Feel the burn: AustralianSuper CEO applies a blowtorch to encourage progress
It would be nice to think business is stamping out bad behaviour because it is the right thing to do. But that rarely is the case.
The growing pressure from regulators and the community mean employers have little choice but to clean up their acts, says Ian Silk, the CEO of Australia’s biggest industry superannuation fund.
He’s no stranger to a bit of pressure, adept at applying the “blowtorch” to hasten positive change. With $125 billion in assets, AustralianSuper was an activist shareholder in voting against the remuneration report of the Commonwealth Bank of Australia last year.
“The more controversial the issue, the more vociferous are the people who have strong views either way and, sometimes, you are in the middle of it and you have to make a judgement as to which way you will go.”
Previously, Silk had spoken out about the need for bonuses to be awarded for exceptional results, not just for performing the required tasks and, in the case of CBA, was arguing for more rigour around the bonus process.
The fund has also pledged to vote against the appointment of male non-executive directors where there are no women on the boards.
In an interview with The Ethics Centre, Silk says AustralianSuper’s high profile brings an obligation to speak out on “certain issues”.
“The more controversial the issue, the more vociferous are the people who have strong views either way and, sometimes, you are in the middle of it and you have to make a judgement as to which way you will go”, he says.
Ethics in business is a hot topic, particularly in the financial services sector.
“[It is], in a very large measure, a response to the egregious behaviour that is now so well publicised and readily-known by the public”, says Silk.
“Everybody knows unethical behaviour when they see it and I think there is a move back to appropriate norms. I think there is a recognition that much of the bad behaviour in the financial services sector is wrong.”
Silk says it is difficult to discern if this revitalised interest in ethics is deeply-felt, or whether it is a protective measure to avoid getting caught and penalised
“But I think there is a slow improvement in behaviour, much of it regulator and government led, but much of it community-led, consumer-led, some industry associations take a strong position on it.”
In terms of standards in his own organisation, Silk says he had been confident that the culture and behaviours at AustralianSuper would stand up to scrutiny. This is partly because, as a member-organisation, its sole purpose is to act in the interest of members and this provides a de facto ethical framework, he says.
However, earlier this year, he decided to get a second opinion. The Ethics Centre was engaged to undertake a “culture audit” to test whether the fund’s policies, procedures and practices were aligned with its purpose, values and principles.
“In my darkest moments, I just wondered if we had all drunk the Kool-Aid”, he says.
The results were gratifyingly positive and were affirmation that AustralianSuper and its 550 staff are on the right track, says Silk, who has led the fund since it was founded in 2006.
However, The Ethics Centre also found some areas for improvement, including a culture that could be “conflict averse”.
“We weren’t as robust as we might be. There was a tendency to avoid conflict in certain parts of the organisation, so we could introduce a bit more aggression into the organisation – aggression in a positive sense”, he says.
“People who are rude to others are counselled and abusive language or behaviour is not tolerated and could be regarded as a sacking offence.”
“Those areas where improvement opportunities were identified, we have consciously thought that we want to do something about that, we want to lift the standard in the organisation … so we have an action plan, we have done all the things that you might do with a business plan, we have identified all the particular areas, we have assigned responsibility to people, we are going to check in periodically to make sure progress has occurred.
“We haven’t just used it as a soft survey.”
It is too early to see much in terms of a change in culture since The Ethics Centre report was completed, but Silk says some progress has been noticed, such as more robust questioning in meetings.
“We are getting better outcomes as a result”, he says.
Silk’s commitment to respectful behaviours is well known. According to a recent report in the Australian Financial Review, every recruit to the organisation gets a one-and-a-half hour briefing from Silk on the fund’s four values.
People who are rude to others are counselled and abusive language or behaviour is not tolerated and could be regarded as a sacking offence.
The Ethics Alliance sat down for a further conversation with Ian. He shared his insights on the importance of discussing ethics with your network, why organisations always need to work toward good ends, and why leaders can’t just talk the talk. They need to walk the walk.
This article was originally written for The Ethics Alliance. Find out more about this corporate membership program. Already a member? Log in to the membership portal for more content and tools here.
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The Ethics Centre is a not-for-profit organisation developing innovative programs, services and experiences, designed to bring ethics to the centre of professional and personal life.
Managing corporate culture
It’s not uncommon these days to hear regulators sounding warnings about culture.
They point out that it’s a crucial role of boards to determine the purpose, values and principles of the company they govern, whilst the CEO and senior management have responsibility for implementing the desired culture. Personnel in human resources, ethics, compliance, and risk functions all have a role to play in embedding values and ethics.
Culture, we hear, has an important role to play in risk management and risk appetite. Weak risk cultures are often the root cause of the most spectacular governance failures. Firms lacking good corporate culture will fail investors and stakeholders.
“Trust, like beauty, is in the eye of the beholder,” says John Price, Commissioner of the Australian Securities and Investment Commission (ASIC). “If consumers don’t like the way a firm has behaved, they can take their business elsewhere and tell everyone about it through the wonders of social media. Loss of reputation due to poor conduct destroys value in a firm. Even more challenging is that poor conduct may be technically within the law, but still have negative impact on a firm’s reputation.
