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CORPORATE ETHICAL RESPONSIBILITY

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What builds trust regulation/rules or principles/ethics? Examples: ... In the book the code of ethics? In the mind of the MD? ... – PowerPoint PPT presentation

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Title: CORPORATE ETHICAL RESPONSIBILITY


1
CORPORATE ETHICAL RESPONSIBILITY
CPD Lecture Series
  • Achieving and maintaining professionalism

Niall Gallagher Galway 21 October 2009
Disclaimer The Insurance Institute of Ireland
does not endorse or approve the content of any
third party.
2
Themes of the presentation
  • What is Corporate Responsibility?
  • What has it do with Ethics?
  • Is there a problem and has it to do with Trust?
  • What builds trust and what undermines it
  • Why we need to rethink values in finance
  • Does Corporate Social Responsibility contribute?
  • What has Corporate Governance to do with Ethics?
  • Leadership - establishing and maintaining ethical
    values

3
What is Corporate Responsibility?
  • Sustainability long term growth and
    profitability
  • Serving customers and treating them fairly
  • Providing fair employment and respecting the
    individual
  • Obeying the law and regulations
  • Contributing to society
  • Doing no harm
  • Corporate Social Responsibility
  • Companies meaning (or seeming) to be good
  • (The Economist 19 January 2008)

4
What do we mean by Corporate Ethical
Responsibility?
  • Ethics is the study of the moral value of human
    conduct and the rules and principles that ought
    to govern it
  • Ethics in business is the study of individual or
    corporate behaviour with special attention to
    moral adequacy
  • Ethics is, by its nature, obedience to the
    unenforceable and the ultimate guarantor of
    trust.
  • Corporate Responsibility without ethics is a sham

5
Where personal ethics, business ethics and CSR
meet
  • Personal Ethics
  • Business Ethics (Ethics in Business)
  • Social Ethics Corporate Social Responsibility

Personal
Social
Business
Social
6
Where ethics and sport meet
  • The material released yesterday 25th August
    2009 makes claims of bullying and intimidation,
    deceit, connivance, sweeteners, hush-hush offers
    and a complete disregard for the supposed ethos
    of the game. Honesty is for wimps. Integrity is
    for losers. Winning is all that matters
    emphasis added
  • (Mick Cleary, Rugby Union Correspondent, Daily
    Telegraph, 26th August 2009 referring to the
    Bloodgate affair)

7
Where do we stand in relation to Corporate
Ethical Responsibility?
  • Is there a problem?
  • If so who is responsible?
  • What can be done about it?
  • Does it pay?
  • What is the role of the Professions in building
    trust?
  • What is the ideal state of Corporate Ethical
    Responsibility?

8
Corporate Ethical Responsibility
  • Is there a problem?

9
Is there a problem?
  • Yes
  • Trust has gone missing

10
Is there a problem? Yes Trust has gone
missing
  • Trust is like oxygen vital to human flourishing
    and unnoticed until it goes missing
  • Papering Over the Cracks Rules, Regulation
    and Real Trust Smith and Reeves, The Work
    Foundation (2006)
  • Capitalism is a system that functions on trust
  • Financial Times - 30 June 2003.

11
Trust in various professions Note this is a UK
survey does it apply in Ireland?

Q. For each (profession) which would you
generally trust to tell the truth? Responses .
Source Ipsos MORI Survey (UK) November
2008
12
Financial Services and trust
  • Trust is the cornerstone of confidence in the
    financial services sector, and confidence is
    fragile
  • Consumers must trust the providers
  • Firms must have trustworthy employees and
    directors
  • Regulators must trust the providers and be
    trusted by the consumers
  • You cannot legislate for trust
  • Trust / Integrity / are Ethical Values.

13
Is there a problem?
  • Yes
  • Trust has gone missing
  • So, where did we go wrong?

14
What leads to lack of trust?
  • Weak governance and controls/checks and balances
  • Short-term horizons
  • Inappropriate incentives
  • Unchallenging internal culture
  • Conflicts of interest
  • Failure to understand the business and why it
    exists
  • Hubris n.1. pride or arrogance (in Greek
    tragedy) an excess of pride, ambition etc.
    ultimately causing the transgressors ruin

15
What are the consequences?
  • Damaged reputation business/industry/individual
  • High-cost internal control necessary
  • Dysfunctional corporate culture
  • Heavy hand of external regulation
  • Loss of customer and consumer confidence
  • Business failure
  • Economic consequences

16
What builds trust?
  • principled leadership
  • prudence
  • freedom to speak up and challenge
  • Intelligent accountability
  • honest communication and disclosure
  • Consistency (word and deed)
  • Meeting commitments
  • Professional standards
  • Corporate Ethical Responsibility

17
What builds trust regulation/rules or
principles/ethics?
  • Fincial regulation is a mix between rules and
    principles
  • Irish and UK Regulators favoured principles-based
    regulation
  • US Regulators favoured rules-based, and law.
  • Who has been proved right?
  • A principles based approach does not work with
    participants who have no principles Hector
    Sants, CEO, FSA. March 2009

18
Corporate Social Responsibility (CSR)
  • Examples
  • Sustainability (the capacity to endure)
  • Environment and conservation
  • Welfare and community activity
  • Ethical investment
  • Business leadership in promoting society values
  • International responsibility Fairtrade/human
    rights
  • CSR builds trust if it is consistent with
    business strategy and brand and is it authentic-
    not just PR and spin?
  • CSR is (or should be) voluntary action

