'Tone from the Top – Boardroom Ethics in Ireland', details the findings of research carried out with 401 IoD members in February 2017. The online survey was conducted among executive and non-executive directors to measure their views on how the board conducts itself in respect of ethics; some 68 percent of respondents sit on boards. This figure includes CEOs and Managing Directors.
Focus on ethical behaviours is desirable and important, but what is the reality on a practical, day-to-day basis in businesses and boardrooms in Ireland? This research provides a barometer of IoD members’ views on how the board conducts itself in respect of ethics. It explores how the board and senior management choose to carry out their respective roles, and this in turn can provide a benchmark as to the level of importance ascribed to ethical behaviour in businesses in Ireland.
The good news: Today, boards are looking more seriously at corporate culture, and whether their organisations have the right ethics in place. They are more aware of what they need to do and are clearer on what constitutes ethical behaviour.
- 80% of respondents say that the board adheres to a specific ethics code or policy, 79% say that their organisation has a Company Values Statement and (74%) say that the board has a Conflict of Interest Policy.
- 70% say that the board on which they sit has either discussed company values, ethics and behaviour fully, as a specific item on the board agenda, or has covered them but not as a specific item on the board agenda, within the past year.
- Or, to look at it in another way, just 5% of boards have not discussed company values, ethics and behaviour at all within the past year.
There is very high awareness (97%) of what constitutes a conflict of interest in boardrooms in Ireland.
- 86% of respondents definitely know, or know to a large degree, what is expected of their board in terms of ethical behaviour.
- The vast majority (86%) of respondents believes that there is now a greater focus on ethical behaviour at boardroom level than there was ten years ago.
- There has been an increased focus by the board on business ethics recently because there is greater awareness by the board of its responsibilities, say 77%.
- Almost half (47%) of boards monitor their own compliance with ethical behaviour and this occurs mostly through board evaluation or internal audit processes.
- If respondents were asked to do something that breaches their business ethical standards, 88% of them would know what steps to take.
- According to the majority (82%) of respondents, the board reacts appropriately to ethical or compliance failures.
Areas of concern: While there is certainly more awareness of ethics and ethical behaviour, there is a lack of focus among boards and management to ensure compliance. Boards discuss behavioural risks and recognise the need for oversight, but there is not enough motivation to get a clear view of the nature and source of those risks, and/or creating a means of preventing them. Furthermore, it appears that the main driver for behaving ethically is fear of public scrutiny, rather than because it is the right thing to do.
- 81% say that recent controversies and public scrutiny has increased boardroom focus on ethical behaviour and 90% say that reputational risk is the key driver for ethical behaviour.
- Almost half (44%) do not monitor their own compliance with ethical behaviour through board evaluation or internal audit processes.
- 50% of CEOs/executive management say that ethics were not mentioned in their most recent annual report.
- Almost half of respondents (49%) believe there is a prevalence of conflicts of interest among boards in Ireland.
The Conflicts of Interest Policy is attributed the least importance by the board, when compared with the Ethics Policy and the Values Statement.
- 20% CEO/executive management respondents say that they never report to the board on ethical matters.
- After the board as a whole (33%), the board’s Chairperson is the second lead for monitoring the Conflicts of Interest Policy (26%). However, 40% of the respondents say that the Chairperson’s ethical behaviour in itself is not monitored, or that they are unsure whether it is or not.
- Executive management does not have a way of measuring their own ethical behaviour according to 32% of all respondents. However, when just CEO/executive management respondents are analysed, 42% say that they do not have a way of measuring their ethical behaviour.
- Most Non-Executive Directors (29%) do not know how often ethics are discussed in management settings.
- Almost a quarter of respondents, 24% commented that ethics are “never” or “infrequently” an item for discussion on the board’s agenda, or “as the need arises”.