Moral injury is a new test for employers
When I am unsure if something is ethical, my favourite ‘ready reckoner’ is to apply the reflection test – I ask myself if I could look myself in the mirror after doing it.
Would my self-image be helped or hindered by the action? I could also call it ‘the slumber test’. Will I be able to sleep at night after doing what I’m setting out to do?
I’ve spent years studying the ethical and psychological toll that comes with doing things that stop us from meeting our own eyes in the mirror. There is a price that comes when we violate our most precious moral beliefs.
In military communities, this price is called a ‘moral injury’. Psychiatrist Jonathan Shay, the foundational voice on the subject, describes it poetically as “the soul wound inflicted by doing something that violates one’s own ethics, ideals, or attachments”.
This needs attention
As parochial as talk of souls might be, organisations should start paying attention to this risk for three reasons:
- So they can take steps to prevent their workers from being affected by moral injuries (basically, as an OH&S issue).
- So they know how to spot and manage moral injuries if they do occur.
- To figure out what support and remuneration they should offer if it turns out moral injuries are an ‘occupational hazard’.
The OH&S analogy is apt. Today, we expect organisations to think about their duty of care in a broad sense – taking an active interest in their employees’ wellbeing, seeking to reduce the risk of physical injuries, managing and minimising psychological stressors and mental illness, and providing fair training, support, and compensation when physical or mental stressors are likely to have a negative effect on employee wellbeing.
So, it follows that if some ethical issues can have an effect on wellbeing, they should be treated seriously by organisations claiming to care about their people.
How moral injury takes place
Moral injury is still a contested topic. Some people think it’s just a variation of post-traumatic stress disorder (PTSD), others think it’s no different from moral emotions like guilt, regret or remorse, and others still see it as something distinct.
Among veterans (who tend to dominate discussions of moral injury), the condition is seen as a condition akin to PTSD – a different kind of war trauma with different causes and different treatment pathways.
Whilst PTSD originates in feelings of fear and physical insecurity, moral injuries arise when we witness a betrayal or violation of our most deeply held beliefs about what’s right. It has to happen in a high stakes situation and the wrongdoing has to have been committed by someone in a position of ‘moral authority’ – a position you yourself might hold.
A group of US psychologists who have studied the issue offer a similar definition, describing moral injuries as “maladaptive beliefs about the self and the world” that emerge in response to the betrayal of what’s right. The injury is caused by the betrayal, but it’s in the beliefs and our response to them that it actually resides.
When we suffer a moral injury, our beliefs about ourselves, our world, or both are shattered in the wake of what we’ve witnessed or done.
Our moral beliefs are one of the ways we see the world and one of the ways we conceptualise ourselves. Everything flips when people no longer adhere to a ‘code’, good people are forced to do bad things for good reasons, or our different identities contradict one another.
This contradiction gives rise to ‘fragmentation’. Our moral beliefs, identities and actions no longer harmonise with one another. In the words of Les Miserables’ Inspector Javert, we find ourselves thrown into “a world that cannot hold”. Fragmentation demands reunification, and the way we go about this will determine both the extent of the moral injury and the likelihood of recovery.
How we respond to the conflict
If we can accept the critical event as being a rare product of extreme circumstances and a particular context, it’s possible to move on. We can accept guilt and seek forgiveness, admit our trust in a moral authority was betrayed and sever ties, or concede that the world is not as fair as we had thought.
This approach is relatively risk-free, albeit unpleasant.
However, if we are unable to see the event as context-dependent and, instead, see it as reflecting something universal – or worse, something about us – then a moral injury is likely to occur.
For example, if we have a handshake agreement to honour a business deal which is then betrayed, leading to widespread unemployment, we might decide that people are no longer trustworthy and either withdraw from them altogether or ‘get them before they get us’ next time. Either approach has an impact on a person’s ability to flourish in society.
Another possibility lies in concluding that we must be bad in order for us to have done what we did. Even if we were doing our duty without fault, guilt lingers and an employee could be permanently tainted by what they have done: “How can I say I am a good person when my actions resulted in this?”
Finally, we can recalibrate our moral beliefs. Perhaps, as many veterans argue, we were wrong to think the world was predictable or reliable to begin with. Maybe our moral injury isn’t an injury at all. Perhaps it’s a sign we’ve learned something new.
What employers can do
Moral injuries must be addressed because they affect a person’s future ethical decision making and their capacity for happiness.
This gives organisations another reason to have a robust ethical culture that guards against wrongdoing and refuses to ask people to act against their conscience.
However, this won’t always be possible. Sometimes professional demands require people to ‘get their hands dirty’, witness wrongdoing or even participate in something they feel contradicts their moral beliefs.
A committed parent may be required to decline an insurance claim, leaving the claimants – a family– homeless. How will he go home and sit with his children knowing his actions have put another family in jeopardy? A nurse may be legally prohibited from helping someone to end their life. Can she be a good person while allowing someone to needlessly suffer?
The question of moral injury has typically been posed as an individual problem but, if the OH&S analogy is a valid one, we should think about the responsibilities of organisations in the wake of what we’re learning.
An organisation violates its duty of care if it exposes workers to risk without reason, consent, support or fair compensation. Perhaps we might say the same for moral injuries, with one important caveat: it would be perverse and potentially corruptive to offer financial incentives for people to compromise their values and moral beliefs, offering a salary increase to be exposed to ethical risks, for instance.
A clear ethical purpose with which staff can identify and that is consistent with their moral beliefs is a more appropriate incentive. Not only might this prevent wrongdoing in the first instance, it can help reunify a fragmented identity if a moral injury does occur.
This article was originally written for The Ethics Alliance. Find out more about this corporate membership program. Already a member? Log in to the membership portal for more content and tools here.
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BY Matthew Beard
Matt is a moral philosopher with a background in applied and military ethics. In 2016, Matt won the Australasian Association of Philosophy prize for media engagement. Formerly a fellow at The Ethics Centre, Matt is currently host on ABC’s Short & Curly podcast and the Vincent Fairfax Fellowship Program Director.
BY The Ethics Centre
The Ethics Centre is a not-for-profit organisation developing innovative programs, services and experiences, designed to bring ethics to the centre of professional and personal life.
Sell out, burn out. Decisions that won’t let you sleep at night
Nick Naylor is a man who is comfortable being despised. In the movie Thank You for Smoking, he is the spokesman for the tobacco lobby and happily admits he fronts an organisation responsible for the deaths of 1,200 people every day.
