Abstracta

FIFA – THE ETHICS OF HAVING A BALL WITH OTHER PEOPLES’ MONEY

FIFA – THE ETHICS OF HAVING A BALL WITH OTHER PEOPLES’ MONEY

Friday, June 24th, 2011

The recent decision by FIFA’s executive committee to abandon its investigation into unethical – and perhaps corrupt – behaviour by some of its leaders following the resignation of Vice-President, Jack Warner, is a classic example of how out-of-step this organisation is with society’s expectations of leadership accountabilities. The attempt to shut down the debate by declaring a “presumption of innocence” in the wake of the resignation, has caused a counter reaction as society now shakes its head and asks if this is the right thing to do? Is this how the tone at the top is set?

Global corporations with valuable brands to protect such as Nike, Coca Cola, Shell, BP, Nestle and others have learnt from bitter experience that they cannot operate outside of their social context, or ignore society’s expectations of how corporations keep their social licence to operate. They cannot work alone. They must work alongside their major stakeholders to develop and create more sustainable business models and practices, as well as products. FIFA, as one commentator put it, is the only organisation divorced form its primary product: football. But how big is the separation? Here in Australia every player, from the Under 6s all the way up to the professional leagues, pays to belong to this global club, as does every player in every country.

It used to be that the price of admission was a given, but increasingly, grass roots level associations are questioning what they are getting for their money, and asking why should there be a compulsory levy? The Federal Government is rightly asking why they contributed $50million of taxpayers’ money to a failed World Cup bid – a bid that was at the very heart of the investigations into allegations of bribery by the outgoing Vice President, and his alleged associate, the head of the Asian Football Federation … the direct recipient of FIFA’s favour by virtue of being awarded the World Cup in Qatar!!

Doesn’t every Australian taxpayer have the right to insist on a full investigation into the process for awarding the 2022 World Cup be carried out … or at least ask for our money back!!  Couldn’t every grass roots football association withhold payment to Football Federation Australia until FFA puts pressure on the Federal Government to demand an inquiry? And what of the FIFA Ethics Committee? What is their role?

We don’t have to look far for a voice from the inside as Australia’s own Les Murray is a member. He explained quite loquaciously recently that the Ethics Committee is a review body only, and can only act on complaints referred to it, which in its semi-judicial role, it will investigate from and evidentiary perspective only. So, extending that thinking, can the Ethics Committee at Enron be absolved of any responsibility for the illegal activities of executive and board on the basis that no one complained to them? How does that play out in real life?  Mr Murray should resign as a point of principle and exhort his colleagues to do the same so that he and others can be advocates for change from the outside.

FIFA has a large number of commercial sponsors who prop up its decaying artifice. Adidas, Emirates, Coca Cola, Sony, Hyundai/Kia, Visa, and for the World Cup in Brazil, McDonalds, Castrol, Budweiser, Continental, Oi, Seara, and YingliSolar all have something to lose by being associated with the stench of corruption that now is widely associated with the brand of Football.  Can these sponsors afford to remain silent much longer?

The harsh reality that seems to have eluded the President of FIFA, Mr Sepp Blatter, is that FIFA is a global corporation whose product is the participation of billions of people in a clean game.  So much effort has gone into cleaning up the game at the playing level.  Why does it seem that the administrator is allowed to play by different rules?

*Managing Values Principal, Brian Moran, is a football player, spectator, coach and referee.

 

How Leaders are Created & Citizenship Nurtured

How Leaders are Created & Citizenship Nurtured

Sunday, February 20th, 2011

The upside of the flood levy

“Drove my Chevy to the levy but the levy was dry”.  These immortal words live more in the lexicon of 1970s middle America and in the songs of troubadour Don McLean than they do in modern-day Australia, but ‘levy’ is a term we have come to understand in the last three weeks of media coverage of the floods in Queensland, and then as the flood waters moved south into Victoria. We held our collective breaths as the levies of successive towns held-out in the vanguard of the cyclone initiated torrent of water that moved progressively southwards.  The levy in our case, was anything but dry, and may prove to be the metaphorical saviour of 21st century virtue.

