A note on corporate governance and direction

This is the position adopted by the organisation that is apparent from its policies, aims and objectives and the means established by which these are to be achieved. In this context the extent of honesty and integrity are immediately apparent. This is reinforced by the clarity and realism of overall purpose, the basic approach taken to customers, markets and staff, and management style; and underlined by the rules, systems and procedures that are put in place to support all of this, and the ways in which these are presented, delivered and implemented. Reflection of governance and direction is therefore a key performance indicator.

Example 6: Measuring governance and direction

BP Energy: from the year 2001 onwards, this company has sought to re-brand itself as an environmentally concerned oil company. In support of this, it produced a series of public relations announcements, supported by environmentally appealing television advertisements, declaring its aim to make the world a cleaner place to live. In no part of its environmental policy does the company make any reference at all to the enduring levels of pollution produced by its products via car and aero-engine exhausts. Nor does it make any reference to the fact that the company and its contractors both continue to dump oil drilling and refining waste and effluent in Third World countries and into the atmosphere.

Stakeholders

Attention to the relative position of stakeholders is based on the recognition that some - especially staff, customers and owners - are more critical than others - for example, the local community pressure groups and vested interests. Each has its own position and is worthy of being dealt with from the point of view of honesty and integrity and worthy also of respect and esteem. However, organisations will not normally accommodate a peripheral interest at the expense of the core purpose - though they will (or may) do this if it can be successfully integrated. The best organisations seek ways forward which are capable of integrating the peripheral interest with that of the core.

Resources

There are ethical implications for resource utilisation. Profligacy is wasteful and therefore wrong - even where constraints are not apparent. It is unsatisfactory, normally leading to a general loss of care and consideration. It is also off-putting to customers - for example, those customers visiting luxurious offices may well come to the conclusion that a good part of the business that is being conducted is being used on expensive furnishings rather than business performance and effectiveness. In general therefore, it is bad business.

A useful equivalent in public service terms may also be drawn. This is the propensity - very often driven by managers and directors - to use up the year's budget in time for the year ending (usually February and March because of the end of the financial year on 1 April). Resources that have been managed and constrained for 9 or 10 months suddenly therefore become expendable; this is reinforced if there is no prospect of carrying the resources forward to the following year. The result is that departments affected in this way engage in any activities or purchases that are guaranteed to use up the resources.

On the other hand, resource constraints lead to choices and priorities. This leads, in turn, to the consideration of who should receive resources and who should not, and why. An ethical assessment will look at organisational aims and objectives. Other elements include establishing whether everything is to be attempted in the knowledge that it will probably fall short of full success and effectiveness (common in public services); or whether resources will be concentrated on that which can be completed fully at the expense of that which cannot.

Resource constraints also lead to resource battles in many cases and this compounds the issue. Problems especially arise when resources are seen to be distributed on the basis of favour and expediency as distinct from operational necessity; or to head office functions at the expense of outlying and often front line activities.

The ethical line is therefore to maximise and optimise resources in the pursuit of objectives. This is based on the judgement and integrity of those responsible taking the point of view of what is best for the organisation and its long-term future.

Conduct

This is the basis on which all relationships are founded. They key is the attitude adopted by staff to each other and the organisation to its people. It is underlined by establishing standards of conduct and enforcing them - so that a clear distinction is made between what is acceptable and what is not. Everyone is held in confidence, respect and esteem. This is, in turn, underlined by the nature, emphasis and application of the rules and regulations.

Professional standards

This is attention to the quality of staff, the ways in which they apply their particular trades and expertise, and the expectations and requirements that are placed on them by the organisation. These standards are to apply to everyone. There is no reason why ostensibly unskilled or simple tasks and jobs are not to be carried out to the highest possible quality. This is supported by the organisation's commitment to provide the correct working environment, equipment, style of supervision; and by the standards of respect, trust and esteem referred to above. Absolute standards are present and upheld where each of these elements is present; and where one falls short, this may lead to the beginnings of questioning the integrity of the relationship. Where the shortfall is allowed to persist, professional standards inevitably fall in all areas. There is moreover, a loss of self-worth all round and those with distinctive trades or professions retreat into being a professional or expert practitioner (as distinct from an organisation practitioner) and may seek employment elsewhere where these standards are known (or perceived) to be higher.

Example 7: The Actions, Attitudes and Values of Key Figures

Organisational and professional standards are reinforced (both positively and negatively) or diluted by the actions, attitudes and values of key figures. If a company Chief Executive states that: 'The staff are our most valuable resource', but actually hires and fires at will, he or she will be judged by his or her actions, not words. Similarly, any company that is determined not to make staff redundant must use a phrase equivalent to: 'We will not make staff redundant', rather than: 'There are no plans for redundancies at present', because the latter statement has been widely used by dishonest and expedient companies and their managers in the past. Other examples that may be usefully noted are as follows.

• 'Riddled with the disease of sloppiness': verdict of Lord Justice Sheen on the then Townsend-Thoresen car ferry company following the inquiry into the Herald of Free Enterprise disaster in March 1987 at Zeebrugge.
• 'The mechanics refused to fly in these planes': the Chief Executive of Vietnam Airlines, September 1994. He was referring to the company's inability to maintain its fleet of Soviet built Illushyn and Tupolev airliners in an airworthy condition, and comparing these very unfavourably with the Airbus and Fokker airliners with which the company was beginning to be re-equipped.
• 'Jupp Heynckes has been dismissed as coach of Real Madrid, because we have had a poor season': Lorenzo Sanz, President of Real Madrid Football Club, dismissing Heynckes as coach, June 1998. The Club had just won the European Champion's Cup for the first time for 37 years; it had also reached the Spanish Cup quarter-finals, and had finished fifth in the domestic championship.

