Ethical engagement–or rather the lack of it–came into sharper focus this week with the resignation of Chris Hyman, long-standing CEO of the outsourcing firm Serco.
This corporate leader has presided over a long trail of unethical behaviour including allegations of overcharging on a tagging contract, dodgy record keeping when escorting prisoners, and a damming official report on the state the Serco operated Thameside prison.
Under his eleven year leadership this company has hardly been seen to live up to its declared values “that underpin the way we run the company and the way we behave.”
These values are: “foster an entrepreneurial culture; enable our people to excel; deliver our promises; build trust and respect”.1
Serco’s entrepreneurial culture has certainly garnered some highly profitable state contracts. But there has clearly been serious non-delivery on the remaining three core values—putting it bluntly they have simply fallen apart.
Serco’s replacement CEO therefore faces a significant challenge. One obvious response will be to hire masses of ethics or compliance officers to try and detect ethical issues before they surface. He will be in good company, since that has been the classic solution adopted by numerous large commercial institutions caught badly misbehaving.
But how do you get 120,000 employees to be sufficiently ethically engaged to come forward early with warnings when things are going awry? As one commentator summed up the situation, the new boss needs to ask “whether Serco has long passed the point where the directors stood a chance of detecting a scandal before it erupts.” 2
The sheer scale of the challenge is suggested by what can happen when large numbers of employees, regardless of existing codes of conduct, compliance systems, and declared values, fail to ethically engage.
For example, in November 2006, regulatory investigations of the German engineering giant Siemens revealed hundreds of employees had been siphoning off millions of Euros into “phoney consultants’ contracts, false bills and shell firms” to pay massive bribes to win contracts.
A trial judge described it as “a system of organised irresponsibility implicitly condoned” by senior management.3
A resulting exhaustive diagnosis met with internal resistance. Only the following year did the most serious revelations surface. This followed the departures of the CEO and Chairman, and the decision by the newly appointed CEO to announce a month-long amnesty for employees to come forward, explicitly excluding former Directors. Forty whistle-blowers brought more incriminating evidence, extending the scandal’s reach into the previous management Board.
How many whistle-blowers will the new Serco boss induce to spill the beans on the company’s dismal record of unethical performance? Beyond that, what actions might he adopt to “enable our people to excel” and persuade them to deliver on helping the company act more responsibly?
To follow the Siemens model he might need to:
- Establish new strict rules and processes on corruption and compliance
- Launch a programme to prevent, detect and respond to ethical dilemmas
- Hire a significant number of full-time compliance officers
- Set up help-desks and hotlines, and an external ombudsman based worldwide and online.
- Create a web portal for employees to understand their risk in their client and supplier interactions.
At last aware of the serious changes needed, the board of Serco has declared various steps including: the appointment of an Ethical Leadership Group to undertake a cultural review and review of its systems and controls; updating Serco’s Code of Conduct, Values Statement and Governing Principles, backed up by training, induction and performance management.
As the Siemens external adviser explained at the time, the new culture must prevent managers from falling back into “easy, and illegal, patterns of behaviour”.
The company’s replacement CEO put it even more forcefully: “Highest performance with highest ethics – this is not a contradiction.”
2 Is Serco so big directors can no longer see a scandal coming? N.Pratley, Guardian 26 October 2013