Request for research participants: Ethics of performance appraisal

dreamstime_xs_22737173Researchers from Macquarie University are seeking participants for a study into people’s experiences of performance appraisal or management in their workplaces. The aim is to develop a framework for conducting performance appraisals or management ethically.

Researchers are seeking to conduct interviews of approximately 45 minutes with people who have been employed in a professional role for at least 5 years. The interview will cover your experiences and views of the performance appraisal or management you have experienced.

All individuals and organisations participating in the study will remain anonymous.

Participation is entirely voluntarily. A small gift voucher ($50) to a bookstore will be provided to thank you for your time. Summarised findings of the study will also be made available to all participants on request.

If you are interested in participating, please contact the chief investigator, Dr Dale Tweedie, at: dale.tweedie@mq.edu.au.

The ethical aspects of this study have been approved by the Macquarie University Human Research Ethics Committee.  If you have any complaints or reservations about any ethical aspect of your participation in this research, you may contact the Committee through the Director, Research Ethics (telephone (02) 9850 7854; email ethics@mq.edu.au). Any complaint you make will be treated in confidence and investigated, and you will be informed of the outcome.

Who Should Be A Director?

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dreamstime_s_51900283Directors are critical to organisations’ long-term success. Regulators and other stakeholders are also increasingly looking to directors to provide ethical corporate leadership as well as strategic oversight. But how do organisations – or potential directors – decide who should fill this role?

A recent report by Mr Patrick Gallagher (FCPA) and Prof. Nonna Martinov-Bennie – Who Should Be A Director? – addresses this question. The report is the first in a new series of thought-leadership papers by IGAP and CPA Australia on contemporary national and international governance issues.

The report is a primarily a guide to, and discussion of, the 3rd edition of the Australian Security Exchange’s (ASX) Corporate Governance Principles and Recommendations (ASXPR) (2014). The report covers three main areas:

  1. The main principles of ASXPR2014, with a comparison to international governance standards;
  2. The skills and characteristics directors and boards need, including character, knowledge and formal ‘independence’ requirements; and,
  3. The benefits of board diversity.

Understanding ASXPR (2014).

ASXPR 2014 applies to all listed entities in Australia. It has eight principles and 29 more specific recommendations, with additional explanation and recommendations in accompanying commentaries.

According to Gallagher and Martinov-Bennie, the most important ‘foundational rules’ about should be a director are contained in ASXPR Principle 2, which emphasises that:

a listed Entity should have a board of an appropriate size, composition, skills and commitment to enable it to discharge its duties effectively.

This principle requires that all directors bring skills, character and insight that enable the board to meet its responsibilities.

Director skills and characteristics

While any person can legally be a Director, Gallagher and Martinov-Bennie emphasise that good corporate governance requires close attention to the skills of both individual directors and the board as a whole.

ASXPR Principle 1 provides further insight into these skills. Gallagher and Martinov-Bennie highlight the value of the commentary to Principle 1, which ‘effectively states a range of expected functions that directors must fulfil’.

This commentary indicates attributes a Director must bring, which include leadership, strategic understanding and financial knowledge, and also the personal skills and character to challenge powerful individuals or interests when required.

Gallagher and Martinov-Bennie also outline important formal requirements for directors to be ‘independent’. However, they stress that – in itself – being independent is not enough to be a good director: Directors must also bring the right mix of skills, knowledge and capabilities.

Benefits of board diversity

ASXPR2014 (1.5) recommends that boards should have a diversity policy, disclose this policy and report on their performance in encouraging diversity.

Gallagher and Martinov-Bennie state that the wording of this recommendation implies that ‘gender diversity is at the heart of ambitions for new corporate governance thinking within Australia’.

While some may view diversity as an imposition, Gallagher and Martinov-Bennie highlight key benefits of greater gender diversity that have emerged from extensive research. These benefits can include:

  • Improved board performance;
  • A better mix of leadership skills; and
  • Access to a wider talent pool.

Final thoughts: Setting the tone

So ‘Who should be a Director?

ASXPR2014 sets out key principles that ASX-listed boards must understand and apply. But Gallagher and Martinov-Bennie also observe that ‘every corporation is different and faces different circumstances from time to time’.

Hence, they argue, the good director not only understands the fundamental principles of good corporate governance, but is also attentive to the ‘needs of the corporation, its shareholders and other stakeholders’.

For Gallagher and Martinov-Bennie, two key principles encapsulate the approach that directors and boards should be able to enact:

  1. The board must set the tone for the whole corporation; and
  2. The tone needs to ensure an ethical and responsible organisation.

