The Ethical Advantage
The ethical advantage: the economic and social benefits of ethics to Australia
We know what ethical failure costs – look at the billions of dollars paid by financial institutions in penalties and customer remediation since Hayne. But what are the economic benefits of ethical best practice? What can we gain economically by being more ethical as a nation?
Turning around the loss of trust in government, corporations and institutions could deliver Australians significant economic and social dividends. The Ethical Advantage’s exclusive new economic modelling by Deloitte Access Economics shows that if our leaders, businesses, institutions and everyday Australians made more ethical decisions, our GDP, wages, corporate returns and mental health would improve.
For the first time, the report quantifies the benefits of ethics for individuals and for the nation. An increase in ethical behaviour could raise Australians’ average income by $1,800 a year, lifting GDP by $45 billion. An increase in a company’s performance based on ethical perceptions can increase return on assets by about 7%. The modelling also reveals a host of individual and collective benefits for Australians across wages, trust and mental health.
The report also identifies five interlinked areas for improvement for Australia and its approach to ethics, supported by 30 individual initiatives. Download a copy to learn more.
ECONOMIC ADVANTAGE
$45,000,000,000
Lifting Australia's trust levels to that of global leaders would increase the GDP by $45 Billion
BUSINESS ADVANTAGE
7%
Improving a businesses ethical reputation can lead to a 7% increase in return on assets (ROA)
INDIVIDUAL ADVANTAGE
2.7%
A 10% increase in ethical behaviour is associated with a 2.7% increase in individual wages ($23 bil accumulative)
AUTHORS
Authors
John O'Mahony
John O’Mahony is a Partner at Deloitte Access Economics in Sydney and lead author of The Ethical Advantage report. John’s econometric research has been widely published and he has served as a Senior Economic Adviser for two Prime Ministers of Australia.
Ben?
John O’Mahony is a Partner at Deloitte Access Economics in Sydney and lead author of The Ethical Advantage report. John’s econometric research has been widely published and he has served as a Senior Economic Adviser for two Prime Ministers of Australia.
Download The Ethical Advantage Report
Berejiklian Conflict
The next phase in the political life of NSW Premier, Gladys Berejiklian, depends on answers to three questions.
First, was her former relationship with Daryl Maguire not just ‘close’ but, in fact, an “intimate personal relationship”? Second, did the Premier make or participate in any decisions that could reasonably be expected to confer a private benefit on Mr Maguire? Finally, if the answer is ‘yes’ to each of these questions, then did Ms Berejiklian declare her interest in the Ministerial Register of Interests and seek the permission of Cabinet to continue to act?
Nothing else matters – not the Premier’s choice of friends, not her judgement … only the answer to those three questions.
The reason for this can be found in the NSW Ministerial Code of Conduct (the Ministerial Code) which has the force of Law. As might be expected, the Ministerial Code imposes obligations that are in addition to and are more onerous than, those applying to Members of Parliament.
The Preamble to the Ministerial Code of Conduct says, amongst other things, that, “In particular, Ministers have a responsibility to avoid or otherwise manage appropriately conflicts of interest to ensure the maintenance of both the actuality and appearance of Ministerial integrity.” With that end in mind, the Code not only takes account of the personal interests of individual Ministers – but also those of members of their families. It is here that the precise nature of the Premier’s relationship with Mr Maguire risks becoming a matter of public, rather than personal, interest. This is because the Ministerial Code of Conduct defines a “family member”, in relation to a Minister, as including, “any other person with whom the Minister is in an intimate personal relationship”.
‘Intimate’ is not a word used in the ICAC hearing to describe the Premier’s relationship with Mr Maguire.
Instead, it was agreed that theirs had been a “close personal relationship” – the precise nature of which was never explained. However, the evidence suggested that the words ‘close’ and ‘intimate’ may have been synonymous. If so, then Mr Maguire will have fallen within the definition of ‘family member’ during the period of his relationship with the Premier.
However, this (in itself) is neither here nor there. The nature of Ms Berejiklian’s relationship with Mr Maguire was (and should have remained) an entirely private matter up until the point where the Premier became involved in any Ministerial decision that “could reasonably be expected to confer a private benefit” on Mr Maguire. Only then did the public interest become engaged.
So, did any such decisions come before the Premier (acting alone or in Cabinet) during the period of her relationship with Mr Maguire? And if so, did she declare her interest as she is required to do under the Ministerial Code? The matter would then have been in the hands of her Cabinet colleagues as the final provision of the Code states that, “a ruling in respect of the Premier may be given if approved by the Cabinet”.
The Premier obviously knew something of Mr Maguire’s hopes and plans – even if she thought them to be fanciful. She knew of his financial exposure and the material impact that NSW Government decisions might have on his personal wealth. We also know that, for a time, Mr Maguire was at the centre of the Premier’s private affections. The issue is not that the Premier would have acted against the public interest for the benefit of Mr Maguire. I sincerely doubt that she would ever do so. It is most importantly a question of what was done to ensure the maintenance of both the actuality and appearance of Ministerial integrity.
The Premier had a formal obligation to declare her relationship with Mr. Maguire if, a) it was intimate, b) she was involved in deciding any matter that could reasonably be expected to confer a private benefit on him. It was then up to her Cabinet colleagues to rule on how she should proceed from there. Beyond settling these questions, the public has no legitimate interest in the private life of Gladys Berejiklian – except, perhaps, to extend to her our sympathy if she has been drawn inadvertently into a web of grief spun by a former friend.
