UNI Global Union is the voice of 20 million service sector workers around the world. Through 900 affiliated unions, UNI represents workers in 150 countries and in every region of the world. UNI represents workers in the Cleaning & Security; Commerce; Finance; Gaming; Graphical & Packaging; Hair & Beauty; ICTS; Media, Entertainment & Arts; Post & Logistics; Social Insurance; Sport; Temp & Agency Workers and Tourism industries. UNI Global Union’s mission is to grow and strengthen affiliated unions and UNI Global Union to improve the working conditions and lives of workers in the services and allied sectors. [Information quoted from UNI Global Union web site. For further information on UNI Global Union and its philosophy kindly consult: http://www.uniglobalunion.org/Apps/uni.nsf/pages/aboutusEn]

1. What is the most important ethical lesson you have learned (either personally or professionally)?

My worst ethical moment was when I had to console a family of an assassinated Citibank union leader in Bogota who had been murdered at age 37 by a terrorist group. There was a complete collapse of any sense of ethical values – taking the life of an innocent person trying to improve the life of Columbian people. I had to try to answer the question “why”? I learned that this was a society where any kind of ethical sense was lost. A journalist told me, “that’s just what it’s like here.” It was part of the culture. My lesson: I had to try to change the culture.

2. What is the most shocking corporate ethics matter you have seen in the news recently? Non-profit sector? Why?

The most shocking corporate sector example is that fact that the financial sector was thrown into the top of the league in unethical behavior. It is systemic in nature. Employees at the bottom or lower levels of the pyramid on the “shop floor” were instructed and given performance targets to sell certain products to consumers when they knew the consumer couldn’t meet the commitment (predatory selling). When they tried to bring the information back to supervisors they weren’t listened too. When organizations are willing to be so unethical that they sell unethically to simple consumers where is the limit? LIBOR is another example showing that this unethical behavior starts and resides at the top.

3. What do you see as the opportunities for the corporate sector and non-profit sector to collaborate in raising the bar in ethical matters?

There is an important role for NGOs and the labor movement to play. Organizations like Transparency International are important, as are mechanisms like whistle blowers. NGOSs must keep their independence though – their own robust decision-making methods – in order to contribute meaningfully.

4. What are the most effective strategies for mitigating risk of unethical behavior in your organization?

In the labor area, the issue is as fundamental as reorienting the business model.  The board of directors must be clear that they are no longer prepared to tolerate the fact that the world doesn’t like the company anymore. They must make a commitment to engage with civil society and the labor movement. But this all must start at the top.

5. What are your strategies for ensuring ethical policies and standards flow down through all levels of the organizing and to all stakeholders?

5. Are there areas you think regulation should be more extensive in regulating corporate ethics? Non-profit sector ethics?

A legal framework is critical. We cannot leave unethical behavior to voluntary initiatives. This includes an independent judiciary that cannot be bought and, critically, a political process that reflects the will of the people. We must de-corporatize the lobbying that is corrupting public officials. We must fundamentally change the way business does business. We did a survey of workers around the world that revealed that only 30% of the respondents have faith in the quality of the decisions of their leaders.

7. Should culture be an important contextual element in ethics analysis? What is unique about the ethical culture and environment in your country that should be taken into consideration?

Culture is extremely important as demonstrated in the Columbia example I explained. Unethical behavior in our area of labor is not an incident. It is part of life – just generally expected  – that NGOs or union bosses are fair game. There were 2900 assassinated in recent years with only 20 brought to account. In Columbia we were able to generate progress with a specific example. We met with high-level government officials who felt that the multi-nationals were exploiting. We convened business (and explained that they needed to take responsibility), academics, government officials, and labor for a few days of social dialogue. This at least showed it could be done. Carrefour now has 4000 union workers of an average age of 25, with a potential of 8000. We went out in the field and visited Carrefour stores all over the country.

We have members in 150 countries and tackle this problem of culture country by country.

8. Do you think globally applicable ethics principles and practices are possible? Desirable?

Global standards exist to some extent and are very important. Everyone is on a mission to improve behavior of business.  It all comes down to behavior.

9. What is the biggest mistake people make in making decisions around ethical issues?

Improvement in these areas takes time. The biggest mistake: giving up and not following through. The opponents of ethical progress are waiting for this. We don’t lose the passion, energy, and commitment.

Copyright 2013 Susan Liautaud & Associates Limited. All rights reserved.

This week I’m going to keep it simple. Nike and Tiger Woods are appalling. It’s hard to know which is worse, although given that presumably Nike controls its advertising, the buck stops there. By now the ad “winning takes care of everything” (published immediately after regaining his position as “world number 1” following a win at Arnold Palmer Invitational) has been all over the press and social media. What does this have to do with ethics? Everything. In short, a “winning fixes all” attitude defined Lance Armstrong, the Libor banks, Lehman Brothers, Silvio Berlusconi…

I do not in any way intend to minimize the accomplishment of making a comeback, whether athletes, bankers, or wayward teenagers. We all have a lot to learn from acknowledging mistakes, seeking the help necessary to remedy them, trying to make right vis a vis those we have hurt, and regaining lost ground in our lives and careers. But this is no comeback. This is no reminder that unethical behaviour requires on-going vigilance and that the consequences are not erasable with a win. This is no acknowledgement that it wasn’t about the golf, so the golf can’t “take care of it.” I highly doubt that Tiger Wood’s fans (or wife) believe this last win took care of everything. Rather, this is a highly unethical and disrespectful message that the unethical behavior and the ensuing hurt didn’t matter in the end. Above all, it is a horrendous message to our children to “win at all costs” and drop responsibility for past harm.