19
Reputation is a consequence of corporate ethics
  • Reputation is critical to long term/sustainable
    performance (and derives from it)
  • Reputation is based on trust without trust.
  • Good reputation contributes to superior
    performance (and brand value)
  • People greatly value their personal reputation
    (integrity)

20
Does Corporate Ethical Responsibility pay?
  • Difficult to measure consider the opposite
    does crime pay?
  • Good ethics is good business intuitively
    correct Jim Collins Good to Great (Harper
    Business, 2005)
  • Research by Institute of Business Ethics (IBE),
    Does Ethics Pay? (2003, and 2007 Revisited)
    says YES . Ethics training is a key factor.
  • Strong evidence of link between good corporate
    governance and good performance.
  • Weak but positive links between companies social
    and financial performance The Economist January
    2008

21
What can we do about it? Who is responsible?
  • Personal to act with integrity
  • Management to set the tone from the top lead
    by example and manage the ethical agenda.
  • Board to balance stakeholder demands and
    establish appropriate governance (including
    rewards and incentives)
  • Professional bodies to educate, promote and
    enforce high ethical standards
  • Regulators to regulate cost-effectively and to
    serve the public interest
  • Government to govern responsibly, legislate
    effectively and police fairly the public
    interest.

22
What is the role of the Professions?
  • What defines a profession?
  • Formal education and training with examinations
    high degree of intellectual difficulty
  • A concern with Ethics, usually with Codes of
    Conduct (Ethics) with enforcement procedures
    high degree of responsibility.
  • The pursuit of excellence in practice high
    standards of professionalism
  • How do we measure up as professionals?

23
Corporate Ethical Responsibility
  • Where does ethics fit in the business?
  • in its submission to the regulator?
  • In the 5 year plan?
  • On the website?
  • In the adverts?
  • In the book the code of ethics?
  • In the mind of the MD?
  • In the job description of the Director of
    Communication?
  • In the Compliance department?
  • In all of the above?

24
Ethics fits at the heart of business
decision-making
Society and the Environment
Legal and regulatory framework
Business
activity
CSR Voluntary Codes
Corporate Governance Regulatory
Compliance
Ethics and values
25
  • What would an ethically responsible company look
    like?

26
  • What would an ethically responsible bank look
    like?

27
What would an ethically responsible bank look
like?
  • You money is safe.
  • You can trust us
  • Our values are our most important asset

28
  • The bottom line on
  • Corporate Ethical Responsibility?

29
What is the bottom line on Corporate Ethical
Responsibility?
  • Companies must earn the trust of their
    stakeholders through ethical leadership in action
  • Building and retaining trust requires a
    relentless focus on values
  • Ethical considerations must be at the heart of
    business decision-making
  • Corporate ethical responsibility pays -long-term

30
USEFUL REFERENCES
  • An Introduction to Business Ethics, Chryssides
    Kaler ,
  • International Thompson Business
    Press (1993)
  • Ethicability Roger Steare Roger Steare
    Consultancy Ltd., (2006)
  • Creating the Good Life, James OToole, Rodale
    International Ltd., (2005)
  • Good to Great Jim Collins Harper Business
    (2001)
  • Value Shift., Lynn Sharp Paine, McGraw Hill
    (2003)
  • Just good business A special report on
    Corporate Social Responsibility
  • The Economist (19th January 2008)
  • Papering Over The Cracks? Rules Regulation and
    Real Trust The Work Foundation,
  • Ed Smith Richard Reeves. (February 2006)
  • All you need to know about Ethics and Finance,
    John Plender and Avinish D. Persaud,
  • Longtail Publishing Limited (2007)
  • Business Ethics and Values, Colin Fisher and
    Alan Lovell, FT Prentice Hall, 2nd Ed. (2006)
  • Virtuous Leadership An agenda for personal
    Excelence , Alexandre Havard, Scepter
  • Publishers inc. (2007)
  • Good Value Reflections on money, morality and
    an uncertain world Stephen Green, Penguin Books
    (2009)
  • A Short History of Ethics, Alasdair MacIntyre,
    Macmillan Publishing Company (1966)

31
USEFUL WEBSITES
  • Institute of Business Ethics www.ibe.org
  • Business in the Community www.bitc.ie
  • ACCA (includes Ireland news) WWW.
    ACCAGLOBAL.COM
  • Institute of Chartered Accountants in England
    Wales www.iceaw.com/bettermarkets
  • Hermes Pension Management Ltd www.hermes.com
  • Dow Jones Sustainability Index
    www.sustainability-indexes.com
  • FTSE4 GOOD Index www.ftse4good.com
  • Ethical Research Services www.eiris.org
  • Ethics Resource Centre www.ethics.org
  • Wikipedia www.wikipedia.org/wiki/business_ethics
  • Spitzer Centre for Ethical Leadership www.
    spitzercentre.org

32
Corporate Ethical Responsibility?
  • Discussion
  • And
  • Your views

33
CORPORATE ETHICAL RESPONSIBILITY
CPD Lecture Series
  • Achieving and maintaining professionalism

Niall Gallagher Galway 21 October 2009
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