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Integrity—First Quarter 2017
A French Philosopher, by the name of Albert Camus (1913–1960), penned, “Integrity has no need of rules.”
David F. Zarlenga, CPA, ABV. CFE, CVA
NACVA—Ethics Oversight Board Member
In my college years, I happened to take classes in philosophy. As such, let’s apply some simple logic to Mr. Camus’ quote. If Mr. Camus is correct that “integrity has no need of rules,” then codes of ethical conduct are redundant and superfluous. Please do not jump to conclusions at this point; I have not lost my mind and, for the record, this is not a logical conclusion. Camus’ point is that integrity should exist without dictating the framework, or as the old saying goes, “integrity is doing the right thing even when no one is watching.” So let’s look at the quote in another way: if “integrity has no need of rules,” then everyone acts with integrity. I am not sure this is a logical conclusion either. There are plenty of examples in the world that prove this conclusion is a colossal fallacy.
Why do the various organizations all publish a Code of Ethics and Standards of Professional Conduct when Mr. Camus has implied that rules are not necessary? And to further the question, why are they called Code of Ethics and not just Code of Integrity? I ask this because, in my humble opinion, without integrity, the hierarchy of ethics and professional conduct tends to breakdown. How can we be objective without possessing the integrity to be objective? How do we acquire professional competence without the integrity and desire to be professionally competent? How can we effectively execute due professional care without possessing the integrity to do so? In the event that you did not know this, integrity, objectivity, professional competence, and due professional care are listed in this order at the beginning of the Nation Association of Certified Valuators and Analysts’® (NACVA®) General and Ethical Standards. I did not author, nor have I served to assist in writing, the NACVA Standards, but if I were to guess, the authors wanted to stress that, above all, our members have agreed integrity is by far the foundation of the organization.
I decided to focus on integrity from my reading of an Association News article written by Greg Reagan, CPA, ABV, CVA, CFF, CFE. In this article, he addresses conflicts of interest and avoiding ethics violations. If you have not read this article, please do. You can find it at, Ethics for Valuators. In the article, he explains he posed the question, “Can ethics be taught?” while delivering a presentation. The overwhelming response was no. After reading the article, it struck me that if it is perceived ethics cannot be taught, then the level of one’s integrity is subject to the same perception, and again the hierarchy of ethics and professional conduct is subject to scrutiny. But how can this be? Various professional organizations define integrity quite clearly. For example, NACVA's General and Ethical Standards state: “A member shall remain objective, maintain professional integrity, shall not knowingly misrepresent facts, or subrogate judgment to others. The member must not act in a manner that is misleading or fraudulent.” The American Institute of Certified Public Accountants’ (AICPA) Code of Professional Conduct requires its members to be “honest and candid.” “Service and the public trust should not be subordinated to personal gain and advantage. Integrity can accommodate the inadvertent error and honest difference of opinion; it cannot accommodate deceit or subordination of principle.”
In general, various professional organizations seek to have basic principles that, when followed, promote values such as trust, good behavior, and fairness. I asked the question earlier as to why organizations feel it is necessary to publish a Code of Ethics and Standards of Professional Conduct. The answer is quite simple. The importance of publishing these standards is not only for the member’s benefit; it is also for the benefit of the general public. It is necessary to communicate ethical guidelines so the general public understands how organizations intend to operate, and the standards their members are expected to follow. Will the general public ever read an organizations’ standards? Maybe, but I suspect this does not happen very often unless there is a reason to do so. Should we as members read and re-read our standards? Yes. Just like re-reading a good book or watching a movie for the second time, re-reading and re-visiting our NACVA Standards is a discipline we should all possess. We may inherently know the vast majority, but just like that suspense novel or movie, we might just catch something we missed the first time. In the context of standards, it might remind us of why we decided to enter the professions we currently practice. For me, re-reading the NACVA Standards reminds me of the pride I have in being a member of NACVA and my desire to never bring disgrace to the profession or my fellow members. I realize how this sounds, but it is true. I know how hard I worked to build my professional standing. I know how hard I worked to achieve my certifications, how hard I worked for the knowledge I have gained, and the time I have committed to become a trusted expert in my field. I certainly do not want someone or a group of someone’s bringing disgrace to the work I have done just because I happen to practice in the same profession and belong to the same organization. You may think that generalized judgement of this type does not exist, and any perception, good or bad, rests with the individual professional. I challenge that with two examples when professions were under attack: The first relates to large accounting firms going out of business, such as Arthur Anderson, because of their involvement with various public company’s improprieties. I remember the number of articles I read that were attempting to earn back the public trust in the CPA designation. Then CPA’s were subject to amended and added standards and code of ethics as a result of the actions of a few AICPA members. In all probability, the amendments and additions were executed to send a clearer message to the members and provide the public with some comfort that something like this will not happen again. In these situations, a few professionals caused a great deal of damage that, in turn, required the profession to react. My second example is Bernie Madoff. He stole billions. He single-handedly caused the public distrust of investment advisory professionals worldwide. After Mr. Madoff was discovered, there was a push by all the big investment houses to make certain their clients understood this would never happen to them and published assurances about the differences between their operations and what Mr. Madoff was able to accomplish. Let us not forget all the new regulations that were placed upon the industry. Even my own mother and father looked at investment advisors with a jaundiced eye. When switching investment advisors a few years back, they asked the same question to each person they interviewed, “How do I know you won’t pull what Madoff pulled?” It only took one person to start a domino effect that nearly crippled a thriving profession. This is why I said earlier, I never want to be that person, and I remind myself of that by reading the standards we all agreed to live by.