“The possible loss of trust and confidence is a key business risk. If the conduct of a firm genuinely reflects ‘doing the right thing,’ this mitigates conduct risk and will be rewarded with longevity, customer loyalty, and a sustainable business.”
All very well, we hear you say: but how does a company manage culture? What does good culture even look like? By what standard do we measure it or assess it? How do you shift from the culture you’ve got today to the culture you aspire to for the future?
The Ethics Centre has been exploring this subject for many years, developing frameworks and methodologies for measuring and improving culture along the way. We’ve played a significant advocacy role as well, arguing for boards to accept responsibility for setting and maintaining the culture standard in the organisations they govern.
The Ethics Centre recently partnered with the Governance Institute, the Institute of Internal Auditors and Chartered Accountants Australia to produce Managing Culture – A Good Practice Guide. This publication sets out to define culture and explores challenges in identifying, monitoring and driving culture, including organisational change programs. The guide also explores the importance of embedding culture and the nature of the board’s role in evaluating and overseeing culture.
Research has shown that companies that have a good culture perform better than companies that do not. The Guide outlines how each group in an organisation can contribute to a good culture, the first step of which is to create an ethical framework that provides guidance on decisions and an appropriate ‘tone from the top’.
While having an integrated governance and risk management framework is important, unless an organisation establishes a culture that promotes risk awareness into everything it does, it is unlikely to achieve its objectives. Governance and risk management must be at the core of an organisation’s culture.
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Bladerunner, Westworld and sexbot suffering
The sexbots and robo-soldiers we’re creating today take Bladerunner and Westworld out of the science fiction genre. Kym Middleton looks at what those texts reveal on how we should treat humanlike robots.
It’s certain: lifelike humanoid robots are on the way.
With guarantees of Terminator-esque soldiers by 2050, we can no longer relegate lifelike robots to science fiction. Add this to everyday artificial intelligence like Apple’s Siri, Amazon’s Alexa and Google Home and it’s easy to see an android future.
The porn industry could beat the arms trade to it. Realistic looking sex robots are being developed with the same AI technology that remembers what pizza you like to order – although it’s years away from being indistinguishable from people, as this CNET interview with sexbot Harmony shows.
Like the replicants of Bladerunner we first met in 1982 and the robot “hosts” of HBO’s remake of the 1973 film Westworld, these androids we’re making require us to answer a big ethical question. How are we to treat walking, talking robots that are capable of reasoning and look just like people?
Can they suffer?
If we apply the thinking of Australian philosopher Peter Singer to the question of how we treat androids, the answer lies in their capacity to suffer. In making his case for the ethical consideration of animals, Singer quotes Jeremy Bentham:
“The question is not, Can they reason? nor Can they talk? but, Can they suffer?”
An artificially intelligent, humanlike robot that walks, talks and reasons is just that – artificial. They will be designed to mimic suffering. Take away the genuine experience of physical and emotional pain and pleasure and we have an inanimate thing that only looks like a person (although the word ‘inanimate’ doesn’t seem an entirely appropriate adjective for lifelike robots).
We’re already starting to see the first androids like this. They are, at this point, basically smartphones in the form of human beings. I don’t know about you, but I don’t anthropomorphise my phone. Putting aside wastefulness, it’s easy to make the case you should be able to smash it up if you want.
But can you (spoiler) sit comfortably and watch the human-shaped robot Dolores Abernathy be beaten, dragged away and raped by the Man in Black in Westworld without having an empathetic reaction? She screams and kicks and cries like any person in trauma would. Even if robot Dolores can’t experience distress and suffering, she certainly appears to. The robot is wired to display pain and viewers are wired to have a strong emotional reaction to such a scene. And most of us will – to an actress, playing a robot, in a fictional TV series.
Let’s move back to reality. Let’s face it, some people will want to do bad things to commercially available robots – especially sexbots. That’s the whole premise of the Westworld theme park, a now not so sci-fi setting where people can act out sexual, violent, and psychological fantasies on android subjects without consequences. Are you okay with that becoming reality? What if the robots looked like children?
The virtue ethicist’s approach to human behaviour is to act with an ideal character, to do right because that’s what good people do. In time, doing the virtuous thing will be habit, a natural default position because you internalise it. The virtue ethicist is not going to be okay with the Man in Black’s treatment of Dolores. Good people don’t have dark fantasies to act out on fake humans.
The utilitarian approach to ethical decisions depends on what results in the most good for the largest amount of people. Making androids available for abuse could be a case for community safety. If dark desires can be satiated with robots, actual assaults on people could reduce. (In presenting this argument, I’m not proposing this is scientifically proven or that it’s my view.) This logic has led to debates on whether virtual child porn should be tolerated.
The deontologist on the other hand is a rule follower so unless androids have legal protections or childlike sexbots are banned in their jurisdiction, they are unlikely to hold a person who mistreats one in ill regard. If it’s your property, do whatever you’re allowed to do with it.
