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Country ethics

04 March 2019 by Anthony Hilton

Country ethics

Organisations are raising governance and corporate behaviour standards

Millennials seem very exercised with environmental, social and governmental issues or ESG, so it seems are companies – particularly FTSE 100 firms. Directors say that it is impossible to engage with young people with a view to offering them a job without first laying out what it is that the company stands for, what it makes, and how this is achieved. Only if it meets those criteria does the company have a chance of success.

You can take this with a pinch of salt, but there is no doubt that companies are raising their game, not just in governance but also in ethical and appropriate behaviour. The problem, however is that there is still a gulf between what boards think should be a consistent approach to ethics and what the employees think should be applicable.

The Institute of Business Ethics (IBE) published one of its triennial surveys of business ethics in the workplace last December, looking at eight countries. The result is a fascinating close-up of employee attitudes, between males and females, between the young, the middle aged and the old, and separating SMEs and big companies. The study covers a wealth of detail but to take its key findings the majority of employees (78%) say their organisation acts with honesty. But equally, 30% of people – nearly one in three – have been aware of misconduct at work.

Similarly the pressure on employees to speak out if they think something is wrong has also increased, though only 54%, or roughly one in two, actually would intend to do so. At the same time more employees have felt some form of pressure to compromise their organisation’s ethical standards. This accounts for 16% of those surveyed, or almost one in six.

Finally there seems to be a much greater tolerance of petty fiddling then there used to be – and some, like increased fiddling of expenses is not that petty, and fiddling the profit figures is even more reprehensible. But it is increasingly the norm, although still just 30%. It is at odds, though, with a professed ethical standpoint.

Once of the biggest issues is when employees choose to speak up – or choose not to – because of what they have seen. The freedom to speak up is supposedly encouraged by the organisation, though, in a lot of cases, whistleblowers have a hard time of it. In fact you have to be pretty sure of your ground because whistleblowers, more often than not, end up sacked or ‘let go’.

Even in less pressured situations speaking up can be difficult. As has been said, just 54% of employees say they would raise concerns if something bothered them. For those keeping quiet, 28% say they do not believe any corrective action would be taken, and 27% think it might jeopardise their job. The other three big reasons for doing nothing were that they felt it was none of their business, that they did not want to be seen as a trouble maker and that they felt their colleagues might be alienated from them.

The other factor of course is what companies do about it, if they do get a complaint. Of those who raise an issue with management, just 51% were satisfied with the outcome.

Interestingly IBE says that though companies highlight the consequences of violations of ethical behaviour in their code of ethics, far fewer organisations publish data in their accounts on actual ethical breaches or dismissals. Indeed only 16 of the FTSE 100 covered this in 2017, and none of them had an employee who was dismissed. It does make you wonder if companies are seeing things the same way as the employees do or whether they think ethical guidance is just another tick box measure.

Similar problems arise when managers cut corners. In general they help employees support their ethical behaviour. But not always and particularly not if the manager might be under time pressure. Even though employees are meant to follow the standards, managers do sometimes reward those employees who deliver results, without actually acknowledging how those results were obtained – because they suspect the truth. When that happens it does not take long for the other employees to latch on, noticing that if one person gets a reward for unethical behaviour, they might as well all try it. Thus the company can go into a downward spiral – as with the phone hacking at the News of the World.

Though companies seem wedded to ESG metrics they seem to find it rather like trust – easy to lose and devilishly difficult to regain again. If companies think this is worth doing, they need to engage more, not simply in promoting good ethics, but in actively rooting out bad behaviour. It is walking the walk, not simply talking about it. That will be a lot harder.

Anthony Hilton is Financial Editor of the London Evening Standard

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