As Anna Bligh and the Federal Prime Minister, Julia Gillard searched for a response that met both the moment and the momentum of public awe about the scale of the disaster, we had to comprehend the notion of ‘levy’ in a language we all understand – a charge on our collective wealth that would pay for the true social cost of the catastrophe in economic terms. Thanks (but no thanks) to the ‘deficit is evil’ politics, built on the false populism of the Reagan and Thatcher years.  The notion that we now have the debate about whether a levy to pay for this one-off natural disaster is any less important than the unnatural disaster of a crazed marksman who slaughtered 35 people at Port Arthur is at the cornerstone of what constitutes a ‘civil society’. Surly the bigger questions are, “who should pay for the reconstruction of an Australian State, if not the people of Australia?”, and “what constitutes and who determines public good when catastrophe strikes?”  Hasn’t the recent GFC already demonstrated that societal cohesion depends on transcending the economic argument?  Determining the public good can no longer be seen as the exclusive preserve of business leaders or politicians.

The school of positive psychologists, as pioneered by Martin Seligman, is building a library of field research to show how acts of kindness are uplifting and character building for all concerned.  Both the giver and the receiver get to experience transcendent moments where they can feel they belong to a bigger story about  the depth dimension of humanity and the innate goodness that resides in us all.  It is this that propels us to reach out to the vulnerable and help a fellow citizen in need.  Similarly “the search for happiness industry”, that many seek out to immunise themselves from the emptiness of our consumerist culture, also advocates that people can actually feel happier giving to others rather than spending on themselves.  Others will argue that practicing gratitude increases our well being.  The recent floods have certainly led many to be grateful for what they have got when they see how quickly all that is valued can be snatched away.

Business leaders as well as society elders have regularly lamented the lack of opportunities now afforded incoming generations to learn from hardships, and the virtues they ingrained in past generations. The silver lining to our floods catastrophe is that it has provided the opportunity to demonstrate to our children and their children what it means to be a citizen of a country that nurtures a civil society that is big enough to reach out and lend a helping hand when need strikes.  What better opportunity do we need to demonstrate community values in action!

Individuals, corporations and nations states face defining moments – moments when the world watches to see how leaders in all spheres respond.  Defining events surface the ethical dimension and present either opportunities to step up to a higher order values, or to circumstances where the option  is to retreat to lower order values of self protection.  We recently saw two business CEOs respond very differently to their defining moments – BP’s defining moment came with the Deepwater Oil spill in the Gulf of Mexico, and its CEO was found wanting.  Toyota’s came with the discovery of defects in its Prius, and its leader stepped up to a higher order accountability which, in the court of public opinion, was what was required of the situation.  Time will tell whether either corporation (or CEO) merely survives or thrives.

At the national level, two countries and their leaders too have been tested.  For America it was the Bush Administration’s response to the catastrophe that was Hurricane Katrina, and the perceived failure of its elected leaders to respond in a manner and a quantum that was considered measured and appropriate.  So too, the Pakistan Prime Minister, when he failed to return from an overseas trip to share his people’s pain in the wake of the country’s devastating earthquakes.

Leaders are created, not made.  They are created in defining moments in the face of unanticipated challenges, not in the comfort of a strategy room.  The ethical dimension of decisions surface and leaders are left exposed, or celebrated for their responses.

Anna Bligh has been roundly praised for her moment-by-moment and very human response to the unfolding drama of the floods over the past several weeks. What we are seeing now is a measured response to the clean-up, and the political fallout that inevitably follows the physical clean up. How do we move on from a disaster that could put the whole of society at risk? Like any personal tragedy, a national tragedy that involves significant loss of life needs a thorough grieving process as well as a rationalisation of how to avoid it happening again. Whether it is BP, Shell, James Hardie, or the myriad of corporate crises that we have seen unfolding over the last few years, the question is not what happened, but what do you intend to do? How do you intend to respond so that society benefits, rather than so that the shareholders receives a better short term dividend?

We all want to belong to a society that buys into a bigger story about what its’ people can be. A grass roots army of some 67,000 ordinary Australians also had their defining moments when they spontaneously volunteered to help fellow Queensland citizens in their time of need.  It was the same citizen-led leadership that we saw in the wake of the Victorian bush fires when Australians dug deep into their pockets to ensure that the victims were looked after.

We constantly remind business leaders that people listen with their eyes; that it is how people behave, not what they say that tells everyone what is truly valued.  Let us role model the kind of behaviour and values that we want to pass on to future generations.  Let’s demonstrate what the values of accountability and responsibility look like in action.  The flood levy is our defining moment in drawing a line in the sand for the next generation – a line that says there is strength in demonstrating caring, responsibility and accountability.  Paying a flood levy is a valuable life lesson and a tangible step in nurturing the kind of virtues we wish to pass down to the next generation. Rather than an impost, the flood levy can be seen as a timely investment in passing the virtue baton onto the next generation.

