Next corporate scandal already in pipeline, claims CIPD

When tasked with increasing organisational performance, 30% of business leaders would choose to continue rewarding high-performing individuals regardless of the values they demonstrate. This finding comes from new research from the Chartered Institute of Personnel and Development (CIPD). The CIPD claims that this focus on the short term means that the next corporate scandal is already in the pipeline, and is calling for principles-based decision-making and greater transparency to increase trust in business.

The CIPD research, which is based on a survey of approximately 3,500 business leaders and 2,200 HR practitioners around the world, explores ethical decision-making in business and the principles and values that influence corporate behaviour.

Only 24% of business leaders and HR practitioners said they are “always” prepared to make short-term sacrifices for the long-term interests of people, organisations, and society. This is in stark contrast with what they say is “the right thing to do”, with up to 9 in 10 claiming they would protect the long-term organisational health and reputation, when given a choice of pursuing expedient or sustainable decisions.

In addition, three-quarters of business leaders describe employees’ ability to influence decisions that affect them as either “nice to have but not imperative” or as “applying but can be compromised”.

Other key findings from the report, which is being showcased at the CIPD annual conference next month, include:

  • 29% of business leaders (compared with 34% of HR practitioners) say they have to compromise their principles to meet current business needs.
  • Less than half of business leaders and HR practitioners in the survey (48%) believe that their core values cannot be compromised, whatever the context.
  • 22% of business leaders (and 21% of HR practitioners) say they have to compromise on their principles because they affect their ability to succeed in their organisation.
  • When asked to choose, 37% of business leaders (and 43% of HR practitioners) say decisions by their company are justified as long they follow the laws of the country they operate in, compared to with 63% (57% of HR practitioners) who believe their organisation should take account of the moral responsibility it has for employees.

“Stark reminder”

CIPD chief executive Peter Cheese commented: “The VW scandal is a stark reminder that organisations – particularly large and complex ones – need to think carefully about how they create organisational culture and how they increase the chance that people at all levels of the organisation will make ethically sound decisions.

“Our research suggests that far too many business and HR leaders continue to be focused on the short term at the expense of the long-term interests of the organisation and its people. This risks unintended consequences when people try to cut corners or maximise short-term returns without thinking about the consequences of their actions on all their stakeholders, which includes employees, customers, suppliers and communities, and, as we’ve seen in the case of VW, the shockwaves are considerable and can significantly damage even the biggest brands.”

This report is the first stage of the CIPD Profession for the Future strategy. The findings will inform the development of a set of core principles that could provide a framework for more balanced decision-making in the boardroom and beyond. It draws on existing moral philosophy literature to identify and test eight lenses that people might use when making ethical choices in the workplace. These include the view that organisational profit is not an end in itself, but that business decisions should pursue the long-term interests of people, economies and societies.

“Need to move beyond accounting to accountability”

Peter Cheese continued: “We also need to see more transparency and consistent reporting of the people and organisational elements of business to get more insight on how an organisation is working, how it is looking after and developing its people, and some understanding of corporate cultures. We need to move beyond accounting to accountability.

“We’re starting by identifying some key principles that can help business leaders, HR practitioners and employees make ethical decisions when under pressure and faced with ambiguous and complex situations. Our research also raises questions about the purpose of business and whether treating people fairly should be seen as a means to an end or an end in itself.

“Looking ahead, we’ll be working to ensure the HR professional of the future is equipped to apply these principles with expert knowledge about people and organisations as well as a thorough understanding of the business context.”

You can download the full CIPD report From best to good practice HR: Developing principles for the profession here.

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