When abiding by the law alone is not enough

It should come as no surprise that one of the key attributes of a good and effective board member is an unswerving commitment to ethical and fair behaviour.

But that’s not as simple and as straightforward as it sounds, especially in a world where what’s lawful may be frowned upon by large sections of society and viewed in a particularly negative light.

It demands of the modern director to be attuned to what’s going on, both when making judgement calls as an individual and as a member of the collective – the board.

I guess the litmus test every director needs to apply when confronted with decisions carries a number of strings:
 Is what’s being proposed legal?
 Is it ethical?
 How does it sit with me morally?
 And finally, what will it look like were it to make the front page of tomorrow’s newspaper?

While it’s pretty much a given that companies have codes of conduct which apply to all employees and directors and ensure that they comply with the law on issues such as conflict of interest, a code goes only so far.

It simply reinforces legal obligations and has nothing to do with elements of an ethical nature.

That’s where good directors – and good boards – stand out from the mass of mediocrity. Their thinking and their decisions go beyond the legal and embrace morals, ethics and fundamental fairness.

They have their fingers on society’s pulse, they understand and empathise with how the public feels about certain issues and they appreciate that the law tends to be a follower rather than a leader… moving behind, adopting and enacting commendable changes in societal thinking.

So while a decision might be lawful right now, it can be frowned upon by society in general. Societal attitudes may view the decision as morally reprehensible and judge it harshly, which will impact on the company and damage its reputation and share price.

I’m thinking here of the whole sweatshop phenomenon, where workplaces, many in poorer developing countries, employ workers – sometimes child labour – at pitifully low wages, in dreadful conditions and for long hours to produce globally desirable footwear and apparel brands on behalf of large Western companies, who then profit handsomely.

Similarly, an interesting case in the Kalahari in southern Africa had the indigenous San people fighting a global pharmaceutical giant that wished to commercialise their ancient herbal diet secret – for generations the San have eaten the stems of the Hoodia cactus to stave off thirst and hunger during long hunting trips – into an obesity drug with an estimated market potential of US$3-billion. All with scant regard for how the San could fairly benefit from the knowledge they unwittingly shared.

In both cases, the actions are probably legal. But are they moral, ethical and fair?

Until next time,

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2 thoughts on “When abiding by the law alone is not enough

  1. Kate,

    This is a very vexed issue but the examples you give clearly fall short on any judgement of ethics , morality and fairness. However there is such a subjective range of matters to determine the extent of morality and ethics and we should be very careful about making those judgments out of context. Take for example the recent Federal Parliament Senate investigations on international profit sharing and taxes paid in Australia. I take particular objection to the Chairman of the Committe lecturing corporates on morality when he was the person who approved the payment of legal fees in the Craig Thomson case. Do we have a surfeit of morality one day and a shortage the next? Don’t we need to maintain open minds on every issue or are we permitted to pick and choose those issues which give us a conspicuous presence in debate – I hope not the latter? You should explore the tax debate as I found the reporting of that subject – a very significant moral issue – to be biased and pathetic. The whole debate should have been centred on why one country can achieve a lower rate of tax than another (which becomes the incentive to (re)- locate a global business). Parliaments and regulators should recognise that we have global businesses supporting our economy and tax collectors have a moral obligation to cooperate and impose fair imposts with counterparts in all countries – not squeal that everything the corporates do is immoral or unethical. Heaven forbid, we have a federation here with state jurisdictions competing with one another for new business. You are old enough to remember Joe B-P abolishing stamp duty and attracted thousands to move to Queensland; idiots, but was that immoral and unethical?
    I liked you examples but they are at the extreme of the range. Go for the middle and see where you end up! I’ll read with interest.



    • Hi Peter, I couldn’t agree more. I certainly would never personally seek to lecture someone on morality and I agree, like life, many things are a shade of grey – certainly not black and white.

      The challenge I have with a blog is getting the message across in just a few words. It doesn’t always allow for a deep and thorough examination of the issue being considered.

      Keep up the responses, I really appreciate your intellect.


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