Murdoch and Moral Leadership

The news that James Murdoch, Executive has decided to step-down as Executive Chairman of News International is the latest development in the sordid tale of disreputable conduct in the UK newspaper industry. The Leveson inquiry into the “culture, practice and ethics of the press” represents a timely exploration of the complex relationship between organisational culture, leadership and the conduct of individual employees. Behind the question of who knew what about the practice of “phone-hacking” lies a bigger issue: should society hold business leaders responsible for the personal values and integrity of their employees?

A failure of moral leadership

It seems reasonable to suggest that senior executives have a responsibility for the internal culture of the organisations they lead. That is, not just what a company’s employees do, as defined by the structure of roles and accountability in an organisation, but how they do it, as demonstrated by their conduct and behaviour. What is it that causes staff members to believe that the ends justify the means, however unethical they are? The fact that phone-hacking appears to have been systematic at News International, a practice that had become institutionalised, has to be acknowledged as a failure of leadership. Business leaders set the goals and expectations of the organisation, and hence what is expected of its employees. But in setting targets and objectives, leaders and managers should never be indifferent to the manner in which these goals are met. It would be nice to think James Murdoch finally accepted his responsibility for the scandal at News International. 

Turning to external values 

But there is another nagging worry. Is the failure to uphold ethical standards at News Corporation symptomatic of a deeper trend amongst large corporations to neglect their internal values in favour of an appeal to values located beyond the organisational boundary – such as the perceived needs and expectations of their stakeholders?

Admittedly, there is every reason to suppose that organisational codes of ethics do little to influence personal values and integrity amongst employees (Trevino & Brown 2004), and may simply promote a compliance culture rather than foster genuine autonomy in individual moral judgement. It makes little logical sense to expect a corporation to act collectively as a moral agent if its individual members are not expected to act as such too.

Although an organisational “code of ethics”, policed by compliance officers, remains popular amongst US companies, in general the ethical narrative appears to be disappearing from business life. Issues of business ethics are being replaced by new terms which shift the focus of attention away from internal values that define the collective identity and culture of the corporation.  Ethical considerations are instead subsumed within the wider panoply of CSR philosophies and approaches.

Thus, rather than talk about corporate values and ethics, companies are increasingly adopting the language of sustainability, stakeholders, citizenship and social responsibility in which some kind of ethic is implicit but never fully apparent. One might say that this language is itself the product of an ethical discourse which has swung away from normative approaches towards a sort of ethical pragmatism.  

Dropping Es in the investment industry

A few years ago the term “ethical investing” was in popular and familiar use within the retail financial services sector. As large mainstream institutional investors began to develop their own “socially responsible investment (SRI) product offerings, investment professionals would add to their financial analyses the need to consider GSEE factors – issues of governance, social, environmental, and ethical concern. Nowadays all the talk is of “Responsible Investment” and the integration of “ESG” – environmental, social, and governance – into investment decision-making. The slippery issue of ethics has been quietly dropped in favour of a more easily reached broad consensus: a set of principles which cohere to no particular ethical framework but serve as industry good practice guidelines promulgated by the finance initiative of the United Nations Environment Program (UNEP) as the Principles for Responsible Investment (PRI). 

Don't make me blush

Has business become shy about “ethics”? Perhaps it is too soft and hazy a term to provide raw material for rigorous and rational business analysis. The triple bottom line, on the other hand, sounds comfortingly familiar. Being responsible no longer simply means not getting fined and avoiding bad press. The success of CSR in recent years lies in the fact it is increasingly viewed in strategic management terms. In the process of mainstreaming CSR approaches into management practice it is being increasingly absorbed into the wider management toolkit.

Thus, strategic CSR is now couched in value-chain terminology as “shared value creation”; self-declared sustainable businesses appeal to stakeholder theory in the development of sustainable products and services and in the development of brand identity. The harmonisation of integrated reporting frameworks, such as the Global Reporting Initiative (GRI), and the growing range of codes and management system standards has shifted the practice of CSR towards pithy issues of performance and measurement.

If what can't be measured, can't be managed where does that leave the vague notion of simply being "ethical"? It is unlikely Lord Justice Leveson will help us find our misplaced sense of personal morality in business life.