The Australian Institute of Company Directors recently conducted research into ethics and good corporate governance determining, “The link between director ethics and corporate governance practice is well established. It is accepted that boards with strong codes of ethics and directors with high personal moral values are more likely to provide enhanced corporate governance for their organisation.” (https://aicd.companydirectors.com.au/membership/company-director-magazine/2017-back-editions/march/insight)
Yet why is it that we continue to get bombarded with stories of business directors performing unethically within their organisations? Each story usually results in exposing their organisations to shady events or worse, false advertising that severely damages their company’s brand. The list is already jaw-dropping. Volkswagon’s fake emissions exposed in 2016, Samsung’s bribery in 2017, and just a few months ago, Carlos Ghosn indicted for corruption at Mitsubishi Motors. No wonder trust in business is running at an all-time low.
How is it that respected business leaders, many who have loving and caring families, can choose to operate so unethically? Do they choose to knowingly turn a blind eye? Perhaps they believe they will never get caught? Or, they see everyone else doing it so why not them; the ‘follow herd’ mentality.
Here’s the travesty. If someone was acting unethically to you or one of your family members, you would immediately try and stop that behaviour from occurring against your own family. Many directors today would view the family matter as something uniquely individual to them, and not an extension of how they behave elsewhere. After-all, people naturally tend to think the bad thing is always far away from their own decision that they don’t see the connection right away.
When I was a graduate student a few decades ago, I was assigned to read, ‘The Nazi Doctors’ by Robert Jay Lifton. These God-fearing and morally-upstanding doctors prior to World War II saved lives for a living, but then during the war found themselves performing some of the most grotesque experiments on their fellow man. How in the world did they get to that situation? Additionally, a high percentage of them committed suicide shortly after the war, and only when they fully understood the crimes’ they were responsible for. With their moral compass smashed to pieces, many couldn’t live with themselves for what they had done.
I’m not arguing morally corrupt directors behave like Nazi doctors. Instead I am drawing the parallel to demonstrate the slippery slope to which leaders can find themselves when untethered from their moral compass.
In her latest book, Fascism, Madeline Albright quotes Benito Mussolini who said, “if you pluck a chicken one feather at a time, people don’t notice.” One poor decision by a leader in isolation may not make have a huge impact, but a room full of directors making poor decisions, or worse, choosing to ignore those decisions, WILL have a significant negative impact. To borrow another quote, in the 2016 hit movie, Spotlight, a victims advocate says to the investigative team, “If it takes a village to raise a child and it also takes a village to abuse them.”
Chasing the almighty dollar purely as a FINAL endgame is untethering oneself from using money as it was meant to be, the engine for creating new business value. Capitalism was never constructed to simply be a win-lose game played against society and our planet on the opposing side. Adam Smith would be turning in his grave right now. He’d argue the essence of capitalism is to create like-minded community value in which businesses operate within.
Many purposeful businesses have not lost a profitable step because they are returning to Adam Smith’s manifesto to find competitive advantage. To be purposeful requires some degree of ethics and morality that underpin it. In today’s socially conscious age of the consumer, there is no graver threat to a business than when it loses the core reason for existence.
Leaders that put profit above values do so at their own peril. Boards that turn a blind eye to bad behaviours and poor leadership qualities are co-conspirators. And investors who only desire a healthy return on their investment are knowing accomplices to the rot being created.
If you are reading this and feel like this is too big a problem to solve or feel cynical and detached, fear not for systemic changes are afoot as I write.
The New York Times recently featured a story describing how higher numbers of technology start-ups are saying no to venture capitalists. They are instead finding new, more ethically-aligned financial instruments to help fund their businesses.
On the investment front, investors are flocking to electronically traded funds (ETFs) that are created based on environmental, social and government (or ESG) measurements. A set of ethical drivers are the foundation for each EFT ESG issued.
And at the board level, there are increasing ways to build more ethically-enhanced brands through showcasing the creation of business value beyond the traditional financial and mechanical capital approaches mandated today.
Building ethical businesses is not a mega trend anymore, it is THE trend. The one that trumps Trump.
What can you do as a leader to embed ethics without sacrificing your organisation’s profitability? Here are three easy steps to strengthening the practice of ethics inside your organisation.
- Openly discuss ethics frequently – each week ask yourself, and your direct reports, to describe one ethical thing each of you did that impacted others within the workforce and/or the organisation’s strategic intent.
- Start actually living those values through your strategy – review your organisation’s set of values against your current strategy to ensure there is clear and unambiguous alignment.
- Build the application of ethical standards into your performance structure – don’t just have employees sign an ethics statement, ensure they are living it through formal review processes.
I want to thank both The Ethics Centre and the many of you out there passionate about this topic. Each of your events, blogs and posts have inspired me to make my own contribution. You know who you are.