Ethical Race to the Bottom?

Ethical Race to the Bottom?

Two worrying “non answers” to questions posed to business leaders have marked me during the past fortnight.

The first was posed to the General Counsel of a major sports manufacturer during a panel discussion entitled ‘Ethics drives Performance’. Fascinating topic, though why a GC would be well placed to speak to it is perhaps more of a mystery. And so it proved. The question went to the apparent contradiction between on the one hand the company’s professed adherence to ethics, compliance and business integrity and on the other hand their high profile sponsorship of a well known sporting body which has recently been the subject of serious corruption allegations.

Gentlemen”, I asked (for no ladies featured on this particular panel), “with all due respect, I find myself wondering whether the title here is ‘Ethics drives Performance’ or ‘Lack of Ethics drives Performance’. Are we not in danger of preaching to the choir here, with an audience of ethics and compliance professionals? If we were among CEOs and business people, would the conclusion not be that ‘Sales trumps Ethics every day of the week’?”.

No satisfactory answer was forthcoming, though your correspondent did hear a claim that, as these are the bodies running world sport, one has no choice but to do business with them…! One cannot help but wonder what the business impact would be if the major corporations which choose to invest their profits in high profile sponsorships of international sports were to take a strong – and principled – stand on ethics and compliance issues on the part of their well-funded recipients. What might the impact on performance be in that case? I for one would be much more likely to buy their brand of sneakers over the (less ethically obvious) competition – are you with me?

This brings me to the second unanswered question. This was at an Executive Breakfast at which the Spanish CEO of a technology company was presenting on innovation trends. Lots of mention of younger generations and Asian mega-cities; less mention of the hundreds of millions of Dollars which this corporation has paid out for violating the Foreign Corrupt Practices Act in various countries around the world.

After sharing with the (female) CEO that the research indicates that companies with female CEOs tend to be more ethical, I reminded her – and the audience – about the bribery incidents, some of which took place in countries ranked higher than Spain in Transparency International’s Corruption Perceptions Index. “What”, I enquired, “does the CEO of the Spanish business do in light of these events, to make absolutely sure that this could not happen here?”.

Interested observers, and more particularly shareholders, could be very interested in the CEO’s response… The answer: nothing! We were told about the CEO’s high personal morals and how she would never be able to sleep at night if she was party to dirty business, oh and also about the hotline in place for people to report ethics violations (strange how that didn’t seem to work in those other countries).

In neither case above was there evidence of Ethical Leadership. We have all heard about the importance of Tone from the Top, but scratch the surface and it’s hard to find. How can it be acceptable for corporations with state-of-the-art anti-corruption policies and training, who perform due diligence on third parties with whom they do business, to throw millions of Dollars at sporting bodies which fail to meet acceptable standards of ethics, transparency, compliance and anti-corruption? Surely paying out tens of millions of Dollars in penalties for FCPA violations forces an organisation to take a long hard look at its global practices? Sadly, the reality appears to be that on the former, this is perfectly acceptable, and on the latter, no such internal action is deemed necessary. As a good friend who serves as Ethics Officer for a multinational manufacturing business has commented, are we not witnessing an ‘Ethical Race to the Bottom’?

This needs to change – now. Having an ethics and compliance programme is not simply a strategic investment, reacting to applicable legal requirements to be able to defend the organisation in the face of allegations of non-compliance. Real accountability, transparency and ethical culture are required – urgently. Initiatives such as Rowland Jack’s I Trust Sport are shifting the debate forwards in the right direction. Grassroots social media movements can influence consumer behaviour – hurting companies with inadequate ethics by reducing their multi-million Dollar retail sales. Most importantly, our esteemed (and well remunerated) business leaders need to throw off their ethical dust sheets and stand up and be counted – today!

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Murray Grainger leads the ethics and compliance leadership firm Impact on Integrity (www.impactonintegrity.com). IOI will be running the acclaimed Global Business Ethics Challenge on December 1st in London. Registration is via http://gbec-london.eventbrite.co.uk.

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