07 August 2015 by Henry Ker
In light of recent governance scandals, ethics has been reinforced as a major consideration for boards. Building on last month’s Quick Question, we asked the Governance and Compliance/Core community whether enough time is spent by the board discussing ethics during decision making.
We had a very positive response, with nearly two thirds of participants arguing that enough time is spent on this ‘vastly important’ topic. Many said that it is an integral part of their meetings, stating: ‘We ensure that there is a standing board agenda item dealing with ethics and governance matters’ and ‘compliance and ethics is on every board meeting agenda’. Another commented that ‘the board often considers dilemmas between financial, social and environmental returns which might be achieved from any decision’. There was some consideration of the sector-based demands on ethical discussion – for example one argued that ‘as [we are] a charity, this is fundamental’ – however, others suggested that it ‘is almost taken as read, in that … ethical behaviour is expected as the norm’.
There was an interesting alternative viewpoint from some that there is actually ‘too much’ discussion of ethics on the board, whether from their point of view, or external stakeholders. One commented that ‘shareholders may argue too much at times but we believe it is important.’
Despite only 31% of the responses taking the ‘no’ side of the debate, these respondents were among the most vocal. Some said that although they consider ethics to be important, it often gets buried beneath more pressing concerns on the agenda. One suggested ethics is ‘not well articulated’ in board meetings and ‘current issues may detract from ethical considerations’. Another agreed, arguing ‘sometimes the consideration of ethics comes too far down the line’. One of the respondents explained this view: ‘In my experience there is a lot of varying degrees of knowledge and experience on the issue at board level, so boards can shy away from debate. There isn’t always enough challenge on what not to do when it’s easier to adopt a well-trodden path.’ Another took this view further, stating that it was not a question of interest in ethics, but rather a lack of experience in how to deal with the topic and a balking at the level of time required to be invested: ‘They might want to engage but actually I don’t think that they know how. This really is about setting the tone and being curious about the culture of the company, which would mean making a serious investment in finding out and being prepared to question if something seemed uncomfortable.’
Although most do seem to consider ethics regularly at board level, a third feel it is not understood properly. This is perhaps a surprisingly large fraction, especially when considering something as topical and fundamental as the ethical position of a company – not least, as one argued, because ‘if [companies] do not [consider ethics], it can have a profound impact on the business.’
Conducted in association with The Core Partnership