The extraordinary expansion of company legislation and corporate governance codes across the world since the collapse of Enron, the energy trader, has had many unintended consequences. One of the more paradoxical is the damage that has been done to business ethics.
The attempt to legislate and regulate people into good behaviour has spawned a compliance culture rather than an ethical culture. Too many boards have outsourced the task of ethics to ethics officers, who have turned to consultants to define the company’s values. Ethics have become something that “other people” in the organisation worry about, leaving everyone else unfettered by such concerns. Does it matter? And if it does, what can be done about it?
We will argue in this and subsequent extracts from a new book* that ethics do matter in business because they underpin trust, which is fundamental to business relations. Markets work more efficiently where there is trust between participants. Within the company an ethical culture provides the glue that makes for a cohesive and effective organisation.
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