Ethical leadership is often described as doing the right thing. For Non-Executive Directors the challenge is more complex. Boards make decisions collectively, often with consequences that extend well beyond the organisation itself. In a recent NED Community session, Lauren Branston, CEO of the Institute of Business Ethics, explored ethical leadership through three lenses: individual, organisational and systemic.
“Bias and assumptions can challenge your ethical leadership, or the oversight that you’re providing, if you’re not clear on those three levels,” says Branston, who illustrates the point with an example from her time working in the UK & Ireland Executive Leadership Team of Coca-Cola. She recalls how, when the company was grappling with the emerging issue of obesity, it initially focused on what it could do at an individual level.
“With the benefit of hindsight, we perhaps went too far in how we managed the issue at the individual and organisational level, and didn’t think enough about the fact that this was an issue we had responsibility for but wasn’t in our direct control,” says Branston. As a result, the company’s initial solutions centred on individual responsibility, including nutritional information, pack sizes and product labelling. “Really what we needed to be thinking about was collaboration with government, regulators and competitors to come to the kinds of solutions that would be required to take the broadest possible view of this issue,” she adds. It’s a useful example of why NEDs need to look beyond what is immediately in front of them and consider the wider context of an ethical issue.
So, how can NEDs use this three-level framework in their own board work?
Level 1 – Individual
“To be an ethical leader, self-awareness is critical,” says Branston. For NEDs, that means taking a step back and considering what you personally bring into the boardroom. What are your own values? What is important to you from a values-based perspective? And how do your values compare with those of the organisation you are overseeing?
It’s also worth thinking about your purpose. Why have you chosen to become a NED on your particular board? What skills and experience are you bringing to the role and where might there be gaps in your knowledge or experience? Where could your own biases and assumptions influence how you see an issue? These questions can help NEDs understand not just what they think, but why they think it, which is an important part of ethical leadership.
As well as being aware of yourself, Branston emphasises the importance of being aware of the impact you have on others. “To speak up, to listen, to act and to learn – that flow of things is critically important,” she says.
At the heart of ethical decision-making is creating an environment where people feel able to speak up and challenge, have constructive conversations and disagree agreeably. For NEDs, that also means thinking about your own contribution to how the board operates as a team.
Ultimately, it’s worth asking yourself: Does your board have a good approach to challenge, constructive decision-making and debate?
Level 2 – Organisational
For Non-Executive Directors, ethical leadership also means having a sound understanding of the organisation’s culture and how it influences behaviour and decision-making. This means looking beyond policies and procedures to understand what is really happening within the organisation. Are there pressures or incentives that might discourage people from speaking up? And does the organisation genuinely encourage open dialogue and challenge when it comes to difficult issues?
Branston highlights the impact that pressure can have on organisational culture, drawing on longitudinal, multi-national research from the Institute of Business Ethics’. “High pressure environments can quieten down dissent or challenge,” she says. An IPO or merger and acquisition, for example, can create a heavy focus on meeting targets, making it harder to speak up about ethical challenges.
There are also the formal mechanisms to consider. Are employees treated fairly? This extends to customers, suppliers and third parties. Is the code of conduct genuinely embedded, or is it simply empty ‘words on a page’? And if you don’t have an ethics and compliance team, who is responsible for ethics within the organisation?
Ethical decision-making is another important part of this. When the rules don’t provide an obvious answer, NEDs need to consider the organisation’s principles, purpose and values, as well as the impact on different stakeholders. This means asking whether you have a good understanding of the decisions the board is making and what they might mean for the people affected.
“Sometimes I think that, particularly on Boards, you can be really at a distance. It’s asking not just what we are trying to do, but how do I start to unpack what this means for the people that we would consider stakeholders in this decision?” adds Branston.
Branston reflects on her own experience of working on human rights issues. She says that travelling to countries affected by human rights issues and meeting people who had experienced modern slavery or gender-based violence changed her perspective dramatically. “You’re in a completely different space because of that and your ability to contribute is transformed,” says Branston.
Level 3 – Systemic
The third level looks beyond the organisation itself. For NEDs, this means thinking about emerging ethical issues and the organisation’s wider impact on society, including areas where it may have responsibility but not direct control.
AI is one example. It is transforming organisations and how people work, but it also raises wider questions about its impact on society and the role organisations should play in addressing them.
Branston argues that NEDs should think about where their organisation can have influence, including how it engages with regulators and shares its expertise on issues that are material to the organisation. There may also be opportunities to work with competitors on common challenges.
She points to electric vehicles as an example. Despite years of targets to support the transition to electric vehicles, different charging plugs remain an obstacle to scaling. “That’s clearly where competition has gone ahead of collaboration,” says Branston.
Ethical leadership requires NEDs to understand themselves, understand the culture and dynamics of the organisations they oversee, and understand the wider systems of which those organisations are part. The challenge is to hold all three perspectives at once.
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