For the real shock, compare to the bankers – not the bastion of respect for many of my readers but by comparison in the remedy process a model of integrity. At least they are reinforcing standards, sending messages of “integrity before profits,” and recognizing that there is no winning unless, as Barclays says, they win the right way. They are demonstrating an understanding that remedies are multi-dimensional, take time, and require real commitment. Comebacks are not erasers, even when done right.

For a guy with kids, this is appalling. For our own kids, this is appalling. For golfers, this is appalling. For everyone, this is appalling.

Copyright 2013 Susan Liautaud & Associates Limited. All rights reserved.

In this intertwined reality, ethics are first and foremost about quality of decision-making. This means all decisions at all levels on all matters all the time. Effective ethics oversight infiltrates all levels of decisions and organizations – not just the moral purpose guiding the decision or the senior managers who might step down. In my ethics consulting, I use a working definition of ethics: “an on-going determination of moral principles guiding conduct, taking into account all relevant information, values, and current and future impact on all stakeholders (including the public).” (See ____.)    How does this play out for the NHS?

• What does “moral purpose” mean – in the London Times or in NHS hospitals?  As my definition suggests, the starting point is defining “moral purpose.” Organizational moral principles and values require specificity and clarity. Would the nurses, cooks and cleaning staff understand “moral purpose” the way the board or health minister dictates? Or the way journalists use it? Surely the intent is a uniform interpretation of moral purpose. These two words left on their own are unlikely to be understood in the same way by all in light of such varied NHS roles, personal criteria, cultural backgrounds, and personal moral principles.
• How does moral purpose link to conduct? Moral purpose must be operationalized. Ethics oversight requires linking the moral purpose and underlying principles to decision-making, conduct, and evaluation. How does “moral purpose” affect the NHS’ minute by minute choices that require balancing the bad against the worse – put bluntly, often one human life versus another? Ethics live within dynamic, highly pressured operating systems.  The NHS needs an ethics operations plan not a two-word declaration. Without a concrete plan and the practical mechanisms to back it up, at best “moral purpose” is a sticky media plaster likely to fall off with a change of headlines.
• How is buy-in assured? Moral principles need buy-in. How was the moral purpose declaration determined? Two words imposed from “on high” don’t work. Moral principles and their links to conduct must reflect the community, especially in a bureaucratic, reality-stressed environment like the NHS. According to recent press, these words emanate from health sector leaders not from thoughtful organization-wide ethics consideration. Presumably the pending code of ethics touts transparency. The starting point is transparency on the process of defining the NHS’ moral purpose and developing and implementing the code.
• What is the information required to ensure proper ethics oversight? Moral principles require information for correct application. The aforementioned plan must assure that all decisions are taken and implemented with adequate information. Processes must be in place to move information to the decision-makers and action-takers in a timely, appropriate manner.
• What is the impact on all stakeholders (including the public at large)? One of the most common ethics crises stems from failure to consider broadly enough the ethical impact on all stakeholders (including the public at large). NHS leaders should map much more rigorously breadth of impact far beyond moral purpose or even the patients. On the other end of the spectrum, the individual members of the NHS team at all levels (most of whom are likely extremely competent, hard-working, and well-intentioned) should ask two questions. First, if they were the patient, how would they react to the decision or conduct? Second, if they look back on their contribution – whether at that moment, that day, that month, or that career – what do they want their own legacy to be to all stakeholders?
• How does the “moral purpose” affect leaders? Calling for a leader’s resignation may or may not be a good idea. In the wake of ethics crises, leadership change may be important for managerial, symbolic, or even enforcement reasons. Alternatively, they may be unfairly punitive and detrimental to the organization. Either way, leadership change does not solve the underlying ethical problem. Heads are attached to organizational bodies. Neither the dismissal of a former head nor the hiring of a new head will alone cure what ails the rest of the body.  Either way, the question must point upward and not only downward. Where were the relevant governing bodies? Where were the reporting and oversight systems that should have prevented the now criticized complacency– or at the very least caught them at every annual CEO review and through other internal review processes? CEOs may be responsible for their own conduct and conduct within the organization, but boards are responsible for the CEO…and ethics oversight.
• Two words can lead to complacency.  Often regulators, organizational governing bodies, and even the media stop at buzz words. Moral purpose for now is just two words. Without the above implementation, it is also itself an ethical hazard as buzz words often lead to complacency. A dangling call for moral purpose could do far more harm than good by erroneously conveying internally and externally a sense of quick-fix resolution to an immensely complex illness.
• Relationship to the Code of Ethics. I have not yet been able to see the code of ethics mentioned in recent press. However, the same analysis applies to codes as to two-word remedies. A code is only as effective as its implementation – in real time in the real world within a real budget. Codes must reflect buy-in; offer clarity of requirements and consequences; link to conduct; and consider implications on all stakeholders (including the general public).

