beyond ethical compliance: the challenge of building ethical … · 2 days ago · 2. governance...

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Beyond ethical compliance:

the challenge of building

ethical culture in organisations


Ethics

Good

Self Other


Organisational ethics

“In the context of organisations, ethics

refers to ethical values applied to

decision-making, conduct, and the

relationship between the organisation,

its stakeholders and the broader

society.”

Good

Self

Other


Governance of Ethics in Steinhoff

Corporate Governance Report, 2011:

“Steinhoff has not established a formal process for obtaining assurance on ethical awareness and ethical compliance throughout the group.”(Repeated in: 2012, 2013, 2014, 2015, 2016)


Ethical Culture in King IV

Strategy Policy Oversight Disclosure

Ethical

culture

Performance

Effective

control

Legitimacy

Governance Responsibilities

Outcomes


The Shift to Ethical Culture

Principle 1.3

The board should ensure that the

company’s ethics is managed

effectively.

Principle 2

The governing body should govern the

ethics of the organisation in a way that

supports the establishment of an

ethical culture.

KING III


What is culture?

• The social and unwritten rules with regard to how

people in groups interact; the collective habits.

• Shared patterns of thinking, responding, and

interpreting

• Culture is built incident by incident…

Source: Salz Review


Importance of Ethical Culture

Opening sentence:“Banks and banking rely on trust. And while trust takes years to establish, it can be lost in a moment through failures caused by problematic ethics, values and behaviors.”


Ethical Culture and Conduct

59%

23%

0%

20%

40%

60%

80%

100%

Yes

Have you observed unethical conduct in the last year?

Poor Culture (< 50% approval)

Good Culture (> 50% approval)


Ethical Culture and Conduct

44%

62%

0%

20%

40%

60%

80%

100%

Yes

Have you reported the unethical behaviour you observed?

Poor Culture (< 50% approval)

Good Culture (> 50% approval)


Two Types of Ethical Culture

Extrinsic motivation

Somebody is watching…

Preventing unethical behaviour

“Zero tolerance”

(fear-based)

Catching those

who do wrong

Intrinsic motivation

Nobody is watching…

Promoting ethical responsibility

“Doing the right thing”

(conviction-based)

Catching those

who do right


Problem of extrinsic motivation(and fear-based compliance)

Source: Salz Review

• Extrinsic motivation dulls creativity, narrows focus

and slows down problem solving

• Fear-driven compliant behaviour undermines doing

the right thing


1. Leadership commitment

i. Ethics risk assessment

2. Governance structures

ii. Ethics strategy

iii. Code and policiesiv. Institutionalisation

v. Monitoring & reporting3.

Ethics management

Cultivating Ethical Culture in Organisations

4. Independent assessment and external reporting


Assessing Ethical Culture Maturity

1. Ethics accountability and responsibility

2. Top leadership commitment to ethics

3. Middle management commitment to ethics

4. Awareness of ethical standards

5. Ethical treatment of staff and stakeholders

6. Employee commitment to ethics

7. Ethics talk

Source: TEI Ethical Culture Maturity Indicator


Useful Resource

www.tei.org.za


Q&A Session


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beyond ethical compliance: the challenge of building ethical … · 2 days ago · 2. governance...

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