Estimado socio, Nuestro producto eGlobal INCP presenta noticias internacionales relevantes para la profesión a nivel global. Todos los artículos son difundidos en su idioma de origen; para filtrar por interés hemos traducido los títulos pero al leerlos en su totalidad los encontrará ya sea en inglés o en español. Para garantizar la recepción de estos correos en su bandeja de entrada, favor agregar este correo electrónico (comunicaciones@incp. org.co) en su lista de correos deseados.
Contable El FASB propone modificaciones a la norma sobre el reconocimiento de ingresos
Las nuevas normas de contabilidad desafiarán la industria bancaria: Nouy, del BCE
El Consejo de Normas de Contabilidad Financiera de los Estados Unidos (FASB, por sus siglas en inglés) emitió el 30 de septiembre un borrador de los cambios propuestos a algunas áreas de su norma de reconocimiento de ingresos, la cual entrará en vigor a partir del 2018. Las áreas de la norma que el FASB espera mejorar incluyen la exigibilidad [...]
La introducción de un nuevo estándar de contabilidad para instrumentos financieros será un desafío para la industria bancaria -particularmente en el caso de la modelación de pérdidas esperadas, afirma el Director de supervisión del Banco Central Europeo. “La finalización de esta norma de contabilidad como una de las respuestas a la crisis financiera [...]
Estados Unidos: 5 cosas que las organizaciones sin ánimo de lucro deberían saber sobre las nuevas normas de reconocimiento de ingresos
El FASB busca facilitar las combinaciones de negocios
En Estados Unidos, las reglas sobre el reconocimiento de ingresos pueden ser complicadas. Los minoristas contabilizan los ingresos de una cierta manera, los fabricantes de otra y las organizaciones sin ánimo de lucro de otra aun. De hecho, actualmente los libros presentan más de 200 normas específicas a la industria. Con el fin de tornar el proceso en uno más consistente [...]
Como parte de su iniciativa continua para simplificar los Principios de Contabilidad Generalmente Aceptados (GAAP, por sus siglas en inglés), el Consejo de Normas de Información Financiera de los Estados Unidos ha publicado una actualización de las normas contables, la cual elimina el requisito de contabilizar retrospectivamente los ajustes a los montos provisionales reconocidos en una combinación de negocios. De acuerdo con el Consejo [...]
Las nuevas propuestas del FASB buscan aclarar la materialidad
Trabajar en el área contable de una startup
En un esfuerzo por que las revelaciones de los estados financieros sean más efectivas para las organizaciones, el Consejo de Normas de Información Financiera de los Estados Unidos (FASB, por sus siglas en inglés) emitió el 24 de febrero dos borradores de consulta que abarcan el concepto de materialidad. El uso de la materialidad es un componente clave del proyecto de marco de revelación del FASB, cuyo objetivo [...]
Entre la serie Silicon Valley de HBO, las noticias sobre las startups de tecnología que empiezan a cotizar en bolsa con valoraciones de alta calidad y el encanto de las instalaciones corporativas con todo incluido, la industria tecnológica nunca ha estado tan candente. Para los contadores, las oportunidades en el sector prometen una mezcla de ambientes laborales agradables, posibilidades de crecimiento significativas y un cambio [...]
Cómo calcular el valor nominal en la contabilidad financiera Las acciones tienen un valor nominal. ¿Qué es y cómo se calcula el valor nominal de las acciones ordinarias de una compañía para fines de contabilidad financiera? Por supuesto, los bonos tienen un valor nominal: el monto del capital. Sin embargo, las acciones también pueden tener un valor nominal. Más adelante descubrirá lo que representa este valor nominal y la manera de calcular [...]
Auditoría Las grandes compañías mejoran de manera voluntaria las revelaciones de sus comités de auditoría
Variables necesarias para la calidad de auditoría, incluyendo la responsabilidad compartida
Mientras que la Comisión de Bolsa y Valores de los Estados Unidos (SEC, por sus siglas en inglés) y el Consejo de Supervisión Contable de Compañías Públicas (PCAOB, por sus siglas en inglés) evalúan qué hacer con los informes de los auditores y de los comités de auditoría, una cantidad cada vez mayor de compañías ha empezado a incluir -de manera voluntaria- más revelaciones del comité de auditoría, según un análisis del Centro para Asuntos de la Junta de EY. El estudio analizó las declaraciones de representación de empresas del índice Fortune 500 […]
La calidad de la auditoría es un asunto muy relevante hoy en día -siempre lo ha sido, pero en el mundo de los negocios actual, lo es aún más. Como miembro de la junta de una compañía cotizada en bolsa, creo firmemente que la calidad de la auditoría es una responsabilidad compartida entre muchas partes. El Marco para la Calidad de Auditoría, desarrollado recientemente por el Consejo de Normas Internacionales de Auditoría y Aseguramiento […]
La demanda de auditoría interna está creciendo más rápido que nunca La auditoría interna se ha esforzado -durante mucho tiempo- para lograr un mayor reconocimiento e influencia de su trabajo. Sin embargo, un claro ejemplo del refrán «cuidado con lo que deseas», es la sobrecarga que los auditores ahora deben asumir debido a la demanda por parte de una variedad de fuentes internas y externas. Según un nuevo informe de la Fundación de Investigación del Instituto de Auditores Internos, […]
El FRC consulta sobre la preparación frente a las normas de auditoría de la UE El Consejo de Información Financiera del Reino Unido (FRC, por sus siglas en inglés) está intensificando sus actividades con el fin de garantizar una fácil implementación del régimen de Reglamentación y la Directiva de Auditoría, así como un fortalecimiento de la confianza del público en general. El resultado fundamental de esta iniciativa es la publicación de una consulta sobre los cambios a las Normas de Ética y Auditoría, el Código de Gobierno Corporativo del Reino Unido […]
RSE
Ética Alinear esfuerzos en responsabilidad social empresarial
Cómo ser fuente de influencia ética en su compañía
Toma de decisiones empresariales éticas
La responsabilidad social empresarial es un asunto que las empresas de Malta han venido abarcando desde hace mucho tiempo. Sin embargo, aún existe una necesidad apremiante de cambios sociales y económicos transformadores e innovadores con el fin de incluir a los muchos que han permanecido excluidos por largo tiempo, de enfrentar asuntos climáticos […]
¿Alguna vez ha querido evitar que su organización haga algo indebido y no logró hacer valer su perspectiva? ¿O, en ocasiones podría mantener a su organización fuera de problemas, pero nadie lo escucha? De nada sirve diferenciar lo bueno de lo malo si no se tiene influencia sobre los demás para hacer lo correcto. […]
Un programa de ética y cumplimiento efectivo, por definición, se traduce en decisiones empresariales éticas. Aunque no lo crea, para añadir la ética a la ecuación no es necesario ser filósofo, historiador o especialista en ética. La toma de decisiones éticas es una disciplina. Es un enfoque para identificar y resolver asuntos en […]
Las marcas pueden aprovechar el poder de la RSE
El posicionamiento de marca y la RSE van de la mano
¿Su negocio necesita un código de ética o de conducta?
El cambio de un servicio social esporádico a una RSE estratégica es importante para las empresas. Ha pasado un poco más de un año desde que la Responsabilidad Social Empresarial (RSE) se convirtió en un mandato legislativo para las compañías. La voluminosa ley de 294 páginas exige a las empresas organizar un comité aparte de la junta y asignar el 2% de sus ganancias netas a […]
El problema radica en que muchas firmas acuden al “green washing” únicamente con propósitos de relacionamiento público. La RSE es la responsabilidad de las partes interesadas, la transparencia en todos los asuntos y la sostenibilidad. Todo esto crea un halo de “responsabilidad” alrededor del negocio y permite a las compañías construir confianza. […]
¿Su negocio necesita un código de ética, un código de conducta, o ambos? ¿Cuál es la diferencia? La diferencia es que un código de ética ofrece una orientación frente a la toma de decisiones, mientras que un código de conducta define los comportamientos específicos que son requeridos, así como los prohibidos. De acuerdo con el Índice de Pequeñas Empresas creado […]
Las iniciativas de impacto social corporativo generan más lealtad en los empleados La oportunidad de retribuir algo a la sociedad sin tener que renunciar a una promisoria carrera resulta ser un enorme incentivo para que los empleados valiosos permanezcan en la empresa. Las compañías están observando que, para lograr un impacto social sostenido y de gran escala, su agenda social debe integrarse con el núcleo de su negocio […]
Dejemos de ignorar la ética en los negocios Son solo negocios, ¿verdad? La ética es relevante más allá del campo profesional. Sin importar si se trata del lugar de trabajo, o el campus universitario, la política ética empresarial afecta nuestras vidas cotidianas —y nuestro nivel de éxito. Muchos hemos escuchado a nuestros profesores advertirnos sobre las consecuencias del plagio en […]
Contable FASB proposes revisions to revenue recognition standard The Financial Accounting Standards Board (FASB) issued an exposure draft on Sept. 30 that outlines changes that are being proposed to certain areas of its revenue recognition standard, which will go into effect starting in 2018. The areas of the standard that the FASB is hoping to improve include collectibility, sales or other taxes collected from customers, noncash consideration, contract modifications, and completed contracts at transition. The revisions in the proposed Accounting Standards Update, Revenue From Contracts With Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, would not change the core principles contained in the standard’s guidance, just in “narrow aspects” of the standard, the FASB stated. “The board decided to add a project to its technical agenda to improve Topic 606 by reducing the risk of diversity in practice at initial application, and the cost and complexity of applying Topic 606 – both at transition and on an ongoing basis,” the FASB wrote in the exposure draft.
