Ethical principles in governance guidance lacking says IBE

Attention to ethics is increasingly a core feature of boardroom agendas but there is a lack of explicit engagement at EU level with ethical principles in corporate governance guidance, finds a new report from the Institute of Business Ethics.

The report - A Review of the Ethical Aspects of Corporate Governance Regulation and Guidance in the EU, conducted in association with ecoDa, the European Directors’ Association, examines corporate governance policy debates and frameworks. Its findings draw attention to a notable lack of explicit reference to ethical imperatives.

Julia Casson, author of the report, said: “We began this report wanting to understand whether there was guidance for companies in governance policies, at national and EU level, on ethical business practice. Although we did find similarities in corporate governance requirements around practice and certain issues, there seems to be a general lack of ethical language in corporate governance provisions. This is in spite of the fact that boards are expected to set the values which will guide their company’s operations.”

For some key governance issues that boards have been expected to address, the explicit driver is most often given in terms of what is ‘good for business’ rather than engagement with any moral imperative. This is the case even though what is generally viewed as unethical behaviour, including at the most senior levels, has led to business failure on numerous occasions. The link has yet to be explicitly made in corporate governance discourse that what is ethical is very often good for business, or at least that what is unethical generally impacts negatively on business.

Patrick Zurstrassen, chairman of ecoDa said: “The purpose of governance can be said to be to encourage companies to make robust decisions, manage risk properly and account to those that provide their capital. To complete this approach, it is essential to get individual board members with a great sense of ethics and a collective mindset in line with the company’s values.”