Marc Le Menestrel

Three Inconvenient Truths about Corruption

Marc Le Menestrel — 2019-01-29T02:53:00Z

Having honest, adult conversations about corruption requires accepting that none of us is ethically pure.

These days, I sometimes begin my classes on corruption with an unusual admission. I announce to my students – who may be judges, police officers, military investigators, bureaucrats or any other variety of public official – that corruption is not a problem removed from me. I am corrupted too.

This is only partly a gesture of humility. It is also my attempt to initiate a dialogue on business ethics that is honest, for a change. The common thing to do when the subject of ethics comes up is to grandstand and make sweeping moral declarations, as though combating corruption were simply a matter of finding the “bad”people in an organisation, agency, justice system, etc.

But corruption has always existed and goes on everywhere. It is indeed very likely that it will always exist. Why not also in myself? Of course, I can avoid thinking about it. Even more convenient, I can choose or invent a definition of corruption that does not include my actions. In doing so, however, I am indulging a self-protective fantasy in which corruption has lost some of its most valuable meaning.

Most of us are very uncomfortable when confronted with the truth of our unethical behaviours. Since we tend to think in exclusive categories, we fear being bad because we think it implies we are not good. However, the truth is that ethics is a grey zone. Each one of us is both good and bad. We are not saints.

In my experience, the more I know the extent to which I am corrupted, the better I am at navigating the grey zone of my own ethics. Finding moral orientation in the grey zone sometimes entails resisting my own imperfections and striving for something higher. At other times, it is a matter of accepting some of my own “badness” so that I can keep my attention focused on the real world, on things as they actually are.

It can be difficult to determine what to resist and what to accept. Here are three ideas that I have found useful in my moral and ethical decision making.

A zero-tolerance stance towards corruption is neither necessarily honest nor desirable

When I invite business executives and civil servants to consider “accepting” their own corruption, it is not an invitation to moral nihilism. Instead, it is a reminder that none of us is perfect. We all have flaws and blind spots that we must be willing to face head-on if we are to learn and improve. If we adopt an unrealistic standard for ourselves (and others), we will be incapable of choosing our moral battles wisely.

For my part, I am trying to embrace the fact that, as a Western male individual, my thinking is biased by an education, a culture, social norms and habits that constitute my identity. This has both good and bad ramifications. Teaching all over the world, I have come to realise that some of my attitudes could be perceived as discriminatory, even racist sometimes.

When a student points out some hidden negative bias in my teaching, I strive to show interest and curiosity. Then I can learn, instead of pushing away any information that contradicts the temptation towards self-conferred sainthood.

So overall, I have very good reasons to have some tolerance about my ethical vulnerabilities. As I am intolerant of the aspects of myself that I really want to fight, I can be tolerant of the aspects that I accept as part of my fallible humanity. I can bring those aspects to a clearer and more peaceful conscience.

Abandon the business case in order to re-invent it

Being clear-headed and emotionally mature – i.e. adult – about corruption means confronting the tensions that can arise between moral and profit-making imperatives or, if you like, between business value and stakeholder value. These are both moving targets, and it is a rare moment indeed when the two are aligned such that they can be pierced with a single arrow.

Yet executives persist in the belief that they can popularise anti-corruption by stressing the “business case” for doing the right thing.

I believe that an insistence on the business case contains fatal contradictions. The search for profits – i.e. the core cause of corruption – cannot also be the core of anti-corruption. Treating anti-corruption like a strategy that must yield financial returns is like treating a disease with its very cause. It almost ensures that we will miss the most meaningful opportunities for positive change. Yet this is the situation we face today, in which anti-corruption itself risks becoming corrupted. If, however, we submit our way of thinking to principled self-scrutiny, positive change can be the catalyst for improving all stakeholder relationships and, ultimately, achieving sustainable and meaningful business success.

As corruption begins with temptation, it is important to promote anti-corruption for moral reasons, not just self-serving ones. It is only to the devil that ethics can be sold.

In my own teaching, I have had to abandon the business case. I needed to be prepared to teach outside my students' comfort zone instead of always telling them what they preferred to hear.

With time and hard work, I built sustained and profitable client relationships. Still, I continue to navigate the grey zone between my intellectual honesty and my own success. It is only because I am not confined to the business case that I can incrementally invent mine.

Altruism is not always ethically superior

Ethics and altruism are often wrongly conflated. Especially when it comes to corruption, doing what is best for others does not equate to acting ethically. In my experience, it seems that my students are spending a great deal of their time and effort pursuing goals – or working around constraints – other than their own. In many cases, their unethical behaviour serves the interests of their company. It may also stem from deference to authority, blinding them to the risks they personally incur by disregarding ethics. Hence, paradoxically, a deeper anchoring in their own self-interest could indeed promote more ethical behaviour.

Embrace paradoxes, not platitudes

Paradoxes can be unpopular in the boardroom. Nonetheless, they are essential because we do not live in a black and white world. Rather, we are complex beings navigating an even more complex world. An ethics suitable for such a world will be more tolerant of paradoxes than of the platitudes that too often dominate discussions about corruption in the corridors of power.

To be sure, complexity and contradictions are difficult to embrace and require a new way of thinking. But accepting them allows us to navigate the ethical grey zone in a way that avoids categorical judgments while acknowledging that some behaviours are more ethical than others.

It also clears the ground for more adult conversations about ethics and especially about corruption. These conversations are urgently needed today, as anti-corruption is at risk of itself becoming corrupted – converted to a moralistic mask designed to prevent us from looking unpleasant realities in the face.

Marc Le Menestrel is Visiting Professor for Corporate Governance and Sustainability at INSEAD.

I thank Benjamin Kessler, editor at INSEAD Knowledge, whom I met when I arrived in Singapore. It has been the start of a productive and pleasant collaboration, writing short pieces for this online outlet.

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Is Anti-Corruption Corrupted?

Marc Le Menestrel — 2018-02-15T03:01:00Z

After some classes that I taught at the Lee Kwan Yew School of Public Policy in 2017, I developed my approach to corruption with an analysis of anti-corruption. I compared the narratives of Danold Trump and Xi Jinping to unveil how the bad can be seen in different guises depending from where you look at it. I also introduced the reasoning of day and night, inviting each one of us to vary our perspective. Once again, in ethics, we need to spuspend our judgement in order to complete our analysis. It is when we act that we draw a line in the grey zone.

This piece is a significantly longer and more developed version than the one published on INSEAD Knowledge. It has been published on global-is-Asia, the online outlet of the National University of Singapore.

Anti-corruption is becoming a strategic item in the agenda of countries, of international institutions, and of business organizations.

We need to approach anti-corruption with the wisdom of the time: complexity, systemic understanding and, most importantly, survival instinct.

For corporate boards, corruption can no more be addressed as a legalistic or compliance issue. It is neither enough to look at it as an ethical issue. Righteousness is not and will never be a guarantee for directors.

Corruption has to be treated as strategic; anti-corruption too.

Both have the power to disrupt a corporation by destroying its reputation, revoking its license to operate, infringing colossal fines, sending director or directors in jail, or even worse. Corruption and anti-corruption threaten lives.

And corruption is one of these complex notions for which no simple reasoning can do much more than giving an illusion of understanding.

For directors and boards to be really smart in the face of corruption and of anti-corruption, they need to think at another level.

The seriousness of this topic was explored during one of the courses held for the Corrupt Practice Investigation Bureau (CPIB) in Singapore where the LKY School and I delivered a programme on Ethics, Governance and Corruptions for 25 government officials from 14 countries. Especially in Asia where cases of corruption continue to hog headlines and where many countries are not well-ranked by Corruption Perception Indexes, questions of good governance and corruption remain global concerns and demands for rigorous discussions surrounding them are welcomed and encouraged. There is no better way to move one level up than expressing dualities and transcending them.

I will illustrate my method with a metaphor: corruption is to integrity what night is to daylight.

Daylight can be defined rigorously as the time between the sun rises and the time the sun sets.

But who would deny that dusk is already the night coming, that the crepuscule holds some daylight in it or that dawn announces the inexorable coming of the day?

Despite any of its definitions, corruption will remain a grey zone.

And if one wants to approach corruption in a dynamic sense, one has to remember that seasons affect the length of the day.

There are cycles and what is day today may be night tomorrow: a practice that is acceptable today may be considered corruption tomorrow.

Whether it may become acceptable again in the future is relevant. The damages may be done. Anti-corruption is also part of the system of power.

Anti-corruption is also a grey zone.

And for those who believe that anti-corruption should be a matter of principles, alas, whether what you are accused of is carried out by many others is also irrelevant. You will just lose.

When anti-corruption is a matter of competition, the issue is who is targeted.