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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.”
Recovery should be about removing vulnerability, not improving GDP
Vulnerability demands attention and, in the past, where profits were prioritised business was preoccupied and vulnerable customers harmed.
Because of Covid 19 we can expect to see more vulnerability with multiple drivers. The pandemic has reminded us that we can all be vulnerable if the right (or wrong) circumstances occur.
A year ago, your vulnerable customer probably didn’t look like my daughter and her friends: cashed-up twenty-somethings, single, easy going and living alone. Nor did a dual-income household with primary school-aged kids automatically raise any red flags.
However, we are now realising the various ways that changes in circumstances can quickly render us vulnerable in both financial and non-financial ways. The physical, emotional and financial impacts of the pandemic challenge business to find new ways to recognise and forecast when people are experiencing hardship. Not least because many people who find themselves in hardship may be less likely to seek support.
We live in a society where wealth is a sign of success – particularly for those who have grown accustomed to a certain level of financial wellbeing. In this context, to be labelled vulnerable is a suggestion that you have failed in some way. There’s an element of shame or even a stigma attached to the label.
Vulnerability is so often positioned through an economic lens, the term synonymous with poverty, diminished capacity or poor decision-making. This means singles struggling with the mental health impacts of isolation and parents collapsing under the pressure of home-schooling may baulk at the idea of being labelled ‘vulnerable’.
Our new reality also requires fresh approaches to handling people who have experienced a sudden change in fortune. People who managed just fine in the “gig economy” are now in a precarious position in “insecure employment”. Those who took on huge debts to buy homes in our major cities are also under extreme financial pressure as the economy continues to slide.
I recently participated in a discussion with customer advocates from the financial services sector. One advocate revealed that estimated calculations were that we can expect around 30,000 homes to be lost as a result of the pandemic. A month ago (which seems an age in COVID-time), the Lowy Institute reported the number of unemployed would soon exceed 1.3 million. The jobless rate will climb to 10 per cent by the end of the year and still be above 8 per cent by the end of 2021, according to the Reserve Bank of Australia (RBA). In short, all evidence points toward an explosion in the amount of vulnerable people businesses are dealing with.
“Measured as Gross Domestic Product (GDP) per head, Australia’s average living standards are falling and will take several years to return to the pre-pandemic level,” says the institute’s John Edwards, a former member of the Board of the RBA, and Adjunct Professor with the John Curtin Institute of Public Policy at Curtin University.
Our economy’s health is measured by our GDP. It’s the magic acronym: – the more it goes up, the better off our society is, or so they say. However, given the anticipated explosion of vulnerable customers and people facing financial hardship, it might be worth revisiting the role GDP plays in our understanding of economic health.
If our GDP recovers, but we see minimal reduction in the amount of vulnerable people – financially vulnerable or otherwise – is this really a recovery at all?
Measuring a society’s health by GPD can be a useful rule of thumb, says business ethicist Dr Ned Dobos, Senior Lecturer in International and Political Studies at the UNSW Canberra. However, it would be “wrong-headed” to put too much faith in it, Dobos argues that we need different metrics than relative material wealth to measure how we are going.
Dobos points to the research conducted by Daniel Kahneman and Angus Deaton, showing that more money will only make people happier up to a certain point – around $US75,000. But while extra money may make them feel more successful, it will not make them feel happier beyond that threshold.
“We’re continuing to measure the welfare of our society in terms of GDP, even though GDP has no proven connection to our sense of wellbeing anymore,” he says.
“We have fetishised material wealth, even though it’s not connected to the things that ultimately matter.”
Dobos hopes that a silver lining from the pandemic will be that, as a community, we have more understanding of people who are unemployed and that we realise that poverty is not a character defect.
“Surely people, after a period of time, would have to appreciate that with a million people in this country unemployed, [unemployment] must be something that is not entirely within their control,” he says. “We can’t have that many degenerates.”
Susan Dodds, Professor of Philosophy at La Trobe University, agrees. She says she would like to see a recognition that attaining wealth requires a fair degree of luck, rather than it being something one “deserved”.
She would prefer the discussion of economics shift from GDP to “talking about what makes for a decent life.”
There are large numbers of people who are working as casual, low-paid, low-skilled, itinerant workers – moving between nursing homes. There’s a reason for that: they’re not doing it because: ‘gee whiz, I’d love the flexibility’,” says Dodds.
Dodds says the pandemic is an opportunity to have another look at what a reasonable expectation of profit is. “The idea that we can get, year-on-year, a two per cent reduction in our costs in order to get an inflationary increase in our profits, making me comfortable with the amount of dividend I get, is really exploitative.”
What gets measured gets done. If our recovery is determined exclusively in terms of GDP, it might mean creating more vulnerable people, as organisations are incentivised to pursue relentless growth.
There has been a global push for more purposeful capitalism; Blackrock CEO Larry Fink wrote a letter to 500 CEOs last year addressing this issue. Closer to home, this year New Zealand is the first western country to design its entire budget based on wellbeing priorities. “We’re embedding that notion of making decisions that aren’t just about growth for growth’s sake, but how are our people faring?” Ardern said.
