What’s so hard about doing the right thing in the business world?

The modern world is filled with loopholes and rationalisations to excuse and justify bad behaviour. But according to Professor Melinda Edwards, that’s why knowing how to make ethical decisions is more important than ever.

Traditionally, society has relied on the law to ensure the people we should be able to trust will do the right thing.

The law imposes certain requirements — called fiduciary obligations — upon the people you trust to act on your behalf. So lawyers are fiduciaries; stockbrokers are fiduciaries; essentially most professionals undertaking to act on your behalf for your benefit may attract fiduciary obligations. That’s where the laws regarding conflict-of-interest come from — you can’t put yourself in a situation where your personal interests conflict with your obligations to your job or your obligations to another person.

To enforce these obligations, the law insists on strict liability. If you are found to have put yourself in a situation where you are making a personal profit at the expense of someone to whom you owe a fiduciary obligation, you will be penalised, even if no detriment is shown. That strict liability is in place to ensure that people aren’t tempted to do things that are unethical or inappropriate.

But when you attempt to apply these laws to modern society, you run into complex business interests that make traditional deterrents more difficult to enforce. Look at the recent investigation into misconduct by Australia’s banking industry, for instance. The decision makers of these banks have professional indemnity insurance — even if they are sued for breach of fiduciary obligation, it may never actually cost them anything.

So the law is still good, the problem is that people have been able to make commercial arrangements to soften its impact. And if the law isn’t a deterrent, and you don’t have the right systems and culture in place within your organisation, people are more likely to do what they think they need to do to get ahead.

We’re not just talking about bankers and financial advisers here, either. There are all sorts of flawed justifications people in all walks of life will use to rationalise their bad behaviour to themselves.

You’ve probably heard them all.

“Everybody else is doing it.”

“But this is how it’s always been done.”

“It’s not hurting anyone is it?”

“The authorities are corrupt, so why should I do what they tell me?”

“My employer doesn’t pay me for all the extra hours I work, so I deserve to use the corporate card to buy myself a nice pair of boots.”

We think we’re smarter, and more ethical, than that. But we all suffer from cognitive biases and blindnesses. We all create narratives in our minds that allow us to think of ourselves as ‘the good guy’. And we don’t always see ethical dilemmas when they present themselves in the first place.

My co-facilitator Dr Alistair Ping is an expert in why people do bad things, and it’s a really fascinating field. The people who use these excuses aren’t necessarily bad people — just people operating within a system that isn’t keeping the ethics of what they’re doing at the forefront of their minds.

The upside of ethics

Of course, we should all want to do the right thing because it’s, well, the right thing to do. But there are other, more financially compelling reasons to behave ethically as well.

It’s not just about being ‘good’ or ‘bad’ — it’s about the fact that no business can be sustainable without ensuring that it is also ethical, because the risk is just too great.

Acting ethically won’t just save your organisation money on lawsuits, it will also reduce the risk of market share loss due to reputational harm.

Leaders in Australian financial services have taken a hit with the public because of what has come out in The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. Look at all of the smaller banks and financial service providers who are starting to take some of the market share — they’re the ones who advertise that they don’t invest in anything unethical, and that they operate for the benefit of members, not shareholders.

My co-facilitator Dr Mark Harvey is an expert in this and he says the landscape is definitely changing. As people increasingly prefer to do business with corporations and brands with ethical business standards, businesses who recognise the potential for a competitive advantage are taking action and marketing themselves accordingly.

Public sector leaders, too, need to understand that they will be more successful in securing funds for programs that demonstrate ethical outcomes for government and the community. Agencies that do not have robust and demonstrable ethical processes in place may be bypassed in favour of those who do.

So aligning your organisation’s values with the values of your audience is now absolutely essential for leaders who want their organisation to be successful, transparent and viewed as a trusted authority.

The ethicist’s guide to modern living

What, then, are some strategies that can be put in place to ensure your organisation behaves ethically, even in the face of economic temptations to do otherwise?

As the saying goes, if it doesn’t feel right – go left! And when you find yourself in that uncomfortable situation there is simply no substitute for well-reasoned and well-practised ethical skills. That’s what QUT’s Ethical Decision Making Program is all about. It’s designed to provide you with the theoretical frameworks and practical skills you need to navigate difficult situations and complex environments, and will arm you with the information you need to promote ethical behaviour and foster integrity within your organisation.

For all the complexities of the modern world, it is still possible to tell the difference between right and wrong — and by putting the right systems and culture in place, you can make sure your organisation is on the right side of that line.

Professor Melinda Edwards is a facilitator of QUT’s Ethical Decision Making Program, a series of one-day short courses designed for both corporate and public sector employees on offer at QUT Executive Education Centre starting from 25 July 2019.

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