What’s the scenario.
Rachel is a CIMA member working as a Finance Manager at a large transport and logistics company. Marcus, the company Chief Operating Officer (COO), has asked Rachel to prepare an annual non-financial report for the board, covering areas such as sustainability initiatives, employee engagement, and diversity metrics. The current Finance Director is leaving the company shortly, and the position is one Rachel would like to be considered for. Rachel’s name will appear on the report as the lead author. Further, doing well on this project may put Rachel in good stead when it comes to applying for the role.
As Rachel starts compiling data, she realises that some of the key metrics are not available, and others paint a less-than-ideal picture of the company. When Rachel raises this with Marcus, he waves it off and says:
"Look, we just need something that looks good for the board. No one really cares about sustainability anyway. If you don’t have the data, just make something up – no one’s going to check the fine details and we can fix anything next year."
Rachel is now stuck in a tough spot. On the one hand, she wants to be a team player and meet expectations. She also wants that promotion to Finance Director and knows a well-received report could help her prospects. On the other hand, Rachel knows that misrepresenting information is dishonest and knows that Marcus is seen as a tough operator. Rachel does not want Marcus to treat her harshly or potentially even pass her over for a promotion for failing to deliver what is expected.
What should Rachel do?
Understanding the ethical Issues and supporting guidance
The CIMA Code of Ethics is very clear that you must not produce or be knowingly associated with misleading reports. Under the fundamental principle of integrity (R111.2), the Code states: “A professional accountant shall not knowingly be associated with reports, returns, communications or other information where the accountant believes that the information:
(a) Contains a materially false or misleading statement;
(b) Contains statements or information provided recklessly; or
(c) Omits or obscures required information where such omission or obscurity would be misleading.”
In this scenario, a senior colleague is giving Rachel license to falsify information in an official report.
Falsifying or manipulating data, even in a non-financial report, will compromise the trust that stakeholders place in the organisation. It could also risk serious reputational damage.
Rachel may of course wish to discuss her concerns with appropriate colleagues, who might be able to provide support in deciding the best approach to take, especially given the COO’s potentially volatile personality. Whatever happens, Rachel’s name must not appear on any report which she knows, or suspects includes false or misleading information.
So, as a starting point, it is always useful to consider what you know, what you don’t know and to think about where you can go to fill in the gaps in your knowledge. Rachel could consider whether anyone else in the organisation is in a position to provide her with accurate information for the report. Even if there isn’t a sustainability team, it may be that there are departments tracking the data he is seeking.
If the sought after data is unavailable, Rachel could consider enquiring as to whether there are plans for the future to track certain data or achieve certain targets, such as commitments to reducing carbon emissions or funding the planting of trees to offset the company’s emissions. The company would then be in a position to report on progress over the course of the years to follow. This would be something positive to give to stakeholders in the immediacy but also providing the opportunity for future progress.
As a professional management accountant, Rachel may be in a position to influence the future direction of the organisation by encouraging the COO and CEO to make a commitment to sustainability, highlighting the demand from a range of stakeholders when making the business case. She could ask for the responsibility of developing an internal sustainability strategy that is supported by suitable processes or work with colleagues to form an employee-led sustainability group. Suggesting such an initiative could also be a way of Rachel putting herself in good standing should she decide to go for the position of Finance Director.
If Rachel is unable to obtain the necessary information and Marcus insists on a report with incorrect, false, or misleading information, Rachel should take steps to ensure that her name is not included on the report and consider who she will need to report her concerns to. It would be prudent for Rachel to ensure her concerns are documented. Should there be any subsequent investigation into the misleading report, Rachel will be able to show that she was not party to it.