UNO August 2013

It´s the ethics, stupid!

 

Scandals, scandals and more scandals. People only need to read the newspapers to find one scandal after another. The location does not matter (from China to the United States, via Spain, Italy and France). The section of the newspaper does not matter either (whether economy, sports, politics or culture). The era matters little (twenty years ago or last week). Nothing matters: scandals do not only exist, but are in the headlines day after day.

The question is not why. Or perhaps it is. Some time ago I read –I cannot recall where– that, in the end, all scandals share common origins: sex or greed. And maybe, after watching movies such as Inside Job –an essential work to understand the economic crisis– it might be possible for both causes to jointly appear in a systematic way (please note that, from now on, I will merely refer to greed in this article).

Why are scandals in the headlines day after day? This problem will not be (merely) tackled through laws, movements or statements. This, ultimately, revolves around something else: values and, particularly, ethics

To fight these scandals, movements both within social society and the institutional and business sphere have arisen all around the world in the last ten or fifteen years seeking to put limits and draw certain red lines in relation to the aforementioned greed. We have witnessed the approval of transparency and corporate governance laws. We have seen movements calling for corporate responsibility and to fight corruption. We have seen public condemnations of all scandals. We have even seen public leaders receiving bonus salaries for behaving ethically (Managing Director of the IMF case).

We have witnessed all we could imagine. But, in the end, we continue reading these scandalous headlines. Why? Why do neither laws, nor movements and social and legal sentences produce the desired results? I am afraid that the answer is not simple, although I will dare to speculate. This problem will not be (merely) tackled through laws, movements or statements. This, ultimately, revolves around something else: values and, particularly, ethics. To paraphrase Bill Clinton… It´s the ethics, stupid!

And that is precisely the problem. What are ethics? When trying to define ethics, we need to understand how difficult it is to understand such a broad concept. Ethics are hard to define, as they are shaped by many cultural and religious factors and values or beliefs. But above everything, ethics are a difficult concept to handle, because anyone related to the management of public affairs in a company might think that by addressing a situation they might be risking to offend individual beliefs. Thus, this becomes a problem: when talking about ethics it is rather common to mix all levels influencing the life of a person: private, public, institutional and professional.

But it being a problem does not mean that nothing should be done. Everyone can “shape” and “manage” the ethic aspects governing their activities and, consequently, put limits to greed, the source of almost all ethical debates.

Transparency is being able to explain your activities with arguments and data

What can be done within the business world in order to “shape” and “manage” ethics? What can be done in order to put limits to greed? Perhaps the solutions I will describe below might not be revolutionary, but bear in mind that almost everything has already been said in this field… the problem is that these solutions are hardly ever applied. Here are a few:

etica-full

First: Having an Ethical Code outlining the main criteria of performance governing an organization in its relations with customers, employees, shareholders, suppliers, society, etc. Please note we are neither referring to general ethics nor to specific beliefs. We are talking about ethical relations for that specific organization. So far, that is nothing new. What might be a bit more innovative is that, as in any Constitution, the Code of Ethics should establish a framework of internal policies and rulings in order to develop it and make it more visible. For example, a code can protect a generic “principle of equality”, but it is advisable for the company to develop global policies regarding this matter and specific rulings specifying objectives, indicators and important dates and milestones.

Second: Having a Code Management Unit. “Deploying a code” calls for more than a mere publication or a regulatory framework. It needs a body capable of fostering the culture of ethics; of training employees in accordance to its values and principles; of fostering internal policies, covered in the Code, of channeling questions, suggestions or “appeals” in relation to the Code and ensuring compliance at all organizational levels. Promoting every element that helps the statement of principles become more visible and real.

Third: Influence the decision-making system. This is the most complex point as it requires to not only “comply” with the Code, but to “live” in compliance with the code. To live according to an Ethical Code is simply shaping the decisions according to the values and principles of a company. Some time ago, I was fortunate to attend a presentation where a representative of Johnson & Johnson talked about their decision-making process based on their famous “Creed”. I was surprised by the simplicity of the process which consisted of four phases: (1) “Recognizing the moral challenge”, discovering if there is a conflict between two assets that must be protected; (2) “Finding a good decision”, for the long-term; (3) “Testing the provisional decision”, asking yourself how would you explain the decision to your family or a third party and (4) “Acting courageously” by reducing your expectations if necessary or accepting the consequences of your decision. Surprisingly simple. Extraordinarily useful. But this requires many years of experience: some experts believe that it calls for at least 15 or 20 years of continuous implementation.

Either we put limits to greed or it will finally devour us and make the value system of the Western world crumble

And Fourth: Being transparent. A long time ago I heard that transparency is the best cure for corruption. Transparency, far from what many may think, does not imply publicly publishing all the accounts, contracts, systems and information of a company. That is not transparency, but nudity. Transparency is being able to explain your activities with arguments and data.

I am well aware that I am offering old solutions; that many or all the points that I have described in the present work are well-known remedies; that I might have offered common guidelines that have already been stated a million times. But I also know that the consequences of scandals are well known by everyone. I also understand that life is not binary, it is not a sequence of zeroes and ones and the reality is not merely black or white; there are many shades of gray regarding each and every decision we make. And, above everything, I know that we either put limits to greed or it will finally devour us and make the value system of the western world crumble. And I am particularly aware of this last thing.

Alberto Andreu
Counsellor in the Department of Economic and Business Ethics at the Comillas

He is Counsellor in the Department of Economic and Business Ethics at the Comillas Pontifical University (ICAI-ICADE) and Director of Corporate Reputation, Institutional Relations and Social Innovation of Telefónica. He has held various positions in the Communication Management Department of CEPSA, Banesto and Banco Santander Central Hispano. Currently, he works as associate professor at the IE Business School and is member of the State Council for Corporate Social Responsibility of the Ministry of Labor. He obtained his Law Degree in ICAI-ICADE, has a MBA from the IE Business School and completed his PhD courses in Economics in the Comillas Pontifical University. @aandreup

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