Ethics positioning elevated to a strategic imperative

Elevating the institutionalisation of ethics to a strategic imperative, necessitates a concerted and integrated approach. It requires all stakeholders to be aware of their responsibilities and to ensure the ethical utilisation of resources.

Organisational ethics, in its simplest and most recognised form, is defined as what is good or right in terms of the conduct and character of an organisation. Once this definition is determined, it becomes a shared understanding, expected to be espoused by both the employer and its human capital. It extends to the organisation acting as a responsible corporate citizen, and its stakeholders, including the society it serves.

While this definition is noble and simplifies the concept of ethics, it also presents the risk of ethics being perceived as a soft issue. Agreeably so, it does carry a sentiment of a soft issue due to its subjective nature. However, we need to balance that notion with a strategic perspective on ethics within organisations. Several interventions (not limited to the following) are significant in the journey of building strong foundations for resilient ethical organisations.

1. Leadership commitment

This is often referred to as the “tone at the top,” a concept that cannot be overemphasised, as several ethics meltdowns emanated from unethical leadership. The King IV Report on Corporate Governance through its first three principles and practices, advocates that the governing body should: i) lead ethically and effectively; ii) govern the ethics of the organisation in a manner that supports the establishment of an ethical culture; and iii) ensure that the organisation is perceived as a responsible corporate citizen. The first principle embodies the ICRAFT leadership traits and practices required to fulfil it. The acronym ICRAFT signifies Integrity, Competence, Responsibility, Accountability, Fairness, and Transparency.

The breaches in corporate governance and ethical conduct committed by those entrusted with captaining organisations have been a grave concern. The moral decay within leadership structures has led to the deterioration in performance across most of our public, private, and state-owned entities, rendering them unsustainable. It is the knowledgeable members of executive management teams and boards who have studied vulnerabilities of organisations and pounced on these vulnerabilities at the expense of the debilitated organisations.

These so-called white-collar crimes have been at the forefront of the limping TransnetEskomDenel, as well as various crumbling municipalities, particularly the metropolitan municipalities. Even major corporations like Steinhoff have faced bankruptcy due to similar issues. It is rare that the perpetrators of material criminal activities in organisations are the staff who occupy the lower ranking positions. While lower-ranking staff might be involved, they usually do not serve as the masterminds behind these improprieties.

The Companies Act outlines the fiduciary responsibilities of board members, along with potential liabilities and sanctions which they will face upon conviction. Likewise, the PFMA (Public Finance Management Act) also outlines the responsibilities of the leadership of public organisations and sanctions where there has been a breach of those regulations. However, despite all these legal frameworks in place, there are people who still endanger the sustainability of organisations, leading to a direct adverse effect on the social, economic, and environmental status of our country, continent, and the world.

Therefore, the emphasis should be on ethics interventions which specifically focus on the behaviour of individuals and groups. Additionally, this vulnerability calls for regulatory bodies to raise the bar in exercising accountability and consequence management on the leaders of the organisations who undermine the integrity of organisations. Furthermore, the recommendations of the Zondo Commission on State Capture include that those who purported organised state capture should face criminal charges. However, there has been a societal outcry that these recommendations are attended to at a snail’s pace and that there is a need to accelerate the prosecution of implicated parties.

2. Integration of ethics into business strategy

I believe that the integration of ethics into business strategies is the key to elevating ethics discussions in organisations. As long as we maintain a separation between organisational ethics and organisational strategy, there will be an ongoing disconnect between these two critical elements of business. The fourth principle of the King IV Report on Corporate Governance emphasises that the governing body should appreciate that the organisation’s core purpose, risks, opportunities, strategy, business model, performance, and sustainable development are all inseparable elements of the value creation process.

Ethics lies at the core of all these elements. Therefore, it becomes imperative that organisations incorporate ethics into each of them. It is crucial to clearly articulate what integrity parameters or ethical conduct are prerequisites for sustainable performance, proactive risk management, and stakeholder trust. This will enable organisations to work towards merging their organisational and ethics strategies into a fully integrated reality.

This requires a continuous effort, and relevant avenues within the organisation should be utilised to advance this interface. Ethics professionals should express their ethics contributions at the organisation’s strategy review sessions, and whenever business decisions necessitate thorough ethical assessment. The business should align strategic policies with the spectrum of ethics-related policies to ensure continuous integration.

3. Ethics on agendas

There is a growing need for the intentional inclusion of ethical considerations in matters discussed at board and management meetings. This deliberate inclusion becomes even more crucial within governance processes that addresses the fundamental purpose of an organisation, oversight of risk management, and financial stewardship. Ample time should be devoted to informed and robust conversations in boardrooms regarding undertakings which have the potential of undermining the ethical culture of an organisation.

It has become crucial for Social and Ethics Committees across all sectors of business to have a high level of competence and independent authority to effectively execute their mandate. The committee’s agenda must be carefully considered to ensure the efficacy of fulfilling the committee’s mandate, as this committee provides strategic oversight on social and ethical issues. This implies actively supporting the implementation of ethical values of organisations across their entire value chains.

The findings of the Zondo Commission demonstrated that organisational values, particularly ethical values that are merely displayed on the walls of office buildings and in integrated annual reports, do not build sustainable organisations or ethical societies. Thus, it has become more important for the Social and Ethics Committee to play its pivotal role in the building of organisational ethical culture and responsible corporate citizenship.

In conclusion, we need leaders who will uphold their fiduciary duties and ethical integrity for ethics to be elevated from a nice-to-have to a strategic imperative. Given the present state of our organisations and society, there is a dire need for radical transformation of ethical leadership. We are not ignorant of the existence of leaders who concern themselves with thriving and sustainable organisations and society. By fostering an enabling environment, these leaders can thrive in their endeavours to build ethical societies. However, an environment is not an abstract entity, but shaped by people who either nurture or undermine it.

About the author: Palesa Mashabane is an ethics subject matter expert at The Ethics Institute.