The ACT has identified that economic conditions, important as they may be, are not the only factors that contribute to the quality of life of Canberrans. In releasing the Budget in March 2020, the ACT Chief Minister Andrew Barr stated, “We are more than an economy – we are an inclusive, vibrant and caring community where we aim for everyone to share in the benefits of a good life both now and in the future.” The ACT Wellbeing Framework will inform Government priorities, policies, investment decisions and Budget priorities.
In his recent Ted Evans lecture, economist Professor Ian Harper, an RBA board member, reminded economists to talk to the public, to keep in touch with what the community thinks are important priorities.
“Apart from anything else, you learn so much about what really matters for people. Whether it’s the level of minimum wages, a level of interest rates, how banks are supervised, where you can open a pharmacy, when you can open a supermarket or where you can get treated for infectious disease,” says Harpers.
“No one should be surprised that an economist should worry about the human dimension of his craft – social science, it may be, but economics started out as moral philosophy.”
“Our quest to raise community welfare cannot be divorced from its foundation in a moral calculus. More to the point, if it is divorced from its moral foundations, then economic policymaking is more likely to diminish than enhance economic welfare.”
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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.
BY Cris Parker
Cris Parker is Head of The Ethics Alliance and a Director of the Banking and Finance Oath.
Character and conflict: should Tony Abbott be advising the UK on trade? We asked some ethicists
Former Aussie PM Tony Abbott’s recent appointment to an unpaid role as a trade adviser to the Johnson government in the UK has sparked controversy in both countries.
UK government MPs have continually been asked what it means to have a man who is, by the judgement of many in both countries, “a misogynist and a homophobe”, as well as a climate change denier and – more recently – sceptical about coronavirus lockdown measures.
In Australia, politicians, journalists and citizens have all questioned the appropriateness of a former Prime Minister accepting a position that leaves him serving a foreign government. Whilst Abbott has obligations under the Foreign Influence Transparency Scheme that are designed to prevent conflicts of interest, there are many who believe Abbott is equipped with too much internal knowledge of Australia’s trade interests, internal party politics and regional issues in the Pacific – accrued as Prime Minister – for him to serve another government.
Given the range of questions that arise around both conflict and character, we made a list of some of the big ethical questions the Abbott situation brings up, and spoke to a few ethicists to help answer them.
1. Abbott is a private citizen now. Shouldn’t he be able to take any job he wants?
“Being Prime Minister isn’t like any other job,” says Hugh Breakey, a Senior Research Fellow at Griffith University’s Institute for Ethics, Governance and Law. “Abbott would have been privy to high level information and forward planning that he is obligated to hold secret.” If a potential employer of Abbott – whether in a paid role or not – would benefit from this situation, Breakey argues that it would give Abbott a conflict of interests.
But it’s not just a question of conflicts of interest. In situations like this, it is reasonable to consider whether this role was given as a “kind of payback for favourable treatment during his time in power,” Breakey says.
However, whilst Abbott’s appointment may generate potential conflicts of interest and are “legitimate lines of ethical inquiry”, Breakey believes they are not problems for Abbott’s appointment.
However, Simon Longstaff, executive director of The Ethics Centre, disagrees. “There just can be no guarantee that Britain’s interests will always coincide with Australia’s. Given this, the fact that one of our former Prime Ministers would ever serve a foreign power almost beggar’s belief,” he said.
2. If Abbott’s trade qualifications make him a good candidate, should we overlook his other beliefs and opinions?
“I believe that a representative of any country, in any honoured capacity like this one, should be a morally upstanding person. Tony Abbott is not that, given his history of misogyny, homophobia, and racism,” says Kate Manne, philosophy professor at Cornell University.
However, Hugh Breakey worries that an approach like this risks jeopardising our commitment to non-discrimination and supporting a diverse set of beliefs and ways of life. Sometimes, he says, ethics might require us to overlook the questionable beliefs of a potential political appointment.
“At least some of the views taken by Abbott on these matters have religious influences, and many similar (and, indeed, far more conservative) views are held by religious devotees across many of the world’s major faiths. Prohibiting from public offices and services all those who hold such views… would allow widespread religious discrimination.”
However, another complication arises when it comes to whose views and personality traits we tend to overlook. Cognitive biases, social norms and systemic beliefs like sexism and racism can mean we’re more likely to overlook controversial beliefs or difficult personalities when they belong to men, people who are straight or white.
Kate Manne suspects that “both women and non-binary people are far less likely to be viewed as truly qualified or competent, unless they’re also perceived as extraordinarily caring, kind, and what psychologists call ‘communal’.” She adds that the tendency to separate the professional and personal/political aspects of someone’s identity is “far less available to women and gender minorities.”
3. Should we label Abbott a misogynist or homophobe based only on his public comments and policies?
“The truth is, few people would know Tony Abbott well enough to say with any confidence what he truly feels or believes, and those who do know him paint a very different picture to the one sketched by his critics,” says Simon Longstaff. “A person can be opposed to same-sex marriage and yet not be a homophobe,” he adds.
However, for Kate Manne, the central question of misogyny or homophobia isn’t whether the person feels a certain way toward women or queer people, it’s what effect they have on those communities.
