Good business cannot stem from an approach to ethics that regards the area as an act of compliance or a means to increase the bottom line, according to a leading ethicist.
Addressing attendees at a function in Sydney organised by financial services communications consultancy Pritchitt Partners, The Ethics Centre executive director Dr Simon Longstaff said there was a growing belief good ethics equated to good work practices, but this was a half-truth.
“This is a claim I have heard made for decades and it trips off the tongue,” Longstaff said, adding it assumes that if people and companies act ethically, they will prosper.
“There is some truth to this, but it is a half-truth.
“The other half of the truth is a paradox that people in the banking and finance sectors should not ignore. If you do it for the dividend, you don’t get the dividend.”
If individuals and organisations only considered the bottom line when making decisions, they would receive few benefits from that approach as no one was likely to trust them at all, he said.
Some organisations found it difficult to state why good ethics were beneficial for their own sake, but once a company was known for its ethics, it could rely on the benefits of being trusted, he noted.
He pointed to research that found organisations that had embedded trust within their culture had low compliance costs, while those in low-trust environments found compliance expensive due to ongoing enforcement and supervision.
Tying the issue to current events in financial services, he said ethics will be critical after the release of the final report of Justice Kenneth Hayne’s Royal Commission into Misconduct in Banking and Financial Services.
“This will be important after Hayne because the ecology of business change and the speed in which a product or service can be copied is so quick,” he said.
“If you can’t compete on what you do, the only thing left is who you are and what you stand for, and they are not a cursory issue that is put aside when the going gets tough.
“Good ethics are only good business if you have an underlying commitment where you bear the cost of those choices.
“If the industry understands its purpose and the standards and principles that underpin it, and acts on them, it will be able to navigate all the legal shoals it might encounter.
“It will have a compass and a purpose that will help achieve ends other people will accept as reasonable. With some failing to see this – cutting corners because, technically, it’s allowed – the industry has ended up in the position it now finds itself.”