Compliance is good, but a culture of ethics is better

Finance and ethics expert Clare Levison, CPA, CGMA, explores the connection between the good life and the knowing and adhering to all the standards and laws that govern the profession.

Chances are, when you encounter the word “ethics,” the good life is not the first thing that comes to mind. But many philosophers, from ancient Socrates to contemporary Peter Kreeft, say the two are inseparable.

The realm of ethics is where we ask questions like, “What values and principles should guide our actions?” and “What leads to human flourishing and well-being?” In other words, how do we find and live the good life?

In this Q&A, we explore the connection between the good life and professional ethics, which is the knowing and adhering to all the standards and laws that govern our profession.

There’s a trend of reaching beyond compliance to something more encompassing.

The AICPA Professional Ethics Executive Committee (PEEC) has developed a principles-based focus with a conceptual framework approach that aids deeper thinking about ethical dilemmas, which reflects this trend. Since the framework’s addition to the AICPA Code of Professional Conduct (the Code) in 2006, members have been using the threats-and-safeguards approach to address ethical situations that aren’t always black and white. (See the sidebar “How the Conceptual Framework Works.”)

Summer Young, CPA, a senior manager in the AICPA Professional Ethics Division, said members who call the ethics hotline are becoming more comfortable exploring the gray areas when they come across a situation that isn’t specifically mentioned in the Code. (To learn more about the hotline, see the sidebar “Have an Ethics Question? Call the Hotline.”)

“We always explain that the Code can’t cover every possibility, and callers understand how the conceptual framework approach can help,” Young said. “It’s also helpful that we can point them to the conceptual framework toolkits, which have examples to spark discussion on ethical issues on everything from independence to tax practice for practitioners in public practice and business.”

Clare Levison, CPA, CGMA, an ethics and finance expert who is a current PEEC member, is passionate about the move toward more than compliance. She leverages her finance background and her love of ethics and inspired education to help organizations and people create a culture of ethics that infuses every level of interaction, every aspect of business as usual.

Levison talks about why she does what she does, why it’s important, and how organizations can overcome challenges in making ethics an everyday, always-present part of business.

In your work helping organizations build a culture of ethics, you say it’s important to focus on the “why” of ethics rather than only the “what.” Why do you believe it’s important for organizations to build an ethical culture that includes but goes beyond compliance?

Clare Levison: It’s about going from good to best. As accountants, we focus on numbers a lot. I really would like to see organizations focus more on ethics as an overarching principle and not just technical compliance. Organizations out there may be good, but if they really want to have that competitive advantage, building a culture of ethics is a great way to get there.

When customers and clients have that trust in you that you’ve built through creating that ethical culture, it’s a win for the organization, clients and customers, and society in general.

Talk about the intersection of ethics and compliance. How does theoretical ethics govern the applied ethics — or technical aspects — of a profession?

Levison: Compliance is necessary, but we really want to work on going above and beyond that. So, I see compliance as the foundation in business or a profession, but it’s also the minimum bar, and we want to go beyond the minimum.

That’s where I think the intersection that you’re talking about comes into play between those codes, those regulations, and really thinking about taking it a step further — to doing the right thing, in general, all the time.

Peter Kreeft is a philosophy professor at Boston College, and, like you, he doesn’t distinguish between ethics and morality. In fact, in his audio course “Ethics, a History of Moral Thought,” he says ethics is “about doing something and doing it well. It’s not merely a checklist of rules, it’s substantive, it’s essential. It’s about the good life. All of life is ethical.” That sounds like what we commonly think of as morality, and it sounds like you agree.

Levison: I do. And that’s why I focus on the why so much. The policy, the procedure, the law, that’s really the what. What do I have to do or not do to be in compliance?

Then the why is understanding why it’s important. And that’s when you really internalize the value system of the organization or when you internalize, say, the code of a given profession because you’ve recognized these laws and rules exist for a reason. So, not only do we want to be in compliance with the letter of the law or the rule, but we want to be in compliance with the spirit of the law as well.

