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Good corporate ethics needs grey-area leadership, not black-and-white rules

By Stephen Cohen - posted Thursday, 5 December 2002


The situation with accountants is but one example of a general problem of trying to spell out grey in black and white, as though there could be a simple formula for matters of good judgement.

Although they have been in the spotlight for their systematic ethical shortcomings, accountants are by no means alone in displaying this ill-advised reductionist strategy.

At all levels of management in the corporate world (beginning with the board, and extending to all those with managerial responsibility), there is simply no escaping the responsibility for exercising good judgement, for which people are then held accountable.

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Focusing on accountability systems alone runs the danger of missing what should be the central target. Trying to replace responsible judgement with rules, regulations, and allowing for the ethically blinkered position of the lawyer CEO, is as close as we can get to a recipe for failure at good corporate governance and ethically informed, responsible decision-making.

Here's a call to arms: directors need to show leadership. They need to assume control of the corporate culture, starting with a review of their own ethical standards and beliefs.

Only by instilling corporate values that clearly authorise and encourage ethical behaviour and just as clearly discourage unethical performance can headway be made at remedying an environment ripe for corporate failure.

Reliance on more black-letter law and regulation will not solve the problem, and runs a substantial risk of making it worse.

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This article was first published in The Australian Financial Review on 26/11/02.



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About the Author

Dr Stephen Cohen is an associate professor at the University of NSW, a director of the university's Graduate Programs in Professional Ethics and a director of the Business Ethics Centre at Compliance Australia.

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University of NSW
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