Never a day goes by without the media exposing company’s who have engaged in unethical or (alleged) fraudulent behaviour.
Tesco – our big supermarket chain who thought were beyond reproach, had overstated its profits by £263 million in 2014.
Credit Suisse were recently under fire for hiding the extent of risky trades in the run up to a cost cutting drive. This led to drop in trading revenue by 40-45% in the first quarter of this year.
Volkswagen, it turns out, has been falsely marketing its diesel cars as low-emission vehicles. Not strictly speaking the case where it has been alleged that the cars were deliberately engineered to give deceptive readings. This could cost the business $18 billion.
Sports Direct were heavily criticised in the press for their employment practices, leading the CEO to commit to spending £10 million to rectify pay practices and ensure all employees are paid living minimum wage or above.
“Business leadership would be relatively simple if corporations only had to produce a product or service, without being concerned about employees; management only had to deal with concepts structures and strategies, without worrying about human relations; businesses just had to resolve their own problems, without being obligated to take the interests of individuals or society into consideration.” George Enderle (Professor International Business Ethics)
The sweet spot is where organisations can achieve great financial success with ethical principles and behaviour underpinning everything they do.
If ethics provides the moral code in which we base our decisions upon, what makes us ignore this moral code in business?
Social learning theory “Do as I do, not as I say”
Social learning theory (Bandura, 1977, 1986) is based on the principle that we learn by paying attention to and copying the attitudes, values and behaviours of people that we see as attractive and credible. What enhances attractiveness? Power and status.
The reality is, we can learn about what is acceptable or unacceptable by paying attention to how other employees are rewarded or disciplined. We use this information to regulate our own behaviour as a result. These behaviours become the ‘status quo’ and over time becomes the culture of an organisation.
In their book Fraud Examination, Albrecht et al (2002) argue that most people are capable of committing fraud and given the right environment, that behaviour is either eradicated or encouraged.
Low integrity, poor controls, loose accountability or high pressure can create a perfect breeding ground for unethical behaviour. The only way to counteract this is to have strong ethical leadership behaviours that is role modeled by all, not just according to our job title.
Let’s make it easy to do the right thing.
It is possible to create environments where ethical and values driven behaviour runs rife. To achieve this organisations will need to be proactive in clarifying their ethical principles (that’s the easy bit) and then ensuring that ethical behaviour is role modeled daily and weaved into all aspects of the business.
Here is my starter for 10…
- Having a clear sense of purpose so we can articulate what we stand for and why.
- Promoting a code of conduct that is shared and understood by all.
- We encourage, develop and grow behaviours based on trust, transparency and fairness. These are leadership traits that not just application for managers or leaders.
- We promote courageous behaviour. It’s easy to stay silent out of fear when we know something isn’t right. It takes more courage to make a stand and this is where organisations can positively recognise this behaviour to encourage others to be just as courageous. You then get a point when it is nothing out of the ordinary – it’s just the way we do things around here.
- As unpalatable as it is, there is needs to be clear consequences for unethical behaviour. Let’s not forget, this is what others will look to in governing their own behaviour.
There doesn’t need to be a trade off between business success and ethics, but the reality is, consumers and employees are expecting more from organisations today. The ethics and the values of an organisation will continue to have a material impact on consumer confidence, candidate attraction, engagement and productivity. Balancing ethics with business performance is possible, it just takes work and a collective commitment from shareholders, leaders and employees. Not because it makes for good PR, but because it’s the right thing to do.