While he excuses his employment as a lobbyist by unconvincingly adopting the “Yuppie Nuremberg defence” of having to pay a mortgage, the audience learns that his real motivation is that he loves to win.
The bigger the odds, the better.
Naylor is not the sort of man who would struggle with ethical distress or moral injury from the work he chooses to do. This work “requires a moral flexibility that is beyond most people”, he says.
He likens his role to that of a lawyer, who has to defend clients whether they are guilty or not.
Partner of law firm Maurice Blackburn, Josh Bornstein, says the convention in law that everyone deserves legal representation can certainly assist lawyers called upon to defend people whose actions they find morally reprehensible – however that argument does not work for everyone.
‘If I don’t, someone else will’
Bornstein says there is no way of knowing how many lawyers refuse to work on cases because of moral conflict, but it happens from time to time. “Not every week or every month”, he adds.
“Do [lawyers] have moral crises? Some people have a strong sense of morality and others try and sweep that to one side and consider that, as professional lawyers, they shouldn’t dwell on moral concerns”, says Bornstein, who specialises in workplace law.
Bornstein is well known for his advocacy for victims of bullying and harassment, however, he has also acted for people accused of those things.
“I’ve found myself, from time to time, acting in matters that have been very morally confronting”, he says.
As a young lawyer, when he was expressing his disapproval of the actions of a client, his mentor told him to stop moralising and indulging himself.
“He said that when people like that get into that trouble, that is the time they need your assistance more than any other. Your job is to help them, even when they have done the wrong thing”, says Bornstein.
Bornstein says ethical distress can occur in all sorts of professions. “I would think the same would occur for a psychologist, social worker, doctors, and maybe even priests.
“Consider the position if you were lawyers for the Catholic Church over the last three decades, dealing with horrific, ongoing cases of child sexual abuse.”
Distress or injury? Making a distinction
The CEO of Relationships Australia NSW, Elisabeth Shaw, says when seeking to understand the psychological damage wrought by such conflicts, a distinction should be made between ethical (or moral) distress and moral injury.
Ethical or moral distress occurs when someone knows the right thing to do, but institutional constraints make it nearly impossible to pursue the right course of action.
This definition is often used in nursing, where staff are conflicted between doing what they feel is right for the patient and what hospital protocol and the law allows them to do. They may, for instance, be required to resuscitate a terminally ill patient who had expressed a desire to end the pain and die in peace.
Moral injury is a more severe form of distress and tends to be used in the context of war, describing “the lasting psychological, biological, spiritual, behavioural, and social impact of perpetrating, failing to prevent, or bearing witness to acts that transgress deeply held moral beliefs and expectations”.
The St John of God Chair of Trauma and Mental Health at the University of New South Wales, Zachary Steel, says most moral injuries stem from “catastrophic traumatic encounters”, such as military and first responder types of duties and responsibilities.
He says he sees moral injury as a variant of post-traumatic stress disorder and distinguishable from the kind of moral harm wrought by bullying and highly dysfunctional workplaces.
Tainted by your compliance
This distinction does not diminish the distress experienced by those who are torn between what they are expected to do, and what they know they should do.
Shaw, who has volunteered at The Ethics Centre’s Ethi-call hotline for eight years as team supervisor, says the service handles around 1,500 calls per year and a typical request for advice may come from an accountant who is pressured to sign off on dodgy records.
“After [complying], you may feel a lesser version of yourself. You may feel you didn’t have a choice, but also feel quite tainted by those actions”, she says.
“Even if you went to great lengths to do all the things that could be seen to be correct, you can still feel very injured at the end of it.”
For some people, it is the nature of the organisation they work for, or its culture, that creates a problem.
“Some people feel like they are part of an organisation that is, perhaps, habitually part of shabby behaviour”, says Shaw.
Someone working for a tobacco company (like the fictional Nick Naylor) may start by shrugging off concerns, reasoning that they need the job and if they don’t do it, someone else will. However, over time, embarrassment grows and they become more aware of the disapproval of others and they start to feel morally compromised, says Shaw.
“And then there is a point where it feels like [your job] has injured your sense of self … or even your professional identity and, in fact, might make you feel less than yourself.”
There are also professions where people sign up for noble reasons, in a not-for-profit, for instance, but then find unjustifiable things are happening.
“You start to feel like there is a huge dissonance – that can no longer be resolved – between what you say you are doing and what you are actually caught up in.”
Can’t tell right from wrong
Burnout and mental health conditions such as anxiety and depression can result from this stress and some people become so ethically compromised they lose their moral compass and no longer can tell right from wrong, she says.
Moral distress is one of a range of factors contributing to the poor record of the law profession when it comes to the incidence of mental health issues, says Bornstein.
A third of solicitors and a fifth of barristers are understood to suffer disability and distress due to depression.
Some of the more “sophisticated” firms encourage their people to seek assistance and offer employee assistance programs, such as hotlines.
Maurice Blackburn has a “vicarious trauma program” for lawyers who may, for instance, work with people dying from asbestosis or medical mishaps or accidents.
“Even in my area of employment [workplace law], vicarious trauma is a real risk and problem”, he says.
“So, we have tried to change our culture to be very open about it, speak about it, to regularly review it, to work with psychologists, to have a program to deal with it, to know what to do if a client threatens suicide or self-harm. But it is an ongoing challenge.”
Bornstein has, himself, sought guidance from the Law Institute on ethical dilemmas.
“The other underestimated, fantastic outlet is to confer with colleagues you respect who are, hopefully, one step or more removed from the situation and can give wise counsel. Another is to seek similar support from barristers, I’ve done that too, and then there is friends and family.”
Bornstein says even though he is not aware of any law firm offering a “moral repugnance policy” that would allow people to avoid working on cases that could cause ethical distress, he is aware there would be little benefit in forcing a lawyer to take one.
“It may be resolved by [getting] someone else working on the case.”
The value of a strong ethical framework
Social work is another area that is fraught with ethical dilemmas and, like lawyers, social workers often see people at their worst.
However, the profession has a developed an ethical framework and support system that ensures workers are not left alone to tackle difficult dilemmas, says Professor Donna McAuliffe, who has spent the past 20 years teaching and researching in the area of social work and professional ethics.
“The decisions that social workers have to make can be very complex and distressing if they are not made well”, says McAuliffe, who is Deputy Head of School at the School of Human Services and Social Work at Griffith University.
