Linkage between Corporate Ethics and Tone at the Top
When the phrase “tone at the top” appears, scepticism about its effectiveness often follows. If all the news, fake or not, is to be believed, the tone at the top – hasn’t been setting the best of examples. Is a major overhaul needed, or will just a little tweaking do? Is it fair to rake all Boards over the coals, or should stakeholders consider a wider range of factors before passing judgement? More importantly, if there is something wrong, should we point it out in the hope that someone fixes it, or should we do the fixing ourselves?
Tone at the top is inextricably linked to corporate ethics which in turn plays a huge role in corporate governance, and corporate governance – good corporate governance – is what keeps the business environment fair and competitive. But in recent years, ethics in the corporate sector has come into question, and for example in the public sector, the Auditor-General’s Report unfailingly brings to light cases of fraud, corruption and abuse of authority. All this points to an officially-recognised decline in ethics!
While the Government sorts out the tone at the top in the public sector, companies can do their part by being a little more discerning about who they let onto their Boards. Not everyone qualifies. For a start, potential directors have to exhibit the necessary skill sets relevant to the industry of the company on whose Board they sit. They should also be recognised high-calibre individuals who have demonstrated correspondingly high standards to which they hold themselves and those whose work they are expected to direct.
Politicians, as far as possible, should not be on Boards because they will always have to grapple with the “conflict of interest” bogey and always be found wanting in the credibility department. The integrity of politicians for example, will always be questioned, more so when they are in positions of influence, so it is best to avoid such awkwardness and refrain from placing them in positions where they are under continual scrutiny or have their integrity continually questioned by stakeholders.
Regardless of their personal integrity levels, they just have too much baggage. This is of particular concern when you consider that directors really are the bedrock of the organisation, and one of its major lines of defence – which is also another reason to ensure that they are competent, diligent and trustworthy. Competency can be developed with the right kind of training, and a clearly-written code of conduct that defines the duties of the firm’s directors but how can ethics and personal integrity be instilled where they may not exist?
Corrupt thinking needs to be eliminated first and foremost, and the right kind of procedures, processes and frameworks put in place, to encourage the right kind of behaviour. The people at the top should be aware that the tone they set at the top – through their policies, strategies, behaviour and personal beliefs – will inevitably permeate the organisation, and be an indication to the outside world of what the firm’s organisational culture is. They should understand what ethics and good governance are, and how the lack of these distorts the firm’s competitiveness, and undermine its sustainability. “Tone at the top” is really about values, morals and integrity. They have to be the example which they want others to emulate.