Corporate tax avoidance: you pay, why won’t they?
What do Apple and Virgin Australia have in common with Donald Trump? Spoiler: it’s not their charismatic leadership.
All three have – alongside a huge range of other companies and individuals – been accused of paying less in taxes than they should have. Whether or not this “makes them smart” or breaks the law, many people feel the practice shows businesses failing to meet their obligations to broader society.
Whether this is true or not depends on an important, subtle distinction between ‘tax planning’ and ‘tax avoidance’.
Responsible companies will seek to minimise their liability through good planning – making the most of the tools and mechanisms government provides: allowances, deductions, rebates and so on.
This is different from tax avoidance. Although legal, when financial instruments are exploited to provide tax advantages they weren’t designed to create, companies can obey the letter of the law while simultaneously undermining its spirit.
The behaviour can also be seen as aggressive – for instance, in the use of overseas tax havens.
Unlike tax evasion, avoiding tax and bending the rules of the tax system is not illegal. However, that doesn’t mean it’s entirely ethical.
Tax as a social responsibility
At a time when government spending cuts are having a real impact on the everyday lives of people, how can multinational corporations justify avoiding paying their fair share of taxes?
A 2015 survey by the Institute of Business Ethics and Ipsos MORI found the British public think tax avoidance is the most important ethics issue for business to address. Avoiding tax is avoiding a social obligation. In the UK, companies such as Apple, Starbucks and Amazon were vilified and boycotted for their tax policies. Tax avoidance can make a company vulnerable to accusations of greed and selfishness, damaging its reputation and destroying the public’s trust.
Paying a ‘fair’ amount of tax in the countries in which they operate is seen as the socially responsible thing for companies to do. Taxes provide the funds for public services such as healthcare, education and public investment in infrastructure – services that companies benefit from directly and indirectly.
Tax planning arrangements that go beyond the policy intent of the law and involve deliberate approaches to exploit the tax system are not ethical. It’s as simple as that.
For this reason, tax avoidance has been branded by some as an immoral and unethical practice that undermines the very integrity of the tax system.
However, company directors see their responsibility as being to maximise the value they deliver for their shareholders. This includes keeping tax costs to a legally permitted minimum. They might also point out the various other ways businesses contribute to the economy: employee and employer contributions, business rates, sales taxes and building sustainable businesses for employment.
Fairness
Remember, corporation tax is a tax on profits. If a company makes no profits, it can’t and shouldn’t be taxed on them. The issue is whether the profits are calculated correctly. There’s a difference between sales and profits – a company might have high sales but still not be turning a profit. But in these cases we would be wise to question how those profits were calculated.
Tax policies should be underpinned by the guiding ethical principles of accountability, transparency and consistency. Tax planning arrangements that go beyond the policy intent of the law and involve deliberate approaches to exploit the tax system are not ethical. It’s as simple as that.
Rather than hiding behind the business case for tax avoidance, businesses need to be transparent about their tax planning.
The public expects businesses to pay their ‘fair share’ of tax but what is a ‘fair’ amount is subjective. What businesses most want out of a tax system is certainty – they want to know what their tax bills will be so they can plan their strategy and investments accordingly.
So if the tax planning industry were able to obtain official clearance for any new tax avoidance scheme, it would be able to operate with confidence that its activities were considered fair according to the standards of government. This would provide it with the confidence and foresight it requires, as well as helping give citizens a clear understanding of what measures are permitted and why.
Striking a balance
Arguments for and against tax avoidance are missing the point. Politically, it might be too difficult to argue that companies pay more tax, but government and business should ensure that corporate tax contributions make a fair return to society.
Rather than hiding behind ‘the business case for tax avoidance’, businesses need to be transparent about their tax planning. Both companies and government need to pay more attention to openly communicating their position on taxation and their interpretation of tax law. This would both restore public trust in business and provide more certainty for those trying to manage their tax requirements.
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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.
Unconscious bias: we’re blind to our own prejudice
For the most part, we respect our colleagues and probably wouldn’t ever label them ‘sexist’ and certainly not ‘racist’. But gender and ethnic diversity in workplaces shows something is amiss.
Women fare worse than men across most measures of workforce equity. The Australian Government’s Gender Equality Agency report notes women who work full-time earn 16 percent less per week than men, constitute 14 percent of chair positions, 24 percent of directorships and 15 percent of CEO positions.
Women lose at both ends of the career lifecycle. Their average graduate salaries are 9 percent less than their male equivalents’ and their average superannuation balances 53 percent less.
Sociology, psychology and gender and cultural studies have all weighed in on the multiple causes of these inequalities, with much of the conversation converging around the role of ‘unconscious bias’ in decision-making.
Applicants with Indigenous, Chinese, Italian and Middle Eastern sounding names were seen to be systematically less likely to get callbacks than those with Anglo-Saxon names.
Studies in which people are asked to evaluate the capabilities and aptitudes of a job candidate show effects of implicit biases on job assessment. In a study mimicking hiring procedures for math related jobs, male candidates fared so much better than women that lower-performing males were chosen over better female candidates.