Social workers have a responsibility, under their code of ethics, to engage professional supervision provided by their employer.
Because social work in Australia is a self-regulated profession, it is important to have a very robust and detailed code of ethics to give guidance around practise, she says.
“We educate social workers to not go alone with things, that consultation and support of colleagues are going to be the best buffers against burn out and distress and falling apart in the workplace – and there is evidence to show good collegial, supportive relationships at work is the thing that buffers against burnout in the best way.”
McAuliffe says employers in business may think about building into their ethical decision making frameworks some consideration of the emotions, worldview, and cultures of the people affected by difficult workplace choices.
“The decision may still be the same … but the [employee] will feel a hell of a lot better about it if they know they have thought about how the person at the end of that decision can be supported.”
Shaw cautions that people should try and seek other perspectives before making decisions about situations that make them feel morally uncomfortable.
“Part of the process of ethical reflection is to work out, ‘Do I have a point?’
“Because we are all developed in different ways ethically, just because you have a reaction and you are worried about something and you feel ethically compromised doesn’t make you correct.
“What it means is that your own moral code feels compromised. The first thing to do is spend some time working out, is my point valid? Do I have all the facts?
“What do I do about the fact that my colleagues and bosses don’t feel bothered? Should I look at their point of view?
“Sometimes, when you feel like that, it really is a trigger for ethical reflection. Then, on the basis of your ethical reflection, you might say, ‘You know what? Now that I have looked at it from many angles, I think, perhaps I was over-jumpy there and I think if I take these three steps, I could probably iron this out, or if I spoke up, change might happen.’
“And then the whole thing can move on.
“Having a reaction to what feels like an ethical trigger is really just the beginning of a process of self-understanding and the understanding in context.”
This article was originally written for The Ethics Alliance. Find out more about this corporate membership program. Already a member? Log in to the membership portal for more content and tools here.
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BY Fiona Smith
Fiona Smith is a freelance journalist who writes about people, workplaces and social equity. Follow her on Twitter @fionaatwork
BY The Ethics Centre
The Ethics Centre is a not-for-profit organisation developing innovative programs, services and experiences, designed to bring ethics to the centre of professional and personal life.
The pivot: ‘I think I’ve been offered a bribe’
The man waiting for me in the meeting room was an unexpected visitor. He introduced himself as the head of a government department and welcomed me to the Czech Republic. He had brought a “friend”.
“You are going to have meet your budget, but I can give you all the government work you need”, he said with a meaningful look. “I just want you to employ this girl.”
He pointed to the young woman who sat opposite. She was beautiful, breathtakingly so, and I suspected she was to be a “spy” for the government. Working on behalf of British and US lenders, I was leading a team investigating cases of fraud that often wound their way back to organised crime and government figures.
I was just a few months into my posting to Eastern Europe and I knew to be wary. This is a country where surveys show two thirds of Czech citizens (66%) believe that most, or almost all, public officials are corrupt.
I left the room, grabbed the arm of my direct report and said, “I think I have just been offered a bribe”.
My first strategy was to make the problem go away by making it clear that everything was to be “above board”.
I walked back into the meeting room. “Leave it with me”, I said. “Look, it sounds interesting, send me her CV and we will see where she may fit in the organisation.”
I had made no commitment, but had asked him to “make it official”. But that was not the end of it. No CV arrived, but three weeks later he was back, unsmiling this time.
“If you don’t employ her, you won’t get any government work at all”, he threatened. I thanked him, said I understood what he was talking about and asked him once more to send the CV. He left without shaking my hand.
A senior leader within the organisation I worked for pulled me up the following day to berate me for being so stupid. Bribes and corruption are a ubiquitous part of the business environment in some countries.
While the organisation might have seen a brown paper bag full of cash as corruption, “scratching each other’s back” in this way was regarded as mere facilitation.
It came to me right then, that this was a real turning point.
With 20 years in the NSW Police behind me, I thought I was a bit of a tough guy, but I knew my life was about to change if I did not change my mind about hiring the “spy”. This could be a dangerous situation because of the kind of people involved in corruption.
It became clear that I had become a problem to the people running the Prague office. At every executive meeting, the others would roll their eyes when I spoke. Their attitude was that we had to get the business, no matter what. Eventually I had to leave before my contract was up.
Looking back through the intervening years, are there things I would have done differently? Perhaps I should have tried being upfront with the CEO – however, he was new to the job and was part of the “giggle”.
I thought at the time that it was better to leave the matter “intangible”, to not start a fight when I was the only Australian in the office.
I had let them know where I stood – a strategy that worked well in the Police Force where, if you were known as a straight shooter, people wouldn’t approach you with corrupt offers.
I could have done more research to find out what was the normal way of conducting business there. I knew there was a lot of corruption in the country, but I had thought the organisation I was working for was above that. It wasn’t. It was part of it.
I could have made my ethical standards clear to the CEO and management team before I started. If I had known their attitude, I would not have taken the job. If they had known mine, they wouldn’t have hired me.
My advice to others in this situation is to bring the matter out into the open, but think about your personal safety. Make sure you have a good exit plan.
An interesting thing about the culture of corruption is it can be invisible. If you didn’t look out the window into the Prague winter, you would think you were in Australia. The building was the same, the people were the same. So, you could be seduced into thinking you could operate the same way there as you do in Australia, but the culture is so very different.
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This article was originally written for The Ethics Alliance. Find out more about this corporate membership program. Already a member? Log in to the membership portal for more content and tools here.
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BY Steven York
Steven York is general manager, Group Compliance and Chief Security Officer at Bank of Queensland and former NSW Police Commander of the Hostage Negotiation Team and as the Negotiation Team Leader for Australia's counter terrorist negotiation team.
BY The Ethics Centre
The Ethics Centre is a not-for-profit organisation developing innovative programs, services and experiences, designed to bring ethics to the centre of professional and personal life.
How cost cutting can come back to bite you
When former Mediacom chief executive Jon Mandel revealed a rampant practice of “kickbacks” in the advertising industry two years ago, media agency CEOs around the world ducked for cover.
Media agencies, that book advertising space for clients, were essentially being paid twice for the same pieces of work and, often, not disclosing it.
While advertisers are questioning the allegiances of their agencies, those same agencies may reply, “What do you expect when your cost cutting effectively reduces our fees and commissions to zero?”
