Ethical Insights: Own the problem, even if it is not of your making

In this series of conversations about ethical leadership, we speak with high profile ICAS members who have reflected on what it means to do the right, or ethical thing throughout their careers. It is hoped that the conversations provide practical guidance to help anyone in a challenging professional situation where they are required to seek the truth and then act.

As well as interviewing these ICAS members individually, under Chatham House rules, we also surveyed our members in a quantitative survey during 2024, conducted by Dodds & Law Research Associates. We received 710 responses from a survey of 10,000 members and we have taken some of the results and findings and used them in this report to highlight the wider views of members.

Insight five

In this fifth instalment of our ethical insights series, we explain why it’s your duty to own any problem, even when it’s not of your own making. The onus to remain ethical doesn’t fade when it’s someone else’s issue. So how do you take ownership? How do you navigate the challenges set forth by others? We look at real-life circumstances where these questions had to be answered, and resolutions needed to be found.

There may be times when you find yourself in situations where you may have to own a set of circumstances not of your own making, but where your stewardship is required to bring about resolution. A willingness to step-up-to-the plate is seen as a kind of professional moral imperative:

“I remember buying a company where it became clear to me they had manipulated the numbers. The profits were overstated by about £35m which meant about a 25% drop in the book value. So, we called the auditors in and asked them to go through the numbers. Once it became clear there was a problem, I said we need to declare this – we need to come out and make a statement and introduce forensic accountants into the situation.

“We also took legal advice at the time and the advice was that if we declared what had happened there was a high probability that the firm that had done the previous audit would not be liable and this would come back to bite the directors. I was not prepared to accept this – we had paid them to audit the business, there was a contractual relationship in place, and we had an expectation that the numbers would be of a certain standard. At around this time the CEO resigned, and I stepped in on an interim basis.

“I remember telling the board that I wanted to prod in a few places to see what I could find – and what I found was that certain entries in certain places had been used to falsify the numbers. I caught people doing this stuff! But I also found good people who had been asked to do it and had refused. So, there were people with integrity in the company and there were others that were just scared and did what they were told.

“At the time I was under some pressure to declare everything was ok, which it clearly was not, and I said ‘I am not prepared to lie for the company. I’m not prepared to sit in a room and listen to the chairman lying about it. So, whatever your PR strategy, you need to revisit it because I’m not going to do a press conference to defend the indefensible’.

What I did insist was that we needed to tell our investors that there was a problem and that we have a strategy for dealing with it, which I went on to do and we eventually recovered the situation. But the fall out was significant. And in the end the auditors were sued, and it was right that they were sued, and the firm eventually went bust.”

As in the example above, where a situation is not just unethical but fraudulent, the circumstances can present challenges:

“I remember being involved in an audit at the beginning of my career where I asked for an explanation about a particular loan from the business that was effectively a bad debt. I asked to see the directors’ minutes before I would put my initials on that component of the audit schedule and was told the issue had been dealt with. The minutes were not forthcoming, so I did not initial the file.

“A couple of years later the organisation went to the wall and I remember being asked by one of the partners winding up the firm why I had initialled this particular schedule? I told her I had not done it because I had not been shown the documents I had requested. That someone would have been willing to forge my signature – this experience stayed with me for a long-time.”

Conversely, not owning a problem is often a strong indication of amoral behaviour.

“Early on in my career I remember speaking to the CEO of a business who had a loan from the special lendings team of a bank. I remember asking him if he was concerned that a fairly modest £250k was now creeping up towards £1m? And he said, ‘of course not – because it is now at a stage where the bank needs to worry’.”

When owning a situation that may well be messy and complex it is also important to be as dispassionate as possible and not let matters extraneous to the circumstances cloud your judgement:

“A few years ago, I was invited to join the board of a housing association. The Chair of the Board was someone I had met at a networking event and someone who I had previously invited onto a board I was chairing. The strategy of the association was all about getting large scale voluntary transfers from local authority housing stock, which struck me as odd because these transfers had largely happened under a previous Government. It quickly became apparent that things were off track. The organisation had committed to delivering 500 properties that year but only 50 units had materialised. The consultant they had employed to write the corporate strategy had a major conflict of interest and the Association had also loaned him £70,000.

“After a protracted and difficult period of dialogue with the board where I tried my best to remedy things, I eventually had to whistle blow what was happening. A key take away for me was that there was something rotten at the core of the business but because the Chair was also an acquaintance, I didn’t quite want to believe that things were as bad as they were.”

Finally, it is worth noting that ownership of a problem is not to be confused with delegation:

“Being an ethical leader requires that you do not expect others to do things you would not do yourself. That is actually quite important, because sometimes you get someone who is an Angel Gabriel, but they’re quite happy to have Rottweilers doing their job for them. We should never ask anyone to do anything that we would not be willing to do ourselves, whatever the situation.”

This article was first published by ICAS at the following URL: https://www.icas.com/news-insights-events/news/ethics/ethical-insights-own-the-problem-even-if-it-is-not-of-your-making