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The Ethical Director: Responsibility and Governance

by The Directors College Team | Aug 30, 2019
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“There is more demand on companies to be ethical and think about how they are run, how they are impacting society with what they sell, who they sell to and who they employ.”
Christie Stephenson, Executive Director, Dhillon Centre for Business Ethics at UBC Sauder 

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When using the word ethics in a sentence, there is often an inherent sense of understanding its true meaning -- but is that the case? Surely, ethics are black and white, no more complicated than right and wrong? On the surface, that appears so. However, ethics are impermanent, they’re not cast in stone – they are a set of moral principles, relating to or affirming a form of acceptable conduct as determined by a group of people. The members of a group may change over time, and the group’s function may adapt to better serve its own needs. A group, and the ethics governing the group, are not static, but rather a process, with the potential for change.

SNC Lavalin: A Very Canadian Affair

Your organization’s ethics are morally right and appropriate when the leadership, including the Board of Directors, says it's so. Temporal context is critical and when circumstances change, so can the moral compass, and by default, acceptable ethics. Think about war-time, when the development of weapons of mass destruction can be temporarily permitted because doing so serves to help ensure the survival of an organization and a country.

Those in power positions, who lead, drive or influence, can alter cultural parameters, and potentially re-write the code of ethics to serve a specific purpose. Unfortunately, the privilege of power can sometimes lead to conflicts of interest.  The ongoing scandals surrounding SNC-Lavalin involving allegations of political interference and possible obstruction of justice by the Prime Minister's Office (PMO), currently being investigated by the Ethics Commissioner,  and serious questions around the role of the SNC-Lavalin board in the Libyan bribery scandal that set things in motion underscore this point.
While no admission of wrong-doing was admitted with the settlement of a multi-million-dollar class-action lawsuit brought by the shareholders regarding ‘improper payments’, questions surrounding the payments in Libya had board members and senior executives claiming they knew nothing about the scheme, other than being dissatisfied with the project expenses.  While one might challenge this argument, the bigger issue isn’t what was done – but rather what was not done, in this case asking the right question: “How are we getting all these lucrative Libyan contracts?” 

Doing Nothing Wrong is not the Same as Doing Right

Issues of independence, transparency, conflicts of interest, blurred responsibility lines, are all possible reasons for failure, however political gamesmanship also plays its part. Individuals can hide in the “the letter of the law” rather than the ethical spirit of it.

Any good governing board appears honest to an outsider, but the system is fallible because it's inherently human.  Any system, process or framework will fail at a single point without supporting operations, and solid governance. Similar to how some companies ensure fiduciary honestly by requiring multiple sign-offs on payments, success comes through systems - not through trust.

Humans are psychologically coded to act in ways that protect the best outcomes. When those outcomes align with the group or organization being governed, things run smoothly, but when those objectives diverge, problems can ensue. Among other reasons, this is one critical reason why a solid, informed and well-balanced board of directors is so important.

The Ethical Director: The Gatekeepers of Good Governance

Board members are relied upon to use ethical and appropriate judgement in the course of their duties and in anticipating, identifying, addressing and avoiding conflict of interest issues as they arise. Directors have become more visible as the gatekeepers of corporate accountability, business ethics and values. 

The board must understand the legacy they are leaving and be willing to step into the public domain to provide a steady presence during turbulent times.  Successful boards are capable of ethically handling a crisis by minimizing blind spots, maintaining reputations and operationalizing ethics.  All boards need to self-assess and ask the right questions to determine the policies and processes of mitigating conflict of interest risk and set the tone for organizational standards of integrity and trust.  Good governance always begins with a courageous and ethical board.
 

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