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GRC Professional : GRC Summer 2012
PROBLEM SOLVING 35 SCENARIO ETHICAL DILEMMA A 14-year-old boy’s mother is suing Australia’s big four banks after they allegedly handed her son dozens of bank accounts and debit cards. She says she called the banks to alert them, but they refused to discuss the matter for privacy reasons. DR. ATTRACTA LAGAN Principal, Managing Values In training executives in ethical leadership, we distinguish between an ethic of care, an ethic of justice and an ethic of consequence. In the first, people make judgments about the people involved and who will be potentially harmed by our actions; in the second we think only about the law; and in the third we have to think through the consequences of our actions. In the recent case involving a 14-year-old boy systematically defrauding several banks and financial institutions, his mother pleaded with them to stop allowing him to open bank accounts. They each cited privacy laws as the reason for not being allowed to act; yet the boy was a minor and legally incapable of signing contracts. The banks arguably operated out of an ethic of justice and would strongly defend their need to protect people’s privacy because that’s what the law requires. But what if a situation arose where, for example, a customer came into a branch and said they were closing their bank account because they were committing suicide? Given that disclosure of intended suicide can be a call for help, would the bank have a duty to inform the person’s family or would the privacy laws prevent any action? Where consequentialism applies is thinking through the positive and negative consequences on the people involved and then the consequences for the organisation as a whole. We cannot separate the people from the context in which they work. Ethics is increasingly located in the fraud and risk area of business. Compliance programs are geared towards ensuring that all employees are aware of the appropriate codes and protocols to ensure that wrongdoing is kept to a minimum. But a growing number of companies are including ethics training in their compliance programs and, indeed, the laws governing corrupt conduct, such as the Criminal Code Amendment (Bribery of Foreign Officials) Act 1999 and the recent UK Bribery Act, place greater importance on the culture that facilitated the corrupt conduct than the acts themselves. There’s always the letter of the law and the spirit, but when higher order imperatives come into play, then it is to the spirit of the law we must look. In certain circumstances, such as the need to protect human life, transgressing the letter of the law may well be justified. BRIAN MORAN Former university lecturer in business sustainability In ethical terms, it’s important to distinguish between breaking the law and breaking the rules, or even breaking ranks as in the case of famous Enron whistleblower Sherron Watkins. Quite clearly, breaking the law is never conscionable in a business context because the regulatory consequences can be onerous. But sometimes, or maybe often, executives are placed in situations where they are encouraged to flout the law in order to deliver a short-term gain at the expense of the long- term profitability of the company. And the law is a laggard; the Sarbanes-Oxley Act was passed in the United States after it emerged that there were no laws preventing accounting or consulting firms from having multiple relationships with a company while also being its auditors. The question, therefore, is more: “If it’s legal, is it ethical?” Or worse: “If it’s not illegal, it must be OK.” As the Storm Financial case is proving, what the financial planners did was technically within the law but lending sums of money to investors that exceeded the equity in their homes is now regarded as unethical. The courts will decide after the fact if any laws were broken but the question the general public is asking is: “Was it fair to exploit people’s vulnerability or naivety in a period of unprecedented economic growth?” Will the financial backers of Storm – the big four banks included – suffer in the court of public opinion as the court case plays out in the daily media? For most organisations, reputation is the biggest issue. In any ethical decision-making model, the question: “Are there any laws, policies or codes to cover this situation?” is ranked behind: “What do the values and principles of the organisation say?” So principle before policy should be the guiding light of ethical conduct. But you can’t break the law if it specifically covers the situation under review. ••• WHAT WOULD YOU DO? QUESTION Is it ever okay to break the law if you believe what you are doing is ethically right? Principle before policy should be the guiding light of ethical conduct.
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