Consciousness
Of course, (another spoiler) the robots of Westworld and Bladerunner are conscious. They think and feel and many believe themselves to be human. They experience real anguish. Singer’s case for the ethical treatment of animals relies on this sentience and can be applied here.
But can we create conscious beings – deliberately or unwittingly? If we really do design a new intelligent android species, complete with emotions and desires that motivate them to act for themselves, then give them the capacity to suffer and make conscientious choices, we have a strong case for affording robot rights.
This is not exactly something we’re comfortable with. Animals don’t enjoy anything remotely close to human rights. It is difficult seeing us treat man made machines with the same level of respect we demand for ourselves.
Why even AI?
As is often with matters of the future, humanlike robots bring up all sorts of fascinating ethical questions. Today they’re no longer fun hypotheticals. It is important stuff we need to work out.
Let’s assume for now we can’t develop the free thinking and feeling replicants of Bladerunner and hosts of Westworld. We still have to consider how our creation and treatment of androids reflects on us. What purpose – other than sexbots and soldiers – will we make them for? What features will we design into a robot that is so lifelike it masterfully mimics a human? Can we avoid designing our own biases into these new humanoids? How will they impact our behaviour? How will they change our workplaces and societies? How do we prevent them from being exploited for terrible things?
Maybe Elon Musk is right to be cautious about AI. But if we were “summoning the demon”, it’s the one inside us that’ll be the cause of our unease.
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BY Kym Middleton
Former Head of Editorial & Events at TEC, Kym Middleton is a freelance writer, artistic producer, and multi award winning journalist with a background in long form TV, breaking news and digital documentary. Twitter @kymmidd
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.
Why victims remain silent and then find their voice
TIME Magazine’s announcement comes amid a storm of reckoning with sexual harassment and abuse charges in power centres worldwide. The courageous victims who, over the past few months, surfaced and made public their experiences of sexual harassment have sparked a social movement – typified in the hashtag #MeToo.
One of the features of the numerous sexual harassment claims that have been made public is the number of victims that have come forward after the first allegations have surfaced. Women, many of whom have suffered in silence for a considerable period of time, all of a sudden have found their voice.
As an outsider not involved in these incidents, this pattern of behaviour might be difficult to comprehend. Surely victims would speak up and take their concerns to the appropriate authorities? Unfortunately, we are very poor at judging how we would behave when we are placed in difficult, stressful situations, as previous research has found.
How we imagine we would respond in hypothetical situations as an outsider differs significantly to how we would respond in reality – we are very poor at appreciating how the situation can influence our conduct.
In 2001, Julie Woodzicka and Marianne LaFrance asked 197 women how they would respond in a job interview if a man aged in his thirties asked them the following questions: “Do you have a boyfriend?”, “Do people find you desirable?” and “Do you think women should be required to wear bras at work?” Over two-thirds said they would refuse to answer at least one of the questions whilst sixteen of the participants said they would get up and leave.
When Woodzicka and LaFrance placed 25 women in this situation (with an actor playing the role of the interviewer), the results were vastly different. None of the women refused to answer the questions or left the interview.
In all these incidents of sexual abuse we typically find that an older man, who is more senior in the organisation or has a higher social status, preys on a younger, innocent woman. And perhaps most importantly, the perpetrator tends to hold the keys to the victim’s future prospects.
And there are many reasons why people remain silent. Three of the most common are fear, futility and loyalty – we fear consequences, we surmise that speaking up is futile because no action will be taken, or, as strange as it might sound, we feel a sense of loyalty to the perpetrator or our team.
There are a variety of dynamics that can cause people to reach these conclusions. The most common is power. In all these incidents of sexual abuse we typically find that an older man, who is more senior in the organisation or has a higher social status, preys on a younger, innocent woman. And perhaps most importantly, the perpetrator tends to hold the keys to the victim’s future prospects.
In these types of situations, it is easy to see how the victim can lose their sense of agency and feel disempowered. They might feel that even if they did speak up, nobody would believe their story. The mere thought of challenging such a “highly respected” individual is too daunting. Worse yet, their career would be irreparably damaged. Perhaps, by keeping quiet, they could get the break they need and put the experience behind them.
A second dynamic at play is what psychologists refer to as pluralistic ignorance. First conceived in the 1930s, it proposes that the silence of people within a group promotes a misguided belief of what group members are really thinking and feeling.
In the case of sexual harassment, when victims remain silent they create the illusion that the abuse is not widespread. Each victim feels they are isolated and suffering alone, further increasing the likelihood that they will repress their feelings.
By speaking out, women have shifted the norms surrounding sexual assault. Behaviour which may have been tolerated only a few years (perhaps months) ago is now out of bounds.
But as the events of the past few weeks have demonstrated, the norms promoting silence can crumble very quickly. People who suppress their feelings can find their voice as others around them break their silence. As U.S. legal scholar Cass Sunstein recently wrote in the Harvard Law Review Blog, as norms are revised, “what was once unsayable is said, and what was once unthinkable is done.”
And this is exactly what has happened over the past few months. Both perpetrators and victims alike are now reflecting on past indiscretions and questioning whether boundaries were crossed.