“This is your CEO speaking” – the Ethic of Business & Being Informed

“This is your CEO speaking” – the Ethic of Business & Being Informed

Monday, October 25th, 2010

“This is your captain speaking. Welcome aboard this flight bound for Utopia. As soon as the last passengers are on board we’ll get under way.  Flying time is approximately 12 hours and we’re expecting smooth conditions but we do ask that when seated you keep your seat belts fastened as your safety is our primary concern.  If we do experience turbulence along the way, we’ll advise you during the flight. We apologize for the delay in leaving the gate but we expect to be able to make up some time en route, and anticipate having you at the gate in Utopia at 24.00, 5 minutes ahead of schedule.”

Sound familiar?

We’ve all had ideal flights, but sometimes we do experience difficulties when things don’ t go to plan. Rarely do the flight crew leave us in the dark. When there’s turbulence, we usually know why and how long it’s going to last. Bumps along the way are anticipated, communicated and negotiated. But, behind that lone voice from the cockpit is a huge information system that provides the data and the support to the flight crew, both on the plane and on the ground.  If you’ve been fortunate enough to have flown some US airlines, you can even listen in to air traffic control through the flight and can then appreciate the enormous and complex web of people and systems that make the air industry such a sophisticated and symbiotic system.

So what does this have to do with business and ethics? Ostensibly  CEOs  - the proverbial captains of industry – should mirror the role of airline pilots in that a large part of their role is informing people of the journey ahead, what conditions are likely to be, and arming employees with the knowledge and information that they need to ensure as smooth a journey in the organisation as possible.  If there are stormy conditions ahead, CEOs have a duty not only to be able to predict them, but also to let their people know how it is likely to affect them.

What do you think?  Do you think that CEOs should provide employees with more information, or simply show you where the closest exit is??

Good People Behaving Badly – How Organisations Shape Unethical Workplace Behaviour

Good People Behaving Badly – How Organisations Shape Unethical Workplace Behaviour

Friday, August 20th, 2010

Some years ago while consulting to a large professional firm, I found myself interviewing a graduate recruit who had recently joined the firm … lets call her Angela. Angela bounced into my office, perfectly groomed, eyes shining, brimming with enthusiasm, and obviously delighted to have secured a position with a firm she felt proud to belong to.  As I listened to her hopes for the future I couldn’t help feeling despondent, wondering just how long it would take  for the organisation to wear down her enthusiasm with it’s risk management policies; lower her self-esteem with lack of recognition or appreciation for her personal contribution; sap her energy with work overload, and dim the light in her eyes when her sense of purpose is lost.

Some eighteen months later I bumped into Angela. She didn’t seem to be so chipper, her clothes had toned down, she no longer had a skip in her step nor a sparkle in her eye.  She had become institutionalised.

I’m sure we all know people like Angela – men and women who join organisations with infinite hope, and yet often these people come to feel under attack.  They begin to feel cheated by their employer because it has not delivered on it’s implicit promise of a mutually rewarding relationship, and in turn they begin (often unconsciously) to cheat the organisation.  This under-discussed dynamic is how the organisational context shapes employee behaviour.  It is under this dynamic that an organisational culture where unethical behaviour can emerge.

Good people too can easily find themselves doing things they dislike because otherwise it would make them vulnerable; cost them their sense of group identity; and in dire circumstances, might cost them a promotion or a job. It can begin with something as simple as fudging a time sheets to meet unrealistic billing budgets, and incrementally escalate until it includes fudging annual reports, sandbagging new business and putting the department’s interest before the clients.

Ethics research highlights that pressure from management or the Board to meet unrealistic business objectives, and the tyranny of the short term and attendant deadlines, are the leading factors most likely to cause unethical corporate behaviour.  Recent Australian research suggests that such workplace dynamics are playing out in Australian organisations which is why learning about Business Ethics must happen in the workplace, and not just in the classroom.

Post analysis of Australian corporate shortcomings, including HIH, NAB and The Australian Wheat Board, point as much to cultural dynamics as individual idiosyncrasies.  Boards and business leaders must accept that unethical behaviour rarely flourishes in a vacuum.  It is as much created and promoted by the organisational culture, as it is created by individual shortcomings.

