Finance Indaba Online puts the spotlight on finance leaders’ role in ethics

Panellists say CFOs are increasingly being asked to act as a voice of ethics and accountability.

During a panel discussion on ethical leadership, Mike Ngoma, director: financial services Gauteng Department of Human Settlements, and Vincent Motholo, CFO UCT and chairman of SAICA, shared their thoughts on the role of the CFO in driving the ethics agenda.

Vincent opened the dialogue by saying that ethics or moral principles are what govern our behaviour in how we do things. He pointed out that CFOs are central in any organisation because they are an enabler of many aspects of the business, and as a leader of finance it is important that they take a lead when it comes to ethics.

He said ethics provide us with a framework of practices and processes, and when those are implemented, organisations are able to thrive by being able to balance stakeholder needs against those of communities, government, financiers, staff and other interested parties.

Mike said the issues of ethical leadership and good governance affect how institutions and organisations are managed and led. He said the issue of integrity, transparency and accountability is a crucial one because it affects the public perception of organisations.

“We have issues of corruption, maladministration, abuse of power and poor service delivery, which often undermine developmental outcomes and further contribute to the loss of public confidence and shift away from development and advancing of society,” he noted.

He said that for the CFO to actually fulfil their responsibilities, it is critical they hold themselves to greater transparency.

When things go wrong, who do we look to?
Mike said the CFO’s words and actions, and adherence to the law, regulations and rules are important anchors for an organisation. Therefore, there should be consistency between what is said and what is actually being done, otherwise it erodes trust and respect and undermines the effectiveness of leadership.

Vincent added that the CFO is part of the executive and often also a member of the board:

“When you’re entrusted with leadership roles, as individuals and as a collective, you become ambassadors with impact throughout the organisation. That’s why the tone of the top really matters, because once we get that one right, you will also be able to recruit and retain people who are aligned to what you believe in.”

Mike said ethics need to be actively managed by the finance function, because doing so turns it into a positive force that shapes the growth of the organisation.

Profitability and ethics
Vincent made the point that short-lived profits are not good. He said when finance leaders think of profits, they should do so in a way that is ethical and sustainable, because when a company closes down because of unethical conduct, the impact is dire.

The failure of ethics is far-reaching, he noted: “It results in job losses, promotes an environment where there is no competition because there are fewer players in the industry, and ultimately it kills creativity and innovation. When it comes to ethics, we must think about the impact our actions have on the communities that we operate in.”

Vincent said that for any organisation to thrive, you need to have operational and financial sustainability, underpinned by ethical conduct:

“Without ethical standards of conduct in place, your financial sustainability is eroded.”

Mike pointed out that in regard to profits, organisations that operate ethically tend to perform better when it comes to recruiting and maintaining talent, engaging and retaining loyal customers and therefore having more financial health. Added to that, organisations that hold themselves to high ethical standards enjoy greater investor confidence, increased brand equity, greater morale and support for all their stakeholders.

Building an ecosystem of ethics
Both panellists agreed on the need to have processes that create a strong control environment built on a strong, ethical organisational culture.

As a finance leader in the public sector, Mike was able to speak to that. He said that in order for the government to build a capable, ethical and developmental state, there has to be a collective way of not only delivering basic services to the people, but also an ideal way of ensuring efficient, effective and sustainable governance.

“I think what happened during Covid-19 and the hijacking of procurement supply chain highlighted how important it is for CFOs in the public sector to take this issue of ethics and drive it within the organisation,” he said. “In doing that, there are a number of initiatives that have actually been put in place, such as developing the management framework to deal with preventing and monitoring issues of corruption, as well as collaboration across various public institutions.”

Embedding industry-wide accountability
Vincent wore his hat as chairman of SAICA to respond to the reports of unethical conduct within the field. He said we have to acknowledge that there is a problem in society and that the numerous cases of misconduct that we have seen have been as a result of finance leaders not adhering to ethics.

“It starts in the recruitment of the right executive, because those are the people who will be more hands-on and influential in implementation of the culture,” he said. “So, it’s crucial to ask who we are bringing on board. What’s the calibre of this person? Do we want to be associated with this person? Because the risk is if the person doesn’t live up to your code, it challenges the good that you're trying to do.”
He said that once you have the right team, you’re going to need the right policies and processes. “Also, what is very important is designing an environment that makes sure that the organisation is run correctly and the controls that have been put in place are adequate to make sure we achieve our strategic objectives.”

Both panellists concluded that leaders who are deliberately driving an agenda of higher ethical conduct create more sustainable organisations, and by using their position to align business processes and systems, they improve the viability and success of the organisation in the long term.