Prospective directors need to ensure they have the skills and knowledge to meet these challenges.

Will Integrated Reporting improve sustainability? Part II – Communicating Value

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dreamstime_s_42615032Dr Dale Tweedie and Prof. Nonna Martinov-Bennie.

This is the second in a series of blogs that asks whether Integrated Reporting can contribute to sustainability, where sustainability means a replicable and just use of natural and social resources.

Our last blog highlighted one key difference between an Integrated Report and a sustainability report: That an Integrated Report describes natural and social resources from the company’s point of view.

This blog explores a second difference, which is that an Integrated Report is more about helping companies communicate than holding companies accountable. As a result, whether Integrated Reporting makes companies more sustainable depends on what and to whom companies choose to communicate.

Reporting and corporate change.

There are at least two ways that any report might change a company’s behaviour:

  1. A report may enable someone – a shareholder, an employee or a regulator – to hold a company accountable for its actions. Sustainability reporting is often viewed this way. For instance, having multi-national companies report against global labour rights may enable civil society to better enforce these standards.
  2. A report may change behaviour by changing relationships, or by starting new conversations. For example, GRI 4 requires companies to engage with stakeholders to determine their concerns. If this discussion changes how companies act, then the process of GRI reporting could change companies’ behaviour by initiating structured conversations between the company and the people it affects.

In our view, the potential of Integrated Reporting to change behaviour is more through the second mechanism than the first. That is, the potential for Integrated Reports to improve sustainability is less about making organisations more accountable, and more about creating different discussions between organisations and their stakeholders.

Communication into action

Viewed in this light, whether Integrated Reporting improves sustainability depends on what kinds of conversations an Integrated Report enables, and whether companies choose to use Integrated Reporting to initiate these conversations.

Internal conversations

Integrated Reporting might provide space and vocabulary within firms to have conversations that might not otherwise occur, especially at board and management level.

There are many people within most companies who are genuinely committed to sustainability, but whose companies may not have a culture of discussing sustainability issues. The language of six capitals might enable more serious discussions about long-term connections between companies and social and environmental issues, especially at senior levels.

External conversations

Although targeted at investors, the six capitals framework might allow organisations to more rigorously engage with stakeholders’ concerns.

For example, a common view amongst academics is that companies need social legitimacy to operate over the long term, sometimes called a social licence to operate. Integrated Reporting might allow organisations to have better conversations about preserving their social licence to operate by creating a common vocabulary in which these conversations can occur.

Implications for Integrated Reporting

Thinking about Integrated Reporting as more a vocabulary than an accountability mechanism has three implications for how companies should use an Integrated Report.

  1. There is no value in simply delegating an Integrated Report to the sustainability reporting team. Since the potential value of an Integrated Report is the conversations it could enable, the only substantive reason to produce an Integrated report is to start discussions between the sustainability team and finance, marketing, management and the board, especially about where the company, environment and society will be in five, ten or twenty years’ time.
  2. Issuing an Integrated Report is unlikely to satisfy public critics of a company’s sustainability record. On present evidence, Integrated Reports are not comparable enough to hold companies accountable on their social and environmental performance. Instead, the value of an Integrated Report is if companies are able to use the reporting framework – and the idea of six capitals it contains – to engage rather than placate concerned stakeholders.
  3. Stakeholder engagement is a key area for future development of the Integrated Reporting Framework. The current Framework requires companies to consider the ‘legitimate interests’ of stakeholders, and provides a language and format for this consideration. But – unlike GRI 4 for instance – there is little guidance on how this engagement should occur in practice.

Next time…

Based on our recent article, our next blog will consider the claim that Integrated Reporting encourages ‘integrated thinking’. What does this mean, and how – if at all – is it relevant to sustainability?

In the meantime, any thoughts or questions most welcome.

Request for research participants: Management accounting ethics

Researchers from the International Governance and Performance (IGAP) research centre at Macquarie University, Sydney, are seeking participants for a study that investigates how professional management accountants, or people with management accounting training and qualifications, interpret their organisational role, and how they manage different organisational and professional / ethical obligations.

Researchers are seeking to conduct interviews of approximately one hour with people who are:

  1. working in management accounting roles, or in roles that use management accounting skills; and
  2. members of a professional accounting association.

Participation is entirely voluntarily, and no remuneration will provided. However, the summarised findings of the study will be made available to all participants on request. All individuals and organisations participating in the study will remain anonymous.

If you are interested in participating, please contact the chief investigator, Dr Dale Tweedie, at: dale.tweedie@mq.edu.au.

