When we look around the world for role models of well-run businesses, we invariably find ourselves studying business ethics examples. Business ethics are the single most important driver of good corporate governance. In our definition of what constitutes good corporate governance, we list our Five Golden Rules:
The first, and critical, Rule is an ethical approach, and in all business ethics examples we will be examining, we shall start with an assessment of the ethical approach of the organisation. The way this creates the culture determines the performance in relation to the other four Rules.
For reference purposes, we will repeat here our general approach: “the business morality or ethic must permeate an organisation from top to bottom and embrace all stakeholders”. As we further say: “reviewing ethics involves looking internally, at the nature of the corporate culture, and externally, at the ethical performance through the eyes of “detached” stakeholders.”
We have written in our earlier business ethics articles about the problems in arriving at a definition which everyone is comfortable with: “different people have different definitions and interpretations of what constitutes ethics, particularly good ethics. We need, therefore, to measure perception of ethical behaviour, in order to understand and respond to stakeholder expectations.”
One of the issues to be confronted early on is that ethics in business can be seen as a grey area where striving for business advantage can go quite a long way before crossing a clear red line into dishonesty.
There are also important questions about the appropriateness of imposing one culture’s values on another and it is very dangerous to take the high moral ground while insisting that “morals change but ethics don’t”.
In our business ethics article promoting the use of surveys in measuring and monitoring good corporate governance, we propose that in addressing the business ethics dimension, we need to monitor whether the organisation is acting properly in three broad areas:
Regarding the potentially contentious moral dimension of the ethical performance, we need to ask whether the company behaves responsibly towards all its stakeholders, exemplified by:
Finally, we can perhaps sum up the results of our analysis by what we call “the Sniff Test”. If there is something about the business that smells unpleasant, the governance will assuredly reflect this. The organisation may well comply with the letter of the laws and regulations that govern it but it probably isn’t complying with the spirit behind those laws. The Sniff Test will find them out though.
We are planning to examine a range of significant corporations on a global basis using our Applied Corporate Governance approach to assessing how well these organisations measure up to our ideals of good corporate governance performance.
We aim to choose representative examples of influential organisations in each of the major trading areas of the world, reflecting our growing global readership. Hence we plan to look at corporations in:
A key input for the future will be the results of a survey input from our growing worldwide membership and we will be encouraging our readers in these regions to suggest their own targets for examination and to contribute to the assessment process.
In assessing the selected business ethics examples, our approach will be to:
For the future we will be looking to include the results from our own surveys, but for the first business ethics example we have chosen the notorious Enron. Why pick Enron? The answer is that Enron is a well-documented story and we can apply our approach with the great benefit of hindsight to show how the end result could have been predicted. It is also a good example to illustrate how ethics drives culture which in turn pushes the ethical boundaries and is a key influence on all the four other key elements of good corporate governance.
Hence, in advance of using our own membership for the survey input we can apply the very detailed findings from the post crash dissection of Enron. Readers who are interested can go to Wikipedia and burrow into the history of Enron and its major players. They can also study the various accounts that have been written and which are referred to in Wikipedia. We particularly commend “The Smartest Guys in the Room”, the story of Enron’s rise and fall, by Bethany McLean and Peter Elkind, and we gratefully acknowledge the valuable insights we have drawn from this fascinating book in producing our case study.