And if one wants to approach corruption in a globalized world, one has to take into account that night and day, in practice, depends on where you are.

When the sun sets in the west, it rises in the east

There are different perspectives to look at corruption and at anti-corruption. They emanate from different historical, cultural, ideological, political, economic contexts and lead to different definitions and different priority actions.

They are perspectives of power driving the explicit and hidden dynamics of global governance.

These different approach to corruption and anti-corruption shape the agendas of countries, organizations, agencies, political and business actors depending on where they are, what they believe is right and for what they fight.

And this takes place at the highest level.

To illustrate my point, take for instance the discourse of Xi Jinping at the 19th National Congress of the Communist Party of China and contrast it with the National Security Strategy of the United States of America by Donald Trump.

Having both appeared at the end of 2017, these are two strategic documents directly implying their authors and their country in a high level formulation of national priorities.

Both documents use corruption as a central notion for their formulation of risks and indication of policies and actions. Let us first point out the commonalities.

Both documents consider corruption a governance issue.

Both documents embed the idea that corruption is antagonist to the rule of law which is formulated in both documents as a fundamental value.

Both documents refer to the benefit for the people to justify their priority against corruption.

Further, their perspective on corruption is like day and night with, of course, shades of grey.

For Xi Jinping, corruption is the greatest threat our Party faces. It is one of the tests confronting the party as they relate to governance, reform, opening up, the market economy, and the external environment.

Imbued in a long Chinese history of rise and fall of central governments, Xi Jinping wants to make sure that officials are honest, government is clean, and political affairs are handled with integrity.

The integrity of party officials will improve the political ecosystem of the party, strengthen[s] internal oversight as well as its close ties with the people.

Xi Jinping advocates anti-corruption to make the Chinese Communist Party better so as to contribute to the long term stability of the country.

For Donald Trump, corruption also arises from weak governance and the failure of the rule of law which serves to protect the individuals from government corruption and abuse of power, allows families to live without fear, and permits markets to strive.

In the search of a global environment based on democratic institutions, corruption is perpetuated by Transnational Criminal Organizations, corrupt foreign officials, corrupt elites, repressive leaders [who] often collaborate to subvert free societies and corrupt multilateral organizations.

Anti-corruption includes priority actions at the political, diplomatic, and economic levels which are aimed at fighting authoritarian states and allow U.S companies to compete fairly in transparent business climates.

Donald Trump advocates anti-corruption to influence the global playing field, protect the U.S. interests and contribute to political freedom and fair economic competition.

These two perspectives on corruption highlight two sides of what corruption can be.

On the one hand, corruption refers to the loss of integrity of a political system because of inappropriate economic incentives.

On the other hand, corruption refers to the loss of integrity of an economic system because of inappropriate political influence.

To fully understand the system composed of these two perspectives, one has to adopt higher level conceptual framework and then analyze the different dynamics proper to corruption and anti-corruption.

To this aim, a social interaction must be conceptualized as a mixture of a relation and a transaction.

In a relation, two identified parties cooperate to benefit from their joint activity. Most importantly, these parties share a common identity and exist together as a collective. It is this collective that they intend to protect by promoting the integrity of the relation.

The relation is a perspective on social interactions that is eminently subjective. It has value because it depends on parties who are who they are because they share something. Implicitly or even secretly, a relational perspective promotes the values of the parties, their agreed processes, their emotional engagement and even their spiritual co-existence.

In a transaction, two anonymous parties compete to benefit from an exchange. The object of the transaction is what is important because it is its attributes that makes the exchange beneficial for each of the party. It is this individual benefit that is the driver of the exchange and needs to be protected by the integrity of the transaction.

The transaction is a perspective on social interactions that is essentially objective. It has value independently of the parties because of what has been exchanged under specific conditions such as price and quality. Explicitly and preferably transparently, a transactional perspective promotes the value of what is exchanged and this is considered the guarantee of integrity.

For instance, a family relation can be enhanced with a transactional aspect, but would be perverted by the inappropriate influence of material aspects when they become excessive.

Similarly, a commercial transaction can be enhanced with a relational aspect, but it would be perverted by the inappropriate influence of relational aspects when they become excessive.

Corruption is not a one-way street where either the relational or the transactional pervert the other taken as a reference for integrity.

Integrity is not about purity. It is about the drawing of a line in the grey zone, a dynamic process that engages the actors, their references and their context.

The relation lies at the heart of politics like the transaction is at the core of economics. The value judgments that drive perspectives on corruption are thus reflecting ideological frames of references.

Whether economics or politics should drive global governance is the question of power that is coloring the perspectives of Xi Jinping and Donald Trump on corruption.

These two perspectives embed a major geopolitical debate about global governance and the appropriate path forward.

In the game for righteousness, these two perspectives will be used in turn to attribute responsibility and blame and to choose who to point at as good and as evil.

But the reality is that corruption and anti-corruption are inherently complex. Oppositions as much as commonalities should pave the way for a smart analysis of what is going on.

It is necessary to study the policies for fair competition promoted in Chinese laws to also understand how liberal capitalism, with Chinese characteristics, also shape the economy.

It is necessary to study the relations among individuals, families, institutions and corporations in the United States go also understand how relational structures of different sorts also shape politics.

A major difficulty lies in the need to express frames of reference as absolute, thus negating the complexity of the issues at play and their grayness.

There is a need for disentangling the multi-faceted aspects of corruption. And the search for establishing appropriate thresholds of discrimination suffers from simplistic discourses.

Because corruption is a grey zone, the inconvenient truth is that corrupted behaviors are not entirely evil. Similarly, those that are not corrupted may not be paragon of integrity either.

Unfortunately, zero tolerance discourses about corruption do not give credit to this complexity.

This is not to excuse the petty corruption or all the forms of relations or transactions that are so perverted that they should rightly be called crimes and punished for.

It is to avow that corruption and anti-corruption necessitate an acute analysis of the good and evil of social interactions, and that such an analysis will lead to necessarily contradictory judgments due to the complexity at hand.

A transactional perspective on anti-corruption bears the risk of dehumanizing social interactions. It somehow assumes global governance could rely on an objective system of anonymous actors exchanging good and services for defined price and qualities and under a transparent set of rules.

A relational perspective on anti-corruption bears the risk of idealizing social interactions. It somehow assumes global governance could rely on a community of actors sharing the same values, the same objectives the same methods and the same manner to find meaning in existence.

Social interactions are a mixture of relations and transactions and should be treated as such. Competition and cooperation are only the two sides of a mental model and should not pretend to capture the full reality alone.

Like many of the fundamental notions that shape the dynamics of the time, corruption and anti-corruption require navigating the frontier between day and night with full conscience.

And it is useful to recognize that such a full conscience embeds significant psychological and emotional attitudes.

For instance, whether corruption is intimately construed as coming out of one-self (reflective stance) or from others (projective stance) will shape the framing of the analysis and the assessment of risks.

The management of corruption and anti-corruption is not just a rational exercise. It requires the careful identification of dualities and their irrational counterparts.

If corruption is to integrity what night is to daylight, we humans know that our risks and our fears increase with our shadows.

The strategic approach to corruption and to anti-corruption requires a very careful analysis is how this impacts a company, its board and its directors in each of the environments they operate, including at the very personal level.

It is with such a complex, systematic and integrative approach that one can understand better what is happening in terms of political and economic dynamics of anti-corruption

Geopolitical, financial, legal, moral, rational, emotional, cultural, ideological, or even spiritual, there are a number of considerations for the teacher to share in order to help companies board to deal with corruption and anti-corruption.

What is essential is to understand that the context in which targets of anti-corruption efforts are chosen is biased. We can then develop the skills to address this multi-faceted complex issue at the board level.

About the author:

Marc Le Menestrel teaches and coaches senior executives and board directors on high level performance and leadership as well as the exercise of wise power in governance, sustainability, anti-corruption and risk management. Leading companies and academic institutions are using his expertise and innovative pedagogical approaches to inspire leaders in search of both performance and meaning. He is advisor to the World Economic Forum on its Partnering for Anti-Corruption Initiative. He was also a key facilitator for one of LKY School's Executive Education Programme on Ethics, Governance and Corruptions. For more information about Executive Education, pls visit http://lkyspp.nus.edu.sg/executive-education.

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Corruption: Drawing a Line in the Grey Zone

Marc Le Menestrel — 2018-01-25T02:33:00Z

In this piece, I introduce one of my preferred model of ethics: a grey zone between night and day. Inspired by Escher, it helps to understand the very special reasoning pertaining to the frontier between good and bad. I also develop a comparison between the anti-corruption of Xi Jinping and Donald Trump.

Corruption can no longer be addressed as a legalistic or compliance issue by executives and directors.

