Navigating the Tricky Terrain of Ethics Issues

NYSE Euronext served as the venue for Ethisphere’s Best Practices in Ethics Communications Workshop, held last Thursday, and what a difference a year makes. in October 2012 Superstorm Sandy caused the stock exchange to close briefly due to flooding nearby. Last week, NYSE Euronext visitors didn’t need to wear wading boots.

Instead, workshop attendees became immersed in weighty topics: the reasons for ethical failures, building ethical cultures, boardroom oversight and the example set by Warren Buffett. While the “oracle of Omaha” didn’t appear at the New York event, his presence was felt in the image gallery outside the conference room. Many other ethics specialists were on hand to offer their perspectives, including PR and corporate executives, professors and lawyers. Below is a brief series of takeaways.

Ethics trends and views vary by region: “Ethics is a bigger trend now in Europe than the U.S., while in Asia, ethics is a work in progress”, said Paul Argenti, professor of corporate communications and social responsibility at Dartmouth’s Tuck School of Business.

“It’s interesting to see how those in developed countries see ethics practices in developing countries, since there’s often hypocrisy in their views”, noted Alex Thompson, EVP of business and social purpose at Edelman. The firm conducts domestic and global surveys on trust and ethics-related topics.

Reasons why ethical lapses occur: “Pressure to meet unrealistic business objectives” is by far the biggest culprit, not the perpetrators’ egos, Argenti reported. Shortcuts leading to tainted food, for example, can result from staff desperately trying to meet short-term returns, he added.

“Having procedures in place is not enough”, Argenti said. “Leadership needs to understand these pressure points that drive unethical behavior, and develop processes to identify and remedy them before compromises occur”.

Building positive ethical cultures: Done right, the ethics training process requires ongoing, consistent commitment from the highest executive ranks”, said Argenti. “Managers must serve as models for behavior they demand of others on issues such as expense reporting.”

Argenti critiqued today’s ethics training, which often “takes place online, and employees race through in fifteen minutes”. He prefers that companies conduct in-person training using varied scenarios and responses. That way, employees will end up feeling more of “a sense of responsibility and accountability for their actions, and will freely raise issues without the fear of retaliation”, he added.

Boardroom behavior is critical: “The board sets the ethical tone and provides oversight, and should understand the systems and processes in place. In bad times the right people, such as CMOs, must be around to inform the board of any concerns. Too often there’s discomfort among management in talking about ethics”, said Holly Gregory, corporate partner at Weil, Gotshal & Manges law firm.

“When there’s a disconnect between the talk and the walk, companies are headed towards internal or external crises”, added Robert Ludke, EVP, corporate advisory practice at H+K Strategies.

“Boards usually think of risk in terms of financial performance rather than the intangible risks of reputation, and that’s a major issue. They need to re-set goals when people are creating too much harm”, Argenti emphasized.

Overall though, ethics can still be a rather subjective topic, as noted by Gregory’s observation. “Ethics is in the eye of the beholder and depends on the issues people want to push.”