Only time will tell whether the shift in norms is permanent or fleeting. As is always the case with changes in social attitudes, this will be determined by a myriad of factors. The law plays a role but as the events of the past few months have demonstrated it is not as important as one might think.
Among other things, it will require the continued courage of victims. But perhaps more importantly it will require men, especially those who are in positions of power and respected members of our communities and institutions, to role model where the balance resides between extreme prudery at one end, and disgusting lechery on the other.
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BY Dennis Gentilin
Dennis Gentilin is an Adjunct Fellow at Macquarie University and currently works in Deloitte’s Risk Advisory practice.
BY The Ethics Centre
The Ethics Centre is a not-for-profit organisation developing innovative programs, services and experiences, designed to bring ethics to the centre of professional and personal life.
The Ethics Alliance: Why now?
After almost thirty years of existence, The Ethics Centre has chosen this particular time to establish The Ethics Alliance. Why the Alliance, and why now?
I’ve heard it suggested that the Alliance is a necessary response to a period of history in which our trust in institutions – including banks, governments and the media – has dropped to a new low point. Some may see it as an opportunity for organisations to restore their battered reputations.
Others may see the Alliance a little more generously, as a community of like-minded organisations with a common commitment to good business practice. A collaborative effort to raise the standards of good business behaviour. A source of insights and tools that will enable better culture to emerge.
While low levels of trust certainly form part of the context within which The Ethics Alliance is emerging, we believe the root cause of our current malaise is something far more significant: the fact that we are on the edge of a transformation that will change our society in ways every bit as profound as those caused by the First Industrial Revolution.
The Ethics Alliance has a clear function. It is a mechanism for developing collective insight and practical measures that will support its members to manage this historic transition. The Alliance will enable companies – and the leaders who work in them – to harness change for the benefit of employees, customers and shareholders alike. The ultimate beneficiary will be the society in which we all live.
We are already seeing clues as to the general shape of the coming changes. Many of these are the product of scientific and technological innovation. Artificial Intelligence and robotics (including nano-fabrication by 3D printers) will displace vast numbers of people from employment. New jobs may be created – but there are very few credible plans in place to ensure the necessary transition will be just or orderly.
The upheaval in employment will be accompanied by a revolution in medicine. Gene editing (using the ‘cut & paste’ functions of CRISPR), pharmaco-genomics, the use of stem cells to regenerate organs and a myriad of other developments will see a startling increase in the lifespan of those who can afford these therapies.
The resulting seismic shift in demography will challenge all of our assumptions about what makes for a worthwhile life, about the status of long-established social institutions, about sources of value and so on. What kind of economy will be needed to support such a society? What is the role of the market, of government, of civil society?
These questions will create new practical challenges within every workplace. If one of the key responsibilities of business leaders is to anticipate and plan for the emerging future and creating organisations which are fit for purpose, then there is much to discuss. Scientists, economists, engineers and lawyers can help us to know what we could do in response to issues of this kind. But only ethics can help us decide what we should do.
We believe business, professional and government organisations not only have a responsibility to help meet the challenges of the future – they also have the capacity to do so.
These matters are not just for governments to solve. Few, if any, organisations will be able to address such ‘civilisational’ challenges alone. Aggregating the resources, energy and insights of members of The Ethics Alliance will achieve outcomes that individual organisations could never achieve on their own.
The Ethics Alliance will also provide practical tools to its members – building their capacity to make better decisions – even in conditions of uncertainty. And it will support innovation. The Ethics Alliance has been designed as a safe place for testing the boundaries of what might be possible.
Society may have lost a little of its faith in government and business lately, and that’s something we should all be concerned about. We believe business, professional and government organisations not only have a responsibility to help meet the challenges of the future – they also have the capacity to do so.
These same organisations cannot afford to ignore these issues or mismanage their response. This is not just about managing risk. It is also about learning how to harvest the dividends of progress without compromising the future.
In that sense, The Ethics Alliance is not so much a response, as a product of the times in which we live.
This article was originally written for The Ethics Alliance. Find out more about this corporate membership program. Already a member? Log in to the membership portal for more content and tools here.
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BY Simon Longstaff
After studying law in Sydney and teaching in Tasmania, Simon pursued postgraduate studies in philosophy as a Member of Magdalene College, Cambridge. In 1991, Simon commenced his work as the first Executive Director of The Ethics Centre. In 2013, he was made an officer of the Order of Australia (AO) for “distinguished service to the community through the promotion of ethical standards in governance and business, to improving corporate responsibility, and to philosophy.”
A guide to ethical gift giving (without giving to charity)
It’s easy to be frustrated by “charity giving” during the festive season. Little Billy gets a card from World Vision thanking him for support he never knew he gave. All because his sanctimonious aunt decided a new bike wasn’t particularly important.
We’d expect Billy to be pretty upset. But is objecting to “charity giving” childish or is donating on a friend’s behalf incompatible with Christmas giving altogether?
Reminding others of their ethical duties at a time of celebration is, in many ways, noble. There is also value for charity gifts as responses to the hollow commercial practices of modern Christmas traditions.
Charity giving overhauls the tradition of giving. It seeks to fulfil a social need without consideration of the putative “receiver”. As such, the moral case for charity giving isn’t black and white.
