Which way does your ethical compass point?

  • DeakinCo.
  • 24 February 2011

by Professor Greg Wood
Head of Deakin Warrnambool Campus

Greg Wood is Professor in the School of Management and Marketing at Deakin University in Warrnambool, Australia, and the Head of the Warrnambool campus. He is running a long-term research study in seven countries that looks at codes of ethics in the top 500 companies in the private sector and at what they have put in to place to make them operational. His other main research interest is in cause-related marketing.

Greg worked nationally and internationally for Shell oil company in its downstream activities, working mainly in Australia and on Guam in the North Pacific region. It was there that he first became aware of some of the ethical dilemmas of business. Moving from there into education, he undertook a Masters degree in postgraduate Management Education, then a PhD in Management specialising in business ethics while at Deakin University. His PhD title was ‘Codes of ethics in large private sector Australian businesses'.

Greg, tell us why the area of business ethics is so fascinating.

Well, I’ve found ethics fascinating since the late 1980s when I worked both internationally and nationally with a major resource company. It took me overseas where I came across different cultures, and the way that they perceived doing business was slightly different from the way that I perceived doing business. There were things that occurred that did challenge you. And when I came back to Australia I was confronted by the economic downturn, and that put all of the knowledge that I had overseas into some perspective. Australia itself had been through its own ‘ethics’ situation and was then going to be examining why we were in the situation that we were in financially in the late 1980s and with the crash of the market. That was something that needed to be addressed.

There have been a lot of lessons learned recently through stories from the GFC. How much does ethics affect an organisation’s long-term performance?

It has a major effect on long-term performance—one example being BRW which in May 1997 ran a supplement on ‘Where are they now?’, looking at the top 25 business people of May 1987 when the crash hit Australia. And it found that three out of the top five had served time in Her Majesty’s Prison within that 10-year period. So, subsequently, the situation is that, in terms of the reputation of organisations and the outcomes we see with Enron and companies like Arthur Andersen, and we now see with the GFC and Lehman Brothers, they no longer exist. And they no longer exist because they were confused in the way they did business. So they not only got confused with their ethical compass, but their moral and legal compass too.

You have conducted extensive research on ethics standards in different parts of the world. Can you tell us a little bit more about that research?

That research has been going on in Australia since 1995 and it now being done in the United States of America, the United Kingdom, Canada, Sweden, Taiwan and Turkey, with my research partners at various universities. What it looks at is the top 500 companies in the private sector and their codes of ethics and how they actually inculcate the ethos of their code of ethics into their everyday activity such as: Do they have education committees? Do they have ombudsmen? Do they have whistleblower protection in place? How do they take what they are trying to achieve with their staff? What are they trying to achieve from a strategic point of view, and how do they make that ethics point of view flow through the organisation?

What I have found is it’s different in different parts of the world. The United States and Canada are much more legalistic coming from a North America perspective. In Sweden, it’s not quite as legalistic because in Sweden up until the early 2000s, when they had some scandals of their own, they believed that, being Swedish, they did the right thing anyway. The interesting part is in all of the research I have done the Americans tend to be very, very strong on having in place many of the artefacts, and the one area they are lacking, compared to other countries, is they don’t compare their code of ethics with their strategic plan. Now, if you don’t compare your code of ethics with your strategic plan, you then leave yourself open to the fact that people may perpetrate actions on your behalf that don’t fit with your ethical code and that to me may well be the Achilles heel of the reason why we have these types of crisis. Companies don’t make that comparison back to their strategic plan in respect to what they are asking their staff to do in the market place.

Now Greg, is the world becoming a more ethical place?

We would hope it is, and legislation has been put in place to make us more aware. The only concern that I have in respect to us becoming more ethical is that the business system by which we work is predicated on the fact that we must always have continual growth. If you don’t have continual growth or even if you stay still, then media commentators will look at your organisation and suggest that you may be actually going backwards not forwards. The dilemma with that is it then affects your share price, it then affects the way you are perceived by the market and sometimes it puts people in invidious positions where they will do things they wouldn’t have normally done and in actual fact, place themselves in a position perhaps outside of the law. It’s interesting—some of the research shows that if you look at people with ethical dilemmas and you give them the same scenarios of work that you would at home, most people would do things at work that they have never considered doing in their home and yet the ethical nature of the dilemma is exactly the same. So, it is a concern. I hope we are getting more ethical. We are definitely being more legislated, but I still think there’s that inherent human weakness, that greed is good, which sometimes still comes to a fall.

So can ethics be taught in a corporate education workshop?

I’m not sure that ethics can be taught in any situation. I tend to believe that we come to any ethics workshop, any ethics class, any ethics instruction and any ethics education with a pre determined set of values and experiences. I can’t teach people to be ethical, but what I can do is provide them with the frameworks, experiences and opportunities to question their own ethical views and that of their society so that they can move forward and hopefully learn from that experience.

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