Global ethics: enlightened path
Ethics should not be a casualty of the credit crunch
Ethics should not be a casualty of the credit crunch
Short-termism got us here. And, as business for many companies becomes a
fight for survival, short-termism threatens to be the corporate management creed
for the downturn too.
Undeniably, the bald message from hard-pressed finance teams to their boards
will be: it’s the cashflow, stupid.
But does corporate ethics deserve to be an early casualty of these worrying
times? Clearly not, if
you care about professionalism, your workforce, or about the future of the
planet.
And there are pragmatic, self-interested reasons for companies too. Firstly,
business leaders must build sustainable enterprises. Spectacular failures this
time round, like Lehman Brothers and AIG, have not been shown to be corrupt, but
they and indeed swathes of the banking sector failed to build lasting
businesses.
The reasons behind this are as fiendishly complex as a tranche of sub-prime
debt. But what we do know is that in many financial service companies risk
managers didn’t enjoy the kudos of deal makers, that individual bonuses were not
aligned with company strategy, and that the risk placed on the company wasn’t
factored in enough to exceptional remuneration.
In the end maintaining professional standards is what underpins business. Red
lights should flash on risk registers not just when performance is unduly bad,
but inexplicably good. A corporate culture rooted in solid values is likely to
see that as common sense. A greed culture won’t.
Now in the downturn firms have the opportunity to embed ethics and a sane
attitude to risk into their strategy. Bolting on ethics to corporate behaviours
is no more effective than a sterile tick-box compliance culture.
And there is another factor too: regulation, until recently a dirty word, is
suddenly fashionable again.
Organisations that choose to cut back on their ethical performance will be
out of step, and possibly exposed to hefty fines.
So whatever the day-to-day pressures on cashflow as the downturn bites,
companies must resist the temptation to cut corners.
They can take comfort that research by the Institute of Business Ethics shows
that firms that take ethics seriously prosper most.
Charles Tilley is chief executive of CIMA, whose event
Global ethics a myth? is on 19 November. Go to cimaglobal.com/ethics