Similar effects have been seen with regard to race. In Australia, applicants with Indigenous, Chinese, Italian and Middle Eastern sounding names were less likely to get callbacks than those with Anglo-Saxon sounding names.
When biases become socially reinforced, individuals can come to see them as ‘reality’. Studies have shown women tend to believe they are worse at math than men and this belief has a negative impact on their performance.
In one study, a group of women were asked their gender prior to math tests and performed worse than the group who weren’t asked to disclose it. This phenomenon is called the ‘stereotype threat’ and it extends to racial beliefs. Two decades ago, a landmark study found that asking students of colour to identify their ethnicity prior to a test resulted in a substantially poorer grade.
This evidence suggests human resource departments might consider adopting hiring procedures that don’t require race, gender or even an applicant’s name be stated. Of course, at some point, the candidate will need a face-to-face interview, so this isn’t a perfect solution to bias- but it does reduce its influence.
Volunteering to learn more about diversity signifies a more general willingness to open organisational culture to people from different backgrounds.
Alongside systematic and procedural changes, we can help cultivate organisational willingness to combat inequality through diversity training. These training programs rose to prominence around a decade ago as a result of a wave of lawsuits against major US companies. However, as Frank Dobbin and Alexandra Kalev explained in an article for the Harvard Business Review, they were dazzlingly unsuccessful — resulting in negative outcomes for Asians and Black women, whose representation dropped an average of five and nine percent, respectively.
Dobbin and Kalev suggest the major reason these programs failed is probably because they were usually mandatory. This suggests they were motivated more by risk aversion — ‘discriminate and you’ll be fired’ — than a genuinely held belief diversity is valuable. It’s not surprising systematic change didn’t occur under such conditions.
At the same time, companies who used voluntary diversity programs saw increases in black, Asian and Hispanic representation – even as the average was decreasing nationwide. Volunteering is most likely motivated by a belief that diversity is genuinely valuable — factors that seem far more effective in influencing workplace diversity, perhaps because they are genuine.
Science is yet to tell us whether we can actually reduce biases let alone erase them altogether. All the same, we can begin to mend workplace inequalities by actively engaging peoples’ will to change.
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BY Jack Hume
Jack studied Philosophy and Psychology at the University of Sydney, completing his Bachelor of Arts in 2017 with First Class Honours. He has supported The Ethics Centre's Advice & Education team in research capacities over the last two years, contributing to their work on cognitive bias in decision making, and ethics education in financial services. In 2018, he joined the Centre full-time as a Graduate Consultant. He brings insights from contemporary political philosophy, moral psychology and skills in qualitative research to consulting projects across a variety of sectors.
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.
5 dangerous ideas: Talking dirty politics, disruptive behaviour and death
The Ethics Centre was the founding partner of the Festival of Dangerous Ideas back in 2009. We’re thrilled that the festival continues with a program full of world-leading thinkers.
Here are five ideas that were pondered, dissected and debated over the big weekend in 2016. We talked dirty politics, disruptive behaviour, disappearing countries and death.
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Dirty politics
In 2016, the festival put dirty old politics in the spotlight. Australia’s federal parliament had just resumed session with a bunch of independent and minority party representatives, the United States was still trying to make sense of Donald Trump and across the globe nations were trying to unpack exactly what ‘extremism’ was and how to deal with it.
“If our goal is to seek a deeper understanding of the world, our lack of moral diversity is going to make it harder.”
American psychologist Jonathan Haidt’s TED talk explores the moral values underpinning liberals and conservatives. Instead of looking at politics as a battleground of ‘right vs wrong’, Haidt encourages us to see political differences as being based in different moral values.
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Disruptive behaviour
You can’t make an omelette without breaking a few eggs, right? For the disruptors of the world, improvement comes at a price – we need to break eggs, challenge convention, and occasionally hurt people’s feelings.
On the other side of the Pacific, the #BlackLivesMatter movement was upsetting middle-class, white Americans in 2016 by calling attention to continued racial disparities in the US.
Check out philosopher George Yancy’s open letter, ‘Dear White America’ to learn about the intellectual basis for the movement. In the letter, Yancy makes a simple but confronting point to his white American fellows – if you’re white, no matter how well intentioned you are, you’re probably racist. He wrote:
“If you are white, and you are reading this letter, I ask that you don’t run to seek shelter from your own racism. Don’t hide from your responsibility. Rather, begin, right now, to practice being vulnerable. Being neither a ‘good’ white person nor a liberal white person will get you off the proverbial hook.”
Yancy’s essay prompted exactly the response he expected – anger. So much so the American Philosophical Association issued a letter of support. You can read Yancy’s thoughts on the backlash he copped here.
Australians reading or hearing about the Black Lives Matter movement might also want to read into the history of Aboriginal deaths in custody.
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Disappearing conflicts
Conflict, politics and geography drive some nations and communities to the brink while others flourish. What are the unseen consequences of major global trends?
The Right to be Cold asks whether the world’s failure to address climate change is a human rights violation against Inuit peoples whose way of life is being eradicated along with the melting ice.