The changes the FASB is proposing include: Collectibility: clarifies the objective of the collectibility criterion in Step 1 (Identify the contract[s] with a customer) of the five-step process companies would use to achieve the standard’s core principle of “recognizing revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.” The objective of this assessment is to determine whether the contract is valid and represents a genuine transaction on the basis of whether a customer has the ability and intention to pay the promised consideration in exchange for the goods or services that will be transferred to the customer. The proposal also would add a new criterion to clarify when revenue would be recognized for a contract that fails to meet the criteria in Step 1. Sales taxes and other similar taxes collected from customers: permits an entity, as an accounting policy election, to
exclude amounts collected from customers for all sales and other similar taxes from the transaction price. Noncash consideration: specifies that the measurement date for noncash consideration is contract inception. It also clarifies that the variable consideration guidance applies only to variability resulting from reasons other than the form of the consideration. Contract modifications at transition: provides a practical expedient that permits an entity to determine and allocate the transaction price on the basis of all satisfied and unsatisfied performance obligations in a modified contract as of the beginning of the earliest period presented. Thus, an entity would not be required to separately evaluate the effects of each contract modification. An entity that chooses to apply the practical expedient would apply the expedient consistently to similar types of contracts. Completed contracts at transition: clarifies that a completed contract for purposes of transition is a contract for which all or substantially all of the revenue was recognized
under legacy GAAP before the date of initial application. Accounting for elements of a contract that do not affect revenue under legacy GAAP would be irrelevant to the assessment of whether a contract is complete. In addition, an entity would be permitted to apply the modified retrospective transition approach either to all contracts or to completed contracts only. The FASB said the proposed amendments are not identical to those proposed by the International Accounting Standards Board (IASB), and some are incremental to changes proposed by the IASB. The FASB expects that the amendments would not result in financial reporting outcomes that are significantly different from those reported under International Financial Reporting Standards for similar transactions. Written comments on the proposed changes to the revenue standard must be sent to the FASB by Nov. 16. Instructions on how to submit comments are included in the exposure draft. Revenue from Contracts with Customers Source: Accounting Web - By Jason Bramwell
Contable United States: 5 things nonprofits should know about the new revenue recognition standards The rules surrounding revenue recognition in the United States can be tricky. Retailers account for revenue one way, manufacturers another way and nonprofits still another. In fact, there are currently more than 200 industry-specific standards on the books. In order to bring some consistency to the process, the Financial Accounting Standard Board (FASB) and International Accounting Standards Board (IASB) are working to develop a new common revenue recognition standard. To that end, FASB and the IASB have issued a joint accounting standards update, Revenue from Contracts with Customers. These standards are designed to help both nonprofit and for-profit entities recognize revenue in a manner that better depicts the underlying economics of a transaction. In the nonprofit world, the new accounting standards focus on recognizing the revenue an organization receives from “exchange transactions” — transactions in which you provide a product or service in exchange for a fee or revenue. Some common examples would be program service revenues generated from a concert or clinical services, tuition and housing revenue, as well as royalties and licensing. Ditto for subscriptions or sponsorships. In many cases, government grants also are categorized as exchange transactions.
5 steps to follow The new standards create a five-step process for recognizing revenue. The process starts with an analysis of the contract as follows: 1. Identify the contract with a customer: determine whether it is indeed probable that you will collect consideration from the customer for the goods and services transferred. 2. Identify the performance obligations in the contract: classify as a performance obligation each promise to transfer to the customer distinct goods or services (or a bundle of distinct goods and services). 3. Determine the transaction price: quantify the amount of consideration you expect to be entitled to in exchange for transferring goods or services to a customer. 4. Allocate the transaction price: apportion the transaction price to each separate performance obligation in an amount that depicts the consideration to which you expect to be entitled in exchange for satisfying each of those performance obligations. 5. Recognize revenue when (or as) each performance obligation is satisfied: it could also be that the performance
obligations are satisfied over time (e.g., a membership privilege that extends over a year). Ultimately, nonprofit organizations will need to implement processes for accumulating information and analyzing terms and agreements to determine the proper accounting for each type of exchange transaction. For example, under the current standards, revenue related to a cost-reimbursement government contract is generally recognized on the books as expenses are incurred. Under the new revenue recognition standards, nonprofits would have to identify any performance obligations included in the contract and then allocate the transaction price among those identified performance obligations. A determination would have to be made of when and how the performance obligations were satisfied in order to determine timing of revenue recognition. Effective date The new accounting standards kick in for annual reporting periods beginning after December 15, 2018, but nonprofits may begin early adoption in fiscal years beginning after December 15, 2016. In the meantime, you may continue to use your existing revenue
recognition methods. Nonprofits can transition to the new standard either retrospectively (that is, to restate prior periods for a consistent basis of accounting and presentation) or by making a cumulative-effect adjustment as of the date of adoption. Steps to take now The new disclosure requirements are extensive and will require changes to financial systems and processes to collect the necessary data. To prepare, consider taking these steps now: 1. Make an early assessment of the potential impact of the standard on the organization’s accounting and information systems. 2. Identify the types of exchange transactions your organization is party to. 3. Identify a point-person or task force to study the new standard. 4. Compare the new requirements to the current requirements. 5. Consider how the new requirements may impact other areas of your organization. Source: armaninollp.com – By Paul O’Grady
Contable New accounting rules to challenge banking industry: ECB’s Nouy The introduction of a new accounting standard for financial instruments will be challenging for the banking industry, especially when it comes to modeling for expected losses, the European Central Bank’s supervisory chief said. “The completion of this accounting standard as one of the responses to the financial crisis will bring major changes and challenges to the industry, mainly regarding the implementation of the new expected loss model,” said Danièle Nouy, chair of the ECB’s banking supervisory arm. She was referring, in remarks for a speech to be delivered in Paris, to the introduction of the International Financial Reporting Standard 9 (IFRS 9), due to take effect from 2018. The rule was called for by leaders of the Group of 20 economies during the financial crisis, in which banks had proved too slow in covering for soured loans.
It marks a radical change for banks, requiring them to make some provision - at a level according to the bank’s view on the riskiness of a loan set against the economic outlook - even on the first day of the loan, and long before a default, the current trigger for provisioning. The rule was written by the International Accounting Standards Board but needs formal European Union endorsement to become mandatory in the 28-country bloc. This process is taking some time, raising doubts about the start date. Last week, Paul Ebling, a senior regulator at the Bank of England, said Britain’s top banks must comply with the IFRS 9 from 2018 even if there is delay in the rest of Europe. Source: Reuters – By Francesco Canepa and Mark Heinrich
Contable FASB aims to make business combinations easier According to the board, stakeholders had said that the requirement to retrospectively apply adjustments added cost and complexity to financial reporting, but did not “significantly improve the usefulness of the information provided to users.” ASU 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments, require that:
As part of its ongoing initiative to simplify GAAP, the Financial Accounting Standards Board has released an accounting standards update that eliminates the requirement to retrospectively account for adjustments made to provisional amounts recognized in a business combination.
