For several years non-profits have been trying to define the “tone at the top”. What is this and what is expected from those charged with governance?
Athletes are not the only people that have to worry about being called a role model. All of us are role models to some degree. Our children watch us intently and learn from our actions and words. Our actions and words also influence the ideas and actions of others outside the home. Our co-workers watch us react to our bosses and the company moral may be influenced by our behavior. Everyone should act ethically and those individuals that are charged with leading public, private and nonprofit organizations are held to an even higher standard and expectation. These individuals set the Tone at the Top and that tone may determine the success or failure of an organization.
Management must establish standards of conduct and procedures for monitoring the effectiveness of those standards. These standards contain the values, philosophy and mission of the organization. These rules should be clear, concise and communicated. Ultimately they must be understood and embraced by management and employees. These rules apply to all employees equally without exception. There should be no preferential treatment.
Many organizations or entities like to call a particular policy “fair,” but quickly learn that fairness is subjective and what is fair to one may not be “fair” to all. Determining and defining "fair standards" is a critical part of executive management and may require legal involvement.
The board (those charged with governance) and management must lead by example, (ie., walk the walk, talk the talk.) If they are complacent in their approach, their employees may assume complacency. If management has a poor attitude, behaves unethically and disregards the mission of the firm, then their employees may follow their lead. Management has the fiduciary responsibility to lead with expected accountability. The board and management must realize that, as leaders, they are role models (operationally and administratively) for their organization. This role is defined by a guiding influence on the mission of the organization. This includes a pervasive attitude for developing, monitoring, and evaluating internal and operating controls.
Employees (valuable organizational resource) are a key function of the internal control environment. Developing, monitoring and evaluating employees and their daily function will strengthen the internal control structure of an organization.
Setting the TONE at the TOP…it's the responsibility of those “charged with governance”. How does this impact the annual audit? See post #2 in this series.