To get a sense of what’s going on for these remote communities, check out photographer Ciril Jazbec’s series documenting climate change and its impact on Greenlanders.
“It was April and the ice was starting to melt, which was highly unusual. Usually the ice would stay out until June.”
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Dealing in death
If evolution hardwires in us the drive to survive, how is it humans are able to overcome their biological imperative and take their own lives? There’s still a stigma that suicide is a ‘selfish choice’, but evolutionary biologist Jesse Bering explores the science behind suicide.
“Human suicide is an adaptive behavioural strategy that becomes increasingly likely to occur whenever there is a perfect storm of social, ecological, developmental and biological variables factoring into the evolutionary equation.”
For the scientifically minded, Bering’s essay in Scientific American is a must-read. If you’ve never donned a white lab coat, you might be more inclined to listen to the Freakonomics podcast ‘The Suicide Paradox’.
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Dangerous ideas
While every Festival of Dangerous Ideas has specific themes, the main goal has always been to create a safe space for open discussion of ideas some people would consider dangerous.
It’s a skill that seems to be in growing demand, so before you listen, read, think or tweet, check out what festival co-founder Simon Longstaff writes on why conversations matter.
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BY The Ethics Centre
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‘Hear no evil’ – how typical corporate communication leaves out the ethics
Evidence from the 2018 Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry was not the first and won’t be the last revelations of unethical behaviour in business. In fact, it’s been a busy few years for anyone interested in business ethics.
We have seen the Panama Papers and Unaoil scandals play out, the muddied relationship between Clive Palmer and Queensland Nickel (who was in charge of the company, really?), managers falsely inflating earnings at Target and an admission of fraud by a senior manager at Seven Network.
Ethical issues involving accusations of dishonesty, bribery, corruption, fraud and theft are, sadly, never too far away from the news. Sometimes that ethical failure has an easily identifiable cause – someone who negligently steered a course into moral hazard or selfishly set out to do something they knew was wrong. It’s also easy to identify a solution: we deal with those people through education, punishment or both.
But what about those more commonplace ethical slip-ups – the ones that don’t fall into the #epicfail bucket or make headlines, at least not immediately? Where it’s not so easy to find a guilty person in need of punishment? It’s useful to think of these as instances of ethical drift – where an organisation unconsciously drifts away from its ethical True North.
How does ethical drift happen?
A big factor could simply be the way people communicate within an organisation. Ethical context, insight and commentary is easily lost in day-to-day business communications, and it can happen in a number of ways:
The ethical framework is nowhere to be seen
Most organisations have a mission statement about their purpose, values and principles, which is expected to provide the overall direction for the company. But this ethical framework is rarely localised or given the same status as other performance indicators. That makes it hard for people to stand back and assess if, for instance, a change management project is on track to reinforce the organisation’s values as well as meeting other objectives.
Emphasis on short time periods
Internal reporting is time-driven. The emphasis on monthly, quarterly or yearly figures makes it seem irrelevant to include commentary about longer term ethical symptoms or effects. As a result, the ethics of an activity are not assessed with the same regularity and urgency.
Managing up
Managers do manage up. As reports go up the line they narrow the focus of the reader and set the agenda for what might need to be understood. Such reports tend to leave out any information that might go against the usual approach or beliefs, be unclear or prompt questions. On one hand – fair enough. Who wants to get a management report and be confused? But the downside is that the reader might be being well managed toward a certain conclusion rather than being well informed.
The glut of communication
We are drowning in information, so wherever possible reporting is abbreviated and metricated. Qualitative assessments are expected to be backed by hard figures and compared against something – a benchmark, a previous period or a competitor’s results. Assessing whether an organisation is still heading in the right ethical direction isn’t something that lends itself to metrification. And if a report’s format doesn’t include a space for ethical insights, it sends a signal that it’s not important or welcome.
Misplaced emphasis on annual staff surveys
Whether an organisation is on course for its True North is often determined by an annual staff survey. Frequently, such surveys ask people to put a numerical score (say, one to 10) on how well their team lives the ethics of the organisation. This can act as a quick point-in-time morale check, but it hardly lets people question an organisation’s accepted norms. It takes an extra level of sophistication for an organisation to change its routine reporting to capture ethical insights and measures, and to put them on an equal footing with routine performance measures.
For organisations to function at their ethical best, they need to have proactive, fearless but humble debate. But it’s hard to foster debate in an environment where reporting tools are very narrowly defined and don’t link back to the organisation’s ethical framework.
Instead, organisations need a culture where questioning is not treated as a ‘gotcha’ opportunity. Where leaders welcome information that indicates all might not be simple and rosy. Where ambiguity creates interest rather than fear. And where numerically insignificant data or exceptions are not confused with ethical insignificance.
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BY Trent Moy
Trent works as a sessional academic and is a Senior Consultant with The Ethics Centre. Prior to specialising in organisational ethics, culture, and corporate responsibility, he spent more than 25 years in corporate roles with a particular focus on financial services. He has also worked across marketing, strategy and sustainability. He is a Fellow of the Institute of Community Directors which seeks to improve the governance of Australia’s not-for-profit organisations.
