Business Ethics in a Post-Truth Era
Finance professionals have a responsibility to fight back against “fake news.”
By Curtis C. Verschoor, CPA, CMA | Digital Exclusive - 2017
“Fake news” seems to be spreading from politics to all of society. Even among users of financial data, trust that they’re receiving fair and accurate news and information has dropped.
More than half of the U.S. respondents in a 2017 AICPA poll believe fake financial news is a serious threat to the ability to make good financial decisions, while 33 percent feel the threat is “very serious,” and 63 percent overall believe the prevalence of fake news makes financial decisions more difficult.
Our own government is keenly aware of the challenges posed by fake financial news. On April 10, 2017, the SEC’s Office of Investor Education and Advocacy issued an “Investor Alert” warning how information presented on investment research websites may in fact be part of a paid stock promotion scheme. The SEC has charged dozens of parties—including public companies, firms and writers—with fraud for providing deceptive articles promoting stocks. Melissa Hodgman, associate director of the SEC’s Division of Enforcement said, “Deception takes many forms. Our markets cannot operate fairly when there are deliberate efforts to reach prospective investors with positive articles about a stock while hiding that the companies paid for those articles.”
According to the 2017 Edelman Trust Barometer (ETB), 60 percent of the respondents to Edelman’s global survey of 33,000 respondents in 28 countries believe that “someone like themselves is as credible a source of information about a company” as something provided by a company, a technical expert, or an academic.
The ETB also highlights a worrisome trend in the decline in trust of leadership, which damages the stature of institutions. There is a huge gap between the modest trust people have in business and a “pitifully” low level of confidence in its leaders. The credibility of corporate CEOs fell globally by 25 percent in just one year. As a result, peer-to-peer hearsay is viewed as “far more credible” than information from a CEO. As a solution to the fall in trust, Kathryn Beiser, global chair of Edelman’s Corporate Practice believes, “Business is the last retaining wall for trust” and must step forward.
In today’s fast-paced environment, consumers and investors feel pressured to act decisively on short notice—75 percent of the AICPA survey respondents believe it’s important to make quick financial decisions whenever there’s breaking financial news. This makes them more susceptible to impulse purchases or sales of investments based on incomplete evaluation of supporting information.
This trend places increased responsibility on decision-support information providers, assurance suppliers, and investment advisors to be sure such information is complete and unbiased.
A robust ethical climate in every organization, strengthened by an unequivocal commitment by ownership and senior management to do the right thing, can certainly help facilitate the preparation of authoritative information of high integrity. But the “tone at the top” must permeate all levels of the organization and actually put ethical words into action. Living up to promises made and constant fair interactions with all levels goes a long way toward ensuring ethical behavior.
Both professional publishers of financial information and their assurance providers need to do their part to be sure all users of financial information, including lenders, investors, and investment advisors receive fair, honest, and objectively complete financial information. Given the challenges ahead in terms of trust, we must come together to make sure all of us are doing all we can to guarantee it in our own professional service.
Curtis C. Verschoor, CPA, CMA, a member of the Illinois CPA Society and Fox Valley Trail Chapter, is Chair-Emeritus of IMA’s (Institute of Management Accountants) Committee on Ethics. He is Emeritus Ledger & Quill Research Professor, School of Accountancy and MIS, and an honorary Senior Wicklander Research Fellow in the Institute for Business and Professional Ethics, both at DePaul University, Chicago. Trust Across America-Trust Around the World awarded him a Lifetime Achievement Award in 2016 as a top thought leader in trustworthy business.