Nor is it enough to regard it as an ethical issue. Righteousness is not and will never be a guarantee for directors and executives.

Corruption is one of these complex notions for which simplistic reasoning can give no more than an illusion of understanding.

Consider the following metaphor: Corruption would be to integrity what night is to day.

Day can be defined rigorously as the time between sunrise and sunset.

But who would deny that dusk is already the night coming, that twilight contains some daylight in it or that dawn announces the inexorable coming of day?

Moreover, seasons affect the length of the day. There are cycles and what is day today may be night tomorrow: A practice that is acceptable today may be considered corruption tomorrow.

And if one wants to approach corruption in a globalised world, one has to take into account that night and day, in practice, depend on where you are.

When the sun sets in the west, it rises in the east…

Xi and Trump

I'll illustrate my point with a concrete example – China's President Xi Jinping's speech to the 19th National Congress of the Communist Party of China, contrasted with the National Security Strategy of the United States of America by President Donald Trump.

First, let's consider the commonalities between the two leaders' statements. Both documents consider corruption a governance issue. Both embed the idea that corruption is antagonistic to the rule of law, which is formulated in both documents as a fundamental value. Both documents refer to the societal benefits of combating corruption.

Further, their perspective on corruption is like day and night with, of course, shades of grey.

For Xi Jinping, “corruption is the greatest threat our Party faces”. It is one of the “tests confronting the Party as they relate to governance, reform and opening up, the market economy, and the external environment”.

Xi wants to ensure “that officials are honest, government is clean, and political affairs are handled with integrity”.

The integrity of party officials will improve “the political ecosystem of the Party”, “strengthen internal oversight” and protect “its close ties with the people”.

Xi Jinping advocates anti-corruption to make the Chinese Communist Party better so as to contribute to the long-term stability of the country.

For Donald Trump, corruption also arises from weak governance and the failure of the rule of law. But he fingers a quite different set of culprits: “Transnational Criminal Organizations”, “corrupt foreign officials”, “corrupt elites”, “repressive leaders [who] often collaborate to subvert free societies and corrupt multilateral organizations”.

Trump's anti-corruption agenda is aimed at fighting “authoritarian states” and allowing U.S companies to “compete fairly in transparent business climates”. In other words, Donald Trump advocates anti-corruption to influence the global playing field, protect U.S. interests and contribute to political freedom and fair economic competition.

These two perspectives on corruption highlight two sides of what corruption can be.

On the one hand, corruption refers to the loss of integrity of a political system because of inappropriate economic incentives.

On the other hand, corruption refers to the loss of integrity of an economic system because of inappropriate political influence.

The question of whether economic or political power should drive global governance frames both Xi Jinping's and Donald Trump's perspectives on corruption.

Between the extremes

It is risky for globalised companies to make business decisions – such as which non-market strategies or sales practices to employ abroad – through one of these perspectives alone. We need both to cover the full spectrum of corruption.

Some theoretical input can help define the different forms of corruption and anti-corruption.

A stance towards corruption that stresses politics at the expense of economics, as in Xi's discourse, is relational. In a relation, two identified parties cooperate to benefit from their joint activity. Most importantly, these parties share a common identity and exist together as a collective. It is this collective that they intend to protect by promoting the integrity of the relation.

A stance emphasising economics at the expense of politics, like in Trump's National Security Strategy, is transactional. In a transaction, two anonymous parties compete to benefit from an exchange. The object of the transaction makes the exchange beneficial for each party. These individual benefits drive the exchange and need to be protected by the integrity of the transaction.

Both of these stances have an absolute definition of integrity that is both culturally grounded and philosophically sound. Each has its own values, and its own value.

However, social interactions are a mixture of relations and transactions, and should be treated as such. Transactions or relations, economics or politics, competition or cooperation represent extremes that should never pretend to capture the full reality alone.

Integrity is not about purity. It is about the drawing of a line in the grey zone, a dynamic process that engages the actors, their references and their context.

The limits of “zero tolerance”

Because corruption is a grey zone, the inconvenient truth is that corrupt behaviours are not entirely evil. Similarly, those that are not corrupted may not be paragons of integrity either. Unfortunately, “zero tolerance” discourses about corruption do not give credit to this complexity.

This is not to excuse the petty corruption or all the forms of relations or transactions that are so perverted that they should rightly be called crimes and necessitate punishment.

It is to acknowledge the need for an acute analysis of the good and evil of social interactions, and that such an analysis will lead to necessarily contradictory judgments due to the complexity at hand.

Accepting the grey zone doesn't mean denying that some acts are darker than others. It is because you accept it that you can aim towards light with full conscience.

So for corporate leaders, effectively combating corruption is, first and foremost, about a critical attitude to one's own perspective on corruption. Do not hold the idea of corruption at arm's length, as though it were a problem too sordid to soil your hands with. Question your notions of what integrity looks like; consider the possibility that, in the complexity of business relationships, integrity sometimes shakes hands with corruption.

The first step might be creating the space in your organisation for uncomfortable conversations and questions. Instead of trying to ensure your company isn't corrupt from your usual perspective, assume – as a thought experiment – that it is corrupt, according to an alternative mindset. Then thoroughly examine your business practices with that shadow perspective in mind. Outside of your comfort zone, you may discover surprising truths about your practices and unleash a new motivation to improve. And you will certainly be better prepared in the event of an accusation.

Marc Le Menestrel is Visiting Professor for Corporate Governance and Sustainability at INSEAD.

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Can we prevent Policy Capture? Reflections about Public Interest in Business Decision-Making

Marc Le Menestrel — 2017-04-04T10:42:38Z

On March 30-31, I was invited to the OECD Global Anti-Corruption & Integrity Forum in Paris. I had prepared the following short piece to reflect on the theme of our panel: Policy Capture. Thanks to the wonderful colleagues at the panel and the moderator, the conversation took an unexpected turn, promoting intellectual honesty and emotional maturity. I was thrilled to feel the audience, during and after the panel, engaged in tackling these difficult subjects in a smart way, from the heart and inspired.

To benefit public interest while pursuing business interest is one of the greatest challenges of business decision-makers. For business actors, aligning the private and the public, the personal and the professional, the ethical and the profitable represent an ideal that all want to attain. For policy makers, sustaining such alignments and providing the conditions of their manifestation lie as at the source of their vocation. We as humans are all capable of thinking of ourselves and beyond ourselves, and our happiness is closely related with our capability to act both in our name and in the name of others.

And it is interesting to think that our ethical vulnerabilities, the mark of our experience around failing to combine our individual and collective motivations in an ideal way, are actually one of our core characteristics. Although everything lies in everything as a whole, we know that most of the time we are entrenched in one or the other of our motivations and sacrifice the other.

As human decision-makers, we must learn to live at the frontier of ourselves, the place where a line is drawn in the gray zone. Whenever
Our ability to think, to communicate and to act at the frontier of business and public interest may in fact be one of the most important skills to face our human future. In some circumstances, business interests indeed collide with policy making aimed at public interest. To some extent, these situations question the very idea of democracy and market economy promoted by the OECD.

Consider the following examples extracted from my recent research and assignments:

Whenever the demand for fossil fuels grow, their price tends to remain high, leading to sustainable profits for extracting companies. So from this point of view, public policies aimed at promoting demand for fossil fuels are of the industry interest. On the other hand, they are not in the interest of reducing the consumption of fossil fuels.

The Chief Scientist of a technology company receives early warning signals about the hazardous character of an advanced solution. He is having dinner with a former senior executives now working in the corresponding government agency. How could the regulatory dynamics be evoked?

As a policy to reduce the incidence of some particular health issue is publicly discussed, a pharmaceutical company that sells drugs treating affected patients ponders on its lobbying strategy: should this policy be delayed?

As a candidate for national elections advocates peace and partnership with a traditional enemy, the chairman of a defence contractor is reflecting on whether they should stop to finance the party of the candidate: is peace genuinely desirable to all?

These examples are typical of business ethical dilemmas where a business actor faces a decision that either favours his/her/its expected interest or the perceived general interest. Should one strictly apply the idea that the responsibility of business is to maximize profits, a decision against public interest would be prescribed. Business actors thus have the temptation to enter into “political activities” that influence policy makers against public interest (See our discussion with Julian Rode about Why Business fails to listen to Early Warning Signals about technological hazards).

In my experience of the classroom, it is undeniable that business actors are tempted to engage in actions that capture public interest. And of course they sometimes do it. It is also interesting to note that they don't like it and are capable of perceiving the ethical issues that lie behind.

Lobbying, revolving doors, political party financing, and more structurally market commoditization of violence or of drugs or confidentiality of technological innovation are certainly not only good, they also have a dark side. The difficulty to speak about these dilemmas openly is a mere proof of the emotional difficulty that we face in admitting our guilt, our shame or our fear in the ultimate consequences of such practices.

