Is it possible to focus on return to shareholders, and remain ethical and moral in the way companies deal with customers, suppliers and the expectation of the broader community?  The answer doesn’t look good.  It is very easy to find examples of companies that have not stuck true to both - particularly following the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry - AMP, ANZ, CBA, NAB, QBE, Westpac, and the list goes on.  While I have no trouble listing these and many others, try and find shining examples of companies where you can see their behaviour has been both ethical and moral, and returned high yields for investors.  It is really difficult to track these down.  Does that mean there are none?  Not at all.  It means that they are not newsworthy enough to be published.

Ethisphere published its list of the world’s most ethical companies again in 2019.  There were 128 companies recognised for exemplifying and advancing corporate citizenship, transparency and the standards of integrity.  Those recognised span 21 countries and 50 industries.  Only one Australian company made the list, Teachers Mutual Bank.  Of course, this doesn’t mean there is only one ethical company in Australia, but it is interesting that no other Australian corporation made the list.  

Why are we being let down so badly by companies we should trust?  Is it not possible to make money and offer a good return for shareholders, while exemplifying moral and ethical behaviour?  For more companies than can be identified, the answer is no.  It’s about competition.  Turn to sport and ask why athletes cheat with drugs, why do cricketers blatantly tamper with the ball for an edge (and this is not specific to Australian cricketers as this has been going on for decades)?  The answer lies in the impact of winning.  This is everything and no one remembers second place.  I can pose the question: in the last Olympic Games, Mack Horton won gold in the Men’s 400m Freestyle, who came second?  Chloe Esposito stunned everyone when she came from behind on the last lap to win gold in the Modern Pentathlon for Women, who came second?  If I’m an investor and have bank shares, am I happier with a 7.4% dividend from Bank of Queensland, or a 2.9% return from CYBG PLC?  If bank X runs ethically and morally, contrary to the practices identified of the big four banks, it doesn’t last as its returns are poorer as a result.

Like sport, return for shareholders, or results, mean more than ethical decisions.  So, where does the pendulum swing?  Toward moral behaviour, or great results at any cost?  It is clear we demand results, and, just as it promotes cheating in sport, so it promotes unethical practices in business.  Is it only the regulators, or do shareholders have a responsibility to expect, and to hold, the companies they invest in accountable for ethical conduct?  Currently, reports indicate the AMP Board and senior management seem to be adopting a ‘means to an end’ approach to claw back confidence and enhance its share price.  In doing so they are making decisions destroying the lives and livelihood of thousands of financial advisers with scant regard for their future or their welfare.  Ethically and morally right?  Certainly not.  Likely to assist in raising the share price?  Maybe, if it isn’t too late.  Do they care about the destruction?  Clearly not.

Will the pendulum swing the other way and create improved ethics in our companies?  It would be comforting to think this is going to happen, but naïve to believe it will.  Like sport, where there are results involved, people will find new ways to shortcut to get the win.  Stronger legislation is not the answer, as it has proven not to be the panacea in the past.  There is no evidence to say it will in the future.  It comes down to the expectations of investors, customers and those who can make decisions to go one way, or another.  If we start rewarding ethically strong companies by investing in them and buying from them, we start to send a message that we will not tolerate cheating.  When we see companies making a big deal, through advertising, about how wonderful they are as they support a charity, and are therefore ‘giving back’, we need to call it for what it is.  We put sporting heroes on pedestals and then shame them when we find they cheat.  We invest in companies returning strong dividends and simply wag a finger but leave our money with them.  What message does that send.  We don’t like unethical behaviour, but it’s quietly alright if I’ve got shares with them!

Legislation is dependant on Government, who can be swayed by noise.  The power lies with the consumer.  As a consumer, it is imperative that we are unyielding over what we will accept and what we find unacceptable.  This is the key to changing unethical business practice. 

Related reading: 

Aussie Conscious Consumers holding businesses to account while they stay home: PayPal

Why you should ask “So what?” and “What if…?”

Is your vision a waste of time?