The Business Ethics Twin-Track

Combining Controls and Culture to Minimise Reputational Risk

Steve Giles

• Publisher: Wiley
• Year: 2015
• Print ISBN: 9781118785379
• eBook ISBN: 9781118785348
• Edition: 1
• Topic: Negocios y empresa
• Subtopic: Ética empresarial

Institute a proactive reputational management framework that matches individual behaviour to organizational values

The Business Ethics Twin-Track is a practical guide to reputational risk management. A deep exploration of the concept of reputation, the ways in which it can suffer, and the consequences when it does, the book outlines an ethics controls framework that can mitigate risk and improve business performance. Readers will learn how to identify and manage weaknesses, and how to institute a system of governance that embeds proper, ethical conduct into the corporate culture. A clear set of controls and procedures provides actionable instruction that can be customised to suit the organisational structure, and discussion of historical and international ethics provides the context for implementation. Case studies illustrate the real-world applications, while interviews with executives from a variety of sectors provide important practical insights into some of the key issues discussed in the book.

The law regulates behaviour in health and safety and financial crime, but otherwise, conduct is largely determined by the culture, ethics and values of an organisation. Effective reputation management is complex, and often difficult to achieve, as much of the available information on the topic is more theoretical than practical. This book bridges the gap by providing the tools that will help managers to:

• Implement a modern ethics control framework, encompassing codes, officers, reporting lines and training
• Consider the role of the media and social media in reputational damage to individuals and organisations
• Analyse the key controls in responsibility and governance frameworks from around the world
• Determine the causes and controls of conduct risk, including incompetence, negligence and criminality

Today's fast-paced media environment means corporate reputations can be obliterated in moments, and damage limitation is often too little, too late. Adopting the measures set out in this book will embed ethics into the culture, and match people's behaviours to the organisation's values.

Chapter One
The ethics project

THE OPPORTUNITY

Initial contact

Introduction

Much of my work since the global financial crisis of 2007–09 has been contingent in its nature. Times have changed. Scheduled bookings on courses and speaking engagements are no longer guaranteed to go ahead and pressure on fees is intense. Business opportunities still exist of course, but in my experience since the crisis they often appear unexpectedly and quickly, requiring an immediate response or else they are lost. They always demand thorough preparation and yet are almost never confirmed until the last minute. In other words, business opportunities are now time-critical and difficult to convert into paid work. The Stronach project came about in just this way.

Looking back, the project seems to be the result of a number of lucky breaks: the initial discussion that went so well; before that there was the presentation – both unusual and highly enjoyable; even before that, there was the successful one-on-one coaching session on governance; and to kick-start the whole process, there was the initial telephone enquiry where it all began. I was fortunate indeed to have the time available because it was only this that enabled me to respond positively and quickly at every stage in the process. Downtime does occasionally have its advantages!

The sequence of events that I describe below confirms two things for me. The first is that there is much truth in the old saying, attributed apparently to the Roman philosopher Seneca, that luck is what happens when preparation meets opportunity. The second is that the most important marketing tool in business today remains a good contacts book.

The call

I pick up a call on my mobile in late November 2012. It is from a contact of mine in the business consulting field, a lady called Margaret. After exchanging pleasantries, she quickly comes to the point of her call: a friend of hers is looking for some coaching, some training and/or assistance (the precise requirement is not clear) around the subject of corporate governance. This is not Margaret's area of expertise at all but she knows that it is something that I cover – might I be interested? There is only one snag, the help, in whatever form it eventually takes, must be provided in the first week of December – so, almost immediately. Am I able to help? As it happens (and this is where I really do get my lucky break) I do have time available in the next week or so and I say that I would be delighted to help – the assignment sounds interesting.

As a result, the call concludes positively: Margaret passes her friend's contact details on to me; I say a big ‘thank you’ to her for thinking of me; and we arrange to meet in the New Year to catch up properly.

Coaching session

Establishing the parameters

Margaret's contact turns out to be Veronica, a senior executive in a professional services firm based in London. I try to call her straight away, get through to her personal assistant Stephanie, make my introductions and we set up a call with Veronica for the next day, first thing in the morning.

The following day I spend 20 minutes talking to Veronica. She has recently been promoted to partner in the UK practice and has been given an additional area of responsibility – to develop and grow the part of the business that offers board evaluation and performance reviews to corporate clients. Veronica thinks there are good opportunities here and is determined to make a success of her new remit. These board appraisal projects will normally result in a board evaluation report setting out observations and recommendations for improvements in the performance of the board itself, the main board committees and the individual directors. Veronica is looking to improve her knowledge of corporate governance standards both in the UK and around the world (her firm receives a number of enquiries each year from foreign companies looking to improve their board performance) and to gain a better awareness of current governance themes and hot topics.

After listening to Veronica's requirements, I say that I am confident that I can help and would be delighted to do so. I take her through my experience of working with boards of directors and also outline the contents of the regular corporate governance workshops that I run for directors and others at the London Stock Exchange. We decide that a one-day coaching session would be the best option for her and arrange a mutually convenient time for this session, which will be held in Veronica's offices the following week.

Coaching

The offices are located near Oxford Street in the heart of the West End of London. I arrive and am met by Stephanie who takes me to the boardroom, where I start to set up. Five minutes later, Stephanie returns with Veronica – she makes the introductions and then leaves us to get on with other things. Veronica and I have coffee, exchange pleasantries and then get down to work.

