Ethics and Governance

Five steps to creating an ethical board

Jan 31, 2020

How can a board set the example rather than becoming one? Ros O’Shea gives a five-step approach to creating an ethical board.

“Where was the board?!” is the question often asked in the immediate aftermath of corporate misconduct. Stakeholders, quite rightly, expect boards to ensure businesses are run ethically. Yet, sometimes boards (and usually their companies in turn) fail dismally in this crucial aspect of their role. What can a board do to ensure the highest levels of probity in their organisations? This five-step approach can help.

  1. Ensure the ethical infrastructure is in place

    From a code of conduct to ethics training, speak up channels, ethical due diligence procedures and incentives programmes that reward the 'how' and the 'what', directors must ensure the appropriate infrastructure is in place in their organisations to enable and foster a culture of integrity. This is akin to laying down an ethical 'base layer'.

  2. Appoint the right CEO

    In leading that culture, the CEO is key. On appointment, they are bestowed with the organisation’s most precious asset – its reputation – and must be responsible for its safekeeping. It is the most important decision the board makes and demands commensurate investment in a robust process to recruit the right leader.

  3. Act ethically

    It is rare for a board to deliberately endorse an illegal act, but we know there can be a vast difference between decisions that are legal and those that are right. Decisions are usually right when a director is comfortable being personally accountable for their part in it, especially if it would be made known to their family on the front page of the local newspaper. Directors would do well to assess all decisions through that lens and determine whether they want to simply meet a bar, raise the bar or – better – set the bar in terms of moral courage.

  4. Lead by example

    In order to effectively set the tone from the top, the board should be a microcosm of the organisation’s desired culture. Espoused values, such as respect and openness, should underpin board interactions and encourage constructive debate. IQ at this level is a given, but emotional intelligence (EQ) differentiates high-performing directors and their boards and should be a prized quality in director recruitment.

  5. Monitor culture
    Finally, directors must know that only so much governance can be done within the confines of the boardroom; they need to experience first-hand the organisation’s “mood music”. This provides the board with the holistic assurance it needs that the desired culture is truly living and breathing across the organisation.

By following these five steps, the board will focus on doing the right things and asking the right questions, which will ultimately lead to the right outcomes. Briefly, that is the board’s role in relation to ethics: to stand squarely behind their chosen CEO and collectively set the tone from the top while providing independent oversight on the organisation’s ethical infrastructure and culture.

Ros O’Shea is the founding partner of Acorn Governance Solutions.