The price paid for companies behaving badly goes on rising.
Apart from a stream of enforced exits by CEOs, mounting fines, priceless damage to reputation and loss of customer goodwill, we’ve seen a steady drop in society’s trust in business leaders.
Yet being an ethical leader is not just a case of staying legal. As the Starbucks, Google and Amazon tax saga showed, just staying within the strict confines of the law may not protect you from being in the hot seat over doubtful actions.
No matter what type of organisation you run, every business leader needs to be able to answer simply and easily just seven basic questions about the ethics of their business.
As a leader of an organisation myself, coming up with these answers is personally testing. Here is the sort of reply from a business leader you should expect.
1. What do you mean by ethics? For our company it means how we get results matters as much as the actual results themselves.
Ethics are what’s right and wrong, what’s good and bad, acceptable or not acceptable in society and in our company. They’re the rules or expectations about our people’s behaviour.
It means judging behaviour using some standard such as: Compliance—people behaving according to a set of clearly defined rules– doing what you’re told to do; Social conscience— people making decisions and doing what’s best for others; Moral principles—people acting with integrity, having a moral compass, or being values drive
2. Is there such a thing as business ethics? Ethics govern how we conduct our business, make profits or achieve other goals. We simply apply society’s external expectations about behaviour to the business setting.
It means for example, treating customers fairly, ensuring a safe working environment, refusing to pay bribes, preventing bullying or various kinds of harassment at work, conforming to certain regulations, and having good standards of governance, and contributing positively to the community generally.
Being seen as an ethical business comes from a subjective view of products and services, priorities, goals and values, our philosophy, reputation and how we treat people.
3. Do ethics really matter to your business organisation? Our business lives and works within a community. It has expectations about how we should behave; taking those into account in our decision making and actions really matters.
Not being a responsible member of our community could prove costly to us—leading to fines, public opposition and even costly legislation causing problems. Secondly, it matters because running an ethical organisation is often more profitable and satisfying than an unethical one.
There is a strong business case, let alone an ethical one, for acting responsibly, such as ease of raising capital, the ability to attract, and retain talent.
4. What makes you an ethical leader? In trying to do what’s right I’m guided by values or principles I believe are important, such as integrity, honesty, fairness, and sustainability and so on.
They’re what I think it means to be responsible person, and I use them to interpret what the community expects of my organisation.
As an ethical leader I also work hard to provide a clear example for others to follow. It’s my special responsibility to set the right ethical tone for my organisation, ensuring our culture encourages people to behave responsibly and engages them in that.
5. How do you recognise an ethical business? By whether our stakeholders and the community in which our organisation lives and works regard us as a respected and responsible member of society.
We expect to be seen as making a worthwhile contribution, driven not solely by profit, but wider concerns such as our role in the community. There are also formal measures that define us an ethical business.
These include: behaving well against a set of criteria, such as being a good employer, paying our fair share of taxes, being environmentally responsible, complying with formal regulations, meeting social obligations and so on.
6. What exactly is your moral compass? This is my set of personal principles for how to behave, make decisions and relate to other people.
My moral compass helps steer my actions and choices and ability to advise others. It helps contribute to the organisation’s culture so both individuals and the entire organisation, learn to act responsibly.
In essence, my moral compass is my personal beliefs and values—what I mean by doing what’s right.
7. How do you make your employees behave ethically? First, we have a proper foundation of codes, monitoring, adequate support and training to encourage proper compliance.
Second, we reward ethical behaviour and make sure we penalise unethical behaviour.
Third, we go beyond box ticking and mere compliance. Instead we get people feeling personally involved with helping the company act responsibly. Once people are ethically engaged naturally they tend to act ethically themselves.
Every ethical leader will answer these seven questions in their own way, interpreting the replies to fit their particular organisation. All the above fit within just 100 words each, though the most articulate leaders could probably do it in less.
What is so clear though, many quite senior business leaders not only don’t know how to answer these questions, they’re not even sure what are the questions in the first place.
Is your performance management doing good or harm
Putting your reputation on the line
Ethics are not just for the birds
Useful resources for making sense of ethical leadeship.
Ethical Engagement – beyond compliance