• An acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. • The acquirer record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change
to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. • An entity present separately on the face of the income statement or disclose in the notes the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized. Partner insights The ASU applies to all entities that have reported provisional amounts for items in a business combination for which the accounting is incomplete by the end of the reporting period in which the combination occurs, and during the measurement pe-
riod have an adjustment to provisional amounts recognized. For public companies, the update will be effective Dec. 15, 2015, including interim periods within those fiscal years. It should be applied prospectively to adjustments to provisional amounts that occur after the effective date, with earlier application permitted for financial statements that have not been issued. For all other entities, the amendments in the update are effective for fiscal years beginning after Dec. 15, 2016, and interim periods within fiscal years beginning after Dec. 15, 2017, and should also be applied prospectively. Source: Accounting Today - By Daniel Hood
Contable New FASB proposals aimed at clarifying materiality In an effort to make financial statement disclosures more effective for organizations, the Financial Accounting Standards Board (FASB) on Sept. 24 issued two exposure drafts that address the concept of materiality. The use of materiality is a key component of the FASB’s disclosure framework project, the objective of which is to improve the effectiveness of disclosures in notes to financial statements. As part of the project, the exposure drafts address the use of materiality in: • Helping organizations employ discretion when determining what disclosures in notes to financial statements should be considered “material” in their particular circumstances. • Helping the FASB understand the reporting environment in which it sets financial accounting and reporting standards. The FASB revisited the concept of materiality after stakeholders indicated that the current discussion of materiality in
the board’s conceptual framework was inconsistent with the legal concept of materiality established nearly 40 years ago by the US Supreme Court. Federal law requires public companies to disclose material information, as defined by the High Court in 1976 in TSC Industries Inc. v. Northway Inc., that would present “a substantial likelihood that the disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered the ‘total mix’ of information made available.” This inconsistency “led to uncertainty about organizations’ abilities to interpret what disclosures are material and the board’s ability to identify and evaluate disclosure requirements in accounting standards,” FASB Chairman Russell Golden said in a written statement. “These proposals are intended to clarify materiality, which will help organizations improve the effectiveness of their disclosures by omitting immaterial information and focus communication with users on the material, relevant items,” he added.
The exposure draft containing amendments to FASB Concepts Statement No. 8, Conceptual Framework for Financial Reporting, aims to clarify the concept of materiality. Specifically, these amendments would be made to Chapter 3, Qualitative Characteristics of Useful Financial Information. The FASB decided that the simplest and most effective way to avoid creating uncertainty or confusion was to: • Make it clear that the FASB does not define materiality. • Delete the existing discussion and replace it with a broad observation of the US Supreme Court’s definition of materiality. The second exposure draft, Notes to Financial Statements (Topic 235): Assessing Whether Disclosures Are Material, intends to promote the appropriate use of discretion by organizations when deciding which disclosures should be considered material in their particular circumstances. The amendments to Topic 235 would apply to all types of organizations: public and private companies,
not-for-profit organizations, and employee benefit plans. The amendments in the exposure draft: • State that materiality is applied to quantitative and qualitative disclosures individually and in the aggregate in the context of the financial statements taken as a whole. Therefore, some, all, or none of the requirements in a disclosure may be material. • Refer to materiality as a legal concept. • State specifically that an omission of immaterial information is not an accounting error. Written comments on both exposure drafts should be submitted to the FASB by Dec. 8. Instructions on how to submit comments are contained in the exposure drafts. Proposed Amendments to Statement of Financial Accounting Concepts Proposed Accounting Standards Update Source: Accounting Web – By Jason Bramwell
Contable How to calculate par value in financial accounting bitrary value assigned to shares in order to fulfill state requirements. The par value is unrelated to the price at which the shares are first issued or their market price once they begin trading. The par value is stated in the company’s articles of incorporation and figures on the paper stock certificates that companies used to issue. Why is the par value of shares so low? Towards the high end of the range, AT&T’s par value is $1 per common share; by contrast, Apple has a par value of $0.00001 per share (that’s a thousandth of a penny.) Companies like to set a very low par value because it represents their legal capital, which must remain invested in the company and cannot be distributed to share-
holders. Another reason for setting a low par value is that when a company issues shares, it cannot sell them to investors at less than par value. How does one calculate the par value of issued shares for the purposes of financial reporting? You need two numbers to calculate a company’s par value of issued shares: (1.) the par value per share, and (2.) the number of shares that have been issued. The par value of common stock for the company is simply:
named ‘Common stock’. This is the stockholders’ equity section of the ATT’s 2014 year-end balance sheet: In this case: Par value of common stock = $1 x 6,495,231,088 = $6,495,231,088 On AT&T’s balance sheet, that number shows up as ‘6,495’ because all figures are expressed in millions of dollars. The $15,978 Social security bonus most retirees completely overlook
What is par value?
If you’re like most Americans, you’re a few years (or more) behind on your retirement savings. But a handful of little-known “Social Security secrets” could help ensure a boost in your retirement income. In fact, one MarketWatch reporter argues that if more Americans knew about this, the government would have to shell out an extra $10 billion annually. For example: one easy, 17-minute trick could pay you as much as $15,978 more... each year! Once you learn how to take advantage of all these loopholes, we think you could retire confidently with the peace of mind we’re all after.
The par value of a common share is an ar-
Source: The Motley Fool
Stocks have a par value. What is it and how do you calculate a company’s par value of common stock for financial accounting purposes? Bonds have a par value, of course – it’s just the principal amount. However, stocks can also have a par value. Below, you’ll learn what that par value represents and how to calculate the company’s par value of common stock for the purpose of financial accounting.
Par value of common stock = (Par value per share) x (Number of issued shares) The par value of issued shares often appears on the balance sheet as a line item
Contable Working in accounting for a tech startup Between HBO’s Silicon Valley, news of tech startups going public at premium valuations, and the allure of all-inclusive corporate campuses, the tech industry has never been hotter. For accountants, opportunities in the sector promise a mix of enjoyable work environments, significant growth prospects, and a change into something more dynamic than traditional public accounting. The appeal is very real—and justified—but may not be for everyone. Helping lead a business to new heights requires a unique skill set, demanding flexibility and a thirst for learning. To understand more about the ups and downs of accounting in the tech sector, The Accounting Path has been speaking with accountants in Silicon Valley and San Francisco, from companies like Netflix, Airbnb and others. Here are some of the big things they learned. The jobs don’t stay static—you have to be ready to explore In a world where “hypergrowth” is a common term, it should be no surprise that things can change quickly. Companies like Zenefits are growing astronomically quickly, with revenues in 2014 jumping twentyfold and growing again this year at record pace. It’s a rate of change that is
just not experienced in public accounting or many other corporate environments. The side-effect is that, where a manager at a Big Four firm can see with relative certainty what their day will include, and can assuredly predict their three– to five-year career path, accountants in the tech and startup space have no such luxury. If you’re thinking about pursuing a career in the tech industry, you need to bring a willingness to adapt and learn as new challenges are thrown out. Whether it’s learning how to conduct global consolidations on the fly or just seeing a need to create a new function and developing it yourself, the rapidly changing business will demand you have a flexible and proactive approach. You will be an explorer. Get dirty In most corporate roles, well-structured support systems have been ironed out over years of ongoing operations. Manager roles have established teams to support them, and accountants have a network of systems and resources at their disposal. While there’s always some level of reinvention and upheaval, most senior accountants will be managing people as much as anything. For anyone considering a shift into a technology startup, be prepared for inter-
view questions involving “rolling up your sleeves,” “getting dirty,” and “being in the weeds.” This is the reality of startup life. Even senior managers need to have the skills to go into SQL databases and solve a problem. It’s partly a question of resource constraints, and partly an attitude in the industry that everyone should be able to solve a problem thrown their way. It isn’t always glamorous, but it gets things done quickly. Stability is an option, but it comes with tradeoffs Silicon Valley and the broader tech sector are built on the ethos to fail fast (so you can ultimately be successful sooner). Depending on who you believe, somewhere between 75 and 90 percent of startups fail. As observers, we hear more about the successes at Facebook and Uber than the 10 to 20 startups that failed around them, with each failure taking their own share of accountants to the unemployment lines. For many, this is a virtuous cycle, filled with hope and optimism for eventually striking binary gold. For others, this threat of lost paychecks will have them looking the other way for a more stable option. For the more risk-averse, joining a startup at a later stage (Series C or D funding and beyond) can greatly improve its stability, but will also sacrifice the potential upside
on the equity that you could earn. It’s a simple matter of risk vs. reward and finding your place on that curve. The later stage the tech company (all the way to the fully formed Googles and Salesforces of the world), the more stability you’ll have, but the closer you will be to a “normal” job. While the culture embedded in these companies still fosters innovation and excellence, your opportunities to take the bull by the horns and build entirely new departments or functions will be limited. It will still be a great experience, although without the cut and thrust of a startup trying to solve the world’s problems from scratch, but perhaps that’s perfect for you. Choose your own adventure At the end of the day, there is so much demand, opportunity and diversity in the startup world, it is an opportunity for everyone to write their own story. There are undoubtedly risks, cultural differences to public accounting, and a demand for flexibility, but each of these can be mitigated partly by the companies you pursue. All the accountants interviewed by The Accounting Path as background for this story stated they wouldn’t go back and change their story—that the tech world, with all its nuances—was right for them. Source: Accounting Today - By Jon Liebtag
Auditoría Big companies voluntarily enhance audit committee disclosures While the SEC and PCAOB ponder what to do with auditor and audit committee reports, an increasing number of large companies have begun to include more audit committee disclosures on a voluntary basis, according to an analysis by the EY Center for Board Matters. The study looked at proxy statements of Fortune 100 companies for the last four consecutive years. The study found that, since 2012, Fortune 100 companies have, on a voluntary basis, significantly increased the information available about audit firm selection, retention and oversight, as reflect in the data below. Many companies are now enhancing their disclosures with the low-hanging fruit: disclosing that the audit committee is responsible for the appointment, compensation and oversight of the auditor; that selection of the outside auditor is in the best interests of the company and its shareholders; and that the audit committee considers non-audit services and fees when assessing the independence of the external auditor. Not surprisingly, however, not many companies tackled the trickier issues: for example, there is virtually no movement with regard to disclosure of the topics discussed by audit committee with the au-
re, these assessments were based “on criteria such as the independence and integrity of the external auditor and its controls and procedures; performance and qualifications, including expertise on the company and global reach relative to the company’s business; quality and effectiveness of the external auditor’s personnel and communications; appropriateness of fees; length of tenure and benefits of a longer tenure; and Public Company Accounting Oversight Board reports on firm and peers.” While none of the companies studied disclosed in 2012 that the audit committee was involved in lead partner selection, in 2015, 61% disclosed that information. The incidence of disclosure of the length of outside auditor tenure has also jumped: in 2012, only 25% of companies included that disclosure, while in 2015, 59% disclosed audit firm tenure. ditors: in 2015, only 8% identified topics that the audit committee raised with the outside auditors (other than those required by regulation), the same percentage as in 2012. The few companies that did provide this disclosure indicated that the topics included risk controls and compliance, cybersecurity and other information technology matters, pension funding and other investments.