Business Ethics is essentially about institutional integrity.  The question has to be asked, “has the organisation recruited the appropriate  CEO to model the behaviour expected, and to oversee adequate systems to ensure the ethical dimension of every business transaction is being managed?”.  Managing ethics should be no different to managing other activities, and demands no less attention!  Nothing less than your personal, and your organisation’s reputation is at stake!

How to Handel Other People’s Money – a lesson for Goldman Sachs

How to Handel Other People’s Money – a lesson for Goldman Sachs

Tuesday, July 20th, 2010

While the mainstream media debate is around Goldman Sachs, their Collateralized Debt Obligations (CDOs) and the breaking or not of the law (they have just agreed to pay $500 million in damages) the issue that will/should impact Goldmans in the long term is the “tone at the top” of this Wall Street icon. Case histories show that corporate ethical breaches often lead to illegal activity and company implosion. In most cases, management does not set out to defraud it’s stakeholders, but the “tone at the top” or ethical behaviour of upper management, suggests that legally sound but unethical breaches are acceptable* – just ask the senior teams at Enron, WorldCom, Lehman Bros and Andersons. Oh wait, there aren’t any! Or better still, find a model that is sustainable and works, such as that of Handelsbanken, Sweden.

What happened in the Sachs case?

In late 2006, Goldman Sach’s executive, Fabrice Tourre – the “Fabulous Fab” – was approached by John Paulsen to find enough people to bet that the mortgage boom would continue… so he could bet against it. Paulson is said to have approached Goldmans with a group of subprime mortgage pools that he felt were likely to fail, and he paid Goldmans US$15 million to find him investors who would bet the other way. The problem was that nobody was going to bet against them, so Goldmans had to find a reputable third party to deem the mortgages a reasonable risk – ACA Capital Holdings Inc.

ACA was allegedly led to believe that Paulson’s intention was to invest in the mortgages, not bet against their success. ACA suggested to Paulson that Wells Fargo should be added to the list but Paulson rejected the suggestion as he must have feared that the mortgages would have less chance of failing if this higher quality subprime loan originator was included. Paulson subsequently purchased through Goldman Sachs insurance that would pay out if the CDO failed. Paulson is said to have made US$1 billion, and Goldmans is said to have made US$15 million in fees.

As a Goldman Sachs internal memo predicted, they were able to “leverage ACA’s credibility” and find the investors to bet that the mortgages were good. The SEC alleges that Goldman lavishly promoted and invited investment banks, insurance companies, pension funds etc to invest in Abacus 2007, the residential mortgage-backed security that was hand picked by ACA Management. The document contained no mention of Paulson.

It is said that all but 1% of the mortgage packages failed within 6 months. The Investors lost US$1 billion. Paulson made US$1 billion.

The “Tone at the Top”?

This case raises questions about how Goldmans resolves conflicts of interest; handles transparency; the reward system used; the value of the Code of Conduct; the excecutives’ ethical responsibility to clients, and institutional integrity. In essence how did their values play out in practice? In order to address this question it might be useful to look at another bank far distant from Goldman Sachs both geographically and philosophically.

Handelsbanken is a traditional Swedish Bank offering corporate transactions, investment banking and trading as well as consumer banking, including life insurance. Its stated aim is to provide a first class banking service to clients who value what might be described as old fashioned banking. The Banks overall goal is to have a higher return on equity than a weighted average of comparable-listed Nordic and British banks. This is to be achieved by having the most satisfied customers and being more cost effective than peer banks.

In global terms the company is relatively a small bank but in terms of the key measures that count, it performs remarkably well. Handelsbanken’s business model is simple and highly effective: ‘the branch is the bank’ and the corporate slogan clearly defines the philosophy ‘banking is global – business is local.’ Handelsbanken made personal service and decentralised decision making the cornerstone of its banking strategy and each branch is an independent profit centre.

“If a bank posts record results during the worst quarter in living memory for financial markets, it could have been a quirk. When the same bank has produced higher than average returns on equity compared with its peers for a number of years, it deserves a closer look. And when it has a business model that appears to answer some of the main governance concerns afflicting the industry, it repays much wider attention.”

