The scenario is familiar to us all. Company X is in crisis. A series of poor management decisions set in motion a sequence of events that lead to an avalanche of bad headlines and public outcry.

When things go wrong for an organisation – so wrong that the carelessness or misdeeds revealed could be considered ethical failure – responsibility is shouldered by those who are the final decision makers. They are and should be held accountable.

Boards of organisations, and the individual directors that comprise them, collectively make decisions about strategy, governance and corporate performance. Decisions that involve the interests of shareholders, employees, customers, suppliers and the wider community. They will also involve competing values, compromises and tradeoffs, information gaps and grey areas.

In the recent 2021 Future of the Board report from The Governance Institute of Australia, respondents were surveyed to consider the most valued attributes for future board directors. Strategic and critical thinking were once again ranked the highest, closely followed by the values of ethics and culture as the two most important areas that boards need to focus on to prevent corporate failure. A culture of accountability, transparency, trust and respect were viewed as a top factor determining a healthy dynamic between boards and management.  

Ethics plays a central role in the decisions that face Boards and directorssuch as:

  • What constitutes a conflict of interest and how should it be managed?
  • How aggressive should tax strategies be?
  • What incentive structures and sales techniques will create a healthy and ethical organisational culture?
  • What about investments in organisations that profit from arms and weaponry?
  • How should organisations manage the effects technology has on their workforce?
  • What obligation do organisations have to protect the environment and human rights?

Together, The Australian Institute of Company Directors (AICD) and The Ethics Centre have developed a decision-making guide for directors.

Ethics in the Boardroom provides directors with a simple decision-making framework which they can use to navigate the ethical dimensions of any decision. Through the insights of directors, academics and subject matter experts, the guide also provides four lenses to frame board conversations. These lenses give directors the best chance of viewing decisions from different perspectives. Rather than talking past each other, they will help directors pinpoint and resolve disagreement.

  • Lens 1: General influences – Organisations are participants in society through the products and services they offer and their statuses as employers and influencers. The guide invites directors to seek out the broadest possible range of perspectives to enhance their choices and decisions. It also suggests that organisations should strive for leadership. What do you think about companies that take a stance on matters like climate change and same sex marriage?
  • Lens 2: The board’s collective culture and character – In ethical decision making, directors are bound to apply the values and principles of their organisation. As custodians, they must ensure that culture and values are aligned. The guide invites directors to be aware that ethical decision-making in the boardroom must be tempered. Decision making shouldn’t be driven by: form over substance, passion over reason, collegiality over concurrence, the need to be right, or legacy. Just because a particular course of action is legal, does that make it right? Just because a company has always done it that way, should they continue?
  • Lens 3: Interpersonal relationships and reasoning – Boards are collections of individuals who bring their own individual decision-making ‘style’ to the board table. Power dynamics exist in any group, with each person influencing and being influenced by others. Making room for diversity and constructive disagreement is vital. How can chairs and other directors empower every director to stand up for what is right? How do boards ensure that the person sitting quietly, with deep insights into ethical risk, has the courage to speak?
  • Lens 4: The individual director – Directors bring their own wisdom and values to decision making. But they also might bring their own motivations that biases. The guide invites directors to self-reflect and bring the best of themselves to the board table. How can we all be more reflective in our own decision making?

This guide is a must-read for anyone who has an interest in the conduct of any board-led organisation. That includes schools, sports clubs, charities and family businesses as well as large corporations.

Behind each brand and each company, there are people making decisions that affect you as a consumer, employee and citizen. Wouldn’t you rather that those at the top had ethics at the front of their mind in the decisions that they make?

Click here to view or download a copy of the guide.