5 Ethical Responsibilities of Corporate Boards.
Board ethics is a hot topic. Most corporate boards have learned to act quickly when a scandal breaks. It is now the rare board that doesn’t launch an independent investigation quickly when misbehaviour is reported.
But the responsibility of the board to prevent scandals is more important than the responsibility to clean up the mess once it has emerged. The recent high profile actions of AMP and Rio Tinto have drawn attention to the vital role of Boards in establishing the expectations and tone of an organisation. As Angus Armour, CEO and Managing Director, Australian Institute of Company Directors says “Boards must set a clear tone from the top on their cultural expectations of management and of themselves. Key decisions will be seen as tangible evidence of what is valued and prioritised.”
Here most boards are still at the starting gate.
Boards need to take a key role in preventing ethics failures before they happen. This is more complicated than calling in the outside lawyers once disaster happens. Work done by Markkula Center for Applied Ethics at Santa Clara University points to several key steps every board should take to get out in front of ethics problems. These include:
- Knowing the health of the ethical culture
- Evaluating the ethics of the business strategy
- Monitoring the real ethics risks in the organisation
- Monitoring the ethical behaviour of the leadership team
- Verifying that the elements of the ethics and compliance system are strong
But does the board really know whether each part of the system works? Everyone took the annual compliance training, but did it have any effect? The company has a code of conduct, but is it viewed cynically by the staff? Do people really believe the company wants more than minimal compliance? The board needs a way of evaluating the strength of these systems, not just their existence.
By meeting each of these responsibilities, the board sets the tone for true ethical behaviour in the company — and does its best to prevent future wrongdoing. Today it is not enough to be conscientious about cleaning up scandals after they occur.
Cranlana Centre for Ethical Leadership draws on more than two millennia of philosophical thinking to foster in-depth, practical discussions that sharpen critical reasoning and strengthen moral courage. Since our formation more than 25 years ago, we’ve seen thousands of senior-level people across business, community and government benefit from our rigorous programs. Cranlana’s programs include the 2 day Executive Ethics, 6 day Executive Colloquium and year-long Vincent Fairfax Fellowship. We also deliver online and tailored corporate programs. Annual scholarships are offered to not-for-profits, start-ups and individuals.