The individual must take responsibility for doing the right thing
The quick departure of David Jones’ chief executive, Mark McInnes, after inappropriate behaviour towards an employee demonstrates the need for companies to have extensive checks and balances in place and set boundaries of organisational behaviour.
A robust code of conduct forms an important component of governance practices. A well implemented code of conduct may reduce the risk of damaging behaviour. Inappropriate behaviour on the part of employees will no doubt affect companies both financially and in terms of reputation.
Promotion of ethical and responsible decision making and conduct will lead to the development of practices that take into account a company’s legal obligations. It will also enhance confidence in the company’s integrity. Reputation is something that can be lost in an instant but can take years to build.
It is important that a company’s code of conduct is backed up by well-defined core values to which the board and senior executives are committed.
The role of boards is critical, because the ultimate responsibility for an organisation’s activities resides with them. The way in which corporate governance issues are handled, including those of an ethical nature, may depend on how well directors understand their roles. Regulators play a role but it is up to the board to impose a culture of risk assessment, compliance and ethical behaviour on an organisation. Having a whistleblower protection policy in place to protect employees’ rights if they report suspected wrongdoing also sends a strong message of support for ethical and responsible decision making within an organisation.
It is impossible to regulate for ethics or common sense. Corporate governance sets the tone but it is important that we as individuals take responsibility for doing the right thing.
Source: Adapted from Alex Malley, ‘The individual must take responsibility for doing the right thing’, The Age.61

Questions

1, This article discusses the issue of a code of conduct in corporate governance. Discuss whether a code of conduct is necessary for good corporate governance.
2, The article states that it is impossible to legislate for ethics. Do you agree with this? If this is the case, does this mean regulation is ineffective?