There are plenty of inspiring business stories out there – the best thing we can do is share them
One – if not the – best thing about doing this job is the potential it offers to meet people...
The Times has since reported on anticipated recommendations from the FRC, suggesting that the proposal for annual elections is likely to be carried forwards (together with calling for more diversity in the boardroom)
In a wide ranging ‘tour de force’ it was though the comment made by Sir David as part of the discussion with the audience that really struck me – that it was behaviours that were at fault, and not ethics.
Tomorrow’s Company strongly agrees that ‘leadership, behaviours and culture’ – the title of one of the workstreams of the Forum – played an absolutely central role: we have set out this argument in our report Tomorrow’s Innovation, Risk and Culture
But does it then follow that ethics did not? I ask feeling especially interested, having had an article published in the Guardian saying that, in the right circumstances, there is much to commend the proposal for the Hippocractic Oath for ‘bankers’ being made by a cross-party commission
To summarise the argument that follows: behaviours are outcomes, but expecting people to behave better without understanding the drivers of ‘better’ behaviour is not going to be effective – an understanding of ethics is essential to having some leverage on what goes ‘inside and between’ people, and how to build the capacity of people to see the need to behave differently.
In this context let me also quote from the quite wonderful short paper written by James Featherby – the White Swan Formula – in what is a very ‘Tomorrow’s Company’ comment:
“You should remember that a business has no real existence. A company is only a construct of convenience of creative imaginations and legal propositions. In reality there are only human beings, trading with each other, albeit at a distance.”
In making the case that ethics matter – a lot – I am in the fortunate position of being able to share the views of, and learn from, a number of people who are thinking deeply about these issues for a long time.
It is also both reassuring and actually not a little inspiring to find that there are powerful voices also making this argument – the Lord Mayor of the City of London in a speech on 30th March 2010 arguing that:
“The UK’s financial services sector can reposition itself so that ethics and effective corporate governance are at its heart – ensuring that there are workable sanctions to enforce good behaviour. In other words, we need to extend governance beyond its usual meaning, ‘giving effective direction’ to include its other meaning, ‘ensuring fast feedback’, too”
Defining terms – morality and ethics
Morality is the adherence to moral principles (or cardinal virtues) in personal and public life, often but certainly not exclusively underpinned by religious belief. Morality involves the behaviour and commitment of the person or the individual.
Ethics are similar in referring to an agreed moral code of practice or behaviour but refer to publicly accepted norms at the organisational rather than the individual level.
Roger Steare, author of the excellent ethicability, then adds to this with the following ‘academic’ definitions:
1. Ethics is the study of moral philosophy.
2. In current usage, “ethics” tends to be used in professional life; “morals” in our personal life. However, this distinction is also part of the problem.
3. In terms of Mike’s proposition, moral values are by definition “virtues”, which are mature, internal drivers of decisions and behaviours such as courage, humility and love. In “ethicability”, we call this our Principled Conscience. Philosophers call this “virtue ethics” and the sum of all our virtues is what we call “Integrity”.
A focus on fair outcomes for all is called “teleology”, “consequentialism” or “utilitarianism”.
A focus on absolute principles or “rules” philosophers call “deontology”.
Our research is consistent with other contemporary psychologists, which strongly suggests that humans use each of these perspectives to make ethical or moral decisions, but that the development of virtue takes time and maturity.
Rule compliance is the moral infancy of the child who cannot be trusted (yet) to make judgements based on internal moral virtues, or indeed on a clear understanding of what fairness for all means.
4. In summary, ethics or moral philosophy, is based on 3 perspectives: We obey the Rules. We do what’s Fair for all. We act with Integrity.
So what does all of this mean for ethics and the financial crisis?
