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.

Economic Inequality: Where are the accountants?

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dreamstime_s_53174060Dr Dale Tweedie and Dr James Hazelton

Rising inequality in income and wealth is one of the biggest contemporary social and economic concerns, but accountants have been surprisingly quiet on this issue.

Concerns over economic inequality

The growth of economic inequality is increasingly a topic of public debate in countries like the United Kingdom, the United States and Australia.

Numerous influential – and typically conservative – economic institutions have now identified growing income inequality as a critical economic and social issue. The World Economic Forum listed deepening income inequality as number one on its top ten trends of 2015, and describes growing inequality as a threat to global economic growth, social cohesion and sustainability. The International Monetary Fund has reported that inequality in developed nations is at its highest level in decades, with ‘significant implications for growth and macroeconomic stability.’ There is also growing evidence of serious and widespread social harms from economic inequality, with economic inequality being linked to social ills ranging from poor physical and mental health to drug addiction to rates of violent crime.

Public debates over inequality have created an all too-rare cross-over between academic research and public concerns. French economist Thomas Piketty’s 685 page treatise on economic inequality was a surprise hit of 2014, reaching the top of the New York Times’ best-seller list. While Piketty’s analysis of the causes of economic inequality is hotly disputed, there is little challenge to his finding that income inequality has sharply risen in most developed nations since the 1970s. For example, in the United States, Piketty reports that the top decile’s share of national income grew from just under 35% in 1970 to almost half by 2010.

A role for accountants?

Despite growing evidence of the economic and social costs of inequality, accountants have had little involvement in either public or academic debates. However, as we observe in a recent article (50 free e-copies here), there are key contributions that accountants could make to public discussions

First, as Piketty and others have argued, both public deliberation and informed public policy about economic inequality requires greater global transparency about who owns economic wealth and receives economic income. Whatever else it may be, accounting is a vehicle – albeit imperfect – for understanding and promoting transparency. Accountants might therefore add their voice to calls to improve public access to economic information, such as in the recent debate over whether taxes paid by resource companies to governments should be disclosed.

Second, key debates about the equity of income distribution, such as ongoing critiques of the pay of executives (especially CEOs), are closely connected to corporate governance. While economists have proposed macro level policies like a progressive tax on capital (Piketty) and a minimum basic income, seriously addressing inequality will invariably need to address how resources are managed and distributed within corporations. Accountants have the expertise to evaluate existing corporate accountability mechanisms and propose workable alternatives. These proposals could complement the broader macroeconomic agenda that economists like Piketty put forward.

What do you think?

Is there is a role for accountants on economic inequality? And if so, what do accountants – or accounting – have to say?

Accounting for inequality will be the subject of a special session of the Australasian Centre for Social and Environmental Accounting Research (CSEAR) Conference, which will be held at Macquarie University, Sydney in 2015, and also a special section of the Accounting, Auditing and Accountability Journal.

Why governance can’t ignore safety

A recent Four Corner’s report (screened 3/2/2014) on road safety and the heavy vehicle transport industry in Australia revealed the human toll of work-related accidents: 242 people killed in truck-related accidents, and many more injured, in just one year. According to Four Corners, safer work practices might have avoided many of these tragic events.

The Four Corners exposé highlights, in two interrelated ways, the fundamental importance of work health and safety (WHS) to all businesses.

truck_givewayphot1. Effective business governance includes effective governance of WHS.

The new WHS Act (enacted in all States but WA and VIC) requires all officers of a business or undertaking (PCBU) to exercise due diligence so as to ensure the health and safety of workers. The Act explicitly requires all businesses to provide safe systems of work – including safe equipment, safe processes and work methods (such as appropriate rosters, supervision, instruction etc.).

The Four Corners program drew particular attention to the potential health and safety implications of deferred maintenance. This is especially relevant to accountants, given their role in allocating budgets for maintenance programs. Moreover, recent research suggests that accountants are less likely than operational personnel such as engineers to perceive maintenance as even having been ‘deferred’.

2. Health and safety risks requirement management along the entire supply chain.

The Four Corners program also documented how a fatal incident on Sydney’s North Shore in October 2013 prompted an external safety investigation into the Cootes transport fleet. Impacting along the supply chain, this incident resulted in retail fuel shortages along the east coast while road safety checks were carried out on hundreds of Cootes vehicles. For example:

Frustrated Melbourne motorists again faced empty bowsers for some types of fuel or complete service station shutdowns today because of disrupted deliveries, with about 25 Caltex, 30 per cent of BP and a number of Shell ­outlets affected. BP spokesman Jamie Jardine said the company would have difficulty maintaining fuel supplies until all of the [Cootes] trucks were back on the road. (Herald Sun, October 10, 2013)

The vehicle checks identified more than 200 defects, many being major defects in safety critical systems such as brakes, steering and suspension. Three months on, the transport company has this week announced the loss of a major contract with Shell to distribute its fuel. The potential for safety issues to pose a risk to the well-being of workers’ and bystanders is clear. These events further demonstrate the potential for poor safety to also impact on the financial performance of both suppliers and purchasers.

Safety and Corporate Responsibility: Systemic Issues

Concerns over the role of payments, subcontracting, incentives and safety are not new. Similar issues raised by the NSW Staysafe Inquiry into Road Safety almost a decade ago, formed the basis of a research note published in the Accounting, Auditing and Accountability Journal in 2007 by IGAP researcher Dr Sharron O’Neill.

The pervasive nature of this problem raises serious questions, explored by Four Corners, about the sustainability of heavy transport business model and the corporate responsibility of business practices. Low wage rates for contractors and drivers coupled with increasing fuel and other transport costs were reported to still be providing incentives for long hours and excessive speed.

Four corners identified two factors motivating these unsafe behaviours.

1. Some drivers reported being directed by transport managers to meet “impossible deadlines”. Importantly, prosecutions and fines for subsequent speeding and log book infringements were falling on the drivers rather than those employers and companies who direct the systems of work. This alludes to a critical disconnect in enforcement processes that appears at odds with the legislated accountability of PCBUs under both the WHS Act (as outlined above) and the chain of responsibility legislation introduced by the National Heavy Vehicle Regulator. The latter suggests,

All parties in the road transport supply chain can be held responsible for their actions (or inactions) relating to breaches of the road transport, fatigue, speed, mass, dimension and load restraint laws.

If you consign, pack, load or receive goods as part of your business, you could be held legally liable for breaches of road transport laws even though you have no direct role in driving or operating a heavy vehicle.

2. Four Corners reported that unsustainably low wage rates lead drivers to work long hours to make a reasonable income. The Road Safety Remuneration Tribunal, established under the previous federal government in 2012, had proposed to examine pay and conditions and ensure ‘safe rates’ for heavy vehicle drivers. However, the future of ‘safe’ remuneration is already in doubt following a Federal Government review of the Tribunal which is due to be handed down by April 2014.

All in all, heavy vehicle safety is a complex problem with significant accounting and corporate social responsibility implications. We now wait to see the outcome of the government’s inquiry, and the response by the retail and transport industries to the Four Corners report. One would hope appropriate changes can be implemented before more lives are lost.

– Dr S O’Neill and Dr D Tweedie.

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.