It’s interesting listening to and reading the media coverage of the storm surrounding Melbourne Storm – particularly talkback radio.  Most of the commentary is around the fairness or otherwise of docking points, taking away trophies; how will the players feel; should the losing teams get the trophies for the last 2 years?; would you as a player on the losing team be glad to accept a medal after all this time?

Surely the bigger questions are: who knew about the fraud that was perpetrated, the two sets of accounts, the gross over-payments, the blatant ‘gaming’ of the system in a culture that is clearly driven by a ‘win at all costs’ imperative?  What messages would we want young fans and players to take from all of this?  The penalty should surely fit the crime.  Fines are inappropriate because the message is then, still “It’s only a matter of money”.  What about the principles; honesty, integrity, truth, fair play?

The franchise system as it exists mitigates against any form of selection, natural or otherwise.  In other codes/countries, the loss of points of this magnitude means relegation from the league and the loss of face as well as finance, and potentially more than 1 year of re-building and loss of star players.  Basketball is the other sport that has followed a similar format and a number of franchises have ceased to exist because they could not strike the right balance between money and sustainable business.

The ethical issues are all about the system that drives unacceptable behaviour in an artificially constructed system where the natural conditions of a marketplace do not exist.  As well as the financial penalties, those that control the Melbourne Storm need to understand and educate their players and staff – from the most junior level up – that a sporting business, like any other business, earns it’s social licence to operate by being a good corporate citizen.  When people in society trust the clubs in any code to apply community values to their enterprise, then they continue to invest their energy and enthusiasm into the club through their support.  When they fail to live up to even the most basic community vaues of trust, integrity and fairness they risk alienation and ultimately, extinction.  The Storm will have a lot of work to do over the next few months and years if they are to re-build that trust, but more importantly to demonstrate to the thousands of community members, from the youngest to the oldest, that they have the character to put these events behind them.

Fans and young players look up to professionals for guidance and leadership; professional sports men and women are important role models for current and future generations.  This carries the responsibility to model appropriate behaviour, and not to see that their ethics, values, and their character are somehow different to the society that created them and that continues to give them a licence to operate.

The results in South Australia recently probably illustrate this better than anything. A party that was elected on a mandate to bring openness, honesty and transparency to the political system has been given a harsh rebuke by the electorate for its apparent lack of all three.

Which begs the question: by what instrument are we meant to judge not just ministers but all those elected to serve the people? It has become fashionable to frame Codes of Conduct for ministers by governments of all persuasions and even, in the case of the Federal government, codes for political lobbyists. But does anyone believe them? The absence of punishment or the frequent calling of exceptions suggests that they are codes in name only.

In business, codes of conduct and codes of ethics are increasingly used to map the ethical territory but are also now used to raise the standard of executive performance. Issues such as inappropriate use of assets, favourable treatment of family and friends, accepting or giving gifts in exchange for commercial favours, inappropriate behaviour towards colleagues or subordinates and conflicts of interest are now vigorously exposed in companies concerned for the protection of their reputation. But where are similar standards exacted in the political sphere?

Take the issue of conflicts of interest; if a director of a company, or an executive or employee has a family relationship with someone with whom the business seeks to do business, they have a duty to declare the interest and make sure that they are completely separated from any decision that might have an impact on the commercial decision. We have seen many prosecutions and sometimes sackings of CEOs who have failed to take action where even a perceived conflict exists. But we rarely see this carried out in the political sphere. There was the much-publicised case of the former PM’s brother and other friends where there was the perception of a conflict and where decisions were made nonetheless. Take, for example the current debate in the Federal Parliament over the proposed split up of Telstra, being driven by the Government’s wish to see the retail and wholesale arms separated off in the interests of fairness to consumers. The Opposition is opposed and consequently in the Senate the decision will come down to the person holding the balance of power, Senator Fielding of Families First. But what so far has seemed to have escaped public scrutiny is that apparently Senator Fielding’s brother is a senior executive with Telstra.

In any other sphere of life, be it the local surf club, the local council or the Board of any listed company there would be an obvious conflict of interest and the person concerned would be obliged to stand aside. Where do the principles of openness, honesty and transparency lie in the case of elected representatives, especially those not governed by party rules or codes? In the post-GFC world, business civil society is demanding higher standards of accountability of our business leaders in these three spheres. Why does it not also demand the same accountability of the elected leaders who give it its social licence to operate? There needs to be a Code of Conduct that covers all elected representatives, with appropriate sanctions including, in extreme cases, expulsion from Parliament and administered by an independent authority such as the office of the Speaker. Otherwise, people can legitimately ask, “who regulates the regulators” and we can expect trust in our politicians to continue to deteriorate.

