Why ethics should be at the top of the board agenda

Tags: Corporate governance

This week we’ve launched our Guidance for board members on developing an ethical culture. But why have we issued this new guidance, and why now?

In all the work we do with businesses it is clear that building an ethical culture starts at the top. Leadership sets the tone for the organisation, leads on the articulation of purpose and values, and provides a role model for behaviour throughout the organisation. So, it is perhaps surprising that we have not previously attempted to set out such guidance for boards.

It is notable that there have been a number of recent board level resignations due to ethical lapses and poor judgement even in organisations that have, overall, demonstrated high ethical standards and have been held up as examples of good practice. Whilst there will always be mistakes and lapses, this suggests that it might be timely to remind boards of the key elements necessary to promote an ethical culture.

And, with the Financial Reporting Council’s consultation on revisions to the Corporate Governance Code just closed, it is timely to offer guidance to help board directors meet the expectations of Principle B of the code: “The board should establish the company’s purpose, values and strategy, and satisfy itself that these and its culture are aligned. All directors must act with integrity, lead by example and promote the desired culture”.

So, we hope that board members will find the guidance helpful. It has been shaped with clear input from an advisory group comprised of non-executive board directors and ethics and governance practitioners who have a wealth of experience. The aim was not to be prescriptive but to provide guidance with humility – board members do not need to be told what to do. And the group was clear that the guidance should be brief – so it is just two pages comprising twelve points.

Whilst the guidance is for boards, we hope that governance professionals and ethics and compliance practitioners will also find it helpful to aid the right conversations at senior leadership level.

The document is just guidance, not a set of rules, but we hope that boards will adopt its twelve points as a framework to structure their ethics policies and programmes. It is based on the IBE Business Ethics Framework which provides the basis for all the work we do with companies that advise and support. Think of it as a checklist, a series of prompts when considering whether an organisation has the right measures in place to promote an ethical culture. It won’t remove the risk of ethical lapses, but it will help to manage the risk. This surely deserves to be at the top of boards’ agendas.

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