One false move and you’re dead

Reputational monitors are essential

Dominique Strauss-Kahn was at the peak of his career as head of the IMF until he was charged with sexual assault, wrongful imprisonment and attempted rape. Guilty or not, his career took a nosedive along with the IMF’s credibility. Strauss-Kahn has since resigned and is yet to face these charges in court. But still, the reputations of the IMF and Strauss-Kahn were put into question.

Bill Clinton, Michael Jackson and more recently, Sepp Blatter, further demonstrate how reputations can be smeared in an instant. Each had a well-established public image tarnished due to behaviour, whether proved or unproved, that was published negatively. Reputation matters and public opinion has the ability to make or break any person or organisation.

Since the business world will forever be held under the watchful eye of society, those who represent a company have the responsibility to think before they act. It can take years to turn around a corporate culture but just one day to ruin a reputation. This makes it important for companies to employ effective ethical management measures. These should not simply react to ethical issues when they become legal and reputational problems. Rather, ethics should be managed proactively and monitored regularly.

Business reputation leans heavily on a company’s ability to instill appropriate business ethics and moral behaviour, which requires good leadership role model and congruent culture. A business with bad ethics is bound for a bad reputation. Leaders need to foster an ethical culture.

With the King III report and the new Companies Act, a larger responsibility has been placed on companies of late, especially top management, to act in accordance with more ethical corporate culture. Ethical behaviour has become more of a non-negotiable issue, and businesses seriously need to rethink their strategies or hear the consequences of rogue behaviour.

According to South African investigation consulting company, OF&A business ethics in South Africa are under threat. Competitors are too willing to forget about ethical conduct and would rather take the low road to ‘success’. There is a moral fabric woven through society and new legislation, the press and public opinion are in the vanguard. Too few companies, listed or not, pay enough attention to ethics strategies.

Cynthia Schoeman, external lecturer at Wits Business School, heads up her own company that assesses and optimises ethics strategies within businesses. “Ethics is the new fault line for businesses,” says Schoeman. “It’s unlike any other workplace challenge, as failure cannot be corrected by simply cutting costs next quarter. Failure to foster an ethical environment extends beyond personal liability for directions to harming corporate reputations.

Schoeman employs a web-based survey, the Ethics Monitor, which is a measurement tool intended for organisations with employees of 100 or more that regard having a high ethical status as an important factor in mitigating risk. “The results of the Ethics Monitor survey provide insight into the ethics of an entire business beyond what the CEO reflects to Board members,” Schoeman explains. “If companies build an internal ethical culture then it is far less likely for business reputation to fall.”

As Dominique Strauss-Kahn, Bill Clinton and Enron can all attest to: Reputation matters. As ethics and reputation are causally linked, a sound ethics strategy helps to ensure a sound reputation and, ultimately makes for good business.

Published in the Insurance Times (South Africa)
August 2011