Three make or break factors to get corporate ethics right

Media Release
15 October 2012

Research by the Ethics Institute of South Africa (EthicsSA) strongly suggests that three factors underlie the inability of many organisations to manage their ethics effectively. Conducted every thrid year, EthicsSA’s National Business Ethics Survey is an in-depth survey of a wide range of South African companies to gauge their ethical organisational cultures.

“It’s clear that many companies find it difficult to manage their ethics, and the research over the years has made it clear that problems in three dimensions are almost always the root cause of these difficulties,” says Professor Deon Rossouw, CEO, Ethics Institute of South Africa.

The first of these make-or-break factors is the need for a visible and audible commitment by a company’s leaders to the ethical values and standards of the company.

“Without  strong and obvious executive support, a company’s ethical standards are destined to remain simply window-dressing,” Professor Rossouw says. “That means that the leadership has to be heard talking about the importance of ethics frequently, and has to be seen to be behaving ethically. Colleagues quickly spot any gap between what a leader says and what he or she does.”

An important aspect of leaders’ commitment to ethics is the resources they assign to the management of ethics. If scant resources are allocated, the message goes out that ethics need not be taken very seriously.

The second factor relates to ensuring how well a company communicates its ethical standards. Rossouw warns that companies should not assume that everybody understands what the companies ethical standards are, and what their implications will be. This point holds true for both employees and other stakeholders across the supply chain. In fact, it’s frequently a company’s suppliers whose unethical actions cause it embarrassment.

“Codes can be very abstract and procedures technical,” Rossouw explains. “The way to translate a code into behaviour is via communication backed up with ongoing, practical training.”

The third factor is the speed and decisiveness with which a company reacts to reports of unethical conduct. Although these reports are typically made anonymously via the various mechanisms the company has in place, the way that allegations are handled sets the ethical tone of the company.

Rossouw points out that South African companies must manage their ethics in order to comply with Principle 1.3 of the King Code of Governance for South Africa 2009 (King III). This principle states that “The board should ensure that the company’s ethics are managed effectively”. Rossouw argues that the social and ethics committee mandated by the new Companies Act (71 of 2008) is the appropriate vehicle through which companies should put this principle into action.

“Managing ethics successfully is not easy, but it’s something that needs to be done and has enormous benefits for the company as a whole, as well as for its stakeholders,” Rossouw notes. “The ongoing research embodied in the National Business Ethics Survey is an invaluable source of fact-based insight for companies. This year’s study is currently under way, and I encourage companies to get in touch with EthicsSA to participate.”