Tags: Corporate governance, Speak Up, Ethical Values, Diversity
Dr Ian Peters' article for One magazine on culture and reputational challenges for all organisations. Putting values at the heart of purpose.
We hear a lot at the moment about building back better. As policy makers and business leaders reflect on what that means in practice, we need to ensure that the ethical imperative is at its heart - to ensure that building back better also means building back ethically. And taking the opportunity to address some of the deeper-seated ethical issues that have built up over the years.
The past twelve months have shone a spotlight onto the way in which organisations behave. There has simply never been a period of such intense public scrutiny of business practices. Nor has there been such a strong public expectation that businesses will operate to the highest ethical standards.
This presents a whole new challenge for corporate culture and corporate reputation.
Hard questions are rightly being asked about furlough and redundancy decisions; about both infrastructure support and pastoral support for staff working remotely; about striking the right balance between being financially sound and being a supportive employer. In short, businesses face more ethical dilemmas than ever before.
How organisations respond to these dilemmas will determine whether they emerge from the pandemic storm with burnished reputations or with tarnished ones. So in making their choices, it is vital that businesses do so with firm ethical foundations and goals.
These decisions must be made with purpose at their core. Companies need to be clear about what impact they want to achieve. And that speaks not just to corporate goals, but a wider consideration of corporate impact on individual lives. A corporate understanding not just of what the organisation does, but of why it does it.
Because to be authentic and effective, purpose cannot be a mere slogan. To be authentic and effective, it must be a true reflection of what a business actually does, not just of what it says.
The IBE is clear that ethical business practices are inherently right in and of themselves. But they also form a sound business imperative. The simple truth is that today, reputation is value. It shapes the emotional decisions of consumers; it drives companies forward when the way ahead is unclear; it stops companies from falling - or having fallen, it helps them to survive the fall, and build back ethically and better.
At the heart of this process is the recognition that every company needs to define its values if it can even hope to define its purpose. And purpose is what keep companies together when times are tough.
The corporate test of values and purpose is, of course, the behaviour of the individuals who constitute the corporate entity. And the values that are set in turn define the tone of the organisation; provide guidance for actions and choices, and help establish the norms by which companies and individuals act.
One might see this as companies setting their own ‘North Stars’ - they provide support and reassurance in difficult times. They help employees steer the right course when the way ahead is unclear.
They also help reassure stakeholders and help us to build relationships with them. That creation of a stakeholder relationship built upon trust has never more vital than during this period of unprecedented stress and challenge. A period that has thrown dilemmas at organisations which they could not possibly have predicted or foreseen.
And trust, like reputation, takes years to build or to rebuild. But mere moments of uncertainty and poor choices to lose.
All that having been said, company purpose alone will not be enough to navigate the difficult times that still lie ahead for business.
Ethical values, if they are properly embedded in the culture of the organisation, are a great leveller and an effective enabler. They help ensure that a company can deliver on its purpose, justify its social licence to operate and ensure that the interests and views of its stakeholders are taken into account. Just knowing what your purpose is isn’t enough - it needs to be made real.
So what does that mean in practice for Boards?
It means a deliberate and specific recognition of the real financial risks of not doing business ethically.
It compels them actively to listen to their employees, their suppliers, and the wider community to ensure their decisions are in tune with expectations. And that they are responsive to any changes in those expectations.
It requires Board leaders to set the tone from the top and to ensure that it permeates all the way through a company. That includes making decisions about personal reward that can stand employee and public scrutiny.
It requires a true focus on diversity and inclusivity where the views of all are valued and there is a listening culture where employees are encouraged to speak up - and have their thoughts considered with an open mind.
It means the creation of an ethical framework built around a code of ethics; strong ethical leadership; good communication; ethics training for all; openness in decision making; and managers who take pride in the art of listening.
And it means looking beyond the company’s strict legal boundaries to the supply chain and the wider network of partners to consider their ethical footprint. The IBE has produced a Business Ethics Toolkit to help companies’ supply-chains and smaller organisations to create an appropriate and proportionate ethical framework.
What can we conclude?
A baseline that ethical companies are listening companies would be a good place to start. A culture of active listening is vital to any chance of being an ethical company. Promoting a culture of speak-up is only half the story. It has to be complemented by ‘listen up' if we are truly to hear the views of all our stakeholders. Diversity is a key component of this listening culture. And we must recognise that ethics and reputation do not stop at the ‘factory gate’.
The bottom line is probably best summed up this way. A company’s most precious asset is its reputation. Its reputation is always at risk - and it’s one risk you most certainly cannot outsource. The best way to insure yourself is by making your company a truly ethical one. And right now, that means not just building back better. But building back ethically.
This article initially appeared in ONE magazine and is reposted with permission from the editor and publisher.
Author
Dr Ian Peters MBE
Director
Ian Peters has been Director of the Institute of Business Ethics (IBE) since May 2020. In addition to leading the IBE’s team of researchers and advisers, Ian works with company boards and senior leadership to support them in promoting an ethical culture.
Ian serves on a number of external bodies including: the IoD Commission to develop a Code of Conduct for Directors, the CBI’s Culture Advisory Committee, the Financial Reporting Council Stakeholder Insight Group, the Chartered Institute for Securities and Investment Integrity Committee and the University College London Centre for Ethics and Law Advisory Panel. He also chaired the Chartered Governance Institute’s Board Performance Review Working Group.
Previous appointments include Chair of the Independent Monitoring Panel of the UK Chartered Banker Professional Standards Board, member of the UK Regulatory Policy Committee and its predecessor, the Better Regulation Task Force, and member of the Court of the University of Lancaster.
Ian’s previous executive roles include Chief Executive of the Chartered Institute of Internal Auditors (UK and Ireland,) Director of External Affairs at the Engineering Employers Federation (EEF), Deputy Director General of the British Chambers of Commerce, Head of SME Policy at the Confederation of British Industry, and a period in public relations for PR agency Burson-Marsteller.
He holds a PhD from Southampton University on the role of small businesses in economic growth and a BA in Geography from the University of Lancaster.
In 2015 Ian was awarded an MBE for services to regulatory reform in the UK.