- Clare Payne is the inaugural EY Fellow for Trust and Ethics at EY Oceania.
- She says business leaders have a responsibility to speak in plain English and demystify finance issues for clients and the community.
- Chartered accountants can teach the rest of the business world a thing or two about ethical behaviour and retaining the public’s confidence, she says.
Story Ben Hurley
Photos Nic Walker
The term “economically active children” might make some think of their first savings account, or back to when they mowed the lawn for pocket money. But the true meaning is far more sinister. This reference to the use of child labour by companies operating in poor countries is an example of the doublespeak Clare Payne wants to see banished from the business world.
Payne is one of Australia’s most prominent ethicists and her recent appointment as EY Fellow for Trust and Ethics at EY Oceania demonstrates the increasing value big business is giving to the perception of trust or, in other words, having a social licence to operate.
High on her agenda is grappling with the way businesses manipulate language to desensitise people to harsh realities or create a false sense of security. The words they choose can either build or erode trust, Payne argues. She says business leaders have a responsibility to unpack this language and tell the truth.
“I bristle at the use of terms such as ‘economically active children’ for child labour or ‘cost offsets of premature mortality’ for suicide,” Payne says. “I think we should be very careful with using abstract terms that distance us from the ethical and moral dimensions of our work.”
This is especially important in industries bursting with acronyms and jargon, and she urges the accounting and finance professionals she works with to speak in plain English.
“As with all professions there’s a certain language that becomes understood by insiders, however it can be quite confusing to an outsider and distance the speaker from the human element of their work,” she says. “Using the actual words can connect you with the meaning of what you are doing and demystify things for clients and the community.”
Developing ethical frameworks
In her new role with EY Oceania, Payne will work at the accounting and professional services giant’s Sydney office at least two days a week. Her responsibilities include developing ethical decision-making frameworks to help guide the firm in making important choices.
She has been pleasantly surprised at how open the firm’s leadership has been to her role, and their deep willingness to engage with some of the great global challenges of our age. “The topic of trust and ethics applies to every single part of EY’s practice,” she says. “Every partner has views on it and has been thinking about it.”
A big attraction of the job was the opportunity to have a major impact by bringing a stronger ethical dimension to EY’s many clients.
“If the partners are thinking about it, their clients are thinking about it, too,” she says.
As a co-lecturer on business ethics at the University of Melbourne faculty of business and economics, Payne also sees her new role as potentially bridging academia and business. “By establishing this role EY are putting a new face to ethics and a new focus to this topic,” she says. “We’re taking ethics out from the philosophy rooms of universities… and really applying it to the current environment.”
Lessons from Australia’s banking Royal Commission
The need for the business and finance community to embrace practical ethics has perhaps never been greater. The 2018 Edelman Trust Barometer showed the lowest levels of public trust in governments and business since the global survey began in 2001. Locally, consumer cynicism towards the banks and big business is plumbing new depths.
The explosive revelations from Australia’s Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry have been making headlines for months. Throughout its hearings, there were many examples of the misuse of language that so irks Payne.
Financial Services Council chief executive Sally Loane came under fire when she described obligations for insurers under the Life Insurance Code of Practice as “aspirational”. National Australia Bank executive Andrew Hagger – who has since left the bank – was grilled over his assertion the bank had “left the door open” for the Australian Securities and Investments Commission to ask questions about the extent of its internal compensation estimates in the fees- for-no-service scandal.
Payne says business leaders from all sectors should look to learn from the scandals exposed by the Royal Commission, and a key lesson is that individuals will be held accountable for their decisions and actions.
“If you look at the Royal Commission you can see a real focus on the accountability of individuals,” Payne says. “We see individuals up on the stand, we see individuals named on the newspaper, we see photos of individuals coming out of the commission, we see individuals resigning, we see their emails… I’m sure when people watch it they think ‘Gosh, I wouldn’t want that to be me’.”
Raising the standards to manage risk
Unlike the banking, insurance and retail superannuation industries, Payne says accounting firms have largely retained the public’s confidence. And she believes chartered accountants can teach the rest of the business world a thing or two.
Accounting is a highly professionalised sector with ethics and a commitment to public service as core learning capabilities, she says. Accountants can be struck off if they don’t abide by internationally recognised standards.
In an age of fierce debate about the use of data and personal information, accountants have long been custodians of much financial information and are trusted to provide credible reports and audits.
“They [accountants] engage in a certain amount of self-regulation and you can see that, across [other] sectors, they are looking to bring in these qualities that chartered accountants have always worked to,” Payne says. “It should be a great relief for CAs to be part of a strong profession worldwide.”
The fallout from the Royal Commission is set to mean boom times for compliance and risk management specialists, and also for accounting and professional services firms.
“Since the global financial crisis we’ve already seen a sustained increase in regulation and compliance. This has of course resulted in much work for accountants, and a continued flow is almost certain,” Payne says. “However, it’s important that accountants remain cognisant of the true intent of the changes and communicate about the unintended consequences – both good and bad.”
As emerging technologies such as robotic process automation, artificial intelligence and machine learning develop, the accounting profession will need to focus on how to expand the human element in their business offerings – especially the concept of ‘client care’. “Accountants are the custodians of much valuable information, so what they do next will matter to us all,” Payne says.
Putting the public interest first is also of increasing importance. “As we see the social licence of business questioned and organisations turning to defining clearly their big picture purpose, accountants will also have to balance the inherent obligation they have to the public interest as a profession,” Payne says.