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.
Capitalism is global, but is it ethical?
Does the dominant economic system of the Western world withstand moral scrutiny? Trevor Treharne asks leading moral philosophers and experts.
While economics are seldom discussed in directly ethical terms, it is through the spirit of moral inquiry that today’s capitalist societies were originally imagined.
Adam Smith, the 18th century thinker known as the father of modern economics and capitalism, was first and foremost a moral philosopher.
Smith’s famous metaphor of ‘the invisible hand’ attempted to describe the wider social benefits that result from individual actions. Capitalism was designed to be ethical, but is it?
The achievement of capitalism
Assuming society has certain obligations – the reduction of poverty, the improvement of health and the extension of human happiness – capitalism plays an important role.
“The best things about capitalism are its mind-boggling productivity and its exquisite sensitivity to what people want and need”, says John Bishop, a moral philosopher at Trent University in the UK and editor of the book Ethics and Capitalism.
Bishop argues that historically and globally, capitalism has caused the life expectancy of people to rise from about 28 years to over 70 years.
“Much of this has been through reducing infant and child mortality – a most ethical goal – and lifting hundreds of millions of people out of abject poverty.”
“Capitalism creates net new wealth on a scale the world has never before seen”, he says.
Harvard cognitive scientist Steven Pinker says that it’s hard to have an intelligent discussion about capitalism because too many people confuse “capitalism” with “unregulated capitalism with no social welfare”. Their criticisms have nothing to do with capitalism itself but about whether it’s a good idea for governments to regulate economic activity to provide social benefits. This is completely compatible with capitalism, as the capitalist economies of Scandinavia, Canada, and New Zealand prove.
“Putting aside that red herring, there are several advantages to capitalist economies, apart from generating wealth that makes rich and poor alike better off”, Pinker says.
“Countries that trade with each other are less likely to start wars with each other, because with effective markets it’s cheaper to buy things than to steal them.”
“Also, in a market economy, other people are more valuable to you alive than dead. All of this reduces some of the exploitative incentives of war and conquest”, Pinker adds.
The issues with capitalism
Bishop warns that capitalism has a tendency to distribute its benefits in an extremely unequal fashion.
“It also has the inability to value important things that do not have market value such as human dignity, caregiving, the climate, the environment, and people who have nothing to offer the market, such as children, the severely disabled, and the elderly”, he says.
Bishop says capitalism also fails to account for the needs of future generations.
“Given this, our ethical duty is to mitigate the harms and omissions of capitalism without serious disruption of its immense productivity and wealth creation.”
Simon Tormey, a political theorist at The University of Sydney, says the problems of capitalism depend on the governing system it operates within.
“What has tended historically to dictate which end of the [ethical] spectrum capitalism appears on is the ability of ordinary people to rein back capitalism’s excesses through the actions of the state on the one hand, and of social movements such as trade unions on the other”, he says.
“Countries with strong states and strong social movements are able to develop forms of capitalism that are quite ethical in this respect and Scandinavia would perhaps offer the most complete examples.”
“However, countries where there is authoritarian governance, where trade unions and other social movements are weak, are often characterised by a highly unethical and obnoxious form of capitalism that prays on individual weakness to generate profits for a small minority.”
Tormey adds that unfortunately much of the evidence of the past 40 years suggests a progressively slippery slope to domination by “the 1%” and thus to “unethical capitalism”.
Not perfect, but superior
Society is ordered by picking a preference from a series of competing systems, all of which flourish and flounder in varying degrees.
It is not sensible to overthrow a system such as capitalism on the mere basis of a few potential pitfalls.
But noting the issues can start a conversation about its reform or adaption.
“Is capitalism ethical? As compared to what?” asks moral philosopher Peter Singer.
“So far, none of the alternatives tried have done nearly as good a job as capitalism of keeping most of the population out of poverty and even providing them with a reasonable level of comfort.”
“Until we have evidence that there is another system that can do better, the sensible course seems to be to stick with capitalism and attempt to deal with its flaws rather than to abandon it”, Singer adds.
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BY Trevor Treharne
Trevor Treharne is a news editor at Yahoo7 and is completing a Masters of Bioethics at the University of Sydney.
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 to deal with an ethical crisis
The recent dissection of CommInsure’s heartless treatment of some of its policy holders (including fellow employees) by Fairfax Media and ABC’s 4 Corners program reinforced every bad stereotype there is about the world of banking and finance.
The people whose stories were featured in the reports were treated in a manner that made me wince. You’d think that people of even moderate decency would have realised that what was being done was wrong. Yet the evidence is incontrovertible.
Basic decency was set aside in favour of the financial interests of the corporation and, one suspects, the people making the decisions. Until now, the cost of this has been borne by those whose claims were denied.
Now the price is being paid by the Commonwealth Bank and the vast majority of innocent employees who will have been appalled and ashamed by what has been revealed.
