Like me, if you glanced at the front page of the AFR on September 27th, you may have been forgiven for thinking ethical business is dead. The calls for Richard Goyder to resign amid claims of unethical customer treatment with the “Ghost Flights” scandal and the illegal sacking of 1,700 workers at Qantas. The leaking of confidential information from treasury to its clients by PwC and we haven’t even turned a page yet!
These matters along with many others recent issues including the royal commission into illegal practices by the banks in Australia, raise some important questions about the role of ethics in business. Certainly, the dominance of larger players with significant market share, very prevalent in the Australian business environment, appears to have led to repeated abuses of that market power with continual breaches of trust by large well-known brands.
There are approximately 1,000,000 operating businesses in Australia, only 1.4% have revenues of over $10.0M. The great bulk of our economy is made up of smaller companies who are operating in very competitive environments which no doubt assists in keeping companies both efficient as well as honest. Few of us are in the position of the market dominance of Qantas, the big banks and the big four accounting firms. The temptation to not be ethical has clearly been too much for some people.
Our own view is that values really matter, we are lucky, our business is relatively small, we don’t just hang them on the wall, we unpack our values, we hire to them, we live them every day, we call each other out when we see our values being compromised. They are the only thing that won’t change for us, in a world that seems to be constantly changing. We don’t crow that we have cracked it-far from it! We are growing and see constant reminders of how we need to better articulate how our values and ethics need to show up in the delivery of our services. Being ethical and living our values demands that we all show up every day and recommit to them. We have one reputation, which is far more valuable to us then any short-term cheap win. Our values have kept us safe for 14 years in Australia and 39 years in the UK
We think that small business has a great advantage in this area over big conglomerates. Whilst it’s not easy to demand everyone lives by the companies’ values, it is possible with effort and dedication. We see dozens and dozens of examples every month of owners and their businesses who have quietly lived and operated to the highest ethical standards developing unparalleled reputations. Whereas large conglomerates appear very challenged when it comes to consistently taking what often hangs on the wall, and sounds wonderful, into the reality of the stakeholder experience.
The Value of Reputation, ethics, and values
The reality of our experience in Australia, is that business owners are by and large salt of the earth people, extremely honest and dedicated, and fiercely committed to their staff and customers. We see through our transaction work how important the matching of values between a seller and a buyer is. People do deals with people. The good reputation of a business, built over many years and even decades is a key component of the good will which is being transferred in a transaction. The buyer knows how important it will be to keep that reputation through the continuation of those values. This often forms a large part of the discussions during due diligence. How will the business continue to deliver its services and products under the new ownership? The previous owners are often asked to continue for a period to help transfer that good will. Anybody that thinks values are woolly and soft hasn’t seen the rapid erosion of value in a business where the ownership has changed, and the previous owners’ values are ignored by the new owners. Trouble arrives in no time, customers leave, and earnings quickly evaporate.
The free market certainly helps keep us all in check. The high-profile examples of malpractice we hope remain the exception and not the rule. We also would urge our politicians to intelligently regulate to avoid the excesses of market dominance and the abuses that often accompany that market power. In conclusion we would say that good business ethics are well and truly alive, and long may that continue.
Good luck and stay safe.
- ‘I am the right person’: Goyder defies resignation calls AFR, Lucas Baird, September 27 2023 https://www.afr.com/companies/transport/shocked-qatar-was-not-told-of-concerns-before-flights-blocked-20230927-p5e7wq
- How confidential tax information was shared at PwC AFR, Neil Chenoweth and Edmund Tadros, September 27 2023 https://www.afr.com/companies/professional-services/how-confidential-tax-information-was-shared-at-pwc-20230927-p5e81