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Governance Ethics

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By Imonikhe Ahimie

GOVERNANCE AND ETHICS

An ethical system is a system of rules that govern the interpersonal relationships between people, that is to say that ethics defines the right as opposed to the wrong and the acceptable as distinct from the unacceptable. Perhaps the most important single factor that determine what societal standards are in any given society are the laws that govern interpersonal behaviour; however, such laws are modified/regulated by history, religion, class background, prosperity/lack of prosperity, education and the like. Non-ethical behaviour is not, of course, a new factor in the affairs of man; if anything, unethical behavior has been around for as long as man as a cursory look at the history books will testify and, it seems, such behaviour has become more commonplace with every passing generation.

Corporate ethics is a form of applied ethics, that is to say the application of ethical principles to the problems that are faced day to day in a business environment. Corporate ethics applies to all aspects of business conduct and is relevant to the conduct of the individuals who make up the business entity as well as to the entire organization. It is simply the application of everyday ethical standards to group behaviour and, insofar as corporate behaviour fails to meet the minimum societal standards of decency, honesty and scrupulosity, such behaviour can be defined as unethical behaviour. The problem of corporate ethics is not new; as Adam Smith (1723-1790) famously pointed out, People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public or in some contrivance to raise prices”.

Business Ethics, as a distinct discipline, first started in the USA in the 1970s and by the late 1980s and early 1990s, many large US corporations were highlighting their own ethical approaches to business in order to distance themselves from the scandals, such as the savings and loans debacle, that made business headlines at the time. However, the hangover from the Cold War, which was only then coming to end, stifled proper media and academic discourse of ethics as it concerned corporate bodies as legitimate criticism/investigation of the ethical conduct of corporations was attacked by some as an attack on free enterprise and a support for communist ideology! This point of view was strongly advanced by Milton Friedman (1912 – 2006) who posited that corporate executives, provided they stayed within the law, had no other responsibility than to make as much money as they could for their shareholders.

Since then, things have moved on quite a bit as non-ethical corporate behaviour has increasingly exacted a heavy toll on the society at large and upon the very shareholders whose interests were supposedly paramount. Both here at home in Nigeria and in the world at large, we have seen the collapse of businesses, to the detriment of both shareholders and society at large, as a result of the unethical behaviour of those who had a responsibility to run and manage the affairs of the corporations. Alpha Merchant Bank, Oceanic Bank, Enron Corporation and an ever increasing list of erstwhile corporations have clearly shown that some minimum ethical standards ought to be required of those who run corporations.

In the view of Aristotle (384 -322 BC), the proper function of society is to provide the good life for its members and he was supported in this view by Adam Smith who points out that a philosophy that advocates all for ourselves, and nothing for other people is a vile one that puts intolerable strains upon the very things that bind society together. It was this kind of attitude, one that discounts ethical concerns, that permitted the legislative bodies of 17th and 18th century European colonies, e.g. in Virginia, to define African slaves as a form of property and permitted native populations to be dispossessed of their lands; the Louisiana Purchase in 1803, for instance, deprived the original inhabitants of the area of over half a million square kilometers of land! Clearly, to discount ethics in corporate life would be to do a great disservice to society as a whole, for it places the requirements of property at a level that is inconsistent with achieving the Aristotelian ideal.

A consideration of non-ethical corporate behaviour reveals that the most important factor, indeed the only factor, is the human factor; after all, funds of money, for instance, do not take a walk  neither would there be insider trading in stocks without some form of human intervention. Clearly, this fact indicates a fundamental failure of the Human Resource function as it operates in corporate bodies. It would seem that the HR function has not done as much as it ought to have done in properly grounding staff members in what constitutes proper ethical behaviour in a corporate setting.

The first step for a corporation seeking to operate according to ethical standards is to abide by the law, and in most jurisdictions there are laws which seek to set out the parameters of what constitutes good corporate behaviour. But, almost always, corporations must go beyond the law, for, as history has shown, the law quite often takes a bit of time to meet up with ethics. An organization that seeks to entrench ethical behaviour as an integral part of its corporate culture must go beyond merely setting out the legal requirements and the policy ideas that the organisation seeks to use in order to meet these requirements. The goal, for such an organization, must be to properly equip every employee (executive, management and line) to be able to make proper ethical decisions when such decisions are called for and to encourage all employees to make such decisions, inasmuch as it lies within their power in every single instance where a decision is called for. It is well to keep in mind that every single staff member of an organisation, from the CEO to the security person at the gate, is a decision maker at one level or another. A demand by the man at the gate for monetary gratification before allowing a legitimate visitor into the premises is just as unethical as a demand by the accountant for monetary gratification before releasing a contractor’s cheque for work done. HR managers, being in charge of the training of staff, ought always to keep in mind the nature of ethical decision making when the screening and training of employees is ongoing. Training is, of course, an ongoing function, so that just as staff are trained on new procedures and machines, they should also be trained in new nuances as to what constitutes ethical behaviour in a corporate environment. It should always be kept in mind that what constitutes ethical behaviour today might not necessarily be so tomorrow.

Although most folk probably do not give much thought to the ethic underpinnings of their day to day decisions, it is well to keep in mind that ethical decision making is an everyday affair and the occasions that call for ethical decisions do not necessarily stand out starkly from those that don’t. As humans, we become so habituated to our everyday doings that the underlying ethics or lack of ethics in the choices that we make becomes blurred or are even totally lost.

