Blog

Business people really do care about ethics

By 12.03.15BlogSeptember 2nd, 2020No Comments

Drilling down into some of the individual answers in our IOD poll, directors mention ethics, employees and reputational risk more than you might think, writes Deborah Hargreaves

Ethical behaviour matters to business leaders more than we might think

I was struck when I looked at some of the individual views expressed in our poll of Institute of Directors members at how often they mentioned ethical behaviour as a measure of good company performance.

When we asked them what were the most important factors in assessing good company performance, a majority (74%) cited customer satisfaction, followed by profitability (66%) and reputation (64%). Our report on the findings is available under the publications section of our website.

But drilling down into the details of the responses, throws up some interesting ideas. We included an “other” category as well as the factors listed in the question for determining corporate success.
This gave directors the chance to come up with their own answers.

The most often quoted factor was ethical behaviour – 30 respondents (out of 1,089) actually mentioned ethics in their answer. While others referred to issues such as good governance and culture that could be grouped under the umbrella of ethics.

Employees cropped up a lot too. Often mentioned were staff retention, training, employee pay and even enjoyment at work. “Creating a great place to work,” said one.

A male director in London summed it up: “Getting the balance between happy clients and happy staff right, alongside a clear strategic direction and good leadership.”

These directors are drawn very broadly from the ranks of business – many come from small companies and even charities and not-for-profit organisations. So it’s not surprising that some of their priorities might differ from big business.

Chief executives in big companies are rarely assessed for ethical behaviour or for staff retention and creating an enjoyable workplace.

In fact, some of the respondents in our survey cited the short-term nature of decision-making at big businesses to be a threat to the reputation of the sector as a whole. The largest number (52%), however, regarded public anger at executive pay as the biggest threat to the reputation of business.

Reflecting the interest in building successful companies, many mentioned longer-term strategy and sustainability as important issues determining good business performance.

Ethics and good governance were also cited in factors driving exceptional personal performance by executives, but they did not crop up here as often. However, team-work, leadership and customer focus were included by many.
As one female director put it: “It is a question of balance. Focus on £ only is negative and short-termist.”

We then asked what should be the main factors governing performance-related pay. Employee and customer satisfaction again were suggested by many.

Also, the directors highlighted the idea that bonuses and incentives should be for something special and not just doing the job. “Should reward exception, not average performance,” said one. That gets to the core of the problem with performance pay for executives. Should they be awarded a bonus for just doing the job?