In sum, left alone (or even accompanied by a code and the dismissal of a leader), a moral purpose declaration can itself raise an ethical issue. The remedy for the NHS is on-going, extensive ethics oversight not two words.

Copyright 2013 Susan Liautaud & Associates Limited. All rights reserved.

TPG’s website describes TPG as follows (http://www.tpg.com/): “TPG is a leading global private investment firm with $54.5 billion of capital under management. Founded in 1992, TPG specializes in recognizing value – or the potential for value – where others do not. Our contrarian philosophy, global reach, and deep investment and operational expertise set TPG apart from other firms. Our complementary asset classes offer a unique investment platform.”

1. What is the most important ethical lesson you have learned (either personally or professionally)?

The most important thing over time is that in order to run an organization successfully ethics must be part of the fabric of the organization. If you don’t set standards and communicate them as part of the platform and underpinning of the organization, you really don’t have a stable organization. If you allow behavior to cross a line, this creates not just transactional failure but personal and corporate failure. (Internal politics is the norm in these kinds of organizations because if there is no respect for ethics of the organization or the organization lacks a good ethics platform, you don’t have people respecting each other or the sectors or divisions within the organization or walking down the same road together.) It’s important to draw the line early in places where ethics standards may be different. We had this experience in Asia, for example.

So many companies failed because there is a code of ethics but not the compliance that checks against these ethics: the real question is how you test it. Sometimes these companies don’t necessarily pinpoint a precise reason (for example, catching an act of bribery) but simply do not flourish. The lesson: you need not only the standards of ethics, but also to test, reiterate, update, ethical standards within the relevant business environment.

Incidentally, I remember the early days at Stanford Business School being almost a guinea pig in the first ethics class around 1980.

2. What is the most shocking corporate ethics matter you have seen in the news recently? Non-profit sector? Why?

Without pinpointing any one example, the most shocking issue is the lack of controls in financial institutions an environment where we have just gone through a phenomenal economic downturn – people operating outside the norms in which they should be operating. To me ethics start with taking responsibility when something goes wrong as soon as you are aware of it: take responsibility and be accountable for the action, step up, and make sure the CEO and executive team do so and not just the tangential staff or risk officer. Then take remedial action. There are many examples where huge scandal might have been avoided had responsibility been taken at the first awareness of the issue: had Madoff stepped up before he started unethical behavior to cover his losses, Lance Armstrong…

Leaders often mistakenly believe that the greater the visibility and the more power, the more they are invisible and believe they are above the fray as if no one sees what they do or how they do it. But as the scale goes up, the scrutiny goes up. Leaders must be “above reproach.”

3. What do you see as the opportunities for the corporate sector and non-profit sector to collaborate in raising the bar in ethical matters?

I am on the board of a number of non-profits. I hold them to the same standards as a for-profit and in some cases higher standards. I always insist that non-profits create a code of conduct and tracking and compliance processes. If a corporate shareholder or investor invests money, a non-profit is worse as patrons offer their disposable income. This revenue should be handled as a scarce resource, and conduct should be operating within highly ethical standards. Also, a lot of people on the governance side of non-profits are there for self-aggrandizement rather than good governance. This is the responsibility of the organization.

At the firm we have a number of initiatives to encourage both giving and, more importantly, giving of oneself, such as our “random acts of kindness” and matching gift programs or the efforts of our New York office to assist after Hurricane Sandy.

4. What are the most effective strategies for mitigating risk of unethical behaviour in your organization?

As discussed earlier, a code of ethics and compliance, together with taking responsibility as soon as you become aware of an issue, are very very important. I have learned through my experience that ethical standards not only include compliance internally but being ahead of the curve regarding deals in places like Russia, China, or Indonesia where compliance may be different. It is essential to be strong enough to impose our ethical standards or walk away – even in situations where transactions are legal.

5. What are your strategies for ensuring ethical policies and standards flow down through all levels of the organizing and to all stakeholders?

Communication is essential and ensuring that you enforce, check, and update. If ethics is something you compose and put on the shelf, people in their everyday work won’t adhere.  You must have regular compliance meetings to ensure that people continuously understand our code, for example with the extreme care required for management of confidential information.

A key message: treat people the way you want to be treated whether an investment bank, companies, portfolio companies, peers, or in an investment review. Be open and honest. If you’re not transparent, you’re not ethical.

6. Are there areas you think regulation should be more extensive in regulating corporate ethics? Non-profit sector ethics?

I am a proponent of self-regulation. Whenever we have seen excessive regulation, everything becomes exponentially more expensive and opaque. It is necessary to have certain standards and compliance (for example, the SEC, the FDA, the Comptroller of Currency…). However too often regulators lack corporate experience and regulate behind closed doors without asking experts in the business world how things really work.

