This article was first published in the October 2017 international edition of Accounting and Business magazine.

Imagine for a moment that you are in the Wild West. You come across train tracks and see a trolley approach at speed from a distance. Ahead, there are five people tied to the tracks and unable to move. If the trolley continues on its current course, it will kill all five. In front of you is a lever. If you pull it, the trolley will be diverted onto another track – but there is one person tied to that track. What should you do? If you do nothing, five people will die. If you pull the lever, one person will die but the other five will be saved.

This well-known exercise is designed to test your willingness to behave in a utilitarian way. If pushed, most people would probably say they would pull the lever to save five people, even if it costs one life. But if this wasn’t an exercise and your actions really would cost a life, would you pull the lever and knowingly kill someone, even to save five others? And what if you knew one of the people involved – would that alter your decision?

Try another one. Imagine you are walking along the street and find a wallet. There is £1,000 inside and a driving licence. The wallet belongs to Bill Gates. Would you return the cash?

Or imagine you are driving home late at night on deserted roads. You come to a red light at a junction. There’s no one to be seen. Do you wait for the green light or drive through the red?

Doing the right thing is tricky, in life and in business. Much as we would like to think that we would make the ‘right’ decision in any given situation, it is unlikely that will consistently happen in practice. So the human race invented the concept of ethics – the standards of behaviour that dictate how we ought to act in given situations.

Ethics are important because they take emotion out of the equation. Ethics and feelings are not the same thing – some people may feel good even when they know they are doing something that is ethically wrong – although feelings and intuition do inform our ethical choices. Ethics also deviate from time to time from what is legally right or wrong – if a legal framework has become ethically corrupt, for instance, or if the law has been slow to address a rapidly developing issue.

A different beast

Ethics in the workplace, particularly in business, has been in the spotlight since the financial crisis. Workplace ethics are a different beast; difficult ethical decisions inevitably come with many pressures, from financial incentives to the fear of losing your job. These have become more intense during recent difficult economic times; and as we move swiftly into the digital age, workplace ethics are changing and becoming more complex.

For professional accountants, ethics have always been about a lot more than following your conscience. As ACCA chief executive Helen Brand says in her introduction to a new report, Ethics and trust in a digital age, ‘being ethical brings with it specific expectations, such as demonstrating professional competency in the role being performed, exercising due care towards stakeholders and acting to uphold the public interest’. For this reason the profession has consistently taken a robust and methodical approach to ethics in training and in practice.

Professional accountants are introduced to formalised ethics during their training. A research study carried out by Nonna Martinov-Bennie of the International Performance and Governance Research Centre at Macquarie University and Rosina Mladenovic of the University of Sydney Business School looked at the impact of formal ethics training on students’ ability to identify and think through ethical issues. It found that incorporating ethics education into accounting education and training increases students’ ethical sensitivity and helps them to think through ethical issues in a business context.  

As the demands placed on accountants increase, though, the approach to ethical training must adapt. This was behind ACCA’s decision to introduce a new Ethics and Professional Skills module into its qualification from October (see page 80). The module, which has been developed in response to demand from employers, is designed to allow professional accountants to demonstrate that they understand and can apply ethical behaviour in complex, real-world situations.

Professional accountants certainly value their ethical training. A study of more than 10,000 professional accountants, trainees and senior managers carried out as part of the Ethics and trust in a digital age report found respondents believe that upholding their own professional code is the most effective way to contribute to an organisation’s ability to uphold ethics; 75% took the view that ‘ethics begins with me’.

Creating a framework

But giving individuals a solid grounding in ethics is not enough to guarantee good governance across an organisation. So an increasing number of companies are putting in place an ethical framework for their employees. A framework helps managers and employees understand the moral dimensions and implications of situations they might meet, and provides a route map for asking the right questions and (hopefully) coming to a conclusion that is consistently in line with the organisation’s values.

Encompassing ethics in a written framework is an idea that is as old as time (as anyone familiar with the Ten Commandments will attest). Some professions are built entirely around an ethical code, most notably medicine’s Hippocratic Oath.

For organisations, ethical frameworks are an important bedrock of corporate governance. Two-thirds of respondents to ACCA’s survey agreed, for example, that embedding ethical standards into day-to-day procedures was important in maintaining ethical behaviour in an organisation. An ethical framework becomes even more important in a time of rapid technological change, as previously unseen or untested situations are likely to arise; in the paper-based world, boundaries were reasonably clear but in the world of big data and instant communication, the ‘right thing to do’ is not always immediately apparent. For that reason, 80% of respondents to ACCA’s study agreed that strong ethical principles and behaviour will become even more important in the digital age.

So what does an ethical framework look like? It will usually take the form of a series of questions or statements that help the user clarify their thoughts and how they see the issue – which might otherwise be clouded by emotion, context or external pressure.

A framework should help users avoid rationalising their immediate reaction, encouraging them to take account of information that may be disquieting, and to consider differing opinions and perspectives (see box opposite).

Codes of ethics are not prescriptive or a list of simple dos and don’ts – they are an aspiration of excellence, for what people should and could achieve. An ethical framework is not intended to give the right answer in every conceivable situation; it provides a principles-based structure for making day-to-day decisions that uphold the organisation’s values.

While the basic format will probably be similar between organisations – usually including a mechanism for reporting unethical practices – it will be customised for each. PwC’s ethical framework, for example, is a code of conduct for employees, known as RADAR:

  • Recognise the event (are you being asked to do something you think is wrong?)
  • Assess the situation (who is affected? What is the impact? Is it illegal?)
  • Decide what to do (what are the options and the implications of each?)
  • Agree a way forward (is your decision right? Can you sleep at night? Would you be embarrassed if others knew about it?)
  • Report and communicate.

EY’s global code of conduct, by contrast, is a set of principles in five key areas:

  • working with one another
  • working with clients and others
  • acting with professional integrity
  • maintaining our objectivity
  • respecting intellectual capital.

But again, these are supplemented by a series of questions that help employees decide in difficult situations if they are upholding the code.

The existence of an ethical framework, though, is not the end of the story. Ethical behaviour requires good leadership and strong support from the top; in fact, two-thirds of respondents to ACCA’s survey said that tone from the top was crucial in promoting ethical behaviour within an organisation.

The message is that good governance and robust ethical behaviour takes awareness and effort from everyone – but the detailed training undertaken by ACCA-qualified professionals, and the pride that professional accountants take in their ethical understanding, ensures that they will lead the way. 

Recognise the ethical issue

  • Could this decision or situation be damaging to someone?
  • Does this decision involve a choice between good and bad alternatives?
  • Is this decision about more than what is legal or what is most efficient?

Get the facts

  • What do I know? What facts are unknown? Can I learn more about this? 

Do I know enough to make a decision?

  • Who has an important stake in the outcome? Are some concerns more  important than others? Why?
  • What are my options? Have all the relevant people been consulted?

Evaluate alternative actions

  • Which option will produce the most good and do the least harm?
  • Which option best respects the rights of all those who have a stake
  • Which option treats people equally or proportionately?
  • Which best serves the community as a whole?
  • Which option leads me to be the person I want to be?

Make a decision and test it

  • Considering all approaches, which option best addresses the situation?
  • If I told someone I respect my decision, what would they say?

Act and reflect on the outcome

  • How can my decision be implemented with the greatest attention to the concerns of all stakeholders?
  • What have I learned from this situation?
Source: Markkula Center for Applied Ethics at Santa Clara University

Liz Fisher, journalist