Wednesday, November 30, 2011

Morality AND Profits: A Study By Corporate Executive Board

I was out at the RSA again this morning to listen to a panel discussion on Corporate Ethics. The panel represented an interesting combination - Wendy Harrison, Programme Director Ethics and Compliance, Shell International, Dan Currell, Executive Director of Corporate Executive Board, Matthew Gwyther, editor, Management Today, and Patrick Donovan, Chief Ethics and Compliance Officer of Airbus and Chandrasekhar Krishnan, Executive Director of Transparency International - and the discussions were effectively steered by Matthew Taylor, RSA's Chief Executive.

The background of the discussion was research undertaken by the Corporate Executive Board, covering more than 30 countries and over half a million executives. Ably presented by Dan Currell, the research explored various issues around corporate ethics, including what makes people tolerate bad behaviour and what may be the effect of corporate corruption on shareholder value. The essential point made was integrity is good business, and usually the companies maintaining and striving to maintain ethical conduct are good long term investment. Indeed, this is commonly preached wisdom, but coming at the back of impressive research, this was valuable advice. Besides, the CEB has also identified seven attributes that influence a Company's culture of integrity, namely, Comfort in Speaking Up, Trust in Colleagues, Direct Manager Leadership, Tone at the Top, Clarity of Expectations, Openness of Communication and Organisational Justice. [More about this research can be found here]

The discussion more or less revolved around these points, with various speakers adding perspectives to it. Interestingly, Wendy Harrsion of Shell identified three main challenges that companies like Shell faces in maintaining a high ethical standard - the challenge of communication (how to keep it simple and understandable for employees who are simply trying to do their job), the challenge of supply chain and third parties (how to create shared values across the 'extended family') and the international challenges (how to make employees understand which law to follow). Patrick Donovan's ideas were on similar lines, though he made clear that corporate ethics and compliance starts and ends with people. He stressed the factors such as Tone at the Top, as well as Tone at the Bottom, and how ideas and opinions are shared and circulated across the company. Chandrasekhar Krishnan broadened the discussion by bringing the challenges faced by small and medium enterprises and how they follow different standards at their home country and at their international locations. He made one specific point which had some resonance with me: He was asking what does a small company do when their material, without which they may lose business, are held in customs for demand of a bribe. I did face a similar situation a few years back and ended up refusing to pay the bribe and lost some business as a result. Mr Krishnan's answer was valid - he talked about 'setting right expectations' and 'better planning' - that businesses should factor in such delay and refuse to pay bribes. He estimates that the cost of doing business will go up by 10% to 20% if the companies are accepting demands for bribery, and this will become 'a race to the bottom'.

Issues discussed in the session, though it was done mostly from a big company perspective, had deep significance for me. Ethics and ethical behaviour is of paramount importance in the sector I have chosen to work in, but this is one thing in acute shortage. Higher Education is over-regulated and under-innovated, a playground for dodgy business practises and unaccountable sole proprietors. Indeed, in some countries like Britain, it is going through a transformation, but corporate investment in the sector will not automatically make the companies more ethical. If anything, this may actually import some problems from the United States, where some of these private providers have been implicated in wrongdoing and mis-selling the courses. What we need is completely fresh perspective on business and people practises in the sector, and sadly, this isn't forthcoming. One should be optimistic and hope that the message, transparency is good business, will reach the industry soon: Till then, however, higher education will remain an industry in search of a long term future. 


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