With regard to auditor retention decisions, less than half of companies (39%) disclose the rationale of the audit committee in appointing the auditor, including the factors used in assessing the auditor’s quality and qualifications. However, that percentage has more than doubled since 2012, when only 17% of the companies studied disclosed that information. Among companies that did include this disclosu-
Of course, disclosure of auditor tenure is another aspect of the 2013 PCAOB proposal. Moreover, the SEC’s recent concept release (see this PubCo post) floats a number of possible disclosure mandates, in addition to auditor tenure, including the factors used by the audit committee in assessing independence and quality of the outside auditor, the audit committee’s rationale for auditor selection and the nature of the audit committee’s involvement
Auditoría Big companies voluntarily enhance audit committee disclosures in evaluating and approving the auditor’s compensation.
rests of the company and/or shareholders, up from 3% in 2012.
Some of the other changes in disclosure in 2015 as identified by EY are set forth below:
• 41% of companies disclosed that the audit committee considered the potential impact of rotating their external auditor, up from 3% in 2012.
• 71% of companies specified that the audit committee is responsible for the appointment, compensation and oversight of the auditor, compared to 41% in 2012. • 9% of companies explained the reason for year-over-year changes in fees paid to the external auditor, doubling the percentage of companies that did so in 2012. • 58% of companies explicitly stated their belief that their selection of the external auditor was in the best inte-
• 80% of companies noted that they consider non-audit services and fees when assessing the independence of the external auditor, compared to 11% in 2012. • 21% of companies disclosed that the audit committee was responsible for the auditor’s fee negotiations. In 2012, none of the companies provided this disclosure. EY also observed that, beginning in
2015, some companies began to discuss the benefits of longer audit firm tenure while providing a description of measures to protect auditor independence. Why is this going on now? EY suggests that, in addition to the various proposals and concept releases from the PCAOB and SEC, there have been a number of developments over the past year that have encouraged additional reporting. For one, some institutional investors have publicly called for disclosure of additional information relating to the audit and the audit committee’s oversight of the auditor. One investment fund issued proxy voting guidelines citing its expectations for disclosure relating to audit committee responsibilities and processes, issues on the audit committee’s
agenda and key decisions made. Similarly, a union pension fund has requested certain companies to indicate, among other things, the auditor’s tenure and the audit committee’s responsibility for auditor selection, oversight and fee negotiations, as well as periodic consideration of auditor rotation. Companies outside the Fortune 100 have also enhanced their audit committee disclosures. EY notes that, in December 2014, The Center for Audit Quality and Audit Analytics published the Audit Committee Transparency Barometer, which showed increased levels of voluntary disclosure regarding audit committee oversight of the auditor among the S&P 500 large-cap companies, S&P MidCap 400 companies and S&P SmallCap 600 companies. Source: cooleypubco.com – By Cydney Posner
Auditoría The necessary variables for audit quality, including joint responsibility Audit quality is a very relevant issue today—it always has been but is even more so in today’s business world. As a member of a board of a listed company, I strongly believe that audit quality is the joint responsibility of many bodies.
organizations has led to unacceptable and dysfunctional behavior. Or as Mark Carney, the Governor of the Bank of England, termed it in early June in his speech given at the Lord Mayor’s Banquet for Bankers and Merchants of the City of London, “ethical drift.”
The Framework for Audit Quality, recently developed by the International Auditing and Assurance Standards Board (IAASB), shows clearly the interactions between the preparers of financial information, those charged with governance, external auditors, users, and regulators. Whilst there can be absolutely no disagreement that the primary responsibility for performing quality audits rest with the auditors, I believe that the organization, particularly those charged with governance, have an equally important responsibility for audit quality as they recommend the appointment of the auditors and agree on the audit program. Clearly management, which interacts with the auditors on an ongoing basis and provides information and assurances, equally have a critical role in supporting audit quality. So too does the organization’s internal audit function and the regulator who, in many jurisdictions, oversees financial reporting and disclosures.
Organizations need a healthy culture as this is the only way to ensure that good governance and strong risk management is part of every employee’s purpose, which in turn drives sustained performance within a strong ethical ecosystem.
I do not believe that external audit is broken.
responsibility of management, not the auditor.
The financial crises we have been facing for more than six years has clearly led to serious questions being asked of the audit profession. The profession has been under scrutiny and will probably always be—such is the public interest in auditor quality.
In my time in business, I have seen some examples where the auditor should have been more assertive in expressing their views and disclosed concerns, but we need to be balanced in our judgement and not rush to the conclusion that the crises we have been facing are solely due to the external auditor. That would be completely wrong.
And while I welcome the reforms taking place, such as auditor rotation and the enhanced audit report, we must not forget that many of the issues have been the
It is clear to many of us that poor culture in
We all know that when we talk about culture it is often difficult to describe, quite elusive, and rather intangible. But we also normally know when the culture is not right. The leadership of organizations, particularly the boards, need to establish the culture they wish to see in the business. The UK Economic Social and Research Council and the Association of Chartered Certified Accountants (ACCA) have produced a series of four reports with the aim to assist boards in preparing to assess their corporate culture. All of these reports are useful for discussions with boards, across management, and within audit teams to drive improvements in organizations’ culture.
