Ethics are rising up the business agenda

By Martin Vogel

About to become a mainstream subject?

Two different articles highlight the importance of ethics and integrity as corporate considerations.

Anthony D’Angelo, writing in Business Week, analyses the curious lack of attention paid to reputation management in business schools:

An analysis of highly ranked MBA programs by the Public Relations Society of America showed that only 16 percent offer a single course in crisis and conflict management, strategic communications, public relations, or whatever label one chooses to describe management of a precious organizational asset: reputation. Even that course is likely to be an elective. So glaring is this omission that it’s typical for MBA-holding executives to assume “reputation management” or “public relations” is the black art of spinning an alternative version of reality, as though that works in today’s wide-open, relentlessly scrutinized, electron-speed information environment.

One can’t blame organizational leaders for not understanding that the way they operate the business is inseparable from the way they communicate about the business, inside and outside the organization. They’re not educated sufficiently to know these are inextricably linked leadership requirements: You can’t have effective leadership without an effective communications strategy. The latter is based on authenticity and transparency because nothing else works.

The delusional separation that exists between what companies do and what they say is not examined in most MBA programs. Yet we wonder why so many company stakeholders – customers, shareowners, government officials, activist groups, community residents, employees, the news media, and so forth – don’t trust businesses.

Trust in companies and their leaders has never been lower. Peter Peterson, co-founder of the Blackstone Group, noted: “What matters is what the public thinks and the public trust is what’s really crashed.” Yet the course content that would directly address building trust, including ethics and communications strategies, is commonly absent or marginalized in MBA programs.

D’Angelo blames this situation on the academic silos which don’t easily allow multi-disciplinary consideration of “the related topics of ethics, social responsibility, reputation management, public affairs, interpersonal dynamics and organizational behavior”.  But I’m not sure this is right.  In my experience, an MBA is notable precisely for its multi-disciplinary character.  It brings a breadth of perspectives to a single object of focus, running a business, whereas most academic disciplines apply a depth of perspective to a variety of topics.

So if reputation management is not making it onto the academic syllabus, this is more likely to be by design than by systemic failure.  It is not offered because there is little demand.  To reach for a famous aphorism of Donald Rumsfeld: MBAs don’t know what they don’t know.  So they don’t think to ask for it.  One could argue that business schools are flunking their educational purpose by not putting reputation on the agenda.  But the failing is unlikely to be caused by the challenges of surmounting the barriers between disciplines.

Unfortunately, this Rumsfeldian ignorance of reputation management may well persist once MBAs continue their careers into corporate leadership.  As D’Angelo points out, executives are much more likely to heed the advice of corporate lawyers who counsel to say nothing than to weigh this against the equally pressing demand for honest communication.

The delusional separation between what companies do and what they say is an increasingly pressing concern of compliance officers.  Alicia Clegg reports in the FT how compliance jobs are broadening in scope.  Where once they were the domain of audit and legal specialists, they are now as likely to be occupied by ethics champions who possess both commercial credibility and the persuasion skills to change company cultures.

In the UK, at least, this is given an urgency by the Bribery Act, which comes into force next month.

The article gives some interesting examples of how different companies are facing up to the challenge of getting beyond a box-ticking approach to compliance and actually investigating whether practice on the ground is consistent with company policy and the law.  A particularly important requirement, the article notes, is a desire to hear the truth:

The skills required to isolate rotten apples are not necessarily those used in corporate audits. According to Louis Freeh, a former director of the FBI and founder of Freeh Group International Solutions, a compliance consultancy, many businesses follow scripts too rigidly rather than probing and picking up on unguarded remarks as investigators do. “A lot of companies are so process-driven that they forget the basic questions,” he says.

This encapsulates the challenge of ethical leadership and is what links the two articles.  Asking the right questions internally is the pre-condition both for understanding the compliance risks in an organisation and for effective, honest and authentic communication (about the company’s strengths and failings).

The bit in the middle is the hard stuff about aligning an organisation’s internal behaviour with the story it wants to present externally.  Creating a sound ethical compass for every employee is not the whole story, but it is a big part of it.

Image courtesy Jaap Stronks.