Marketing management consultant, Darren Woolley, says it is time to consider the ethical impacts of a cost-cutting culture.
“I think it is interesting to see how ethics are quickly reframed or compromised, based on profit”, says Woolley, founder and CEO of TrinityP3 Marketing Management Consultants.
In the case of the media agencies, their duty to clients is to find the most effective advertising space for their clients at the best price.
However, things become complicated when the media owners of print, radio, television, and websites started handing back a proportion of the client’s media spending to the agencies as an incentive to get more of their business.
Those “rebates” were often not disclosed to the clients and were often not passed on. They could be from around 1.67 percent to 20 percent per cent of “aggregate media spending” and took various forms.
“Clients could not be sure that the advertising space purchased was the right strategy for them, or just the most lucrative for the media agency.”
An investigation commissioned by the Association of National Advertisers (ANA) in the US also revealed media agencies were buying heavily discounted media space and not passing on or disclosing those savings to their clients. The agencies’ mark up on these transactions ranged from 30 to 90 percent.
Mandel’s “truth bomb”, delivered at a conference in the US, and the ANA report confirmed suspicions that media agencies around the world may no longer be acting in the best interests of their clients.
Clients could not be sure that the advertising space purchased was the right strategy for them, or just the most lucrative for the media agency.
Were they being pushed into digital advertising, for example, because it offered more lucrative rebates? Were their advertisements being seen by the right people in the right places?
Woolley says instances such as these have eroded trust but are the result of a number of factors affecting agency profitability, including industry disruption, rampant discounting, and endless expectations of cost-cutting by clients.
“We have been in a world of cost-cutting for ten years at least”, says Woolley.
Media agencies are also under pressure from the large holding companies that are often their owners. The holding companies and their shareholders expect to see rising profits each year, irrespective of market conditions.
“The industry is struggling. The traditional remuneration models – the way money moves through the industry, has changed. Firstly, there is less of it and there is a constant demand to do more for less”, says Woolley
“The obsession with cost is at the very core of this issue about ethics and ethical behaviour.”
Woolley says clients should be aware their own cost-cutting has contributed to agencies trying to find new ways to get paid.
“It is interesting to see at which point they [agencies] are willing to do something they wouldn’t normally do, willing to act in a way that is not in the best interests of their clients, but is in the best interests of their own company.
“To me, that is the interesting tipping point. What does it take?”
Woolley says agencies are not out to do their clients harm, but the system is supporting harmful behaviour.
That system includes an expectation that everything should always get cheaper and profits should always increase. Clients over recent years have cut their fees and commissions to media agencies from about 10 percent to around 3 or 4 percent and less, he says.
Melbourne Business School Marketing professor, Mark Ritson, has written that it is possible some media agencies are now effectively working on zero commissions and their only remuneration is through kickbacks from media owners.
“Most experts estimate that if you were to properly assess the revenue streams funding any major media agency, rebate income would significantly, and perhaps in some cases completely, overshadow commission income”, Ritson wrote in a column in The Australian newspaper in October.
Woolley says that with fierce competition from digital media owners, kickbacks have grown dramatically. Traditional media owners (newspapers, radio, and television) used to budget 20-30 percent of revenue as sales incentives, discounts, bonuses, or rebates.
But the owners of websites and social media platforms, which do not have the labour and production costs of newspapers and broadcasters, can “rebate” up to 90 percent of revenue, says Woolley.
This means there is a clear incentive to steer client advertising to digital platforms, whether it is the most effective strategy or not.
Since the widespread practise was discovered, most large advertisers have closed the kickback loophole by drafting contracts that ensure savings are passed on and don’t only benefit the agency middlemen.
“Agencies should be rewarded for delivering value and performance, not just for reducing costs.”
Some have also mitigated the risk by dividing their advertising work between multiple agencies “to keep them honest”, says Woolley.
Getting the advertising and marketing industry back on a sustainable footing will take a lot more than encouraging clients to pay a fair price for their agencies’ work or allocating a reasonable budget towards effective advertising campaigns.
Marketing executives have told Woolley they cannot convince their own chief financial officers to pay their agency more – even when that lack of investment is resulting in ineffective campaigns.
“But it is not working as it is, so everything they are spending is a waste and an increase in spending could make it functional”, he says.
Woolley says the advertising and marketing industry needs to change the conversation if it wants to survive. “It has been about cost for the last 15 years. It is not easy, but the way forward is to actually talk about value”, he says.
“Cost is a downward spiral to zero.” Agencies should be rewarded for delivering value and performance, not just for reducing costs, he says.
“By considering an ethical approach, rather than just a financial or cost approach, it will open up possibilities for people to do and think differently because, certainly, we are in a spiral.”
This article was originally written for The Ethics Alliance. Find out more about this corporate membership program. Already a member? Log in to the membership portal for more content and tools here.
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BY Fiona Smith
Fiona Smith is a freelance journalist who writes about people, workplaces and social equity. Follow her on Twitter @fionaatwork
BY The Ethics Centre
The Ethics Centre is a not-for-profit organisation developing innovative programs, services and experiences, designed to bring ethics to the centre of professional and personal life.
Feel the burn: AustralianSuper CEO applies a blowtorch to encourage progress
It would be nice to think business is stamping out bad behaviour because it is the right thing to do. But that rarely is the case.
The growing pressure from regulators and the community mean employers have little choice but to clean up their acts, says Ian Silk, the CEO of Australia’s biggest industry superannuation fund.
He’s no stranger to a bit of pressure, adept at applying the “blowtorch” to hasten positive change. With $125 billion in assets, AustralianSuper was an activist shareholder in voting against the remuneration report of the Commonwealth Bank of Australia last year.
“The more controversial the issue, the more vociferous are the people who have strong views either way and, sometimes, you are in the middle of it and you have to make a judgement as to which way you will go.”
Previously, Silk had spoken out about the need for bonuses to be awarded for exceptional results, not just for performing the required tasks and, in the case of CBA, was arguing for more rigour around the bonus process.
The fund has also pledged to vote against the appointment of male non-executive directors where there are no women on the boards.
In an interview with The Ethics Centre, Silk says AustralianSuper’s high profile brings an obligation to speak out on “certain issues”.
“The more controversial the issue, the more vociferous are the people who have strong views either way and, sometimes, you are in the middle of it and you have to make a judgement as to which way you will go”, he says.
Ethics in business is a hot topic, particularly in the financial services sector.