In my experience, it is close to be a systematic opinion among business executives that the current dynamics is unsustainable. There is an obvious truth in the consideration that incentives can orient business behaviours against public interest. As a result, another temptation appears, and in particular among policy makers, which is to condemn these behaviours and their actors as “corrupted”. Corruption becomes the “evil” that ruins the world and we should fight against corruption as a priority. We constitute two categories: good and bad actors and we divide ourselves once again, “us” in the good category, “them” in the bad.

If, as advocated in the OECD introduction to the issue of policy capture, citizens reject the current system that does not serve them, politicians must be corrupted for the system to sustain. There would be therefore no genuine fight against corruption without questioning the system. Moreover, not questioning the system would be a signal that no genuine effort against corruption is truly implemented. We would be once again in a game of words and the anti-corruption discourse takes the risk of a cynical and hypocritical intention.

To which extent OECD questions the system in which it plays a role? And if we take OECD core values as a concrete translation of what “system” means, the question therefore is:

Does OECD question, for instance, the search of economic growth as a political priority? Representative democracy as a political system? Or the extension of market capitalism?

These values are in fact at the core of an ideology that is not perfect and should not be advocated as such. Opening a constructive communicational space to discuss the frontier of these ideas is a must for tackling the issue of policy capture in a credible way.

Market capitalism has ensured the institutionalisation of an economic licence to operate for companies. However, democratic structures are attaining their limits at managing their political licence to operate. One may find the reasons for this in the transnational nature of the economic and financial power of business actors, a power that outmatches the national sovereignty of western democracies. Also, the aggregation of specific business interest creates suboptimal collective outcomes that threaten the welfare of the citizens as well as the ability of human societies to live in their natural environment.

If the distinction between business interest and public interest is not new, the current global situation calls for a new way of drawing the line in these grey zones. As a professor of Decision Making, teaching to business decisions makers and from time to time to policy-makers, I have been advocating and developing tools and methods to tackle business ethical dilemmas like to ones evoked above. It is with precaution that I share three skills that emerge from this experience:

Principle 1: Shadow and Light

Each decision-maker can train his/her/its ability to see the shadows casted by his/her/its own interest and hidden by his own moral justifications. One should be able to understand why one's own interest is in itself problematic and does not only include desirable features. There is a need for a systematic analysis of the ethical dimension of business actions. And it is interesting to note that such an analysis requires suspending our judgement so as not to analyze only what supports it, which should be seen as a prejudice. The courage to face one's own shadows helps to draw the line with less violence, towards others and also towards oneself. It also reduces bad faith argumentations where supposedly win-win approaches are mainly the result of impression management and cover up more important issues.

Principle 2: Dilemmas and Win-Win

Each decision-maker can develop his agility in navigating to see both sides of the frontier separating different interests. Of course, one should be able to understand the interest from one's point of view and from the others' point of view. It is then possible to formulate more precisely the dilemmas and the conflicts of interests, which are somehow always present. It is indeed interesting to note that not all win-win are genuine. As it is always possible to do better from the moral point of view, there is always somewhere a line to be drawn. Whether this is done in full conscience and in the respect of the sacrifices that it entails is a major skill to work out. And when, making the difficult choice of what is good for all, we end up discovering good surprises that are also in our private interest, thse win-win are a most formidable reward.

Principle 3: Collective Dream

Decision-makers benefit from being invited to formulate an ideal solution. The power of dreams allows us to think beyond specific objectives. We should not limit our vision of the future and our conversations to what we think we can do. In fact, we need to create the conditions for emerging solutions to surprise us for the better and this is mostly happening in appropriate collective communicational settings.

Today, and especially in developed countries, it is my impression that the context favours business interest more than public interest in critical issues. This is detrimental to the harmonious development of societies. I thus concur with the intention to preserve public interest from business decision making. In line with the principle above, I am however reluctant to promote any confrontational way. The situation requires us to move to the next level and bring these dilemmas as the main subject of discussion. In this spirit, I suggest three directions for considerations:

Business actors, be them companies, associations, lobbyists, individuals, should be invited to take positions in front of these dilemmas. As these positions affect the public interest, they should be public. As they affect their business interest, they should be included in their reporting. This should promote proactive business behaviours and create advantages for those who consider public actors their allies. It should be respectful of the immense difficulty for some actors to take a position.

Policies as normative and prescriptive solutions may prevent our ability to invent new ways to combine business decisions and policy-making by trapping us in advocacy. We should learn to express without violence or judgement the main dilemmas that business decision-makers face at the frontier of business and public interest. Formulating and releasing to the public space such dilemmas in an objective manner, for example industry by industry will increase our capabilities to face the challenge our societies face.

Business and policy-makers should gather in forums to build ideal solutions to the tensions inherent to the combination of national democracy and transnational market capitalism in the age of globalization. Beyond the market, there is a need for spaces where digital capabilities allow participative approaches to complement political representation. That would also help to harness the growing demand of citizens for a harmonious development, beyond profit maximization of companies and national economic growth.

Angola: Searching for a new Spirit by Looking at the bright side

Marc Le Menestrel — 2016-12-08T04:44:18Z

December 2nd, 2016 was a historical day for Angola. Not because I was invited to speak at a conference on Corporate Governance in Luanda but because this is the day President dos Santos decided not to present himself to the coming elections. After nearly 40 years with him, Angola is in search of a new Spirit. I looked at it from the bright side.

And this is not necessarily easy. As Angola was to access independence from the Portuguese at the end of one of the most sombre European dictatorship of the 20th century, Angola was also discovered to be the bed of a great amount of oil. Under sea, yes; expansive to extract, yes; but of excellent quality. And as Angola is nowadays the largest oil producer of oil in Africa, it has also been the victim of the fall of oil prices in the last years. To be sincere, it has somehow been the victim of oil since its discovery: the famous Dutch disease or Oil Curse that characterized countries which rely too much on the sole wealth of oil to drive their development. But I said I was looking at the bright side. So the question is: how oil can help to nurture a new bright spirit for Angola? I witnessed the strong belief that it should not be through violence. Everyone wants to forget the bloody civil war and build on the stability which followed by the victory of future ex-President, his army and his party. I sincerely hope that the days ahead will allow the national forces to hold the ground and protect the country. With slightly rising oil prices, and a global momentum to move away from a carbon-based economy, there is a great chance to have the right amount of added value from oil to support a diversification. It was especially interesting to learn at the conference how people there dream of self-sufficiency in basic sectors such as agriculture, textile or raw material for construction. In Angola, globalization may not preclude autonomy.

A second most important question was also very much related to the global dynamics of the time: under which conditions banks can help finance this transition? If the dedication of Angola banks seemed sincere and competent, the question arises from correspondent banks that can ensure the connection of Angola's economy with the rest of the financial world. In our discussions, the power of the mighty dollar system was very much felt: as the given currency for oil of course (oil represents 95% of exports), but also through the norms pertaining to transactions and governance. Angola is asked (forced?) to adopt the accounting standards of the United States. And it is interesting to note that such exercise of power uses ethics and anti-corruption efforts as a means. Sensitive to this dynamics, and to the emotions felt by a country so proud of its political independences after a long-fought battle, it is not obvious to find a bright way out. There is however no other solution than taking the best of all systems. As Deng Xiaoping said (around the time Dos Santos came into power!), capitalism and communism are two ways to serve the welfare of the people. There is no need to oppose ideologies and there are many smart ways to combine them in order to avoid the worse of each. Angola may fiercely come to terms with practices that now belong to the past and it may do so without selling its soul.

To this end, the obvious bright side of Angola is the proud richness of its people and of its grounds -be it off shore or for agriculture. We dreamed of them leap-frogging to a green and circular economy that uses wisely the new conscience of our unsustainability. Besides the wise men who founded the economic successes of the country over the past 15 years, it was wonderful to meet a new generation of Angola people proud of their roots and farseeing in their visions. The unity provided by Portuguese as a language spoken all over the country is certainly a resource. Moreover, it seems that Portuguese themselves, who were very present at the conference, and expatriates in general, are grateful for the wealth Angola provide to their business or to their home country. In the difficult circumstances of the time, there is an obligation and an opportunity for a win-win post-colonial relation, based on a sense of care for the country itself and for its promises. The question is thus whether these Angola leaders will dare to invent their future on their own terms under the pressure of external conditions, be them coming from other nations or from nature itself.

This is in this context that I deliver my speech on governance as the wise use of power. Treating the global level as well as the corporate and the personal levels, I proposed three principles for the wise use of power.

