Investing in Ethics: Why Boards Must Engage: The Time Is Ripe for the Country's Top Awards in Ethical Business Behaviour to Reflect the Thoughts and Actions of Those at the Top of Our Nation's Enterprises. Rodger Spiller Explains Why

Article excerpt

When the Brookfields Business Ethics Award was unveiled at the 1999 Deloitte/Management magazine Top 200 Awards a significant number of the audience responded with laughter. Business ethics, some commented wryly, was an oxymoron. Such a response might have been expected at a meeting of deep green environmental activists but here were the leaders of New Zealand's business community questioning the place of ethics.

Seven years on times have changed dramatically. From investors through to regulators, business ethics has become a mainstream issue that wise businesses are taking seriously.

This year, the awards are being repositioned to reflect the growing recognition that business ethics starts with the board. The 2006 Kensington Swan Ethical Governance Award, part of the Deloitte/ Management magazine Top 200 Awards, acknowledges the increasing recognition of business ethics at the most senior levels of business leadership.

What is driving this changing agenda for business?

* An increasing focus on ethics from leading businesses both here and overseas;

* Investor demands for ethical performance; and

* The business ethics expectations of regulators, including Securities Commissions.

Leading businesses

Both locally and globally, the boards of leading businesses are tackling ethical challenges and elevating business ethics from the fringe to the mainstream. They are also improving stakeholder relationships and enhancing their company's reputation. The payoffs? Increased ability to attract and retain the best directors and employees, higher consumer loyalty and more robust shareholder returns.

Leading management thinker Peter Drucker reflected the importance of ethical business when talking about the new meaning of corporate responsibility: "Only if business learns that to do well it has to do good," he said, "can we hope to tackle the major social challenges facing developed societies today."

This theme was echoed in the 2005 annual review from the World Business Council for Sustainable Development, a coalition of 180 of the world's leading international companies with collective revenues of approximately US$6 trillion. The chairman's message highlighted the challenge: "Companies must put their principles into operation, and demonstrate that they are doing this. They must also have the courage to come out of their comfort zones and provide solutions to fundamental issues such as poverty alleviation."

To date, the annual New Zealand Top 200 ethics awards programme has provided a rich harvest of case studies of organisations "doing well by doing good". Winners include Honda New Zealand, New Zealand Aluminium Smelters, Mercury Energy, Norske Skog Tasman, Methanex, NZ Post and 3M New Zealand. Their stories, and those of finalist companies, serve as compelling and useful examples for other businesses and students. (For more information on past winners and finalists go to www.nzcbesd.org.nz and www.management.co.nz/top200/ethicalgovernance.asp.)

The Kensington Swan Ethical Governance Award will use a 'Four Ps' model for evaluation.

* Purpose: defined in terms of creating environmental, social and financial wealth;

* Principles of honesty, fairness, caring and courage;

* Practices for the community, environment, employee, customer, supplier, shareholder and stakeholder groups; and

* Performance measurement: to account for a triple bottom line of environmental and social as well as financial performance.

Investor demands

Investors that take full account of business ethics are an important driver of business activity. Whenever these investors assess a business as having satisfied their rigorous investment criteria, they're giving their own award for business ethics.

Expect momentum in this area to continue to build. The launch of the United Nations Principles of Responsible Investment in April this year, for example, has been described as a "historic development for global financial markets". …