Auditoría The necessary variables for audit quality, including joint responsibility Culture clearly has to start at the top, but it needs to be aligned end embedded throughout the organization. Culture needs to be monitored consistently and, I believe, validated externally occasionally. We all need to understand the importance of regulations and codes, but must not be willfully compliant superficially. I used to like the concept of “comply or explain” but there is an increasing danger of believing that if we explain why we are not compliant it is acceptable and needs no further discussion. I now much prefer the emerging concept of “comply and explain”. And of course we need to reward corporate performance but in a manner where the reward takes into account good corporate behavior as well. In so far as we talk about culture in orga-
nizations, it is clearly important that auditors also need to understand the culture of the entities they audit, and align with that culture. As audit quality is a joint responsibility and a shared commitment between all players in the financial reporting chain, there are a number of variables that are necessary to ensure audit quality. We need high-quality audit teams of true professionals who are fairly rewarded (even if these professionals may be more expensive). The audit service should not be seen as a commodity. We need honest and transparent communication between all parties. We need a strong internal control environ-
ment, and I would suggest that every organization needs a strong and independent internal audit function. We need to establish financial reporting timetables that allow quality, and continuous, communication. There are also a number of necessary variables that are the key enablers for audit quality. We need a strong audit profession that is viable. If the audit practice is only viable because of the non-audit services there is something structurally wrong, and eventually we will face serious issues. We need effective governance in organizations, with strong, knowledgeable, and effective independent directors. But not so
independent that they do not really know and understand what they need to know. We also need a strong regulatory framework, with decisive interventions whenever necessary. We need engaged stakeholders prepared to challenge and question boards. And, of course, we need robust codes of ethics and behavior for both the audit profession and organizations. The IAASB’s new and revised auditor reporting standards are a welcome development in the desire to improve audit quality. Culture and channelling corporate behaviour: summary of findings Source: IFAC Global Knowledge Gateway By Alan Johnson
Auditoría Demands on internal audit growing faster than ever Internal audit has long pushed for more clout and recognition of its work. But in a prime example of “be careful what you wish for,” auditors are now overloaded by the demand from a number of internal and external sources.
in place in some countries.” Overcrowded agendas • As demands and responsibilities grow, so, too, do agendas.
According to a new report from the Institute of Internal Auditors Research Foundation, A Global View of Financial Services Auditing, “with growing demands from management, directors, regulators, and external auditors, internal audit is increasingly in a difficult position of serving multiple, sometimes inconsistent, masters with differing agendas.” Authors Jennifer Burke and Steven Jameson surveyed more than 14,000 internal auditors in 166 countries. Respondents indicated that their key challenges include regulatory requirements, managing governance committee agendas, heightened expectations, increased risks from cybercriminals, coordination of defense systems, and management of resource allocations.
• Boards of directors have turned to audit and risk committees to help them satisfy fiduciary responsibilities and provide some level of liability limitations against lawsuits and regulatory actions. • The financial sector has the highest number of formal audit committee meetings compared to all other organizations, averaging 6.7 meetings annually.
from internal audit. Operational risk is a close second. • Regulatory changes have larger impacts, with increasing disclosures.
Here’s a snapshot of findings in each category.
• Regulatory agencies have increased with expanded power.
Regulatory requirements
• Because of the operational impact of regulatory changes and the increased risk of lack of compliance, internal audit is much more involved in regulatory com-
• Compliance and regulatory risk tops the list of issues requiring the most attention
pliance issues. • Regulators expect more from internal audit. According to the report, “In some countries, the regulators also expect internal audit to review and comment on the risk and control culture within the organization. These expectations have been elevated to the point where some have suggested that maybe internal audit should have a formal, direct reporting relationship to the regulators. Various indirect reporting relationships are already
• The number of agenda items and presenters has grown, leading to lengthier meetings. Heightened expectations • Financial services internal auditors report far more often to the audit committee than do auditors in other industries. The majority (69 percent) of respondents report directly to the audit committee, compared to 54 percent across all industries. • Internal audit still assists external auditors; however, internal audit now also
Auditoría Demands on internal audit growing faster than ever must assist regulatory examiners almost as much as or more than external auditors. • Internal auditors have been asked to bypass normal or traditional resolution processes in challenging management, reporting to the board, and even reporting issues to regulators. According to the report, “Many internal auditors worry that the results of their work will be used by regulators to cite additional deficiencies in regulatory examination reports.” Cybersecurity • IT risks rank fourth among the top risks identified by chief audit executives and the percentage of time required to audit
those risks. The authors note, though, that senior managers, directors, regulators, and investors also worry about cyber-risks. • Broader data and privacy controls and programs that encompass preparation, detection, analysis, containment, eradication, and recovery are essential. Internal audit’s involvement in preparation “can yield big dividends” when a breach occurs, the report states. • Forty-three percent of respondents considered their company’s data breach risk as extensive. • Ten percent of respondents said they
hold an information systems audit certification, and 3 percent are certified in IT security. Three lines of defense • Seventy-eight percent of respondents in the financial sector follow the “Three Lines of Defense Model.” The first line is management controls and internal-control measures; the second line includes financial control, security, risk management, quality, inspection, and compliance; and the third line is internal audit. • It’s important that internal audit reports directly to the audit committee when different elements of the “three lines of de-
fense” report to the same executive. Internal audit resources • Chief audit executives ranked analytical and critical thinking as the top skill out of 14 for internal auditors. Accounting ranked sixth; fraud auditing was tenth. • Rotational chief audit executives who serve for a limited time while expanding audit approaches create challenges in continuity, independence, and even whether they understand standards and quality assessments, the report states. Source: Accounting Web - By Terry Sheridan
Auditoría FRC consults in readiness for EU audit rules sures to enhance confidence in the quality of audits and increase the value of auditor reporting to the investor community. These include retendering, enhanced and extended auditor and audit committee reporting, and increased transparency of the results of the its audit quality inspections.
The FRC is ramping up its activities as it strives to ensure that the new EU Audit Regulation and Directive regime is seamlessly implemented, and that the wider public’s trust in audit is strengthened. Central to that drive is the publication of a consultation on revisions to Ethical and Auditing Standards, the UK Corporate Governance Code and related Guidance on Audit Committees. The move marks the audit and accounting watchdog’s latest foray into underpinning public confidence in corporate governance and reporting by UK companies. Ever since the financial crisis unfolded, the FRC has introduced a number of mea-
Stephen Haddrill, FRC chief executive, said: “The Audit Regulation and Directive is large and complex. We are working closely with professional bodies to make sure the new regulatory regime works as effectively as possible.” “We must ensure that it builds on the progress made in the UK in recent years in terms of the quality of audit, that competition in the audit market is strengthened in a way that supports innovation, and that the regulatory regime that emerges provides confidence to investors and to firms by being fair, understandable and independent.” Reviews aplenty Last year the FRC announced that it would
enhance confidence in the quality of audit, and that its work would include recommendations from the then Competition Commission’s review of competition in the FTSE 350 audit market as well as the implementation of the new EU ARD; the development of best practice guidance for audit committees; and the assessment of whether ethical standards for audit remain fit for purpose.
The proposed changes to the code and the revised Ethical Standards and Auditing Standards will apply to financial periods beginning on or after 17 June 2016, ARD’s implementation date.
Hywel Ball, EY’s UK head of audit, said the FRC’s consultation was the “clearest indication yet” that the UK, along with 27 other EU member states, “is nearing the point where the rules of engagement between audit committee, auditor and provider of other professional services will be re-written”.
“UK PLCs will need to make strategic decisions about which professional services they wish to receive: when, where and from whom. Many services will have to be provided by firms other than the incumbent or future auditors,” he said.
“As expected, boardroom behaviour has been moving in advance of the regulatory changes and we have already seen a flood of companies issuing audit tenders and rotating their professional services providers this year. We expect at least 24 FTSE 100 audit tenders in 2015 alone, virtually all of which will result in a change of auditor.”
Ball said the new regulations would affect the procurement strategies of a wide range of professional services, and not just audit.
“Now that the regulators are on the home straight, time is running out for anyone who thinks they can start planning for these changes some other time. Today’s consultation from the FRC should be treated as a wake-up call for companies to put their procurement plans in place.” Source: Accountancy Age - By Chris Warmoll
RSE Corporate social impact initiatives make employees more loyal An opportunity to give back to society without having to give up a promising business career turns out to be a major incentive for valuable employees to stay. Companies are realising that, in order to have a sustained and large-scale social impact, their societal agenda has to be integrated with their core business. Creative thinking can help generate innovative business models for social engagement without undermining commercial objectives. The key is to take a long-term perspective, and to consider a broader-than-usual set of performance drivers. Of particular interest to forward-looking companies are the potential benefits from a human capital perspective. Many companies already have CSR departments coordinating short evening or weekend volunteering opportunities. However, such things rarely build upon the unique capabilities a company might have. Of late, interestingly, we have seen a new form of social engagement emerging - one that recognises that the social impact might be much larger if employees apply their existing skills from their commercial activities to social issues. At the same time, these projects also offer a chance for extending these skills in ways that might also be commercially relevant.
Having the opportunity to give back to society, while maintaining the privileges of a corporate job, ought to be something that employees value both personally and professionally. We should expect this to ultimately help companies improve their ability to retain top talent. However, existing academic literature offers few empirical studies that test this proposition in a rigorous fashion.