“Misogyny to me is not a personal failure or an individual belief system: it’s a system that polices and enforces a patriarchal order,” she says. “I define a misogynist in turn as someone who’s an ‘overachiever,’ or particularly active, in this system.”
Manne says, “misogyny on this view is less about what men like Abbott may or may not feel toward women, and more about what women face as a result of their toxic, obnoxious, and contemptuous behaviour.”
For Manne, this means Abbott can be reasonably called misogynist and homophobic on this basis. His status as a former PM and his very public comments have done considerable work to uphold a system that oppresses women and LGBTIQ+ people. She cites examples such as calling abortion the ‘easy way out’, standing next to a ‘ditch the witch’ sign or talking about feeling threatened by gay people as evidence of Abbott’s contributions.
4. How should we balance the need to reject some beliefs because they’re not morally acceptable or legitimate with our commitment to pluralism?
“Democracies gain critically in legitimacy by being able to conduct inclusive deliberations where diverse views can be raised and considered,” says Hugh Breakey.
“Naturally, no-one can or should expect immunity from social consequences for what they say in public discussion, Breakey adds. “The more that institutional sanctions are applied on the basis of positions taken in [controversial] debates the narrower the spectrum of positions that are likely to be defended, and the more that different views will fail to be represented.”
Kate Manne suggests a simple principle to test which voices we should accept as part of our political life: “It’s good to have a variety of voices, but those voices need not to silence or speak over the voices of other people,” she says.
“Abbott’s voice does not meet that simple test. “
Unlike Manne, Breakey doesn’t suggest Abbott’s views sit outside the realm of acceptable political opinions, he agrees with Manne’s principle. “If we want democracy to be more than the tyranny of the majority, or (worse still) rule by elites, then we need more civic tolerance afforded to those who think and speak in disagreeable ways.”
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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.
Beyond the shadows: ethics and resilience in the post-pandemic environment
Having navigated the first phase of the COVID-19 pandemic with a relatively low loss of life, Australians are hoping to return to a more familiar pattern of living.
For many of those Australians, they seek an illusion. The world to which they return will have been fundamentally altered – not by the virus – but by the decisions we have taken in response to its emergence.
At one point, we feared those decisions would be especially difficult for those working in a health system overwhelmed by infected patients. We imagined health care professionals confronted by the terrible dilemma of having to ration medical resources, deciding who should live or die. Fortunately we have largely been spared from that horror we imagined.
However, it would be a mistake to think that the worst of the ethical dilemmas associated with COVID-19 have been avoided. Rather, they have merely been displaced to another arena – the economy, and the world of work, in particular.
The devastation of the Australian economy has already claimed many victims – not least the hundreds of thousands of people who have lost (or are about to lose) their jobs once the JobKeeper ‘safety net’ is removed.
Those who join the unemployment queues or whose business collapse or whose opportunities dry up will pay the highest price for the choices we have made, so far.
However, there will also be a considerable burden borne by those who must make the terrible decisions about who keeps, or loses, their job during an extended recession – and by those who appear to have survived the crisis, seemingly unscathed.
Every organisation in Australia will be affected by COVID-19. A few will have prospered. However, most will be re-evaluating every aspect of their operations. It is our contention that those with the strongest ethical foundations are most likely not only survive the immediate crisis – but will emerge stronger.
This is not to suggest that the process of change will be easy … in fact, it will be incredibly difficult. However, there are three key insights that we believe will not only ‘limit the damage’ but actually set up organisations for a better future.
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Crises usually bring to light the ‘shadow values’ at work within an organisation: the fewer the better.
Values and principles inescapably shape our choices – and therefore the world they produce. Many organisations enter a situation of crisis with an established set of stated values and principles. However, a crisis can bring into the light an operative set of values and principles that may otherwise dwell in the ‘shadows’.
These ‘shadow’ values and principles often arise as a ‘mutation’ of the stated set. For the most part, the process of mutation is subtle – beginning with an initial act that is at first tolerated (often because it delivers a profitable outcome) and then accepted as ‘normal’. The process of drift is known as the ‘normalisation of deviance’ – and often proceeds without being observed for what it is: a corruption of the norms of the organisation. Occurring in the ‘shadows’ of an organisation’s culture, the mutations are genuinely ‘unseen’ and therefore resistant to correction.
The most common reason for shadow values and principles gaining a foothold during a crisis is that they are ready-made to fill the vacuum caused whenever ethics is reduced to being an ‘optional extra’, or regarded as a luxury that can only be afforded during easier times.
This weakening of commitment to an organisation’s espoused values and principles allows the shadow set to grow in strength.
One of the best examples is that of the German automaker, Volkswagen, where their stated value of ‘excellence’, was mutated into a shadow value of ‘technical excellence’. The resulting decisions led to an emissions scandal that has cost the company a small fortune in fines and severe reputational damage.
Identifying the risk of mutation of the ethical ‘DNA” of an organisation before it occurs, or if this is not possible, having the tools needed to recognise and correct shadow values and principles when they arise will be critical for organisations moving through this next period.
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Those who ‘survive’ a crisis may suffer the effects of ‘moral injury’ – leading to sub-optimal results for them personally (and their organisation) if the injury is not addressed.
Many people working in business and the professions have already been confronted by the need to make some distressing decisions – not least of which has been to weigh in the balance the good of the organisation versus the livelihood and well-being of employees.
