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If you’re the boss, ignorance isn’t bliss. It’s death.

by Dennis Gentilin
14 March 2017
Whether through ignorance or wilful neglect, executives are accountable for failure. Dennis Gentilin reflects on his experiences addressing ethical failure. He says executives need Sherlock Holmes-esque attention to detail.

Holding senior executives accountable for their actions is a vexatious topic. Last week we saw Australia’s banking executives face the House of Representative Committee on Economics. They were asked to explain the lack of consequences for leaders in an industry that has seen several ethical mishaps of late. Accountability is the core challenge for Australia’s big banks but it's one they seem hesitant about.

You can understand why increased accountability would concern executives. It's true, there are people who knowingly engage in, condone or turn a blind eye to unethical or illegal conduct. More common are well intended people trying to do the right thing. More accountability leads to concerns people will be blamed for what someone else has done.

Failure to act sends a loud message to the organisation that the wrongdoing is permissible, helping to incubate ethical failure.

It's possible that even in situations where the executive conducts themselves with unquestionable integrity, employees somewhere in a large organisation can go rogue and engage in unconscionable conduct.

Even in these scenarios, executives often play a role. They typically miss the subtle signs that should have alerted them something was amiss. Their failure to act sends a loud message to the organisation that the wrongdoing is permissible, helping to incubate ethical failure.

I saw this first hand as a whistleblower during my time at NAB. In 2004, NAB discovered millions of dollars in foreign exchange losses were being covered up by a group of traders. Two separate independent investigations found no evidence suggesting executive involvement in the illegal conduct. In fact, they didn't even know it was happening.

But they should have known what was going on. There were clear warning signs. For whatever reason, these were either dismissed or ignored. There was more to the scandal than these failures but events could have been dealt with much earlier. And the executives are responsible for what they failed to notice.

This is one of the burdens carried by executives. What might to them appear as minor oversights can send a deafening signal across the organisation. This is why they must, in the words of Professor Max Bazerman from the Harvard Business School, become “first class noticers”. Warning signs are often missed not because they are obscure or hidden but because for a whole raft of reasons executives are subliminally motivated to turn a blind eye.

Information delivered to the executive is sugar coated and wrapped up in lolly paper.

Executives can also be blindsided by ethical failure when they create environments that shield them from bad news. Of course, this is exactly what happens in organisations that don’t embrace those who speak up. One of the best ways to find out whether an organisation values speaking up is how fast bad news travels up the chain of command.

In many organisations, there is a tendency for people to be sycophantic and blindly obedient. One of the side effects of this is that information delivered to the executive is sugar coated and wrapped up in lolly paper. This provides them with a fictitious, rose coloured image of the organisation they lead.

When a scandal breaks out, they are left shocked while those below them had been watching a train wreck unfold before their eyes.

It is difficult for executives to be on top of everything that happens within their organisations. But it is also unreasonable not to hold those responsible for our largest institutions accountable. If they are to win the public’s trust, executives must prove they carry the heavy burden of responsibility associated with their roles.

If they can’t, it might be seen as a sign of defeat – an admission large organisations are completely unmanageable.

Dennis Gentilin is the author of The Origins of Ethical Failures and an honorary fellow at the Centre for Ethical Leadership. Follow him on Twitter.

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