The Bible story of the woman taken in adultery and was brought to Jesus by the teachers of the law is a graphic example of this blurring of ethical considerations. These teachers sought for Jesus’ support for the legal punishment to be inflicted upon the woman but, until Jesus pointed it out to them, these folk were completely blind to the ethical underpinning of the specific law that they wished to implement; that is, everyone should refrain from all forms of sinful activity. Since, insofar as we know, the woman’s accusers were not adulterers they felt perfectly justified in demanding legal retribution. However, once Jesus had exposed to them their own sinful characters, they all slunk away like beaten dogs with their tails between their legs.

Starting off from this Biblical story, we can safely draw certain conclusions as to what is required of the HR function when it comes to preparing employees to act always, inasmuch as possible, in an ethical manner in all their handling of corporate responsibilities. Every corporate decision maker ought always to be aware that ethical decisions in the corporate world are governed by the same general principles that govern the ethics by which people run their personal affairs and, generally speaking, one oughtn’t to tolerate a deviation from a general principle in corporate affairs that he/she would not tolerate in his/her non-corporate life.

  • Ethical decisions are made based upon a person’s unique personal world view.
  • All such decisions always carry within them the potential to cause harm to other people.
  • In almost all circumstances, the situations that require a person to make an ethical decision will have some resonance with the decision maker’s societal role as well as with the decision maker’s relationships. For instance, in the Bible story referenced above, only the woman is presented as being taken in adultery; yet, the very definition of adultery makes it impossible to be performed by just a single person! Who was the woman’s adulterous partner, and why was he not brought along for judgment? Perhaps his societal standing, more in line with the standing of the teachers of law, made it inconvenient to expose him! As humans, we are faced with a multiplicity of obligations as a result of the societal pressures that we face, and in making decisions we must be sensitive to this fact so that we do not do the wrong rather than the right thing. Not so long ago, a Nigerian wife facing a charge in the UK of knowingly transferring stolen public funds put up as part of her defense that her cultural obligations as a wife were such that, although she knew that the funds that she was transferring were stolen funds, she could not refuse her husband’s demands to transfer the funds notwithstanding that she was aware that it was against the law in the place from which the funds were transferred (Nigeria) as well as the place to which the funds were transferred (UK) to engage is such practice. The defense was, rightly, rejected. As an aside, I am not aware of any cultural obligation in any part of Nigeria that requires a spouse to aid and support a criminal spouse in his or her criminal activities.
  • Directly related to the last point, is the fact that what constitutes unethical behaviour may be sometimes blurred in a corporate environment, as in life in general. For instance, is one just doing a favour to a friend or is one acting in a non-ethical manner?

The issues raised above have clear and practical implications when it comes to the training of staff, and HR ought to set training and development strategies that will face these and similar issues.

  • HR should keep in mind during all training processes that it is almost always in the capacity of decision maker that ethics come into play and it ought also to be remembered that practically every employee, no matter how lowly or highly placed, is a decision maker at one point or the other. Take for example; a CEO who intends to misappropriate corporate funds will almost certainly require the acquiescence or connivance of persons much lower down the corporate hierarchy. Thus it is important that all employees are trained to always take a critical look at their own responses as well as to the requests/responses of others so that they do not inadvertently find themselves embroiled in ethical issues. Recently, evidence was adduced in court that funds were transferred from certain bank accounts to others on the say so of the bank’s CEO in spite of the fact that those who actually carried out the transactions knew that the instruction was at least unethical and quite probably
  • Clearly, training in matters ethical should follow a decision-oriented format. Hypothetical situations ought to be put before the trainee so that he/she is forced to make a decision one way or the other and then be required to defend the position he or she has chosen from an ethical point of view.
  • HR should make more effort to acquaint employees as to whom it is they owe responsibility to. The HR function is apt to set out hierarchical structures that indicate the direction in which responsibility flows. Though these structures are useful, they often fail to tell the whole of the story. By omitting or underemphasizing other vital stakeholders, HR places every decision maker at a distinct disadvantage when it comes to making those important ethical decisions because the decision maker has a warped or incomplete understanding as to whom he/she owes responsibility. Thus, as we saw above, every instruction of the CEO or the Permanent Secretary is obeyed irrespective of how illegal, irrational or unethical such instruction may seem to be. Because the respondents are improperly trained, such a one is under the misapprehension that he/she is obliged to obey each and every instruction emanating from those quarters.
  • Training must emphasize that corporate ethics is merely a subset of overall human ethics. Results that one would not tolerate in private life ought not to be tolerated in corporate life. Almost always, when a decision is described as technically legal it is unethical. If decision makers are trained to always use basic ethical norms as their yardstick in corporate decision making there are likely to be considerably fewer ethical misdemeanors in corporate life. An example is the case of the Nigerian Minister who got involved in the sharing out of her ministry’s unexpended appropriated funds after she was told by the ministry’s permanent officials that that was the normal procedure for disbursing unexpended funds. A bit of common sense would have saved her from the whole trouble; if she sent her housemaid to the market, would she acquiesce to the maid taking over any unexpended funds? Ethics is ethics, whether at home or in the workplace.
  • Experience and research show that people have a blind spot when it comes to discerning an ethical issue in a matter that concerns some of their core values, beliefs, etc. It is HR’s duty to train employees to be able to take a step back from themselves, so to speak, and look in a more unbiased manner at the facts on which they have to make a decision. Two questions arise:
    • What ethical issues, if any, are involved?
    • If there is (are) an ethical issue (s), what are the factors that cause it (them) to raise ethical concerns?

Organisations are made up of people and the quality of an organisation depends upon the quality of the people who make up the organisation. Top to bottom decision making and vice-versa is a fundamental part of organizational quality and as recent history, here at home and abroad, has shown if employees can not be trusted to identify ethical issues that arise and resolve such issues in a responsible manner, then the interests of all stakeholders, not least the employees, are undermined.

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