Mike comments that is that the behavioural failures of people to take their oversight and regulatory roles seriously enough – and I would add, the failures to challenge decisions on for example complex products or risk profiles on board when people did not understand or felt profoundly uneasy – is “a failure of responsibility” and that this is in itself a moral and ethical issue:
Roger adds this following and fascinating insight:
I often refer to Jim Collins’ research in both “Good to Great” and “How the Mighty Fall”. In the first, his research demonstrates that the moral values of personal humility, courage, self-discipline (NOT rules!) and passion (love) are the root values of business greatness. In the second, he demonstrates that the opposite moral vices of ego, fear, greed and apathy are the primary drivers for corporate destruction.
We have also posted his ‘2008 Moral DNA’ Report . See the evidence provided, particularly in the early exposition of Rule Compliance, Social Conscience and Principled Conscience. See also the data on Occupations.
Ethics in the Age of Sustainability: the importance of stewardship
Thinking aloud, I wonder if there is a parallel between how we used to think about CSR and how Tomorrow’s Company thinks about business as a ‘force for good’. Central to this is our view of value and value creation, and the link between value and values.
So too for ethics, perhaps?
We have long argued that key actors and institutions now need to understand their responsibility to the systems of which they are part and on which they depend – and that the failure of for example Ratings Agencies and many others was not simply an ethical failure in the sense already described, but was also a failure of ‘stewardship’: yes, it was unethical in the sense that Michael mentions, and failed to meet norms of business behaviour; but in so doing, this contributed to a dynamic systems failure – ethics in the twenty first century is about understanding the butterfly effect, and not throwing the stone that may lead to the avalanche.
But if this is correct, what do we do about it?
Peter Lewis calls for Moral Philosophy and Ethical Decision Making to be an essential part of any Board Induction – “Character begets Judgement which determines Behaviours, so it is no good talking about improving behaviour if you don’t look at what underpins it”, he argues.
There is a jigsaw of techniques and practices that need to be put in place to create a new and reinforcing self reinforcing ‘system’ which encourages key actors to embed an ethical dimension in what they do and how they do it – I am continually struck by Jane Anderson, of Forum Member YSC’s remark that there are many known and evidenced techniques for improving individual and team performance and decision making, but their use stops short of the no-go zone of the Boardroom
These techniques and practices – which we called for in our recent report include:
Going beyond the Boardroom, do we not also need to explore how best to set the ‘systems conditions’ to drive/reinforce these new actions and transformed behaviours – for example by:
The recent intervention by Avivia, LINK the fund managers that own about 1.5 per cent of every company quoted on the FTSE All-share index, writing to 800 chairmen, is a very encouraging indicator:
As the Good Governance Forum considers its future programme of work and what in practice we will look at under the theme of ‘leadership, behaviours and culture’, it will be fascinating to see what Forum members determine will need to be considered in detail – and what the Forum as a whole agrees it will need to consider in mapping out all the regulatory, behavioural and ‘behavioural plus’ issues that need to be worked through in order to map the agenda for good corporate governance in the future which is effective and enduring, by being practical whilst also rising to the challenge of being holistic and systemic in the solutions it offers.
Postscript: Beliefs and Values vs Ethics
I mentioned earlier the wonderful White Swan written by James Featherby. My blog prompted the following, generous, comment which is well worth sharing. In particular James suggests that the focus on ethics comes across as too judgemental and ‘moralising’ – and that instead we would do better to focus on foundational beliefs and values:
1 Foundational beliefs are the inner core. Foundational beliefs focus on two questions: who am I (basically am I loved and therefore am I safe) and why am I here (is there a bigger story I am part of or is life pointless).
Again my sincere thanks to all those who have shared their insights and very considerable understanding of the issues raised in this blog.
One – if not the – best thing about doing this job is the potential it offers to meet people...
The embarrassment suffered by Sir Craig Mackey, Deputy Commissioner of the Metropolitan Police, after it was revealed that he had locked...
Interview conducted by Norman Pickavance. NP in bold. Ruby is a volunteer at a hospice. For her, progress is about...
Here’s a selection of news stories and features that caught our eye whilst trawling the web and social media this...
Sign-up to our mailing list to receive all our latest discussions, publications and events.
Press return to search