7. Should culture be an important contextual element in ethics analysis? What is unique about the ethical culture and environment in your country that should be taken into consideration?

Whether at profit-oriented organizations or non-profits, you either go to the lowest common denominator or to the highest standard because your organization is your organization and your brand is your brand everywhere. You can’t stand for something different in different places just because some places don’t care about or don’t enforce certain ethical issues. And it’s not the US that is always highest…you must take the highest standard and integrate that into your corporate ethics profile whichever country/standard that is. Then you must show people right and wrong from the start and do remedial work as necessary. It is essential to aim to have ethics transportable and communicable across lines, as well as to test, check, reiterate, and show people how to operate and be successful but within clear boundaries. It is critical to show everyone how to work together in the relevant environment.

8. Do you think globally applicable ethics principles and practices are possible? Desirable?

Yes. The old adage applies everywhere: never do anything you wouldn’t want to see on the front cover of the Wall Street Journal.

9. What is the biggest mistake people make in making decisions around ethical issues?

It goes back to taking accountability for, and acting on, any issues no matter how painful or how key the person is in the organization. With ethics it’s usually just the tip of the iceberg: if you find someone acting unethically or in a manner potentially injurious to the organization, when you dig down you are usually going to find flawed judgment. Strike fast and strike hard when you have all the facts. You must act or you are culpable.

© Copyright 2013 Susan Liautaud & Associates Limited. All rights reserved.

Second, respectfully, whilst shareholder approval of bonuses, non-compete payments, severance packages and the like may be appropriate – or even appropriate for regulation – shareholder approval does not alone indicate that the directors have fulfilled their fiduciary and ethical obligations. Nor does it indicate that the approved action is ethical. Shareholders are an important voice. But shareholders are not the only voice and not necessarily a neutral and/or comprehensively analytical or legally conclusive voice.

Third, maintaining secrecy of payments to a departing organizational leader is unacceptable. Likely it is also illegal in many jurisdictions. Legal or not, as a baseline ethical consideration there is simply no excuse for lack of transparency. This is particularly the case when significant sums are involved and when the sums have no apparent relationship to the market value of services rendered. (This is indeed perhaps the explanation.) Why is transparency so critical? It is, as the US Securities and Exchange Commission “reasonable investor” standard indicates, the basis on which reasonable people decide to trade in securities (or make donations) or even more broadly to engage in business with an entity and its leaders. It might also provide added incentive to keep the business dealing appropriate, in this case compensation aligned with fair market value.

Fourth, the solution is not to panic or to rectify one mistake with another. Heeding shareholder cries and cancelling or reducing a payment makes sense. Dropping an important strategic tool such as a non-compete does not. Boards must address such challenges comprehensively, not as one-issue defences. Even if an organization needs to backtrack on a particular decision, it is critical not to be so narrowly focused that another worse decision is left standing. I am not in a position to judge the value of the non-compete in the Novartis case, but the Vice-Chair is widely quoted as confirming the value. Therefore, we can assume that likely dropping the non-compete was not in the company’s or shareholders’ interests. Myriad examples relate to this. Dismissing an organizational leader in a media panic prior to assessing the most ethical course of action can lead to a decision that is not in the best interest of the organization. Another example is rapidly cutting a non-profit program providing services essential to human life following a relatively minor monetary fraud.

Fifth, leaders need to stand up and act ethically, even if there is no payment involved. It seems fairly standard that when a leader of a major organization leaves, a reasonable non-compete period at a reasonable salary should protect everyone. Perhaps this should be negotiated at hiring. The terms should take into account reasonable compensation at the time it kicks in, perhaps with shareholder approval in the case of a corporation. Whether or not golden handshakes are illegal as they may soon become in Switzerland, they are not ethically wise in today’s environment. Failing that, ethical negotiations at the end seem at the very least the fiduciary and ethical responsibility of all.

Finally, as with many recent news stories, the real lesson of the Novartis case is the flawed organizational ethics not one compensation point. Organizational leaders must focus on the need for a more proactive and forthright ethics oversight of organizational decisions, processes, the results, and the impacts on shareholders and other stakeholders.

© Copyright 2013 Susan Liautaud & Associates Limited. All rights reserved

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1. What is the most important ethical lesson you learned (either personally or professionally)?

Respecting simple ethical rules characterizes moral behaviour, but should also refer to intelligence and economic efficiency. Ethical rules should be simple. People sometimes say that they are “doing the right thing” when they are trying to implement ethical values but they don’t really understand their meaning because these rules are too complicated.