Social initiatives as a business
To fill this gap, I have been working on a study analysing more than six years of employee data from a leading global management consulting firm. The results have been published as the article “Corporate Social Initiatives and Employee Retention” (forthcoming in Organization Science, co-authored with Michelle Rogan and Christiane Bode). We found a strong link between retention rates and participation in a corporate social initiative (or “CSI” for short) being run by the firm as a business integrated with the rest of the organisation.
Importantly, the projects are not pro bono, as the company feels that such an approach would be neither scalable nor sustainable. Instead, clients are asked to pay, albeit at lower than commercial rates in order to ensure affordability. A really novel aspect of the model is that consultants are also asked to accept a salary reduction (up to 50 percent) and go without customary consulting perks (business-class travel and luxury hotels) for the duration of the project. Despite this requirement, there continues to be a long waiting list of employees keen on being staffed on a CSI project.
Since employee turnover is often cited as the top challenge facing HR departments, our findings hold major significance for companies, especially for would-be “social intrapreneurs” looking to buttress the business case for proactive social engagement.
The consulting firm in question offers its employees the option to step away from commercial client projects for a few months, and put their well-honed consulting skills to work for a project with an NGO, development agency or another organisation explicitly prioritising social impact – often in a developing world context.
Overall, we studied a database of 10,634 employees, including both those who participated and those who did not. Our analysis found that consultants who participated in CSI were up to 32 percent less likely to leave the firm relative to their
non-participating counterparts. On digging deeper into employees’ reasons for leaving as well as their performance record, it emerges that voluntary departures were indeed what made the difference and that the individuals retained due to CSI are also exactly the kind of high-performing individuals worth retaining. For the sceptics A sceptical reader might wonder whether the kind of individuals who opt into CSI would be more likely to stay with the firm anyway. That possibility occurred to us as well, and we addressed it in two ways. First, the stringent research criteria used ensure that our sample of participants and non-participants is comparable, at least on dimensions we observe. In addition, we surveyed current employees who had not yet participated in CSI in order to compare their interest in CSI with their stated enthusiasm for their day-today responsibilities. The survey revealed that, if anything, the employees most keen on CSI were slightly more likely, not less, to consider leaving their current role. In other words, innate, pre-existing differences between participants and non-participants in CSI are unlikely to be the full story behind the observed retention benefits.
RSE Corporate social impact initiatives make employees more loyal [the firm].” • “I certainly came back refreshed from my experience… It helped me stick around for another two years.” • “I think it flips a switch in your brain that even if development isn’t for you, you’ve had that experience… I feel very loyal toward [the firm] for providing me this opportunity.” Transition management and re-integration
The transformative effect of the CSI experience also came up over and over again in our numerous interviews with participants. Here are some representative quotes from the interview transcripts: • “Once I settled back into commercial practice, I realised that I really enjoy this kind of work… I was making more of a difference… Doing CSI was one of the reasons I wouldn’t move from
While the retention effects were positive on average, not all CSI projects were equally beneficial for retention. The retention effect was significantly stronger for participants in shorter CSI projects than for those whose CSI projects lasted six months or more. Moreover, the increase in retention rate disappeared entirely when we considered employees who served in far-afield emerging markets. This suggests a boundary condition for the overall finding: that there is such a thing as too much time away from business-as-usual and too much distance. The explanation is that, beyond a certain point, an employee’s connection back to the company’s commercial activities might become too weak. This is consistent with what we found in the interviews. Employees
found that the transition back into their normal work routine after CSI could be a challenge, especially when they had lost touch with their commercial peers. They noted that not enough effort went into re-integrating them back or applying the new skills gained from their unique experience into commercial work. These points imply that in order to derive the full business benefit from initiatives like CSI, companies would have to more carefully design the processes around the transition into and out of projects as well as maintain communication with the employees during such projects. While there would certainly be some employees that still feel the need to leave as their career goals just do not align with what the company can offer, the companies would still be better off doing their best to retain a subset that can see their continued relevance at the firm. Dollars and sense Our paper does not argue that mandatory participation for employees in initiatives like CSI would increase retention. The benefit, instead, comes from giving employees with an inherent interest in social impact the chance to participate. Firms that offer something like CSI provide
a new kind of career track that the more socially-minded employees value and are willing to stay for: one that allows them simultaneously to pursue a business career and engage closely with societal issues, rather than having to make a stark choice between one or the other. It’s hard to know the exact cost of replacing a highly skilled executive such as a management consultant, but some reports have placed it at over 200 percent of the executive’s annual salary. It therefore seems reasonable to conclude that this particular firm saved millions in turnover costs as a result of CSI. Therefore, despite the fact that CSI projects are not as profitable as commercial projects in terms of direct financial contribution, there starts to be a persuasive business case once broader considerations are taken into account. At a minimum, it certainly seems worth exploring whether initiatives like these might be a better way of spending the “CSR dollars” that a company would otherwise be spending - often on projects unrelated to where their competitive advantage and unique value creation lie. Corporate social initiatives and employee retention Source: Knowledge INSEAD (The Business School for the world) - By Jasjit Singh
RSE Brands can harness the power of CSR business functions and social responsibilities. CSR in its proper context is beyond giving. If companies look beyond cheque book charity and adopt initiatives that are in natural alignment, by minimising operational risks and in line with their business expertise, they can establish a strongly differentiated offering for all stakeholders.
The shift from sporadic social service to strategic CSR is important for companies. It has been over a year since corporate social responsibility (CSR) became a legislative mandate for companies. The voluminous 294-page act necessitates companies to set up a separate board committee and allocate 2 per cent of net profits in the last three years to CSR activities. This sounds simple and empirical, but leaves plenty of room for ambiguity. While NGOs are eagerly waiting for the floodgates to open, corporates are wondering where to start. The act raises questions regarding the very role of CSR in the context of a company’s
What companies should focus on, in order to be responsible, is to start CSR from the inside. A responsible company is one which operates its business with care on a day-to-day basis -be it consumers of its products or services, employees, suppliers, the environment through the energy or water it uses and the waste it creates, shareholders who expect a return, the government through timely payment of taxes, and a myriad other stakeholders it impacts depending on the scale and scope of the business. The company can, for example, encourage better work-life balance amongst its employees, move towards zero waste status, zero corruption policies and so on. This approach is far from the knee-jerk philanthropy that we often see such as building homes for the flood-affected, or protecting the environment with short term tree planting campaigns. Rather, it’s about conducting business in a way that
minimises the negative impact on society and the environment of one’s daily business operations, whilst maximising the positive impacts. It is about being proactive, not reactive. The reality is that CSR should be approached holistically and it must be integrated with the core business strategy for addressing social, environmental and economic impacts of businesses. It must address the well-being of all stakeholders and it must be remembered that philanthropic activities are only one small part of CSR, which otherwise constitutes a much larger set of activities entailing strategic business sustainability and responsibility. An example of how this has been done successfully is ITC, which has managed to embed responsibility into its business philosophy. It has been able to generate sustainable livelihood opportunities for around six million people through its community initiatives and has been carbon positive for nine successive years, water positive for 12 consecutive years and solid waste recycling positive for the last seven years.* Many may say that ITC undertakes more CSR initiatives than its due share because of the business it is in, but that still does not take away from the
work being done by the company. Mahindra & Mahindra embeds sustainability in the culture of the group. Their philosophy, ‘Rise for Good’ clubs governance, community, environment and people through a holistic approach. They have even built some businesses like Mahindra Rural Housing Finance and invested in electric cars to support the concept. Body Shop says it is an ethical cosmetics company that pioneered natural and ethically produced beauty products. It shunned animal testing which was an industry standard at the time. The company actively advocated self-esteem amongst women (even shunning the overly thin female models), supports fair trade, defends human rights and is sensitive to the protection of the planet throughout its global operations. The shift from sporadic social service to strategic CSR is important for companies not just to convince their stakeholders about their commitment, but to genuinely do business as a responsible corporate citizen for their own sustainability. Source: Business Standard - By Lulu Raghavan and Ruchi Gunewardene
RSE Aligning corporate social responsibility efforts Corporate social responsibility is an issue that Maltese companies have been addressing since a long time. However, there is still a pressing need for transformative and innovative economic and societal changes in order to include those too many who remained for too long excluded, to face climate issues, resources depletion, financial budgets’ pressure and the demographic changes. These all require a more collaborative and innovative approach – grounded within a sense of citizenship of people and institutions. This requires the real involvement of companies, governments, civil society, investors and other stakeholders to step up their individual and collective efforts. As the driving force behind economic growth, businesses – from small enterprises to multinationals – are uniquely positioned to help establish a more equitable, inclusive and sustainable society. Many business champ-ions have already developed circular business models leading to new opportunities and market leadership. However, a
organisations and more than 10,000 companies. The affiliation to CSR Europe was submitted and representatives of the organisation will be participating at the launch.