ABSTRACTA 2

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Ethics Q & A for Small Business

How do the following areas affect a small business’s workplace and overall productivity?

• Managers lying to employees

An ethical culture – and a high performing one – depends on a high degree of trust between employer and employee.  It is a psychological contract to achieve a number of things together in exchange for rewards, recognition and whole host of personal values that people seek to have met when they join the organisation.  In small organisations where relationships are even more important, trust is essential.  When the employer, or a manager appointed by them, is found to be lying, it undermines that trust and directly affects productivity.  Employees are likely to “downshift” and do the minimum rather than go the extra mile.

• Expense account abuses at high levels

This is a common factor in many businesses, what we call “the politics of envy”, or “tit for tat” bargaining.  People who feel cheated by the organisation then cheat the organisation themselves.  Many small businesses talk about need to cut back on expenses, especially in times like these, but then staff sees the “bosses” going out to lavish lunches, treating their family and friends to expensive gifts or indulging in expensive toys like cars, etc.

That’s not to say that such expenses are not legitimate business expenses – if nothing else the ATO would have a keen interest in them if they were not – but they are often symbolic of double standards that apply in other aspects of the business. During the Global financial crisis, we all saw pictures of representatives of the big car companies and stockbroking firms flying down to Washington in their private jets to ask for billions of dollars in handouts.

Business owners need to be mindful that people will take their lead from the actions they see not the words they hear.  We say that staff ‘listen with their eyes’ and find it hard to rationalize staff layoffs or cutbacks when they don’t see any pain, or “skin in the game”, coming from higher up the tree.

• Office bias and favouritism

It is, of course, easy to accuse people/ managers of bias and favouritism in the workplace.  If someone is passed over for promotion or doesn’t get the bonus or pay rise they were expecting they’ll sometimes look for reasons other than their own performance.  That said, people do have a basic expectation that they will be treated fairly and promotion, bonuses, etc. be awarded on the merits of the individual.  There are now laws in place to protect many workers’ rights in the workplace but the law should always be seen as a last resort.  Bias or favouritism undermines the morale of not just those discriminated against but many others who see it and ask, “Could this happen to me?” A happy, productive and inspired workplace is one where the rules are clear to everyone, are applied fairly and with a great degree of transparency, and where people know that they will get a fair return for the effort put in.  Otherwise they’ll go elsewhere and the company will have wasted a lot of money in recruiting, training and developing them.

• Taking credit of another’s work

This is a hard one as most workplaces these days work on teams and collaboration. Often, many people will have contributed to the whole and it should be a case of shared recognition for a job well done.  However, there are many workplaces where people do claim credit for others’ work and the best thing to do is the individual to “brand’ their work in some way.  If you’ve done a good piece of work, got a particularly juicy order or suggested an improvement in a system that could save or make the company a lot of money, make sure that the boss knows where the idea came from. Put it in writing, or save the announcement for public forums such as sales or production meetings, or better still suggest that the company sets up a structure for generating new ideas where it will be clear where the good idea came from.

Companies, for their part have to set up mechanisms for proper recognition of individual and team contributions.  And, of course, in claiming credit for your own work you have to make sure that you do it in a subtle but assertive way so as not to get a reputation as a braggart!

2. What sort of programs or processes have you seen that work best for small businesses in:

• Maintaining a moral course in turbulent times. (Especially during the GFC)

People often confuse morals with ethics.  Morals are about how we individually make decisions about what’s right or wrong in society; ethics is fundamentally how we behave and how our actions may impact on others.  In business ethics is about how we treat each other and how we manage relationships with everyone who has an effect on the business or how is affected by the business.  Increasingly, we are seeing big companies and government purchasers trying to manage ethics through their supply chain.  So, ethics will affect small businesses in a number of ways.  What’s important to remember is that good ethics are good for business; if you manage your staff relations well; if you manage your supplier relations well; and you manage your customers well  you will have a sound business no matter what the circumstances around you.