“[It is], in a very large measure, a response to the egregious behaviour that is now so well publicised and readily-known by the public”, says Silk.
“Everybody knows unethical behaviour when they see it and I think there is a move back to appropriate norms. I think there is a recognition that much of the bad behaviour in the financial services sector is wrong.”
Silk says it is difficult to discern if this revitalised interest in ethics is deeply-felt, or whether it is a protective measure to avoid getting caught and penalised
“But I think there is a slow improvement in behaviour, much of it regulator and government led, but much of it community-led, consumer-led, some industry associations take a strong position on it.”
In terms of standards in his own organisation, Silk says he had been confident that the culture and behaviours at AustralianSuper would stand up to scrutiny. This is partly because, as a member-organisation, its sole purpose is to act in the interest of members and this provides a de facto ethical framework, he says.
However, earlier this year, he decided to get a second opinion. The Ethics Centre was engaged to undertake a “culture audit” to test whether the fund’s policies, procedures and practices were aligned with its purpose, values and principles.
“In my darkest moments, I just wondered if we had all drunk the Kool-Aid”, he says.
The results were gratifyingly positive and were affirmation that AustralianSuper and its 550 staff are on the right track, says Silk, who has led the fund since it was founded in 2006.
However, The Ethics Centre also found some areas for improvement, including a culture that could be “conflict averse”.
“We weren’t as robust as we might be. There was a tendency to avoid conflict in certain parts of the organisation, so we could introduce a bit more aggression into the organisation – aggression in a positive sense”, he says.
“People who are rude to others are counselled and abusive language or behaviour is not tolerated and could be regarded as a sacking offence.”
“Those areas where improvement opportunities were identified, we have consciously thought that we want to do something about that, we want to lift the standard in the organisation … so we have an action plan, we have done all the things that you might do with a business plan, we have identified all the particular areas, we have assigned responsibility to people, we are going to check in periodically to make sure progress has occurred.
“We haven’t just used it as a soft survey.”
It is too early to see much in terms of a change in culture since The Ethics Centre report was completed, but Silk says some progress has been noticed, such as more robust questioning in meetings.
“We are getting better outcomes as a result”, he says.
Silk’s commitment to respectful behaviours is well known. According to a recent report in the Australian Financial Review, every recruit to the organisation gets a one-and-a-half hour briefing from Silk on the fund’s four values.
People who are rude to others are counselled and abusive language or behaviour is not tolerated and could be regarded as a sacking offence.
The Ethics Alliance sat down for a further conversation with Ian. He shared his insights on the importance of discussing ethics with your network, why organisations always need to work toward good ends, and why leaders can’t just talk the talk. They need to walk the walk.
This article was originally written for The Ethics Alliance. Find out more about this corporate membership program. Already a member? Log in to the membership portal for more content and tools here.
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BY The Ethics Centre
The Ethics Centre is a not-for-profit organisation developing innovative programs, services and experiences, designed to bring ethics to the centre of professional and personal life.
Managing corporate culture
It’s not uncommon these days to hear regulators sounding warnings about culture.
They point out that it’s a crucial role of boards to determine the purpose, values and principles of the company they govern, whilst the CEO and senior management have responsibility for implementing the desired culture. Personnel in human resources, ethics, compliance, and risk functions all have a role to play in embedding values and ethics.
Culture, we hear, has an important role to play in risk management and risk appetite. Weak risk cultures are often the root cause of the most spectacular governance failures. Firms lacking good corporate culture will fail investors and stakeholders.
“Trust, like beauty, is in the eye of the beholder,” says John Price, Commissioner of the Australian Securities and Investment Commission (ASIC). “If consumers don’t like the way a firm has behaved, they can take their business elsewhere and tell everyone about it through the wonders of social media. Loss of reputation due to poor conduct destroys value in a firm. Even more challenging is that poor conduct may be technically within the law, but still have negative impact on a firm’s reputation.
“The possible loss of trust and confidence is a key business risk. If the conduct of a firm genuinely reflects ‘doing the right thing,’ this mitigates conduct risk and will be rewarded with longevity, customer loyalty, and a sustainable business.”
All very well, we hear you say: but how does a company manage culture? What does good culture even look like? By what standard do we measure it or assess it? How do you shift from the culture you’ve got today to the culture you aspire to for the future?
The Ethics Centre has been exploring this subject for many years, developing frameworks and methodologies for measuring and improving culture along the way. We’ve played a significant advocacy role as well, arguing for boards to accept responsibility for setting and maintaining the culture standard in the organisations they govern.
The Ethics Centre recently partnered with the Governance Institute, the Institute of Internal Auditors and Chartered Accountants Australia to produce Managing Culture – A Good Practice Guide. This publication sets out to define culture and explores challenges in identifying, monitoring and driving culture, including organisational change programs. The guide also explores the importance of embedding culture and the nature of the board’s role in evaluating and overseeing culture.
Research has shown that companies that have a good culture perform better than companies that do not. The Guide outlines how each group in an organisation can contribute to a good culture, the first step of which is to create an ethical framework that provides guidance on decisions and an appropriate ‘tone from the top’.
While having an integrated governance and risk management framework is important, unless an organisation establishes a culture that promotes risk awareness into everything it does, it is unlikely to achieve its objectives. Governance and risk management must be at the core of an organisation’s culture.
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The Ethics Centre is a not-for-profit organisation developing innovative programs, services and experiences, designed to bring ethics to the centre of professional and personal life.
The Ethics Alliance: Why now?
After almost thirty years of existence, The Ethics Centre has chosen this particular time to establish The Ethics Alliance. Why the Alliance, and why now?
I’ve heard it suggested that the Alliance is a necessary response to a period of history in which our trust in institutions – including banks, governments and the media – has dropped to a new low point. Some may see it as an opportunity for organisations to restore their battered reputations.
Others may see the Alliance a little more generously, as a community of like-minded organisations with a common commitment to good business practice. A collaborative effort to raise the standards of good business behaviour. A source of insights and tools that will enable better culture to emerge.
While low levels of trust certainly form part of the context within which The Ethics Alliance is emerging, we believe the root cause of our current malaise is something far more significant: the fact that we are on the edge of a transformation that will change our society in ways every bit as profound as those caused by the First Industrial Revolution.
The Ethics Alliance has a clear function. It is a mechanism for developing collective insight and practical measures that will support its members to manage this historic transition. The Alliance will enable companies – and the leaders who work in them – to harness change for the benefit of employees, customers and shareholders alike. The ultimate beneficiary will be the society in which we all live.