In many cases, the people who lose their jobs will have been loyal and diligent employees who have performed their roles with distinction; roles that are either unaffordable during a recession or that no longer make sense in the emerging strategic environment where the risks posed by the virus are controlled but not eliminated.
Those who make necessary – but unfair – decisions will suffer a certain amount of personal harm from doing so. However, exposure to the risks of such decision making is generally understood to be part of the job. The greater risk is to those people who play no direct part in the decision making but who also feel that they are the inadvertent ‘beneficiaries’ of the sacrifices made by others.
There is much to be learned about this phenomenon by considering the experience of those who survive disasters like shipwreck. The first phase of the disaster will see strangers (and even rivals) driven to work together by the indiscriminate ‘lash of necessity’. People will bend themselves to the task of rowing towards safety – hopeful that a rescuer might be close at hand.
The second phase arises when the situation becomes more desperate … when rations are depleted, when the water is rising toward the gunwales of an overloaded lifeboat. It is then that some place their personal interests before those of all others – throwing overboard any sense of fellow-feeling. Yet, there will be others who decide that they will make the ultimate sacrifice – quietly slipping below the waves so that others survive.
Finally, the moment of rescue comes and the lash is withdrawn. It should be a time of celebration and euphoria. However, it is common for those who survive enter a stage of grief – because they have survived when others, each equally deserving, have not.
‘Moral injury’ is not only experienced by those who made the decision to sacrifice others, or who hoarded goods that could have helped others. The same injury is caused by those who remain without any reason to explain (or justify) their relative good fortune.
Telling any of these people that they should count themselves ‘lucky to have survived’ is worse than useless. Mere survival, as experienced by such people may be a welcome reality – but it is also an ‘empty achievement’ – and does nothing to protect against the consequences of untreated moral injury; which include depression, post-traumatic stress disorder and in the most severe of cases, suicide.
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The best response to moral injury is to offer the opportunity to find meaning in adversity – a positive reason that justifies continuing effort.
There are only two ways to prevent moral injury. First, one can seek support when making the initial decisions so that, no matter how tough, they do not give rise to a form of regret and self-blame linked to a series of ‘if only’ statements (‘if only I had considered that perspective’, ‘if only I had thought of that option’, ‘if only I had asked one more question’ …).
Second, one can offer a purpose that transcends mere survival. It is only then that the sacrifice of others can be a source of positive motivation. Instead of individuals being beneficiaries, they become ‘stewards’ of a purpose that, if realised, will justify the sacrifices made by others.
Of course, the saving purpose must be something of real substance – not just a few words that make people feel good about themselves. The purpose must be non-trivial, enduring and deep, the kind that people can truly believe in.
However, there is a temporal ‘twist’ at this point. There’s not much point in having a purpose that will rescue an organisation from crisis if decisions made during the crisis render the purpose invalid or unbelievable.
The last thing you want is for those who survive to look back on their experience of crisis and conclude that all that went before makes the purpose seem to be a ‘hoax and the organisation’s leadership a group of hypocrites. That is why it is essential that organisations identify and manage any shadow values or principles that might undermine the better future it must create in the aftermath of the crisis.
In these circumstances, ethics is neither an ‘optional extra’ nor a ‘luxury’. It is a necessity!
The lesson in all of this is relatively simple
Those who wish to prosper in the aftermath of a crisis need to project themselves into the future and identify an underlying purpose that guides their decision making in the present.
Of course, it will be impossible to predict all of the details that define the strategic and tactical environment in which the organisation will need to operate. However, an organisation’s Purpose, Values and Principles (the three principal components of an Ethics Framework) should provide an enduring platform that is serviceable in all environments but one … where there is no genuinely useful role left for the organisation to perform.
Unless that exception exists, organisations and their leaders have an obligation not merely to persist, but to flourish for the sake of all those that made their continued survival possible.
The Ethics Centre is a world leader in assessing cultural health and building the leadership capability to make good ethical decisions in complexity. To arrange a confidential conversation contact the team at consulting@ethics.org.au. Visit our consulting page to learn more.
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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.
Pulling the plug: an ethical decision for businesses as well as hospitals
If you were to plot a timeline of the Covid-19 pandemic, one way of dividing up the different stages would be by reference to the resources shortage we were facing at the time. First stage: toilet paper and hand sanitiser. Second stage: masks and protective equipment. Third stage: ventilators and hospital beds. Fourth stage: money.
Fortunately, we seem to have skipped stage three in Australia, and for the most part, we’ve addressed shortages in protective equipment and at grocery stores. However, with the focus in Australia now largely on the economic fallout from the pandemic, the question of how to distribute and share limited wealth is now at the front of people’s minds.
Among a range of economic measures introduced to address the Covid-19 crisis, the government has suspended insolvent trading laws for six months. This enables organisations who would otherwise go out of business to continue trading.
Welcomed as a lifeline by many, the question we should be asking is: who is the lifeline for? Should every organisation who is eligible take advantage of the scheme? Whilst it would be tempting, and completely understandable for someone to try to take advantage of every possible support before letting their business go, doing so may well overlook other, more pressing concerns.
