Ethics in business is becoming just as important as a strong financial and marketing plan. Clearly detailing company principles influences employee behaviour and sets the groundwork to promote fine moral conduct within the organisation.
How to do the right thing
STRATEGY: BIG IDEAS
How can we place a dollar value on a national park? And why would we want to?
“Almost invariably these are not wicked people, they are good people who end up doing bad things, because of unthinking custom.”
By international standards, Australia and New Zealand are honest, trustworthy, ethical places to do business. They’re not always at the very top of the international league tables, but they’re thereabouts. On Transparency International’s perception of corruption index, for example, New Zealand is equal first and Australia is 18th, out of a total of 180 countries surveyed (the world’s worst are South Sudan, Somalia and Syria).
– Dr Simon Longstaff, The Ethics Centre
“We try to measure the value which you get from the consumption of things which aren't included within the economic system. For example, we can value the water coming out of a dam wall, but the water coming into the dam is something we don't currently value,” he says.
Donal Curtin is an Auckland-based economic consultant. He served for 12 years on the New Zealand Commerce Commission and was previously chief economist at BNZ. He was named Columnist of the Year in the 2020 Mumbrella Publish Awards and was Highly Commended in the 2021 Awards.
Story Donal Curtin
Donal Curtin is an Auckland-based economic consultant. He served for 12 years on the New Zealand Commerce Commission and was previously chief economist at BNZ. He was named Columnist of the Year in the 2020 Mumbrella Publish Awards and was Highly Commended in the 2021 Awards.
STORY DONAL CURTIN
New Zealand
#1
Australia
#18
Source: Transparency International’s perception of corruption index
Out of 180 countries surveyed, New Zealand and Australia are viewed as trustworthy places to do business
How do people walk themselves into a poor ethical place?
“What’s common to every one of these cases is that typically, in all sincerity, people did not see what they were doing for what it was”, says Dr Simon Longstaff, executive director of The Ethics Centre in Sydney. “Everyone was doing it, and throughout history you see unthinking customs and practices and behaviour conditioned by practice and habit. It’s understandable,” he says.
Linked to that, there’s a second element, according to Longstaff: “The practices get embedded in processes and policies – it’s not accidental, they are designed to do that”, he says. “Almost invariably these are not wicked people, they are good people who end up doing bad things, because of unthinking custom. Habitual conduct is the antithesis of ethical conduct: ethics by definition means living a reflective life.”
The typical hierarchical corporate structure can contribute to an unthinking “it’s just what everybody does” culture. “Hierarchies can have that effect, especially if they are giving signals that the only thing that matters is dollars and if only the financial implications reach the chief executive officer and the consumer interest bits have dropped off along the way,” says Longstaff.
“And there can be an over-reliance on ‘compliance’, to see them safe,” he adds. “Systems with automised jobs, where employees only see a little bit of the overall picture can also be unhelpful: “People are effectively trained not to think”.
To keep things on a better track, there’s an important role for the professions. Society allows certain activities – the free market, or the privileged legal status of the limited liability company – on the premise that they are likely to enhance the common good, but with an eyes-open recognition that they may fail to deliver or go to extremes. Part of the social contract permitting their operation is consequently ethical surveillance, where the likes of lawyers and accountants play a key role.
“A regulatory system of surveillance works only if people enter into a compact where you have professional people acting as checks and balances. Now, people become professionals for all sorts of reasons, for the status, for the income, but the system won’t work if professionals appropriate the logic of the market, if the accountant or the lawyer loses that grounding and instead says ‘tell me what you want’. Institutions have forgotten the purpose they were created for.”
And yet, even in this generally decent environment, individual companies and even whole sectors, can sometimes find themselves in dark, unethical places: the 2019 report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry – the ‘Hayne Commission’ – revealed industry-wide misbehaviour.
To Longstaff’s way of thinking, a neglected national ethical infrastructure needs attention across a wide range of issues – everything from humane treatment of boat people refugees, through the tax system which needs to be “redesigned for the purposes it was meant to serve”, to balancing the surveillance needs of national security against the rights of citizens, all against a background of low levels of trust in the political process and their deadweight costs.