We are already seeing clues as to the general shape of the coming changes. Many of these are the product of scientific and technological innovation. Artificial Intelligence and robotics (including nano-fabrication by 3D printers) will displace vast numbers of people from employment. New jobs may be created – but there are very few credible plans in place to ensure the necessary transition will be just or orderly.
The upheaval in employment will be accompanied by a revolution in medicine. Gene editing (using the ‘cut & paste’ functions of CRISPR), pharmaco-genomics, the use of stem cells to regenerate organs and a myriad of other developments will see a startling increase in the lifespan of those who can afford these therapies.
The resulting seismic shift in demography will challenge all of our assumptions about what makes for a worthwhile life, about the status of long-established social institutions, about sources of value and so on. What kind of economy will be needed to support such a society? What is the role of the market, of government, of civil society?
These questions will create new practical challenges within every workplace. If one of the key responsibilities of business leaders is to anticipate and plan for the emerging future and creating organisations which are fit for purpose, then there is much to discuss. Scientists, economists, engineers and lawyers can help us to know what we could do in response to issues of this kind. But only ethics can help us decide what we should do.
We believe business, professional and government organisations not only have a responsibility to help meet the challenges of the future – they also have the capacity to do so.
These matters are not just for governments to solve. Few, if any, organisations will be able to address such ‘civilisational’ challenges alone. Aggregating the resources, energy and insights of members of The Ethics Alliance will achieve outcomes that individual organisations could never achieve on their own.
The Ethics Alliance will also provide practical tools to its members – building their capacity to make better decisions – even in conditions of uncertainty. And it will support innovation. The Ethics Alliance has been designed as a safe place for testing the boundaries of what might be possible.
Society may have lost a little of its faith in government and business lately, and that’s something we should all be concerned about. We believe business, professional and government organisations not only have a responsibility to help meet the challenges of the future – they also have the capacity to do so.
These same organisations cannot afford to ignore these issues or mismanage their response. This is not just about managing risk. It is also about learning how to harvest the dividends of progress without compromising the future.
In that sense, The Ethics Alliance is not so much a response, as a product of the times in which we live.
This article was originally written for The Ethics Alliance. Find out more about this corporate membership program. Already a member? Log in to the membership portal for more content and tools here.
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BY Simon Longstaff
After studying law in Sydney and teaching in Tasmania, Simon pursued postgraduate studies in philosophy as a Member of Magdalene College, Cambridge. In 1991, Simon commenced his work as the first Executive Director of The Ethics Centre. In 2013, he was made an officer of the Order of Australia (AO) for “distinguished service to the community through the promotion of ethical standards in governance and business, to improving corporate responsibility, and to philosophy.”
Measuring culture and radical transparency
The Ethics Centre is often asked whether it’s possible to “measure” or evaluate organisational culture. Executives and Directors are now alive to the considerable responsibility they bear for the workplaces they preside over – and this has led to a growing demand for robust and credible measurement tools.
Using a methodology developed over 25 years, The Ethics Centre’s Everest process is a forensic review into a company’s ethical culture. It’s based on a simple proposition: that good culture can be measured. Global research shows a healthy culture is essential to sustainable, long-term performance; it enables innovation and builds trust between staff, clients, and customers. Conversely, poor culture leads to bad decisions and an erosion of trust and credibility. The result, inevitably, is disengagement, cynicism, and loss of value.
In the face of challenging conditions, many leaders are tempted to focus their efforts on compliance to prevent ‘bad’ behaviour. But this over-reliance on regulation and surveillance can be counterproductive. Not only can it restrict growth of a positive ethical environment that enables people to innovate and act with a shared purpose and direction, it also doesn’t work. Failures persist. A strong ethical culture is critical to managing risk and building a foundation that will support long term value and performance.
We’ve employed Everest to evaluate the culture of numerous, very different, organisations. We’ve used it on one of Australia’s “big four” banks and a leading superannuation fund. We’ve measured the culture of universities, insurance companies, and leading sports organisations including the Australian Rugby Union, Cricket Australia, and the Australian Olympic Committee.
In carrying out the process both in Australia and abroad, we look at the misalliances between what a company says it stands for, and what occurs in practice. Using this premise, we check how organisations live up to the standards they set for themselves through an audit of systems, policies, procedures, and practices. We undertake extensive qualitative and quantitative research to determine how employees and key stakeholders view the organisation. Out of this process comes a set of powerful insights into the degree of alignment between purpose and practice. We identify the gaps.
Once we’ve made sense of the current state of an organisation, we’re in a position to ask our clients some tough questions about the kind of company they’d like to be. We present clients with a Future State Framework that maps the pathway from the present to the future – asking them to imagine the pinnacle of what’s possible for their organisation. In doing this, we examine five domains:
Culture: The operating system through which people create meaning, purpose, and belonging.
Ecosystem: Organisations are complex, interconnected, and interdependent. They sustain, and are sustained, through relationships, mutual dependencies, and the value they bring to the whole.
Leadership: Providing the guidance, direction, and consistency that allows an organisation to respond to the challenges of uncertainty and change.
Readiness: The ability of an organisation to anticipate and respond to uncertainty. The ability to pre-empt a possible future before it arrives fully formed.
Legacy: The future’s perspective on the present. The map we leave behind for others.
The nature of Everest, particularly when coupled with the independence of The Ethics Centre, is that we can confront leaders with issues that have not previously been articulated, recognised, or challenged. And we do this in a way that lessens defensiveness and focuses on building on the goodwill contained in the existing culture of the organisation.
We’re proud that our process has provided leaders across business and government with the expertise to shine a spotlight on current practices and make choices about the culture and style of organisation they wish to cultivate in the future.
One final note: our Everest reports are delivered to our clients on the understanding that everything contained therein is strictly confidential. What a company does with the report is entirely up to them. None had ever been made public until we worked for the Australian Olympic Committee in 2017.
Facing a media storm over their culture, the AOC took the brave step of releasing the report, in its entirety, to the public. Thanks to this act of radical transparency, we’re able to share it with you here.
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The Ethics Centre is a not-for-profit organisation developing innovative programs, services and experiences, designed to bring ethics to the centre of professional and personal life.
A radical act of transparency
The Australian Olympic Committee had been through a six month media firestorm by the time its new CEO, Matt Carroll, got his hands on a confronting review of the organisation’s culture.