While the act might be well-intended, it is poorly executed. When we give at Christmas, presents convey a specific message – one that charity gifts miss altogether.
When we give, we create a sense of shared meaning between individuals. The gift establishes a relationship on the basis of common commitment. In the case of Christmas, the commitment is to one another. Different gifting rituals have other messages.
For instance, during Kwanzaa, members of the African diaspora give homemade gifts to encourage one another to remember their heritage. Kwanzaa emphasises the creation of a moral community in which each member is dedicated to the other. Do-it-yourself gifts foster an attitude where the focus is not on the gift itself, but the recipient.
It might seem as though the charity gift does something similar. By doing good in the name of the recipient, perhaps we foster a relationship based on social justice rather than consumption. But there is a difficulty here.
When our gift is a donation for a distant community, we’re no longer giving a gift to our friend or family member. We’re giving a gift to that distant community.
However deserving the community is, this form of giving is radically different to the form inherent to Christmas or Kwanzaa. We effectively cut the receiver out of the process and instead use the gift ceremony as a means to achieving our own moral agenda.
If charity gifts are a problem, can we give in a way that goes beyond the department store notions of giving and escapes the cycle of consumption?
Yes, but the solution doesn’t lie in what we give, but in how we give.
We can take cues from other cultures. There are entire systems of morality built around the idea of the gift. The famous sociologist Marcel Mauss wrote of gift economies in tribal cultures. He learned how members of traditional Samoan communities gain or lose standing based on their ability to give and to receive well. The exchange of property there is more about establishing relationships than obtaining any particular object or achieving any social goal.
This idea of the giving being more important than the gift isn’t foreign to Christmas traditions. The first recorded act of Christmas gifting was Queen Victoria to her children in 1850. You’d have to rack your brain to find something that the kids of imperial royalty needed. Indeed, the gifts they got were purely symbolic, gestures of goodwill.
So if you’re toying with the idea of ethical giving this Christmas, don’t line up the usual suspects. Make donations to your chosen charities in your own name, but avoid treating them as a replacement for gifting. Charity gifts don’t show others what they mean to you, they substitute the gift for some other moral end.
Give some thought instead to the received wisdom of gift cultures.
Begin by asking yourself, “what does this person mean to me?” “How best can I show them?”
If the gift is a way of sending a certain message, focus on the message. The object is just a means of communication – the message lies in the giving.
Become an artist of the gift – creative, thoughtful and mindful of the recipient – and you can give without being smarmy or sanctimonious.
Truly a modern Christmas miracle.
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Measuring culture and radical transparency
The Ethics Centre is often asked whether it’s possible to “measure” or evaluate organisational culture. Executives and Directors are now alive to the considerable responsibility they bear for the workplaces they preside over – and this has led to a growing demand for robust and credible measurement tools.
Using a methodology developed over 25 years, The Ethics Centre’s Everest process is a forensic review into a company’s ethical culture. It’s based on a simple proposition: that good culture can be measured. Global research shows a healthy culture is essential to sustainable, long-term performance; it enables innovation and builds trust between staff, clients, and customers. Conversely, poor culture leads to bad decisions and an erosion of trust and credibility. The result, inevitably, is disengagement, cynicism, and loss of value.
In the face of challenging conditions, many leaders are tempted to focus their efforts on compliance to prevent ‘bad’ behaviour. But this over-reliance on regulation and surveillance can be counterproductive. Not only can it restrict growth of a positive ethical environment that enables people to innovate and act with a shared purpose and direction, it also doesn’t work. Failures persist. A strong ethical culture is critical to managing risk and building a foundation that will support long term value and performance.
We’ve employed Everest to evaluate the culture of numerous, very different, organisations. We’ve used it on one of Australia’s “big four” banks and a leading superannuation fund. We’ve measured the culture of universities, insurance companies, and leading sports organisations including the Australian Rugby Union, Cricket Australia, and the Australian Olympic Committee.
In carrying out the process both in Australia and abroad, we look at the misalliances between what a company says it stands for, and what occurs in practice. Using this premise, we check how organisations live up to the standards they set for themselves through an audit of systems, policies, procedures, and practices. We undertake extensive qualitative and quantitative research to determine how employees and key stakeholders view the organisation. Out of this process comes a set of powerful insights into the degree of alignment between purpose and practice. We identify the gaps.
Once we’ve made sense of the current state of an organisation, we’re in a position to ask our clients some tough questions about the kind of company they’d like to be. We present clients with a Future State Framework that maps the pathway from the present to the future – asking them to imagine the pinnacle of what’s possible for their organisation. In doing this, we examine five domains:
Culture: The operating system through which people create meaning, purpose, and belonging.
Ecosystem: Organisations are complex, interconnected, and interdependent. They sustain, and are sustained, through relationships, mutual dependencies, and the value they bring to the whole.
Leadership: Providing the guidance, direction, and consistency that allows an organisation to respond to the challenges of uncertainty and change.
Readiness: The ability of an organisation to anticipate and respond to uncertainty. The ability to pre-empt a possible future before it arrives fully formed.