Firstly, a principle for the mind that I termed duality. As the mind naturally thinks in classes and value-judgement, I invited participants to make the effort to think contrarily to their natural categories and to their prejudices. As Hermann Hesse wrote in Siddharta, “the contrary to any truth can be as true as the truth itself”. It is thus necessary to suspend judgments and apply critical thinking to our natural thoughts, beliefs and methods.

Secondly, a principle for the heart that is certainly called love. The mind can be treacherous to motivate us and there is nothing better than doing what we love to do it sustainably and with courage. Moreover, being able to accept our vulnerabilities helps to have the emotional maturity to thing broadly and creatively.

Thirdly, a principle for the soul that I called dreams. In a time of disruptive uncertainty, dreams can be like a light house in the storm. We do not necessarily head straight towards them, not even reach them exactly, but they offer an irreplaceable sense of guidance for our vision. Dreams help to avoid the many traps that direct routes hide below the surface.

It is with a sense of achievement that INSEAD organizers concluded the conference. There is a genuine opportunity for such events which allow conversations to take place beyond polemics and prejudices. An academic approach combined with a strong sense of relations in the respect of diversity, all with a superb organization, offer a bowl of fresh air in today's difficulties. In such conferences, the brilliance of INSEAD alumni prove that INSEAD is a business school for the world and it was indeed my privilege to be part of it. I wish Angola, its people and its Alumni to find a bright new spirit for the days ahead.

Reflections on Governance and the Africa Directors Program: at the forefront of responsible board practice?

Marc Le Menestrel — 2016-02-28T10:28:02Z

I wrote this short piece as a Reflection Paper for the Newsletter of the INSEAD Corporate Governance Initiative. It illustrates my commitment towards the transformation of business governance and the profound impact that South Africa has on my reflections about who I am: descending from African ancestors and man of white skin.

When INSEAD Corporate Governance Initiative accepted the invitation of the University of Stellenbosch Business School and their Executive Education branch USB-ED to partner in the offering of the Africa Directors Programme, I was especially interested in the programme's intention to bring ethics at the centre of the governance discussion and practice.

Crises of many types are currently raising new challenges for business organizations. In a context where capitalism is being questioned in its foundations, improved governance has emerged as one response and a critical issue for the credibility of the whole system. A new paradigm is emerging where business and boards have a new and more active role to play, where responsibility and power are two keys going together. This includes a shift towards a stakeholder view of boards, away from the previous shareholder view which is now recognized as having imposed too many negative externalities on other stakeholders (employees, bondholders, communities, governments and the environment).

South Africa at the leading edge of governance for social transformation

In this respect, it is remarkable that South Africa plays a leading role in the current discussion about corporate governance. As part of the post-apartheid transition led by Nelson Mandela's arrival to political power, a committee on corporate governance was constituted in 1993. Chaired by retired Supreme Court of South Africa judge Mervyn E. King, the “King Committee on Corporate Governance” has produced a series of reports over the last 20 years - the “King Reports”- that apply to all listed companies in South Africa.

It is important to understand that the political changes of the post-apartheid South Africa is one more instance of what is a profound transition, one that goes much deeper than the already complex change of political and economic dominance from white to black ownership. As program co-director Arnold Smit taught me, the King Commission was about designing a corporate governance framework that would be able to mirror the values of a progressive constitution, one that would match the new democratic dispensation and one that should guide the rebalancing of South Africa's economic and business landscape to make it fairer and more inclusive for all the country's citizens. As it faces this challenge, South Africa is an important point of focus and even a source of inspiration for the wider transformation of our societies.

Leadership, sustainability and good corporate governance citizenship are at the core of this new vision for governance. The King committee has brought South Africa at the leading edge of the discussion about corporate governance, heralding a different approach, for example, than that which Sarbanes and Oxley have advocated for the U.S.. The latter does not question the supremacy of shareholders, and has instead focused on a greater ability of detecting responsibility for value destruction and in particular fraud. This is mainly because SOX came as a legislative response to the big fraud cases of the 90's and early 2000's (WorldCom, Enron, Tyco …).

The South African approach has to be applauded and has indeed been recognized. It certainly has increased the perception of a greater effectiveness of South African boards. For instance, South Africa ranked #3 in board efficacy according to the Davos World Forum Global Competitiveness ranking.

In this program for African Directors, we are of course guided by the King Reports, which are an inspiration to identify and discuss key principles that could be implemented all over the African continent, a context that offers a broad range of worldviews and business systems. Especially, we allow stakeholders to take a prominent position when conceptualizing the role of corporations. It is held explicitly that business organizations shall be governed in a sustainable manner and for the benefit of society as a whole. This view goes well beyond the primacy of shareholders model and brings new perspectives to the governance conversation. It acknowledges the un-sustainability of the shareholder view and considers that, for business to exist in the future, it has to pay greater attention to human values, ethics, social justice and environmental sustainability. This rejoins the idea that greater performance arises when looking not narrowly at profitability, but also considering social and environmental impacts like in the “Profit, People, Planet” framework. In a sense, this program is one of the first in the world that is strongly built on such a transformative paradigm.

Developing a Capacity for Directors to Use Power Responsibly

In terms of pedagogical intention, the program aims at building capacity of directors for the contribution of business governance towards societal transformation. When we go to the details, it is crucial to realize that, ultimately, governance is very much about the responsible and irresponsible use of power. Thus, building capacity in governance is about developing effective uses of power that contribute to effective corporate transformation, and ultimately beneficial societal transformation. The creation of business value is not an end in itself but a means towards a greater end: the transition to a more cohesive, just and sustainable society. Business rationality is reversed: society is not used as a means to profits but profits are a means to a greater purpose which is to benefit society in the respect of environmental impacts.

Responsible uses of power give meaning to power and the program intends to give meaning to the power of boards. Rather than top down lectures, this is achieved through facilitated conversations: conversations amongst business, political and social actors, conversations across business actors, conversations at board level with employees and stakeholders, conversations preparing these boards which ultimately require deep conversations amongst board members and finally conversations within each board member. In this program, we enter into conversations that give meaning to the use of power in business governance and that prepare board members for the responsible use of power for the benefit of corporations and their positive impact on “people and planet.”

As the world is undertaking a profound transformation on its own sustainability, it is critical that business governance develops a language that allows conversations about the use of board power and its impact on profits, but also people and planet. As a result, this program is unique in its ambition to discuss the broad extent of the power of corporations on their environment.

As an outcome of the program, participants become empowered to give new meaning to their contribution to the boards they chair or sit in. For instance, they find new ways to empower their boards to tackle issues of risks – where excessive risks often lead to fraud and then corruption. Resisting the temptation of excessive or unwarranted risk, and then fraud, and ultimately corruption is thus a novel manner to preserve the value creation of an organization. As my mentor Ludo Van Der Heyden puts it, value preservation more than value creation is the most important responsibility of boards. It is also an opportunity to enter into a new meaning for the role of board members, and through them, of business in society. It is an opportunity that promotes strategies that are based on sustainability and justice. By proposing a language that overcomes the narrow mindset of shareholders profit maximization, we open a space that gives business a greater purpose and a more positive contribution to society and its ongoing and necessary transformation.

Enlightened Power and Ethical Shadows

Going deeper into the theoretical realm, the articulation of governance has been traditionally approached either about interests (how to further the interest of a particular actor, how to coordinate interest of different actors), either about ethics (how to constrain interest by ethical principles, norms and rules). The reality is richer and more complex because it must articulate both.
Governance is about the smart articulation of both interests and ethics. A fundamental principle of this articulation of a bias that characterizes us all: each of us are very good to perceive, think and communicate about the ethical side of our own interests and, conversely, to see and communicate the unethical sides of the interest and actions of the other actors. There is generally very little awareness of our own shadows, while there remains a very strong bias against those who may judge us or infringe our particular interests. This bias creates a sort of tiny corridor where one thinks about ethics, focusing only on one's own interest like the light at the end of the corridor. A main objective of the program is to empower participants to be free from that sort of ethical bias, if not blindness, i.e. to bring light to our own ethical shadows. That is the challenge that needs to be overcome to allow for deeper societal and thus ethical discussions at board level.

The word ethics has been used a lot, so much so that in many quarters it leads to dubious or even cynical reactions. We indeed believe that it should be understood in the presence of another notion: enlightened power. Through the use of carefully designed and facilitated processes, such as a cognitive, emotional and shall we dare say a spiritual awareness of our and our corporation's negative and harmful shadows, we can liberate that enlightened power from having dared to bring new light to our shadows. In the program, the harnessing of directors' enlightened power increases capacity of participants 1) to be free to think strategically about a wider range of opportunities for action and vision, 2) to be emotionally more mature to fully hear and understand the hidden risks of strategies that oppose legitimate interests, so as to combine them better in resolutions that are more satisfactory to stakeholders 3) to enter into board dynamics that leverage the grey zones of interests and ethics in an inspirational manner.
As a result, and as a final comment, this program is not just about governance for social transformation. It also becomes an opportunity for personal transformation. A transformation that equips us with a way to talk about some of the most pressing issues that capitalism face today in Africa and beyond, one that gives us the language to find meaning in our professional life and experiences as a director so as to truly become actors building and contributing to a better world.

