Expert Coaching. Practical Resources.

October 17, 2017

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Rose Mercier

Becoming “Most Ethical”

I read a wide variety of articles and reports –sometimes because they help to understand the breadth of thinking about governance, sometimes to help me reflect on how Policy Governance® can support increasingly impactful governance, sometimes just out of curiosity. Recently a March 2017 article in Forbes, “The World’s Most Ethical Companies”1 caught my eye. I read the article and then followed up by reading the report of the same name, published by Ethisphere, which was the basis of the article. (Small caveat, the full 2016 report hasn’t yet been published but the 2015 report, interesting in itself, gave me a good idea what I might expect to read once the 2016 edition is published.)

This annual list – produced for the 11th time in 2016 – is intended to identify corporations that “show a strong moral compass,” that address ethics in the normal course of business. Corporations that choose to participate must complete an extensive questionnaire, the answers to which are independently verified. In addition, a company’s reputation and litigation history is researched by Ethisphere. Through this process, companies are assessed on five criteria – ethics and compliance program, degree to which ethics is embedded in company culture, corporate citizenship and responsibility, governance, and leadership, innovation and reputation.

So, you wonder, how do I connect this report to Policy Governance?

First, the question of what is ethical is central to a board’s deliberation about means: which actions, decisions, conditions, etc. would a board consider unacceptable even if it resulted in the CEO being able to achieve the board’s defined Ends policies? In other words – is there anything that the board considers unacceptable because it is imprudent or unethical? If so, the board should put it off limits in its policies. Through deliberation about what it considers unethical and therefore unacceptable and documenting these decisions as Executive Limitations policies, the board sets “tone at the top” about ethical operations. By rigorously and systematically monitoring compliance with these policies, the board gets data on how ethics are reflected or embedded – how the tone is echoing – in the organization’s operations.

Secondly, a board also needs to reflect on what it considers ethical conduct in its own governing process. How will it make decisions? How will it avoid conflict of interest? How will it ensure members fulfill their duties to be well-prepared and knowledgeable for meetings? How will it ensure that it avoids what Robert Greenleaf has called the “ethical failure” of not developing long-term, big picture perspectives? Tone at the top is set not only by policies that apply to management; but also by holding up an ethical lens to governance. Interestingly, the focus in the governance criteria in the report was on whether the company’s CEO and Board Chair roles are held by separate people (something John Carver has long advocated), and the diversity in board and leadership persons. The latter consideration could easily be incorporated in the board’s governance process policy on board succession.

Finally, the emphasis on the verifiability of evidence provided by companies in their application to be considered on the list of “most ethical companies” parallels, for me, the need for the CEO to provide to the board verifiable data that demonstrates the achievement of reasonable interpretations of the board-defined Ends and compliance with the board-defined limitations. Are means deemed to be unethical being avoided?

I keep reading and continue to expect that I will discover how the application of the principles of Policy Governance can enable any organization – corporate, public or nonprofit – to be effective and efficient and…ethical.

 

1 Retrieved from: https://www.forbes.com/sites/jeffkauflin/2017/03/14/the-worlds-most-ethical-companies-2017/#18ed98087bc3

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