Month: July 2020

The dictionary definition of humility says: “The quality or condition of being humble; modest opinion or estimate of one’s own importance, rank, etc.”

Humility is considered a state of being, highlighted by your behavior and approach to things. It’s also considered one of the virtues of the human condition, along with kindness, patience, diligence, charity, temperance and chastity.

Humility is often thought to occur in the absence of pride. To C.S. Lewis, pride was about competition and therefore not a virtue. Pride manifests in people thinking they are “cleverer” or “richer”, for instance.

On the other hand, in the absence of pride, you find humility, which sees no need for competition. In humility, you are nothing more and nothing less than the other people around you.

In essence, humility is not about hiding away or about becoming a ‘wallflower’, but it is about the realization your abilities and actions are not better or less. Humility doesn’t require the ranking of things, but it calls for the understanding of the true value or worth of things.

One important point about humility is how it can’t be faked. But this doesn’t mean humility is difficult; in fact, it’s one of the simplest things in the world. But the more you start thinking about how to be more humble, the harder you make it for yourself to actually be humble.

Instead of focusing on the humility within you, you should pay more attention to celebrating the achievements of others. It is by acknowledging others and understanding the universal values we all share that you start becoming more humble. In a way, understanding the vastness of the world around us can make us realize our own value and the humility we should feel.

Humility is the quality of being humble. Dictionary definitions accentuate humility as a low self-regard and sense of unworthiness. In a religious context humility can mean a recognition of self in relation to a deity (i.e. God) or deities, and subsequent submission to said deity as a member of that religion. Outside of a religious context, humility is defined as being “unselved”, a liberation from consciousness of self, a form of temperance that is neither having pride (or haughtiness) nor indulging in self-deprecation.

Humility is an outward expression of an appropriate inner, or self regard, and is contrasted with humiliation which is an imposition, often external, of shame upon a person. Humility may be misappropriated as ability to suffer humiliation through self-denouncements which in itself remains focused on self rather than low self-focus.

Humility, in various interpretations, is widely seen as a virtue which centers on low self-preoccupation, or unwillingness to put oneself forward, so it is in many religious and philosophical traditions, it contrasts with narcissism, hubris and other forms of pride and is an idealistic and rare intrinsic construct that has an extrinsic side.

Humility and leadership

Recent research suggests that humility is a quality of certain types of leaders. For example, Jim Collins and his colleagues found that a certain type of leader, whom they term “level 5”, possesses humility and fierce resolve. Humility is being studied as a trait that can enhance leadership effectiveness. The research suggests that humility is multi-dimensional and includes self-understanding and awareness, openness, and perspective taking.

Financial managers must have the skills to handle large sums of other peoples’ money, but skill alone isn’t enough. The potential for financial managers to line their own pockets or ruin a client or company through bad judgment is immense. It’s essential to have a code of ethics in finance and to live up to those principles every day.

Financial managers shouldn’t see the code as setting a limit on ethical behavior: Tick off all the boxes, and you’re good. Having ethics in finance means doing the right thing, even in situations that aren’t covered on the list. If in doubt, find someone with the standing to give you ethical guidance.

Conflicts of Interest

Underlying the role of ethics in financial management is a fiduciary duty. Managers must act in the interests of their clients and employers, not their own. If there’s a conflict of interest where you can enrich yourself while harming a client, you must side with the client.

Bernie Madoff, for example, served as both a broker for his clients and a custodian for their money. With both roles combined, there was no independent auditing of his operations, which made it easier to defraud his clients of millions.

That’s why establishing internal controls is essential. When the risk of exposure is high, it’s less tempting to steal.

Security and Information

In the networked 21st century, ethical conduct includes how you handle and secure information. The security breach at the Equifax credit bureau, for example, may have affected confidential credit and personal data belonging to 143 million Americans. Strategic CFO magazine suggests that a proper code of ethics could have led to better protection for people’s data and more transparency after the breach occurred.

