I recently attended a thought provoking conference, Ethics by Design, on the topic of fostering ethical culture in organisations.

Ethics pays

The morning session was led by Jonathan Haidt, a Professor at NYU Stern School of Business.  One takeaway for me was something that I had only partly rationalised – that is that ‘Ethics Pays’. Professor Haidt elucidated that poor ethics adversely affects the perception of a business – which is likely to lead to lower sales prices, tighter terms of trade, a higher cost of capital and makes it harder to retain and attract talented people.

While it is right to do the right thing, businesses still exist to make money and there is a hard-nosed (unethical?) case for ethics!

A challenge for the business community – including small business

The attendees I met mostly had large business backgrounds or were from academia.  Large businesses have particular challenges when trying to embed culture across multiple locations.  Stock market pressures can also come into play when companies are listed.  However large businesses should have the resources to stand back and look at their business from an ethical standpoint.

Smaller businesses have their own quirks.  Scarcity of funds can lead to short-termism.  They are more likely to be headed by one person who is rarely challenged and who spends most time working in the business rather than on it. Limited staff resource can have have a bearing.  Who stands back and challenges existing norms?

SMEs employ a significant part of the UK’s work force. Large businesses may look at ethics within their own organisations, but there also needs to be a broader societal approach.  This should involve smaller businesses.

Challenges for the accountancy profession

The final question of the day was about the challenges that exist for the accountancy profession. Smaller business directors often see their accountant as a trusted advisor.  However the advice may just be in response to specific requests from the client without there being a holistic approach.

No easy task I’m sure, but engaging smaller businesses requires the involvement of their accountants. At one level there can be conversations about the benefits of ethical business and the challenges for smaller clients. There could also be discussions about the role that accountants can play in the future including the opportunities and challenges.

What about the conference?

Lots of good points were raised during the day, including:

Millennials are more likely to be motivated by ethical objectives than their older counterparts.  This is interesting in terms of employee engagement and perhaps as a way of taking the debate to (millennial run) small businesses.

Some decisions can have both ethical and unethical consequences.   An example is Kids Company; meeting the needs of children conflicted in the short term conflicted with the charity’s long term future.

The topic of ‘nudges’ was raised.  Small things that can be done to influence behaviour –such as the place of a signature a form.

Wrapping up

I hope this has provided some food for thought.    Are my thoughts about engaging smaller businesses and accountancy firms a pipe dream?  Do feel free to comment and let me know your thoughts.

AuditFutures hosted the Ethics by Design conference.  Niamh Swanson from Draw It Out impressively kept up with proceedings at the same time as scribing the above graphic!