Now that the issues have been exposed, the first order of business should be to remedy the harms that were caused to individuals who had a right to expect that their legitimate interests would not be sacrificed for commercial gain.
The particular vulnerabilities of those affected make for especially chilling stories. No person, whatever their circumstances, should have the careful parsing of the language of insurance policies turned against them. We all buy insurance in the expectation that it will be available when we really need it. It is just plain ‘tricky’ when loopholes are used to deny our reasonable expectations.
It is time that we developed a more mature understanding of what it means to live an ethical life as an individual or as an organisation.
The second order of business must be to rescue the concept of ‘ethics’ in banking and finance. In recent months, I have spoken to a number of senior leaders in the banking and finance industry about their signing the Banking + Finance Oath. As things stand, about 600 people have made a personal commitment to the tenets of the Oath. Every person with whom I have spoken supports what the Oath says and stands for.
However, quite a few are reluctant to sign for fear that something might go wrong – and that in the face of evidence of ‘ethical failure’ they will be accused of hypocrisy.
Their misgivings are understandable – especially after the CommInsure scandal. It was only at the CBA’s last AGM that the Chairman and CEO both raised the issue of ethics – making a commitment to become an “ethical bank“. At the time, cynics scoffed at the idea. In recent days, and quite predictably, the CBA has been ‘hit over the head’ (clobbered is probably the better word) with this aspiration. No wonder people are nervous about making a public commitment to ethics!
The Ethics Centre worked extensively with the CBA in late 2014 and early 2015 (but not with CommInsure) and I have a high regard for the sincerity with which they laid out a path for ethical development at the 2015 AGM. What was said then should not be dismissed out of hand – and especially not because of recent events. Rather, we should ensure that the standard by which we assess the CBA is a reasonable one – and then judge accordingly.
To think that any individual (other than a saint) can achieve ethical perfection is unfair and unrealistic. I certainly wouldn’t measure up to that standard. To think that an organisation of 50,000 people will be perfect is just ridiculous. What we can (and should) expect is that an ethical organisation will distinguish itself with a number of key features.
First, it will actively seek to reinforce the application of its values and principles – not just at the rhetorical level but as part of an ongoing program to root out and eliminate all systems, policies and structures that might subtly (and not so subtly) lead people to act in a manner that is unethical.
Second, it will build a culture of open communications in which people are rewarded (and certainly not punished) for drawing attention to practices that appear to be inconsistent with the organisation’s declared ethical framework.
Third, an ethical organisation will be marked by the quality and character of its response to ethical failure. For example, it will own up to its own failings. It will remediate and compensate for any harms done. It will ensure that the lessons to be learned are widely published for the benefit of others. It will aim to do what is right – and not just the minimum that it is required to do.
This third aspect was evident in Ian Narev’s response to questioning on Four Corners. I believe his expressions of concern were sincere and that he will follow up, personally, with the affected individuals. Beyond this, I have no doubt (but no certain knowledge) that he is leading a process that will meet the expectations outlined above. That CBA follows this path will be a surer indication of its commitment to ethics than the fact that this shameful series of events occured in the first place. And that is what we need to evaluate.
An ethical organisation will be marked by the quality and character of its response to ethical failure.
It is time that we, in society, developed a more mature understanding of what it means to live an ethical life as an individual or as an organisation. If we cannot be perfect, then we can at least be held to account for the sincerity with which we make our best efforts to act, in good conscience, in conformance with our chosen values and principles.
And second, we should be accountable for the competence we bring to bear in our ethical decision-making – it’s a skill that cannot be taken for granted and needs development through active, reflective practice.
If this (rather than perfection) was the standard we insisted on – for ourselves and others – then more people in the world of banking and finance might publicly commit to what they know, in their heart-of-hearts, to be right and good.
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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.”
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.
Ending workplace bullying demands courage
Despite increasing measures to combat workplace harassment, bullies remain entrenched in organisations. Changes made to laws and regulations in order to stamp out bullying have instead transformed it into an underground set of behaviours. Now hidden, these behaviours often remain unaddressed.
In other cases, anti-bullying policies can actually work to support perpetrators. Where regulations specify what bullying is, some people will cleverly use those rules as a guide to work around. Although these people are no longer bullying in the narrow sense outlined by policies or regulations, their acts of shunning, scapegoating and ostracism have the same effect. Rules that explicitly define bullying create exemptions, or even permissions, for behaviours that do not meet the formal standard.
Because they are more difficult to notice or prove, these insidious behaviours can remain undetected for long periods. As Kipling Williams and Steve Nida argued in a 2011 research paper, “being excluded or ostracized is an invisible form of bullying that doesn’t leave bruises, and therefore we often underestimate its impact”.
The bruises, cuts and blows are less evident but the internal bleeding is real. This new, psychological violence can have severe, long-term effects. According to Williams, “Ostracism or exclusion may not leave external scars, but it can cause pain that often is deeper and lasts longer than a physical injury”.
Bullies tend to be very good at office politics and working upwards, and attack those they consider rivals through innuendo and social networks.
