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Financial Performance Management and Reporting: Ensuring Unified Global Reporting

Explore the relevance of financial reporting, the impact of non-financial reporting on financial health, and the importance of ethical behavior in business. Discover guidelines for ethical behavior and the potential for creative financial reporting. Learn from past business ethics crises and develop guidelines for future business sustainability.

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Financial Performance Management and Reporting: Ensuring Unified Global Reporting

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  1. Marcus Evans - 6th Annual Conference Financial Performance Management and ReportingAlignment, Integration and Consolidation to Ensure Unified Global Reporting ETHICS IN BUSINESS AND REPORTING - 2008 BRIEF PRESENTATION BARCELONA – SEPTEMBER 2008 CSER AS A NEW STANDARD OF ANNUAL EXTERNALLY AUDITED FINANCIAL REPORTING Dr. Bob Boland Professor of Accounting International University in Geneva www.crelearning.com

  2. 1. RELEVANCE TO FINANCIAL REPORTING • Corporate financial reporting, is generally believed only when validated, by annual external professional audit. • Non-financial reporting of CSER (Corporate Social (ethical) and Environmental Responsibility), is reported in great public relations detail, but is generally is not validated by professional audit? • Can we believe it?

  3. 1. RELEVANCE TO FINANCIAL REPORTING • Could failure in CSER by our company or our stakeholders (shareholders, managers, staff, customers, suppliers, trade unions, community etc.) be our concern? • Are we responsible for our stakeholders? • What could we do? • Could IMPACT provide a useful relationship? • More anon.

  4. 1. RELEVANCE TO FINANCIAL REPORTING • Could failure in CSER affect our corporate stock price or even survival? • Does “non-financial” reporting (or failure), seriously affect the validity of our financial reporting of the financial health of the company? Are we responsible for it?

  5. 1. RELEVANCE TO FINANCIAL REPORTING • When things are going well, ethical corporate reporting is relatively easy, but when there is intense pressure for survival, then some “creativity” in financial and non-financial reporting, seems to be justified! • CESR (Corporate Environmental and Social Responsibility) is currently involved in a movement for “Business Sustainability” … with great enthusiasm. • BUT … alas there is not yet much enthusiasm for external CESR annual corporate audit , to VALIDATE the reality of business practices in the tough world of business. Do we all prefer out illusions rather than reality? • Cases

  6. 2. GUIDELINES FOR ETHICAL BEHAVIOR • Conscience of the person faced with a moral choice, with the penalty of feeling guilt, shame and remorse if we do the wrong thing • Judgment of the community and wider society, with the penalty of public opprobrium, disgrace and loss of status or 'face'. • Judicial judgment with fines and prison sentences, which comes into play if the first two are failing to curtail wrong behaviour. • Question: What is your personal ethics score out of 10? See the Ethics of Business book on Lulu.com • Cases

  7. 3. ETHICAL MINDS AND STANDARDS • Cultural differences: Europe, Middle East. India, Asia. • Religious differences: Christian, Moslem, Hindu, Buddhist. • The UN Global Compact (Exhibit A) sets out ten principles of CESR.

  8. 3. ETHICAL MINDS AND STANDARDS The UN Global Compact - ten principles of CESR 1. Support human rights. 2. Not allow human rights abuses (directly or indirectly indirectly through stakeholders e.g. managers, staff, suppliers, customers etc.) 3. Accept trade unions and collective bargaining. 4. No forced or compulsory labour 5. No child labour. 6. No employment discrimination 7. Environmental responsibility 8. Environmental protection 9. Environmentally friendly technologies.    10. No corruption – by any stakeholders

  9. 3. ETHICAL MINDS AND STANDARDS • So many UN and NGO’s are involved. • Question: Should we buy or sell our goods and services, with a developing country business that abuses children with forced labour at the age of 8 years? • Cases

  10. 4.ETHICAL IMPACTS • Pressure to survive • Continued employment • Environmental damage • Internal politics and whistle-blowers • Accounting standards • Global business realities • Cases

  11. 5.0 THE POTENTIAL FOR CREATIVE FINANCIAL REPORTING • Unlimited - with just basic accounting skills. Is helping management, by deliberately over-stating profits and assets ethical? What about deliberately under-stating? • Increasingly creative complex financial instruments and options • Tax - avoidance or evasion • Off-shore legalities & unlimited, with IT creative potential • Transfer prices in multi-centered accounting for tax economy. • Cases

  12. 6. BUSINESS ETHICS CRISES OF 2005-8 • USA • Europe • Middle East • Asia • Africa • Cases

  13. 7. DEVELOPING GUIDELINES FOR FUTUREBUSINESS SUSTAINABILITY 1. Recognize that ethical standards are necessary for business sustainability, to prevent Global Business becoming a Mafia-warfare, with unlimited harm done to others, in the name of profit and survival. 2. Recognize ethics as part of business company responsibility to Society, which requires validation in annual Financial and Non-financial (CESR) audit and reporting.