The example of auditor independence shows the serious consequences of complicating ethical rules. When I was President of IFAC[1], the auditing profession decided to limit the auditors’ scope of work to statutory audit. Thanks to this decision, the ethical rules were simple. The recent decision to, once again, allow auditors to perform consulting assignments led to three serious consequences: (i) when governments yielded to the pressure of lobby groups to allow auditors to perform consulting assignments, many new complicated and difficult to interpret regulations were adopted and conflicts of interest between auditing firms and their clients rose dramatically. (ii) Auditors’ revenues decreased as professionals were compelled to answer to competitive bids in order to obtain auditing assignments. Therefore, auditors have lost their brand image as pure statutory auditing firms. (iii) Operating costs of the new audit and consulting firms have increased considerably. This trend was due, for example, to teams’ wages in charge of interpreting ethical rules and ensuring the compliance of internal rules. More generally, it is impossible to act both as a statutory auditor (whose mission is to protect third parties) and as an adviser (who performs assignments for the company).

2. Which ethical business matter shocked you the most in the news recently? Why?

The biggest shock I had, occurred during the 2008 financial crisis and the subsequent period. At this time, most financial institutions had highly competent boards of directors but their members lacked the necessary relevant information to enable them to anticipate difficulties. In fact, these members can only base their decisions in good faith with the available information provided to them.

If we want these boards of directors to make good decisions, we need to change the boards’ mentality and must require its members to be more proactive in asking for more relevant information. Moreover, we should create a new specialized committee gathering board’s members which will be in charge of assisting the Board of directors: this information committee would be responsible for seeking the most complete, up-to-date and relevant information from external advisers, lawyers, the CEO and other members of the management team. If we keep the process simple for this committee, information should be transmitted quickly to the Board’s members and the serious risks should be easily addressed.

3. In your opinion, what are the opportunities for both corporate and non-profit sectors to collaborate, in order to improve ethical matters?

In both private and non-profit sectors, I strongly believe that if we do not take into account the interests of society as a whole (all stakeholders), companies will disappear because many countries will begin to reject business activities such as financial services. If companies don’t engage in Corporate Social Responsibility (CSR) – for instance, by sponsorship or funding research or universities – they will face increasing difficulties in Europe where, while no one argues with earning profits, there is a high expectation regarding CSR.

In the non-profit sector, the problem is similar: the high cost of fund-raising is increasingly difficult to accept. Non-profit organizations need to rethink the way they operate and renew or seek new partnerships.

How can both private and non-profit sectors work together? Thanks to a kind of “short-cut” in the existing system: companies can support non-profit entities thus reducing the fund-raising costs for these organizations. In the end, there is an exceptional opportunity for both sectors and the combination of transparency and solidarity can raise the level of expectations for ethical rules.

4. What are the most effective strategies to mitigate the risk of unethical behaviour in your organization?

Written procedures and team works are the best way to reduce the risk of unethical behaviours. We have a written procedure describing the rules to follow in order to issue our opinions. This procedure requires that two teams review the work performed (a team in contact with the client company carrying out the assignment and a team who has never met the client company’s representatives). Generally, both teams agree. In case of a disagreement, I have never seen the team in contact with the client imposing its point of view to the internal team. As one of the French leading financial advisory firm, our incurred risk is enormous. However, we have no complaints against us. This result is due to the application of a simple ethical rule: we do what we say.

Regarding the French public authorities, the example of the investment fund named Investissements d’avenir (“investing for the future”) that I was in charge of, after being appointed by President Sarkozy, had 35 billion euros under management. In this organization, I implemented a strict procedure similar to those existing in private firms. It included the following items : (i) recruiting a team with the help of an external consultant and a committee in charge of recruiting the best qualified people through a transparent process and (ii) launching an open invitation to tenders regarding projects that have been selected by an independent international jury (whose members’ identity has never been revealed). We really complied with this procedure and this investment fund is one of the few structures created by President Sarkozy still in place after the President Holland’s election, with the recent appointment of Louis Gallois as director of the organization. Ernst & Young issued a report indicating that 75% of those who wanted to invest in France did so because of the launching of this fund.

Finally, risks’ mitigation requires remaining vigilant and learning about emerging ethical issues at the international level (for instance, the health care support system in Great Britain providing care reimbursements whose amounts depend on the patient’s age) which could concern us in France, in order to avoid them.

5. In your opinion, what measures should be taken to ensure that the ethical policies and standards flow through all levels of the organization and involve all stakeholders?

This is a highly complex management issue that requires ascending and descending flows of information regarding strategy, various decisions and ethics. It is a matter of organizational culture. Long lasting companies have a culture taking into account values such as ethics and efficiency. The question is whether management has the ability to organize this information flows and check the implementation of ethical rules. CEOs have a responsibility primarily to create a culture of shared values, strategies and tactics and secondly to integrate ethical rules in their business operations.

6. Are there areas where you consider that regulations should reinforce corporate ethical values? In the non-profit sector?

In general, there are already too many rules that make the companies’ management more difficult. I strongly support the reduction of regulations, but I also support stricter rules. The main reason for excessive regulation is that we try to deal with too many different objectives. The modern world needs more simplicity.

For example, auditors may continue to have regulations including hundreds of pages regarding independence, or only two lines that say “don’t perform consulting and auditing services in the same company”. The first type of regulation requires expensive and heavy processes, as well as recruiting professionals to interpret ethical rules, even if transparent processes and auditing standards have been implemented. There is still no widespread consensus on the auditing standards’ interpretation. Similarly, you can write endless rules on hedge funds and investment banks, or you can say that the retail and investment banking cannot coexist in the same organization.

