Mark Chambers, Associate Director of the Institute of Business Ethics, has guest blogged for the Committee following Lord Evans' delivery of the Hugh Kay Lecture on 11 November.
Although the Nolan Principles were designed to set standards for those in public office, like many people in business, I have found them to be a handy reference point throughout my career for calibrating my own responsibilities and values when serving the companies I have been part of.
More and more, employees want to work for companies whose values they recognise and share. At the IBE, we work with a wide range of organisations to promote high standards of business conduct based on ethical values. Many companies mirror some of the Principles (such as ‘integrity’ and ‘honesty’) in the ethical values they have chosen to adopt. The best organisations recognise that ‘leadership’ and ‘accountability’ are essential elements of embedding those values into the culture across the business; principles that become still more important when companies enter into contracts to provide public services. A company lives and breathes through its people, so a consistent tone from above is vital, and a concerted effort is needed at all levels of management to ensure that the culture isn’t allowed to shape itself locally.
‘Selflessness’, with its implications of altruism, has been the Principle that has perhaps translated least effectively beyond public life. Acting solely in terms of the public interest is not easily to reconcile with statutory and fiduciary duties to promote the success of the company for the benefit of shareholders as a whole. Applying the Principle of selflessness to my role has always required a degree of rationalisation and reinterpretation; for example, putting the interests of my employer ahead of my own by avoiding conflicts of interest, making the right choices rather than the easy choices, and making appropriate sacrifices in terms of work/life balance to get the job done.
But the obligation to promote the success of the company for the benefit of shareholders has always been qualified by the requirement in Section 172 of the Companies Act for directors to have regard to a range of other stakeholder relationships and longer term considerations. Although that requirement has been codified law for many years, larger companies are now required to report on how their boards have discharged those obligations in their decision making. This coincided with a much broader global re-evaluation of company purpose and a welcome reassessment of the notion of shareholder primacy. Together with a renewed focus on ESG and non-financial reporting, this reopened the debate about the social license that businesses need for legitimacy.
Covid has accelerated these trends by reminding us that companies do not operate in isolation; rather, they are part of a complex stakeholder ecosystem, and maintaining a vibrant and healthy ecosystem benefits everyone. 2020 has been a sobering reminder that the world is much more connected than we had thought.
That translation gap for ‘selflessness’ beyond public office is narrowing. Decisions for boards are becoming harder and more nuanced, with more significant trade-offs. It is becoming increasingly difficult to find solutions which work for all stakeholders. As levels of transparency on board decision making continue to improve, decisions which take a narrow view of the company’s interests or which have only short term horizons are more likely to be challenged by a wider range of stakeholders and judged with the benefit of hindsight.
By contrast, commercial organisations that find a way of embracing ‘selflessness’ as part of their ethical values will find new ways to work in partnership with their stakeholders and enjoy the sustainable business benefits that flow from stronger relationships based on trust with their customers and the communities they serve.
They need to – public expectations are changing fast.