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Simon Longstaff, the executive director of Australia’s Ethics Centre, said he believed investigations into a company must include an examination of whether it has established a culture reinforcing the rightness of certain behaviours.
“That’s the point at which the corporation should be held accountable,” he said. “It’s culture that says you can ignore a policy because other things are counted as more important.”
He said corporations could find loopholes in policies to exploit workers, and gave the anecdotal example of a company withholding bonuses when it fails to meet a profit target.
Speaking to FMT after he had addressed a conference on financial crimes, Longstaff called for an approach based on principles in governing a company instead of one based on the mere enforcement of a set of rules.
“A lot of people in business don’t like a principles-based approach,” he said. “If you talk to directors and senior managers they’ll say, ‘Tell me exactly where the line is drawn. I want to go as close to that as I possibly can.’
“That’s how people start to find loopholes and that’s where trust gets broken.”
He said he was sure that corporations could attract capital from parties agreeing with their values and principles.
He also said the board of directors must be the first to uphold a company’s values and principles in order for these to translate into a culture.
The reinforcement of those values and principles, he added, would encourage voluntary action by employees to do what’s right, leading to better outcomes at lower costs.
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