Ethics comes when business justifies itself
Financier Bernard Madoff (R) exits Federal Court in New York. | EPA/PETER FOLEY
With the almost daily reports of wrongdoing by business or governments, New Europe discussed how to move forward with Prof. Charles Sampford, Director of Australia’s Institute for Ethics, Governance and Law.
Business and ethics has been the underlying theme in major news stories for the last few years, how close is ethics to business?
Ethics can’t have a separate word. Either you act ethically or not. Ethics is not sat on some surreal cloud. Ethics is about people doing everyday jobs and thinking about their values, asking hard questions about those values and living by them. If you do, you have integrity and act ethically. If you don’t, the first person you cheat is yourself, because you’re not the person you told yourself you are.
You also cheat other, but that’s secondary. This is individual ethics and one of the problems of talking about public ethics, or business ethics is that it concerns how an organization works, not just an individual. It’s not the matter of an unethical corporation and an ethical saint trying to do the right thing. What we need is for business ethics to go through the same process as an individual. It needs to ask hard questions, give honest and public answers and live by it.
Now a corporation has many people with different views. So it’s a more complex process, but one that is absolutely essential. Leaders need to lead a process where they and their colleagues ask these questions and ask ‘what’s this organization for?’ and ‘How is the community better off?’
It’s critical that every organization justifies itself to the community it is part of. In what way does it make the community a better place? This isn’t to say that business should act like a charity. They can serve the community and make a profit. It’s very important to make sure they do.
This involves thinking where are the pitfalls, the temptations? It’s not enough to have a code of ethics. There must also be accountability mechanisms and sanctions.
This has to be an ever more complex issue in a globalised world?
Companies should have an overall justification of what it does and adapt to each community it works in. If it operates in one country to the detriment of the community it should be honest about it. I think they should make sure to say, before they enter a community, how they will benefit the community and then live up to it.
Shareholders need to think about their values and they should invest where their values are preferred. If there’s a company that is acting unethically, they should become shareholder activists and try to ensure the corporations they invest in live up to defensible values.
Is this about long term rather than short term thinking?
In downturns, people are tempted to cut corners and there is a real problem with short-termism and the way the financial markets operate is a real problem. Within corporations there are some who think long term and others who think short term. The investors have long term interest, they may not see any money for a long time.
One of the problems is that all the intermediaries between investors and the corporation are into short term interests. That makes it hard for investors long term interests are being diverted. Planning involves long and short term but there’s too much short term right now.
Is the concept of ethical business taking off?
In Australia there has been some very serious crisis in corporations and government. There’s a lot of talk about ethics. I was asked if it was a sea change and I said it was more like a tidal movement. Wait till the stock market picks up again! Those who want to engage in government reform have an opportunity; hopefully each time there is a scandal we can improve a little bit. But there’s a temptation to go the other way when the market improves. Ethics in business is a long term game. new europe on line
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