As directors become leaders of their organizations, and even enlightened leaders, they integrate the changes and new mindsets their corporations need to acquire by anticipating, integrating, living and being the change before leading, inspiring, supervising it on the others, and particularly on the corporation. Isn't this leading a responsible and new view of the board?

Marc Le Menestrel
Co-Director of the African Director program

The Ethics Challenge: Finding the courage

Marc Le Menestrel — 2015-03-25T02:18:00Z

What sort of courage does ethics require? The search for intellectual honesty faces many emotional barriers that prevent us from seing the truth: we are not as ethical as we like to think.

This easy piece published in a semi-academic journal shares my teaching about ethics, in particular to Directors during classes in Governance. I was glad to benefit from the edits of Ludo van der Heyden and the Editor.

The question that I wish to address here is going to the heart of ethics. The subject has been much debated over the last decades, yet a sceptic could rightfully argue that all the talk has delivered insufficient results in terms of change in business behaviour.

One of the main reasons for which ethics has not delivered may be that most of the effort has been directed at pointing to the lack of ethics in others. These others include employees, managers, CEOs and
senior executives, boards, shareholders,regulators, governments and other stakeholders. Having designed various strategies for “these others” to behave more ethically, we end up lamenting that, alas, our strategies fail miserably. We come back to a state of powerlessness, evoking human nature as the ultimate
culprit.

One of the main reasons for which ethics has not delivered may be that most of the effort has been directed at pointing to the lack of ethics in others. These others include employees, managers, CEOs and senior executives, boards, shareholders, regulators, governments and other stakeholders. Having designed various strategies for “these others” to behave more ethically, we end up lamenting that, alas, our strategies fail miserably. We come back to a state of powerlessness, evoking human nature as the ultimate culprit.

Ethical training should be seen as an investment that invites this courage, and sheds a new light on the – previously unsuspected – risks that we actually face. This training is unavoidable and quite different than any “compliance” training. Such investment may then lead to a wonderful “windfall”: it frees the mind, the body and soul, and prepares the individual, and his or her organisation, for unsuspected future benefits.

The hard climb to building ethical conscience

Participants in seminars I facilitate are regularly overcome with emotions when sharing personal experiences of corruption, intimidation or coercion. Often, strong ethical judgments cloud their mind and stress their heart. Many claim to be relieved to find a space where they can openly discuss the direct or indirect subversion of the democratic sphere, using powerful influential practices or lobbying organizations. Indeed, how many boards and executive committees honestly face up to the contribution business is making to the current destruction of our natural ecosystem – in nature or in our society?

Seeing the full spectrum of ethical and unethical behaviours requires an emotional effort that must not be underestimated. In a very human need of self-preservation, we typically avert or abort thinking about unethical topics precisely because of the deeply unsettling emotions they evoke. This occurs both consciously and unconsciously. As a result of these psychological processes, our thinking is constrained in a tiny corridor bounded by frightening shadows. In an attempt to fight our discomfort, we sometimes desperately focus on the positive aspects of ourselves or on the light at the end of the tunnel, becoming entrenched in a perspective that is blind to the biggest risks we actually face.

The courage that we need shall be found both in the mind and in the heart. The mind must learn to let go of the sometimes obsessive need of a positive self-image and a desperate pursuit of our goals. The heart must learn to love others, as well as ourselves, even in the shadows.

The Restraining Boundaries of Self-Rationalisation

Let us consider corruption: one of the most daunting challenges we face today. From Washington to Paris or Shanghai, I have been engaging with young and senior executives in various industries about corruption for more than 15 years. The quasi totality of the participants I taught would describe themselves as ethical managers, working for ethical organizations. Of course, they all say they would not be corrupted, or corrupt themselves. Yet, my learning process was to reveal – through role plays in ambiguous and difficult situations involving both time, competitive and hierarchical pressures – that, in one way or another, a large majority of them would indeed end up corrupting. And when this is pointed out, in the immense majority of cases, and in particular when working in groups, participants would spend most of their effort, not seeking alternatives, but rationalizing why they cut corners, and why they had no choice but to do so.

I have identified three steps in which participants typically engage when challenged to explain their choices.

Firstly, they try to deny that they are actually corrupting.

Secondly, they justify why they have done it.

Thirdly, they externalize their responsibility to others, and blame them for their being put in such a situation.

These rationalization mechanisms prevent them from being individually, and collectively, more astute in the face of corruption. In some of the cases I teach, there is actually no good reason to corrupt, and people do it because they can't think differently. Most of the time with corruption, we just do it because we don't try hard enough not to do it.

A genuine effort to minimize corruption, in and by organizations, is leveraged by first identifying the way people think, talk and act to perpetuate corruption. This, in fact, is not helped by hastily pointing fingers and apportioning blame to various “rogue elements” or “bad apples”. Changing attitudes to corruption firstly requires understanding how it comes about. From there, one can discover that the drivers of corruption lie in an emotional inability to think wide enough.

Furthermore, in my experience, understanding our own unethical behaviour is a stronger driver for ethical change than preaching and reinforcing ethical behaviour. Compliance efforts help, of course, but they sometimes become a mere attempt to protect top management and feed their self-perception of righteousness: it becomes a self-deceptive practice. Worse, when compliance nurtures a belief that it guarantees ethical behaviour, it actually becomes a hindrance.

The false comfort of ethical blindness

As indicated earlier, we – us humans – avoid discomfort, physical or emotional. When avoiding a direct awareness and confrontation of the potentially unethical aspects of our business interests, we typically switch to a reactive mode. We still deliberate, but our cognition is trapped in various forms of denial, rationalization and externalization of our locus of control – in other words, apportioning responsibility to elements beyond our control – and feeling safe again. By constructing these individual and collective protections at the psychological and emotional levels, we also isolate ourselves from the source of future problems. We become like ostriches with our heads in the sand, seeking refuge from what seems too large a challenge. We are in this case preparing ourselves for bad surprises; we are actually sowing the seeds of real nightmares.

Firstly, and paradoxically, ethics requires suspending judgment. As a teacher, I spend a tremendous effort in my preparation working on my own prejudices towards the people and companies I address. A typical set-up for failure is when I appear to be judging them, projecting my own prejudiced shadows onto the participants or their organizations with the illusion that it serves some good. In reality, it only produces a reaction that reinforces the vicious circles in which we are all trapped: blaming the messenger of bad news to escape our shadows.

To the contrary, a solid and efficient way to proceed is to be non-judgmental, so that participants feel that they occupy a safe, intellectually honest and credible space for courageous and smart conversations to take place.

The Duality of Ethics and the “grey zone”

We prefer to think and talk about our ethics in a positive light. We easily provide arguments to explain how ethical we are. Most companies have success stories about how they contribute to environmental sustainability, advance social justice and promote human values.

However, for all of us who are neither saints nor devils, our ethics typically fall in a grey zone. It lies somewhere on a continuum between being “completely unethical” and being “fully ethical”. There is some good in most of our actions, as well as some bad. If most of our actions are therefore both ethical and unethical at the same time, it is profoundly different to look at the ethical aspects, as opposed to look at the unethical aspects. In my experience, companies whose behaviours raise the most daunting ethical issues, have developed the strongest blinding bias towards their own ethics. It is normal and profoundly human to move away from the disagreeable, to want not to see it, and rather prefer to dull ourselves in good conscience.

But there is more: we also are biased against others. In a typical business setting, we are biased in favour of the ethical side of our own actions, while focusing on the unethical side of others' actions, especially if they are those of our competitors. In general, our ability to think about both sides of the ethical judgment is significantly influenced by our emotions, our interests, our mental habits and self-image, our cultural context, our work environment, and, finally, our power to act. An aspect of ethical training is thus to learn to see both the good, and the bad, of any situation or action. For instance, consider the following questions:

Is it ethical to close a profitable plant?

Is it ethical to compromise on the safety of a product?

Is it ethical to influence a government?

It is likely that you will naturally answer yes or no to these questions. Yet, there are substantial and compelling arguments to answer both yes and no. Thus, observe your own bias and observe your own (in)ability to overcome it. Sometimes, it needs others to show us the other side of our own thought, and then it becomes obvious. Training this ability to explore our own ethical perspective requires discomfort and effort.

