Three important lessons from the MPs’ expenses scandalJune 2009
At first glance, the furore in Britain over the expenses claims of members of parliament has little to do with corporate responsibility. But there are lessons to be learned for companies aspiring to be socially responsible.
One is that, in reputational terms, it is not enough just to conform to the letter of the law. Most MPs exposed in the past month didn’t break any rules and, in fact, had their expenses cleared by the authorities. Yet the spirit of the law was broken, and the reputational stock of those involved has sunk as a result.
In CSR terms, this shows that it isn’t enough to base responsible business programmes solely on compliance with the law. It is entirely possible to be legally compliant yet gravely at odds with society’s norms of expected behaviour. Businesses therefore need to set the bar higher – whether on health and safety, environmental stewardship or any other aspect of CSR management. Although an obvious point, this has still not been grasped by many companies, just as MPs failed to see the risks associated with their by-the-book approach.
A second lesson concerns self-regulation. Wary of outside interference or scrutiny, MPs not only set their own rules on expenses but policed themselves, leading to a lack of accountability that invited trouble. Companies, too, prefer self-regulation of their behaviour and face the same risks. Admittedly, cross-sector business programmes often have NGO input, which is an improvement on the MPs’ arrangements. But most lack real accountability with robust external checks. Just as MPs cannot avoid an independent audit of their claims on taxpayer money, so business will have to admit more rigorous scrutiny if it wants its CSR credentials to have public credibility.
The third lesson is on transparency. What most sullied parliament’s reputation was its collective resistance to let light into its affairs. A foolish assertion of privilege made the eventual revelations all the more outrageous. Crucially, lack of transparency allowed an unacceptable expenses culture to arise in the first place. Similarly, companies will regret it in the long run if they try to keep their inner workings secret. Just as MPs should have thought about how seeking reimbursement for expenditure on moats, mowers and manure would look on the front page of a newspaper, so company executives must avoid actions they wouldn’t want to see exposed in the media. In the end, trying to conceal misfeasance behind ‘commercial confidentiality’ avails as little as the attempts by MPs to hide their property dealings under the cloak of ‘national security’. Openness is essential to good business because only public scrutiny can ensure that companies pursue their objectives in accordance with the ethics of the community.
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