What have you seen as the biggest challenge for organizations that are working to move from a compliance mindset to a culture infused with ethics?

Levison: One of the biggest challenges I see is bringing this type of content to life. Your quote from Dr. Kreeft mentioned a checklist. I think a lot of times ethics training can become compliance training. We’re here to train you on all these things that you need to be in compliance with. And sometimes it leaves out that why. Typically, people want to follow all the procedures and rules that they’re required to, but impactful and meaningful training will help them see the benefits within the organization and within their own personal careers of really taking it to that next step of going above and beyond.

What have you found to be the biggest challenge for staff who may not be in leadership positions?

Levison: It’s about finding their voice and finding that willingness to speak up when they see something is maybe not going the way they feel it should be, ethically. And really navigating those waters of having difficult conversations with differing points of view. They may not feel they have the political capital to initiate these discussions because they are at the staff rather than the leadership level.

What’s a suggestion you have for leadership to help foster this environment of “always-on” ethics throughout their organizations?

Levison: You have to consciously create an environment of open and honest communication. Having an open-door policy so that employees feel they can come to you to discuss issues. That is only going to be as impactful as the genuineness with which the employees feel that the policy is being lived out in the workplace.

So, not just having the policy, but really making sure people know that you really do value the opinions and insights of others, which includes going to them and seeking out that input, not waiting until they come to you.

You really have to walk the walk and not just talk the talk. That’s how people are going to believe that you value that opinion and insight — they see when they come to you changes actually happen. Difference actually happens. They’ve been actively listened to, and they can see some kind of result or outcome, not just a chat for the sake of having the chat.

What’s the single most effective change individual leaders can make?

Levison: If I had to pick one piece of advice it would be: Get to know your people so they feel comfortable with you, you feel comfortable with them.

You’re working on building that trust so that people do feel like they can come to you and tell you when they think a problem exists. You have to model that ethical behavior yourself. So, again, not just talking the talk but walking the walk.

Where have you seen the greatest return on investment of time and budget related to building a culture of ethics?

Levison: Definitely, the impactful, meaningful training we talked about before. And it’s not enough to do it once a year. It needs to be a consistent conversation because, although you may be spending more budget, if you get together more times a year, that helps you put out the message that this is in fact a priority for your organization and you’re not re-creating the wheel, so to speak, every time the group gets together.

By the time one year goes by you might be starting the same conversations over again. But if you have that training throughout the year, with conversations happening on a more regular basis, you have an opportunity to continually build that culture.

It’s important to have that intersection that we talked about between the activities that we do related to ethics training and our daily work life.

How the conceptual framework works

In the move away from “bright lines” and toward principles, the conceptual framework approach in the AICPA Code of Professional Conduct (the Code) helps practitioners think about what threats may exist and decide whether safeguards can be put in place to mitigate or eliminate those threats.

For example, the Code explicitly says that your independence will be impaired if one of your immediate family members holds a key position at an attest client and there’s no way around that threat. But what if it’s your cousin? This relationship is not addressed in the Code.

That’s where the conceptual framework approach comes in. Several threats may exist, such as familiarity, self-interest, and management participation. Your job is to identify those threats and do something about them, such as ensuring that you aren’t on the engagement team for this client or that another CPA in your office is reviewing your work.

You can find more examples in the toolkits mentioned as resources to this article.

About the author

Kelly D. Mullins is the communications manager for the AICPA Professional Ethics Division. To comment on this article or to suggest an idea for another article, contact joaed@aicpa.org.

AICPA RESOURCES

Code

AICPA Code of Professional Conduct

Toolkits

Conceptual Framework Toolkit for Independence

Conceptual Framework Toolkit for Members in Business

Conceptual Framework Toolkit for Members in Public Practice

Have an ethics question? Call the hotline

The ethics hotline is one of the ways the Association fosters a culture of ethics. It is free of charge, and Professional Ethics Division staff are ready to help you think through ethical dilemmas and questions. Call 888-777-7077, option 2, then option 3, or email ethics@aicpa.org.