John Winter, the CEO of the Australian Restructuring Insolvency & Turnaround Association (ARITA), worries that the six-month safety net might have significant economic impacts later on. “All they are doing is kicking the can down the road,” he says. As a number of businesses take no-interest or low-interest loans to mitigate insolvency, they increase the risk of a more expensive insolvency later on.
“You’re going to have a tsunami of insolvency. You have to have one,” says Winter.
Ethicists use the term ‘moral temptation’ to refer to situations where personal needs and desires are strong enough to override our usual ethical decision-making. Moral temptations aren’t ambiguous ethical choices; rather, they’re situations where the potential benefits for a person are high enough that they might rationalise making a choice that doesn’t hold up to their ethical beliefs. The possibility of keeping a business afloat could generate this kind of situation.
What typically occurs in a moral dilemma is that a person puts disproportionate weight on their own needs and desires, thus overlooking or underestimating the importance of what other people need.
When it comes to the decision to continue trading whilst insolvent, this might mean failing to consider how desperately creditors need their outstanding debts paid. It might mean retaining staff and giving them false hope of ongoing employment, rather than giving them redundancies and the opportunity to seek work elsewhere, whilst unemployment payments are higher than usual. In many cases, it’s unlikely someone taking an objective view would think the benefits of keeping a struggling business afloat were justified, relative to the harms it generates for other groups of people.
“When you are insolvent as a business, you know that you’re not going to pay back the money you owe,” says Winter.
“You can’t get more broke than broke, [but] what you are doing is significantly impacting those that you owe money to,” he adds. “If you’re running a small business, it’s generally other small businesses you owe money to as well. You could actually be sending them broke.”
Here, it might be helpful to consider the kinds of questions that ventilator shortages and other health resource limitations are posing around the world – the kind we’ve managed to avoid here. In New York, where there is a real possibility of healthcare shortages, guidelines indicate that doctors “may take someone who is desperately ill and not likely to live off that ventilator and put someone else with a much better chance on.”
The logic here is simple: when faced with a choice between delaying inevitable, imminent death and restoring someone’s health to live a full life, we should choose the latter.
In many cases, families and patients will decide to remove a ventilator in such cases, knowing that in doing so, they are gifting a lifeline to someone else. For some, the choice is also one that offers considerable relief. Rather than fighting to maintain life, despite the suffering on all involved, they can finally let go.
Winter suggests a similar relief is possible for those whose businesses are in trouble. “When directors finally sit down and say, ‘yeah, I’m done, I’m handing the business over to a liquidator’, they feel a massive sense of relief. They’ve taken so much weight on their shoulders because of the ethical concerns they face around the consequences for others.”
For organisations on the brink of insolvency, the central question seems to be whether to take a lifeline or be a lifeline – resolving matters as best they can, ensuring staff and creditors are cared for – or taking a shot at reviving their business with the help provided?
Before making a choice, organisations facing insolvent trading may wish to consider:
- Do I have justifiable reasons to think that the business will be in a better financial position? Will it be able to pay its debt and meet its obligations in six months time?
- What effects would my decision to continue trading have, whether I am successful or not, on creditors and staff?
- What is the intended purpose behind the suspension? Am I exploiting a loophole or one of the intended beneficiary?
- Are there people who could be saved if I decided to cease trading now? Does the business have any obligations toward those people?
- Is my desire to see this business continue clouding my judgement? Do I need someone independent to help me make this decision?
There is no hard-and-fast rule here. Some organisations will be able to use this support to revive their business to a healthy state. Ideally, those that do have done so in the confidence that the risks they were posing to others were low: they weren’t ‘taking a punt’ with the time available, but making an informed choice about what was in the best interests of the business, creditors, staff and the economy at large.
There is an old saying in military circles: death before dishonour. The question facing some organisations now is just that: when are the social costs too high for me to continue trading? When is it the right thing to do to pull the plug?
You can contact The Ethics Centre about any of the issues discussed in this article. We offer free counselling for individuals via Ethi-call; professional fee-for-service consulting, leadership and development services; and as a non-profit charity we rely heavily on donations to continue our work, which can be made via our website. Thank you.
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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.
A Guide to Purpose, Values, Principles
Purpose, Values, Principles: Ethics Framework Guide
A Guide to Purpose, Values, Principles
Each day, countless decisions are made within organisations of all shapes and sizes. An Ethics Framework provides a compass for those choices.
A solid Ethics Framework offers a clear statement of what an organisation believes in and what standards it applies. It’s a roadmap for good decisions, and if it’s lived throughout an organisation, it’s also a guide to making that organisation the best version of itself.
Fundamental to good business, every organisation should have an Ethics Framework to guide decision making; from Apple, Amazon and ANZ, to the Nedlands Netball Association.
"An Ethics Framework is foundational. It provides the blueprint for organisational decision making, delivering clarity, consistency and connection across all levels and responsibilities."
WHATS INSIDE?
Learn what an ethics framework is
Why you need an ethics framework
A step by step process to establish your own
Tools to embed your framework
Whats inside the guide?
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AUTHORS
Authors
Dr Matt Beard
is a moral philosopher with an academic background in applied and military ethics. He has taught philosophy and ethics at university for several years, during which time he has been published widely in academic journals, book chapters and spoken at national and international conferences. Matt’s has advised the Australian Army on military ethics including technology design. In 2016, Matt won the Australasian Association of Philosophy prize for media engagement, recognising his “prolific contribution to public philosophy”. He regularly appears on television, radio, online and in print.
