Corporations pay the price for unethical behaviour

We saw some significant failures in corporate ethics in 2015. Rising expectations of corporate conduct have put how companies do business firmly in the spotlight.

One notable scandal of 2015 was Volkswagen admitting to installing emission-test evading software in its diesel cars. The far-reaching fallout affected other carmakers and resulted in the resignation of VW chief executive Martin Winterkorn (pictured).

Australia wasn’t without home-grown scandals: 7-Eleven faced revelations of worker exploitation; supply chains were found to be subject to corporate abuse; and a series of ethical boycott campaigns of major brands would have dulled the recent festivities in some offices.

Are corporations increasingly being held to account? Fundamentally, has anything changed? The market continues to be geared primarily to reward profits and increasing revenues, and these remain at the heart of incentive structures, but it is rare today to find executives openly following the Gordon Gekko “greed is good” guide for business.

Importantly, the way a company is valued today is largely based on intangible assets. Boards, management and investors are also increasingly aware of the importance of such assets as drivers of growth, such as the ability to attract and retain good staff, corporate reputation, innovation, brand awareness, consumer trust and loyalty.

So, are companies becoming more sustainable and ethical? The short answer is yes. But, with some notable exceptions from the banking sector, Australian companies have been slow to seize the opportunities of sustainability and ethical leadership.

Research shows Australians are traditionally among the world’s most ethically active with 57 per cent of Australians refusing to buy from a company they do not trust.

Jill Riseley is the founder and managing director of advisory firm Meliora Group

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