Is business finally taking responsibility?

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Haven’t boards always had ethical obligations?

Simon Webley, research director, Institute of Business Ethics.

They have always had a duty of care written into what they have to do. But
you can’t assume, now, that everybody acts responsibly. ‘My word is my bond’ is
no longer a generally accepted basis of doing business. If you have a
conversation or enter into any agreement, being asked to put that into writing
is common. It is a live topic and there will be people who take a view that
profit is more important than ethics or values and this is a fact of business

In the UK, there were a number of high-profile scandals and as a result of
that business, rather than government, took the lead to say, let’s have some
standards in these matters, let us look at our corporate governance. We had a
series of committees – Cadbury, Hempel and so on – and, ultimately, that led to
the combined code. So really the sea change in realising that you couldn’t
assume that people would always act responsibly, directors couldn’t always act
responsibly goes back to the early 1990s. I think businesses should have a
responsibility policy of which the social aspect should be part of that.

Why is ethics back on the agenda?

Andrew Chambers, director, Management Audit and chair of ACCA’s corporate
governance and risk management committee.

My concern is that there is a disconnect between the policies of the board
and how they are implemented by executive management. I think, very often,
boards, particularly the outside independent directors, are not well informed
about what is actually happening within the business. They believe they have
ethical policies which are being implemented across the piece and then they
discover, when there is an explosion at an oil refinery or a failure to account
properly for oil reserves or the payment of apparent bribes to secure overseas
contracts, that they’ve been caught out. They’ve been presiding over a business
which has been conducted in a way that they didn’t imagine it was being

There are companies where the flow of information through to the board is
strictly filtered through the chief executive and the finance director and other
executive directors on the board don’t feel that they have the freedom to
express their concerns openly to the board without the approval of the chief
executive. This is a serious issue which needs to be addressed.

Where should the responsibility bar be set?

Jayn Harding, principal adviser for responsible investment, FTSE Group.

We’ve moved from a period where its been ‘tell me’ through to a period when
its been ‘show me’; now we are in a ‘prove to me’ period. There is the issue of
does the right hand know what the left hand is doing? Are policies being
implemented? These are very important issues for well-run companies and for
companies that want a good reputation. They need to have organised approaches
like a policy management system, measurement reporting, so that every part of
the business knows that it is implementing the requirements of the board. These
elements actually form elements of the FTSE4Good index that FTSE has.

Is the bar being raised? Certainly in FTSE4Good we are finding that the
demands are increasing and, therefore, we have an approach which is to gradually
increase the standards that help move the benchmark on and how companies move
their performance on as well.

At the moment, the benchmark is set in FTSE4Good and other standards and it’s
increasing and moving all the time. It’s a bit like a journey and, at the
moment, no ultimate destination has been defined, but we are all moving in the
right direction and improving all the time.

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