This is a costly issue for both individuals and organisations. No-one wins. Individuals can suffer symptoms akin to Post-Traumatic Stress Disorder. Organisations in which harassment occurs must endure lost time, absences, workers’ compensation claims, employee turnover, lack of productivity, the risk of costly and lengthy lawsuits, as well as a poor reputation.
So why does it continue?
First, bullies tend to be very good at office politics and working upwards, and attack those they consider rivals through innuendo and social networks. Bullies are often socially savvy, even charming. Because of this, they are able to strategically abuse co-workers while receiving positive work evaluations from managers.
In addition, anti-bullying policies aren’t the panacea they are sometimes painted to be. If they exist at all they are often ignored or ineffective. A 2014 report by corporate training company VitalSmarts showed that 96 percent of the 2283 people it surveyed had experienced workplace bullying. But only 7 percent knew someone who had used a workplace anti-bullying policy – the majority didn’t see it as an option. Plus, we now know some bullies use such policies as a base to craft new means of enacting their power – ones that aren’t yet defined as bullying behaviour by these policies.
Finally, cases often go unreported, undetected and unchallenged. This inaction rewards perpetrators and empowers them to continue behaving in the same way. This is confusing for the victim, who is stressed, unsure, and can feel isolated in the workplace. This undermines the confidence they need to report the bullying. Because of this, many opt for a less confrontational path – hoping it will go away in time. It usually doesn’t.
Cases often go unreported, undetected and unchallenged. This inaction rewards perpetrators and empowers them to continue behaving in the same way.
What can you do if a colleague is being shunned or ostracised by peers or managers? The first step is not to participate. However, most people are already likely to be aware of this. More relevant for most people is to not become complicit by remaining silent. As 2016 Australian of the Year David Morrison famously said, “The standard you walk by is the standard you accept.”
The onus is on you to take positive steps against harassment where you witness it. By doing nothing you allow psychological attacks to continue. In this way, silent witnesses bear partial responsibility for the consequences of bullying. Moreover, unless the toxic culture that enables bullying is undone, logic says you could be the next victim.
However, merely standing up to harassment isn’t likely to be a cure-all. Tackling workplace bullying is a shared responsibility. It takes regulators, managers and individuals in cooperation with law, policy and healthy organisational culture.
The onus is on you to take positive steps against harassment where you witness it. By doing nothing you allow psychological attacks to continue.
Organisational leaders in particular need to express public and ongoing support for clearly worded policies. In doing so, policies begin to shape and inform the culture of an organisation rather than serving as standalone documents. It is critical that managers understand the impacts of bullying on culture, employee wellbeing, and their own personal liability.
When regulation fails – the dilemma most frequently seen today – we need to depend on individual moral character. Herein lies the ethical challenge. ‘Character’ is an underappreciated ethical trait in many executive education programs, but the moral virtues that form a person’s character are the foundation of ethical leadership.
A return to character might diminish the need for articles like this. In the meantime, workplace bullying provides us all with the opportunity to practise courage.
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BY Petrina Coventry
Petrina Coventry is Industry Professor and Director of Development with the University of Adelaide Faculty of the Professions and the Business School. She previously held global vice president roles with the General Electric Company and The Coca Cola Company in the United States and Asia and was most recently CHRO with Santos Ltd.
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.
What your email signature says about you
Getting too many unethical business requests? Sreedhari Desai’s research suggests a quote in your email signature may be the answer to your woes.
In a recent study Desai enrolled subjects to participate in a virtual game to earn money. The subjects were told they’d earn more money if they could convince their fellow players to spread a lie without knowing about it. Basically, subjects had to trick their fellow players into believing a lie, and then get those other players to spread the lie around the game.
What subjects didn’t know is that all their fellow ‘players’ were in fact researchers studying how they would go about their deception. Subjects communicated with the researchers by email. Some researchers had a virtuous quote underneath their email – “Success without honor is worse than fraud”. Others had a neutral quote in their email signature – “Success and luck go hand in hand”. Others had no quote at all.
And wouldn’t you know it? Subjects were less likely to try to recruit people with a virtuous quote in their email. The quote served as a “moral symbol”, shielding the person from receiving unethical requests from other players. In an interview with Harvard Business Review, Desai outlines what’s happening in these situations:
When someone is in a position to request an unethical thing, they may not consciously be thinking, “I won’t ask that person.” Instead, they may perceive a person as morally “pure” and feel that asking them to get “dirty” makes an ethical transgression even worse. Or they may be concerned that someone with moral character will just refuse the request.
So, if you want to keep your hands clean it may be as simple as updating your email signature. It won’t guarantee you’ll do the right thing when you’re tempted (there’s more to ethics than pretty words!) but it will ensure you’re tempted less.
There are other, more expensive ways to avoid unethical approaches via email.