Dr Simon Longstaff
has been Executive Director of The Ethics Centre for over 25 years, working across business, government and society. He has a PhD in philosophy from Cambridge University, is a Fellow of CPA Australia and of the Royal Society of NSW, and in June 2016 was appointed an Honorary Professor at ANU – based at the National Centre for Indigenous Studies. Simon co-founded the Festival of Dangerous Ideas and played a pivotal role in establishing both the industry-led Banking and Finance Oath and ethics classes in primary schools. He was made an Officer of the Order of Australia (AO) in 2013.
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A new guide for SME's to connect with purpose
Purpose, values and principles are the bedrock of every thriving organisation. With many facing a reset right now, we’ve released a guide to help small to medium sized businesses create a road map for good decisions and robust culture.
In the world of architecture, even the most magnificent building is only as strong as its foundations. The same can be said for organisations. In these times of constant change, a strong ethical culture is essential to achieving superior, long-term performance – driving behaviour, innovation, and every decision from hiring, through to partnerships and customer service.
The foundations for a high-performance culture are made up of three principal components: Purpose, Values and Principles.
Each is necessary. Each plays a specific role. Each complements the other to make a stable foundation for the whole. Together, they make up what we call an Ethics Framework.
PURPOSE (WHY) – An organisation’s reason for being.
Purpose explains the WHY; it is the reason an organisation exists and what it was set up to do or achieve. It’s a defining expression of what your organisation stands for in the world and why it matters.
VALUES (WHAT) – What is good.
Values shape the WHAT; they are the things that an organisation believes are good and worth pursuing. Values guide actions, activities and behaviours within an organisations by identifying what is of merit.
PRINCIPLES (HOW) – What is right.
Principles determine the HOW; helping to guide how an organisation obtains the things it thinks are good. If Values tell an organisation what to pursue, Principles tell them how they should go about getting those things.
The Ethics Centre has spent the past thirty years helping organisations to build and strengthen their ethical foundations. In many cases, we have been able to work directly with organisations. However, not every organisation has either the time or the funds needed to invest in specialist advice.
So, the Centre was pleased to accept a grant from The Australian Securities and Investments Commission’s Community Benefit Fund for the purpose of creating a ‘DIY Guide’ for ethics frameworks – with a special focus on the needs of small to medium-sized businesses. It goes beyond broad theory to offer practical, step-by-step guidance to anyone wanting to define and apply their own Purpose, Values and Principles.
The publication of this guide comes at an especially important time. The current pandemic is testing organisations as never before.
Indeed, COVID-19 is every bit as dangerous as an earthquake – except, in this case, it is the ethical foundations of organisations that will determine whether they stand or fall. In a time of crisis, weak foundations are susceptible to crumble, opening up an organisation to the risk it will make ‘bad’ decisions that will ultimately cost it dearly.
The Ethics Centre believes that prevention is better than cure. Our hope is that the practical guidance offered by this guide will provide owners and managers with the tools they need to build stronger, better businesses.
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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.
Ask the ethicist: If Google paid more tax, would it have more media mates?
If multinational tech platforms paid more tax on the revenues they made in Australia, would they be in a better moral position to resist government attempts to force them to pay a ‘license fee’ to news media?
This article was first published by Crikey, in their weekly Ask the Ethicist column featuring Dr Simon Longstaff.
There are a couple of ways to look at this question – one as a matter of principle, the other through the lens of prudence. In terms of principle, I think that we should treat separately the issues of tax and the proposed ‘licence fee’. This is because each issue rests on its own distinct ethical foundations.
In the case of tax, all citizens (including corporate citizens) have an obligation to contribute to the cost of funding the public goods provided by the state. For example, a company like Google shares in the benefits of a society that is healthy, well educated, peaceful and effectively governed under the rule of law. All who draw on and benefit from such public goods should contribute to the cost of their generation and maintenance.
Instinctively, most citizens believe that we should each pay our ‘fair share’ of tax. However, that belief is at odds with the fact that our formal obligation is not to pay a fair amount of tax but, instead, to pay only the amount of tax due to be paid as defined by law. Most of us don’t have much choice about how we discharge this formal obligation – as our taxes are automatically remitted to the Australian taxation Office (ATO) by our employers.
However, most corporations, including Google, have considerable latitude when calculating the tax they think due. For example, corporations have a clear choice about the extent to which they move right to the edge of what the law allows: ‘avoiding’ (which is legal) but not ‘evading’ (which is illegal) tax obligations that, to an ordinary person, might seem to be due.
It is this approach to ‘tax planning’ that allows Google to earn revenue, in Australia, of $4.3B yet only pay tax of $100M. Google has a perfectly rational argument about how this can the case – and relies on the fact that it should only pay tax that is legally due.
However, as is the case with other multinational corporations who make similar calculations, Google’s position fails the ‘pub test’ in that it seems to be unfair? Why? Because it seems inherently improbable (and improper) that such massive local revenue should flow offshore to benefit people who contribute nothing to maintain the society that has made possible such a financial windfall.
