Boards and C-suite must lift their game — Ethics Index findings

The Australian public sees big business, banks and politicians as ‘unethical’, according to the findings of the inaugural Governance Institute Ethics Index. The majority of people surveyed also consider chairs, CEOs and senior executives to be more unethical than not, despite being considered the most important ‘gatekeepers’ influencing ethics in companies. These roles are perceived to wield considerable influence over ethics in corporate culture — government laws, regulations and financial penalties are seen to influence ethical behaviour, but are not considered as important a factor as the ‘tone from the top’ set by directors and the C-suite.

When this perception of the role of gatekeepers is considered in relation to the findings that large corporations are seen to less ethical than other sectors of society, it is clear that boards and CEOs need to lift their game. It also makes sense of why ASIC is so keen to get the message out to gatekeepers that they have an essential role to play in setting the tone from the top and monitoring if it cascades throughout the organisation.

Australians also perceive whistleblowers as having an important role to play in corporate Australia, with 80 per cent of respondents believing they are an essential element in driving ethical behaviour.

Interestingly, listed companies are seen to be relatively ethical compared to private companies and foreign companies operating in Australia, which suggests that the transparency and accountability that accompanies being listed (through disclosure obligations) allows the public to assess company behaviour and ethics (private companies have no disclosure obligations and generally foreign companies operate subsidiaries here which are not listed and so also have no disclosure obligations).

When determining the most important elements in ethical conduct, 68% of Australians nominated accountability and 63% nominated transparency. Highly ethical leaders were considered important by 58% of the survey respondents and 54% thought whistleblower protection was necessary. This shows that the cornerstones of a good governance framework — accountability and transparency — are seen to shape ethics, and it also ties in with the manner in which listed companies are perceived to be more ethical, because they are more accountable and transparent through disclosure obligations.

These views also confirm how important leadership is perceived to be as one of the strongest drivers of ethical behaviour.

An Executive Summary of the Governance Institute Ethics Index as well as a more detailed presentation can be downloaded here.

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