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Ethics in European Treasury and Financial Affairs

by François Masquelier, RTL Group Head of Treasury, Corporate Finance & ERM, and Honorary Chairman EACT

A company can hardly expect to apply principles if the conduct of its employees does not respect them.

Generally speaking, ethics have acquired great importance, and particularly in the financial world, in the wake of the widely-publicised and explosive scandals of the early 21st century. It is important to remember that the cases of Ahold, Enron, Arthur Andersen, Parmalat and Vivendi (among others) have shown that accounting fraud and financial malpractice can either sink a company or cause it serious harm, due to the actions of a handful of irresponsible individuals. America’s celebrated market watchdog, the SEC, has imposed its view of the situation and the American Senate has issued legislation in the form of the much debated Sarbanes-Oxley Act (or SOX, named after its main architects). Distorting a company’s reputation, particularly with regard to financial affairs and accounting, can have extremely serious consequences for its shareholders and employees.

Clearly, as is often the case, the answer has come in the form of heavy penalties (even custodial sentences in the USA) and the divulgence of financial information (disclosure, to coin the American term). The rules have even become nightmarish to implement, and the quantity of information published makes for time-consuming and laborious reading of annual reports and internet sites. Surely, even in finance, you can have too much of a good thing? We are entitled to ask ourselves the question, even though some maintain that there is a need to legislate in order to impose what companies and their shareholders do not seem to be able to do of their own accord in the field of internal audits. The risk to reputation has loomed large and heavy. Moreover, it often features prominently among the top three places in the classification of general enterprise risks.