Ethics: Need to Be Taken More Seriously by Business

24/03/2016 12:25 | Updated 5 days ago

How well business behaves should be governed not just by rule books and regulations, there needs to be an instinct for good behaviour that gets talked about. For ethics.

Common sense? Apparently not. What we are seeing instead is a gradual erosion of ethical standards, or at least any sense that they represent something important to a firm or can be articulated.

A new report from the Chartered Institute of Internal Auditors found that less than a quarter of FTSE100 companies give shareholders any clue about their ethical standards. Do they consider the issue of such little interest that it's hardly worth bothering the printer with? They are setting a poor standard.

It is not that the best firms don't know the word. They clearly do. In fact, 94 per cent of the firms questioned state in their annual reports that they are committed to ethics.

But how troubling that they apparently consider explaining them more widely a low priority.

Or worse. Another study quoted by the America business ethicist Frank Bucaro asked respondents to rank the top three deterrents to corrupt behaviour in business. Ethical behaviour ranked six out of eight options.

Those rated the most important all involved some element of punishment or risk, which is a telling insight into human motivation.

But ethics cannot be an afterthought in business, which does not operate in a bubble but within wider society. They are the moral principles that represent its soul, although not its purpose. Many business leaders confuse ethics with compliance, which is largely a corporate governance box ticking exercise, albeit an important one.

But adding more boxes to tick does not make people better corporate citizens. We may in fact have reached the ethical equivalent to assuming that if it isn't bolted down you can take it. But surely the point is that formal regulation only goes so far, as do company manuals. They are largely lists of 'thou shalt nots' and to be otherwise would run to impossible length.

This raises the problem with relying on compliance rules, codes and regulations generally: the implicit assumption that any action left unmentioned, or imagined, is acceptable. Plainly that is not the case.

Ethics is about individuals and their values. Just look at how good leaders will bring those values to an organisation, diffusing them throughout the structure to all employees, indifferent ones will scarcely bother.

What is a simple truth is that ethics is, at a basic level, just a sentence long: It is about doing the right thing, not what the law permits. It is a way of being not of specifically proceeding.

We are not living in a golden age of corporate propriety, despite the visible trappings of 'social responsibility' and responsive customer interactions. These create the illusion that Corporation and Clients and Consequences march nowadays more to the same beat, enjoying a harmony of purpose.

But we should not be blinded by firms increasingly speaking out for good causes. Whilst all perfectly laudable, much of it is driven by a marketing instinct rather than an ethical one.

How firms present themselves and how they behave are often separate and unrelated. And in an age of economic uncertainty of the sort we are living through, the ties to ethical standards can loosen in the search for profit.

It is not enough to just talk about ethics, but it would certainly help to explain them. FTSE 100 companies should take a lead. The senior people in all organisations should consider their own motivations and set the tone from the top.