In the Handelsbanken’s 2009 Annual Report, it states that one of Handelsbanken’s most important assets is the confidence of customers, public authorities and the general public, and the Bank’s success in the market is dependant on that confidence. The Bank’s ethical guidelines state that operations must have high ethical standards and employees must conduct themselves in a manner that upholds confidence in the bank. It is a fundamental that the bank’s employees must comply with the law. Financial advice must always be based on the customer’s needs, and financial position, and should provide the customer with the tools to choose the most suitable product from the Bank’s suite of product, irrespective of the Bank’s short term needs. As a guide, employees are encouraged to ask themselves, “can I account for my actions to the other employees, …to the press… and the general public without having the slightest doubt as to whether my conduct was ethically acceptable?”

The salary and pension system, combined with the Oktogonen profit-sharing scheme help to promote lifelong employment. Customers should never have to suspect that the bank’s actions are steered by its’ employees receiving commission on certain products. With the long-term approach to customers and employees, employees feel a sense of security in that they can always offer a customer the Bank’s best advise without affecting remuneration.

Question: What stops other banks from copying the Handelsbanken model of success?

Lessons from David Jones’ Locker

Lessons from David Jones’ Locker

Tuesday, July 6th, 2010

The unplanned and ignominious departure of David Jones’ CEO Mark Mcinnes begs a number of questions, not only of his alleged conduct towards employees but also ‘who else knew’. The subsequent leaking of press reports and further allegations of misconduct cast a shadow over the whole organisation whose primary stakeholders are mostly women. It is fair to ask did anyone know of his various liaisons; his colleagues;, other executives, the corporate professionals charged with managing the cultural antennae of the company. And what about the Board?

Did a number of people simply go along to get along to ensure David Jones’s success wheels kept turning? Did they conveniently turn a blind eye to their duty of care and their duty to set the tone from the top? Or were they simply, as many Boards continue to be, blindsided by the unrecognised, undiscussed and unresolved day to day activities that shape the ethical dimension of every organisation’s culture? Cultural inertia or ethical muteness are the biggest barriers to creating healthy workplaces were employees can feel safe to raise issues of concern.

The “I did not know” defence no longer stands up. People listen with their eyes and the day is long gone when a Board can simply sign off on a values statement and assume that policies alone will drive employee behaviour. DJs had is Code of Ethics as did Enron, Goldman Sachs, Visy, Amcor and many other corporations whose behaviour has been found wanting.

Concepts such as duty, responsisbility and accountability are an essential part of the psychological contract between directors and shareholders.All too often they become casualties when corporate leaders fail to match standards of behavior to the public expectations of accountability.

The ethical issues that haunt directors are more often the result of an absence of any intent to manage the ethical dimension of their enterprises. Contemporary research shows that Australian directors demonstrate a passive orientation to organisational culture and rely on corporate policies to shape cultural development. The dominance of legal and accounting perspectives around the boardroom table lulls business leaders into a false notion that culture is inherently unmanageable despite case histories from long lasting organisations including Nordstrom’s, John Lewis Partnership and American Express demonstrating otherwise.

Every Board needs an actionable board strategy for managing ethics that ensures that culture can be supervised and reviewed in relation to business strategy and goals. Organisational ethics must be anticipated, measured and actively managed or else it mutates. Character, the touchstone of personal ethics cannot be assumed, If ethical accountabilities are not clearly defined in senior managers’ KPIs then they present a serious risk to the reputation of the company, an asset increasingly worth protecting.

What do you think? Are Boards responsible for choosing CEOs that uphold the integrity of the organisation they manage an are CEOs accountable for a higher standard of ethics? How are ethics managed in your organisation?

Blind-eyed professionals?

Blind-eyed professionals?

Wednesday, June 2nd, 2010

First we had the AWB scandals and now the revelations about the Reserve Bank’s subsidiary, Securrency, and the ongoing saga of the BP cleanup in the Gulf of Mexico. One could be forgiven for thinking that we, society, the business community and the hundreds of thousands of professionals who work in, with and behind all of corporate Australia and Corporate America have learnt nothing from the last 10 years.

Where are/were the legions of professionals who were involved behind the scenes in all of these public corporations that appear to have gone bad – the auditors, internal and external, the lawyers, the bankers, the diplomats and the MBA qualified business managers?  Did all of these people suddenly forget what it means to be a professional and simply default to a ‘go along to get along’ collective mindset?