Considering that an action has both an ethical and an unethical side does not preclude the comparison between actions, i.e. judging that an action is more ethical than another. On the continuum, some actions lie closer to “fully ethical” or “completely unethical” than others. It is not because we must reject an absolute and categorical synthetic judgment about the ethics of a particular situation that all becomes relative.

Interestingly, this duality is useful to decode discourses, and to perceive the implicit preferences and objectives that lie behind them. In a series of work about the way the oil industry was influencing the science and politics of climate change, it became very clear to my colleagues and I, that the ethical aspects of actions that were profitable to the industry were emphasized, while unethical aspects highlighted.

Drawing a line in the grey zone

For our own actions, analysing both sides of the ethics equation is the only way for us to consciously choose our ethical opinion.

With effort and training we can develop our ability to look consciously at both the ethical and unethical aspects of any action. As we have seen, this is emotionally difficult. It is also cognitively difficult, because the mind does not like the ambiguity of grey zones, and even less the frontiers of the grey zone, preferring to seek the simplicity of black and white assertions. Often over-estimated for its ability to control emotions and decisions, the mind prefers to categorize each action as either ethical or unethical. Accepting that both are true is a challenge for our logical thinking and it is particularly easy to dismiss it as pure relativism: everything then goes.

The truth is that separating grey situations into two categories, in an attempt to draw a frontier between what is unacceptable and what is acceptable in a particular situation, is essentially subjective. But it is not because each one of us may draw our ethical lines at a different point of the grey divide that the extremes cannot be objectively defined. As far as both black and white exist in themselves, the good and the bad may be clearly defined concepts. It is when a particular instance of an action, situation or person is totally reduced to one of them that we create a problem. As Shakespeare reminds us, the good and the bad are not a property of things, but of a particular perspective we take on them.

One of the goals of ethical training is to clarify what is objective (agreed upon by all) and what is subjective (specific to each one) in ethical judgments. For the objective, it is impressive how we can get absolute consensus on the negative and positive aspects of particular behaviours in a collective setting. If trust is present, all arguments for the good or for the bad can be made explicit, may be agreed upon and accepted. The plurality of experiences helps the uncovering of these multiple arguments. What remains subjective is whether, overall, these arguments should deem a particular action “ethical” or “unethical”. In reality, do we really need such a categorical opinion? And what does it mean? What does it mean to say that a particular grey is black or is white? Not a lot indeed. What we need is to consciously draw a line, to freely choose a frontier by saying something like “this is too bad for me to do it”.

For each one of us to consciously choose where we want to draw the line, we better be able to see both sides of the line. Having such a dual and systematic analysis increases ethical awareness at the individual and collective level and helps elaborate and improve conscious, free and powerful ethical judgment. It is a difficult process that requires us to separate the ethical analysis from the behaviour itself and to work outside of our comfort zone. Taking the pain to analyze systematically the good and the bad in our actions, doing so in contexts where a diversity of perspectives enrich the exercise, suspending our categorical judgments over people and actions, are the intellectual and emotional efforts we have to pay in order to generate alternatives that we can freely choose, instead of merely living in denial and providing excuses.

Uncovering Ethical Risks

The concept of Ethical Risk refers to unexpected negative consequences stemming from a lack of ethics of our actions. Because we tend to be unaware of the unethical aspects of the actions that we choose, especially when these actions are in our self-interest, we cannot anticipate the negative consequences emanating from them. Indeed, it is likely that the stakeholders concerned will respond in an adversarial manner by seeking to impose negative consequences on us. These can be legal and reputation costs in particular, but also breach of trust and revocation of license to operate. At the individual level, it is sometimes the whole meaning of professional life that becomes questioned, which then becomes a source of profound suffering. Because we tend to deny the unethical aspects of our actions, these negative consequences are unexpected and constitute bad surprises: these are ethical risks.

As I said, when confronted with the unethical side of our actions, we tend to react negatively, emphasizing the ethical aspects of our actions and denying their unethical aspects. For instance, because we have implemented a compliance program, we find the exposure of our unethical aspects unfair, and we trap ourselves in a reactive attitude. These attitudes further reduce the self-awareness of ethical risks and can progressively lead us to an increased propensity towards unethical action. This is the “slippery slope”.

Such reactive attitudes deal with ethical risks only superficially, because denial and justification are merely designed to appease our minds and are only effective for our own conscience. They also lead to increased secrecy and confidentiality surrounding unethical aspects of decisions taken, and consequences learnt. As a result, the whole organization becomes trapped in a culture of self-censorship and deception and eventually, we begin to believe in our own propaganda.

Who? Me?

For others, denial and justification tend to nurture the adversarial attitude of stakeholders that are alerted or harmed by our unethical actions. Offended by our lack of understanding, frustrated by our lack of attention for issues impacting them, disabused by what they perceive as a lack of good faith, they push us towards an ethical crisis. We then face escalated costs in order to mitigate unexpected negative consequences, which can be a good opportunity for PR companies, but not for us. In a series of crises that I have investigated with colleagues, this nightmarish slippery slope leading to boycotts, dismissals, violent events or even societal crisis, can be fatal. A key learning from it is that the cost of anticipating ethical risks would have been pocket money compared with the cost they actually bear on us when they crystalise.

A Paradigm of Ethical Rationality

In reaction to our unethical behaviours, we end up pointing to external influences, as if we had no other choice. In this manner, we reduce our own power to identify a profitable alternative course of action. We reduce our freedom to choose, and deny ourselves a choice. Indeed, without proper ethical analysis, a typical justification of an unethical action is that an alternative course of action would have been too costly.

Inclusive awareness of ethical and unethical aspects triggers a natural search for more ethical solutions.

Awareness of potential ethical costs increases the relative attractiveness of alternative, more ethical actions.

A rational analysis of the benefits of a more ethical alternative can avoid an exaggeration of its costs and benefits.

The re-framing of the situation, an adjustment of the terms of a new paradigm by which we measure success often allows the identification of new opportunities otherwise hidden to us.

Eventually, with some ethical effort, an alternative and more ethical action may be implemented and without much additional cost, even considered as a strategic investment. I have witnessed wonderful experiences of individuals, teams and organizations rejecting corrupt practices to discover a simpler process to promote their products and ensure the smoothness of their processes.

I recall in particular an executive who stood up in front of his boss to refuse indulging in a practice that was decidedly “too much”. As a result of his disobedience, the boss of his boss, a senior executive of the company, summoned him to his office where he explained that he refused to act against his own values. That was to be the long awaited call that the senior executive was unconsciously waiting for, and the beginning of a strategy with the executive committee to modify certain practices. The company eventually became a leader within its sector group to fight against corruption, and that senior executive later took executive positions worldwide. It was impressive how he was the only one to be able to raise these subjects in meetings, beyond emotion or guilt, opened views to both sides and intelligently, and powerfully pushed the frontier towards the better.

For him, like for others, avoidance of ethical risks opened the path to unexpectedly positive consequences. It transformed the individual, the team and the company by recovering their true identity, their meaningful purpose and unleashed again the pleasure of working and doing good business.

Ethical Training Reloaded

Proper training about ethics and ethical risks allows the identification, mitigation and transformation of ethical risks, at once improving organizational efficiency and developing organizational identity.

In my experience, ethical training shall always start at the individual level. However, it is particularly interesting to work with executive teams, so as to both share our ethical analysis and confront our different perspectives. Rather than looking for systematic alignment about where to draw the line, we first look for consensus on the extreme and establish a common understanding of the various shades of grey. We can then rely on the diversity of personalities and characters present to enrich the team's capabilities to face ethical situations. Again, rather than judging, it is first important to understand the full dynamics that has led to some ethical or unethical decisions, independently of whether such decisions have led to success or failure. Further, at the level of the company itself, dedicated programs whereby a significant proportion of top executives are trained, are especially useful for companies intent to forge a culture or develop new attitudes towards emerging or transforming markets.

Regarding identification, ethical training allows us to identify systematically the various unethical aspects of our actions, thus reducing the awareness bias, the tendency to stick with intuition and the “obvious” solution, and identifying ethical risks before they lead to bad surprises. At the individual, team or organizational levels, identification requires a safe space, a trusting environment and non-judgmental facilitation. This can be eased by a past crisis that has liberated a motivation to “do something about it”. Sometimes, different modalities and formalities are required so as to protect the company and so that individuals feel free to express themselves without fear of embarrassment or retribution.

