Update Autumn 2011

Ethics in the spotlight

With tents pitched around St Paul’s Cathedral, and the City and Church engaged in a dialogue about ethics in the financial services sector, the issue of responsible business behaviour is once again in the spotlight. There have been many calls for greater corporate responsibility since the crash of 2008, but little direction as to what that really means.

From the work we do with companies around the world, we know that many have a clear idea of what corporate responsibility is all about. Our business ethics debates, held this Autumn and written up below, acknowledge the need for a strong ethical culture to permeate throughout an organisation.  From what we see, it is establishing a robust ethical code of conduct that has a real impact on behaviour, rather than simply abiding by rules and regulations.

This debate is becoming increasingly important for businesses and we welcome and support any initiatives to promote it.

GoodCorporation debates ethics versus compliance in Paris

This September, GoodCorporation held its first debate on business ethics in Paris. It was attended by senior figures in the fields of ethics and compliance from some of France’s most prestigious companies including Total, EdF, France-Telecom/Orange, EADS, L’Oreal. Lafarge, Thales and Airbus.

The debate centered on the role of ethics and compliance within an organisation. Led by GoodCorporation client Bernard Claude, Chair of the Ethics Committee at Total, the debate examined the difference between the two functions and asked if they should work together or be kept separate.

It was clear from the discussion that compliance was seen as an essential part of the regulatory framework that governs businesses today. However, it was also felt that compliance alone was not enough to ensure an ethical code of conduct in all areas of business practice. Indeed, there are plenty of examples of heavily regulated industries with dominant compliance functions that have failed to prevent corruption or malpractice.

While compliance takes care of rules and regulation, ethics, it was felt, has a direct influence on behaviour. As business has become more global and both the media and indeed social media have become more far reaching, there has been a corresponding rise in both the importance and the prevalence of codes of conduct and codes of ethics.  Allowing poor ethical conduct is a high-risk strategy with potentially disastrous implications for corporate reputation.

But while few would argue against the need for both a compliance and an ethics function, there was a difference of opinion as to how they should operate within an organisation.  Many felt that they should be kept separate to avoid the possibility of the two functions converging. It was suggested that by keeping the two in distinct departments, it would ensure an equal emphasis on ethical behaviour as well as regulatory compliance and so avoid the establishment of a box-ticking culture.

However, others felt that by keeping the two functions in different departments, there was a risk of Chinese walls, of the left hand not knowing what the right hand was doing and of these two vitally important functions effectively in competition.

Ethics and compliance, it was argued, are two complimentary functions that must operate side by side. This was broadly agreed. Both, it was felt, have equal importance within the corporate structure and whether or not they are in the same or different departments, they must operate together to ensure the same goal.

House of Lords Debate: Ethical challenges in the pharmaceutical sector

At the first GoodCorporation debate on ethics in the pharmaceutical sector the issues of compliance, corporate values and industry standards were widely discussed.

The debate was introduced with a thought provoking analysis of the main ethical concerns for the industry. Pharma is now at a key point with important decisions to be made about commercial governance. Some leading industry figures are stressing the importance of compliance. Others feel that in future, business practices will be driven primarily by values rather than laws. This will involve going beyond legislation and regulation to establish new approaches to stakeholder interactions and build new relationships based on trust and shared values.  Key messages include that ‘competitive advantage in the future will come by distinguishing a company through integrity’.

It was even argued that the law is beginning to get in the way of doing the right thing, inhibiting an ethical path forward. Values, set out in internal and external Codes of Practice, but more importantly embedded in company culture, could and should define future business activities. An important part of this new position is that pharmaceutical companies genuinely act as responsible partners in healthcare, which many industry leaders are talking about.

GoodCorporation’s own work in the pharmaceutical sector supports the view that there are competitive opportunities for companies to obtain from developing aspects of their Codes of Conduct ahead of their industry peers. However, from a society point of view, it is also important that the sector works together to ensure that poor ethical practice is identified and collective action is taken to ensure minimum good standards are in place across the sector as a whole.