Strong ethics are not enough
Ross Tieman | Monday, 14 July 2008
Britain has never been short of great business leaders with a sense of social responsibility. From Josiah Salt, who provided medical care for his 19th- century mill workers, through the Lever Brothers and their worker housing at Port Sunlight, to George Cadbury's sports fields at Bournville, the examples of private company bosses who shone by their ethical practices are legion.
Today's corporate leaders face a different challenge. Far from being prodigiously rich, most are hired managers.
They have to justify their responsible business decisions, not just to their consciences, but to a host of stakeholders, beginning with shareholders, and including employees, legislators, consumers, and the communities in which their offices and plants are located.
Corporate geography has changed too. National champions have become global leviathans, with supply chains stretching to the far corners of the earth.
Yet our data-rich society can inform the world within hours of any ethical breach, no matter how far removed from the supermarket shelf or the London head office.
The sheer volume and speed of information flows have turned any transgression into a risk to corporate reputations built over decades.
For leaders who sincerely believe that business should behave responsibly, this is a blessing in disguise. Risk management is no mere cloak for rigorous ethical policies. Sound behaviour, embedded in corporate culture and adopted worldwide, is the only way to protect companies and their brands from reputational risk.
Events in the financial markets over the past year have amply demonstrated the vulnerability of brands such as UBS, ABN Amro and Bear Stearns in banking.
Leaders who sign up to the responsible business agenda are doing the right thing. Shareholders may wince at the cost but, for believers, the investment in reputation is modest compared to the risk of inaction.
For some leaders, such as Chris Hyman of services contractor Serco Group, Christian values underpin a drive for responsible business practices across the company. Others, such as Stanley Fink, former chief executive of Man Group, the hedge fund manager, have reasoned that better ethics produce better results, as well as fulfilling a moral obligation.
Yet no matter the motive, for today's generation of bosses the challenge of making a complex international business behave responsibly in every respect is awesome.
A study in July 2006 by Ashridge Business School for the European Academy of Business in Society, entitled "Leadership Qualities and Management Competencies for Corporate Responsibility", set out something of what it takes to be a good leader in this field.
The report, by Andrew Wilson, Professor Gilbert Lenssen and Dr Patricia Hind identified seven necessary qualities for responsible leadership. Top of the list was respect for employees at all levels. Successful corporate responsibility leaders also had to be honest and trustworthy.
It was important not to be complacent, or think things could not be improved. They needed commitment to the growth and development of employees. They had to be honest and open with staff in the organisation, as well as strategically. And finally, they had to question "business as usual" by being open to new ideas, challenging others to adopt new ways of thinking.
But even inspired, and inspiring, individuals will not necessarily deliver much improvement across an organisation. To build responsible practices into an organisation that would be sustained long-term requires real cultural change.
In practice, the researchers found, outstanding leaders needed a combination of deep-seated personal beliefs and values, allied to considerable management skills.
Responsible business leaders have two other hallmarks - intelligence and courage. The intelligence to recognise that, in a world of instant communication, unethical behaviour is ceasing to be an option; and the courage to push through change and pursue an ethical agenda that runs ahead of the rising standards that data capture and analysis are making inevitable.
They also have to override national cultures. A practice that is universally frowned upon in Denmark - the world's least corrupt country in the global index drawn up by Berlin watchdog Transparency International - may, for example, be culturally acceptable in Africa.
Convincing employees and stakeholders to adhere to universal standards cannot be achieved overnight. Leadership in responsible business is not really about changing companies. It is about changing hearts and minds both within and outside an organisation.
And it is about continuous change. Practices accepted in yesteryear are often unacceptable today. Tomorrow, the standards will be higher still. That, too, is a message leaders need to be singing loud and clear.
..........................................
Today's corporate leaders face a different challenge. Far from being prodigiously rich, most are hired managers.
They have to justify their responsible business decisions, not just to their consciences, but to a host of stakeholders, beginning with shareholders, and including employees, legislators, consumers, and the communities in which their offices and plants are located.
Corporate geography has changed too. National champions have become global leviathans, with supply chains stretching to the far corners of the earth.
Yet our data-rich society can inform the world within hours of any ethical breach, no matter how far removed from the supermarket shelf or the London head office.
The sheer volume and speed of information flows have turned any transgression into a risk to corporate reputations built over decades.
For leaders who sincerely believe that business should behave responsibly, this is a blessing in disguise. Risk management is no mere cloak for rigorous ethical policies. Sound behaviour, embedded in corporate culture and adopted worldwide, is the only way to protect companies and their brands from reputational risk.
Events in the financial markets over the past year have amply demonstrated the vulnerability of brands such as UBS, ABN Amro and Bear Stearns in banking.
Leaders who sign up to the responsible business agenda are doing the right thing. Shareholders may wince at the cost but, for believers, the investment in reputation is modest compared to the risk of inaction.
For some leaders, such as Chris Hyman of services contractor Serco Group, Christian values underpin a drive for responsible business practices across the company. Others, such as Stanley Fink, former chief executive of Man Group, the hedge fund manager, have reasoned that better ethics produce better results, as well as fulfilling a moral obligation.
Yet no matter the motive, for today's generation of bosses the challenge of making a complex international business behave responsibly in every respect is awesome.
A study in July 2006 by Ashridge Business School for the European Academy of Business in Society, entitled "Leadership Qualities and Management Competencies for Corporate Responsibility", set out something of what it takes to be a good leader in this field.
The report, by Andrew Wilson, Professor Gilbert Lenssen and Dr Patricia Hind identified seven necessary qualities for responsible leadership. Top of the list was respect for employees at all levels. Successful corporate responsibility leaders also had to be honest and trustworthy.
It was important not to be complacent, or think things could not be improved. They needed commitment to the growth and development of employees. They had to be honest and open with staff in the organisation, as well as strategically. And finally, they had to question "business as usual" by being open to new ideas, challenging others to adopt new ways of thinking.
But even inspired, and inspiring, individuals will not necessarily deliver much improvement across an organisation. To build responsible practices into an organisation that would be sustained long-term requires real cultural change.
In practice, the researchers found, outstanding leaders needed a combination of deep-seated personal beliefs and values, allied to considerable management skills.
Responsible business leaders have two other hallmarks - intelligence and courage. The intelligence to recognise that, in a world of instant communication, unethical behaviour is ceasing to be an option; and the courage to push through change and pursue an ethical agenda that runs ahead of the rising standards that data capture and analysis are making inevitable.
They also have to override national cultures. A practice that is universally frowned upon in Denmark - the world's least corrupt country in the global index drawn up by Berlin watchdog Transparency International - may, for example, be culturally acceptable in Africa.
Convincing employees and stakeholders to adhere to universal standards cannot be achieved overnight. Leadership in responsible business is not really about changing companies. It is about changing hearts and minds both within and outside an organisation.
And it is about continuous change. Practices accepted in yesteryear are often unacceptable today. Tomorrow, the standards will be higher still. That, too, is a message leaders need to be singing loud and clear.
..........................................