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Why ethics matters in business

Karen Higginbottom

A laptop with angel wings and a halo

Managers have indicated in recent ILM research that they want to work for organisations who are open and ethical for leaders with integrity. Karen Higginbottom asks why ethics is increasing in importance

The aftermath of the economic crisis in 2008 prompted some organisations to embrace an ethical style of leadership.In January 2013, Anthony Jenkins, the chief executive of Barclays told the bank’s 140,000 employees to sign up to a new code of conduct or leave. Staff were told to sign up to five key values –respect, integrity, service, excellence and stewardship, and that bonuses would be assessed against a new ‘purpose and values’ criteria.

One way that business leaders can become more socially and ethically responsible is through exposure to social issues such as homelessness and alcoholism, claims a new study by Business in the Community (BITC) and Ashridge Business School. The study analysed the Prince’s Seeing is Believing programme which exposes chief executives to social issues such as homelessness and alcoholism. The Developing Business Leaders report revealed how first-hand experience of social issues acted as a catalyst for the chief executives to transform their leadership style.

Growing awareness of social issues

The economic crisis in 2008 was one driver for organisations looking at ethical leadership, but it was also prompted by a growing awareness among senior business leaders about social issues, remarked Matt Gitsham, director of the centre for business and sustainability at Ashridge Business School and co-author of the Developing Business Leaders report. “There is a recognition among business leaders that social issues cannot be solely sorted out by government but it has to be done in conjunction with business. Most big challenges are pretty hard for governments to address on their own and require collaborative leadership by government, business and civil society organisations.”

Ann-Marie Nienaber, a reader in business management at Coventry University’s centre for Trust, Peace and Social Relations, believes that attempts by organisations to be involved in social issues has been driven by reputational damage. “Organisations have to show why they exist on the market. There is pressure from various stakeholders for organisations to behave in an ethical fashion and organisations have to react to those pressures.”

How to define responsible business practice

But how do you define responsible business practice? Responsible business practice is about having a big picture view of the purpose of your business, says Gitsham. “It’s not just about generating financial profits but creating value for people in society as well as profits. This is also about how you spend your time as a leader and recognising the influence you have to shape the values and norms of your organisation. It’s about how you make sure products and services that you offer to the market make people’s lives better not worse,” he comments.

One of the first steps to embed responsible business practice into an organisation is to have a large enough number of people in the organisation who think it’s important to be ethical, comments Gitsham. “Part of that is creating a development programme where potential leaders have experiential learning which shapes their thinking. It’s also about what you value when you recruit people? Are you looking for staff with a background in volunteering opportunities?”

However, there are challenges in creating responsible business practices, remarks Lee Waller, director for the centre for executive development at Ashridge Business School and co-author of the report. “From our research, we discovered that chief executives found it difficult to prioritise responsible business practice. One of the things that chief executives talked about was demonstrating the business case and showing that acting responsibly in business doesn’t have to cost you money.”

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