In fact, most non-profit organizations in France are well-managed, so we need less regulation but as I said before clearer and stricter rules.

When the European Commission issues a directive or a recommendation, it would divide by ten the number of pages of the equivalent regulation in the national law. But, today, the European regulation multiplies by ten the number of pages in the national law. After that, no one should be surprised by the rejection of the European Commission by European citizens!

There are areas where it is impossible to escape international standards, such as nuclear security. A key question is which authority can prevail in a globalized world. Nobody has the authority, so we expect a consensus, but we don’t know whether it is good or not.

7. Should culture constitute an important part of the ethical analysis’ context? What is unique about the ethical culture and the environment in your country that should be taken into consideration?

Cultures vary considerably and are key to understanding the ethical analysis’ context. We need fundamental rules as simple and short as possible in order to be universally enforced. Areas such as safety, nuclear security, and the financial markets require strict and simple rules.

In France, we have a cultural divide between the North and the South which is partly Germanic and partly Mediterranean. We have a good track record for issuing a lot of rules, but not respecting them. Our history shows an evolution from being a great country to a medium-sized country. We need to address this trend with less arrogance in global affairs, and recognize that France has no longer the power it had before. When I was a child, the first visit performed by a new US President was in France. This is no longer the case. On the other hand, President Obama should acknowledge that the United States will not remain the most powerful country in the future. The Nordic countries are very intelligent in that respect.

8. Do you think globally applicable ethics principles and practices are possible? Desirable?

Yes, as previously stated.

9. What is the biggest mistake that people make regarding decisions around ethical issues?

The biggest mistake I see over and over again is the emphasis on independence, from auditors and Board of Directors’ members for instance. The relentless promotion of independence can prove very arrogant and may be a way to escape from ethical process. The real question should be integrity and competence to ensure compliance with proper procedures combined with integrity. Unfortunately, there is a widespread confusion between independence and integrity, and the use of independence may reveal an excuse.

Reasons vary. Organizations may take refuge in ethics box-ticking. Leaders may prefer not to face the reality of the ultimate outcome of their organization’s decisions and/or actions. Often organizations feel they receive adequate perspective through board expertise such as a cancer researcher or development expert. Models or buzz words trump outcome, for example believing that impact investing and social entrepreneurship should displace charity completely. Sometimes (often in privileged offices) grand conclusions about “data” on the impact of longer-term outcomes versus shorter-term action justify leaving horrifying violations of human dignity and threats to human security unremedied.

Irrespective of the reason, failure to address outcomes, see from the non-expert eyes affected, focus on the results over the model, or force data to live in context (shoes) leads to failed, or at least incomplete, ethics. Sometimes the needs just don’t bring investment returns within a reasonable time frame. Sometimes there’s no time to “teach a starving child to fish”. I would respectfully suggest that if most of us were deciding which of our starving children to leave to die on a roadside in Somalia because we could only carry one through miles of heat and danger to a refugee camp, we might not find “learning to fish” the most ethical choice. Moreover, our view of prioritizing short-term assistance over long-term quantitative results might differ – not least because likely our view of the ultimate risks of doing so beyond the impact on ourselves might also differ.

I am not suggesting that organizational ethics should be personal. Indeed, I strongly warn leaders of the risk of personalizing ethics rather than filtering ethics through the well-being of the organization and its stakeholders (see: It isn’t personal). For example, board members of medical institutions with ill family members may care less about the long-term (or even technical legal requirements) than curing a disease. (This may worsen when the board member is a major donor feeling able to control use of funds.) Most importantly, I am not suggesting that standing in someone else’s shoes is the only criterion or even the deciding factor driving an ethics decision. Rather from the standpoint of quality of ethics oversight, trying on a result oneself offers essential perspective (even for interpretation of data), compassion, and assurance that the ethical analysis best suits the context.

Finally, many of the ethics issues I address have no perfect answer.  Limited resources, human error, increasingly complex global challenges, and evolving ethics analyses all contribute to the reality: sometimes the choice is between children dying and leaving violent rapists unchecked. When faced with the seemingly impossible choice, pause for a while now because you and others will live (or not) with the consequences of your ethics analysis for much longer.

1. What is the most important ethical lesson you have learned (either personally or professionally)?

That basic individual rights are not and should not be culturally relative but universal.

2. What is the most shocking corporate ethics matter you have seen in the news recently? Non-profit sector? Why?

It’s not so much corporate (although the entire banking sector it seems to me requires a radical change in culture) but more about the way in which Government responds to the corporate sector. Thus compromise of fundamental rights for commercial gain, the unwillingness to face widely held perceptions about the duplicitous behaviour of individual politicians, the backtracking on commitments (e.g. the Liberal Democrats on top up fees). I continue to have concerns about the impact of aid, development or otherwise. Despite the numerous studies that now point out the ineffectiveness of much of the billion dollar aid industry radical shifts in approaches are not immediately obvious.

