With the election of President Donald Trump in the US, and the UK vote for Brexit, many voters appear to have turned against the establishment. There is a sense that much of what has driven social and economic policy in the past decades has been the interests of a narrow, privileged few. On both sides of the Atlantic, living standards have stagnated and many feel globalisation has brought few benefits to them. They struggle to obtain security for themselves and their families in key areas like housing, health, and education.
All of this comes at a time of rapid change, with the development of artificial intelligence and the rise of the Asian and African economies. Outsourcing has changed the nature of the workplace and made employment more temporary. Many individuals have more than one employment relationship or work as subcontractors, making them distant from their employer. The corporate sector has a large stake in the challenge of helping society address these issues, partly because it is itself bound up with the forces that are driving change, but also because social and political stability are key to its long-term success.
Institute of Business Ethics (IBE) surveys of public opinion show that the way larger businesses handle remuneration and their tax affairs are a major source of public disenchantment. There are many examples where companies were overly focused on short-term profit and failed to deliver value to their customers. Scandals around remuneration, taxation, and cheating in the money markets, or as with Volkswagen on diesel emissions, reveal practices that are unacceptable.
But these scandals are not the cause of the problem; they are symptoms of deeper cultural issues. Profit becomes legitimate when it is earned through the delivery of real value and the genuine assumption of real risk. It is not legitimate when it is achieved by extracting value from the very customers it purports to serve. A new approach to business leadership based on consensus building, the ability to embed values, and connecting business to society is needed. Leaders who see themselves as individual superstars will not be able to deal easily with this. We need to look for new models – leaders who are connected with their employees and society and use this talent to facilitate good and sustainable results. We need to redefine successful leadership as engaged with ethical values, less iconic, and imbued with strength of character.
Business needs to do more to rebuild trust and secure its place in society. Corporate culture needs to be based on principles of positive behaviour that are consistently applied. While the tone from the top is critical, companies and boards need to devote time and effort in ensuring that the values they have espoused are properly embedded throughout the organisation. Scandals do not necessarily originate at the top of the business, but business leaders are always responsible for the framework that allows them to occur.
The good news is that boards are responding to this, as IBE’s recent survey of ethics programmes illustrates. Almost two-thirds of respondents (64%) say that the senior leaders in their organisation are very engaged on ethics, while another 28% report some level of engagement on ethics by senior leadership. The engagement of senior leaders is mirrored by the focus placed on ethics, values, and culture at the board level, with 86% of respondents stating that these are regular items discussed in board meetings and a third reporting that this happens at least once a year. By adopting a transparent approach to corporate reporting, boards send a message that ethical issues really matter.
However, reporting on business ethics need not be limited to addressing issues of misconduct. In addition to the tone at the top, performance metrics on issues such as customer complaints, staff turnover rates, results of staff surveys – especially responses related to employees’ perceptions of workplace values and culture, staff morale, and stakeholder engagement – could be recorded.
Presenting these elements in an integrated manner reinforces how the business is run and how ethics influences the overall picture of the business, its strategy, performance, and future prospects. The challenge for business leaders is to develop a culture that takes their organisation beyond mere compliance with regulation.
Companies wishing to thrive in the longer term need a sense of purpose and a set of values that are aligned with society and the more demanding expectations of the public.