Beyond Good Intentions: How Should a Board Oversee Ethics?

Boards say ethics matter, but many still lack a firm approach to ethical issues. Learn what works in today’s volatile environment to bring ethical judgment to business decisions, strategy, risk, and performance conversations.

In this podcast, Dr Sabine Dembkowski, Founder and Managing Partner at Better Boards, is joined by Vera Cherepanova. Vera serves as chair, director, and ethics advisor to global professional bodies, corporations, and international nonprofits. She brings more than two decades of practical experience across risk, compliance, and internal audit. She is the Executive Director of Boards of the Future, a US-based nonprofit advancing ethical leadership and integrity at the highest levels of corporate power. She writes and speaks about business ethics, risk, economics, and philosophy. Her insights have been featured in the Financial Times, Wall Street Journal, Law360, City AM, The Banker, Thomson Reuters, and multiple governance magazines.

“Boards and companies still treat ethics or integrity primarily as a personal virtue.”

Vera sees companies and boards operating as if ethics is a character trait one either has or lacks. However, the real question is not whether leaders are nice, kind, or personally sincere, but whether they understand the ethical obligations created by the power and discretion their roles give them on the board or in executive leadership.

“Ethics got absorbed into compliance and instrumentalised as a mechanism.”

To Vera, framing ethics as a mechanism does it a big disservice. It reduces the philosophical and strategic capability to the legal defence function. Ethics in business is not a substitute for regulation or a regulatory intervention. It has a complementary role, because the law will never be sufficient, and enforcement will never be perfect.

“How do we make sure that the ethical reasoning and the ethical judgment happens before something goes bust?”

For Vera, the key element is “before,” and boards need to be ahead of the action, not reacting to the crisis. For directors, this means being intentional, consistent, comprehensive, and coherent when dealing with ethical trade-offs.

Governance mechanisms alone do not eliminate competing stakeholder interests or trade-offs. Instead, they structure the process so trade-offs are surfaced, negotiated, confronted, and solved. To Vera, a best practice is to designate an outside expert or existing board member as the point person for ethics so issues surface and are managed ahead of a scandal or crisis.

“FOFO, the fear of finding out, gets in the way of asking good questions.”

In Vera’s experience, asking good, probing, discerning questions is one of the most underappreciated skills in governance. Too often, boards avoid certain questions or settle for rehearsed, sanitised answers. They don’t want to appear difficult or like they are slowing down the business. However, appropriate ethical curiosity requires both courage and a willingness to notice when an explanation doesn’t add up.

 

The top three takeaways from our conversation for effective boards are:

• Ethics in business is a practice and discipline that comes as a bundle with the director’s role. It’s not just a personal virtue.
• Collegiality is nice, but constructive abrasion is a prerequisite for effective oversight as it just does not happen when everyone is in full agreement.
• Instead of the scary formulation of ‘This is unethical, how can we make it otherwise?’ try ‘How can we make this 10% more ethical?’ When you present the problem as black and white, people get scared of the word unethical. Try something more gradual and less intimidating, and you’ll see conversations become better.

 

Come Join the Better Boards Community

We’d love to get to know you! If you’d like to become part of the Better Boards community, discover our unique approach, and explore ways to work with us or share your ideas on The Better Boards Podcast Series, drop us a line at info@better-boards.com

Remember to subscribe and never miss an episode of the Better Boards Podcast Series. It’s available on Apple, Spotify, or Google.

 

To find out how you can participate in the Better Boards Podcast Series or for more information on Better Boards’ solutions, please email us at info@better-boards.com.