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'Smelling The Air" in PLCs and 'Moral Compass'

Posted on June 22, 2013 at 3:30 PM

There is something in the air, and it isn't all just speculation about the British weather. Like an influx of pollen, it's all about ethics and the boardroom.

I am delighted to introduce Ian Muir,  a Director at Keeldeep Associates Limited who works with top teams on organisational effectiveness. He is the author of Board Evaluation published by Ashridge Business School and is currently featured in the May/June edition of the The Corporate Board magazine, published in the USA.

Here's Ian- 

Much has been written recently about ethics in business.  From corporate responsibility to corporation tax, some big-name multinationals have been caught up in reputational and commercial difficulty.

Following research last year on board evaluation, we at Keeldeep Associates are starting a new research project called "The Tone From The Top." It will explore the role of boards in setting, upholding and maintaining the ethical compass of their organisations.

In summer 2013 chairmen from a range of FTSE100 and FTSE200 plcs as well as senior people from investor bodies and private equity will be interviewed to find out more. The research will explore what boards do to provide an appropriate tone from the top. Examples of good practice will be a useful learning opportunity.

Our research will also explore what boards do to monitor the tone being set and how they "smell the air" in their companies. In particular, it will explore how non-executive directors can check that their company has a good ethical compass.

Keeldeep Associates was founded on the belief that behaviour trumps strategy. It appears that many of the companies that ran into difficulty, did so because of inappropriate behaviour. Organisations do not behave in automated, predictable ways. Risk management systems that focused on quantitative and process issues but which neglected qualitative matters did not help. Dysfunctional behaviour can originate from people far more senior than the risk manager. The tone from the top must therefore make it acceptable to call "the emperor's new clothes" rather than be career limiting - as the head of risk at HBOS found out.

It will be an interesting journey to gain insight from chairmen on how they are minimising any risks from: the following:

  • Gaps in communication and information, • Inadequate board skills and NED control, • Any "glass ceiling" hiding risks from the board, • Inappropriate incentives, • Organisational complexity and change, • Leadership lacking in direction on ethos, culture and values • Blindness (especially on risk) as manifested in ‘group-think’.

Finally, if environment, health and safety are paramount in any company’s moral license to operate, a growing emphasis on M&A deals can also cause a plc to take its eye off the ball. No matter how many boxes are legally ticked, if a company loses the public’s confidence and there’s a backlash or boycott, it’s time to wake up and smell the coffee.

Those businesses that take a stand and withdraw from bidding where improper behaviour has called their ethics into question have been known to win much more business elsewhere because of their clear tone from the top.

Keeldeep Associates Limited and Ashridge Business School will publish the research jointly towards the end of this year.

And back to me - I love having a platform to rant on, but it's very exciting when others want to join. For contact details go to home page. Thank you.

Categories: Behaviour, Ethics, Communication