The AOC had been battered by a succession of negative events. Its former CEO, Fiona de Jong, had resigned in a blaze of headlines while their longstanding president John Coates had fought off a bruising challenge to his leadership in a publicised election campaign.
Some of its most senior executives received allegations of bullying and poor behaviour. Part of its 36 staff complained the AOC was the most dysfunctional place they’d ever worked. There was even an ugly rift between the AOC and the Australian Sports Commission, which funds high performance sports.
What’s more, the medal tally from athletes in the most recent summer Olympic Games in Rio had been disappointing – our worst in 15 years.
Even with Carroll in place as the new “cleanskin” CEO, the damaging headlines were showing no sign of abating. With the results of the 64-page cultural review in his hands, Carroll knew the bad news would keep leaking out.
So he and Coates decided to publish the review’s findings and its 17 recommendations on its website and release them to the media – effectively putting the organisation’s “dirty laundry” on the table for all to see.
“Why? We knew we were going to get criticised, and we did. We knew we were going to get held up and ridiculed, and we did”, says Carroll today.
“We copped a bit of a battering in the media for a week, but I know that the national sporting federations had a great deal of respect for us doing it.”
“But there was one question I couldn’t have answered if we hadn’t done it and it was: ‘What are you hiding?’ And that would have dragged us backwards.”
They concluded the only way to move on and put their troubles behind them was to engage in an act of radical transparency.
A ‘brave’ decision
The independent review, conducted over two months by The Ethics Centre, was not initially intended to be a public document. But when the report finally landed in the AOC boardroom – a frank appraisal of all that was wrong with the organisation, and what they needed to do to fix it – the decision was quickly made to go public.
“The transparency involved in publishing the report is very good for my purposes in changing the organisation because it is out there”, Carroll says.
“There can be no pushback … It sets a standard that this is the way we are going to operate.”
The business community was agog; a corporate leader made a wary comment telling Carroll the move was “brave”.
But while staff and the sporting federations were generally appreciative of the review and the courageous decision to go public with the findings, it was not a painless process.
“It did have an effect on some of the senior managers because there was this inherent criticism of the leadership team – some of whom are new – but they have shouldered that”, says Carroll.
“For the leadership team, there was this feeling they had all been tarred with the same brush and some of them took that quite hard. We have all been tarred a bit, but we have recognised the issues, recognised the problems, we have agreed that we need to make change.”
Coates, however, was accused of sidestepping responsibility for the poor organisational culture when he told a news conference, “The only criticism of me, personally, has been my acrimonious relationship with some stakeholders, particularly [Australian Sports Commission chair] John Wylie, and that has been put in context.”
Extending transparency
One of the findings of the AOC culture review was a lack of transparency around key decisions – like how individual sports are funded, how staff members are selected to work on site at each Olympic Games. This lack of transparency had led to an atmosphere of suspicion and allegations of favouritism.
Carroll intends to usher in a new era of transparency to dispel any suggestion of favouritism.
“Equally, performance is expected. Yes, we can structure everything and will make sure everyone knows their roles and responsibilities. There is a process, and it is transparent, but that doesn’t mean everybody is a winner.
“We are in the business of high performance sport and our athletes expect the same [level of performance] from our organisation. If you don’t perform in your role, yes, you probably won’t get to go to the Games – but you will know why.
“I am always of the view that you tell the truth, otherwise it comes around to bite you anyway.”
Carroll says this level of openness does not mean that everyone gets a say. “Transparent decision making doesn’t mean you are standing out there asking everyone’s opinion.
“But there is a process where everyone knows how it works and they know what the expectations are and, therefore, they can measure themselves.”
A culture of stress
“One reason that it was always so frantic was that people made it frantic.”
Having come into his role with a 20 year career in sports management, Carroll says he did not think there were any serious ethical problems at the AOC. He saw it was more of a matter of applying appropriate ethical standards to behaviours – especially at times when the organisation is operating under “emergency mode”, such as Games times.
“I am sympathetic to the stress the organisation is sometimes under. I don’t think there was a massive problem, as big as the media was dressing it up, at all. It was more about settling the organisation down and having those restructured roles and responsibilities”, he says.
“There was a culture of stress. One reason that it was always so frantic was that people made it frantic, rather than taking a deep breath. We are not changing the world, we don’t save lives every day of the week, we leave that to more important organisations. You have got to get people to take a step back and take a deep breath.”
Sometimes, the solution is to be nicer to each other, Carroll says. “You can have a disagreement with people … but, for Heaven’s sake don’t behave like [you are in] a schoolyard. Have respect for people.
“If you have no respect for people then they won’t have respect for you.”
Carroll says sport’s important role in Australian culture is reflected in the community’s high expectations of behaviour.
“That is why sport needs to retain its absolute credibility. If it loses that credibility, those role models – no matter how hard they try – won’t be able to show that influence and leadership.
“We can change lives, we don’t save lives. Sport has got to have its own perspective: it isn’t the be all and end all of the country. There are other far more important aspects of society in Australia than sport.
“We can play that leadership role, we can play that role of setting some standards, but we also must accept, at the end of the day, it is about sport.”
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BY The Ethics Centre
The Ethics Centre is a not-for-profit organisation developing innovative programs, services and experiences, designed to bring ethics to the centre of professional and personal life.
In the court of public opinion, consistency matters most
If you’re like us, you spend a lot of time reading the business news. And you’re be familiar with a strange paradox: while some highly respected business leaders can be brought to their knees by one poor decision or ethical stumble, there are others that seem to get away with it time after time. In the language of the CBD, they’re Teflon-coated.
It hardly seems fair that those who have spent their career doing the right thing attract more criticism when they fail. But it seems there is nothing the public hates more than a hypocrite.
Psychologist Dr. Melissa Wheeler says hypocrisy is often considered a bigger sin than the transgression itself.
“The thing that really gets people’s attention is someone’s moral hypocrisy – when you say something, but do something very differently. Or you condemn something, but then have been found to be doing it as well”, says Wheeler, who has a PhD in moral and social psychology and is a Research Fellow in the Department of Management and Marketing at the University of Melbourne.
Cyclist Lance Armstrong is therefore judged more harshly because he was a healthy-life champion who was doping himself throughout a career, which included winning seven Tour de France events.
“The thing that really gets people’s attention is someone’s moral hypocrisy – when you say something, but do something very differently.”