Many of you have heard plenty of NACVA faculty discuss such topics as “bias,” “overreaching,” and in a few cases, perhaps “ignorance.” All easily overcome by stepping back and reminding ourselves of the responsibility we have to our profession. However, as professionals, our integrity is sometimes called into question; especially for those of us who spend our time in the litigation arena. Those who choose to stay away from litigation, your integrity may be called into question; for example, if your client and/or their representatives are not accepting the result of your engagement. Those of us who practice in the litigation setting, our integrity may be called into question by the client, by counsel (opposing or otherwise), the judge, and even a jury. Unfortunately, some of these perceptions of our integrity can be unfounded, unwarranted, and just plain lawyering, while others are warranted and deserving.
As professionals, we need to be observant of the pressures that can harm our integrity. We need to be aware of how we practice. We need to be cognizant of how what we do every day, impacts or calls into question, our integrity. Since I spend the vast majority of my time in the litigation environment, attorneys may sometimes pressure to get the most advantageous result for their client. Although this is an uncomfortable discussion, I ward off a request like this by discussing with the attorney and their client prior to engagement that my results cannot be swayed to produce the results they desire. If results happen to meet their expectations, I explain that they will be happy, if the results do not, my opinion will not change and they may not be so happy. I think the vast majority of valuation professionals know this, but there are always exceptions. I recall a litigation matter where my integrity was attacked by a litigants’ accountant. In reviewing documentation for my valuation, I found something that could, and ultimately did, impact the valuation in a significant way. I needed more information to corroborate what I believe I had found. When I began to request additional information, the accountant scolded me for turning the valuation engagement into a forensic accounting engagement. If I recall, I was accused of “overreaching” and somehow I was violating the valuation standards. I had to explain to the accountant that valuation work and forensics are closely aligned and if I did not continue to “peel back the onion” so to speak, I could be providing a valuation that is severely flawed. I interpreted the attack as an accusation that I was biased and purposefully trying to hurt the accountants’ client. I was able to explain the issue and my position to both attorneys and the problem was resolved, but not without an attack on my integrity. Initially, I was shaken by the accusation, but I calmed down and referred to the NACVA Standards. I believed my request complied with, not only, my obligation of due professional care and my obligation to acquire sufficient relevant data, it also complied with my obligation of acting with integrity. If I did not fight to receive this information, I would have published a substandard report; a report that would have harmed both parties in the litigation. My duty was not to succumb to the threats of an individual, my duty was to perform as I agreed to perform when I became a CVA. My actions in this case were to not only protect my integrity, but protect the integrity of the profession. I fought back for me, but I fought for all of you as well. Acting with integrity protects the profession.
I cannot argue with the response received from Mr. Reagan’s attendees— that ethics cannot be taught— but I also believe being ethical and being a person of integrity is a choice. As individuals and professionals participating in our society, we make this choice every day. For me, the choice is easy. I have a family I am proud of and they of me. I am loved and respected by them and I love and respect them. My first choice every day is to return that love and respect by setting an example and living my life in a manner so that I can be a steward to my family. By doing this, I never have to worry about causing damaging disappointment to my loved ones. From there it continues into my interactions as a professional, as a friend, and as a stranger meeting a stranger. When the choice is made to live as a person of integrity, it means we are “honest;” it means our actions are in concert with our beliefs; it means we are not afraid to voice our beliefs; it means we are “candid” and not “misleading.” It means I respect the NACVA organization and I respect its members. For me, “integrity has no need of rules.” But it is not just about me. It is about all of us. Perhaps it is time to re-read the NACVA Professional Standards.
 Professional Standards, National Association of Certified Valuators and Analysts® (NACVA®), Section II. A., page 4.
 Code of Professional Conduct, American Institute of Certified Public Accountants, Inc., 2016, .300.040.