Company ethics -remember its starts at the top!

company higher consil

When you step back and take a look at everything that has emerged from the global financial crisis, there is a pressing need to shore up ethics in companies across the corporate world. The sheer scale of fraud and malpractice revealed by the crisis has had a devastating impact on markets and the credibility of companies. How does one begin to repair the damage? How much do stakeholders trust their companies? As the recent case with the rogue trader at UBS has come to a close, it appears that companies have lost their bearings in the corporate world, and they urgently need to find an answer to the crippling greed, arrogance and corruption that has been apparent in the crisis. The repair job should involve the installation of strong ethical behavior in the company.

When things go bad, ultimate responsibility rests with the Board of Directors so there must be a sense of urgency to eradicate the failings evident in the financial crisis. No matter how complex the company structure, ‘a back to basics’ approach is needed. What is this approach? The Board of Directors must be non-executive and independent. Moreover, in order to ensure the healthy functioning of the whole company, a non-executive chairperson should head the Board. The same individual must not be the CEO and chairperson.

It is absolutely essential that the Board of Directors takes ownership of ethics. They must ensure that the ethics code is regularly reviewed, implemented by management, and that all employees understand what it means relative to the corporate culture of the company.

The Board of Directors must delegate authority to senior management to ensure that the ethics code is properly implemented. Here, key senior management personnel such as the CEO must understand that their role is one of stewardship when spearheading ethics in the company. The introduction of a separate Ethics Director may also be beneficial to ensure that a tight ship is run.

Transparent policies including performance objectives must be established by the Board. They must set the tone from the top relating to workplace issues such as procurement of contracts, employment and diversity policies, doing business in foreign jurisdictions etc. These policies must be backed by adequate training programs, and employee evaluations to reinforce their value.

All issues relating to reward and remuneration issues should be viewed by the Board of Directors as ethical matters. The general public will irk at the prospect of excessive bonuses. Through the Compensation Committees (made up of non-executive and independent directors), Board of Directors need to evaluate what impact the company’s performance has on the economy and society. Does the profit generated by the company deliver clear benefits for the general public and its own stakeholders? Moreover, owing to transparency, a clear disclosure must be made to the public on how the Compensation Committee arrived at the decision on the remuneration packages of the

The Board of Directors should be held responsible for ensuring that the ethics code is communicated clearly and effectively to all stakeholders. Everybody must be briefed about it, and it is useful that it is documented via an annual company ethics audit which has been ratified by the Chairperson.

The Board of Directors must ensure that the CEO is in involved from all angles to provide leadership on ethics with the backing of the Board. The company needs to achieve transparency by ensuring it participates and engages with key stakeholders on issues such as corporate values, and corporate social responsibilities of the company. Companies must think of themselves as being part of the wider social fabric of a country.



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