3. What do you see as the opportunities for the corporate sector and non-profit sector to collaborate in raising the bar in ethical matters?

The non-profit sector would do well to professionalise its approaches and work on understanding commercial imperatives and the corporate sector MUST work on acknowledging that ethical business is ultimately the more secure financially. I feel strongly that if aid agencies were prepared to work together, in the field at least, then grossly unethical government actions could be confronted. I well remember in 1984 that MSF (Doctors Without Borders/Médecins Sans Frontières) was alone among the agencies crowded into Ethiopia during the famine crisis who confronted the government with its murderous actions of transporting cholera victims from the highlands to the south thereby creating a nation wide epidemic. The UN in particular kept silent for fear of being thrown out – MSF was very temporarily thrown out but returned. Had all the agencies had this kind of courage maybe the government’s actions could have been halted and many thousands of lives saved.

4. What are the most effective strategies for mitigating risk of unethical behaviour in your organization?

Transparency is the key strategy. In the organisation I currently work in we have worked hard to develop standards (with sanctions for any transgressions), published them and also set up a register of interests.

5. What are your strategies for ensuring ethical policies and standards flow down through all levels of the organizing and to all stakeholders?

Consultation, transparency, reviews and overt leadership in all matters to do with standards. The leaders of any organisation set the tone and the standards of behaviour.

6. Are there areas you think regulation should be more extensive in regulating corporate ethics? Non-profit sector ethics?

Bonuses and salary levels for top management and the gap between low and high earners within any one corporation. In the non-profit sector how about agreeing a nationwide and acceptable division between administration and actual programme costs.

7. Should culture be an important contextual element in ethics analysis? What is unique about the ethical culture and environment in your country that should be taken into consideration?

The danger here is that cultural relativity will creep in; for example, it is within the culture of a given business that small bribes in the form of hospitality and/or actual cash is essential for the smooth flow of business. Larger companies that can afford to should lead the way and there should of course be adequate legislations AND monitoring.

8. Do you think globally applicable ethics principles and practices are possible? Desirable?

Yes, slowly and with difficulty – culture change is a gradual process.

9. What is the biggest mistake people make in making decisions around ethical issues?

Fear and weak leadership or perhaps ineffective leadership. Pragmatism is a wonderful thing but it is possible to compromise on issues apart from ethical ones which should not ever be compromised. Many companies may not as yet be aware of or alive to ethical issues, thinking these only concern environmental organisations and the like. So there is a large public education job to do demonstrating what ethical issues might affect all corporations.

Amidst the seemingly endless headlines of one-off ethics scandals over the past year, a dangerous trend toward more strategic, embedded unethical behavior in all sectors of organizations remains underemphasized. Examples abound: investment banks repeatedly engaging in egregiously conflict of interest-ridden deals; pharmaceutical company sales forces chronically bribing; oil and mining companies pursuing long-term business activities irrespective of the local human rights violations; on-going sales of unhealthy foods in school vending machines; incomplete or overly outsourced supply chain supervision; and even non-profit organizations justifying regular bribery in order to deliver services.

Many organizational leaders in these cases calculate that the cost of doing business with unethical practices is net positive. They are wrong. They believe that the profit or other benefit to the organization exceeds any cost of the unethical behavior. Bribery-dependent sales revenue may exceed the non-bribery option even including regulatory penalties and negative media fallout in the cost of sales. Doing deals with conflicts of interest may net greater profits even while jeopardizing client loyalty and again risking negative media attention. Sometimes the motive is competition (Lance Armstrong again). Sometimes the aim is simply increasing profits or other benefits to the organization internally. Nonetheless, whatever the quantitative result or the goal, the leadership of these organizations both intentionally disregards on-going unethical behavior and intentionally integrates unethical behavior into medium- and long-term strategy.

The purpose of this blog is not to point fingers but rather to apply the fundamental Lance Armstrong query to organizations: can they really win unethically? They cannot.  “Winning” through a business model that intentionally integrates unethical behavior is not winning, irrespective of the financial or other quantitative calculation. It is cheating and in some cases violating the law. The short- and long-term destruction of reputation alone incurs costs of all kinds from impact on recruiting and retention to customer perception to regulatory risk (including the ill will of regulators who will be less accommodating for an isolated issue with an organization regularly engaging in unethical behavior). This approach tarnishes leaders’ reputations whether or not they are directly involved, especially when it is clear they are, or should be, aware. And there usually are measurable quantitative hits: the fines; the lost deals, customer purchases, or donations to a non-profit; the rape victims; the number of deaths in a fire in Bangladesh; the youth obesity statistics. The often insidious consequences of this integrated failure of ethics far outweigh those of even a major one-off ethical crisis for the company, the management, the board, and all stakeholders including the public. The impact grows over time.

Finally, a recurring theme of this blog and the focus of my own research is contagion of unethical behavior. The unethical business model deliberately catalyses contagion of both the initial unethical conduct and the expected and unexpected consequences. Proper ethics oversight and strategy should aim to contain contagion of unethical behavior not systematize organizational doping.

