It makes good business sense to prevent unethical behaviour. What is ethical intelligence and why should businesses actively nurture it?
By Megan Breen
The findings of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry prompted major changes to these industries, serving as a reminder of the importance of prioritising ethics in business.
For Bruce Weinstein, a US-based ethicist, author and presenter at CPA Australia’s Virtual Congress 2021, developing and understanding ethical intelligence is core to any business, not only for the organisation’s own advantage, but also for the benefit of staff and the community at large.
Put simply, ethical intelligence is the personal code that dictates how we work and the ability to make ethical decisions when faced with moral challenges.
On any given day, we make ethical decisions in our workplace, often without consciously thinking about them. For example, is our relationship with our staff and colleagues nurturing or exploitative? Are we misusing company time? Are we being entirely honest and open in every situation?
Weinstein argues that ethical intelligence is grounded in five key principles that need to be embedded across an organisation: do no harm, make things better, respect others, be fair, and care. It comes down to asking yourself whether something is “the right thing to do”, he adds.
“These five principles are extremely basic. If you look at your organisation’s code of conduct, I guarantee you that these principles are at the foundation of every rule in that code. It might not be spelled out like that, but this is a framework that not only spans professions – these principles are the foundation of every culture and every civilisation,” says Weinstein.
Applying and promoting values
While the principles might seem simple, ensuring they inform the behaviour of all employees in a workplace takes time and is not a “set and forget” exercise. The challenge is in applying them and reinforcing the relevant behaviours.
The first step is to promote your values to the world and within your organisation. The next step is to “hire for character”, which means embedding references to your values in the job description. Then you need to ask questions that are character focused in job interviews, says Weinstein.
“Is it important for your team to be knowledgeable and skilled? Yes, but is that it? No, there are plenty of ‘crooks’ who are very knowledgeable and very skilled.
“Ask a candidate about a time when they had to tell an uncomfortable truth to someone at work, for example. That would reveal two crucial qualities of high character employees – courage and honesty.”
Mahesh Balakrishnan CPA, compliance manager with Commonwealth Bank and member of CPA Australia’s Ethics Centre of Excellence, reinforces the importance of recruiting with ethical behaviour in mind.
“You need to recruit for a culture of ethics. People ask behavioural questions all the time in interviews, but how many questions are actually targeted at the culture and ask, how will someone behave ethically?
“Being able to perform the job well is one thing, but the value of ethics is higher than compliance on its own – compliance is just following the legislation,” Balakrishnan says.
Sharing stories of where ethical behaviour has benefited the business can assist with embedding a culture across an organisation, says Weinstein, adding that, in some cases, showcasing examples of honesty and integrity can even drive financial rewards “In one case, the client was so impressed by a person’s honesty and courage that they gave that person’s company an additional contract for US$2-3 million.”
Legal versus ethical
Even though an action may be legal, it does not always mean it is ethical, says Weinstein.
“There is an implication that the first question we should ask before we do anything is ‘is it legal?’ Well, that is the first question, but it’s not the last question, because there are plenty of things that are legal to do that are unethical or ethically questionable. The question the ethically intelligent CPA should ultimately ask is, ‘Is this the right thing to do?’”
Compliance with legislation aside, there is increasing pressure from regulators for companies to improve their culture. The Final Report of the Royal Commission highlights numerous instances of unethical behaviour, and recommendations for change, says Balakrishnan.
“Accountants do tend to stick to the law – but ethical behaviour takes a further step, and that’s the step people will need to be looking at.
“Ethical behaviour needs to be modelled across an entire organisation. To paraphrase Commissioner Kenneth Hayne, the key element is what employees do when no one is watching.”
Bruce Weinstein is featured in CPA Australia’s Virtual Congress 2021, along with an impressive list of industry thought leaders.
Click here to register for CPA Australia’s Virtual Congress 2021 or explore the full program.