And in case you’re looking for a virtuous quote for your email signature, we surveyed some of our staff for their favourite virtuous quotes. Here’s a sample:
- “The unexamined life is not worth living” – Socrates
- “No man wishes to possess the whole world if he must first become someone else” – Aristotle
- “Protect me from what I want” – Jenny Holzer
- “A true man goes on to the end of his endurance and then goes twice as far again” – Norwegian proverb
- “Knowledge is no guarantee of good behaviour, but ignorance is a virtual guarantee of bad behaviour” – Martha Nussbaum
A small disclaimer to all of this – it might not work if you work with Australians. Apparently our propensity to cut down tall poppies and our discomfort for authority extend to moral postulations in email signatures. Instead of sanctimony, Aussies are likely to protect people with fun or playful quotes in their emails. Desai explains:
“We’re studying how people react to moral symbols in Australia. Our preliminary study showed that people there were sceptical of moral displays. They seemed to think the bloke with the quote was being ‘holier than thou’ and probably had something to hide.”
So, as well as your favourite virtuous quote, you might want to bung a joke on the bottom of your emails to please your sceptical Antipodean colleagues, lest they lead you into temptation.
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Your donation is only as good as the charity you give it to
It’s admirable, perhaps even required, for those of us living comfortable lives in the developed world to give some time or money to ‘good causes’. We recognise fortune has smiled upon us and have a desire to ‘give back’ in some way – we have so much and others have so little, we seek to redress it.
But while there is strong agreement the fortunate have an opportunity – some would say an obligation – to use their resources to make life better for the less well-off, the discussion often ends here. That is, we think people should do something but we’re often not concerned with exactly what that something is. Should you donate to a local homeless shelter, a national medical research charity or a big international NGO? For many people, it’s unclear there’s any difference between these actions – surely they all make the world a better place?
Let’s think about that.
Say there were only two charities in the world, The Cupcake Foundation and the Real Actual Medicines Trust. The Cupcake Foundation distributes delicious cupcakes to people in hospital. The Real Actual Medicines Trust distributes medicines that will completely cure a patient’s disease. Both charities are undeniably making the world a better place but it’s pretty clear that one is doing much more good than the other. I think most people would choose to donate their money to The Real Actual Medicines Trust.
Asking these questions gets to the heart of why it is we help people. Are we altruistic because we think that making others better off is good in and of itself? Or do we just do it to stave off our middle-class guilt?
Take a different example. Let’s say that a third charity, Medicines ’R Us, is also distributing medicines, but they use generic medicines that cost half as much to produce as the on-brand medicines distributed by The Real Actual Medicines Trust. This means that a $20 donation to the Medicines ‘R Us will cure twice as many people as a $20 donation to the Real Actual Medicines Trust. Surely – given we can do twice as much good donating to the former than the latter – we should give our money to Medicines ‘R Us, thus doubling our impact.
These seem like contrived examples, but in reality, the differences between charities are astounding – not just a factor of two or three times, as in the example above, but some are ten, or even 100 times more effective than others!
Asking these questions gets to the heart of why it is we help people. Are we altruistic because we think that making others better off is good in and of itself? Or do we just do it to stave off our middle-class guilt? To impress other people? To show off?
Undoubtedly many good works are motivated by these latter factors. But are they really good reasons? Are they the reasons we’d choose? I’d certainly like to think that when I donate to charity I’m doing it for the benefit of other people. The sense of wellbeing that I get afterwards is nice but ultimately not morally important.
If it’s really other people’s benefit we care about, we need to think hard about how we choose where we spend our time and money on good causes. We don’t have infinite time and money. Every choice to donate something to one cause is an implicit choice not to donate it to another.
It might seem harsh to judge any charity less effective than any other another. Doesn’t that mean that the people served by the less-effective charity lose out? It does. But not making comparisons doesn’t mean everyone gets the help they need. It means that people who would be helped by the more effective charities lose out. More people are becoming sick, even dying, because people are choosing not to donate more effectively.
In the long run, hopefully we’ll be in a position to eradicate extreme poverty and disease from the world and we’ll have enough resources to fund all good causes. In the meantime, we should surely help as many people as we can.
Effective Altruism, a new social and philosophical movement is emerging to try to answer a fundamental question – “what is the most good that we can do?”
Effective altruism is about using evidence and reason to find ways to make the world as good a place as it can be. It tries to view all people – wherever they are in the world, even those not yet born – as being equally deserving of living happy, healthy, dignified, flourishing lives. Its proponents try to focus on the best ways of doing good. It’s just like regular altruism in that it seeks to do good for others. However, by focusing on effectiveness, it seeks to do the most good possible.
This manifests in different ways. Some people try to find the most effective charities to donate to, others try to work out which career you should choose if you want to have the biggest impact. Others think about the long-run future of humanity, reasoning that if there’s even a small chance that humans could wipe ourselves out (say, in a nuclear winter, or a deadly engineered disease escaping a laboratory), avoiding such an outcome would be a huge benefit.
It’s just like regular altruism in that it seeks to do good for others. However, by focusing on effectiveness, it seeks to do the most good possible.
Many also take a pledge to give a fixed portion of their income to effective charities – often 10 percent – because it increases the chance that they’ll actually donate, rather than putting it off for another day. In all these cases people are motivated by their sense of empathy but guided by scientific evidence and reason.
