ETHICAL LEADERSHIP THE KEY TO UNDERSTANDING KING III

Introductory remarks Ethics and King III

Principle 1.1 Ethical leadership by board

Principle 1.2 Board and company as responsible corporate citizen Principles 1.3 Board and effective ethics management

ETHICS VOCABULARY

Ethics
Values-based conduct Discretionary decisions grounded in values

Values
Standards/norms for good, right and fair conduct Examples: respect, integrity, responsibility, accountability, fairness

Compliance
Rule-based conduct (following laws, regulations, rules) Ethics codified

Ethical dilemma
Values clash

Ethical reasoning
Using values-based reasoning to solve ethical dilemmas

MAKING AN ETHICAL DECISION

An Ethics Quick Test
1. 2. 3. 4. 5. 6. 7. Is it legal? Do my organisations Code of Ethics/Conduct and other policies allow it? Do my professional standards allow it? What would my ethical role model do? How would it look on the front page of tomorrows newspaper? How does it make me feel? Would I be comfortable sharing my decision with my closest family? Does it pass the Golden Rule test?

8.

ETHICS IN ALL HUMAN ACTIVITIES

Religion
Animals and natural environment

Personal relations

Education

Organisations

Science

ETHICS
Sport

Professions Law, medicine, accountancy, etc

Politics Art
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ETHICS IN ALL ASPECTS OF BUSINESS

Business ethics The application of ethical values to organisational behaviour
Boardroom strategies and control HR, IT, technical Product development Sales and marketing Accounting practices Relationships with agents, suppliers and customers (stakeholder relations)

KING III STAKEHOLDER TRIPLE CONTEXT APPROACH TO CORPORATE GOVERNANCE

QUESTION 1
To whom is the board responsible?

QUESTION 2
For what is the board responsible?

All stakeholders
Stakeholder (vs shareholder) model of corporate governance

Triple context performance and reporting

Economic Social Natural environment
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RELATIONSHIP ETHICS/GOVERNANCE IN KING III

Ethics of governance
Ethics is the reason for corporate governance and the King reports Every aspect of corporate governance is grounded in ethical values
Board responsibilities Risk management Internal audit Sustainability

Governance of ethics
A companys ethics performance needs to be actively governed and managed By means of a ethics programme

Introductory remarks Ethics and King III

Principle 1.1 Ethical leadership by board

Principle 1.2 Board and company as responsible corporate citizen

Principles 1.3 Board and effective ethics management

Principle 1.1: The board should provide effective leadership based on an ethical foundation.

ETHICAL LEADERSHIP
Ethics of governance
Corporate governance requires that the company is run ethically through effective ethical leadership
Strategic direction Board sets tone at the top Control Board delegates operational aspects of ethics management

License to operate

Company earns approval from all its stakeholders

ETHICAL LEADERSHIP
Ethical leaders
Set the tone at the top Make ethics explicit Legitimise ethics discourse Are ethical role models Encourage ethical conduct in others Hold others accountable for the ethics of their conduct

ETHICS OF GOVERNANCE ETHICAL VALUES (RAFT)

1. Responsibility
Board responsibility for companys assets

2. Accountability
Board able to justify its decisions

3. Fairness
Board considers interests of all stakeholders fairly 4. Transparency Board discloses information in manner that allows for meaningful analysis of the companys actions

ETHICS OF GOVERNANCE ETHICAL DUTIES OF DIRECTORS/LEADERS

1. Conscience

Intellectual honesty; avoids conflict of interest; independence of mind

2. Care

Devotes serious attention to affairs of company; acquires all relevant information needed for effective control and direction
3. Competence

Has knowledge and skills; develops competence

4. Commitment

Diligent in performing duties

5. Courage

Courage to take risks associated with directing a successful sustainable enterprise and to act with integrity

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Introductory remarks Ethics and King III

Principle 1.1 Ethical leadership by board

Principle 1.2 Board and company as responsible corporate citizen Principles 1.3 Board and effective ethics management

Principle 1.2: The board should ensure that the company is and is seen to be a responsible corporate citizen.

RESPONSIBLE CORPORATE CITIZENSHIP

Company as collective citizen, analogous to natural person Discharges duties in manner sensitive to triple context
Economic Social Natural environment

In South Africa it means that company builds trust by respecting rights

Universally recognised human rights Constitutional rights

Introductory remarks Ethics and King III

Principle 1.1 Ethical leadership by board

Principle 1.2 Board and company as responsible corporate citizen Principles 1.3 Board and effective ethics management

Principle 1.3 The board should ensure that the companys ethics is managed effectively.

GOVERNANCE OF ETHICS THE ETHICAL CHALLENGES

Proactive: Building
Trust Reputation

Defensive: Preventing
Fraud, corruption, theft Cartels, insider trading Conflicts of interest

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2.2 Develop ethical standards (code and policies)

2.1 Assess ethics risks and opportunities

1. Build ethical culture

2.3 Integrate ethical standards (ethics code)

2.4 Monitor, report and disclose

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ETHICS IN ORGANISATIONS A Ethics is not an optional add-on to STATEMENT normal business, nor it is a soft issue.
All business strategies and operations have an ethical dimension that we cannot escape as we cannot escape our own shadow. Ethics holds enormous risks for companies, but more importantly creates reputational and competitive opportunities.

BILLTOP BUSINESS TRAINING SOULTIONS

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