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Executive Perspectives

EXECUTIVE PERSPECTIVE: The Moral Imperative of Business

“This is about changing attitudes and perceptions – in a sense “rebranding ethics” – in the business community so that they are recognised as practical, dynamic and innovative.”

In this interview, Rabbi Gideon Pogrund, Director of the Ethics and Governance Think Tank at the University of Pretoria’s Gordon Institute of Business Science (GIBS) in Johannesburg, South Africa, discusses the need for businesses to assume the role of “moral protagonists” and have a values-based approach rather than an exclusively rules-based approach to business so that they can avoid risky behaviors and build trust. Sherah Beckley, Editor Thomson Reuters Sustainability.


Sherah: What is the moral imperative of business and why is it important?

Gideon: A joke used to do the rounds in business schools:

“If there was a course on business ethics, it would be the shortest in the curriculum”.

This reflected the historic view of the corporation – its sole purpose was to maximise shareholder wealth without breaking the law.

There has, however, been a quiet yet dramatic transformation in attitudes and expectations, and progressively, the corporation is viewed not as an amoral entity but as a moral protagonist. Increasingly, corporations are expected to have a purpose beyond profits, and to behave responsibly towards their myriad of stakeholders – not only shareholders but also employees, customers, suppliers and the general communities in which they operate.

Increasingly, they are required to demonstrate a commitment to ethical practices based on values such as integrity, responsibility, fairness, respect and care. At Harvard Business School, they talk about a “new performance standard” for world class companies, distinguished by the achievement of both financial and ethical excellence.

While this transformation is part of a global trend, it is especially urgent and vital in South Africa because of its huge ethical and societal challenges and low trust levels, which threaten the conditions for the success of business and the country. To address these challenges, business needs to assume the role of moral protagonist.

Rabbi Gideon Pogrund speaks about the need for ethical businesses at a forum with South Africa’s then Deputy Finance Minister, Mcebisi Jonas.

Sherah: Why is it important for business to pay attention to their ethical culture?

Gideon: Ethical values are integral to culture, famously defined as “the way we do things over here even when no else is watching”. Companies shouldn’t exclusively rely on a rules-based approach, solely focusing on compliance and control. They should also pursue a values-based approach, aiming to promote behavioural change by encouraging their employees to willingly commit to ethical principles and practices – what the great British jurist Lord Moulton called “obedience to the unenforceable”.

Ethical willpower – our capacity, resolve and determination to make the right ethical choices in the face of various pressures and temptations – is like a muscle. We can work on developing our ethical muscles as well as those of the people we manage. To borrow a phrase coined by Rushworth Kidder, founder of the Institute for Global Ethics, we can build up our “ethical fitness”.

We can promote a more ethically fit culture within organisations through a series of interventions which draw on creative processes and techniques; merge conceptual and experiential learning; and practically address the ethical challenges which employees face. These interventions should be designed to improve employees’ ethical awareness, strengthen their capacity for ethical self-reflection, and deepen their motivation and ability to make the right choices.

Sherah: In a world of disruption and uncertain times, how does morality and ethics reap higher business success?

Gideon: An emphasis on ethics serves as a risk management tool, helping to reduce the likelihood of misconduct. We’ve witnessed a litany of high-profile corporate scandals which have inflicted massive financial and reputational damage.

According to the 2018 edition of PWC’s Global Economic Crime and Fraud Survey, as many as 49% of respondents said that their organisations had experienced fraud or economic crime within the last 24 months. The damage caused by ethical failure is accentuated by our natural human tendency to focus disproportionally on the negative – to notice the bad more than the good.

Psychologists call this “negativity dominance”, and it means that an infraction by a small number of employees, or even one employee, can have an exaggerated impact on an organisation’s reputation and relationships – it is the 1% not the 99% who often stand out. So, from a risk management point of view, a focus on ethics is crucial.

But it’s not only about reducing risk; it’s also about seizing an opportunity to build trust and achieve competitive differentiation in tough markets.

Dov Seidman, author of the book “How”, argues that whereas it has become increasingly difficult for corporations to establish an extended window of competitive advantage through innovation or process and performance, there is still one way in which they can achieve this – “outbehaving” their rivals.

This is because human behaviour is infinitely varied and very hard to imitate. “Competitors,” said Herb Kelleher, the legendary founder of Southwest Airlines, “can buy tangible assets but they can’t buy culture.” Ethics are key to this “outbehaving”, and they can help ensure trust-based, successful relationships with various stakeholders– including employees, customers, suppliers, investors, regulators and communities.

Sherah: Who do you convene these discussions with and what are some of your most memorable discussions?

Gideon: The Gordon Institute of Business Science’s Ethics and Governance Think Tank has established itself as a pre-eminent platform for a national conversation about business ethics. This has been achieved via a series of public forums featuring influential South African thought leaders from business and government. All our forums have drawn large audiences and have attracted substantial media coverage.

In parallel with these high-profile discussions, we convene and facilitate private dialogue forums between senior leaders from business and diverse societal stakeholders, including the public sector, labour, NGOs, academia, media and the student movements.

These sessions are conducted according to Chatham House Rules as many of the participants are well-known public figures – we would like them to speak as openly and directly as possible without fear of being publicly quoted. The purpose is to build understanding and trust between leaders who don’t normally engage in this way – an antidote to the dangerous polarisation threatening South Africa – as well as to generate insights and recommendations for business.

In this video, South Africa’s Former Finance Minister, Trevor Manuel discusses an issue relevant to both public and private sectors – corruption.

Sherah: What do you hope and aim to achieve going forward?

Gideon: While the corporation is increasingly viewed as a moral protagonist, attitudes of indifference and scepticism remain. These attitudes stem from well entrenched stereotypes about ethics. It is assumed that ethics are abstract, predictable and boring; they are just an “add-on” to core business activities; and that they only play a peripheral role in organisational decision-making.

Ethics are often viewed as being about no more than “tick box” compliance with rules and regulations – a necessary cost of doing business perhaps, but a nuisance. Similarly, ethics are often regarded as synonymous with Corporate Social Investment (CSI) – which, for all its positive impact, does not form an integral part of a company’s commercial activities and, as such, remains limited in scope and scale. As one banking executive put it: “CSI is what we talk about on Friday afternoons.”

The aim of the Think Tank is to help shift ethics from the periphery to the centre of organisational decision making – to weave it into how business gets done. This is about changing attitudes and perceptions – in a sense “rebranding ethics” – in the business community so that they are recognised as practical, dynamic and innovative. It has to do with transforming the understanding of the relationship between ethics and compliance – working to make values-based behaviours an inherent part of our business models so that regulatory compliance is more of a natural outcome than it is a goal.

It has to do with developing business models which move beyond CSI, merging financial and social imperatives in line with how Paul Polman, CEO of Unilever, defined sustainability: “the right to produce profits long into the future, given to firms that contribute to human progress”.

GIBS is ideally placed to host this initiative because it prides itself on being close to business (it is known as the “business school for business”). The GIBS campus is remarkably vibrant with 3,500 participants in our educational programmes every week.

Our approach is to develop thought leadership and then disseminate it though our educational platform, thereby influencing the attitudes and behaviours of current and future business leaders.


To see more from the Gordon Institute of Business Science (GIBS), watch here.

 

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