How can HR help CEOs make good ethical choices?

ethical
John H. C. Colvin

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written on December 7, 2017

HR can help set the cultural tone in an organisation, and provide an ethical lens through which the CEO, executive team and the board make decisions.

It’s not difficult to see why an ethical standard is critical in the cultural matrix of an organisation.  A quick look at the financial press is all that’s needed. Culture can go to the very heart of an organisation’s sustainability. It’s also fundamental to retaining and attracting staff, creating good relationships with customers, suppliers and the community. But the difficulties in setting and nurturing a positive organisational culture should not be underestimated. This is because there’s not a universally accepted definition of culture and measuring “culture” itself is problematic.

Proxy measurements can sometimes be useful to quantify culture, for example, absenteeism, staff turnover or staff surveys. Bringing these measurements to the attention of the CEO, discussing their significance in terms of any ethical concerns, and working on possible solutions is an important role for HR. Good judgement is fundamental in these discussions and looking carefully and critically at results with the CEO adds an important and necessary layer to these discussions.

Managing ethical issues as part of the fabric of the organisation is a bit like international peace.  It requires constant vigilance. Serious ethical breaches can be life threatening to any organisation and reputational damage can be long lasting. Misjudging the severity or nature of the ethical issue, be it over or underestimating, can also be cause for concern. HR can help the CEO in assessing these judgements, as most are people issues. Questioning whether the problem is an isolated incident or more widespread is just one of the discoveries required.

There are many other ways that good HR practitioners can assist CEOs in making good ethical choices. These choices are built into the HR function in some ways, such as when organisations are involved in disciplinary actions, setting remuneration including bonuses, discrimination, and workplace safety. It’s part of what good HR practitioners do on a day to day basis. Ensuring any ethical issues are discussed in addition to performance, conduct and business issues where appropriate is invaluable to a CEO and the board. Courage to do so in some circumstances can be required.

Given the old adage that “a fish rots from the head down”, HR should be assisting the CEO,  executive team and, if requested, the board. It’s important for the leaders of any organisation to “walk the talk” on cultural and ethical issues. This demonstrates to the wider organisation that the actions of the leaders reinforce ethical standards and don’t detract from them. HR can also assist and advise the CEO personally and confidentially on ethics if a positive and professional relationship has been developed.

To ensure ethics are a “whole of organisation” approach, HR can implement programmes, policies and training which is up to date, relevant and user friendly. Induction programs for all new employees which includes ethical expectations is also part of the ethical mosaic.

It’s helpful if HR assists the board of directors in the appointment of a CEO. The major role in leading this appointment of a CEO in large organisations is usually the responsibility of the chair, or chair of the HR Committee of the board. Wise directors often use HR to assist in this process. If this is the case, and particularly if there are internal candidates for the CEO position, the chair should make it clear that HR is reporting directly to the board and not via the usual executive hierarchy, unless otherwise instructed by the board. This helps in avoiding possible conflicts, embarrassment and ethical concerns.

The discipline of seeking references and looking at the wider cultural fit and ethical background of potential CEOs by HR can be extremely useful when appointing a new CEO. Hopefully this attention to detail by HR helps to appoint the right “ethical CEO” which is one of the keys to creating an ethical organisation.

In order for HR to assist the CEO on ethics, HR must also be up to date on organisational culture and ethics. HR should have access to training and professional programs in this regard to assist it in the training of others.

Lastly, HR creating a trusted adviser relationship with the CEO to carry out the HR function at a high level, including the ethical space, is a big advantage to the organisation.

John H.C. Colvin Is a consultant at Herbert Smith Freehills, adjunct professor at the University of Sydney Business School, principal of Boardwalk Consultancy and director of Colvin Wines.

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