transformative change requires all companies to further integrate environmental, social, ethical and good governance approaches into their strategies and to focus on creating shared value. This is the true contribution of corporate responsibility to a sustainable world. With these concerns in mind, President Marie-Louise Coleiro Preca has stimulated and supported the creation of a collaborative mechanism to involve associations, enterprises and civil society, as well as any parties interested in CSR and sustainable development. In this context, a task force involving employers’ institutions, civil society organisations and individual companies – with the support of the Presidency – has
brought to life the Core Platform (corporate citizenship of responsible enterprises) to be launched on Thursday. This will comprise an international conference and two workshops addressed to companies and other interested institutions. The platform has the form of an association administered by an executive committee (chaired by the Chamber of Commerce and Industry with the secretary from the GRTU) with no political or union affiliation. It is non-profit making, voluntary and open. The task force has been in close contact with CSR Europe, the European organisation that represents 42 country CSR
This initiative had the support of the European Commission, represented by a director general and the team leader of the CSR task force. Moreover, GRACE, the Portuguese association member of CSR Europe, will also take part. The main purposes of the Core Platform are: to promote the concept of corporate citizenship and CSR by supporting debate, awareness, dissemination and activities developed by members and other parties; to promote exchange and mutual learning among members and associates, promoting a forum of discussion and exchange of good practices; to provide services to members and associates in the areas related to the objectives of the association; and to develop and organise CSR awards and promote events for their distribution. Source: Times Of Malta - By Maria João Rauch
RSE Branding and CSR go together ge with customers on a continuous basis. Companies must understand the two pronged approach that brand building calls for. Firstly, it is important to go about establishing the unique position of their brands in terms of quality or service or credibility in the minds of consumers. Secondly with CSR, companies must establish themselves as good corporate citizens. When a company can directly influence a particular problem or work towards a solution, it helps build a reputation and CSR in conjunction with regular branding activities can play a hugely influential role in impacting peoples’ perceptions of a company, product or service. The problem is that too many firms resort to ‘green washing’ purely for the purpose of public relations Corporate Social Responsibility (CSR) is all about stakeholder accountability, transparency in all dealings and sustainability. All this creates a ‘responsible’ halo around the business and helps companies build trust. It provides a platform of moral uprightness and establishes a company’s reputation in the minds of customers and employees. And this is absolutely crucial for brands as it helps to attract and enga-
A corporate or brand’s reputation is only as good as what exists in the public mind today. Maintaining it requires consistent and committed efforts which may be challenging as the business grows and other complexities demand more attention, subjecting the brand to vulnerability. By understanding stakeholder expectations, CSR can predict and pre-empt possible issues in the future and mitigate risks very early on. Organisations must therefore make it a regular practice to evaluate and pre-empt regulatory influences and pressures. Be it throu-
gh their own systems and strict standards by looking outwards or even benchmarking with other international companies and their world class practices, even if the organisation serves only local markets. The ability to seamlessly combine brand building and strategic CSR should therefore not be confined to any specific departments within an organisation. Rather, it should be integrated into the processes and systems and be continuously evaluated and actively managed from within. The problem is that too many organisations resort to ‘green washing’ purely for the purpose of public relations. These ad hoc philanthropic projects or short term environmental initiatives may well be unrelated to their business and have little value in building the resilience needed to truly enhance reputation amongst stakeholders. However if implemented in the right manner and with the right approach, brand building and CSR can perfectly complement each other. Consider IBM’s ‘Smarter Planet’ initiative. Launched six years ago, it was initially an advertising idea meant to communicate the company’s intent to share knowledge, start a dialogue with customers, and inspire their 400,000 plus workforce to see value in their research and thinking. But the campaign was
more than that; it was rooted in an idea that sought to make the world a better place. The ‘Let’s Build a Smarter Planet’ agenda was a call to such action. Importantly, the initiative was rooted in the company’s vision and ongoing business practices and therefore fully integrated into the business. Another example is Starbucks that has openly declared its commitment to conducting its business ethically. The company’s Business Ethics and Compliance programme supports the Starbucks’ mission and helps protect its culture and reputation, by providing resources that help its employees make ethical decisions at work. This programme develops and distributes awareness materials, including the Standards of Business; facilitates legal compliance and ethics training; investigates sensitive issues such as potential conflicts of interest; and provides additional channels for partners to voice concerns. There are many such companies all over the world whose experiences show that integrating branding and CSR can build a corporate culture around responsibility leading to business sustainability. Source: Business Standard – By Lulu Raghavan and Ruchi Gunewardene
Ética How to be a source of ethical influence in your company Have you ever wanted to keep your organization from doing something wrong and failed to get your point across? Or, are there times when you could keep your organization out of hot water, but no one will listen? It doesn’t help to know right from wrong if you can’t influence others to do the right thing. Utilize these five tactics to get your co-workers’ buy-in and influence ethical decisions in your organization. 1. Use the element of surprise If you want to be a source of influence in important ethical situations, don’t constantly point out minor ethical issues or criticize the ethics of your colleagues. Others will perceive that you think you’re ethically superior, and you’ll have no capital to spend when a truly important ethical issue comes along. Instead, choose your battles. Then, when you call attention to an ethical issue, you’ll be more successful if others are surprised to see you taking a stand. They’ll understand that this is an issue you regard as truly important. 2. Reason from the outside in Instead of making your case based only on your own beliefs, which may not be shared
by others, make your case in terms of how those outside of the organization may view matters. In this way, you’re not asking your colleagues to abandon their beliefs and adopt yours. You’re asking them to consider the judgment of other stakeholders. No one wants to admit they’re wrong when it comes to ethics. It’s easier to admit that others may take a negative view of an action and that this is an important factor to consider. 3. Argue from common goals Make your case in terms of goals that you probably share with your colleagues. When you try to make an ethical point, people often assume that you don’t share their goals. But, at least in the work place, there are usually at least some common goals. Suppose you want to stop cars with a potentially defective ignition switch from going into production. Buttress your position with the observation that it will be bad for the company if this gets out. It is far easier to accept a challenge from someone who is on the same team than it is to accept a challenge from someone playing a different game. 4. Go out in front When trying to convince others to do the
right thing, they may be worried about the consequences to themselves. Make it clear from the outset that you’ll do your best to be out in front if there’s criticism from above. Be sure that it doesn’t look as if you’re looking for credit as Mr./Ms. Right. Make it clear that if things go well, the team will get the credit. Once the team understands that you’re serious enough about the issue to take risks, your opinions are likely to get more respect. 5. Think ahead Bad ethical decisions are often made because making a good decision seems more difficult in the short run. When you’re trying to influence someone towards a good decision, bring the long-term consequences of what’s being decided into the picture. Emphasize how the decision made today eventually will become known and, when it does, there are likely to be consequences. It’s not enough to know what’s the right thing to do if you can’t influence your colleagues to recognize it as well. It’s important to be able to influence others to choose the ethical course. Using these sensible tactics will give you a better chance of influencing ethical decisions in your organization. Source: The Globe and Mail – By Mark Pastin
Ética Does your business need a code of ethics or conduct?
Does your business need a code of ethics, a code of conduct or both? What’s the difference? The difference is that an ethics code provides guidance about decision-making, while a code of conduct defines specific behaviors that are required as well as those that are prohibited. According to the Small Business Index
created by The Houston Chronicle, large corporations typically have both (and frequently combine them into a single governing document) to set a consistent standard of employee behavior throughout multiple departments that cross national, and in many cases, international boundaries. But while small companies can go about their business without any formal code,
creating one is a good practice for several reasons. A code of conduct and/or ethics: • Helps define the company culture. • Sets standards and expectations for employee behavior. • Serves as a marketing tool for potential customers and partners who prefer to do business with those who share similar values.
So while keeping in mind you probably should develop both kinds of codes, let’s take a look at each kind of code. Code of ethics A code of ethics accomplishes the following, according to Ethics Web: • Defines acceptable behaviors. • Promotes high standards of practice.
