Why Business Ethics Matters to Your Bottom Line


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Why Business Ethics Matters to Your Bottom Line

  1. 1. Session number and title(goes here in 32pt Georgia)W13 – why business ethicsmatters to your bottom line?Presented by:Dr. Attracta LaganPrincipalManaging ValuesPresented by:Dr. Attracta LaganPrincipalManaging Values© Copyright of Managing Values www.values.com.au
  2. 2. Business Forum2013Business ethics context• Business ethics is a management accountability inUS, UK & Europe• Australia is out of step with its laissez faire attitude• Institutional integrity is modern day focus• Ethical risks are known & regulators demand morethan a paper trail• IBM’s research points to the inevitability of greaterorganizational transparency & accountability• Current leaders invest in ethics managementsystems to protect their people• Embrace increased transparency as the enabler ofethical cultures© Copyright of Managing Values www.values.com.au
  3. 3. Business Forum2013Business ethics dynamics• Employees consistently report they are working inenvironments conducive to misconduct• Fall out GFC led many boards to concentrate on complianceand paper trails at the expense of managing culture• Compliance inhibits systems view of how risk issues emerge• Ethical skill development promotes managerial & personalaccountability© Copyright of Managing Values www.values.com.au
  4. 4. Business Forum2013Discipline of business ethics• Focus on the institutional & contextual dynamics that shapeemployee behaviour• Demands that leaders move beyond “tone” setting to aimhigher beyond legal minimums• To design institutional practices that encourage & rewardethical behaviour• To establish robust ladders of escalation© Copyright of Managing Values www.values.com.au
  5. 5. Business Forum2013Do ethical failures matter?• 2012 UBS fined $29.7m system failures• 2012 HSBC paid $1.92b settle charges money laundering• 2012 Barclay’s fined £290m manipulating key interestrates• 2010 BAE Systems pays £400m settle bribery charges• 2010 Rio Tinto employees jailed bribery in China• 2010 Daimler paid $185m fines bribing foreigngovernment officials• 2008 Syngenta fined $2m discriminationcase• 2008 Siemens paid $1.6b settle globalcorruption case© Copyright of Managing Values www.values.com.au
  6. 6. Business Forum2013Collateral damage• Loss of human liberty; reputation & livelihood• Family shame , Company shame, Nation shame• Increased legislation• Destabilisation social fabric of societies• Inter-generational adversity – robbed of right to work &participate in the marketplace; right to same wellbeing asparents’ generation© Copyright of Managing Values www.values.com.au
  7. 7. Business Forum2013Heightened connectivityvulnerabilities• Internet means more people now see how you do things, how youimpact on others and tell others how you should be heldaccountable• Stakeholder internet retaliation - anytime, for no cost and withoutrestraint• Linking ethical behaviour to reputation makes ethics integral towhat drives business success eg. Starbucks & Google taxminimisation fallout• Management of organisational culture key priority today’s successformula© Copyright of Managing Values www.values.com.au
  8. 8. Business Forum2013Benefits business ethics High integrity companies also high performing (CEB) World’s Most Admired Companies deliver highestshareholder value (Hay) Clear link between institutional integrity & employeeengagement 2011 Australian research 78 organisations found companiesfocused on culture as well as financial indicators 3 timesmore profitable© Copyright of Managing Values www.values.com.au
  9. 9. Business Forum2013Top ethical risks - how well areyou managing these?• Funding concerns enjoying a higher priority than ethicalstandards• Unaligned compensation plans• Poor management of unacceptable behaviour• Anti-competitive practices / contract violations• Harassment / Retaliation• Health or safety violations• Insider Trading/stealing• Substance abuse• Environmental violations© Copyright of Managing Values www.values.com.au
  10. 10. Business Forum2013Businesses of the future• Build organisational integrity as an enabler business success• Embrace ethics and transparency as way of flatteninghierarchies & engaging employees• Step up to employee desire to be part of a business thatseeks to enhance society as well as financial successIndividualPerceptionTime DimensionContextdimension StakeholderDimension© Copyright of Managing Values www.values.com.au
  11. 11. Business Forum2013How to- build organisational integrityDemonstrate ethical leadership e.g. remunerations thatreward sustainable practices & culture builders and not justbottom line resultsActive culture measurement as well as complianceTrain employees & reinforce with visible action on poorbehaviourDesign systems to promote high level of trust© Copyright of Managing Values www.values.com.au
  12. 12. 1212-6DisclaimerThis paper represents the opinion of the author(s) and not necessarily those of the Institute of Chartered Accountants in Australia (the Institute) or its members.The contents are for general information only. They are not intended as professional advice – for that you should consult a Chartered Accountant or other suitablyqualified professional. The Institute expressly disclaims all liability for any loss or damage arising from reliance upon any information in these papers.Dr Attracta Laganwww.values.com.auDetailed research available in white paperWhy Business Ethics Matters- to your Bottom LineCase studies available on institute websitewww.charteredaccountants.com.auThank you!© Copyright of Managing Values www.values.com.au