Who are the most important role players in building an ethical organisational culture?

A recent EthicsSA website poll asked who the most important role players are in building an ethical organisational culture.

 

pollimage

The results of the poll are rather surprising. The majority of respondents (57%) were of the opinion that an organisation’s Board of Directors is the most important role player in building an organisational ethical culture. Although the Board, and nowadays, the Social and Ethics Committee of the Board in particular, has a distinctive role to play in the governance of ethics, it is doubtful whether it can really influence ethical culture in the way other role players may be able to.

If one considers the principles provided in Chapter 1 (Ethical leadership and corporate citizenship) of King III, namely that the board should provide effective leadership based on an ethical foundation (Principle 1.1) and that the board should ensure that the organisation’s ethics is managed effectively (Principle 1.3), it is clear that board indeed does have an important role to play in the governance of ethics. The Board’s responsibilities include (1) ensuring that the values that should guide the organisation are identified (this will include any espoused ethical values), (2) ensuring that organisational values are communicated to all stakeholders and (3) delegating responsibility for the governance (management) of ethics in the organisation. The role of the Chairperson of the Board is to set the ethical tone for the board and the organisation. 

The Social and Ethics Committee of the Board (as required by Companies Act) provides strategic direction and oversight of the ethics management of the company. The ethics mandate of the Social and Ethics Committee is not stipulated in the Companies Act. However, the committee’s ethics mandate could be expanded to include monitoring the organisation’s activities with regard to ensuring that the company’s ethics is managed effectively, including –

  • leadership demonstrating support for ethics throughout the organisation;
  • a strategy for managing ethics that is informed by the negative and positive risks the organisation faces;
  • ethical standards are articulated in a code of ethics and supporting policies;
  • structures, systems and processes are in place to ensure that the board, employees and supply chains are familiar with and adhere to the organisation’s ethical standards;
  • ethics performance is included in the scope of internal audit and reported on in the organisation’s integrated annual report; and
  • ethics is imbedded in the corporate culture.

An organisational ethical culture is informally defined as ‘the way we do things around here, even when no-one is watching’. Organisational ethical culture is a component of a broader organisational culture. Ethical culture is also, to a smaller or larger extent depending on the ethical maturity of the organisation, imbedded in the identity of the organisation. Ethical culture characterises the organisation in terms of formal and informal systems that influence behaviour.

Formal organisational systems that influence ethical culture are tangible and easy to identify. Examples of these are codes, policies, rules, instructions, procedures and formal reward systems. Informally, culture is stimulated through communication and action that may include ‘How decisions are “really” made’, ‘What behaviour is “really” rewarded’, as well as tales (organisational ‘stories’), totems (e.g. persons or objects that are highly respected), traditions (practices and rituals) and taboos (behaviours that are generally understood to be unacceptable). Should messages of formal and informal cultural systems differ, the ethical culture will be misaligned. Employees’ behaviour would then be more likely to be influenced by informal culture.

The role of the CEO of an organisation is to provide ethical leadership. Other executive leaders in the organisation, and especially ethically respected leaders design and maintain formal systems. However, ethical leaders play a crucial role in stimulating the organisation’s informal systems conducive to the development of an ethical culture. Such stimuli and actions could include: being ethically sensitive and aware; displaying personal exemplary behaviour (e.g. honesty, fairness, consistency); encouraging the discussion of ethics in general (ethics talk); creating a work environment where employees feel safe to raise ethics concerns; making ethical decisions and recognising the ethical consequences of seemingly purely business decisions; demonstrating ethical imagination by effective identifying and dealing with ethically grey areas in the organisation (ethical dilemmas); and displaying ethical courage when required to do. Ethical leadership has a ripple effect on all other leaders at all levels in an organisation, creating capacity and providing a mandate to simply do what is right.

The organisation’s ethics office through its ethics management practitioners actively manage ethics in the organisation. This role may include providing ethical guidance to the board, senior management and staff on ethics-related issues, coordinating ethics management interventions, advising employees on ethics matters, formulating and updating codes of ethics, ethics policies and procedures, managing, developing and implementing ethics awareness and other ethics training programmes, identifying (through whistle-blowing facility and other channels) and reporting on unethical behaviour and corrupt activities, and providing regular feedback to the board and executive management on the organisation’s ethics performance and challenges.

The role of internal audit is to monitor, audit and report on the adequacy and effectiveness of ethics management activities.

As such, ethical culture is an outcome of the activities of all these role players. The role of the Board is to provide strategic direction and oversight of the ethics management of the company and to delegate ethics management to the ethics office. The ethics office executes its mandate through the active design, implementation and facilitation of ethics management interventions. The Board and the ethics office is thus responsible for indirectly influencing the ethical culture of the organisation through formal ethical culture change systems. The real catalyst of ethical cultural change is the CEO, senior management and other line managers in the organisation, however. Although leadership support and implement ethics management interventions (formal systems), they play a much more significant role in the informal dimension of ethical culture development than any other role player in the organisation. The fact remains – an organisation’s Board may be too far removed from the mechanics of daily life in the organisation to have much of a direct influence on the ethical culture. Leadership, on the other hand, is the face of the organisation within. By being visible and audible ambassadors of ethics leaders are ideally positioned to change ethical culture for the better. 

Written by Leon van Vuuren