Companies must invest in integrity

What does integrity mean in a business setting? It is a concept that most people in business understand intuitively, but it can be difficult to conjure an exact definition. And yet it is absolutely central to doing business. It is easier to identify cases where there has been a breakdown in integrity; where individuals or organisations have concealed information or misled customers or regulators. This is extremely corrosive; nearly all business, and especially financial services and banking, ultimately rest on trust and confidence. Recent scandals in different parts of the world have highlighted how dangerous a breakdown in trust can be; once broken, confidence takes a long time to rebuild and restore. Failures by one individual can taint a relationship with a whole company, but over the last few years we have seen whole industries and markets become tarred with the same brush. For example, a combination of high-profile scandals and a build-up of regular dissatisfaction with high lending charges and less-than-optimal customer service has led to a public misconception that “all bankers are dishonest.” The public does not always discern that the financial services industry is made up of several discrete arms, leading to finance professionals in general being eyed suspiciously. So how can companies — and entire industries — regain that trust? And whose responsibility is it?

From the top down

The tone from the top in organisations is critical. Failures of integrity tend to develop over time as the culture of an organisation becomes slowly corrupted; sometimes this can be as a result of outside pressures, or it can be part of a “slippery slope” where a few people start to bend the rules or identify loopholes in the letter of the law. Over time this can become normal practice and worsen. It is not within the power of senior executives to micro-manage every aspect of an organisation, but by setting a clear example they can have a huge influence on what happens on the rungs below. This, in practice, means that the CEO and CFO have to take the lead. Research conducted this year by ICAEW showed clearly that the behaviour of senior management is reflected all the way down through a company, and a recent debate at ICAEW’s CFO Club in Dubai agreed that integrity is “the expected cornerstone of behaviour” for a CFO. However, it also suggested that it is not enough for the senior management team to simply hope that their examples will be followed, practical steps are also necessary to instil and implement a culture of integrity.

Openness and accountability

One practical step that has been seen to help instil integrity in companies is fostering a culture of openness and transparency. Employees should never feel awkward or provocative for discussing the ethical dimension of their work with senior management. Too often an ethical enquiry, even in the abstract, can seem difficult. Far more so if a junior employee feels that there is a specific issue or behaviour with which they are not comfortable. It is of vital importance that employees never feel that they will be ostracised if they highlight potential or actual ethical dilemmas. This needs to be a two-way process; those at the top should be open about how and why the business acts as it does, what the drivers are and where the direction of growth lies. In return they will gain trust and confidence and this should pay dividends in the long term as potential problems can be eliminated at an early stage.

Speaking up

Although an open culture hopefully helps to head off potential issues, it is also very important that there is help and support for employees who suspect something is seriously wrong to raise the matter confidentially without fear of repercussions. Often known as ‘whistleblowing’, a few high-profile scandals over the years have made this seem perhaps either dangerous or even glamorous, but the truth is usually more prosaic. However, when employees feel that they cannot speak out problems can be left to fester until it is far too late. Sometimes this can also happen as a result of confused loyalties; in close-knit or family run organisations, employees might think that speaking out would be seen as a betrayal of trust. But what starts out as commendable team spirit could end up as conspiracy. Companies should make it clear that speaking out is the right thing to do, and make provision for those that do.

Nail the colours to the mast

With these policies in place, research suggests that the best way to reinforce them is to state them publicly for all to see. Openly stating an organisation’s core values can do two things; firstly it makes it more likely that people will stick to and stand up for them. But secondly, it offers employees a benchmark against which they can test behaviour when they are not sure how it measures up. Often ethical dilemmas are not simply black and white, but a case of identifying a direction of travel. A publicly stated set of values and standards offers a guide to how people should act, especially when a decision is not purely a commercial one.

Evolving Integrity

Whilst these are all practical measures that have been shown to help businesses instil and embed ethical behaviours, they are not the only ones available. There are a number of companies that offer “ethics training”, and some of them may do excellent work. ICAEW’s research found that the results were mixed, however. Where the training was individually tailored, it showed a good result, but generic “ethics courses” showed limited benefits, and no wonder. Across many different industries, areas, sectors and sizes, there are many different challenges that face employees and no single approach can be right for each company.

Rewarding ethical behaviour

Equally, rewarding ethical behaviour can provide an incentive, but can also make it seem special, rather than an expected norm. Even disciplinary action must be used carefully; whilst it means companies can rid themselves of persistent offenders, it can suggest that employees are ethical under threat of punishment, rather than because it is the right way for a company to work. Ultimately, embedding integrity should not be about legal compliance, it should be about being the best company to work for and to work with, being a trusted supplier or buyer, provider or client. One effect of the economic crisis has been to show how important trust is as a part of business, and as businesses start to drive forwards into economic growth again, trust and confidence will become even more important. Integrity is an investment, and trust is one of the best assets a company will ever have.

The writer is the regional director of ICAEW Middle East.