Australians hold directors and executives accountable for corporate ethics

Governance Institute of Australia’s recently launched inaugural Ethics Index has confirmed what many of us suspected; that while Australian society overall is seen as ‘somewhat ethical’, many view big business, the banks and politicians as unethical.

The first survey of its kind conducted in Australia, it received widespread media coverage creating tremendous interest, commentary and food for thought as to what needs to be done to engender greater confidence in the ethical conduct of our society overall and in corporate Australia particularly.

The Index found that Australians see company chairs, CEOs and senior executives as being more unethical than not, despite playing a key role in setting standards within companies.

Australians rate chief executives and directors as the most important ‘gatekeepers’ influencing ethics in organisations. Board chairs and senior management are also seen as important drivers of ethical conduct, showing that these roles are perceived to wield considerable influence over this aspect of corporate culture.

And while government laws, regulations and financial penalties are seen to influence ethical behaviour, they are not considered as important a factor as the ‘tone from the top’ set by directors and C-suite executives.

However, overall, these corporate leaders do not rate well. While company secretaries, directors of Australian companies and chief financial officers are rated positively — with more respondents on balance viewing them as ethical than unethical — board chairs, foreign company directors, chief executives and senior executives are all seen as unethical on balance.

The message from the Index is clear. Boards and the C-suite need to lift their game. The role of leadership in promoting ethical conduct in the business sector is viewed as crucial by 82 per cent of Australians, and these leaders are seen to have the key role in influencing ethical behaviour, yet neither they nor their organisations score well in the ethical stakes.

Whistleblowers also have an important role to play in corporate Australia, with 80 per cent of respondents believing they are an essential element in driving ethical behaviour.

You’ll be pleased to note that the survey found that professional and business associations, including Governance Institute of Australia, the Australian Medical Association, Farmers’ Federation of Australia, Engineers Australia, Chartered Accountants Australia and New Zealand and CPA Australia, are considered strongly ethical.

The Index also suggests that the greater scrutiny placed on companies listed on the securities exchange — a result of their transparency and accountability obligations — encourages higher perceived standards of corporate ethics, as it allows for greater insight into their behaviours and conduct than is possible for private and foreign companies that are not subject to the same disclosure requirements. Given that corruption, tax avoidance, misleading and deceptive advertising, bullying and discrimination are seen as the top five ethical issues for business — ahead of issues like executive pay — the findings suggest that companies should also pay attention to how transparent and accountable they are on these issues.

However, while executive salaries and bonuses were not a key ethics concern for business generally, they are considered more important factors influencing ethical conduct in the banking, finance and insurance sectors than leadership by boards and senior executives. From the public’s point of view, these findings are a call to action for leaders in banking and finance to address remuneration structures as a matter of priority.

This new annual gauge of public perceptions of corporate ethics will for the first time provide a measure of how successful corporate leaders are in meeting the challenge of being seen to set high ethical standards in their organisations and will provide an important benchmark when we release the results of Governance Institute’s 2017 Ethics Index.

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