Firms accused of poor ethics plans: report

FTSE 100 companies have been accused of failing to provide investors with clear measures of how they maintain robust ethical standards in a study conducted by the Chartered Institute of Internal Auditors.

The Institute has raised concerns that investors and shareholders are left with inadequate information about the methods companies are employing to protect themselves from reputational damage and corporate scandal.

The research was based on the annual reports that FTSE 100-listed companies are required to send to all shareholders.

This report comes in the wake of the recent exposure of suspect accounting at Japanese camera company Olympus, and amid the ongoing investigation into how aware News International senior executives were of phone hacking at the group’s News of the World tabloid paper.

The Chartered Institute of Internal Auditors found that 91 per cent of FTSE 100 companies refer in their annual reports to their high standards of business ethics and integrity.

However, only eight per cent of the FTSE 100 provided a specific metric of their company’s ethical performance.

The report also showed that 56 of the 100 companies state in their annual report that they have an ethical code of policy.

However, only three companies provided information to suggest that their employees had read and understood this code, while a further four companies included figures to demonstrate that a proportion of the workforce had undergone training on the company’s ethical policy.

Dr Ian Peters, chief executive of the Chartered Institute of Internal Auditors, said, “Recent corporate scandals have provided ample demonstration of the material risk that poor ethical standards can pose to businesses.

“It is an area that internal auditors tell us requires increased emphasis, and yet FTSE 100 companies are surprisingly silent on it in their annual reports.”

He concluded, “It suggests that either companies don’t take ethics seriously, or they think investors don’t – and the latter is increasingly unlikely to be the case.”

The Insitute added that the risks associated with poor ethical standards are significantly increased in light of the new UK bribery act.

Dr Peters said, “The Act makes the potential repercussions of a lapse in those standards even more serious.”