The Commission’s Director General, William Mason, today gave the key note speech at the annual Guernsey conference of the Institute of Chartered Secretaries and Administrators. The theme of his speech was “Ethics in Governance” in which he set out to make the case for a meaningful discussion of morality at the boardroom table and for ethical codes which can inform decision making at all levels of the organisation.
Key points covered by Mr Mason included: -
- good corporate governance being about ensuring a firm acts in an appropriate manner;
- the directors of a board are responsible for establishing the corporate culture (behaviour) of the whole firm and not just that of the board itself;
- most corporate governance codes are high level and do not adequately deal with the subject of ethics; and
- many decisions taken by firms are not purely technical but often involve judgements about what is the right thing to do based on sentiment as much as on logic.
As part of his speech Mr Mason contended that, if you advance the argument that there is no more to business ethics than narrow compliance with law, you arguably advance an argument that where shortcomings are exposed, the State has a duty to legislate to inhibit those shortcomings as legislation and associated regulation would logically be the only way in which change can come about.
In his thought-provoking speech, Mr Mason acknowledged that there are strong arguments against too much morality in business and that the prime focus of a firm is often to make money, but countered those arguments by pointing out that they don’t satisfactorily address issues such as the losses to taxpayers and shareholders caused by the financial crisis and misconduct scandals such as Libor rigging.
In taking a wider perspective of how firms might define and then underpin their approach to ethics, Mr Mason posited on the tricky issue of how a firm’s board might approach establishing a moral code by which they expect their staff to conduct the business of the firm and he suggested two principal options. Firstly, if you accept that there are inevitable cultural variations across the world but that the vast majority of humans have a sense of right and wrong in terms of reciprocal relations with each other, it is possible, without being discriminatory, for a firm to construct a meaningful ethical code which addresses the issue of right and wrong in a manner which is not unacceptable or offensive to any reasonable employee.
The second option starts from the premise that definitions of right and wrong in reciprocal relations between humans are culturally specific and possibly that the notions of right and wrong are relative rather than absolute. In this instance, a firm’s board - without making any sweeping cross-cultural assumptions - should be capable of developing an ethical code for its business based on its members’ understanding of right and wrong. Such a code can then be promoted throughout an organisation to influence the factors it considers when taking decisions. He challenged the notion that such codes cannot have a religious inspiration and pointed to the great wisdom in many theist and non-theist traditions, irrespective of one's personal belief in a deity.
Mr Mason’s principle conclusion was that if you create a culture - as so many large financial institutions did prior to the crisis - where any discussion of ethics and morality is practically impossible, then when firms fail because of their inability to ensure their staff behave in a moral manner, the inevitable response from lawmakers will be to vastly increase the regulatory burden as has happened since the financial crisis. If we wish to preserve what remains of our previously freer society then we need to encourage an environment in which consideration of the morality of actions, alongside the consideration of the potential short term profitability of those actions, has a secure seat at the table when decisions are taken on what actions to pursue.
Please click here to view speech.