Most of us probably like to think of ourselves and our firms as ‘ethical’ and ‘decent’. Couple this with values and our other systems and we are inclined to think we are doing what we can and should in regard to ethics. Cynthia Schoeman, who presented a topical keynote on ethics for business leaders at the 2011 Boss of the Year Award convention in South Africa warns that this may not be enough. She highlights a number of challenges and things we can do to be better prepared. I think the points she made have particular relevance for legal leaders.

Fault-line patterns - © 2011 Sean Larkan

Cynthia highlighted a number of ethical issues and challenges for leaders within the context of the present economic environment:

  • ethics is the new fault-line of leadership
  • what has changed in recent years is the level of visibility arising from ethical slip-ups; this has increased substantially
  • ethical failures have the potential to cause untold harm – the BP oil spill provides a graphic example as does the News of the World scandal. While the cost of clearing up the oil was massive, as will be the payouts in relation to News of the World, but the companies will not get credit for such payments, but rather how they handle the fallout.
  • the cost of failure in relation to ethics is high – it directly impacts brand equity, staff morale and of course customer loyalty and trust, potentially leading to business closure and the loss of jobs. Leaders can also end up in jail.
  • on the question of responsibility and accountability for ethics, this is clearly a leadership issue. Leaders are the ultimate custodians of ethics. They are the ethical role models and are impactful and influential in determining ethical and unethical behaviour.
  • leaders are “on-stage” all the time, wherever they are and whatever they are doing. They are constantly demonstrating their values and commitment to the firms ethics; this is a huge challenge.
  • successes are taken for granted but every ethical failure is amplified.
  • when a firm or its partners are guilty of unethical behaviour it cannot be fixed by simply cutting costs or relying on professional indemnity insurance – one is faced with the harder task of repairing damage to firm integrity. An ethical culture has to be built from scratch.
  • in regard to the ethical status of your firm the issues are somewhat like brand (in that your brand is not what you think it is, but what others think it is) – it is not you or your partners who decide on your ethical status but rather what stakeholders decide. They will have a view on the ethical status, positive or negative. This will be determined by many things – what they read in the press, what employees say, on the basis of dealings they have with your people and whether the firm and its leaders do what they say and whether the values are lived as they are framed.
  • another challenges is that stakeholders more readily share information of unethical behaviour – it is more newsworthy and “interesting”.

What precautionary steps can and should be taken?

  • ensure you have the right leadership in place. This is of primary importance to strengthen ethical perceptions, behaviours and realities. Ideally, this should be a defining feature of leadership’s legacy in the firm.
  • address ethical expectations before they turn into issues.
  • in the first instance, leaders should recognise that an ethical fault line is one of the biggest issues a leader can face.
  • a few practical steps can be borne in mind if issues arise:
    • apologise and do it quickly
    • admit what was wrong
    • quickly make amends
    • make sure it does not happen again
    • learn the lesson that the best approach in dealing with ethical failure is to adopt a preventative strategy
  • ethics should be managed proactively and regularly and certainly not on an ad hoc basis.
  • it is important to have a good understanding of the ethical status of one’s firm. Any issues identified should be actioned. Take a simple example – if you take a vehicle to a garage you will naturally first assess the ethical status of the garage and the person who fixes your car. You will do the same for anyone who works in your home or who treats you for a health issue.
  • as a leader know the ethical status of your organisation. This is not an optional extra. Such an ethical assessment can have a direct impact and can be hugely valuable and have a monetary value. A good ethical assessments provides access to capital and can reduce its cost. It also increases brand equity. By way of example think of an unethical company – would you invest in it? Not likely.
  • a practical challenge you may face – partners may argue that given competitive environmental issues and questions of “survival of the fittest” that shortcuts sometimes have to be taken. Such arguments will stress-test your leadership and the ethics and values of your firm. Leaders need to be strong enough to draw a firm line between what is tolerated and what is not.
  • ensure that the leaders of your firm and senior staff consciously strengthen the ethical character of your firm.

We often assume that because we are ‘ethical’ in our dealings and have ‘good’ values that this is enough. It probably is not. Ethics, like most other things in our firms, have to be actively addressed and steps taken to consciously raise awareness of the strategic importance of our firm’s ethical reputation. We should also be constantly on the lookout for any drop in ethical standards.