It’s illegal to drive on Britain’s roads without a driving licence. From 2nd April 2013 aspiring brokers and capital market traders must take the equivalent of a driving test. This assesses their ability to make ethical decisions; without a pass they cannot practice their trade.

An ethical test, especially for financially services, is obviously overdue, since the sector has been riddled with malpractice. Now demanded by the industry’s main professional body, this test though raises a wider issue concerning all business leaders.

Shouldn’t it be mandatory for all company directors to pass an ethics test? It might prove slightly tricky devising such an exam, but surely well worth it. Trust in senior corporate leaders is at an all-time low. Integrity or lack of it is a well-known factor undermining employee trust.

It’s time every business leader, at least in the larger corporates was properly trained and capable of handling the many ethical issues that daily arise in every organisation.

The new ethics exam consists of six on-line scenarios the broker or investment manager must deal with. These include requests for hospitality, errors in CVs and fiddling expenses.  Saying how you would deal with a difficult ethical situation is the standard way ethics development works. However, in the best organisation this happens through real life discussions, rather than an on-line system which may be easily subverted by the user.

What does it take to be an ethical business leader? This is the subject of my new book Ethical Leadership: Creating and Sustaining an Ethical Business Culture to be published by Kogan Page in October 2013.

Business leaders need first to accept it’s up to them to set the tone of their organisation. People expect this and it is unacceptable to suggest ethics is purely a matter of personal conscience and therefore of no relevance to their business.

Increasingly employees expect their leaders to demonstrate integrity and therefore take an ethical stance. Again, the research evidence is revealing. Employees prefer to work in organisations that are ethical, even if they earn less working for an unethical one.

For leaders the ethical issue is not just one of knowledge, it’s about judgement and values. For example, in a real ethical situation, as opposed to an artificial scenario, they face many difficult pressures. These may include people’s emotions, team loyalty, expectations and formalised codes that must all somehow be reconciled.

From looking closely at the increasing demands for 21st Century leaders to develop and sustain an ethical business, it’s apparent the task involves ethical action at both the individual and the corporate levels.  For example simply constructing ever more complex codes of behaviour and compliance systems will not ensure the organisation stays on the straight and narrow.

To quickly assess how close you are to becoming an ethical leader try our Ethical Leader Litmus Test:


Comments are closed.