Professional services firms – accounting firms, management consulting, law firms – play a critical role in informing the strategies and practices of the business world, helping companies create value and manage risk.
Corporate scandals over the last several years have threatened the reputation of companies and their advisors, reducing trust in business overall. To help regain that trust, companies within the professional services sector are increasingly recognizing the need – and the business case – for a more deliberate approach to corporate citizenship.
Recently The Center conducted a research study on behalf of Center member Ernst & Young, a global audit firm, in order to understand, from the perspective of diverse stakeholders, the corporate citizenship challenges and opportunities of the professional services sector. The study was based on interviews with 26 key stakeholders of the accounting profession including Ernst & Young clients and partners, institutional investors, business associations, academics and non-governmental organizations.
As one Ernst & Young partner commented, "We have a unique role. We are a private enterprise with a very public purpose. What we do matters. We provide the foundation of assurance to stakeholders that companies and executives are playing fair."
The insights in this research report are useful to all professional services companies who are exploring ways to further embed corporate citizenship into their business operations and leverage their core assets – their people, knowledge and networks – for social good.
Defining Corporate Citizenship
Stakeholders agree that business has critically important roles in society beyond making a profit. Corporate citizenship comprises a company's responsibility for the full range of effects it has on the communities it touches. According to one management professor interviewed, corporate citizenship "involves how the company's day-to-day operations affect its stakeholders. It is a much broader and more holistic concept that goes well beyond doing ‘good' socially, to encompass internal integrity with respect to all the company's impacts."
Accounting Firms' Key Corporate Citizenship Role
Broad consensus exists among the diverse group of individuals interviewed that the accounting profession's core product contributes to the social fabric in a critical way by enabling the effective functioning of capital markets. One Ernst & Young partner commented, "We have a unique role. We are a private enterprise with a very public purpose. What we do matters. We provide the foundation of assurance to stakeholders that companies and executives are playing fair." An institutional investor remarked that the role of the accounting profession is to be a steward of corporate integrity. As one accounting professor stated, "accounting firms' client is the investing public and their role is to help society create value by making good investment decisions."
Prevailing Professional Services Sector Approach to Corporate Citizenship
Most accounting and professional services firms continue their focus on community engagement and have been slow to integrate a corporate citizenship lens into their core business activities.
Move beyond compliance: Stakeholders believe the accounting profession needs
a more deliberate approach to corporate citizenship that goes beyond compliance.
One interviewee from an NGO stated, “Auditors are bound by a ‘law and compliance’
mentality. This does not lead to optimal performance. Full transparency and
probity are the goal — currently auditors appear to be looking for the ways to
shuffle the deck to help companies be in compliance.” And one corporate client
stated “God help the next accounting firm that is acting in a technically defensible
way but not in the spirit [of regulation/law].”
Integrate corporate citizenship into core operations: Similarly, interviewees
agreed that the key to addressing the sector’s challenges is not through doing
good in the community but rather addressing issues of culture, management and
operations within accounting firms. As one corporate client stated, “there is a
need to be more proactive about thinking about how to incorporate corporate
citizenship into daily business practice and to make it part of core business
performance systems/models.” While another client shared that “ultimately, the
tone at the top overrides everything in driving ethics through a company.”
The interviews indicate both a need and opportunity for the professional services
sector (in particular, the accounting sector) to expand and deepen its commitment
to corporate citizenship. Specific recommendations that emerged strongly from
the stakeholders interviewed included:
- Strengthen and communicate (internally and externally) systems for ensuring
staff and partners do the right thing.
- Support development of metrics and assurance standards for corporate
- Encourage thought leadership and dialogue on balancing corporate and public
interests in tax advice.
- Encourage corporate citizenship issues to be a larger part of curriculum for
students interested in accounting and other business disciplines.
- Support enterprise development in developing countries and in underserved
communities in the United States.
- Provide expertise to help build financial market capacity in emerging
- Support professional development in emerging markets.
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