Reputation and Ethics in Finance

Another role of ethics in financial management is to guard your and your employer’s reputation. If you act ethically, you’re in the clear. However, cross the lines, and you can destroy your company’s good name as well as your own.

Some regulators and lawmakers assumed the risk of scandal and loss of reputation were sufficient to discourage financial managers from acting unethically. Repeated financial mismanagement cases in the 21st century have shown that the largest finance companies can sail through a scandal with no loss of business.

Some industry analysts say tighter regulation is necessary because ethics in finance can’t withstand temptation.

Ethics in Finance vs. Rewards

One problem with living up to a code of ethics in finance is that the system sometimes rewards unethical behavior. If an organization rewards financial manager for making decisions that benefit the company, not the clients, some financial managers will stumble.

Wells Fargo, for example, wound up in trouble when it turned out employees had opened accounts without customers’ permission to meet sales targets. In the banking industry, misselling to customers is a serious breach of ethics. If the rewards system prioritizes targets over ethics, it’s too tempting for some to pass up.

Transparency

Financial documents reflect a company’s performance relative to its peers, and its internal strengths and weaknesses. Regulatory agencies require publicly traded companies to submit periodic financial statements and make full disclosures of material information. A change in the senior executive ranks, buyout offers, loss or win of a major contract and new product launches are examples of material information. Transparency also means explaining financial information clearly, especially for those who aren’t familiar with the company’s operations. Financial managers should not hide, obscure or otherwise render relevant financial information impossible for ordinary shareholders to understand.

Ethical violations

The most frequently occurring ethical violations in finance relate to insider trading, stakeholder interest versus stockholder interest, investment management, and campaign financing. Businesses in general and financial markets in particular are replete with examples of violations of trust and loyalty in both public and private dealings. Fraudulent financial dealings, influence peddling and corruption in governments, brokers not maintaining proper records of customer trading, cheating customers of their trading profits, unauthorized transactions, insider trading, misuse of customer funds for personal gain, mis-pricing customer trades, and corruption and larceny in banking have become common occurrences.

Insider trading is perhaps one of the most publicized unethical behaviors by traders. Insider trading refers to trading in the securities of a company to take advantage of material “inside” information about the company that is not available to the public. Such a trade is motivated by the possibility of generating extraordinary gain with the help of nonpublic information (information not yet made public). It gives the trader an unfair advantage over other traders in the same security. Insider trading was legal in some European countries until recently. In the United States, the 1984 Trading Sanctions Act made it illegal to trade in a security while in the possession of material non-public information. The law applies to both the insiders, who have access to nonpublic information, and the people with whom they share such information.

Professional ethics encompass the personal and corporate standards of behavior expected by professionals.

The word professionalism originally applied to vows of a religious order. By at least the year 1675, the term had seen secular application and was applied to the three learned professions: Divinity, Law, and Medicine. The term professionalism was also used for the military profession around this same time.

Professionals and those working in acknowledged professions exercise specialist knowledge and skill. How the use of this knowledge should be governed when providing a service to the public can be considered a moral issue and is termed professional ethics.

It is capable of making judgments, applying their skills, and reaching informed decisions in situations that the general public cannot because they have not attained the necessary knowledge and skills. One of the earliest examples of professional ethics is the Hippocratic oath to which medical doctors still adhere to this day.

Components

Some professional organizations may define their ethical approach in terms of a number of discrete components. Typically these include Honesty, Trustworthiness, Transparency, Accountability, Confidentiality, Objectivity, Respect, Obedience to the law, and Loyalty.

Implementation

Most professionals have internally enforced codes of practice that members of the profession must follow to prevent exploitation of the client and to preserve the integrity and reputation of the profession. This is not only for the benefit of the client but also for the benefit of those belonging to that profession. Disciplinary codes allow the profession to define a standard of conduct and ensure that individual practitioners meet this standard, by disciplining them from the professional body if they do not practice accordingly. This allows those professionals who act with a conscience to practice in the knowledge that they will not be undermined commercially by those who have fewer ethical qualms. It also maintains the public’s trust in the profession, encouraging the public to continue seeking their services.

