IN TOUCH : Ethics Pays – But Can It Be Taught?

As personal investment adviser who champions business ethics the first question I am usually asked is whether there is cost to being ethical. The evidence is that you can do well by doing good. The bottom line is highlighted by academic research in 52 studies (involving 33,000 observations) of the relationship between corporate social and environmental performance and corporate financial performance. The conclusion was that there has been sufficient research to prove positive association between the two.
More locally, AMP in Australia divided the shares of 350 companies into two equally weighted portfolios according to their ranking for corporate responsibility. Over four years the highly ranked companies outperformed the low ranked companies by five percent, and over 10 years they outperformed by three percent.
Businesses that are ethical leaders attract and retain the best employees, increase sales and customer loyalty, strengthen relationships with suppliers, enhance corporate citizenship and goodwill within the community and perform better financially for shareholders. Ethics clearly is enlightened self-interest for business.
Reflecting this increasing understanding is strong revival of interest in ethics education. In May 2007, The Economist discussed how in 2002 American business schools in particular took some of the blame for the corporate scandals at firms such as Enron and WorldCom. It was even suggested that, with former Enron boss Jeffrey Skilling star of the Harvard Business School in 1979, and many other corporate villains boasting MBAs, the way to solve corporate America’s ethical problems was to fire everyone under 35 with an MBA!
Post Enron, business schools have started to teach more ethics – for example, the Harvard Business School, has introduced popular new course in “Leadership and Accountability”. The University of Auckland Business School now offers two-day short course on ethical leadership.
Yet many people wonder whether ethics can be taught. The ethics learned in our youth are not immutably etched in our character. The formation, refinement and modification of person’s ethics – the attitudes and beliefs that motivate conduct – is an ongoing process that continues throughout one’s adult life.
The ethical leadership training I offer provides insight to the literature, case studies and examples, opportunities for reflection and deeper understanding of business practices. It includes creating ethical leadership action plans to improve your triple bottom line. Participants create individual and organisational ethical and sustainable development scorecards as roadmaps for holistic corporate governance and building an ethical corporate culture that engages and inspires staff and other stakeholders.
Training can enable leaders to clarify their purpose with focus on making difference as well as making money. The aim is to create environmental and social, as well as economic wealth. In response to Peter Drucker’s challenge that “only if business learns that to do well it has to do good can we hope to tackle the major social challenges facing developed societies today”, business ethics training encourages business leaders to serve mankind and save the world.
Ethics education includes identification of clear set of principles. Two thousand four hundred years ago Aristotle advocated virtues such as responsibility, integrity, honesty, fairness, caring and courage as fundamental to living “a good life”. Training can explore the application of the virtues personally and professionally and support businesses to be models of ethics and excellence.
The test of ethics is whether business walks the talk. Ethical practices address the concerns of stakeholders including shareholders, customers, employees, suppliers, the community and the environment. Here in New Zealand ethics courses can draw upon local examples of enlightened leadership from the finalists in the ethical governance category of the Deloitte/Management Magazine Top 200 Awards. Past winning initiatives cover ethical leadership, safe working environments, environmental policies and stakeholder dialogue. Nominations for 2007 are currently being sought – see www.management.co.nz/top200/ethicalgovernance.asp.
Performance measurement is another key element addressed in the education. This involves accounting for environmental and social as well as financial performance. Ethical accounting includes qualitative and quantitative measures, using both stakeholder perceptions and company data to determine performance in terms of the “triple bottom line”.
Ethics training helps to meet the expectation of the Securities Commission’s Principles and Guidelines for Corporate Governance which state that directors should observe and foster high ethical standards, including provision of employee training and system to implement and review the entity’s code of ethics. Meanwhile, investors such as the New Zealand Superannuation Fund and the Asteron Socially Responsible Investment Trust (also available as KiwiSaver’s first responsible investment option) are encouraging businesses they invest in to commit to ethics education.
•Dr Rodger Spiller is financial adviser with special interest in responsible investment. He presents business ethics training courses. www.nzcbesd.org.nz