Don’t ignore the power of the board outsidersJanuary 2010
Non-executive directors can play a crucial role in setting the ethical agenda, argues Danielle Cohen
Company training can instil good behaviour in employees, but if corporate culture legitimises corruption as a necessary evil then it will all be in vain. Allegations of price-fixing in the construction industry and claims of the existence of large-scale bribery by defence companies suggest that poor ethical standards may have become endemic not just to companies, but across entire sectors.
Corporate culture is powerful and difficult to challenge. Just think about the complex politics of workplace convention: it takes courage to suggest doing things differently, especially if it is on the grounds that current practice is unethical. Being seen to take the moral high ground is risky, and may not win many allies. It is therefore essential that companies deliver ethical training from the bottom up. But the people at the top exemplify the true ethical standards of an organization and unless they demonstrate desired behaviours themselves, then ethics training for other employees will have a limited impact.
Non-executive directors play a particularly vital role in setting the ethical tone. The most effective of them will challenge management where appropriate, acting as a check and balance. That is why my organization has worked with the other chartered accountancy institutes of the UK and Ireland to develop and publish a series of ethics case studies for professional accountants who work as non-execs.
As the foreword to the case studies points out, non-executive directors have a particularly important role to play in creating and maintaining an ethical culture. They may be approached by employees wishing to report unethical behaviour and, despite being senior figures within the organization, are likely to be seen as a more independent voice that can make itself heard.
Balancing confidentiality with professional duty, dealing with a junior employee’s ethical concerns and resolving any conflicts of interest are all relevant issues for non-execs. Their focus in the sphere of ethics should be on how to safeguard the principles of integrity, objectivity, professional competence and due care – as well as confidentiality and professional behaviour – which form the backbone of any ethical code.
As the financial crisis and ensuing recession wear on – and talk turns increasingly to the green shoots of recovery – the role of non-execs in promoting and upholding ethical codes needs to be highlighted more. Allegations of poor corporate governance and low ethical standards persist, even as we seek to learn from the mistakes of the past. We need to think about how behaviour can be improved: and that means using the influence of professionals working in business at every level.
Non-execs must be courageous enough to stand up for what is right, but companies must also ensure they are instilling high standards of ethics. For those that do break the rules, government must then step in to curb unethical behaviour with the right regulation and appropriate sanctions.
Danielle Cohen is ethics manager at the Chartered Institute of Management Accountants
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