The ethical aspects of this study have been approved by the Macquarie University Human Research Ethics Committee. If you have any complaints or reservations about any ethical aspect of your participation in this research, you may contact the Committee through the Director, Research Ethics (telephone (02) 9850 7854; email ethics@mq.edu.au). Any complaint you make will be treated in confidence and investigated, and you will be informed of the outcome.

 

Safety at Work: Policy meets performance

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???????????????????????????????????????????????????????????????????????????????????????????????????????????????????????discussion of Dr Sharron O’Neill’s research with Safe Work Australia in late 2014 – by WHS consultant Kevin Jones – highlighted how better WHS accounting might improve both work, health and safety (WHS) policy and performance.

Jones reported on the 2014 annual Australian Council of Trade Unions (ACTU) conference on occupational health and safety, which was held in Melbourne last October. The conference was addressed by the ALP Shadow Minister for Employment Relations: Brendan O’Connor MP.

According to Mr O’Conner, the Royal Commission into the Home Insulation Scheme risks distracting attention from broader deficiencies in the WHS laws that should ‘protect the interests of working people, particularly young workers’.

Whether legal reform can improve WHS outcomes is a matter of debate. Jones’s view is that the needed changes are:

unlikely to come through laws, particularly as OHS/WHS laws remain a State responsibility. Change will need to be attempted through modifying the public services’ processes of consultation and collaboration of safety-related matters.

However, the Shadow Minister also discussed the economic argument for improving WHS policy and performance, which suggests that WHS accounting has a critical role to play:

If you look at the costs that are borne by a community because of bad health and safety laws, on economic grounds you win the argument, leave aside the fact that you’ve torn a family or community apart because of injury or death.

If the economic grounds of WHS are indeed central to the public policy argument, then accounting needs to be able to bring the costs of WHS into both public policy discussions and organisations’ reports in a clear and comparable way.

As Dr O’Neill’s presentations on WHS reporting have shown, both financial and non-financial accounting has some way to go to adequately recognise either the community or organisational costs of WHS practices, or to effectively communicate good WHS practices to stakeholders.

But if the current standard of WHS reporting is part of the problem, then new WHS reporting mechanisms, which Dr O’Neill’s research is helping to develop, have the capacity to be an important part of the solution.

For more information on this research, or on improving WHS performance in your organisation, contact Dr O’Neill at: sharron.oneill@mq.edu.au.

Communicating Safety: Avoiding common mistakes

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???????????????????????????????????????????????????????????????????????????????????????????????A discussion by James Harkness (for Zenergy Recruitment), headed Reporting on WHS: where companies go wrong, illustrates how IGAP’s Dr Sharron O’Neill’s research on work health and safety (WHS) can improve how organisations communicate their safety practices.

Harkness cites Dr O’Neill’s presentation at Safe Work Australia’s Virtual Seminar Series in October, which found a large gap between the WHS information stakeholders want and what annual reports provide.

Some common mistakes organisations make are:

  • Providing a generic statement of commitment to WHS, but without detailed information on WHS governance;
  • Failing to provide key lead and lag indicators, which can deliver important evidence on whether WHS practices are effective;
  • Providing limited evidence on whether audits and training sessions are effective;
  • A lack of consistent indicators and evidence e.g. Using different names for the same indicator, failing to define their indicators or failing to stick to their definitions;
  • Being reluctant to talk about the severity of injuries, effectively hiding the impact of gaps in companies’ health and safety systems; and
  • Building inaccurate narratives around their data.

By contrast, for best-practice WHS reporting in annual reports, organisations should:

  • Recognise who the users of the report are;
  • Clearly articulate their WHS vision;
  • Identify their critical risks;
  • Outline how risks are being managed; and
  • Acknowledge the consequences of failure;
  • Provide analysis where there has been a serious injury or illness: What happened, what was the cause, what is the lesson, what is being done to prevent this occurring again.

Where poor WHS reporting can be confusing or misleading, Dr O’Neill’s address highlighted how best-practice WHS reporting in annual reports can help instil confidence in an organisation’s WHS performance and practices in its stakeholders.

For more information on this research, or on improving WHS performance in your organisation, contact Dr O’Neill at: sharron.oneill@mq.edu.au.

Podcasts: Ethics and the Professional Accountant

dreamstime_m_16826054In 2013 CPA Australia’s In the Black magazine hosted a series of informative and entertaining podcasts on ethical behaviour and the professional identity of accountants, with Professor Sally Gunz.

Sally is Professor of Professional Ethics and Business Law at the University of Waterloo in Canada, and the Director of the Centre for Accounting Ethics. She visited Macquarie University’s International Governance and Performance (IGAP) Research Centre in mid-2013, and discussed ethics with Dr Eva Tsahuridu, Policy Adviser at CPA Australia.