Where the GFC has impacted over the last year or so is in shrinking the market for many services. We were lucky in Australia that we did not see the extremes witnessed in America or Europe and the contraction in the market was not as severe as the recession of the early nineties.  Nevertheless, when some of the excess is sucked out of the market, small companies have to put ethics on the agenda and ask themselves on a continual basis: are we the employer of choice; are we the supplier of choice; are we the neighbour of choice?  Ethics needs to be managed in the practice not in the breach.

• An ethics program encourages strong teamwork and productivity.

We have seen an upsurge in demand for ethics in the last 3 years. That’s largely because the community is talking about it and the media is increasingly talking about it.  Even politicians, never well known for being ahead of the game, are starting to think about how they can introduce ethics into the business of government (although I have to say that the Victorian Government is at least 5 years ahead of NSW in this regards).

The first and most important aspect of an ethics program is that it makes sure that everybody in the business is on the same page.  We live our ethics through our values and increasingly businesses of all shapes and sizes are putting together Values Statements.  A fair bit of our work is in helping companies do this.  If a company has a set of values – usually 3 to 5 at most – then people have a right to expect that they uphold those values and live their lives according to those values. For employees it establishes some rules about how they will be treated and how they are expected to treat each other.  For customers, they know that the company is setting out its stall for how they will provide the service or product to them and they also want to know that people are fairly treated inside the company.  Increasingly, reputation is seen as a vital asset of the business and one unsavoury story in the media about how a company mistreats its employees can lose it al lot of business in the short term. Look at the case of the café in Melbourne where an employee was driven to suicide by persistent bullying by her workmates. For shareholders, or the owners of the business, they want to know that the business is being properly run, that people are happy working there and are being treated fairly.  The Values Statement is their comfort statement that this is the case.

• Ethics programs support employee growth and meaning.

When people join a company they are looking for a sense of belonging, a sense of meaning.  The social side of business, especially for young people, is an important part of how the company does business.  Research shows that this is an increasing consideration as other aspects of our society – the extended family, organised religion and community – are in decline. One other consideration is that people have a basic need to grow and to get a sense of meaning from the work they do and what their company does; this particularly so in the case of Gen Y.  Ethics programs, if properly designed and implemented, provide a structure for people to discuss the bigger things in life, the principles of why we do things the way we do them in work and who might be affected positively and negatively by our actions. Businesses, and relationships, are becoming increasingly complex and the explosion of social networking has taken relationship management to a whole new level.  Unless we discuss these pressures in an open and constructive forum they can sabotage the goodwill of the business and adversely affect its capacity for healthy growth.

• Ethics programs promote a strong public image.

There is no doubt that ethics programs contribute significantly and positively to the culture of an organisation.  There is a huge body of research on this in the U.S. and in Europe. Businesses that manage for their broader stakeholders than simply for their narrow set of shareholders perform significantly better financially, too.  But we must be careful to avoid the suggestion that an ethics program can be used as some sort of cynical PR exercise.  Employees get very wary of their company trumpeting about an award winning ethics program when they see blatantly unethical acts inside the business.  As the Americans say, you have to walk the talk.

And:

1. How does corporate social responsibility related to small businesses?

In one sense, corporate social responsibility is a subset of ethics.  As I have said earlier, managing relationships with external stakeholders is crucial to the success of any business, large or small. Being the neighbour of choice is all about managing the impacts that you have on the community of which you are a part.  At the extreme, people won’t buy from you if you are seen to pollute the environment, have a total disregard for waste management or are known to exploit your employees.  But increasingly society is asking for more. How can you positively contribute to creating a better society by supporting local causes, by allowing your employees to volunteer at charity events such as Clean Up Australia day, by becoming an advocate within your local business association?  The business benefit is that you are seen to be an active participant in the local community, you are doing more than the minimum in terms of managing your environmental and social impacts and you have created a great place to work.  Let’s face it, we all want to buy from companies like that and we all want to work for companies like that.  Work should be fun, and rewarding, and satisfying and we need to have a sense of being part of something bigger than us.  Corporate social responsibility provides all of these.

This Q&A appeared in the online newsletter of Big Fish, a recruitment company based in Parramatta, NSW.  It is reproduced with their permission

All data and information provided on this blog is for information purposes only.  Managing Values makes no representations as to accuracy, completeness, suitability, or validity of any information on this blog and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. All information is provided on an as-is basis