Those who follow the business news of the UK would have heard of the accounting error committed by the giant grocery retailer Tesco, which resulted in an overstatement of profits. Here is a brief summary for those that have not heard or read about it.
Last Monday, Tesco announced that it had overstated its expected half-yearly profit by some £250 million and that it had suspended four senior executives.
The problem involved incorrect reporting of the timing of payments to Tesco from suppliers for things like product promotions. Essentially, it took certain income into account which it should not have. The problem was unearthed by an employee, who then blew the proverbial whistle. That same day, the value of Tesco’s shares fell by 12 per cent, which compounded the falls seen in the last 12 months.
We are all aware that the role of the politician is also to determine the economic and business strategy of the country one serves
My intention is not to recount the story of Tesco of the last couple of years. It is rather to highlight yet another corporate scandal, which is bound to have repercussions on the UK business environment and from which the investors (as always) will emerge among those most badly hurt.
Analysts are still not sure whether what Tesco did qualifies as an infringement of financial reporting standards.
However, the fact that it happened at a time when its CEO (who left the company last July) was under pressure following negative business results, would seem to indicate that the rules were not properly followed.
As one analyst succinctly stated, “such an announcement is not the stuff of a well-operated FTSE-100 organisation”.
Hence the cry of yet another corporate scandal.
This brings me to the point that in Germany there is a boom in training programmes in ethics for business people, which has been created following the spate of corporate scandals since the demise of Lehman Brothers in 2008.
Even after these various scandals, business executives, especially in large corporations, seem to have still not understood that they cannot be slaves to figures. They still have not understood that one needs to be true to oneself and that one has to know how to manage oneself before one can manage other persons or manage a business.
Being slaves to figures at times forces some executives to meddle with those figures to make themselves look better. Rules and regulations (and we have had many of those in recent years) cannot of their own push executives to act correctly.
The ability to act correctly depends on one’s values and culture. Rules and regulations cannot provide values. The executive with no values would soon find a way of circumventing such rules and fall back to one’s old habits.
However, there is still hope for the future. According to a recent survey among German executives, the need to achieve success has dropped from second to sixth place in their index of values; freedom maintained its number-one position.
At the same time, promoting the common good has risen from 10th to fourth place.
I would like to tie this to the programme being organised in Malta by the Pastoral Formation Institute in collaboration with the Malta Chapter of the Centesimus Annus Pro Pontifice Foundation.
Its objective is to provide a forum for discussion and discernment on the Christian ethical engagement in public life. Its focus shall not be the business sector but rather politics and public life.
However, we are all aware that the role of the politician is also to determine the economic and business strategy of the country one serves.
It is within this context and against the background of the Tesco story, which is likely to result in another corporate scandal, that we need to be ever vigilant of the need to maintain an ethical dimension in our business, financial and economic decisions.