Ethics without borders

For organisations that strive to be ethical, there are two important criteria for earning and maintaining an ethical status: the continual, consistent application of their values to all their stakeholders and their on-going adherence to all applicable laws and regulations. If a company’s commitment to their values or their compliance with regulations is intermittent or applied selectively, it erodes their ethical standing. The constancy of ethical behaviour reflects the practice of “ethics without borders”.

Borderless ethics necessitates that the organisation has a very inclusive ethical boundary, whereby ethics is exercised beyond self-interest and includes all stakeholders affected by the company’s operations. By contrast, an exclusive ethical boundary, which implies that ethics is exercised only for the organisation’s own benefit and relative to a select few stakeholders (typically shareholders), totally contradicts an approach of ethics without borders. While the exclusion of other stakeholders does not necessarily mean that the company is behaving unethically, it does highlight the fact that the company prioritises their own goals and needs above others’ or that they don’t give equal priority to their various stakeholders – such as communities who are impacted by the company’s operations. Added to that, organisations are rarely obliged - for example, by law - to include all stakeholder groups formally within their ethical boundary. So, although such companies may not be technically behaving unethically or illegally, their limited application of ethics means that they would rarely be regarded as an ethical organisation.

There is a further challenge to following an approach of ethics without borders. This emanates from the recurring discourse in workplace ethics that ethics differs for different people, cultures, countries and situations. This view needs to be addressed not only because it appears to invalidate the possibility for ethics without borders, but also because it undermines the pursuit of common and shared organisational ethics. The globalised nature of the world of work particularly makes for a multitude of differences in the workplace. Yet, ironically, globalisation makes the practice of ethics without borders all the more valuable, not least for the clarity it offers all affected parties and the fairness it embodies by operating in terms of the same ethics globally.

To realise a situation of borderless ethics, organisations need to surface and focus on the apparent ethical differences in their workplace. This is best done by firstly considering the primary two clusters of factors that shape ethics – namely the values, norms or culture and the leadership of the group (such as, for example, those of an organisation or community) and the relevant laws, rules and regulations – and secondly to recognise that these issues are applicable at a personal and a work level.

In terms of the latter cluster, in a given context national laws and organisational rules and regulations would probably be common to the organisation and its employees. There are also increasing similarities in legislation between countries, such as laws addressing bribery and corruption: for example, in South Africa, there is the Prevention and Combatting of Corrupt Activities Act and the Companies Act; the UK has the UK Bribery Act, and the US has the Foreign Corrupt Practice Act and the Sarbanes-Oxley Act. However, there are many countries that do not have adequate legislation or satisfactory legal enforcement. This manifests itself, for example, in the area of counterfeiting where outsourced manufacturers in foreign countries cannot easily be held to account for producing and selling fake goods. The best solution for the problem of globally inconsistent or inadequate legislation is a combination of an understanding of the relevant country’s legal system and a commitment to abide by the law in whatever country one operates.

Similarly, personal values and norms can differ significantly from those of the organisation as the individual’s values are affected by a variety of factors including upbringing, culture and the behaviour of their leaders and role models. An employee may have, for example, grown up in circumstances that condoned dishonesty or lived in circumstances where it was acceptable to pay a bribe to speed up services. This represents a serious ethical divide for an organisation that threatens to destroy the ideal of aligned personal and organisational values and norms.

Though different individual values and norms may be held, it is not only appropriate, but essential that in the workplace the organisation espouses a set of values that reflects what constitutes acceptable ethical conduct in that environment. The crucial point is that values in the workplace are not a means for accommodating the full spectrum of values – from impeccable to appalling – among employees and stakeholders. They serve, instead, to define the criteria and standards by which an organisation strives to operate and to act as a guide for ethical behaviour.

The argument that the interpretation of the organisation’s values can also differ has very little substance. Core moral values such as honesty, integrity or fairness that are exercised in an ethical manner (which means they are applied equally to stakeholders and without variation) do not lend themselves to a range of different behaviours. As an added precaution against this view, companies should ensure that appropriate definitions are included in their code of ethics to promote a common understanding of their values and desired behaviours.

A difference, however, that can occur is the way the values manifest themselves in practice. A good example is respect. While respect would undoubtedly enjoy overwhelming support from most organisations and individuals, people differ in the way they express it. For example, is it respectful to look at one’s superior directly when being addressed or should one lower one’s eyes? The answer depends on factors that include the individual’s culture and the prevailing company culture. The key issue is to recognise that the value is shared and to expose and explore the different expressions of the value as a route to achieving agreement on what is appropriate within the context, goals and environment of the organisation.

Cultural norms can also give rise to differences. In a global context, the business practice of giving gifts is one example, such as in China. In many Western countries gifts and personal perks (like tickets for sporting events or holiday trips) are classified as bribes and are subject to a zero tolerance approach. While there is no one easy solution for this clash, a combination of transparency, discussion and respect can be effective. This includes, for example, focusing on customers that have similar values and being aware at the outset of business dealings of this potential area of difference. For those companies where bribes have become common practice, it is best to actively avoid doing business with them: the cost of complicity in misconduct is unlikely to warrant the potential benefits of the business.

Clearly, therefore, ethics without borders is not without its challenges. The benefits, however, exceed the challenges. A policy of borderless ethics can build and maintain excellent levels of trust with stakeholders – including amongst shareholders, employees, customers, suppliers and investors - which, in turn, can enhance a company’s reputation, attract and retain top talent and facilitate other advantages such as easier access to capital or a lower cost of capital.

The sound ethical status it accords a company delivers a further very valuable benefit: it serves as a unique source of competitive advantage. Unlike many sources of competitive advantage that offer only a limited window of competitive opportunity or that are vulnerable to the ease and speed with which they can be copied and to the rate at which they can become outdated, a unique source of competitive advantage, which cannot be easily copied, is infinitely more valuable. And an ethical status or ethical culture offers just such a source. It is not easy to copy. It cannot be bought or sold. It cannot be owned, delegated or loaned, but instead must be lived every day.

Leaders therefore need to equip themselves with an understanding of the flaws in arguments against borderless ethics to effectively deflect them. And, for those leaders who make the choice to follow an approach of ethics without borders, they need to recognise that the responsibility for living by that approach will be demanding and will warrant their on-going support and commitment - and that it will be a rewarding route to follow.

Recommended reading. The case study, “Culture Clash in the Boardroom”, focuses on whether a German-Chinese joint venture should follow the ethical rules of the parent company or the company of operation. Katherine Xin and Wang Haijie (2011) “Culture Clash in the Boardroom”, Harvard Business Review, September. HBR Reprint R1109L.