I have my laptop and slide deck with me. I use the slides periodically during the day to take Veronica through a classic modern corporate governance presentation including: different governance regimes around the world; directors' duties; agency risk; committee structures; leadership; the role of non-executive directors; board processes and behaviours; and the benefits and business drivers of strong corporate governance.

The slides provide a useful framework, but this is not a lecture and we spend most of the time talking. At various stages I take Veronica through some of the headline scandals and corporate failures of recent years to help illustrate the key points: the Enron saga in the USA; the Satyam fraud in India; and the banking failures at Northern Rock and the Royal Bank of Scotland in the UK. We discuss the importance of understanding and managing risk, including the crucial area of ‘people risk’ arising from malign or negligent actions. As part of this we talk about some of the behavioural issues at the top of organisations that often underlie many of the problems in business: arrogance and greed; the failure to challenge effectively around the boardroom table; a lack of cognitive diversity in the approach to problems by directors and senior managers. We agree that good corporate governance is an essential component of a good business and that, without it, reputations can be damaged quickly, both for individuals and for organisations alike.

The day goes well. The coaching has worked and I can see that Veronica is pleased. For my part, I have really enjoyed working with Veronica. Walking out into Berkeley Square and then on to Oxford Street with its Christmas lights and thousands of shoppers I think that there is a good chance that we will work together again in the future.

As it happens, such an opportunity came about much faster than I thought.

An unexpected request

Follow up

It is now the third week of January 2013 – it is cold here in the UK, snow is on the ground and, as is normal for this time of year, it is a quiet period for me business-wise.

Then one day, out of the blue, I get a call from Veronica: ‘Lovely to speak to you, did you have a good time over the festivities, how is business?’ Veronica comes quickly to the point: ‘How is your diary looking for the second week in February? I am hosting a networking event for a group of leading business ladies, about 20 in total. We will start with drinks before dinner, during which there will be talk around a topical subject, followed by a discussion. I need a speaker and I thought of you – might you be interested?’

I know straight away that the timing is not good – my wife and I have a holiday planned for that week, we are going to stay at a place on the Norfolk coast, some 120 miles north east of London. However, it occurs to me that this might not be impossible – I could drive back to London after lunch on the day, attend Veronica's event in the evening and then return to Norfolk early the next morning. My wife is always brilliant and totally supportive when business opportunities come up. So, following some rapid calculations I take a deep breath and reply: ‘Yes, absolutely – what do you have in mind?’

The briefing

It turns out that what Veronica has in mind is a 20–30 minute talk based loosely around the themes of damage to corporate reputation caused by poor behaviour and what the board and senior managers can do to minimise this risk. She thinks that a number of examples of business scandals and failures, similar to those we discussed at the coaching session before Christmas, together with practical tips and recommendations, will go down very well with the audience and provide a good platform for subsequent discussion.

We talk through some of the detail and Veronica tells me a little of what I might expect: I should aim to arrive at her offices by 7.00 pm; the talk will take place at some stage during dinner, probably whilst the guests are eating their main course; it will be difficult in the circumstances to have a projector and screen in the room, so forget the slide-deck; and there will be time for discussion and debate over coffee afterwards. Veronica ends by saying: ‘Everything will be finished by 9.30 pm. – what do you think?’

‘Yes … Great, I look forward to it, see you there.’

Hot talk, cold chicken

Setting the scene

I am sitting at a long dinner table set up in the boardroom of Veronica's firm, totally transformed from the last time that I was there. Veronica is not present – she has had to travel to Dubai on urgent business – so one of her fellow partners is hosting the event and is looking after me. I have been introduced to the guests – a mix of business leaders both from the public and private sectors, high-flying accountants and lawyers, academics and authors, all strong achievers in their respective fields and interesting to talk to. As an example, I spend some time talking to an American executive who tells me that she has recently spent time in China and written a book on Western business practices and etiquette for Chinese business people.¹ It is currently the best-selling business book in China – now that is a smart idea! The American impresses me hugely.

Veronica's colleague introduces me to Rachel Gordon, another American, who is chairing the discussion this evening. Rachel is tall and elegantly dressed, perhaps in her late 50s. She tells me a little about her business background: after graduating with an engineering degree, she changed direction and started her career in financial services where she flourished, eventually reaching main board level. She married an Englishman and has been living in the UK for the last 20 years, holding a number of non-executive director positions. She briefly mentions her new role – six months ago she was appointed as the non-executive chairman of a large FTSE 250 engineering group.

Rachel has had a distinguished career but I am also struck by how down to earth she is – I like her.

Dinner

I am the only male in the room, but this is not what is bothering me. We are now sitting around the table, the dinner is well under way and everyone has finished their starters. Rachel opened by asking us all to introduce ourselves when...

Table of contents

• Cover
• Title Page
• Copyright
• Table of Contents
• Dedication
• Acknowledgements
• Prologue
• Chapter One: The ethics project
• Chapter Two: The business ethics framework
• Chapter Three: Bribery, corruption and adequate procedures
• Chapter Four: Reputation, risk and conduct
• Chapter Five: The governance dimension
• Chapter Six: Aspects of leadership: ethics, tone at the top and handling a crisis
• Chapter Seven: Risk, compliance and the controls framework
• Chapter Eight: The business ethics toolbox
• Chapter Nine: Whistle-blowing: encouraging a culture of openness
• Epilogue
• Index
• End User License Agreement