Ethics, What’s That?

What does it mean to be a responsible leader? One place perhaps not to look is towards Goldman Sachs. In the most recent example of the conflict between ethics and mammon, the investment leadership at the company clashed head on with the: “if it’s legal can we do it?” issue.  The leadership choice was whether to pay bonuses to avoid inconvenient tax rates.

Sometimes daily, every business leader faces this challenge of “if it’s legal should we do it?” The difference between a responsible leader and one who is unethical, is the former sets the tone and this governs everything they do. In the case of Goldman Sachs it took the combined pressure from the governor of the Bank of England and other less exalted financial interests to get the message across to the board that avoiding tax may be legal, but it is not necessarily right.

Other bankers though seem to be getting the message.  Recently Andrea Orcel CEO of UBS Investment Bank told the Parliamentary Commission on Banking Standards his company was “serious about putting integrity over profit.” [i] Barclays too has a CEO apparently bent on restoring his bank’s reputation, which presumable also means acting responsibly.

The basic facts about ethical behaviour still seem to be escaping so many leaders. All the evidence is that ethical or responsible companies do better on numerous indicators of performance than ones that are not. Employees prefer working for organisations that are ethical, materially reducing the costs of retention and recruitment. For those focused on the bottom line the evidence is even stronger. Continuous data collected for the annual awards for the Worlds Most Ethical Companies, (WME) persistently shows they do better financially than less ethically-minded organisations.

Last year’s WME winners know a strong ethics program is a key component to a successful business model. As Alex Brigham, Executive Director of Ethisphere.Corporate who produces the WME data put it: “ethics has become much more important globally”.

SCA is Europe’s largest private forest owner and has high ambitions to pursue profitable and responsible forestry activities, while continuing to show consideration for nature. It is one of the 2012 WME winners and “SCA’s track record in ethical business practices and strong environmental performance is a business differentiator strengthening our competitive advantage,” says Jan Johansson, President and CEO of the Sweden-based company.

“Our customers, consumers and investors trust us because of the high level of transparency we demand at all levels of our business. We have seen a true difference in our company’s performance as we have put sustainability on top of the agenda.”

Putting the idea of being a responsible business high on your company’s business agenda may seem extreme to some business people, yet the evidence is it really pays off. So why don’t more leaders do it? One reason of course is the sheer pressure of short termism—there are not many CEO’s like Amazon’s renowned boss who argues: “Well, if you’re long term oriented, customer interests and shareholder interests are aligned. In the short term, that’s not always correct.”

Being a responsible company, in other words an ethical one, can seem an oxymoron to some people. That is, an impossible contradiction in terms. “Ethics, what’s that” snarled Richard Desmond owner of the Daily Express, to the Leveson Committee and many leaders clearly find the whole question of ethics highly distasteful. Naturally it remains far easier to focus on the bottom line than worry about whether you are being in some ways “responsible.”  Yet the two are not necessarily in conflict and hopefully this message is gradually making itself felt. Even if you work for Goldman Sachs.

Andrew Leigh is a founding Director of Maynard Leigh Associates and his book “Ethical Leadership” will be published in October 2013, by Kogan Page.

[i] Financial Times 10.1.2013

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