Legacy: The future’s perspective on the present. The map we leave behind for others.
The nature of Everest, particularly when coupled with the independence of The Ethics Centre, is that we can confront leaders with issues that have not previously been articulated, recognised, or challenged. And we do this in a way that lessens defensiveness and focuses on building on the goodwill contained in the existing culture of the organisation.
We’re proud that our process has provided leaders across business and government with the expertise to shine a spotlight on current practices and make choices about the culture and style of organisation they wish to cultivate in the future.
One final note: our Everest reports are delivered to our clients on the understanding that everything contained therein is strictly confidential. What a company does with the report is entirely up to them. None had ever been made public until we worked for the Australian Olympic Committee in 2017.
Facing a media storm over their culture, the AOC took the brave step of releasing the report, in its entirety, to the public. Thanks to this act of radical transparency, we’re able to share it with you here.
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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 win for The Ethics Centre
The Ethics Centre was announced the 2017 winner of the Optus MyBusiness Awards Training Education Provider of the Year, for our innovative business ethics education program.
The prestigious annual event is Australia’s longest running awards program for SMEs. 150 finalists attended the award ceremony at Sydney’s Westin Hotel where the winners were announced across 28 award categories.
The Ethical Professional Program is our core professional education program, centred on applied ethics, quality decision making, professional practice and leadership. Exclusively devised for financial advisors, brokers, bankers and those who work alongside them, it has been rolled out across the financial service sector.
Participants who have completed the program tell us it helped them build stronger relationships with colleagues and clients, link everyday decisions back to their organisation’s strategy and purpose, and deal with complex issues as they arise.
The program consistently achieves high net promoter scores and positive feedback that indicates participants not only leave with new skills but enjoy the process too – not something you hear every day about ethics education!
We take our role as a leading provider of ethics education very seriously. As events in the world continue to shock, scare and surprise us, and our trust in core institutions appears to plummet, it can seem as if people care less and less about ethics. Our experience tells us otherwise. The people and organisations we work with across our ethics, leadership and learning programs are hungry to explore what they value, the principles they hold on to, and how to make their way through some of the most difficult ethical challenges we face today.
Our organisation has been involved in learning and education for over 25 years and are thrilled to be recognised for the transformative programs we deliver in ethics education.
As an independent non-profit specialising in ethics, we’ve been asked by many organisations, industries and governments, both locally and internationally, to provide a different kind of education and training experience.
Each of our education and training programs challenge participants to think differently – to critically examine other opinions, be consistent in their judgements, and make responsible and considered decisions. They provide the skills and tools to understand and resolve the multitude of difficult ethical challenges we all face as part of our personal and professional lives.
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A radical act of transparency
The Australian Olympic Committee had been through a six month media firestorm by the time its new CEO, Matt Carroll, got his hands on a confronting review of the organisation’s culture.
The AOC had been battered by a succession of negative events. Its former CEO, Fiona de Jong, had resigned in a blaze of headlines while their longstanding president John Coates had fought off a bruising challenge to his leadership in a publicised election campaign.
Some of its most senior executives received allegations of bullying and poor behaviour. Part of its 36 staff complained the AOC was the most dysfunctional place they’d ever worked. There was even an ugly rift between the AOC and the Australian Sports Commission, which funds high performance sports.
What’s more, the medal tally from athletes in the most recent summer Olympic Games in Rio had been disappointing – our worst in 15 years.
Even with Carroll in place as the new “cleanskin” CEO, the damaging headlines were showing no sign of abating. With the results of the 64-page cultural review in his hands, Carroll knew the bad news would keep leaking out.
So he and Coates decided to publish the review’s findings and its 17 recommendations on its website and release them to the media – effectively putting the organisation’s “dirty laundry” on the table for all to see.
“Why? We knew we were going to get criticised, and we did. We knew we were going to get held up and ridiculed, and we did”, says Carroll today.
“We copped a bit of a battering in the media for a week, but I know that the national sporting federations had a great deal of respect for us doing it.”
“But there was one question I couldn’t have answered if we hadn’t done it and it was: ‘What are you hiding?’ And that would have dragged us backwards.”
They concluded the only way to move on and put their troubles behind them was to engage in an act of radical transparency.
A ‘brave’ decision
The independent review, conducted over two months by The Ethics Centre, was not initially intended to be a public document. But when the report finally landed in the AOC boardroom – a frank appraisal of all that was wrong with the organisation, and what they needed to do to fix it – the decision was quickly made to go public.
“The transparency involved in publishing the report is very good for my purposes in changing the organisation because it is out there”, Carroll says.
“There can be no pushback … It sets a standard that this is the way we are going to operate.”
The business community was agog; a corporate leader made a wary comment telling Carroll the move was “brave”.
But while staff and the sporting federations were generally appreciative of the review and the courageous decision to go public with the findings, it was not a painless process.
“It did have an effect on some of the senior managers because there was this inherent criticism of the leadership team – some of whom are new – but they have shouldered that”, says Carroll.
“For the leadership team, there was this feeling they had all been tarred with the same brush and some of them took that quite hard. We have all been tarred a bit, but we have recognised the issues, recognised the problems, we have agreed that we need to make change.”