Internal regulation

In cases where professional bodies regulate their own ethics, there are possibilities for such bodies to become self-serving and fail to follow their own ethical code when dealing with renegade members. This is particularly true of professions in which they have almost a complete monopoly on a particular area of knowledge. For example, until recently, the English courts deferred to the professional consensus on matters relating to their practice that lay outside case law and legislation.

Statutory regulation

In many countries there is some statutory regulation of professional ethical standards such as the statutory bodies that regulate nursing and midwifery in England and Wales. Failure to comply with these standards can thus become a matter for the courts.

Businesses today are technology and innovation driven. There is huge competition in the sphere and therefore like other industry or business function ethics is essential here also. Specially because ethics by itself is only a tool to create and doesn’t know ethics or morals!

Every day we have innovative products and services that announce their arrival in the market place and others that go obsolete. It is this technology and innovation that leads to ethical issues, considering the competition to stay ahead by innovating is immense. Issues like data mining, invasion to privacy, data theft and workplace monitoring are common and critical.

In technology we speak of ethics in two contexts; one is whether the pace of technological innovation is benefiting the humankind or not, the other is either severely empowering people while choking others for the same. Technology, for example, has drastically replaced people at work.

In the first case we are compelled to think about the pace at which technology is progressing. There are manifold implications here, be it things like computer security or viruses, Trojans, spam’s that invade the privacy of people or the fact the technology is promoting consumerism.

Nowadays data storage is primarily on computer systems. With the advent of internet technology the world has got interconnected and data can be accessed remotely by those who are otherwise unauthorized to do the same. This is one of the pitfalls of innovation. The other one i.e. the pace of technological change also raises the question of ethics.

New products make their way and leave the existing ones obsolete. In fact technological change and innovation is at the heart of consumerism, which is bad for economy and environment in general. The recent economic downturn makes up for a very good example.

Increasingly technological products are adding up to environmental degradation. Computer screens, keyboards, the ink used in the printers are some of the ways in which technology is polluting the environment. All these produce toxins that cannot be decomposed easily.

The other major issue in technology that brings in ethics is interface between technology and the computers. Many scientists are of the opinion that the world will come to an end with a war between the humankind and the technology. Technology they say will advance to an extent beyond the control of those who have made it!

No doubt technology has replaced people at work and made certain others redundant. On the flip side many people have been raised to power while others have been severely handicapped. The latter is especially true for third world countries. New manufacturing processes that are outsourced either replace manpower there or either exploits the latter in the name of employment by engaging them cheaper prices.

Technology has also made inroads into the field of medicine and life care. New cloning techniques, genetic modifications or other life saving drugs need continuous monitoring and surveillance. Bioethics has thus emerged as ethics in the field of medical technology.

Whereas we cannot talk of controlling technology and innovation, the better way is to adapt and change. The role of ethics in technology is of managing rather controlling the same. Continuous monitoring is required to keep track of latest innovations and technological changes and for ensuring fair practices.

Corporate culture represents the professional values a company adopts that dictate how it interacts with employees, vendors, partners and clients. The mission strategy of an organization is a summary of how the company perceives its role and the beliefs it uses to achieve its goals. Because the corporate culture is a driving force in how the company does business, it has an impact on developing business strategy.

Risk

The corporate culture dictates how much risk an organization is willing to take when it comes to research and development, client interaction, investing in equipment and any other activity that involves risk. If the corporate culture is one that promotes environmental responsibility, that will impact the risks that the company will take when developing new products. Assessing risk based on boundaries established by the company’s beliefs and sense of responsibility has an impact on corporate planning.