For us it begs the question: what does it truly mean to be “a professional”?  Implicit in all professional codes is the principle that a professional services a public good beyond the immediate interests of the client.  So, for the legal profession it’s the public good of justice rather than just the letter of the law; for the medical profession it’s the public good of health rather than the narrow confines of their individual specialty; for the audit profession it’s the public good of trust rather than merely inspecting the numbers; and for the professional manager it’s balancing the needs of all stakeholders rather than serving the narrow interests of shareholders.

Beyond that a professional signs up to a ‘duty of care’ because their professional training gives them licence to advise people who in many circumstances are unable to make informed choices due to their own limited knowledge.  This is the base assumption that civil society works on, that forms the basis of trust in the professions.

But perhaps in the most recent cases of corporate malfeasance we have seen the separation of professional conduct and ethics, driven by a belief that they operate in separate spheres. To assume this is both artificial and highly risky as most business decisions play out in social, environmental and economic terms that cannot be neatly quarantined from each other.  We see this now being played out on a daily basis as we see the desperate attempts by BP to salvage their social licence to operate in the face of an increasingly angry US public.

Another facet of this declining trust in the professions is what appears to be a belief system based on the doctrine of public virtue/private vice,that one can be a different person in one’s public office from that which we are in our private lives. The careers and reputations of many icons in the business, political and sporting fields have perished on the rocks of this particular fable, such as Eliot Spitzer, Tiger Woods and Justice Einfeld.

So how did an army of professionals fail to recognise the warning signs of the financial tsunami that was on its way? What is the price we pay for the collective amnesia or myopia around the obligations of professional status? Might it be too extreme to suggest the destabilisation of the western world as hundreds of millions of citizens found themselves thrown into economic hardship because of decisions not of their choosing?

Such is the indivisibility of ethics and professionalism.

In exchange for privileges not extended to other members of society, professionals need to honour the principles behind their codes and step outside the comfort of the boardroom to look at their superordinate duty to protect the interests of all they are licensed to serve.  Otherwise we will see an inexorable race to the ethical bottom.  As one wise person once said, “If you stand for nothing, you’ll fall for anything”.

What do you think: Do professionals have a duty to society to protect its interests even if it means compromising the interests of their client?

The Ethics of Oil Spills – BP’s “defining moment”?

The Ethics of Oil Spills – BP’s “defining moment”?

Friday, May 14th, 2010

There are defining moments in a corporation’s history just as there are defining moments in our personal lives.  These moments shape our character and what we become in the future.  BP is in such a moment now.  How it responds to the social and environmental accountabilities arising from its oil operations will shape how people perceive it from here on in.

So far BP has got it right, but if the lawyers get their way we might expect to see some slippage back to the legal minimum in the weeks to come.

As desperate attempts are made to cap the well in the gulf of Mexico, the debate revolves around who is responsible and how such man-made catastrophes can be avoided in the future.  The ethical issues are fourfold: Who was responsible for the deaths from the explosion and the resulting oil spill? Who is responsible for the cleanup of our global commons? Who is going to compensate the thousands of land based people whose livelihoods are likely to be destroyed? And what should be the overall responsibility of a corporation when it has significant negative externalities associated with its’ operations?

While BP rightly focused on who was in charge of the rig and who made the critical decisions that led to the explosion, they were also right to begin the emergency processes of capping the well and confining the slick before recriminations began.  This is consistent with the industry’s policy in recent times, where the ethic of care demands that immediate action be taken to mitigate further damage irrespective of any legal liabilities that might arise from such actions.

It is also consistent with the principles of ‘product stewardship’ that we are seeing emerging in many industries – the belief that producers and manufacturers are responsible for the damage as well as the benefits that their products bring to consumers and society at large.  The principle was no more graphically represented by the James Hardy Case here in Australia.  If society gives business its license to operate, then surely society can demand that business takes responsibility for any significant negative consequences associates with its products.

The US Government has rightly asserted that the cost of the the clean up must be borne by BP, whether or not they can extend some responsibility to the sub-contractors they delegated control of drilling to.  But who restores the eco-system that will be destroyed possibly forever?  Is this one of the ‘externalities’ that also need to be factored in when assessing the true cost of the cleanup?