“Low trust means high costs”, for example when doing deals on a handshake are replaced by formal contracts between teams of lawyers and there are other downsides when people are wary of each other. There will be a chilling effect, for example, on worthwhile policy innovations, which people will be wary of: “wonderful things won’t be happening because I dare not let you do them, as the benefits will go to others but the costs will fall to me,” says Longstaff.
there could be a big payoff if there was even a moderate increase in national levels of trust, of the order of A$45 billion a year on Deloittes’ modelling.
He points to research commissioned from Deloitte Access Economics by The Ethics Centre, which found
An especially big challenge will be finding an ethical way to manage the impact of automation and artificial intelligence – threatening jobs in finance, accounting and law – so that people are enabled to live lives with meaning, even after the jobs which had previously given them meaning and connection have gone.
What’s currently on businesses’ minds when they come to The Ethics Centre for advice? “People ask, how do we make the complex simple? The answer is, you don’t. You develop your ability to handle complexity.”
And yet, even in this generally decent environment, individual companies and even whole sectors, can sometimes find themselves in dark, unethical places: the 2019 report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry – the ‘Hayne Commission’ – revealed industry-wide misbehaviour.
How do people walk themselves into a poor ethical place?
“What’s common to every one of these cases is that typically, in all sincerity, people did not see what they were doing for what it was”, says Dr Simon Longstaff, executive director of the Ethics Centre in Sydney. “Everyone was doing it, and throughout history you see unthinking customs and practices and behaviour conditioned by practice and habit. It’s understandable,” he says.
Linked to that, there’s a second element, according to Longstaff: “The practices get embedded in processes and policies – it’s not accidental, they are designed to do that”, he says. “Almost invariably these are not wicked people, they are good people who end up doing bad things, because of unthinking custom. Habitual conduct is the antithesis of ethical conduct: ethics by definition means living a reflective life.”
The typical hierarchical corporate structure can contribute to an unthinking “it’s just what everybody does” culture. “Hierarchies can have that effect, especially if they are giving signals that the only thing that matters is dollars and if only the financial implications reach the chief executive officer and the consumer interest bits have dropped off along the way,” says Longstaff.
“And there can be an over-reliance on ‘compliance’, to see them safe,” he adds. “Systems with automised jobs, where employees only see a little bit of the overall picture can also be unhelpful: “People are effectively trained not to think”.
To keep things on a better track, there’s an important role for the professions. Society allows certain activities – the free market, or the privileged legal status of the limited liability company – on the premise that they are likely to enhance the common good, but with an eyes-open recognition that they may fail to deliver or go to extremes. Part of the social contract permitting their operation is consequently ethical surveillance, where the likes of lawyers and accountants play a key role.
“A regulatory system of surveillance works only if people enter into a compact where you have professional people acting as checks and balances. Now, people become professionals for all sorts of reasons, for the status, for the income, but the system won’t work if professionals appropriate the logic of the market, if the accountant or the lawyer loses that grounding and instead says ‘tell me what you want’. Institutions have forgotten the purpose they were created for.”
To Longstaff’s way of thinking, a neglected national ethical infrastructure needs attention across a wide range of issues – everything from humane treatment of boat people refugees, through the tax system which needs to be “redesigned for the purposes it was meant to serve”, to balancing the surveillance needs of national security against the rights of citizens, all against a background of low levels of trust in the political process and their deadweight costs.
“Low trust means high costs”, for example when doing deals on a handshake are replaced by formal contracts between teams of lawyers and there are other downsides when people are wary of each other. There will be a chilling effect, for example, on worthwhile policy innovations, which people will be wary of: “wonderful things won’t be happening because I dare not let you do them, as the benefits will go to others but the costs will fall to me,” says Longstaff.
He points to research commissioned from Deloitte Access Economics by The Ethics Centre, which found
An especially big challenge will be finding an ethical way to manage the impact of automation and artificial intelligence – threatening jobs in finance, accounting and law – so that people are enabled to live lives with meaning, even after the jobs which had previously given them meaning and connection have gone.
See all Big Ideas
See all Big Ideas
See all
Big Ideas
See all
Big Ideas