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How shared ethics provide accountability

Sharon Constancon of Genius addresses a topic that has become increasingly relevant in recent times in this guest blog. The unified ethical stance of many a company has been vital in getting through recent scandals, and as Sharon discusses this must be consistent, from the chairman downwards.

Culture and ethics are topics that many boards are having to cover more regularly as stakeholders are demanding higher levels of accountability over corporate decisions and activities.

This means that the role of the board is changing, and as scandals occur, such as the PPI, LIBOR and Forex, the Chairman is having to lead the Board through times of uncertainty while in the media spotlight.

The need to be forward thinking and constantly reassessing strategy is crucial to the flexibility needed in the face of challenges and to get to the root cause of the issues they present.

The Chairman, through his experience and style by default sets the tone of the boardroom, however the real issue is the appropriateness of that tone by today’s investors and media’s judgement. It is crucial that the values reflect ethics, transparency, sustainability and care for the customer.

Diversity in the boardroom can significantly improve the setting of the culture and the way it is infiltrated to the front line through having different approaches to the same issue. It is key that a unified message is passed on to employees that sets the tone of the company.

Lists and codes of ethics just don’t cut it any more. There is a need for active participation, and this starts from the boardroom. While the Chairman sets this tone it is the Chief Executive that must champion it. The CEO must pass it through management to the front line. This is only successful if the all Directors “walk the talk”.  Determining the success of the culture message usually occurs through interaction between Board and staff supported through employee surveys which determine if the culture is being infiltrated.

This culture should not just be diffused internally, but should be exposed to the various stakeholders too. This is a sign of strength of the business, and is key in showing that the company is unified.

There needs to be a process of monitoring the effectiveness of the culture which is best done by an external board evaluation by a person that can get under the skin of the boardroom behaviours and characters and unlock barriers to effective board behaviour.

There are inevitably conflicts of interest between the directors and stakeholders as to focus and returns. There is no social consensus that allows companies to be entrepreneurial and successful other than the traditional route of maximising stakeholder value. Few Boards realise that shareholder value should not be the most important measurable value of sustainability.

Risks are an inevitable part of business, but risk management review is not being effectively incorporated into the agenda and discussions within the boardroom. Each known risk as well as the unknown unknown risks need to be assessed in turn with the opportunities they present and cost if materialise. Effective risk reporting is crucial to matching tone and risk appetite.

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