Coates, however, was accused of sidestepping responsibility for the poor organisational culture when he told a news conference, “The only criticism of me, personally, has been my acrimonious relationship with some stakeholders, particularly [Australian Sports Commission chair] John Wylie, and that has been put in context.”
Extending transparency
One of the findings of the AOC culture review was a lack of transparency around key decisions – like how individual sports are funded, how staff members are selected to work on site at each Olympic Games. This lack of transparency had led to an atmosphere of suspicion and allegations of favouritism.
Carroll intends to usher in a new era of transparency to dispel any suggestion of favouritism.
“Equally, performance is expected. Yes, we can structure everything and will make sure everyone knows their roles and responsibilities. There is a process, and it is transparent, but that doesn’t mean everybody is a winner.
“We are in the business of high performance sport and our athletes expect the same [level of performance] from our organisation. If you don’t perform in your role, yes, you probably won’t get to go to the Games – but you will know why.
“I am always of the view that you tell the truth, otherwise it comes around to bite you anyway.”
Carroll says this level of openness does not mean that everyone gets a say. “Transparent decision making doesn’t mean you are standing out there asking everyone’s opinion.
“But there is a process where everyone knows how it works and they know what the expectations are and, therefore, they can measure themselves.”
A culture of stress
“One reason that it was always so frantic was that people made it frantic.”
Having come into his role with a 20 year career in sports management, Carroll says he did not think there were any serious ethical problems at the AOC. He saw it was more of a matter of applying appropriate ethical standards to behaviours – especially at times when the organisation is operating under “emergency mode”, such as Games times.
“I am sympathetic to the stress the organisation is sometimes under. I don’t think there was a massive problem, as big as the media was dressing it up, at all. It was more about settling the organisation down and having those restructured roles and responsibilities”, he says.
“There was a culture of stress. One reason that it was always so frantic was that people made it frantic, rather than taking a deep breath. We are not changing the world, we don’t save lives every day of the week, we leave that to more important organisations. You have got to get people to take a step back and take a deep breath.”
Sometimes, the solution is to be nicer to each other, Carroll says. “You can have a disagreement with people … but, for Heaven’s sake don’t behave like [you are in] a schoolyard. Have respect for people.
“If you have no respect for people then they won’t have respect for you.”
Carroll says sport’s important role in Australian culture is reflected in the community’s high expectations of behaviour.
“That is why sport needs to retain its absolute credibility. If it loses that credibility, those role models – no matter how hard they try – won’t be able to show that influence and leadership.
“We can change lives, we don’t save lives. Sport has got to have its own perspective: it isn’t the be all and end all of the country. There are other far more important aspects of society in Australia than sport.
“We can play that leadership role, we can play that role of setting some standards, but we also must accept, at the end of the day, it is about sport.”
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In the court of public opinion, consistency matters most
If you’re like us, you spend a lot of time reading the business news. And you’re be familiar with a strange paradox: while some highly respected business leaders can be brought to their knees by one poor decision or ethical stumble, there are others that seem to get away with it time after time. In the language of the CBD, they’re Teflon-coated.
It hardly seems fair that those who have spent their career doing the right thing attract more criticism when they fail. But it seems there is nothing the public hates more than a hypocrite.
Psychologist Dr. Melissa Wheeler says hypocrisy is often considered a bigger sin than the transgression itself.
“The thing that really gets people’s attention is someone’s moral hypocrisy – when you say something, but do something very differently. Or you condemn something, but then have been found to be doing it as well”, says Wheeler, who has a PhD in moral and social psychology and is a Research Fellow in the Department of Management and Marketing at the University of Melbourne.
Cyclist Lance Armstrong is therefore judged more harshly because he was a healthy-life champion who was doping himself throughout a career, which included winning seven Tour de France events.
“The thing that really gets people’s attention is someone’s moral hypocrisy – when you say something, but do something very differently.”
Conversely, we shrug off US President Donald Trump’s Twitter diatribes and troublesome behaviour because they’re generally consistent with his career and private life over the decades.
“With Trump, I keep wondering why people aren’t more outraged and shocked at all the things that are coming out, scandal after scandal, and why are people not even batting an eye anymore”, says Wheeler.
“And I think it is because we have come to expect that from him, because it conforms with what you are expecting and it conforms with your stereotype of what he, as a politician, is.”
Surprise makes a scandal ‘stick’
Mud seems to “stick” if someone does the unexpected or flouts their own stereotype, she says.
In the corporate world, Volkswagen’s falsification of its vehicle emissions data became one of the biggest scandals of 2015. It was trading on its “green” credentials, but was lying about its performance.
Organisations cannot even expect that their good record will help insulate them from future mistakes.
“If you do anything to fall from that grace, it is going to be worse”, says Wheeler.
In fact, not only can “good-practise champions” attract more criticism when they fail, they can also draw more scrutiny in the first place, according to the managing director of the Australian Centre for Corporate Social Responsibility, Dr Leeora Black.