The pod-casts cover three themes:

1. common ethical challenges.

2. ethical obligations; and

2. professional trust, obligation and crises of consciousness;

This series explores ethical challenges facing professional accountants across different industries, including in public practice, not-for-profits, business and the public sector.

For Professor Gunz, the common ethical obligation for all professional accountants to consider is serving the public interest:

“It always comes back to the ultimate responsibility to serve the public. You have to remember as a professional of any stripe that even though you may act as a manager many times, you’re different from a manager.”

“You have additional responsibilities. You ultimately have the responsibility to your profession, which translates to serving the public.”

“You are there because of that responsibility. And when push comes to shove, if you don’t remember that, the question is, ‘Why are you there?’”

A good question to consider heading into 2014.

Four ideas for improving Integrated Reporting

The International Integrated Reporting Council (IIRC) recently completed the consultation period for its draft version of the International Integrated Reporting (<IR>) framework, with <IR> ‘Version 1’ to be released in December. IGAP researchers Dr Dale Tweedie and Prof. Nonna Martinov-Bennie raised four ideas for the IIRC to consider in its revisions.

????????????????????????????????????????????????????????????????????????????????????????1. Clarifying the relationship between <IR> and other reporting systems

The IIRC’s ‘value-creation’ approach to non-financial reporting is very different from the ‘impact-assessment’ approach used by the Global Reporting Initiative (GRI). Users of <IR> would benefit from greater guidance on how <IR> and GRI4 can be complementary in a practical reporting context; for example, by clarifying differences in the materiality determination processes of <IR> and GRI4 and which – if any – takes precedence.

2. Acknowledge and address stakeholder conflicts

The IIRC’s view that the interests of providers of financial capital – the primary audience of <IR> – and other stakeholders will align over the long term overlooks potential conflicts between these groups, and so how conflicts should be reported. An example in Australia is coal seam gas (CSG) exploration, which promises significant financial benefits to mining and energy organisations, but which other stakeholders have claimed is a long-term risk (e.g. to primary production and water supply). Given this perceived conflict, what should be reported by organisations engaged in CSG exploration? Further clarity on the ‘legitimate needs, interest and expectations’ of other stakeholders that an <IR> should acknowledge would help address these kinds of issues.

3. Increase comparability through a stronger ‘core’

As our earlier blog discussed, while a principles-based framework is a useful method of avoiding boiler-plate disclosures, <IR>s need sufficient commonalities to be comparable over time and between organisations. Providing a stronger ‘core’ of reporting requirements and methods, best practice guidance (e.g. on carbon reporting) and definitions of key terms could encourage comparability without sacrificing the principles-based approach.

4. Governance as accountability

The draft <IR> framework asks each organisation to explain how its ‘governance structure support[s] its ability to create value in the short, medium and long term’. While good governance is part of value creation, the key features of governance are accountability, transparency and ethics, which are fundamental to ensuring that the value that organisations create is managed and distributed in appropriate ways. Following the King Reports in South Africa, <IR> could play a greater role in emphasising and communicating the importance of these aspects of governance. 

Telework to ‘Anywhere Working’: The Next Steps

As reported in the Australian Financial Review, a key theme emerging from the recent Digital Productivity in the Workplace of the Future Conference, sponsored by Macquarie University and CSIRO, was that the conversation is moving on from ‘telework’ from a home office to ‘anywhere working’. Increasingly we will see employees working from locations such as a café, a partner’s, supplier’s or customer’s premises, a smart work centre, a co-working centre, from home, a car, an airport lounge or anywhere that is conducive to achieving the outcomes and levels of productivity required to achieve organisational strategic objectives.

On the latest statistics, around six percent of Australian workers have formal anywhere working arrangements. The statistics on informal arrangements for working from anywhere are more difficult to ascertain. This is an important area for research because workers with informal anywhere working arrangements typically have more autonomy to complete ?????????????????????????????????????????????????????????????????????????????????their tasks and projects, and so this is where we are more likely to see productivity gains.

Clearly not all organisations see anywhere working as an effective strategy, and prefer their employees to work from an office.  Marissa Mayer, CEO of Yahoo, famously (or infamously) banned all work from home arrangements early this year. Ms Mayer argued that innovation and creativity only occurred when people were together. Yahoo are not alone. Google publically stated that their organisation did not condone working from home.

