Walking the ethical board talk

WHILE BOARD chairpersons take ethics seriously, few of Australia’s top companies have actually put initiatives in place to enhance an ethical culture, according to a recent Australian Council of Super Investors report

Walking the ethical board talk

WHILE BOARD chairpersons take ethics seriously, few of Australia’s top companies have actually put initiatives in place to enhance an ethical culture, according to a recent Australian Council of Super Investors (ACSI) report.

Furthermore, only 28 of Australia’s top 200 ASX listed companies have instituted measures to determine whether they were complying with their own code of conduct.

On a brighter note, the report found the majority of board chairpersons emphasised the fact that ethics were at the core of all decision-making.

“The main finding from the study was that boards take ethical issues seriously. Eighty per cent of chairpersons said that their boards discussed ethics in the previous year,” according to Professor Jack Flanagan, head of the Australian Catholic University’s Centre for Research into Ethics and Decision making in Organisations, who wrote the report for the ACSI.

The aim of study was to discover what ethical values influenced board decision-making with regard to governance practices and codes of conduct by surveying company chairpersons.

“Even though most chairs emphasised that ethics was at the core of all decision-making, this does not appear to have been translated into concern or action with regard to stakeholders other than major shareholders.” said Flanagan.

Seventy-five per cent of company chairpersons believed their mission and value statements provided guidance for decision-making.

“Most respondents had some form of code of conduct distinct from their mission statement. They believed that the ethical values held by boards were a reflection of the personal moral values brought by directors to board decision-making,” Flanagan said.

Most chairpersons indicated a connection between their mission statement and code of conduct but in one case only was that connection made explicit.

Seventy-two per cent of chairs stated that directors were assumed to have the necessary ethical background, and only 25 per cent provided any formal training in understanding the company’s code of conduct.

“Based on our findings it was not surprising that few initiatives with regard to enhancing the ethical culture were being undertaken in respondent companies,” Flanagan said.

Furthermore, in 54 per cent of companies codes of conduct were being used as a mechanism to control individual management and employee behaviour, rather than track organisational performance.

“Most surprising was the finding that risk management was not yet at the centre of board concerns,” said Flanagan. “We have barely scratched the surface in understanding the relationship between ethical practices and company performance.”

Flanagan said there were many other questions around the relationship between corporate risk, ethics and stakeholder values, how an outsider can evaluate the risk to a company’s reputation from its interactions with various stakeholders, and how observers distinguish between the values held by corporate management, the policies articulated and the performance being monitored.

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