“There never is a good time for tough decisions. There will always be an election or something else. You have to pick courage and do it. Governance is about taking tough, even unpopular, decisions.” – Business Writer Jairam Ramesh
Who is the main person ethically accountable in the area of corporate governance? As a corporate ethics motivational speaker, corporate ethics consultant and author, the question comes up more than you might imagine. Is it the CEO, the CFO, the corporate attorney and legal team?
To determine the answer to the question of the role of ethics in corporate governance is to examine the word accountability in more detail. Most of us believe accountability is a matter of responsibility. In truth, its best definition involves the concept of answerability. Putting it another way, who is answerable in an ethical dilemma to the shareholders, board of directors, fellow employees, vendors and greater community?
And, ultimately, who bears that responsibility when things go sour? My answer as a corporate ethics motivational speaker, corporate ethics consultant and author may surprise you. Everyone in the corporation is answerable. Not just accountable, but answerable.
Everyone is answerable – or no one.
What do I mean about answerability? Let me relate some real-life examples. Several years ago, a major food processor of nut butters was found at fault for selling product they knew had unacceptable levels of bacterial contamination. The CEO who ultimately approved the nationwide sales was found guilty, but so was the head of their quality assurance and the chief microbiologist who could have blown the whistle but was afraid of losing her job and remained silent.
During the explosion of Big Pharma’s painkiller era, one company in particular was found guilty for its cavalier attitude for dispensing the medication. Among its many unethical practices, the company was supposedly holding educational sessions for physicians about the painkilling qualities of the drugs. The luncheons, arranged by the sales team, turned out to be little more than illicit payments to physicians who were pushing their prescriptions onto unsuspecting patients. The ownership of the company eventually saw massive fines but also implicated were sales people and the physicians themselves.
Finally, we have the case of a major automobile manufacturer who falsified EPA documentation on its engines. Upper management bore the brunt of the fines and the disgrace but so did every executive and manager along the way who refused to do the right thing. The entire organization was tainted because no one thought they were answerable not only accountable. The lower-level people must have thought accountability was out of their hands once they voiced the most tepid of protests.
What is the role of ethics in corporate governance?
In my role as a business ethics and corporate social responsibility consultant, I maintain that good ethics are the essence of corporate governance. Further, everyone in an organization has the primary duty to be answerable to fraud, bribery, discrimination and unfair pressure placed on their shoulders from unethical people above them.
If the employee cannot face their supervisor, then clearly confidential HR or legal reporting is appropriate. At some point in the cycle of circumventing unethical corporate governance, someone had the power to say, “This isn’t right.”
Does it matter? Well, in the examples I gave above those in the greater community were duped, or poisoned or tragically died. In all cases, companies either went bankrupt or faced massive consequences.
As the quote I cited says: “Governance is about taking tough, even unpopular, decisions.” To think of governance as stale or dry is fundamentally wrong. It is the very life-force of a healthy organization.
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