INTHEBLACK September 2024 special edition - Flipbook - Page 43
think that leaders are now a bit more visible and
more accessible, and therefore more accountable.
“Historically, leaders have been able to
hide behind corporate communications
or just deliver a ‘No comment’.
“There’s a different relationship with the
community now, and I think this was either
already happening or has accelerated after the
Hayne Royal Commission,” Payne explains.
is substantiated. It will not then be subjected to
misstatements or pressures that ultimately come
out a few years down the path, when some of the
individuals have long gone.
“I think we clearly understand the negative
ramifications of not getting ethics right.
“What I find interesting is there is not enough done
in promoting how good ethics can improve
the bottom line,” Stokes says.
ESG JUGGERNAUT
DO THE RIGHT THING
A lot of the change is driven by growing stakeholder
expectations of ethical behaviour and strong
commitment to environmental, social and governance
(ESG) concerns.
“The level of sophistication, in terms of how people
make purchasing decisions, is increasing,” says
Patrick Viljoen CPA, ESG lead at CPA Australia.
“When you bring it down to basic economics, if
your customers are demanding a particular service
or product with ethical expectations and you fail to
deliver on that, they will vote with their feet. There is
an economic imperative here.”
Stokes adds that ethical practices lead to greater
consistency for shareholders and financial analysts.
“You will also have better credibility and a happier
organisation,” Stokes says.
“People will be remunerated appropriately. You
will have a P&L [profit and loss statement] that
Financial reporting is a window
into ethical conduct. Stokes
believes organisations need
to create an environment that
encourages individuals to do the
right thing.
“In a boardroom setting,
there is often a hesitation to
dissent if five of the seven
people are in agreement,”
Stokes says. “There is a natural,
inbuilt mechanism to protect
yourself and to not be the odd
one out, and therefore you
may not want to voice
your opinion.
“The boardroom has to
create a safe culture of willingly
Chrissa Pagitas
discusses ESG
UPSKILL
NOW
Australian
financial
reporting
framework
ETHICS STUDY AND AI
Findings of a research project led by the University of Queensland’s Dr Peter Do reveal that
companies with better ethics scores produce higher quality financial reports.
The research, supported by CPA Australia through its Global Research Perspectives Program,
draws on 3609 ethical culture reviews from current and former employees of ASX-100 companies
published on the employer review website Glassdoor between 2008 and 2022.
Using an artificial intelligence tool, researchers analysed the natural language in the reviews,
interpreted what it communicated about the ethics of an organisation and assigned an ethics score
to each review.
For every one-point increase in a company’s ethics score, the likelihood of their financial
statements being restated reduced by 36 per cent.
The research also examines the relationship between the level of ethics at the organisation’s
corporate reporting functions and the investors’ reaction to the financial information released.
The findings found that for every one-point increase in a company’s ethics score, the stock returns
on the day of financial statement release are 0.2 per cent higher.
ETHICS ESSENTIALS intheblack.cpaaustralia.com.au 43
