Unimpeachable Principalities

A Principle-Driven Framework to Standard Setting

This 17^th article of the unimpeachable neutrality series will attempt to elevate your understanding of standards beyond mere compliance and foster a world rich in principle-driven actions.

In a world increasingly governed by complex standards and regulatory landscapes, the craft of creating standards that stand the test of time has never been more crucial. Just as it is insufficient to teach a child not to murder merely because it is illegal, effective parenting also nurtures a respect for life and the well-being of others that transcends legal mandates. This approach parallels the essence of creating impactful standards; not just as tools to dictate behavior, but as guiding lights that shape ethical principle-driven decision-making. As such, great parenting—and great standard setting—both rely on instilling deeper values, paving the way for more thoughtful, ethical, and effective interactions in every facet of life. Through principles, we empower professionals to adapt to varied circumstances with a moral compass, rather than navigate through a sea of prescriptive, loophole-laden directives. Principle-based standards, woven with ethical threads, offer more than rigid rule-following; they inspire, guide, and mold the very fabric of professional judgment. This 17^th article of the unimpeachable neutrality series will attempt to elevate your understanding of standards beyond mere compliance and foster a world rich in principle-driven actions.

Principle-Based Framework

In the context of creating effective standards, a principle-based framework offers distinct advantages over more rigid, rule-based systems. A principles-based approach utilizes overarching principles centered upon underlying objectives as a means of promoting compliance, rather than merely following processes. This focus helps ensure that standards do more than just dictate actions; they guide decision-making towards achieving broader goals. A principles-based approach emphasizes flexibility, judgment, and the broader objectives of the standards, rather than strict adherence to prescriptive mandates. A principle-based approach empowers professionals to use their judgment in applying standards to specific circumstances.

Principles-based standards differ from rules-based standards that use detailed rules, prescriptive prohibitions, or requirements as a means of promoting compliance. More prescriptive rules-based standards can deprive the professional from exercising professional judgement and instead encourage loophole-based compliance with the form of the requirement rather than the substance. By focusing on principles rather than detailed prescriptions, such frameworks can often avoid the complexity and volume of standards typical in rule-based systems. This simplification can make the standards easier to understand and apply, reducing the burden on those affected by them and increasing compliance.

Ethical Principles

I often hear people say, “you can’t teach ethics.” If that is true, how did our parents keep most of us from becoming predicate felons? Ethics must be logically understood on an almost emotional level, rather than taught. In my experience, the best and most effective parenting directives must have a reason behind them and, as a child will be more apt to give credence to parameters if the parent has an ethical principle behind it. When ethical principles are clearly articulated and integrated into a parent’s marching orders, it encourages voluntary compliance by making it clear as to why adhering benefits everyone. When stakeholders understand the rationale behind standards, they are more likely to promote and adhere to these standards. This understanding can lead to more proactive and enthusiastic compliance efforts from all parties involved.

Ethical principles are not just supplementary; they are fundamental to the legitimacy and effectiveness of any standard-setting initiative. Embedding ethical principles directly within a set of principle-based standards offers several advantages that enhance the effectiveness and integration of these principles in practice. It aligns ethical considerations directly with the practical aspects of decision-making processes, making it more likely that these principles will be effectively integrated into everyday actions. These reasons highlight the value of a holistic approach where ethical considerations are woven into the fabric of standards, ensuring they are an active part of daily decision-making processes.

Brevity and Clarity

In the development of principle-based standards, conciseness is a critical element that enhances effectiveness. By striving for brevity and clarity, standard setters can ensure that the principles are not only comprehensive but also easy to comprehend and apply. Conciseness helps in avoiding the pitfalls of over-complication and ambiguity that often accompany verbose documents. Clear, concise principles are more easily understood and less prone to misinterpretation, leading to more consistent application across different contexts. Standards that are straightforward and to the point are more user-friendly. They are easier for practitioners to remember and reference, which is particularly important in dynamic environments where quick decision-making is often required.

Brevity encourages standard setters to focus on the essence of what is most important. This focus helps in distilling complex ideas into fundamental principles that guide behavior without being overly prescriptive. When principles are concise, compliance becomes less burdensome. Stakeholders can more easily align their practices and policies with the standards without having to navigate through extensive and dense regulatory text. By emphasizing conciseness in the development of principle-based standards, standard setters can improve the effectiveness and impact of their regulatory frameworks.

Consensus Building and Stakeholder Involvement

In a globalized world, harmonizing standards across borders is crucial. Consensus building among a diverse group of stakeholders in an ongoing dialogue is integral to creating harmonized standards that are practical, equitable, and sustainable in a global context. Active dialogue among stakeholders allows for the identification of common values and objectives, which can serve as a foundation for harmonizing new standards with existing ones. This process helps in finding a balance between maintaining global consistency and respecting local nuances. By involving a broad range of stakeholders, standard setters can identify and address areas where new standards might overlap or conflict with existing standards. This approach prevents inconsistencies that could complicate compliance for stakeholders operating in multiple jurisdictions. Incorporating consensus building and stakeholder involvement into the standard-setting process not only enhances the quality and applicability of the standards but also ensures they are robust enough to function effectively across different systems and jurisdictions. When stakeholders are involved in the development of standards, it enhances the legitimacy and acceptance of those standards. This inclusive approach helps to prevent conflicts and resistance during the implementation phase.

Standards Must Do More Than Dictate Behavior

Standards are most effective when they are designed to be adaptable to a wide range of situations, including those not foreseen by the standard setters. When ethical principles are an integral part of standards, it signals to the public and all stakeholders that ethics are not just an add-on or afterthought but a fundamental component of all practices and policies. Standards must be articulated clearly and precisely to avoid ambiguity, ensuring that standards are not only understood but are also implementable. Integral to the standard setting process is the inclusion of diverse stakeholder voices, which is essential for crafting standards that do not disproportionately impact one group over another. By prioritizing ethical principles, clarity, and stakeholder involvement, standard setters can ensure that their standards do more than just dictate behavior—they also cultivate an environment where ethical practices are valued and rewarded.

---

Zachary Meyers, CPA, CVA, is the managing member of C. Zachary Meyers, PLLC specializing in litigatory accounting and valuation services. He has been retained in over 2,900 matters since 2011, as a testifying expert, consulting expert, or neutral/court appointed expert qualified in forensic accounting, business valuation, pension valuation, and taxation. Mr. Meyers has held multiple influential roles on national and international standard setting bodies, where he has made significant contributions to the financial disciplines at the highest levels of the National Association of Certified Valuators and Analysts (NACVA), Global Association of Certified Valuators and Analysts (GACVA), and The Appraisal Foundation (TAF).

Mr. Meyers can be contacted at (304) 690-2619 or by e-mail to czmcpacva@czmeyers.com.