Before tackling the lofty business ethics question of “What is the role of ethics in corporate governance?” As a business ethics speaker and business ethics consultant and author, I believe it befits me to explain the concept of governance in this context.
Corporate governance from an ethical point of view
The myth of corporate governance is that it only applies to publicly-traded companies. It can apply to any sized organization. Granted, smaller entities are much more informal in their approach, but it doesn’t mean a structure of accountability is unnecessary.
The concept of accountability is a good place to start. It is key to corporate governance and corporate social responsibility. Corporate governance should function like a set of guiderails. The ethical rules set in place, for example, a prohibition against sexual harassment and bullying or strict enforcement as to the taking or offering of bribes should align with the code of conduct. There should no “air space” between what is written as policy and what are actionable grounds for discipline or termination.
You might say that in terms of corporate social responsibility there is a zero-tolerance policy between rule and action. However, in my role as a business ethics consultant and business ethics keynote and breakout session speaker, I have seen many situations where the role of ethics in corporate governance is uneven and spotty – at best. Let me explore a few reasons why this occurs.
Enforcement is they key
If we explore the question of “What is the role of ethics in corporate governance?” we will often find that the term “ethical behavior” is merely that; a term to toss about in board rooms and meetings, but with little impact in daily corporate life. Part of the reason for this is usually the absence of training and education with impactful follow-up. Terms and buzzwords such as “Good Ethics” are valueless if they are not defined and then reinforced.
Another problem with most corporate governance – ethical connections is the unevenness in the application of the rules that have been set in place. Prime offenders (speaking of board rooms) is that the same rule of ethical behavior that might get a production line supervisor fired doesn’t automatically apply to the chief marketing officer. This sends an incorrect message to the organization that some are ethically privileged while others are not. It is impossible to calculate how badly this affects morale. Indeed, one of the contributing reasons for the so-called “Great Resignation” is this very company-wide spectacle of insincerity.
We cannot rule out bias, overt or subtle as deeply subverting corporate governance and whether racial discrimination or religious or gender issues, if bias occurs there is no alignment between ethics and corporate governance.
The list of issues that cause a misalignment between ethics and corporate governance also include the full range of theft, bribery, inappropriate internet usage and accounting or sales fraud.
The point in this discussion is that for any company to properly answer the question of “What is the role of ethics in corporate governance?” is to seriously review if the ethical policies that are in place are in agreement with the actions of the organization. No matter the professed or written codes of conduct and HR directives, if the actions of any segment of the company is inconsistent with policy, there is no corporate governance, it is only posturing.
As a business ethics speaker and business ethics consultant, I can well assure any organization that once there is an ethical – governance misalignment, catastrophe typically ensues. All it takes is one whistle-blower or legal action to bring down the mightiest of organizations.
Ethics is at the heart of corporate governance. When it isn’t there, expect that problems will ensue.
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