The role of the director

By Simon Longstaff

A version of this article was first published: (publication unknown) - December 1993

nb: The following statement relates only to that part of the director's role that touches on the development and maintenance of a company's framework of values and ethics.

There is no such thing as a value-free organisation. The values adopted by an organisation can be for good or for ill. That is, they can contribute to the organisation's ability to achieve its objectives or they can act as a hindrance. Given that values shape an organisation's ‘climate’ or ‘culture’, it is important that they be identified and managed in the best interests of the organisation and the people that it is there to serve. One of the key roles for directors is to help create the conditions and competencies through which an organisation's values can be harmonised in a way that best serves the organisation's mission.

Leaving aside questions of increased productivity, higher retention rates, improved compliance and so on; there is also the issue of simple decency in the way in which we organise our social institutions.

We sometimes act as if businesses can exist as totally independent entities. This dangerous fiction obscures the fact that businesses, governments, indeed all of our institutions are created by and for people. To take a serious look at values and ethics is to make a statement along the lines that we recognise the importance of the human dimension in what we do. It says that whilst notions of efficiency are important, they are not the whole of the story. It recognises that people are not cogs in a machine. It says that we are concerned about the kind of community that we want our organisation to be. It says that people matter.

If an organisation is to flourish, especially in times of change, then it must manage its values in a way that provides a stable foundation for growth and development. Directors have an important role to play in this process. Bearing this in mind, directors ought to:

• recognise the need for a properly developed corporate philosophy and ethos,
• stimulate the development and articulation of a corporate philosophy and ethos,
• ensure that there is a proper appreciation of the importance of managing values (and not just processes, finances, risk etc.),
• ensure that the institutional design of the organisation under their direction is such that it reinforces (and does not undermine) the values that it purports to represent,
• provide considered advice and assistance in the debate and resolution of ethical issues and dilemmas that arise from time to time.

While any list of guidelines is bound to be incomplete, the following are offered as a point of reference for directors.

Guidelines

In the formulation of policies and in the performance of their duties, directors ought to:

recognise that their responsibility is to the shareholders in perpetuity and that "this general expression of a principle permits, indeed requires, directors to pay full regard to their employees, to labour relations generally, to the community, to the country, in all their decisions for and on behalf of shareholders".

ensure that they set a positive example of ethical behaviour. This example ought to be set in all the dealings of directors - with each other, with the company, with employees, with customers, with suppliers and with the community at large.

1. Ensure that they possess the skills and experience necessary to make a positive contribution to the affairs of the company.
2. Ensure that the companies under their direction are operated according to best practice, especially in the application of principles of corporate governance.
3. Ensure that stakeholders are sent an unambiguous signal indicating the board's support for principled and ethical business practices.
4. Ensure that management is encouraged to foster an ethical climate that is 'owned' by the organisation as a whole.
5. Ensure that companies under their direction do not merely profess ethical standards as a form of ‘window dressing’. Stakeholders are quick to spot the existence of a ‘values gap’. Just as with individuals, companies risk sacrificing their reputation for integrity when they countenance a mis-match between their words and deeds
6. Insist that professional advisers be selected on the basis of their high ethical standards as well as their competence.
7. Insist that companies under their direction observe the spirit as well as the letter of the law.
8. Ensure that the policies and practices of the company are such that ethical behaviour is recognised as being intrinsically desirable and that no officer or employee of the company is rewarded for achievements based on unethical activities - irrespective of their contribution to profits.
9. Recognise that there may be occasions when ethical principles come into conflict and that there will be times when one principle will be sacrificed in the service of another. When it is necessary to give preference to one ethical value over another, then the decision ought to be explained to the affected parties and ways sought to minimise any damage to the competing value(s).
10. Develop their own ability to assist management in the resolution of ethical issues and dilemmas (Where directors lack the necessary skills, then suitable assistance should be sought).