© Copyright 2013 Susan Liautaud & Associates Limited. All rights reserved

1. What is the most important ethical lesson you have learned (either personally or professionally)?

The overarching ethical lesson, both personally and professionally, I have learnt over the course of years is rather simple. Anything that needs to be veiled and concealed is often wrong and unethical. On the other hand, if one has no qualms about openness and transparency, the likelihood of ethical behavior is much higher both in personal as well as in professional conduct. Of course this has to be in context. In personal life the context is social and cultural whereas professionally, stated norms and policies become the milieu around which these behaviors have to be gauged.

2. What is the most shocking corporate ethics matter you have seen in the news recently? Non-profit sector? Why?

Since I live and work in Pakistan and have an interest in governance from a public policy advocacy standpoint, I am painfully familiar with collusive practices at every level within the state and societal system, of which the corporate sector is a part. Relevant to your question, what immediately comes to my mind is the Isotab drug scandal in Pakistan, which highlighted the salience of blatant regulatory graft at one level and inattention to compliance with stated norms by the local corporate pharmaceutical sector in Pakistan on the other. In fact developing country medicines value chain and its regulatory oversight provides many examples of shocking corporate ethics when it comes to connivance with state entities.

3. What do you see as the opportunities for the corporate sector and non-profit sector to collaborate in raising the bar in ethical matters?

The ethics-conscious and bonafide entities in the corporate and not-for-profit world should see the potential within collaboration to exploit synergy. Unethical behaviors and absence of a level playing field hurt the economy because of growth of the black market; additionally, they undermine bonafide businesses because of infringements on their legitimate prerogatives, and cause social pain as they divert resources away from those in need. Advocating in unison against these practices through a variety of complementary channels can help raise the bar, in terms of better norms and regulation and better incentives for ethical conduct. In particular, technology offers a unique opportunity to ingrain better transparency in organisational governance, which should be leveraged better.

4. What are the most effective strategies for mitigating risk of unethical behaviour in your organization?

At Heartfile, we use a range of strategies to mitigate such risks, ranging from transparency in governance, merit in staff selection and promotions, a clear disclosure and conflict of interest policy, segregation of roles at the operational level, clearly designated norms and stated policies with a mirroring reward and accountability system, a process of internal and external audit, and strategic use of technology. At Heartfile, we have zero tolerance for collusion and regard transparency as one of our hallmark core values. An example of the latter is the donation management system at Heartfile Health Financing, where innovations in donation management enable real time viewing of micro-transaction details, a feature unprecedented even by international standards. In the same program we have strived to supplant human discretion with automated algorithms, and subjective decision-making with preconfigured rules, which additionally help to ingrain better ethical values.

5. What are your strategies for ensuring ethical policies and standards flow down through all levels of the organizing and to all stakeholders?

What is most important is to have the right policies, guidelines and standard operating procedures in place as well as implementing arrangements in human resource and institutional terms, as without them good intentions alone cannot deliver. Setting an example right at the top and leaderships levels is important. In developing country settings, adequate remuneration is critical, as most forms of collusion are of a ‘subsistence nature’

6. Are there areas you think regulation should be more extensive in regulating corporate ethics? Non-profit sector ethics?

Regulation should be more extensive in relation to the enabling environment it can create; the system of checks and balances it can mandate; and the incentives that can potentially be institutionalized for the promotion of ethical behaviors. The more coercive the regulation, the higher the likelihood that people will find ways around it—here I am referring more to developing country environments, where governance challenges are usually quite a concern and regulatory effectiveness, is always a constraint.

7. Should culture be an important contextual element in ethics analysis? What is unique about the ethical culture and environment in your country that should be taken into consideration?

I feel the concept of ‘right’ and ‘wrong’ is quite universal, subtle cultural and religious differences, notwithstanding. My country Pakistan is perhaps unique from an ethical perspective, as there are stark differences in the ethical values of the ‘state’ and the ‘society’. The state is predatory and collusive, and has fallen prey to rent-seeking and capture. The society, barring exception’s, on the other hand is deeply conscious of community support with a strong culture of philanthropy. What is worrying is that the societal fabric is wearing out with burgeoning of extreme ideologies, which are blurring ethical margins for illiterate masses on the mistaken notion that some practices are permissible under the religion.

8. Do you think globally applicable ethics principles and practices are possible? Desirable?

Entirely—and I quite fail to understand why the global development community hasn’t aimed for these. We have the UN system and other multilateral fora, which have the convening ability and the mandate to engage heads of state around a specific agenda which can culminate in the setting of such standards. These institutions have resolutions on just about every other subject, except for this.

9. What is the biggest mistake people make in making decisions around ethical issues?

The biggest mistake is underestimating the importance of ethical issues! Ethics is not just about right and wrong from a moral standpoint. It is also about policies, norms and institutional devices, requiring the right input as a way to build the necessary safeguards.

© Copyright Susan Liautaud & Associates Limited. All rights reserved