Philippa Foster Back, director of the Institute of Business Ethics, called on businesses to embrace ethical behaviour in a speech given at the Chartered Institute of Management Accountants (CIMA) annual conference. HR Zone business editor Dan Martin reports.

Back started her address by referring to the key ethical words which companies using in their business ethics policies: honesty, transparency, integrity, openness, trust, respect, fairness and responsibility.

She said ethical values help to set the tone of the business as well as underline consistency of conduct. “Business ethics are particularly important in the modern workplace where more people from diverse backgrounds are moving jobs,” she added. “It’s very important for a company as part of risk management to be able to say to someone joining that this is how we do business around here.” Business ethics can also bring competitive advantages, she said.

Turning to the practicalities of business ethics, Back emphasised the importance of leadership setting an example. “Leadership is at every level within an organisation. We sometimes forget in our own behaviours, who’s looking up to us like we look up to others?” Quoting Carla Fiorina, Back said: “It’s all about doing the right thing when no one’s watching.”

The three main aspects of ethical leadership, Back explained, are behaviour, building trust to make effective relationship and the attributes of courage, ability to listen, honesty, fair minded and openness.

Companies can face several ethics dilemmas during important decisions, Back continued. Issues can arise, for example, in marketing policies, differential pay, offshoring or outsourcing decisions and PR spin.

When it comes to setting an ethical programme, a good statement to follow is: “Ethical values expressed in a code offer a framework for the logical analysis of dilemmas which emerge in the course of day to day business.”

Back advised companies setting an ethical code to follow a particular process. They should first identify an ethics champion and draft a policy based on the company’s values. Widespread consultation of all employees should take place and the code should be signed off at board level. It should be published and made available to the entire workforce and training and support should be provided. In addition, the code should be regularly reviewed.

“The most important aspect of the process is support,” Back said. “We are concerned the companies putting in code of ethics do not always putting in the mechanism for staff to raise concerns about behaviours they see which are not appropriate.” Back called on firms to write the policy in such a way that you imagine “you are the person plucking up the courage to pick up the telephone to say they have a concern”. “Too many codes are written from a company point of view in how they are going to deal with an issue and not from the other way round so that an employee knows exactly what’s going to happen,” Back claimed.

Many companies build ethical tests into their codes, Back continued. These can be: transparency: ‘Do I mind others knowing what I have decided’, effect: ‘Who are my decision affect or hurt?’ and fairness: ‘Would my decision be considered fair by those affected?’

Despite lots of effort being put into ethical codes, there are still problems, Back argued. “In 1986, 18 percent of larger companies had a code of ethics. In 2006, it’s 90 percent but we still see newspaper headlines about unethical business behaviour,” Back said. “What is the reason for the paradox?” One of the main reasons is ineffective values and programmes. “Few are written with the user in mind, some are collections of company policies on different issues and some are couched in ‘do this or else’ language,” she added.

Back argued that there is also a lack of relevant training. “There should no exceptions of who to train,” she said. Training methods vary. Face to face training is effective but often expensive and e-based training is cheaper but covers those with computer access only and has a tendency to give black and white answers. “Dilemmas based training exercises is really the best,” Back said. “Set up a mini cameo and ask the question ‘what would you do?’ That gets the debate going very quickly.”