Employee Retention

When the company develops a policy of withholding information from employees, that can start to develop a culture of distrust among the staff. The ability to retain employees can be weakened when the promises made by the company in regards to company growth and employee opportunity are compromised by a lack of trust. Allowing the atmosphere of mistrust to become a part of corporate culture makes it difficult to execute employee retention plans as employees tend to not believe what the company tells them.

Incentive Pay

Incentive pay is something that employers use to improve productivity and maintain employee morale. But incentive programs need to be monitored and administered carefully to avoid creating a culture of expectation. If an incentive pay program is set up to reward employees that do not perform, that creates a dangerous culture precedent. For example, a profit-sharing program where every employee gets a bonus check regardless of performance will diminish the motivating effect of the program and cause employees to expect the bonus without having to perform even at baseline expectations. By instituting a system of checks that forces employee to reach certain performance levels before being able to take part in an incentive program, you help to create a culture of performance expectations. This makes the investment of a profit-sharing program viable and makes it into a motivational tool.

Focus

A corporate culture that each employee subscribes to helps to create focus among the staff. When employees abide by the company’s beliefs and values, it gives a unified impression to vendors, clients and partners. The company can then create a business strategy knowing that the entire organization will apply the guidelines in a uniform manner and improve the chances that a strategy will succeed.

An Emphasis on Excellence

When staffing levels are adequate to provide quality products or services to customers, and both safety and quality feel like a top priority, employees feel they work for a great company. If excellence is part of your company’s values, deciding to relentlessly pursue that end will attract employees that share the same value.

Belonging to a Team

When employees believe there’s a spirit of cooperation and a culture of diversity, they are free to bring their best work to the table. The kinds of organizations that are great at hiring people who fit within the culture tend to have employees who have fun at work and like the people they work with.

There are tons, but most can be resolved straight forwardly by encouraging people to share information with each other about their cultures. We used to do monthly pot luck lunches where people would each bring a native dish and take turns explaining them. In the process, you’d get a lot of non-food insight into their lifestyles. Toronto, where I worked for many years is the most mixed city and workforce in the world. In one business they hung everyone’s flags in the cafeteria – about 80. In my admin assistant’s church, some 40 languages were spoken. This mixing makes it much easier to overcome culture differences on the job, because everyone gets used to them pretty well everywhere.

The problematic issues were sometimes quite odd. A group of women from the same culture ran a lottery inside a few departments and anyone who didn’t buy a ticket was shunned and punished in various other ways a blackmail scheme really, since those who ran it kept about half the proceeds. Apparently this was common in their culture ‘back home.’

Occasionally we’d find a theft ring taking our products, usually to sell at flee markets and they’d reasonably often be based around family or culture members working in different locations, supported by others of the same from outside – gangs really.

Sometimes we’d find bosses or even work groups where promotions were given almost always to people of one culture. Of course, this is rampant all around the world with respect to the biggest culture divide of all – men versus women – where women are most often offered fewer promotions and paid less nearly everywhere and men are given the advantages. People can see and disagree with some ‘culture differences’ and can’t see or try to correct others.

Studies all prove that the best, most creative teams are mixed ones, but they take a bit more skill to manage, so you certainly find many, many bosses who assemble teams who are like themselves. In hiring it is a given that if there are two candidates the boss, if left to themselves, will almost always find a rationale for taking the one most like themselves. For that reason some companies now use hiring teams, sometimes even excluding the boss. Not sure if that fixes the problem.

Communication is one of the biggest issues in cross-cultural teams. While some people are more direct in their communication ( they say what they mean), people from some other cultures can be very indirect in their communication, especially in the presence of seniors. You need to watch out not only for what is said, but also the way it is said – the tone is as important as the words.

Time Management is another challenge in cross-cultural teams. Countries like Germany, Switzerland etc. are very time conscious and punctual, whereas Spain, Italy, India etc. are more relaxed in their attitude towards time. Long lunches, unplanned/sudden long coffee breaks are fairly common in these countries, where unplanned breaks might be frowned upon in Germany. Meetings, deadlines etc. need to be clearly communicated, and late coming needs to be appropriately dealt with early in the process.