Concerning mitigation, ethical training allows us to describe our behaviour more objectively and to anticipate the possible unravelling of ethical crisis. Simulations, case studies, sharing of personal and organizational issues are good supports for these stories to be told and for conversation to take place. The learning space shall allow participants to experience both their ethical and unethical behaviours so as to understand their attitudes at each side of the frontier. In terms of stakeholders, management are trained to recognize the legitimate part of stakeholders' reactions, communicate with more sincerity and engage with them, thereby preserving trust and alliances. Rather than behaving reactively, they learn to empathize and act proactively towards the mitigation of the unethical aspects of their actions.

With regards to transformation, ethical training enables us to spend at least as much time looking for opportunities. This intends to un-bias our tendency to justify the actions that we expect to maximize our interest, while being unaware of the unethical risks they bear. Decisions not to engage in more ethical actions become more salient, and the training allows participants to develop their power of discrimination.

It is this change at the individual level that makes the organization less vulnerable and more resistant to ethical crisis. Moreover, decisions to engage in more ethical actions do not follow a blind faith in favour of ethics. In this manner, ethical training develops resilience and fortitude: it turns ethical risks into opportunities by dedicating cognitive and organizational resources to creating good surprises.

It is a constant surprise to me to realize how much we are blind to our ethical shadows. Still, the individual and organizational courage to face the risks that these shadows entail quickly brings us to a change of ethical conscience and a natural transformation of our behaviour. There is no better driver of ethical behaviour than conscienciousness of our unethical behaviours.

The author wishes to express his gratitude to Ludo Van Der Heyden and Anthony Smith-Meyer for their editorial support in writing this article.

Marc Le Menestrel is Professor at the Department of Economics and Business of University Pompeu Fabra (Barcelona, Spain) and Visiting Professor of Ethics at the Social Innovation Center of INSEAD (Fontainebleau, France). He is a specialist of the role of ethical values in business decision-making and he has been teaching and coaching executives across a wide range of critical topics. Among his preferred ethics assignments, he is noted for his teaching about business influence on the science and politics of climate change, and teaching ethics to tobacco companies, banking, the nuclear energy industry amongst many others.

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Fairphone: much more than a fair phone

Marc Le Menestrel — 2014-12-19T11:11:50Z

Fairphone is much more than a fair phone.

Fairphone is a fairer phone but it is firstly a movement. Any movement is a transformation of the world, something that continuously changes and evolves. Fairphone is a movement transforming the world, continuously changing and evolving. This is the most important thing I understood from a discussion with Laura Gerritsen (Impact and Development).

Fairphone aims to do things differently. It is “creative, innovative, involving and incorporating many different ideas aiming at changing something not envisioned to be changed.” The primary importance is given to “the process”, “the difference is in how to do things”.

Of course Fairphone has an ambition in terms of “fair economy”, an objective to pay more attention to “human values”. But this is “without determining top down what is fair”, which is done through “debate” as “fairness is subjective”.

The dynamics is not merely motivated by a clear vision of what has to be changed: “this can be debated.” Indeed, the opening of a conversation by providing a “platform for discussion” may be the first transformation Fairphone has already accomplished.

I especially liked the expression that “…in a sense, values are created”. In line with the approach taught in my course, this is an existentialist approach to ethics. Fairphone is not bound by a dogmatic approach defining first what is ethical. They first try to build a very large perspective in order to understand what happens in the field and then act appropriately (see the blog of Laura for what she does around mining, a major issue for the supply-chain of phones).

Fairphone has understood that ethics remains a grey zone. By promoting “transparency” through a debate they want to be “inclusive”. But transparency also means being open about what you have not been able to achieve and what remains to be improved, such as working conditions at mine sites. Hence, Fairphone is not exempt of unfair issues. There is much more to do evidently and they have noted that “being open about the issues you have not been able solve and why does not necessarily lead to more (negative) criticism, but is key to develop a constructive debate”.

In fact, they have been criticized a lot and this has empowered them. “If you take critics seriously, it leads to a good discussion and a good learning. It does not need to be always easy but it can be very useful.” Sometimes, misinformed supporters can also raise issues, for instance by saying wrongly that the phone is biodegradable or fully recyclable. Things are both fair and unfair which, as we know, does not imply that they are equally fair (see ethics as a grey zone).

In class, we often discuss why Apple, Samsung or Sony have not yet launched such a product. For Laura, this is not just about the product. “You can have 1 product over 20000 that is more fair and ecological but what does it mean?” More important is whether there is a change in approach and social and environmental values are integrated in the everyday decision making and activities of companies.

“At Fairphone, the DNA is different. Still, we know we are a small company and believe we need to work together with all players to trigger a change that goes beyond Fairphone. By establishing the market for ethical products we hope to motivate the entire industry to act more responsibly”.

More than a fairer product, Fairphone creates a movement with transparent and inclusive discussions about how to move forward.

Questions for reflection:

• Under which conditions a clear vision of the future is not necessary to accomplish a great project?

• Why, when and for whom it can be difficult to accept that a fairer phone may not be entirely a fair phone?

• Why, when and for whom communicating about ethical vulnerabilities can be appropriate?

• If a company can be “a movement”, what would it mean for you as a person to be “a movement”?

Love, Ethics and Peace in Fashion

Marc Le Menestrel — 2011-11-08T08:54:45Z

When I was contacted for an interview by FT's fashion editor Vanessa Friedman about the CEO of a fashion house who is now partner with the creative director, I thought it was a joke.

The ethics of love in the fashion industry? What an insignificant subject to think or write about!

At that time, I was preparing a difficult assignment for a company involved in military intelligence. I was reading about covert operations, disinformation, influence tactics and strategic military planning. I was attempting to analyze how we now treat war and information as a business. I was feeling important and powerful, glad to study this subject professionally and not as a subversive covert activist. I felt disdain for the fashion industry.

In fact, my reaction was so much ego-driven that I could not avoid noticing it. I became prudent about myself. I first asked Vanessa about the ethics of writing about such a personal topic and she told me that they (the coming-out couple) asked for it. This was a good reason for her to do her job. I began to think more about the subject.

Discussing this topic is one more manner by which “love” enters business relationships.

I first thought about love as an antidote to violence, which is more and more present in business and which obviously raises ethical issues. I also thought about love as a source of true creativity, which has monetary value, particularly in the fashion industry. But I also thought of love as a metaphor to share about priceless values. In my dreaming sessions, I observe that most business leaders dream of a life where their personal values would be compatible with who they are at work. Hence, this love story is also about the tension between personal life and professional life, about the meaning of life. It was a fairy tale that says you can work and love. That was the input Vanessa will use in her article.

Bringing love to the debate about ethics and business also raises unethical issues. In a sense, we participate in a system where love becomes a business, and a show business that conveniently hides other unethical issues. I thought about Guy Debord and his “Societé du Spectacle”:

"Toute la vie des sociétés dans lesquelles règnent les conditions modernes de production s'annonce comme une immense accumulation de spectacles. Tout ce qui était directement vécu s'est éloigné dans une représentation."
Guy Debord

The world is becoming a show business and we are actors in this show.

Again, ethics appeared to me as a continuous experience where contradictions resolve when our actions reveal our true identity.

For these business lovers, how they will manage their affair will reveal who they are to themselves and to stakeholders. I wish they will see the many dilemmas they will face as opportunities to truly become who they want to be. They are bringing love to business.

Finally, “peace and love in business” came to my mind. In association with the FT, I thought it was too much. And I loved it!

Click here to read what Vanessa finally wrote: "When personnel get personal", By Vanessa Friedman, Financial Times, October 28, 2011.

Compliance and the Grey Zone

Marc Le Menestrel — 2011-10-28T14:12:00Z

Compliance is an organizational process aimed at encouraging ethical behavior at work. However, it is not sufficient to guarantee ethics. It can also be perceived as a top-down constraint, pressuring even more managers who have already many balls in their hands. On the other hand, it is often a first measure to meet the expectations of regulators and stakeholders. A key aspect is to consider compliance not as an end in itself but as a means to promote ethics beyond compliance.

Approaching compliance and ethics as a grey zone allows to rationally think about the various situations where ethics conflicts with economic and financial interest. What are these situations and how can we analyze them? How do we act in front of these dilemmas and how can we honestly talk about them, inside and outside the organization?

These questions are at the center of a session whose objective is to empower participants to strive in the grey zone of business ethics and to move beyond compliance. Leading us outside our zone of comfort, the interactive method gives a special emphasis on the emotional character of values-loaded decisions.

In terms of organizational ethcis, moving beyond compliance can be especially useful to contextualize and harness a code of conduct. Because ethics is not guaranteed by compliance, it also helps to uncover ethical risks, to create a more ethical climate and to nurture a values-based culture.

Designed for a leading company of more than 200.000 employees, this session allowed to move from seeing compliance as a constraint to ethics as an opportunity. Thanks to the genuinely honest discussion about the difficulties of combining ethical values and business interest, it raised enthusiasm and willingness to act.