Ethical business starts at the top and SA has work to do, survey finds

The ethics of an organisation filters from the top down, recent research has confirmed - but in South Africa, there is a "disconnect" in how ethical various levels of management are perceived to be. 

Moreover, 31% of non-managerial employees say they have personally observed ethical misconduct in their organisations - up from 25% in 2016. 

This is according to the South African Business Ethics Survey for 2019, launched on Monday by the Ethics Institute at and event at Stellenbosch University Business School. 

In addition to showing that leaders play a significant role in shaping the ethics of an organisation, the survey also showed that overall, the private sector in SA has a developing ethical culture that still needs to mature.

The survey, conducted in intervals of three years, measures the state of ethics in corporate South Africa. Over 2 200 respondents from 19 organisations – mostly listed companies and large businesses - participated in the 2019 survey.

Room for improvement

With the ethical culture risk score at 63, it means that there are some aspects of ethical culture present in organisations, but the culture has not permeated throughout, co-author of the research Liezl Groenewald said.

"In most organisations there is a focus on ethical standards and conduct, but it is not completely part and parcel of the DNA of the organisation," Groenewald said.

The research showed there was a general perception by employees that senior management is committed to ethics. However, middle management and non-managerial employees were perceived as less committed, the report read.

This suggested a disconnect between the ethical commitment of senior management and employees at lower levels, who otherwise would be more committed to ethical culture if they observed senior management actively being ethical, it added.

More misconduct, but more reporting

Just under a third (31%) of respondents said they had personally observed ethical misconduct in their organisations, up from 25% reported in the last survey in 2016.

However, there was also a higher incidence of reporting. Of those who observed unethical conduct, 55% reported it, up from 48% recorded in the 2016 survey.

Of those who did not report unethical behaviour, 32% felt they would be victimised and 31% did not believe would be done. Groenewald said that these issues must be addressed.

Driving change

When it comes to fostering an ethical culture, the research found accountability and responsibility were crucial – in other words, an environment where unethical behaviour is punished and ethical behaviour is recognised and rewarded.

Another important driver of change is commitment by leadership and middle management, Groenewald said.

Panellists in a discussion which followed the presentation of the report echoed views that management had a key role to play.

Ivershini Reddy, general manager enterprise risk and assurance at Engen, said if staff do not believe a business is ethical, then there are fundamental reasons for that, which start at the top of the organisation.

"You can't have lower level staff believing there is ethics if the board is not practicing standards of ethics," Reddy said.

Invest in doing better

Solly Moeng, CEO of DonValley Reputation managers, stressed that leadership should be ethically grounded.

"Leaders have to lead from the front," he said. "The minute you are compromised as a leader, you lose the moral high ground."

Moeng suggested that companies must have a set of values and incorporate these values in performance management of staff. He added that organisations should be prepared to let go of talented people if they are not accountable to the organisation's values.

Prof Deon Rossouw, CEO of The Ethics Institute, who was also a panelist, added that ethics goes beyond compliance and should be a culture. He said in organisations with poor ethical culture, the likelihood of reporting unethical behaviour was less than in companies with strong ethical culture.

"We need to invest in culture," he said.

Senior management is crucial, Rossouw said. "The tone at the top needs to be replicated on all levels throughout the organisation," he added.

ZAR/USD
17.00
(-0.09)
ZAR/GBP
21.24
(-0.12)
ZAR/EUR
19.14
(-0.13)
ZAR/AUD
11.81
(-0.13)
ZAR/JPY
0.16
(-0.20)
Gold
1774.74
(+0.03)
Silver
18.05
(+0.01)
Platinum
808.00
(+0.25)
Brent Crude
42.78
(-0.79)
Palladium
1914.01
(+0.62)
All Share
54521.90
(-0.17)
Top 40
50179.89
(-0.26)
Financial 15
10150.02
(-0.64)
Industrial 25
76554.73
(+0.52)
Resource 10
50138.02
(-1.24)
All JSE data delayed by at least 15 minutes morningstar logo
Company Snapshot
Voting Booth
Please select an option Oops! Something went wrong, please try again later.
Results
I'm not really directly affected
18% - 1598 votes
I am taking a hit, but should be able to recover in the next year
23% - 2090 votes
My finances have been devastated
35% - 3147 votes
It's still too early to know what the full effect will be
25% - 2269 votes
Vote