Right versus wrong in ethical financial decision making

The pressure that decision-makers face in today’s competitive financial services environment creates the unfortunate circumstance where, while we understand the difference between right and wrong, we do not always do the right thing. “Understanding ethics and ethical concepts is relatively easy; but being ethical and acting in an ethical manner is not,” said legal and ethics consultant, Advocate Jan Dijkman, as he set out to answer an open-ended question: Does business ethics matter?

An insightful ethics explainer

Dijkman’s 40-minute presentation to the South African Underwriting Managers Association (SAUMA) 2024 Conference offered one of the most helpful, insightful and thought-provoking ethics explainers your writer has had the pleasure of attending. It opened with a quote by Anglo-Irish statesman and philosopher, Edmund Burke, that goes, “All that is necessary for the triumph of evil is that good men and women do nothing.” Most FAnews readers will have encountered the comment in its political context, but it holds water in the competitive, cut-throat world of business too. 

Business ethics has been in the spotlight for decades thanks to a long list of catastrophic business failures; you need only Google the likes of Enron, Fidentia, Masterbond or Steinhoff to understand what happens in the absence of ethics-based corporate governance. “Good corporate governance is about effective leadership characterised by the ethical values of integrity, competence, responsibility, accountability, fairness and transparency,” Dijkman said. Thus, while business ethics and corporate governance are not synonymous, there is considerable overlap between the fields. 

The advocate noted an emphasis on business ethics in both the King Codes™ on Corporate Governance and the Companies Act of 2008, the latter imposing a statutory requirement for listed companies to have social and ethics committees. Of course, you will not find the ‘what is’ or ‘how to’ of ethics and ethical behaviour in the legislation. A basic definition of the former, courtesy of Oxford Languages, is ‘the moral principles that govern a person’s behaviour or the conducting of an activity’. Per the presentation, ethics revolves around the concepts of self, good and other… with ethical behaviour going beyond what is good for oneself to include the other. 

The good, self and other of ethics, morals

“Business ethics is about identifying and applying standards of conduct in and for business that will ensure that the interests of its stakeholders are respected,” Dijkman said. “We need to give context to the good, being the ethical values and standards, and then determine whether the interaction between the self (the business) and others (the internal and external stakeholders) lives up to these ethical values and standards.” He also offered a useful definition from the old King II standard, which describes business ethics as ‘the principles, norms and standards that guide the conduct of an organisation’s activities, internal relations and interactions with external stakeholders.’ 

The theory is clear-cut, but it soon becomes evident that deciding what is right and wrong presents challenges in both social and business settings. In the former, people are mostly aligned with biblical dictates like ‘thou shalt not kill’ and telling the truth. In the latter, most business stakeholders will buy into treating company property and employees with respect. “However, difficult situations arise in business when it is hard to tell what is considered right or wrong in a given situation; these tough choices are called ethical or moral dilemmas, and these dilemmas arise when the distinction between what is right and wrong is blurred,” Dijkman opined. 

He offered up differences of opinion over whether a company had the right to monitor its employees’ email accounts or to what extent employees’ personal internet access should be limited or restricted while at work as examples of this moral dilemma. Again, thanks to the Advocate: “Dilemmas are often characterised by the fact that there is no longer a straightforward choice between right and wrong but [rather one] between conflicting moral options, and the challenge for business is to provide clear guidance on what the business considers to be right and wrong... and how to deal with these dilemmas when they arise.” 

Brokers, insurers and underwriters take note

The SAUMA 2024 Conference, held virtually, attracted a mixed bag of financial services stakeholders, including insurance brokers, risk managers and underwriters… and, of course, professional stakeholders in the broader insurance, reinsurance and underwriting disciplines. It made sense, therefore, to devote a few minutes to professional ethics in the financial services industry. “All players in the financial services industry are required to adhere to some form of ethical standard, which is usually contained in a code of conduct, professional conduct standard, or in legislation such as section 8(1) of the FAIS Act,” the Advocate said. 

The Financial Advisory and Intermediary Services (FAIS) Act and its associated General Code of Conduct set out fit and proper requirements for both key individuals and representatives. Key requirements include personal character, encompassing qualities such as honesty and integrity and competence through qualifications, regulatory exams, experience and continuous professional development (CPD). SAUMA has a Member Code of Conduct which leads with: ‘In the promotion of professionalism and high ethical standards, members shall comply with the standards below…’ 

And the preamble to the Financial Intermediaries Association of Southern Africa (FIA) Code of Conduct reads: ‘Members will at all times interact with clients … honestly, with integrity, fairly, with due skill, with care, with diligence, in the interest of clients and to enhance the integrity of the financial services industry.’ Professionals in the broader financial services sector would do well to revisit these and other professional codes in light of the shocking outcomes shared by consumer journalist Wendy Knowler later in the programme. Her presentation shone the light on the ethical dilemma facing banks and insurers in the pressured environment of direct sales and paying claims. 

The magic keys to integrity

“Being ethical is not easy and staying committed to your values takes moral strength,” concluded Dijkman. He urged attendees to avoid taking the first step down the proverbial ‘slippery slope’ by remaining silent about (or participating in) the ethical or moral missteps or transgressions taking place at their firms. To close, he offered the words of W Clement Stone, a businessman, philanthropist and self-help book author, who said: ‘Have the courage to say no, have the courage to face the truth [and] do the right thing because it is right; these are the magic keys to living your life with integrity’. 

Writer’s thoughts:

As I put the finishing touches to this email, I learned that no fewer than 42 of South Africa’s ministers and deputy ministers have been charged at some time or another. Today’s big question: If ethics doesn’t matter in government, why should it in business? Please comment below, interact with us on X at @fanews_online or email us your thoughts editor@fanews.co.za.