Risk & Reward and the Greed is Good Grid

Guest blog contribution by John Dawson & Carmel McDonald

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Gordon Gekko from the 1980s movie Wall Street would be proud of the enormous numbers of people globally in public and private sector organisations now who act on his mantra “Greed is good”

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In this blog we’re providing the Greed is Good Grid because these people must be using something like this grid to evaluate their best options.  But we’re also asking the question “what the hell happened to ethics?”

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The Greed is Good Mob

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Mitsubishi Motors is just the latest in a long line, with the share price being savagely slashed, after admitting it has been manipulating fuel economy testing methods and contravening Japanese regulations for 25 years.

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Among the latest admissions to the Greed is Good mob in Australia are Colgate-Palmolive and four cement companies – Cement Australia Pty Ltd, Cement Australia Queensland Pty Ltd, Pozzolanic Enterprises Pty Ltd, and Pozzolanic Industries Pty Ltd

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Colgate-Palmolive has been ordered to pay penalties of $18 million for cartel conduct by colluding with competitors and a major supermarket chain to limit the supply and control the price of laundry detergents.  The regulator has an ongoing action against those competitors and the supermarket chain

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The four cement companies have also been ordered to pay more than $18 million in penalties for colluding to prevent competition in the market for flyash, a by-product of burning coal, which can be used in making concrete

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This type of collusive behaviour has been banned by legislation in Australia since 1974, with the provisions and penalties regularly publicised, so the executives or managers involved can’t claim ignorance of the law.  Collusion in Australia requires a very conscious decision to break the law

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As well as these, there have been regular reports of staff at various levels in banks, insurers, government organisations, financial planners, retail franchises, wealth management companies, stockbrokers, educational institutions, construction companies, developers and others all finding ways to blindside the system for personal or corporate gain

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We almost forgot to mention Political parties doing their own form of money laundering to disguise donations from banned sources

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What the hell happened to ethics?

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These grubby scandals keep oozing into the public domain, seemingly every week somewhere in the world.  What the hell happened to the idea of the importance of leaders acting ethically?

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Is ethical leadership just a concept for academic debate, without meaning in the real world?  Ethical conduct sure seems in short supply in financial services, judging by the results of a 2015 joint survey by the University of Notre Dame and law firm Labaton Sucharow

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They surveyed 1200 professionals in the financial services sector in the USA and UK, ranging from young professionals to senior executives.  The survey aimed to measure workplace ethics in this sector

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Despite much tougher regulatory regimes introduced since the GFC of 2008 and swingeing fines and penalties, ethical behaviour looks like a Swiss cheese.  Here are some of the holes found by the survey –

• 47% of respondents find it likely that their competitors have engaged in unethical or illegal activity in order to gain an edge in the market. This figure jumps to 51% for individuals earning $500,000 or more per year.
• More than one-third (34%) of those earning $500,000 or more annually have witnessed or have first-hand knowledge of wrongdoing in the workplace. • Nearly one in five respondents feel financial services professionals must at least sometimes engage in illegal or unethical activity to be successful.

• 25% would likely use non-public information to make a guaranteed $10 million if there was no chance of getting arrested for insider trading.

The only thing stopping one in every four of these people from acting illegally to make $10 million is not the desire to act ethically but the fear of being caught.

Greed is Good Grid

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Here’s our Greed is Good Grid.  The Gordon Gekkos of the world must be using something like this to evaluate their options.

greedisgood

 

 

 

 

 

 

 

 

 

 

Doesn’t a social licence require ethical behaviour?

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Many organisations and commentators talk about the importance of having a social licence, or approval from the community and stakeholders, to operate

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When unethical behaviour comes under public scrutiny that surely damages an organisation’s social licence.  We’re not talking here about the occasional rotten apple but about more widespread and repeated unethical behaviour

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So let’s ditch the Greed is Good Grid and commit to ethical behaviour

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We think ethical behaviour requires leaders at all levels to think about two simple, but related, questions –

• What is the right thing to do?

• Will this be fair to all stakeholders?

Please take a few seconds to share this because sharing ideas helps all of us to improve performance

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About the Authors

John Dawson & Carmel McDonald are the co-owners of Dawson McDonald Consulting.  They’ve been running Risk Culture Assessments since 2008 to help clients understand the strengths and weaknesses of their culture in managing risk, and how to strengthen it to protect their organisation and build resilience.  They can be reached at info@riskculture.com.au
In 2015 they published a book BUILD Your Business.  Risk Managers will also find this helpful in communicating their message effectively
To get your copy of this book, or to download a free sample chapter, click here