Conversely, we shrug off US President Donald Trump’s Twitter diatribes and troublesome behaviour because they’re generally consistent with his career and private life over the decades.
“With Trump, I keep wondering why people aren’t more outraged and shocked at all the things that are coming out, scandal after scandal, and why are people not even batting an eye anymore”, says Wheeler.
“And I think it is because we have come to expect that from him, because it conforms with what you are expecting and it conforms with your stereotype of what he, as a politician, is.”
Surprise makes a scandal ‘stick’
Mud seems to “stick” if someone does the unexpected or flouts their own stereotype, she says.
In the corporate world, Volkswagen’s falsification of its vehicle emissions data became one of the biggest scandals of 2015. It was trading on its “green” credentials, but was lying about its performance.
Organisations cannot even expect that their good record will help insulate them from future mistakes.
“If you do anything to fall from that grace, it is going to be worse”, says Wheeler.
In fact, not only can “good-practise champions” attract more criticism when they fail, they can also draw more scrutiny in the first place, according to the managing director of the Australian Centre for Corporate Social Responsibility, Dr Leeora Black.
“Paradoxically, sometimes companies with stated good intentions are targeted [by activists] more frequently than companies without, simply because they are more likely to respond.”
Black, an advisor with a PhD in Corporate Social Responsibility, says change campaigners will target companies that already have expressed a commitment to be socially responsible. “They know they will get more traction from those companies than companies that don’t care.”
“Paradoxically, sometimes companies with stated good intentions are targeted more frequently than companies without, simply because they are more likely to respond.”
Activists target companies they can change
Public opinion and media coverage often follow the activists, which goes some way towards explaining why socially responsible companies get more flak for their ethical breaches, she says.
“Normally, without that targeting by activists, if a company is doing well and it stumbles, stakeholders are more likely to give it the benefit of the doubt.”
“Many people have spoken to me about this [phenomenon] in their companies, particularly in the early days, when they get started. Normally, companies that are further advanced in their corporate responsibility journey become more resilient and they also develop stronger relationships with stakeholders and so they are much less likely to suffer that kind of backlash when they do slip”, says Black.
“It is the companies that are newer to CSR that are more likely to get targeted and may be more concerned about it.”
However, fears of harsh judgement should not be a disincentive to hold and display high ethical standards. The business case of corporate social responsibility (CSR) is that the “benefits outweigh the troubles”, she says.
“And the troubles are short term and the benefits are long term.”
Black says the benefits of CSR are better employee attraction and retention, higher employee productivity and organisational commitment.
“For companies listed on the stock exchange, over time, their better performance will be rewarded by shareholders. There is also the opportunity for enhanced risk identification and management, enhanced innovation and improved reputation”, she says.
“But it does take consistency and persistency. You don’t just do one good thing and expect everybody to fall all over the place, gobsmacked about how wonderful your company is. That doesn’t cut it. That is the kind of thing that is more likely to be viewed as hypocrisy.
“Where there are systemic, fundamental, deep-seated commitments being made by the company that are being expressed in its culture and its strategy, then, over time, the persistence and the consistency will be rewarded and the company will become much more resilient to shocks that may happen from an occasional stumble.”
Scandal recovery depends on response
Wheeler says once a scandal has broken, an organisation’s ability to recover will depend on how it handles the aftermath and whether it uses it as an opportunity to grow.
Effective responses include taking responsibility, working around the facts of the transgression, not sweeping it under the rug and providing appropriate explanations for the wrongdoing.
“I think there is a real sincerity in that. So, it is not just like trying to weasel out of the blame.
“And then people like to see that the companies are willing to accept and serve what might be considered an equitable punishment. They want to see there is some punishment for the action and some consistent internal changes – what sort of rehabilitation are they doing?”
University of Pittsburgh researchers studied 100,000 social media tweets to see how the tenor of the public discussion changed in the weeks following Volkswagen’s emissions data scandal.
A sentiment analysis over four separate weeks showed how criticism of the company abated once Volkswagen and the regulators took action.
“Ultimately, if the company’s efforts at recovery are successful, the sentiment returns to a neutral state”
Sentiment about the brand was extremely negative immediately after the news broke, but shifted once the company started recovery efforts (such as an apology and recall) and regulatory agencies placed responsibility with the company.
“Ultimately, if the company’s efforts at recovery are successful, the sentiment returns to a neutral state”, says the study’s lead author, Vanitha Swaminathan, Thomas Marshall Professor of Marketing at the Katz Graduate School of Business at the University of Pittsburgh.
Learning from the experience
The damage to Volkswagen included a plunge in their stock price, government investigations in North America, Europe and Asia, the CEO’s resignation, the suspension of other executives, the company’s 2015 record loss, and a tab estimated at more than $US19 billion to rectify the issues, according to American economist, Boris Groysberg, in the Harvard Business Review.
There are also expected to be long term impacts on the careers of Volkswagen employees. “Our research shows that executives with scandal-tainted companies on their résumés pay a penalty on the job market, even if they clearly had nothing to do with the trouble”, says Groysberg.
“Overall, these executives are paid nearly 4 per cent less than their peers. Given that initial compensation in a job strongly affects future compensation, the difference can become truly significant over a career.
Good news for those who have slipped up is that surviving a scandal can result in a stronger operating performance in the long term – if the organisation has learned from the experience, ejected the wrongdoers and put into place measures to avoid a recurrence.
Researchers at the University of Sussex studied 80 corporate scandals and discovered that although share prices plummeted by between 6.5 and 9.5 per cent in the month after the bad headlines started, the experience could lead to improved performance in the long term. The scandals included breach of contract, bribery, conflicts of interest, fraud, price fixing and other white-collar crimes, as well as personal scandals such as a CEO having an affair, lies on CVs and harassment cases.
Dr Surendranath Jory, who led the study, said safeguards put into place to protect against further abuses seemed to allay investor fears and avoid further drops in a company’s stock price, ensuring they rebound to the levels of their rivals. “Three years on from scandals, the share price performance of firms matched those that had not been affected by scandals.
“Clearly, investors value ethics and they place a premium on it.”
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This article was originally written for The Ethics Alliance. Find out more about this corporate membership program. Already a member? Log in to the membership portal for more content and tools here.
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BY The Ethics Alliance
The Ethics Alliance is a community of organisations sharing insights and learning together, to find a better way of doing business. The Alliance is an initiative of The Ethics Centre.