  14. 7. DEVELOPING GUIDELINES FOR THE FUTURE 3. Recognize that they Financial and Non-financial (CESR) reporting both need professional annual audit, to be recognized as valid measures for assessing the financial health of a company. 4. Recognize the reality of pressure for survival in business, as a critical influence on “creative” Financial and Non-financial reporting. Nobody seems to sympathise with a failed company, which has high CESR standards.

  15. 7. DEVELOPING GUIDELINES FOR THE FUTURE 5. Recognize that financial reporting must keep up with the ever increasingly complex international standards, whereby “under” as well as “over” statement of profits, assets and liabilities may be unacceptable. 6. Recognize that non-financial (CESR) reporting needs accepted realistic (culturally acceptable) international standards - like the UN Global Compact (Exhibit A) which is currently supported in principle but not yet in practice.

  16. 7. DEVELOPING GUIDELINES FOR THE FUTURE 7. Recognize that for annual CESR audit to be effective, it needs standardised auditing techniques, training, examinations, reporting and professional qualifications. Work on environmental audit has already progressed with ISO 14,000 and 9,000. 8. Encourage EVERY company stakeholder (shareholders, managers, staff, suppliers, customers, communities, trade unions etc.) believe and adopt ethical Financial and CESR standards of action and reporting.

  17. 7. DEVELOPING GUIDELINES FOR THE FUTURE 9. Encourage stock exchanges to require both annual Financial and CESR audit for listing and quotation. 10. Encourage World Bank, IMF, UN to require Financial and CESR audit, for funding projects. 11. Encourage all countries to require annual Financial and CESR audit for every business company.

  18. 7. DEVELOPING GUIDELINES FOR THE FUTURE 12. Encourage Government and Business to control each other ethically and publicly, with no excuses for unethical action. Give press freedom to investigate breaches of Financial and CESR reporting standards. 13. Encourage a generous reaction to honest financial reporting mistakes of judgment. 14. Encourage increase in critical civil servant pay to reduce the motivation for corruption, and then make legal penalties for corruption without limit.

  19. 77. DEVELOPING GUIDELINES FOR THE FUTURE 15. Encourage the teaching of business CESR in schools and university to achieve ethical values. Teach a code and practice of ethics, which is reality and not illusion: a. Positive b. Transparent c. Open to all at every level d. Varying culture and basic values e. Realistic in choosing between alternative evils f. Obeying law as a measure of honesty g. A norm of recognized business achievement

  20. 7. DEVELOPING GUIDELINES FOR THE FUTURE 16. Encourage one or two very successful multi-nationals , to set an example, and to begin … very carefully, to publicly adopt annual financial and annual non-financial (CESR) audit as a NORM of every business, and to publish results. This could begin a new “public image norm” that could motivate other companies to follow for the benefit of all the stakeholders of every business! For business sustainability and PREVENTION not merely diagnosis on CSER failure!!

  21. 7. DEVELOPING GUIDELINES FOR THE FUTURE Perhaps these suggestions are “impossible” , but like space travel and the internet … the “impossible” seems to happen so often nowadays, especially when it becomes, like “Sustainable environment” and “Business Sustainability” … a political … (not merely an ethical) … priority … ! Key skill of management in 2008 – SURVIVAL!!

  22. 7. DEVELOPING GUIDELINES FOR THE FUTURE • Perhaps you could be one of the first companies to do it and could prove that annual Financial and Non-financial (CESR) audit and reporting, is indeed good for the stock price and for business with a whole range of new benefits. • Then perhaps: “Ethics in Business Financial and Non-Financial Reporting”… • Can at last become a reality … rather than illusion … • On we go together …?

  23. 7. DEVELOPING GUIDELINES FOR THE FUTURE • The Institute of Chartered Accountants in London has always been regarded itself as: “Chartered Accountant - The Traditional Honest Man of Business” • and now the Institute has not one bit three guideline web sites for CESR: www.icaew.com/bettermarkets; www.icaew.com/ethics; www.icaew.com/. • This could be a first step towards CESR audit for all major companies, but the Institute is traditionally very cautious … and perhaps is waiting for you?

  24. EXHIBIT A – UN GLOBAL COMPACT 1. Support and respect the protection of internationally proclaimed human rights. 2. Not be complicit in human rights abuses.   3. Uphold the freedom of association and the effective recognition of the right to collective bargaining. 4. Eliminate all forms of forced and compulsory labour; 5. Effective abolition of child labour.

  25. EXHIBIT A – UN GLOBAL COMPACT 6. Eliminate discrimination in respect of employment and occupation.  7. Support a precautionary approach to environmental challenges. 8. Undertake initiatives to promote greater environmental responsibility. 9. Encourage the development and diffusion of environmentally friendly technologies.    10. Work against corruption in all its forms, including extortion and bribery by both the company, and its customers and suppliers.

  26. EXHIBIT B. POSTSCRIPT • Billions of dollars are donated each year for aid programs in Africa and other developing countries, where poverty and under-employment are the major causes of HIV/AIDS/TB/sickness/child death etc. • According to the World Bank, corruption of aid funding, may vary from about 20-70%. • In 2008 some aid program specialists are beginning to believe that simple aid funding to Africa is a complete waste of money. • They feel it would be far better to help African business to recover, develop and be much more effective.

