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Business ethics begin in the boardroom
Recent business scandals and corporate collapses have brought calls for better business ethics, more training in ethics, and further regulation. But ethics in business are intrinsically part of every business decision – they begin in the boardroom. Trust in business will not be rebuilt by more rules, regulations, or corporate governance codes, but as directors create cultures that recognize and handle ethical risk.
Recent years have seen a spate of business crises and corporate collapses around the world. The actions of key executives and the attitudes of their directors have come under the public spotlight. Fraudulent management in Australia’s HIH Insurance, corruption in Italy’s Parmalat, allegations of bribery against BAE Systems and Rolls Royce, the world-wide collapse of auditors Arthur Andersen, and the rigging of interest rates by bankers provide ready examples.
Such cases have raised concerns about business ethics, which are now widespread and serious. The media focuses on companies’ social responsibilities, relations with their stakeholders, and call for more ethical business. Regulators, commentators, and business school professors push for better corporate citizenship. Recently, green credentials and sustainability have been added to the agenda.
“Decisions at every level in a company have ethical implications – strategically in the boardroom, managerially throughout the organization, and operationally in each of its activities.”
But business ethics are not an optional exercise in corporate citizenship, they are fundamental to the governance and management of every organization. Decisions at every level in a company have ethical implications – strategically in the boardroom, managerially throughout the organization, and operationally in each of its activities. Ethics reflect behaviour in business and the behaviour of business. In business, ethics involve the recognition and management of risk. Read more
Other Featured Picks of the Week
The social capital benefits of ethical leadership
IESE Insight writing for the Eurasia Review writes, “Ethics has gained prominence in debates around social capital creation. According to social learning theory, employees learn standards of appropriate behavior by observing the behavior of role models.
To explore these behavioral links, IESE’s Miguel A. Ariño and David Pastoriza of HEC Montreal surveyed 408 Spanish, French and Portuguese MBA students who were working while studying part-time. They were asked to rate their supervisors on ethical leadership and their firms on internal social capital.
Using structural equation modeling, the authors found that the ethical leadership of supervisors does indeed exert a significant influence on the creation of social capital in the organization, particularly in three areas.
Ethical leadership means higher willingness of employees to share. This extends not only to employees’ one-on-one relationships with their supervisors but also to their relationships with the rest of the organization…” Read more
What’s culture got to do with it?: A guide for leadersFrom Deborah Himsel of the American Management Association, “Culture is a complex and critical component of leadership. Yet many leaders underestimate its impact or fail to deal effectively with it in conjunction with growth strategies and other business initiatives. As CEO Lou Gerstner said about IBM’s culture during a period of transformation, “I came to see, in my time at IBM, that culture isn’t just one aspect of the game—it is the game.”
One of the biggest challenges for leaders charged with evolving their organizations is that the same characteristics that once made a company great can also derail key business objectives. Even when cultures need to evolve, changing them too quickly or radically can destroy the spirit of an organization. There are many fine lines leaders must walk when it comes to culture, so let’s start out by exploring how culture connects business goals to organizational norms and environments.
Culture has many definitions, but for our purposes here, let’s agree that it consists of a company’s norms and values; it manifests itself in “the way things are done around here” and includes both the formal and informal rules of the game. In most established companies of at least moderate size, certain identifiable traits cut across geographic and functional boundaries. At the same time, subcultures can exist within departments or regional offices. For instance, a marketing or accounting culture may have distinct characteristics that aren’t shared with the larger corporate culture. Similarly, the culture in a company’s Hong Kong office may be different from that of the one in Paris… Read more
You’re fired—by email?Bruce Weinstein of The Huffington Post writes, “Which of the following are ethically acceptable ways to fire an employee?
If your answer included “B,” you’re in good company. According to an interview with Fortune, George Zimmer, former CEO of The Men’s Wearhouse, was told via e-mail that his services would no longer be needed.
This isn’t a rude way to let someone go. It’s unethical. Here’s why…” Read more
Law and ethics can’t keep pace with technologyVivek Wadhwa, of MIT Technology Review: “Employers can get into legal trouble if they ask interviewees about their religion, sexual preference, or political affiliation. Yet they can use social media to filter out job applicants based on their beliefs, looks, and habits. Laws forbid lenders from discriminating on the basis of race, gender, and sexuality. Yet they can refuse to give a loan to people whose Facebook friends have bad payment histories, if their work histories on LinkedIn don’t match their bios on Facebook, or if a computer algorithm judges them to be socially undesirable.
These regulatory gaps exist because laws have not kept up with advances in technology. The gaps are getting wider as technology advances ever more rapidly. And it’s not just in employment and lending—the same is happening in every domain that technology touches.
“That is how it must be, because law is, at its best and most legitimate—in the words of Gandhi—‘codified ethics,’ says Preeta Bansal, a former general counsel in the White House. She explains that effective laws and standards of ethics are guidelines accepted by members of a society, and that these require the development of a social consensus.…” Read more
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Home Compliance Programs Ethikos Weekly Editor’s Picks – April 29, 2014