Caleb M Fundanga: Integrity and professionalism in finance, industry
and business
Keynote speech by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the ACCA
Professionalism and Ethics Event for Employers, Lusaka, 7 November 2007.
* * *
• The Chairman
• Mr Sundeep Takwani, ACCA Head of Ethics and Regulation - Professional Standards
• Mr Chintu Mulendema, ZICA President
• Senior Government Officials
• Heads of Corporates
• All protocols observed
• Distinguished Ladies and Gentlemen
I am honoured to stand before you to discuss the matter of "integrity and professionalism in
finance, industry and business". I commend ACCA Zambia for organising this forum which
allows us to discuss matters which have long been considered of primary importance in the
financial sector. I am certain that the importance of this subject extends beyond the financial
sector to all sectors of the economy.
Mr Chairman, this event, the first in the series of ACCA professionalism and ethics events to
be held in Zambia coincides with the launch of the ACCA new professional qualification,
which will be first examined in December 2007. Named the it will build
ACCA qualification,
on the success of the current professional scheme, which has become the world's
fastestgrowing international accounting qualification.
Mr Chairman, The new ACCA qualification is designed to provide accounting knowledge
skills and professional values which will deliver finance professionals who are capable of
building successful careers across all sectors, whether they are working in the public or
private sectors, practising in accounting firms or pursuing a career in business.
ACCA has designed a qualification which embeds the global accounting education standards
set by the International Federation of Accountants (IFAC). There is a strong focus on
professional values, ethics and governance.
These skills are essential as the profession moves towards strengthened codes of conduct,
regulation and legislation with an increasing focus on professionalism and ethics in
accounting. They will be examined at the highest level in the new ACCA Qualification, and
will be a core element of students' practical experience requirements.
Mr Chairman, allow me now to dwell on the main theme of our discussion this evening.
Going through the literature one finds it difficult to obtain explicit definitions as regards the
concepts of "integrity" and "professionalism". However, the associated behaviours and
characteristics of the two concepts are fairly unproblematic. In this regard, behaviours
associated with "integrity" include honesty, sincerity, truthfulness, punctuality, ethics, fairness
and justice while professionalism is characterised by expertise, generalised and systematic
knowledge, a high degree of self control and governance by a code of ethics.
Mr Chairman, the behaviours and characteristics described are virtues which are desirable in
finance, industry and business. I note that this forum is for employers and one fundamental
aspect about being an employer is that you may not be involved in the day-to-day operational
issues of your organisation, hence the need to have professional employees of integrity. This
gives comfort as regards reliability of financial reporting, compliance with laws and
regulations, effectiveness and efficiency of operations and safeguarding of assets. These
issues which give comfort are encompassed within the framework of corporate governance.
Mr Chairman, in the recent past the world has witnessed a number of corporate failures such
as Enron, Worldcom and Parmalat brought about largely by fraud on the part of employees.
This has brought the discussion of corporate governance to the fore in finance, industry and
business. The behaviour of corporations and the people that run these corporations have
come under increased scrutiny by stakeholders and the wider public, not least of all, the
financial sector in Zambia following the banking failures which we experienced in the late
90's. The financial sector thus provides a critical example of the need for integrity and
professionalism, and the Bank of Zambia has a keen interest in ensuring that these principles
are upheld by players in the financial sector.
The Bank of Zambia's interest stems from its mandate to protect depositor's interests as well
as to ensure financial system stability. As the examples of Enron, Worldcom and Parmalat
have shown us, poor corporate governance may lead to corporate failures. For the financial
sector, this can cause significant public costs and consequences due to the potential
negative impact on the payment systems and the loss of confidence in the financial sector as
a whole. As a result, the Bank of Zambia issued "Corporate Governance Guidelines for
Commercial Banks and Financial Institutions" in November 2006 in an attempt to instil
corporate responsibility in the financial sector.
Mr Chairman, the corporate governance guidelines issued by the Bank of Zambia offer vital
lessons to other economic sectors with regard to integrity and professionalism. In this regard,
allow me, Mr Chairman, to outline just four of the principles out of a total of 15 principles that
are contained in the guidelines:
Principle 2 - ethical standards and corporate values
"The board of directors, in keeping with their responsibilities to the shareholders and other
stakeholders, is committed to the achievement of business success and the enhancement of
long-term shareholder value with the highest standards of integrity and ethics. Each director,
as well as each member of senior management, is therefore expected to lead by example in
a culture that emphasizes trust, integrity, honesty, judgment, respect, responsibility and
accountability."
The guidelines for this principle essentially call upon the board to ensure that senior
management implements strategic policies and procedures that are designed to promote
good and acceptable ethical behaviour.
Principle 3 - board responsibilities and composition
"The board of directors' role is to oversee the proper functioning of the institution. In order to
achieve this, the board shall have clear, well-defined and understood responsibilities. There
shall be a balance of skills, knowledge, experience and perspectives among directors so that
the board works effectively to ensure the long-term safety and soundness of the institution."
The guidelines in this respect expect the board of directors to exercise professionalism by
having a formal charter that sets out its responsibilities, having a rigorous formal processes
for evaluating its performance along with that of board committees and individual directors
and, ensuring that the institution complies with all relevant laws, and codes of business
practice, and that it communicates with its shareholders and relevant stakeholders openly
and promptly
Principle 6 - roles of senior management
"It is the responsibility of management, under the direction of the chief executive officer, to
conduct the institution's business and affairs in an effective, responsible and ethical manner,
consistent with the principles and direction established by the board through the strategic
plan."
Apart from reflecting integrity in their management of the institution, the guidelines for this
principle require that senior management be appropriately qualified to run the affairs of the
institution. The expectation is that people of appropriate qualifications will reflect the
professionalism that is required of their respective professions.
Principle 7 - reporting and disclosure
"The board shall demand integrity both in financial reporting and in timeliness and balance of
disclosures on the institution's affairs."
The guidelines for this principle require that the institution's financial statements fairly present
the state of affairs of the institution as at the end of the financial year and the profit or loss
and cash flows for the reporting period. Furthermore, the annual report is expected to state
whether the corporate governance guidelines have been adhered to or, if not, where there
has not been compliance the institution is expected to give reasons.
Mr Chairman, as you will note the four principles highlight the fact that the Bank of Zambia
places a great deal of importance on integrity and professionalism in the financial sector. Our
expectation is that this should extend to other economic sectors as well. Lessons can thus be
drawn from the work that the Bank of Zambia has done and can be applied to the other
sectors.
Mr. Chairman, the prevalence of fraud in institutions all over the world has culminated with
regulatory authorities in several jurisdictions instituting jail terms and fines against the
scourge. The famous Sarbanes-Oxley is one such response. Our own corporate governance
guidelines have a strong linkage to the Banking and Financial Services Act which when not
adhered to may result, upon conviction, to a fine or to imprisonment for a term not exceeding
two years or to both.
Mr. Chairman, the international work that is being done in respect of money laundering and
corruption payments or terrorist financing is such that trade and service companies, like
banks, are now being held accountable for what they deal in and whom they trade with - as
suppliers as well as buyers. The implications of anti-money laundering (AML) are such that
they extend to all forms of finance, industry and business. It is thus critical that the principles
of integrity and professionalisms are applied in all spheres of institutional activities.
Mr Chairman
Ladies and gentlemen
I thank you for your attention.