Business should be steeped in ethics

By Simon Longstaff

A version of this article was first published: The Australian - 7 June 2001

The collapse of HIH and One.Tel have once again focussed attention on the question of ethics in business and professional life.

Most businesses continue to be run by people who are honest and diligent in their approach. Many have established formal frameworks of compliance designed to detect and prevent unethical conduct. However, as we have been warned for almost a decade, this is not enough. The truth is that when it comes to ethics, far too many companies have only been prepared to dip their toe in the water and play at the task of running a truly ethical organisation.

Having worked in this area for a considerable period, I can understand why people in business are reticent to engage seriously with the challenge of ethics. Many hold the mistaken belief that only dishonest people need to worry about ethics. Knowing themselves to be basically good, they conclude that it will be enough to proceed according to their common moral instinct.

The trouble is that a serious engagement with ethics requires exactly the opposite conclusion. One of the greatest enemies of ethics is unthinking custom and practice - even when that practice is basically good. Organisations face real dangers as long as they rely on people who do things because "everyone does it' or because "that's just the way we do things around here". Ethics require people to think and make choices.

Another common reason for not taking ethics seriously can be found in the inordinate faith conferred on systems of compliance. In many cases, those in charge wrongly believe that it is enough to eliminate the opportunity to do what is wrong.

Unfortunately, no system of compliance can cope by itself with the complexity of today's world. Things are changing too quickly to allow a formal rule for every situation. Nor can we afford to have a 'metaphorical' policeman on every shoulder to ensure that we comply.

However, there is a deeper problem with this whole approach. To create a world in which people cannot choose to do what is wrong is also to create a world in which they cannot choose to do what is right. In either case, they cannot choose. Ethical choices need to be practiced or else the capacity to make them is lost. A prudent system of compliance is necessary but it is never sufficient. Yet, far too many businesses operate as if a system of compliance is enough. Without the right culture, any system is fatally compromised.

Yet, the most common reason for ethics not being taken seriously is that it makes life more complicated. I believe that the fundamental rules of business are being re-written on a global scale.

Like it or not, people are revisiting concepts such as that of limited liability for shareholders and asking if society is as well served by this privilege as it expects to be.

Like it or not, the popular perception that business is as powerful as government is being linked to new expectations of accountability that take businesses well beyond the point that many business leaders thought to be the limit of their role in society.

Like it or not, the market place is now populated by customers, employees, investors, citizens (often all rolled up in the person of a single individual) who want more than mere value for money. They also want to purchase goods and services from decent companies. They want their dividends - but not at any cost. They want a job - but one with meaning and dignity. They are prepared to use the levers of politics and the market to bring the recalcitrant to book.

The reality is that ‘ethics’ cannot be quarantined to one area of activity. Nor can it be limited to just one set of relationships. Indeed it needs to permeate the very fabric of any enterprise and shape all that is said and done. An ethical framework, when properly understood, is so fundamental as to justify it being treated as a form of 'organisational DNA". What we say and do in business is inescapably an expression of our values and principles - even if we are not aware of the fact.

All of this makes life infinitely more complicated. But this is reality. This is the ethical landscape that business leaders need to traverse today. It is pointless to close one's eyes and wish it all away. Unless companies become serious about building their capacity to deal with ethical issues, they will find life increasingly hard to bear.

What is needed is a serious commitment to develop ethical cultures and a solid capacity to run companies, consciously and in line with an explicit ethical framework. This will make life more complex, but it will also be more real.