The issue of Google paying a ‘licence fee’ to the creators of news content is somewhat different. In general, you’d think it a reasonable expectation that a company pay for the inputs it draws on to make a profit. After all, businesses pay for labour inputs (wages), for financial inputs (interest and dividends), for material inputs (cash outlays), etc. So, why not pay for content that is derived from other sources?
Of course, what’s good for the ‘goose’ should be good for the ‘gander’. Companies like News Corporation and Nine should also be asked if they pay for all of the inputs that they draw on to make a profit? For example, do they pay for all published opinion pieces, or for the interviews they conduct, etc.? However, in general, it seems reasonable to expect that Google (and other companies) should pay for what they derive from others.
Of course, Google does not agree – and is especially opposed to Australian proposals because, if adopted, they will set a precedent that other countries are likely to follow. It is this consideration that leads us to look at the issue through the lens of prudence.
Governments (of all political hues) are especially attentive to the demands of the media. What NewsCorp and Co. want, they usually get … unless opposed by the one force that wields even greater influence over the judgement of politicians – the force of public opinion. So, if Google wishes to prevent or limit the levying of a ‘licence fee’, its most potent ally might have been the Australian public.
However, the electorate is unlikely to back the interests of a company that is perceived not to back the interests of the people whose taxes provide the infrastructure on which Google depends for the enrichment of its overseas owners.
This is where principle and prudence align. Google (and other multinational corporations) should pay taxes that amount to a fair contribution to the maintenance of public goods. Had it done so, then Google might have many more friends who might stand beside it in its battle with other powerful corporations like NewsCorp and Nine.
I am not sure if arguments from principle or prudence will really carry much weight. Perhaps the situation needs to be expressed in the language of financial self-interest. Compared to a licence fee (which might be as high as $1B per annum), would a less aggressive approach tax planning have have been a good investment?
You can contact The Ethics Centre about any of the issues discussed in this article. We offer free counselling for individuals via Ethi-call; professional fee-for-service consulting, leadership and development services; and as a non-profit charity we rely heavily on donations to continue our work, which can be made via our website. Thank you.
Ethics in your inbox.
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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.
Are we ready for the world to come?
We are on the cusp of civilisational change driven by powerful new technologies – most notably in the areas of biotech, robotics and expert AI. The days of mass employment are soon to be over.
While there will always be work for some – and that work is likely to be extremely satisfying – there are whole swathes of the current economy where it will make increasingly little sense to employ humans. Those affected range from miners to pathologists: a cross-section of ‘blue collar’ and ‘white collar’ workers, alike in their experience of displacement.
Some people think this is a far too pessimistic view of the future. They point to a long history of technological innovation that has always led to the creation of new and better jobs – albeit after a period of adjustment.
This time, I believe, will be different. In the past, machines only ever improved as a consequence of human innovation. Not so today. Machines are now able to acquire new skills at a rate that is far faster than any human being. They are developing the capacity for self-monitoring, self-repair and self-improvement. As such, they have a latent ability to expand their reach into new niches.
This doesn’t have to be a bad thing. Working twenty-four hours a day, seven days a week in environments that no human being could tolerate, machines may liberate the latent dreams of humanity to be free from drudgery, exploitation and danger.
However, society’s ability to harvest the benefits of these new technologies crucially depends on planning and managing a just and orderly transition. In particular, we need to ensure that the benefits and burdens of innovation are equitably distributed. Otherwise, all of the benefits of technological innovation could be lost to the complaints of those who feel marginalised or abandoned. On that, history offers some chilling lessons for those willing to learn – especially when those displaced include representatives of the middle class.
COVID-19 has given us a taste of what an unjust and disorderly transition could look like. In the earliest days of the ‘lockdown’ – before governments began to put in place stabilising policy settings such as the JobKeeper payment – we all witnessed the burgeoning lines of the unemployed and wondered if we might be next.
As the immediate crisis begins to ease, Australian governments have begun to think about how to get things back to normal. Their rhetoric focuses on a ‘business-led’ return to prosperity in which everyone returns to work and economic growth funds the repayment of debts accumulated during the the pandemic.
Attempting to recreate the past is a missed opportunity at best, and an act of folly at worst. After all, why recreate the settings of the past if a radically different future is just a few years away?
In these circumstances, let’s use the disruption caused by COVID-19 to spur deeper reflection, to reorganise our society for a future very different from the pre-pandemic past. Let’s learn from earlier societies in which meaning and identity were not linked to having a job.
What kind of social, political and economic arrangements will we need to manage in a world where basic goods and services are provided by machines? Is it time to consider introducing a Universal Basic Income (UBI) for all citizens? If so, how would this be paid for?
If taxes cannot be derived from the wages of employees, where will they be found? Should governments tax the means of production? Should they require business to pay for its use of the social and natural capital (the commons) that they consume in generating private profits?
These are just a few of the most obvious questions we need to explore. I do not propose to try to answer them here, but rather, prompt a deeper and wider debate than might otherwise occur.
Old certainties are being replaced with new possibilities. This is to be welcomed. However, I think that we are only contemplating the ‘tip’ of the policy iceberg when it comes to our future. COVID-19 has given us a glimpse of the world to come. Let’s not look away.
The Ethics Centre is a world leader in assessing cultural health and building the leadership capability to make good ethical decisions in complexity. To arrange a confidential conversation contact the team at consulting@ethics.org.au. Visit our consulting page to learn more.
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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.”