The law

Compliance with the law may or may not be ethical - this again depends on the attitude and standpoint adopted. Organisations are known to hide behind the law in certain circumstances - especially where legal standards are lower than the absolutes that are known to be required.

This applies especially to waste disposal and discharges, and the relationship between the organisation and its environment. It occurs also in all dealings with staff: the right to disclosure of information, and rights to time off work, to breaks, to maternity leave; and to minimum levels of redundancy notice and pay. Organisations comply with the law because they have to and not because they know that this is the right approach to take.

Organisations should nevertheless comply with the law. Not to do so questions, and is likely to destroy, the total integrity and honesty, and the standards which it has set itself. Condoning acts that are against the law (even encouraging them) also destroys integrity. The quality of the working relationship is also compromised when organisations take a calculating or expedient view of how far the law can be stretched without actually breaking it.

Example 8: Shift Patterns for Medical Staff in the NHS

In UK hospitals at present, nursing and other medical staff are regularly required to work 12.5-hour shifts. These are either days - from 7.30 am - 8.00 pm; or nights - from 7.30 pm - 8.00 am. A full-time working week consists of three of these shifts. However, the following problems occur which cause hospitals and their managers to operate right on the cusp of the law.

• Rosters are drawn up for four weekly or monthly periods, and this can result in some staff working four, five or even six long shifts in succession. Whilst, from the point of view of expediency, this may be achievable in the short-term, in the medium to long-term, it is certain to result in staff exhaustion, stress and loss of effectiveness. No clear guidelines exist as to what constitutes 'best practice' when working in healthcare and medical situations. Hospital ward managers are therefore free to use the rostering process as they see fit.
• Some staff work their regular shift patterns in accordance with their contracted obligations, and then pick up extra shifts through nursing and medical employment agencies, for which they receive fees vastly in excess of pro rata salary payments.
• In many cases, those working 12.5-hour shifts receive a break of 30 minutes only per shift. The collective corporate attitude within the NHS to this is that: 'Medical needs must come first; staff needs have to be subordinated to patient demands'.
• No clear standards for day and night working are stated, nor reinforced by Statute. It is therefore possible for staff to be rostered on for days and nights without any pattern or structure at all; and this also is very damaging to individual health and welfare.

All of this breaks the spirit of the law, and the attitudes required of managers in general to the hours worked by their staff. However, the letter of the law is not strictly being broken, provided that those with managerial responsibilities within the health service are able to invoke 'patient demand' and 'service demand' as their primary drive.

Health and safety

Health and safety at work is covered by the law and it is also a distinctive element in its own right, simply because it is such a fundamental reflection of respect for people (and especially lack of respect for people). The problem lies in the organisation's acceptance of its responsibility to take an absolute view of its environment, technology and other equipment, its procedures and practices, its staff and any other persons who visit or use its premises; acknowledging the entirety of things that can go wrong; and designing each element so that nothing can go wrong.

This is a continuous responsibility and requires reaction as and when new knowledge becomes available.

For example, asbestos was used during the period 1930-1960 as an effective fireproofing material in buildings and construction workers worked with it in the same way as any other material. When it became apparent that it caused skin disease and also the dust that it produced was harmful to the lungs, protective clothing, including breathing protection, became obligatory. The best organisations went out and bought the correct equipment and insisted that their staff used it; and when the equipment was improved, went out and bought it again. Other organisations, either phased the equipment in, or they made it available to the staff to use if they wanted to, or simply rejected the evidence.

Example 9: Health and Safety at Work

Health and safety at work is both a corporate and collective responsibility. This means that, as well as organisations and their managers having to know, understand and be able to implement what is healthy and safe in their particular set of circumstances, the staff must be trained in the right procedures, attitudes and behaviour also. Staff may not be asked to work in unhealthy or unsafe manners, and may refuse to do so without fear of discipline or dismissal.

Organisational integrity is compromised, if not destroyed, when staff are bullied, coerced, cajoled or bribed into working in unhealthy and unsafe ways. This is also the effect when staff are asked to do something that is legitimate at the time but, with hindsight, becomes known or believed to have been unhealthy or unsafe. When this becomes apparent, organisations and their managers should put the matter right immediately, and pay compensation or offer staff support where damage has been done.

This was indeed the case at Chatham Royal Naval Dockyards before it was closed down as a military base. Staff were employed to clean the nuclear reactors of submarines, without adequate protection from radiation. When research demonstrated that damage to individuals had indeed been done, the Ministry of Defence first resisted this on the grounds of ignorance, and subsequently on the grounds of Crown immunity (statutory instrument that meant that nobody could be prosecuted for breaches of health and safety regulations if they were acting in the name of the government). When the matter came to Court, both defences were rejected, and the principle of Crown immunity was lost for all but a very limited set of circumstances.

The radiation damage was done to staff over the period 1950-1975. The case finally came to Court in 1995. Judgement was delivered in 1996. It has subsequently become very much more difficult and expensive for both the Ministry of Defence and other government departments to get private contractors to carry out work in these and equivalent sets of circumstances, because of the then prevailing managerial attitudes; and this is now factored in by contractors working in this and other contentious and extreme industries, or working for government under private finance initiatives and other specific and specialist contract formats.