“Paradoxically, sometimes companies with stated good intentions are targeted [by activists] more frequently than companies without, simply because they are more likely to respond.”
Black, an advisor with a PhD in Corporate Social Responsibility, says change campaigners will target companies that already have expressed a commitment to be socially responsible. “They know they will get more traction from those companies than companies that don’t care.”
“Paradoxically, sometimes companies with stated good intentions are targeted more frequently than companies without, simply because they are more likely to respond.”
Activists target companies they can change
Public opinion and media coverage often follow the activists, which goes some way towards explaining why socially responsible companies get more flak for their ethical breaches, she says.
“Normally, without that targeting by activists, if a company is doing well and it stumbles, stakeholders are more likely to give it the benefit of the doubt.”
“Many people have spoken to me about this [phenomenon] in their companies, particularly in the early days, when they get started. Normally, companies that are further advanced in their corporate responsibility journey become more resilient and they also develop stronger relationships with stakeholders and so they are much less likely to suffer that kind of backlash when they do slip”, says Black.
“It is the companies that are newer to CSR that are more likely to get targeted and may be more concerned about it.”
However, fears of harsh judgement should not be a disincentive to hold and display high ethical standards. The business case of corporate social responsibility (CSR) is that the “benefits outweigh the troubles”, she says.
“And the troubles are short term and the benefits are long term.”
Black says the benefits of CSR are better employee attraction and retention, higher employee productivity and organisational commitment.
“For companies listed on the stock exchange, over time, their better performance will be rewarded by shareholders. There is also the opportunity for enhanced risk identification and management, enhanced innovation and improved reputation”, she says.
“But it does take consistency and persistency. You don’t just do one good thing and expect everybody to fall all over the place, gobsmacked about how wonderful your company is. That doesn’t cut it. That is the kind of thing that is more likely to be viewed as hypocrisy.
“Where there are systemic, fundamental, deep-seated commitments being made by the company that are being expressed in its culture and its strategy, then, over time, the persistence and the consistency will be rewarded and the company will become much more resilient to shocks that may happen from an occasional stumble.”
Scandal recovery depends on response
Wheeler says once a scandal has broken, an organisation’s ability to recover will depend on how it handles the aftermath and whether it uses it as an opportunity to grow.
Effective responses include taking responsibility, working around the facts of the transgression, not sweeping it under the rug and providing appropriate explanations for the wrongdoing.
“I think there is a real sincerity in that. So, it is not just like trying to weasel out of the blame.
“And then people like to see that the companies are willing to accept and serve what might be considered an equitable punishment. They want to see there is some punishment for the action and some consistent internal changes – what sort of rehabilitation are they doing?”
University of Pittsburgh researchers studied 100,000 social media tweets to see how the tenor of the public discussion changed in the weeks following Volkswagen’s emissions data scandal.
A sentiment analysis over four separate weeks showed how criticism of the company abated once Volkswagen and the regulators took action.
“Ultimately, if the company’s efforts at recovery are successful, the sentiment returns to a neutral state”
Sentiment about the brand was extremely negative immediately after the news broke, but shifted once the company started recovery efforts (such as an apology and recall) and regulatory agencies placed responsibility with the company.
“Ultimately, if the company’s efforts at recovery are successful, the sentiment returns to a neutral state”, says the study’s lead author, Vanitha Swaminathan, Thomas Marshall Professor of Marketing at the Katz Graduate School of Business at the University of Pittsburgh.
Learning from the experience
The damage to Volkswagen included a plunge in their stock price, government investigations in North America, Europe and Asia, the CEO’s resignation, the suspension of other executives, the company’s 2015 record loss, and a tab estimated at more than $US19 billion to rectify the issues, according to American economist, Boris Groysberg, in the Harvard Business Review.
There are also expected to be long term impacts on the careers of Volkswagen employees. “Our research shows that executives with scandal-tainted companies on their résumés pay a penalty on the job market, even if they clearly had nothing to do with the trouble”, says Groysberg.
“Overall, these executives are paid nearly 4 per cent less than their peers. Given that initial compensation in a job strongly affects future compensation, the difference can become truly significant over a career.
Good news for those who have slipped up is that surviving a scandal can result in a stronger operating performance in the long term – if the organisation has learned from the experience, ejected the wrongdoers and put into place measures to avoid a recurrence.
Researchers at the University of Sussex studied 80 corporate scandals and discovered that although share prices plummeted by between 6.5 and 9.5 per cent in the month after the bad headlines started, the experience could lead to improved performance in the long term. The scandals included breach of contract, bribery, conflicts of interest, fraud, price fixing and other white-collar crimes, as well as personal scandals such as a CEO having an affair, lies on CVs and harassment cases.
Dr Surendranath Jory, who led the study, said safeguards put into place to protect against further abuses seemed to allay investor fears and avoid further drops in a company’s stock price, ensuring they rebound to the levels of their rivals. “Three years on from scandals, the share price performance of firms matched those that had not been affected by scandals.
“Clearly, investors value ethics and they place a premium on it.”
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This article was originally written for The Ethics Alliance. Find out more about this corporate membership program. Already a member? Log in to the membership portal for more content and tools here.
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