In business, the subject of ethics is always there, but usually just beneath the surface. We might touch on ethics when we consider corporate values but most of the time ethics sit unspoken inside a complex set of narratives that affect our business at so many levels.
Ethics are both a personal matter and a matter for the business. Ideally the gap between personal and business ethics is minimal – but we can be sure that from time to time there may be a bigger gap. This question of the distinction between corporate man and the individual is one of the drivers behind some work on business ethics we’ve just published at Narrative Dynamics, a leadership consultancy I founded with my partner, Dr. Tom Cotton, an executive coach and psychotherapist with a background in film. The purpose of our consultancy is to help business leaders understand and articulate changing narratives at all levels. The research was based on in-depth conversations with business leaders from a range of sectors including finance.
What interests us is the idea that business is traditionally a hard-nosed matter – we talk of “business is business” or a ”business-like” approach – where the business manager might play a tough game all day then return home to be a different person, and playing a fully altruistic part in the family and local community. How common is this split persona – is it a thing of the past or does the traditional business mind- set reassert itself when it needs to? If we look at the way businesses now describe their purpose we might be persuaded that a new world beckons, with customer needs paramount at all times. Our report – and you can read a summary version here takes a more cautious view that there are signs of movement, from a traditional business for profit paradigm, through to business for customer model, and along to business for “good”. Not all firms are moving in this direction, and certainly not at the same pace. Progress is uneven. Moreover, within an organization not all those in the business will hold the same view. Some individuals take the view, for example, that their own ethical principles are their own and that their employer has no business attempting to shoe horn them into some generalised corporate ethical view.
It’s widely understood that a strong customer focus is a prerequisite for commercial success – but it’s also understood that within most firms when there is apparent conflict between customer needs and those of the shareholders or senior management then finance will win out. When the stakes appear to be particularly high – M&A activity, for example - then customer needs or other ethical imperatives will take a back seat.
You also need to overlay the interests and attitudes of external investors. They might applaud a company with a proposition and culture built around the customer – but they might also have an overriding interest in capital growth or in income, or other financial metric. Some argue that there can, in the long run, be no disharmony between customer interests and capital interests, but most accept that in the short term such conflicts will abound.
Our conclusion in the report is that unless an organisation articulates its ethical framework, ensures an element of dynamism within that framework, and builds a clear approach to dealing with conflict when difference forces pull in different directions – then disharmony will certainly occur, from time to time.
Dynamism is of course essential to reflect broader changes in society. The requirements to adhere to new standards on environmental issues, on gender and race diversity and opportunity are all part of a shifting grand narrative on ethics. Similarly a sector might also move in a certain direction, and in the FS sector, one which has attracted much criticism, the regulator has clear designs on helping shape a different style. I was drawn, in the recent FCA Terms of Reference document on platforms (30 pages – only 28 pages too long!), to just one line – where they asked if larger (vertically integrated) platform businesses pass on economies of scale to their customers? The “right” answer I guess would be “yes”. But if that’s the required answer there is an implied paradigm shift in the business model. In reality, when a firm makes cost savings then in a commercial market it has a range of choices. Such choices would include: reserve the savings to boost profits, salaries, enhance IT or service, or give a selective bonus to whoever was most responsible for those savings. If a company is in any sense obliged to pass a saving directly on to the client then that company is severely restricted in its management freedom. Commercially the right answer might be to pass on the savings in reduced client cost only if in the judgment of the management a reduced client price would result in further commercial gain. So, in this debate wherein lies the right ethical standpoint?
One more example from the world of financial services. The question of whistleblowing. It’s essential that all firms create an environment where employees of all levels feel able to raise concerns with complete impunity. There are circumstances where even those in senior management need a communication line that allows them to remain anonymous. Now, Barclays are pretty thorough on this sort of thing, and their documented policy is rigorous and gives every conceivable reassurance to staff on this matter. Yet the views of their CEO, as exhibited by his behavior, appear not to be in line with the company’s policy. On ethics as on every other matter, listen less to what people say, focus more on what they do. There’s another important message here – make sure your pronouncements on ethics are capable of being upheld. It’s easy for a company to bask in the warm glow of a well-crafted policy statement but if behaviors are not in line with it then the statement itself becomes part of an ethical breech.
This stuff is, I believe, very important. If a company is seen to be unethical it may not survive too long. Step one – as Google once said - is to avoid doing wrong. There is a big gap between this position and the potential end game of “doing good”. In all these matters you need to agree the big principles but then you need to drill down to detail. Most of the business leaders we spoke with in developing our report defined ethics as about “doing the right thing”. It’s not possible to disagree with that, but what matters is thinking through what’s right, for whom, in general and in detail. This is not, we think, about embedding standards for all firms. It’s more about all firms thinking through what their stance is, actively involving the whole team and ensuring that whatever ethical stance is agreed is actually deliverable and delivered across the organisation.
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