The International Ethics Standards Board for Accountants’ new and relatively untested Non-Compliance with Laws and Regulations (NOCLAR )ethics standard for auditors and other professional accountants has increased the level of responsibility to the public that accountants take on in their daily work, Payne says. Accountants can no longer turn a blind eye or claim they were just working to the brief.
“Some practitioners have expressed concern that they felt they were being asked to be like lawyers or detectives. So I think there’s still some discussion and guidance needed for the profession to really grasp what the change means.”
In the months before her appointment at EY, Payne worked as an adviser to Chartered Accountants Australia and New Zealand on the update to its ethics guide for members, which is due to come into effect from 1 January 2020.
“I think we should be very careful with using abstract terms that distance us from the ethical and moral dimensions of our work.”
Taking a stand with Tobacco Free Portfolios
Payne has a long CV in the field of ethics in banking and finance. After beginning her professional life in 1995 as a solicitor in employment and industrial relations with Arthur Andersen, she moved to Macquarie Group in 2000 as an in-house employment lawyer. Then she became head of the bank’s integrity office, where she helped the bank’s executive team weigh up important ethics and values-based aspects of decisions that affected the group.
From 2009 to 2017, Payne was a consulting fellow for ethics in banking and finance with the St James Ethics Centre in Sydney (now The Ethics Centre). Here she was the driving force behind developing The Banking and Finance Oath, an initiative for banking and finance professionals that aimed to restore trust in the industry following the financial crisis. The Oath includes a commitment for individuals to speak out against wrongdoing and support others who do the same.
The lawyer, ethicist, academic, activist, author and accomplished marathon swimmer (Payne is the only person on record to have swum from Coogee Beach to the Opera House, and she has swum the 46km around Manhattan Island), has already demonstrated stamina and tenacity when driving change on complex and entrenched issues.
Since 2015 she’s developed an international profile as chief of global strategy with Tobacco Free Portfolios, a not-for-profit activist group that persuades institutional investors to steer clear of tobacco companies. Working with its founder and chief executive, oncologist Dr Bronwyn King (another high-achieving swimmer), Payne has helped drive A$1.3 trillion in Australian funds under management away from tobacco investment. Globally the pledge has more than 130 signatories, representing more than US$6.8 trillion assets under management.
And in October 2018, the global ambassador for Tobacco Free Portfolios, Her Royal Highness Princess Dina Mired of Jordan, visited Sydney to launch Verified Tobacco Free – a certification stamp for its signatories to be rolled out from 2019.
Payne refers to the tobacco divestment debate as the ultimate ethical case study for the finance sector and says it was an easy issue for her to take a strong position on.
“Dr Bronwyn King and I often talk about tobacco as a justice issue,” she says. “Tobacco affects the poorest people in the world most acutely and the sector profits at the expense of others, including our governments.”
Being a professional agitator has made her unpopular in some quarters, but that’s fine.
“If my role with Tobacco Free Portfolios ever limits my other career opportunities then it’s likely a job I wouldn’t want anyway. I believe you should stand for something in this world but invariably it will mean you don’t bring everyone along with you, and that’s OK.”
The tremendous success of Tobacco Free Portfolios over the past 3? years has driven home to Payne the importance of fighting weasel words. She recalls how one of King’s early realisations in her fight against big tobacco was that even the so-called “greenie” opt-outs in some of Australia’s biggest funds – with health professionals as members – still had money in tobacco, despite being designated as “sustainable”, “ethical” or “socially responsible”.
Payne wants to see influential business giants like EY play a major role in ensuring the integrity of financial products. “It’s important that we can rely on terms such as ‘socially responsible’ and ‘sustainable’ and that the financial products have integrity with how they are being marketed.”
“If my role with Tobacco Free Portfolios ever limits my other career opportunities then it’s likely a job I wouldn’t want anyway. I believe you should stand for something in this world.”
New international and local Code of Ethics for accountants
Clearer and stronger guidance is being provided to help professional accountants navigate the ethical obligations and challenges they encounter.
The International Ethics Standards Board for Accountants (IESBA) released its revamped Code of Ethics for Professional Accountants (including International Independence Standards) (the Code) in April 2018, and it will apply from June 2019.
The new Code has the same fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behaviour but has been restructured and rewritten in a way to make it easier to understand.
“The fundamental principles included in the Code give all professional accountants clear principles to follow in their professional activities, regardless of career stage or type of role,” says Kristen Wydell FCA, General Manager Professional Standards at CA ANZ.
“The Code is equally applicable and important for members working in public practice, for corporate enterprises, not for profits or in academia.”
In response to this, standard setters in Australia and New Zealand have been updating their respective Codes for CA ANZ members. The key dates are summarised below.
DATES FOR APPLICATION OF NEW CODES
- To download the new IESBA Code visit: ethicsboard.org/restructured-code
- To download the existing Codes for CA ANZ members visit: charteredaccountantsanz.com/member-services/member-obligations/codes-and-standards
Need to discuss an ethical question?
- Australia: Call CA ANZ Professional Standards on (02) 9290 5627.
- New Zealand: Call CA ANZ Member Care on 0800 4 69422.
Still need more support with an ethical dilemma?
Contact the CA ANZ CA Advisory Group for counselling and support: charteredaccountantsanz.com/member-services/mentoring-and-support/ca-advisory-group