We all have expectations about how businesses should behave.
It’s unlikely you would remain a customer of a company that consistently fails to provide the goods or services they’ve promised or treats you poorly. If you are a member of staff at an organisation with a culture problem or where bullying behaviour is rife, you might well look for alternative employment. If you’re an investor, you might consider where to put your money—or if you’re going to continue investing in a company that consistently behaves in a way you believe is unacceptable.
We expect businesses to operate and behave ethically. Fundamentally, we expect organisations to be doing the right thing for the right reasons.
It’s in the interests of any business to behave in an ethical way and to show they are doing so by measuring their culture and assessing its impact. Doing so can enable better customer experience and reinforce investor confidence, and support team morale, staff recruitment and retention.
The good news is businesses recognise the importance of ethical behaviour. Nearly nine in ten of those in the FTSE 100, some of the biggest and most influential companies in the UK and the world, have adopted codes of ethics that are publicly accessible. This is a ten percent increase since 2021, which is extremely welcome, and helps in setting an example for other organisations and in informing the behaviour of these corporations’ partners and supply chains.
But having a code of ethics is only one half of the equation. A code represents the standards that a business sets for itself and expects staff to deliver. While important, that by itself cannot deliver ethical behaviour. Success can only be assured if businesses are backing up a code of ethics with a decision-making framework that guides and informs employees.
‘Do more’
Of the ninety percent of FTSE 100s with a code of ethics, just a third are currently backing that up with an ethical decision-making framework. This means they’re setting expectations without necessarily giving staff the tools to meet them. So, whilst the increase in the number of big and leading businesses with a code is welcome, it shouldn’t prompt a round of boardroom backslapping. Indeed, there is an opportunity and an obligation for leading companies to go further and do more.
If the code of ethics is the manual of business conduct, then a decision-making framework is its “quick guide” manual, a how-to guide to inform staff behaviour when they have to make choices, sometimes on issues for which the company might not already have rules or policies in place. Having a code of ethics without a framework simply means setting expectations without explaining to employees how they should meet them.
But what should a good decision-making framework look like, and how should it be used?
A good framework should challenge managers, staff and leaders to think about their decisions both analytically and emotionally—whether they’re legal, how they reflect well on the company and are in line with its values, and whether they can be justified to friends, family and colleagues. And it should make clear that any individual member of staff isn’t expected to have all the answers and where they can go for additional guidance.
Without that type of instruction to accompany a code of ethics, companies don’t give managers and staff the tools to make the decisions and behave in a way that is expected and appropriate.
‘Right path’
But there is another key component, which is how a decision-making framework is used and made available to staff.
Businesses fully embracing ethical behaviour will have a code of ethics, backed by a framework that staff will be trained to use—not just given and expected to work it out. And the decision-making criteria should permeate every level of the organisation, from the board down, to ensure consistency of behaviour.
It’s great that big business is committed to operating and behaving in an ethical way, and demonstrating that by adopting a code of ethics they’re happy to show off to the world. But those best placed to succeed in meeting the standards they’re setting for themselves will be the ones also giving staff the information and guidance they need to make decisions.
We’re on the right path – but there is more to do. And if FTSE 100 companies can back up their ethical codes with decision-making frameworks for staff, it sets an example that can be replicated in the wider business community.
Dr Ian Peters MBE is the Director of the Institute of Business Ethics. He is the former Chief Executive of the Chartered Institute of Internal Auditors and has held senior roles at the British Chambers of Commerce and the Confederation of British Industry.