Why Busines Ethics Matters to Your Bottom Line

Session number and title(goes here in 32pt Georgia)

W13 – why business ethics matters to your bottom

line? Presented by:

Dr. Attracta Lagan

Principal

Managing Values

Presented by:Dr. Attracta LaganPrincipalManaging Values

© Copyright of Managing Values www.values.com.au

Business Forum 2013

Business ethics context • Business ethics is a management accountability in

US, UK & Europe • Australia is out of step with its laissez faire attitude• Institutional integrity is modern day focus• Ethical risks are known & regulators demand more

than a paper trail• IBM’s research points to the inevitability of greater

organizational transparency & accountability• Current leaders invest in ethics management systems

to protect their people• Embrace increased transparency as the enabler of

ethical cultures


Business Forum 2013

Business ethics dynamics

• Employees consistently report they are working in environments conducive to misconduct

• Fall out GFC led many boards to concentrate on compliance and paper trails at the expense of managing culture

• Compliance inhibits systems view of how risk issues emerge• Ethical skill development promotes managerial & personal

accountability


Business Forum 2013

Discipline of business ethics

• Focus on the institutional & contextual dynamics that shape employee behaviour

• Demands that leaders move beyond “tone” setting to aim higher beyond legal minimums

• To design institutional practices that encourage & reward ethical behaviour

• To establish robust ladders of escalation


Business Forum 2013

Do ethical failures matter?• 2012 UBS fined $29.7m system failures• 2012 HSBC paid $1.92b settle charges money laundering• 2012 Barclay’s fined £290m manipulating key interest rates• 2010 BAE Systems pays £400m settle bribery charges• 2010 Rio Tinto employees jailed bribery in China • 2010 Daimler paid $185m fines bribing foreign government

officials• 2008 Syngenta fined $2m discrimination

case• 2008 Siemens paid $1.6b settle global

corruption case


Business Forum 2013

Collateral damage

• Loss of human liberty; reputation & livelihood• Family shame , Company shame, Nation shame• Increased legislation• Destabilisation social fabric of societies• Inter-generational adversity – robbed of right to work &

participate in the marketplace; right to same wellbeing as parents’ generation


Business Forum 2013

Heightened connectivity vulnerabilities• Internet means more people now see how you do things, how you

impact on others and tell others how you should be held accountable

• Stakeholder internet retaliation - anytime, for no cost and without restraint

• Linking ethical behaviour to reputation makes ethics integral to what drives business success eg. Starbucks & Google tax minimisation fallout

• Management of organisational culture key priority today’s success formula


Business Forum 2013

Benefits business ethics

High integrity companies also high performing (CEB) World’s Most Admired Companies deliver highest

shareholder value (Hay) Clear link between institutional integrity & employee

engagement 2011 Australian research 78 organisations found companies

focused on culture as well as financial indicators 3 times more profitable


Business Forum 2013

Top ethical risks - how well are you managing these?

• Funding concerns enjoying a higher priority than ethical standards

• Unaligned compensation plans• Poor management of unacceptable behaviour• Anti-competitive practices / contract violations • Harassment / Retaliation• Health or safety violations• Insider Trading/stealing• Substance abuse• Environmental violations


Business Forum 2013

Businesses of the future • Build organisational integrity as an enabler business success• Embrace ethics and transparency as way of flattening

hierarchies & engaging employees• Step up to employee desire to be part of a business that

seeks to enhance society as well as financial success

Individual Perception

Time Dimension

Context dimension Stakeholder

Dimension


Business Forum 2013

How to - build organisational integrityDemonstrate ethical leadership e.g. remunerations that reward sustainable practices & culture builders and not just bottom line resultsActive culture measurement as well as compliance Train employees & reinforce with visible action on poor behaviourDesign systems to promote high level of trust


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DisclaimerThis paper represents the opinion of the author(s) and not necessarily those of the Institute of Chartered Accountants in Australia (the Institute) or its members. The contents are for general information only. They are not intended as professional advice – for that you should consult a Chartered Accountant or other suitably qualified professional. The Institute expressly disclaims all liability for any loss or damage arising from reliance upon any information in these papers.

Dr Attracta Laganwww.values.com.au

Detailed research available in white paper

Why Business Ethics Matters - to your Bottom Line

Case studies available on institute website

www.charteredaccountants.com.au

Thank you!