Individual vs group cultures also clash in multi-cultural teams. While some people are comfortable saying”I will own this / I will do it” , many group cultures find the use of “I” uncomfortable, and use the plural form “we” a lot more even while addressing one-on-one messages. For example, “ we shall complete the process” is fairly common in mails from India to their British colleagues, who are left wondering who the “we” refers to, when the mail is addressed only to one individual. This can lead to problems in fixing accountability, and needs to be addressed in team meetings.

Hierarchy is a huge challenge in multi-cultural teams. In some places your value is derived from who you are, like your status, your family background, your seniority, your education etc. like India and in some others, like USA, the structure is more flat and you are valued for what you have accomplished. When such cultures interact, issues can open over openly challenging your manager, expressing opinions freely in meetings, saying ‘no’ to seniors/ clients, decision making and involvement of team members in the process etc. This can be addressed by openly discussing hierarchy in teams, and encouraging a flat operating model.

The Cadbury Report, titled Financial Aspects of Corporate Governance, is a report issued by “The Committee on the Financial Aspects of Corporate Governance” chaired by Adrian Cadbury that sets out recommendations on the arrangement of company boards and accounting systems to mitigate corporate governance risks and failures. The report was published in draft version in May 1992. Its revised and final version was issued in December of the same year. The report’s recommendations have been used to varying degrees to establish other codes such as those of the OECD, the European Union, the United States, the World Bank etc.

Background

Sridhar Arcot and Valentina Bruno in their article called “In Letter but not in Spirit: An Analysis of Corporate Governance in the UK” explain the background to the Cadbury Committee. Although wrong on the historical facts, as Robert Maxwell died on 5 November 1991 and “The Committee on the Financial Aspects of Corporate Governance” known as “The Cadbury Committee” was set up in May 1991 for other reasons than the Maxwell case, it gives an interesting reading of the situation at the time:

Robert Maxwell’s death while cruising on the Canary Islands in 1990 shone a spotlight on his company’s affairs. A series of risky acquisitions in the mid-eighties had led Maxwell Communications into high debts, which was being financed by diverting resources from the pension funds of his companies. After his disappearance, it emerged that the Mirror Group’s debts (one of Maxwell’s companies) vastly outweighed its assets, while £440 millions (GBP) were missing from the company’s pension funds. Despite the suspicion of manipulation of the pension schemes, there was a widespread feeling in the City of London that no action was taken by UK or US regulators against the Maxwell Communications Corp. Eventually, in 1992 Maxwell’s companies filed for bankruptcy protection in the UK and US. At around the same time the Bank of Credit and Commerce International (BCCI) went bust and lost billions of dollars for its depositors, shareholders and employees. Another company, Polly Peck, reported healthy profits one year while declaring bankruptcy the next. Following the raft of governance failures, Sir Adrian Cadbury chaired a committee whose aims were to investigate the British corporate governance system and to suggest improvements to restore investor confidence in the system. The Committee was set up in May 1991 by the Financial Reporting Council, the London Stock Exchange, and the accountancy profession. The report embodied recommendations based on practical experiences and with an eye on the US experience, further elaborated after a process of consultation and widely accepted. The final report was released in December 1992 and then applied to listed companies reporting their accounts after 30th June 1993.

Summary of recommendations

The boards of all listed companies should comply with the code of best practice set out by the committee.

As many companies as possible should aim at meeting its requirements.

The listed companies reporting in respect of years ending on or after 31 December, 1992, should make a statement about their compliance with the code in the report and accounts and give reasons for any areas of non-compliance.

Companies should publish their statement of compliance only after they have been the subject of review by the auditors.

The Auditing Practices Board should consider the extent and form that an endorsement by the auditors could take.