  27. EXHIBIT B. POSTSCRIPT • They suggest: • Stop giving money away to the wrong people … • Promote local business … • Make people work for the money they get … • Promote cheap portable telephones, as a highly cost-effective tool, for effecting change in traditional cultural values and attitudes!” • Let BUSINESS activity be a key INFLUENCE to reduce the suffering of: poverty, sickness and under-employment in developing countries.

  28. EXHIBIT B. POSTSCRIPT • Perhaps, such business activity could directly support the many UN and NGO development projects in poverty environments and could be consistent with the UN Global Compact. • Perhaps this would that be an interesting CESR challenge for every multi-national business in 2008? See the IMPACT web site and make contact. • On we go … together … just one more thing …? • Dr. Bob Boland • www.crelearning.com • robertboland@wanadoo.fr

  29. IMPACT & CSER • Opportunity for Company Social & Environmental Responsibility (CSER). • IMPACT – THE INTERNATIONAL INITIATIVE AGAINST AVOIDABLE DISABLEMENT

  30. DISABLEMENT & POVERTY • Disabled people are the poorest of the world’s poor, of which about one in six are affected by moderate or severe disabilities. • One human being in every ten is disabled. • Many of the causes of disability are preventable or reversible

  31. UNITED NATIONS SUPPORT It was against this background that IMPACT in 1983, was formally set up by the United Nations General Assembly, on a resolution supported by the British government with the strong support of WHO, UNDP and UNICEF.

  32. IMPACT FOUNDATIONS • Twenty five years later in 2008 there are IMPACT Foundations (see websites) in the United Kingdom, Europe, USA, Asia and Africa. • They annually provide over a million pounds worldwide for: general health care, disability care, surgery, nutrition, immunization, mother/child survival etc. • They have several major sustainable health care projects, such as Lifeline Express Train (India), the Jobin-Tari Floating Hospital (Bangladesh) and so many disability care and prevention programs.

  33. NEW CSER RELATED IMPACT PLAN STARTING IN SEPTEMBER 2008 • Based in the World Health Organization Geneva complex, is a new small experimental IMPACT plan starting in September 2008. • IMPACT – Geneva/Suisse is designed to encourage the ”Social Responsibility of Business” to fund short-term specific small “micro-health care” projects for children in relevant countries, and thus to provide rapid honest help with problems of child disablement, health care and poverty.

  34. PROJECT – ONE FUNDING COMPANY & ONE RESPONSIBLE MD • For each project there must be just one Company funding and one reliable local MD taking complete responsibility. • Each project will cost only from CHF (Swiss Francs) 1,000 - 25,000, so that it can be rapidly approved, financed, started, finished and honest rapid feedback (positive and negative) within 3 months.

  35. RESULTS RAPIDLY AND HONESTLY REPORTED – SUCCESS & FAILURE • Thus the lessons of new unexpected difficulties in the poverty of developing country environments could be revealed and learned!! • We learn more from failure than success! So we must NOT keep it secret!

  36. TRANSPARENCY WEB SITE TO MAKE FULL DATA FREELY AVAILABLE TO ALL • An IMPACT- Geneva web site to be set up to show members of the responsible organizing committee. • Dr. Kevin McGrath (Chief) - Coordinator of IMPACT worldwide in WHO Geneva 2000 and former UN/UNDP/WHO official and resident representative in many developing countries in Asia, Africa and Eastern Europe. • Other members to be invited.

  37. TRANSPARENCY WEB SITE TO MAKE FULL DATA FREELY AVAILABLE TO ALL • List of projects becoming available for evaluation and funding. • List of Business Companies which agree to fund each year, just one small chosen project (CHF (Swiss Francs) 1,000 - 25,000).

  38. TRANSPARENCY WEB SITE TO MAKE FULL DATA FREELY AVAILABLE TO ALL Each company will be publicly recognized for its CSER (Corporate Social and Environmental Responsibility), with a specific IMPACT project. The specific project will be for specific health and disablement care problems of specific people, in a specific country, in which perhaps the Company’s own products and services are actually being sourced, produced or marketed. Good CSER?

  39. OPPORTUNITIES FOR CSER • Perhaps, with CSER audit, business activity will more directly support the many UN and NGO development projects in the disablement, health and poverty environmentss, of the developing world. This would indeed be consistent with the UN Global Compact. • Perhaps this is the interesting CESR challenge for every multi-national business in 2008?

  40. CSER – ILLUSIONS TO REALITY • CSER progress is difficult and slow. • Perhaps can achieve CSER annual external audit and just one small well publicised IMPACT project each year, to help us to change our traditional attitudes and illusions.

  41. CSER – ILLUSIONS TO REALITY • Perhaps we can make progress towards a reality of real CSER in our company, that we are proud to be publicized and to leave as a memory to our successors and our children? • Make contact? On we go … together? • Dr. Bob Boland www.crelearning.com • robertboland@wanadoo.fr

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