Ethics has increased in recent years as an issue of importance in society and in particular in boardrooms. With an increasing focus on the ethical implications of board decisions, the Australian Institute of Company Directors (AICD) and The Ethics Centre have released Ethics in the Boardroom: A decision-making guide for directors. The guide helps directors navigate moral judgements and ethical issues in boardroom decision making.

Ethical issues vary in scope. Some relate to organisational matters, such as conflicts of interest. Others are of broad societal concern, such as how to respond to climate change.

“There is a growing focus on the ethical implications of board decisions and high expectations of ethical conduct and practice from stakeholders, regulators and directors themselves in the context of sweeping structural changes in technology and community concerns with equity,” says AICD managing director and CEO Angus Armour FAICD.

The report includes a model to meet the need for a process for ethical decision-making. There are five steps in this process, and each has a series of questions to assist in decision-making.

  1. Frame: define and understand the precise nature of the issue to be decided.
  2. Shape: develop options that could resolve the issue. Some of these options will have been developed by management, others by directors
  3. Evaluate: apply a matrix of values and principles to evaluate the options.
  4. Refine: identify and eliminate weaknesses in the proposed course of action.
  5. Act: give effect to a decision.

The new guide aims to support directors as they navigate the intricate ethical terrain encountered in every boardroom. It does not attempt to prescribe a set of rules for good conduct. Instead, it aims to complement and inform the good judgement that directors bring to their deliberations. The guide invites directors to view ethics through four different lenses.

These can be used when considering ethics generally or applied to specific ethical issues and dilemmas arising in the boardroom.

Dr Simon Longstaff AO, executive director of The Ethics Centre, notes in the foreword to Ethics in the Boardroom that the ethical landscape traversed by company directors “has always been complex”.

“They are legally bound to act in the best interests of the company as a whole,” continues Longstaff.

“Ethics both informs the law and goes beyond its limits. For the most part, law sets boundaries for what may or must be done. Ethics concerns what should be done — even if not required or prohibited by law.”

Directors will often seek legal advice about what can be done. Whether or not to approach or cross the limits of the legal ‘envelope’ of possibilities is an ethical question. The fact that something can be done does not mean that it should be done.”

The guide reminds directors that fiduciary and statutory duties should be paramount in board decision-making.

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