Ética Does your business need a code of ethics or conduct? • Provides a self-evaluation benchmark. • Establishes a framework for professional responsibilities. • Promotes/enhances your brand. In essence, your ethics code reflects your core values. It contains broad statements that reflect your company’s commitment to such concerns as: • Protection of intellectual property • Commitment to diversity • Promotion of good community relationships • Respect for cultural differences and how to respond when customs and laws in other countries conflict with our standards and expectations • Environmental responsibilities and actions • Safety practices • Financial and accounting maintenance and reporting practices • Compensation standards • Regulatory compliance • Professional standards and expectations As pointed out in Buzzle, “Business ethics is a very subjective issue, which creates various dimensions and interpretations to formal conduct…as an employer, who holds
an authority over the workforce, you need to identify these ethical conflicts and resolve them with absolute objectivity to foster a healthy environment and an efficient workforce.” Code of conduct If a code of ethics is more of a philosophical statement, then a code of conduct spells out whether specific behaviors or actions are acceptable or not acceptable. Why is this necessary? After all, don’t we all know right from wrong? We’d like to think so, but sometimes the dividing line isn’t quite clear. You shouldn’t have to point out that “borrowing” money for personal use from company coffers without authorization is stealing. But, ponder this question: is it ethical for you to partner with a company in a culture where some kind of “extra payment” to a senior manager is a routine part of doing business? In this country, we call that giving a bribe. Put that way, it’s obvious (or at least it should be obvious) it is unethical behavior. In other countries and cultures,
however, such payment just part of doing business. That’s where a code of ethics comes in. There can be no ambiguity about a policy that states: “We do not enter into side agreements that are not clearly stated in the contract terms. Terms and amounts of all payments are completely specified and transparent. We do not enter engage any ‘off the book’ payments under any circumstances. If a contractor, partner or customer requests such an arrangement, we will decline, even if it results ultimately in losing the business.” The code of conduct should also spell out how to report a violation of company policy or ethics, as well as the consequences for not report a violation or providing false information in an attempt to conceal the violation. Writing on LinkedIn’s Pulse blog, Frank Bucaro points out that in addition to reinforcing positive behavior, a code also needs to spell out behavior that is not tolerated and must be prevented. It includes such behaviors as: • Taking shortcuts to attain goals that may cause adverse side-effects
• Treating people disrespectfully, or in a biased manner based on race, gender, social class or religion • Incivility towards colleagues and customers • Use of corporate resources for personal use Why do you need codes of both ethics and conduct? Instituting both a code of ethics and a code of conduct has numerous benefits. These codes provide: • Consistent standards of conduct that promote teamwork, collaboration and mutual respect • Legal protection against actions that exploit gray areas or other ill-defined practices • Framework for employees to formulate decisions that align with shared values and are resolved openly, fairly and responsibly • Enhanced brand image that distinguishes the company as trustworthy, ethical, fair and open in company dealings with employees and customers • Common ground to interact with customers, suppliers, partners and other stakeholders Source: Business.com
Ética Ethical business decision-making
An effective ethics and compliance program, by definition, translates into ethical business decisions. Believe it or not, to bring ethics into the equation you do not need to be a philosopher, historian, or professional ethicist. Ethical decision-making is a discipline. It is an approach to identifying and resolving issues in the business context. Of course, it occurs in many other contexts. Nor can
ethical business decision-making be boiled down to just “doing the right thing.” There is more to it than that.
portant strategic decision to make – e.g. entering a new market, or leaving a market, or discontinuing a product line.
Applying ethics in the business context requires an awareness or sensitivity to ethical issues that may arise and a method to resolve relevant issues as part of an overall decision. To ensure adequate examination of ethical issues, there are a number of basic questions that can be examined. This approach can be applied in a variety of contexts and can be modified as appropriate to fit a company’s profile.
Here are some suggested questions to unearth and examine the ethical considerations of a specific decision.
Ethical business decisions often require a careful discussion among interested parties. The dialogue is important to conduct and evaluate. If regularly practiced, a company and its managers can apply this discipline in making important decisions based on ethical principles. I am not suggesting that every business decision requires a pow-wow and meeting among managers. But certain important and novel decisions should be subjected to a discussion and dialogue among interested parties. The process itself is an important reflection of a desire to bring ethics to the table for everyone to discuss. So assume that the company has an im-
1. What are the relevant facts of the issue? What do we know and what do we not know? Do we have enough facts to make a decision? 2. What are the options? Have we identified all relevant options and examined all possible options? 3. Will the company’s decision damage someone, some group or stakeholder(s)? How important are these concerns? 4. Does the decision present positive and negative alternatives resulting in a trade off?
our corporate values? 8.Considering all of the above factors, which option best addresses the situation? 9. If reported in the media tomorrow, what would public reaction be? 10. Assuming we decide on a specific option, how do we implement the decision with due regard for our stakeholders’ interests? These questions can be a good starting framework for ethical decision-making. They are not meant to be exhaustive but more illustrative. The questions can also provide a standard framework for important corporate decisions at the management, senior executive and corporate board level.
6. Which option will result in the greatest benefits with the least harm? What option best serves the company’s interest?
Legal compliance is a minimum requirement – you cannot make an ethical decision if you violate the law. However, a legal decision does not mean that it is an ethical decision. The consideration of business ethics factors is tied to corporate values, the culture of the company, and the company’s standing with its stakeholders and the public.
7. Which option is most consistent with
Source: lexology - By Michael Volkov
5. Does the issue involve more than legal compliance or economic efficiency?
Ética Stop ignoring ethics in business It’s just business, right?
to be,” said Professor Carlos Ortega, executive professor of business.
Ethics is relevant beyond the professional workplace. Regardless of whether it’s in the professional workplace, or right here on campus, ethical business policy affects our daily lives – and level of success. Many of us have listened to our professors warn us about the consequences of plagiarism at the start of the semester. UH has policies that outline ethical student conduct. Students enter into a kind of contract with UH when they enroll, understanding they can be failed or expelled if they violate it. In some cases, there are clear, black and white rules that tell us what is and is not ethical business behavior. When news of Volkswagen’s emissions scandal and Turing Pharmaceuticals’ 5,000 percent increase in the price of a pill (from $13.50 per pill to $750) was released, the public saw the two companies as yet another set of recent examples of unethical business practices. Advertisment Volkswagen clearly violated the law, but the pharmaceutical company crossed an unwritten ethical line.
Although sometimes difficult to define, ethics is not just a meaningless phrase to be tossed around by philosophers. Ethics can make or break a business, or even a professional career. Today, some might question the relevance of unethical, but still lawful business practices. Realistically speaking, hasn’t everyone at some point in their life told white lies, exaggerated the truth or crossed some moral or ethical line without feeling guilty?
“To a certain extent, people do follow the ethical standards of institutions and companies they work for,” said management information systems (MIS) senior Alan Ng. “How quickly people can change faces is up to them, but once they’re caught…it’s too late.”
According to Bloomberg Business in 2013, “only 21 percent of people characterized business executives as having “high” ethical standards—a little above lawyers (19 percent), but below bankers (28 percent) and journalists (28 percent).”
Ng also pointed out what is likely one of the most difficult problems of making ethical choices in business: Which action is considered ethical?
The same article notes that while some rely on an internal ethical sense to guide their choices, others conform and obey the rules management sets before them. Some may negotiate or rationalize potentially unethical situations or just take the route that is the most advantageous to them.
“[While] I choose not to teach or tell people how to make ethical decisions, there are certain things in business you’ll have to deal with. First, someone may ask you to do something unethical. Second, someone will behave unethically towards you. Decide beforehand what your response is going
He says “We don’t know.”
Ethics in business is “absolutely essential,” says Ortega. “Lots of companies and entrepreneurs get into trouble – if not in the short term then in the long term…Unethical decisions can cost you more in the long term.” Volkswagen is paying the price for its mistake, a total of $18 billion dollars. The CEO of Turing Pharmaceuticals also had to lower the price of the drug to stop the incessant criticism of his leadership. As consumers, we need to hold corporations and their leaders accountable when they cross the ethical line whether it is breaking the law or not. As students and professionals, we need to decide beforehand how far we are willing to go, and remember that we are defined by our choices. Source: The Cougar - By Sarah Kim
“El INCP se une a la consciencia ecológica para la conservación del equilibro ambiental. Sabías que de un árbol de 2,5 metros de alto se pueden producir 10.000 hojas? Pero según estudios mundiales el 70% resulta en la basura. Con el eGlobal no solo damos alcance a las necesidades de nuestros socios si no también ayudamos a preservar el planeta.”