It may seem strange to think we might have an obligation to donate to one set of charities rather than others. After all, surely if someone wants to donate their money to a charity that focuses on people in their local community or on a cause that’s particularly important to them, they have that right. Of course, donation – unlike taxes – is an individual choice, not a legal obligation. But when faced with a choice of whether to help 100 people or just one, is it really a difficult decision?
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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.
Is your workplace turning into a cult?
If every culture has a little bit of cult in it, how do we know when there is risk of the line being crossed? There are a few signals worth keeping an eye on.
Good news cultures
Does everything seem a little bit too wonderful? Do you feel as though people are insisting that you accept how wonderful the organisation is? Good news culture can sometimes hide behind the guise of good PR – a glossy front, shiny happy people adorned in corporately branded t-shirts and caps.
If you sense that questioning, doubt, or dissent is discouraged or even punished for fear of undermining the morale or image of the organisation, a good news culture could be at play.
Dominant logic
Ever heard of groupthink? Cults and organisations alike can generate a uniform way of thinking and communicating featuring jargon and particular decision-making processes. If your organisation’s meetings and strategic documents are full of jargon, or alternative approaches from employees are rejected with statements like, “it’s not the way we do things here”, you might be crossing the line into cultish culture.
Elitism
Organisations that claim special, exalted status can generate polarising us-versus-them thinking. This in turn can pit the organisation against the wider community and divorce organisational values from those of the broader community. Many organisations claim to “only recruit the best”, but when “the best” happen to emulate and follow the rules or standards of the group it should be considered a warning sign.
‘Dear Leader’ syndrome
‘Dear Leaders’ can create elitism and intimacy among followers, allowing access only to those with unquestioning commitment to their belief system and ideology. Ask yourself who has access to the leader – are dissenting voices allowed, or only ‘yes’ men and women?
They often hold conflicting standards – the rules for followers do not apply to the leader.
When the polished charismatic face of an organisation has an internal following full of devotion to their ideas or ideology, it may be time to be concerned.
These leaders may claim new methods of wealth creation, life success or social influence. Their new solutions or ideology may appear able to solve serious and previously insurmountable problems.
They direct attention towards themselves while feigning humility. In doing so, they create dependency and obedience within an organisation by ensuring the wellbeing of the members is tied to their own wellbeing.
When the polished charismatic face of an organisation has an internal following full of devotion to their ideas or ideology, it may be time to be concerned. They can make it impossible to build a consistent ethical culture within the organisation.
Devotional blindness
Do your colleagues seem unusually committed to their ‘Dear Leader’, their ideology, role, status or wealth? Is worship or adoration being generated for the leader and close followers? Does the organisation seem to be venerated in an unusually fervent way? Devotion and adoration can override decisions people would otherwise make in their life. Blind subservience to the leader, group or ideology in cults can radically alter personal goals and commitments an individual had before joining.
Cults expect members to devote inordinate amounts of time to the group and group-related activities at the expense of self-identify or ties with family and friends. They forget their non-group identity and may fear reprisals if they consider leaving the group.
Ideology and exalted ends
When zealous attainment of what seems like an extraordinary goal seems prevalent, be concerned. Zeal for greater profit margins and work success can lead leaders and employees alike to rationalise unethical or ill-considered methods.
Zeal for greater profit margins and work success can lead leaders and employees alike to rationalise unethical or ill-considered methods.
Be sceptical of work cultures that drive debilitating schedules or tolerate sleep deprivation and employee burnout. Exaggerated ambitions or an exclusively achievement-oriented culture should also be viewed carefully. Do not tolerate leaders who justify the means only by whether they achieve stipulated goals.
Scapegoating and marginalisation
Most cults rely on intimidation to maintain their organisational identity. They use humiliation and blame to control their members, often through peer pressure and subtle forms of persuasion. When dissent or criticism is not permitted and individuals are marginalised or excluded from decision-making, you have problems.
Fortressing
Be concerned when transparency is admonished or there is widespread fear that rival people or groups are aiming to undermine the organisation. A simple measure of this is the overuse or abuse of confidentiality agreements. The ability for individuals to discuss their business should only be restricted with good reason. Paranoia and secrecy should not undermine professional transparency.
Does any of this sound familiar? You can find examples of any of these situations in organisations at any time. The real danger is when you find recurring clusters of the signals. If you do spot clusters, don’t despair – many organisational cultures have been redeemed by taking a few simple steps.
Click here to learn about the steps you can take to improve your business culture.
Are you currently dealing with an ethical dilemma? A conversation with an objective, independent person can really help. Call Ethi-call, our confidential ethics helpline, on 1800 672 303 for free anywhere in Australia.
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BY Petrina Coventry
Petrina Coventry is Industry Professor and Director of Development with the University of Adelaide Faculty of the Professions and the Business School. She previously held global vice president roles with the General Electric Company and The Coca Cola Company in the United States and Asia and was most recently CHRO with Santos Ltd.