations. It also defines the values and standards by which the company conducts its business. It provides all stakeholders with a clear understanding of the procedures and processes at various levels of the organization. In other words it acts as the road map or set of guidelines to help the firm in acting and conducting itself in a socially and commercially acceptable manner.
A well designed code of ethics will help highlight the resources available to achieve various goals set at the personal and corporate levels. A good code of ethics document will inspire confidence in all business associates – like suppliers, clients and employees. (Budd, 2007) The rest of the essay will critically analyze the codes of ethics of two accounting firms and evaluate their merits in the process. The two firms chosen for the exercise are KPMG and Grant Thornton.
The following is a passage from the KPMG ethics code:
“At KPMG, our promise of professionalism to each other, our clients, and the capital markets we serve, compels us to align our culture of integrity with our values, words, and actions. By setting high standards for ourselves, and our clients, our commitment to upholding KPMG’s values is clear: There is never a situation when compromising our standards is either expected or acceptable. To support our culture of integrity, KPMG has further developed a robust ethics program that includes our Code of Conduct, as well as the Ethics and Compliance Hotline”. (Budd, 2007)
The above passage captures the essence of what KPMG stands for as an organization. The language is unambiguous and the sentences are well structured – two essential qualities for business writing. It also makes it clear how imperative ethics are to the firm – not compromising their standards in any situation. Keeping pace with the times they have developed a easy to use Ethics and Compliance Hotline, which can be availed by all business associates. So, in this regard, KPMG adheres to international standards of maintaining ethical business conduct (Shearer, 2002).
Grant Thornton, the other accounting firm being considered for this discussion has a similar approach to business ethics. For example, their business ethics document starts with the following words,
“Being at the cutting edge of professional development is vital for an accounting and advisory organization operating in a dynamic business and regulatory environment. By taking an active role in entities that liaise with regulators, promoting high-quality professional standards and insisting upon high standards of ethical behavior, senior member firm partners can influence the development of their profession, equipping themselves in the process with up-to-date information to enable them to participate in the development of standards in the public interest.” (Shearer, 2002)
Here, the importance of “liaising with regulators” is made note of, which is an often overlooked aspect of business conduct. It is understood that a regulatory atmosphere conducive to fair and competitive business can help raise ethical standards of all businesses involved. The drafters of the Grant Thornton code of ethics exhibit a keen awareness of this reality and their allusion to the same in the above passage is a testimony to the foresight and visionary thinking of its business planners. It is also interesting to note that the KPMG code of ethics does not touch upon this important aspect of running businesses.
Nevertheless, KPMG has to be credited for adopting the concept of Ethics and Compliance Hotlines, which have become standard features of major businesses these days. Being one of the early implementers of such a feature, the accounting firm ensures an “anonymous reporting mechanism that facilitates reporting of possible illegal, unethical, or improper conduct when the normal channels of communication have proven ineffective, or are impractical under the circumstances”. With ever-changing technologies, the procedures of reporting inaccuracies and inconsistencies are also required to evolve and adapt. The Ethics and Compliance Hotlines do just that, circumventing the flaws inherent in traditional channels of communication (Shearer, 2002).
All stakeholders in the welfare of the firm can avail of this hotline. According to the ethics code of KPMG, such discrepancies and violations as the following warrant a hotline report:
- Accounting, auditing and professional practice issues
- Accuracy of firm records, including time and expense
- Compliance concerns
- Confidentiality, privacy, and intellectual property
- Conflict of interest
- Discrimination, harassment, threats and other work environment issues
- External activities
- Gifts, meals and entertainment
- Illegal or suspected illegal acts
- Marketing and competition practices, including client, vendor, or third-party services
- Theft or misuse of firm assets and resources