However, several developments may mitigate the limitations of working from home that Yahoo and others have cited. Co-working or collaborative working spaces are providing opportunities for freelancers and entrepreneurs to collaborate and connect. Hub Australia has hubs in Melbourne and Sydney with another to open in Adelaide later in the ?????????????????????????????????????????????????????????????????year.  Fishburners is a co-working space for technology start-ups and has two locations in central Sydney.

Smart work centres (SWCs) provide an alternative for those employees who are unable to work from home for a variety of reasons including social isolation and lack of space. Employers may be more open to employees working from SWCs because these centres can address issues that arise when working from home such as work, health and safety and difficulties in managing remote employees. A sustainable business model will be critical for the success of SWCs, which is another key area for future research.

A second key theme emerging from the conference was the perceived lack of management and leadership for anywhere working employees. Job design should include autonomy so that employees are able to be productive without the constraints of ‘presenteeism’ (being seen in the office). As Dr Blount from Macquarie University discussed on Sky News, management are unclear about how to develop a business case for anywhere working, and are unsure about the skills required to manage workers who are not office-based. While many employers have the HR policies in place for anywhere working, management resistance is an ongoing barrier to an increased uptake of working more flexibly. Alan Dormer – research leader at the CSIRO’s Government and Commercial Services division – has used research from the The Economist to argue that the reluctance of management to devolve responsibility might be preventing significant gains in both worker productivity and well-being.

The Australian Anywhere Working Research Network – which aims to provide a framework for collaborative research on anywhere working – invites any researchers, employers or government representatives interested in this field to join. To become involved, please contact Dr Yvette Blount in the Department of Accounting and Corporate Governance at Macquarie University.

Work, Health and Safety: What ‘Lost Time’ Doesn’t Tell You.

IGAP researcher Dr Sharron O’Neill argues that ‘Lost Time Injury Frequency Rates’ (LTIFRs) – traditionally the ‘gold standard’ in workplace safety reporting – can mask worrying trends in the severity and incidence of occupational injuries. Her analysis of injury data was recently reported in the cover article of the March 2013 issue of Inside Safety – ‘Losing Faith in Lost Time Injuries’ – by journalist Richard Collins .

????????????????????????????????????????????????????????????????????????????????????The article draws attention to three important limitations of LTIFR measures:

1. LTIFR only captures a subset of work-related injuries. By definition, lost time injuries are work-related injuries that prevent a worker from performing their usual work duties for at least one day. Hence, even serious injuries such as permanent loss of hearing are excluded where they involve no loss of work time.

2. Counting injuries does not measure safety risk – dangers at work and the possible consequences – or the effectiveness of hazard identification and management.

3. Research demonstrates that LTIFR performance can fall even when the incidence of severe injuries is rising. This explains how companies can experience a blowout in workers compensation costs despite workplace injury rates appearing to decline.

Given these limitations, Dr O’Neill raised concerns about the way the LTIFRs are being used as a proxy for anything from workplace safety to workplace culture and performance, and then used to inform a vast array of organisational decisions from workplace health and safety (WHS) strategy and policy to resource allocation and executive remuneration. She suggests that the divergent uses of LTIFRs is: “…part of the reason behind claims that [LTIFR] is so manipulated and produces dysfunctional outcomes – it’s like a square peg being forced into too many round holes.”

Instead, Dr O’Neill identifies a number of alternate measures that may be preferable in particular circumstances and urges decision-makers to look to those measures that best suit the context. For instance, lost time measures may be suitable for capturing the financial and productivity costs of workplace injuries. However, the effectiveness of an organisation’s safety policy and systems is better captured with metrics that reflect the control of latent risks and / or quantify both the severity and incidence of workplace injuries.

The importance of evaluating work health and safety in a valid and reliable way is underscored by both the human and economic consequences of poor safety management. Recent Australian Bureau of Statistics (ABS) statistics show 640,700 Australians sustained workplace injuries and illnesses in the 12 months preceding the (2009-10) survey, which equates to about 53 in every 1,000 people in work. Furthermore, Safe Work Australia estimates suggest workplace injury and illness is costing the Australian economy $60.6 billion per year, or approximately 4.8% of GDP.

The need to improve both the measurement and governance of WHS in Australia is a key driver for the WHS performance and governance research being conducted by the IGAP research centre. IGAP is currently working with the Safety Institute of Australia and the Institute of Chartered Accountants, Australia to develop a WHS reporting guide that can help organisations measure, report, interpret and improve their safety performance. In a separate study, IGAP is bringing together CPA Australia, Safe Work Australia and the Safety Institute of Australia to undertake a detailed examination of the role of accounting in WHS governance. Please refer to the IGAP Projects website or contact Dr O’Neill for further details.