The last issue is one of compensation.  When the consequences of business, intended or otherwise, cause people to lose their lives or livelihoods, then financial compensation is due to those affected.  There is an added ethical dimension to this, as was played out the in the past, in how long it can take to pay that compensation.  In the case of Exxon Valdez, the last similar oil spill catastrophe which happened back in 1989, the cost of the cleanup, fines and compensation was put at $3.5 billion, but the punitive damages were originally set at $5 billion to compensate the fishermen who lost their businesses in a $12 million a year herring industry which eventually collapsed.  The case was dragged through the courts for 19 years until the US Supreme Court determined that the damages were excessive and reduced them by 50%. One of the considerations  the court took into account was that no one was killed.  Twenty years after the disaster, the money had still to be paid … Exxon remains one of the least trusted companies in the world.

BP needs to refer to its values now in choosing how it responds to the accountabilities being demanded of it around this oil spill.  Organisational values are meant to set the behaviour standards required of all organisational members.  Ethics – and values – are the depth dimension of organisations, only truly tested in times of crisis.  BP has invested too much in its corporate citizenship credentials to change direction now.  Its challenge is to put the interests of the victims of this catastrophe on par with its own.  Whether it likes it or not, civil society believes it has a duty of care arising from its externalities.  If Beyond Petroleum means Beyond Profit, let’s hope BP chooses the high ground and honours the spirit as well as the letter of the law.

AUSVEG resists Woolies impost on their member’s business

AUSVEG resists Woolies impost on their member’s business

Wednesday, April 28th, 2010

We read an interesting piece recently about how both Woolies and Coles are requiring their local suppliers to submit to an ethical audit in line, they say, with the same rigorous standards they apply to overseas suppliers. They are dealing with two industry associations, one of whom has agreed to cooperate and the other, AUSVEG, who has not.  The thrust of the AUSVEG resistance is that it is an additional impost on their members business.  They do not object in principle to the concept of ethical audits but did reason that Woolworths had a different set of principles for overseas suppliers, for example in relation to freedom of association where apparently Woolworths response was that the laws of the country where the supplier resides need to be applied.

Philosophers call this cultural relativity and it is a dangerous principle to apply to supplier relationships, as Google are now struggling with in China and as companies like Gap, Nike, Marks and Spencer and Walmart have found to their cost in the past.  The downside of this principle if broadly applied is that whatever’s legal goes. So if it’s not illegal to employ 10 year olds sewing soccer balls in Pakistan then it is OK for retailers in developed countries to buy the soccer balls at, coincidentally, very low prices.

But the story does raise the bigger issue of ethical audits in supply chain which, of themselves are a good thing.  Increasingly, Australian businesses, especially those that do business in other countries, are responding to demands from informed consumers for more transparency in sourcing goods which find their way onto supermarket shelves.  But ethics extends beyond simply sourcing and, like charity, needs to begin at home.  In order to demand standards of suppliers, consumer companies need to apply the same rigorous standards to their own businesses. Neither Coles nor Woolies submit themselves to a regular ethical audit nor do they have in place a systematic ethics training program, although to their credit Coles has started to publish an externally verified social report where Woolies does not. Both have been caught out in the past for slippages in their sustainability records – Woolies had to withdraw a line of toilet paper after it was discovered that the environmental credentials claimed by the producers in Indonesia were bogus and both have been caught up in scandals over bribery in procurement.  Neither is prepared to accept the commonly held criticism of abuse of market power by consumer groups and regulators alike.

On the face of it, ethically auditing their supply chains seems a strange place to start on a journey towards more ethical trading. Contrast this with the Tesco group in the UK. Since 2005 they have conducted a group-wide anonymous supplier survey.  Their statement of supply chain enshrines the principles of:

- Treat with Respect

- Professional

- Clear in our dealings

- Reliable in paying on time

- Committed to meeting customer requirements

- Maintain high quality standards

They have established Producer Clubs around the country which meet regularly “to share information to help producers understand customer trends so they can plan their activities” and they make a commitment to “source fresh within the country where possible”. Most importantly, they make a commitment to be an advocate for sustainability in the industry so that all boats are raised.

Ethics is not a cloak of convenience to be pulled on when seeking to exact standards from suppliers or as an excuse for dropping producers from your supply chain.  As Paul Tillich says, “ethics is not a subject, it’s a life put to the test daily in a thousand different moments.”

ABSTRACTA

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Should ethics in sport be an oxymoron?

Should ethics in sport be an oxymoron?

Wednesday, April 28th, 2010

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.

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