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Board decisions often sit in the grey, balancing whistleblower protections, fairness to individuals and reputational risks.
Strong governance relies on agreed principles – legal duties, ethical responsibilities and accountability to stakeholders – not purely individual morality.
Ethical decisions depend on aligned values, open debate, strong leadership and, sometimes, knowing when stepping away from the board is the most appropriate choice.
Anonymous whistleblowers. Well-paid CEOs accused of misconduct. These are the ethical challenges that test the judgement of directors and put an organisation’s reputation and culture at risk. Here are practical pointers to help boards respond with clarity, fairness and integrity.
Seasoned director and an adjunct Professor in the University of Queensland Law School Bruce Cowley FAICD, says an ethical quandary he faced involved a whistleblower who wanted their identity kept confidential.
“Sometimes, this can make it very difficult to gather evidence and put the allegation to the alleged perpetrator, to afford them a reasonable opportunity to defend themselves,” he says.
“The law, quite appropriately, provides strong protections for whistleblowers who wish to keep their identities private, but this can create a difficult ethical dilemma for directors who also want to be fair to the person against whom the complaint has been made.”
When the high performer is the problem
Both Pamela Hanrahan MAICD and Christine Hawkins AM FAICD have had to deal with workplace complaints levelled against a person who was important to the company’s bottom line.
“There can be a temptation to think that hushing it up or putting pressure on the complainant to walk away is in the company’s interests, but you have to think about the longer-term view,” says Hanrahan, Emerita Professor of Commercial Law and Regulation at the UNSW Business School.
The questions she asked at the time included: “If our handling of this complaint was made public, would that adversely impact the company’s standing with stakeholders? And, if I was on the other side of this decision, would I feel I’d been treated fairly, even if I didn’t agree with the outcome?”
Hawkins’ case involved the CEO.
“To get rid of a CEO of a public company would attract bad publicity. You’ll also find there are people who strongly support the CEO and think they’re terrific,” says Hawkins, a board and governance principal at Directors Australia.
“There are also complications with whistleblowers who are convinced of their own integrity, convinced somebody’s doing a wrong thing and the world has to know about it. When you get all the issues on the table, there’s more than one way to see these things and sometimes it’s not really black and white.”
Ethics, morality and the director’s role
So how can directors navigate such dilemmas?
Firstly, it’s important to distinguish between ethics (shared principles that guide behaviour within a group) and personal morality (an individual’s beliefs about what is right and wrong).
“I don’t think personal morality should shape the decisions you make as a director. You’re there to make decisions in the best interests of the company,” says Hanrahan.
In her book Directors’ Legal Responsibilities, Hanrahan references three pillars that support director decision making – legal duties, ethical responsibilities and accountability to stakeholders. “You need to bring all three to the discharging of your role,” she says.
Before joining a board, Hanrahan advises engaging in thorough due diligence to ensure your values are aligned with those of the company and other directors. “That includes understanding how the company defines success and the sorts of practices it encourages among its people to achieve that success,” she says.
“If your values are aligned, it shouldn’t be difficult to act ethically, even if that sometimes involves disagreeing with others.”
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The role of values and culture
Merran Kelsall AO FAICDLife, chair of Dementia Australia, agrees, noting she now only works with people she likes, respects and trusts, particularly the latter two.
“You don’t all have to see the world in the same way. You can have quite different views and robust debates. It’s that diversity of thinking and experience that’s critical — and what makes the job of the director so interesting.”
Carmel Mulhern GAICD, chair of the Telstra Foundation, says the challenges of ethical decision making can be heightened when you’re choosing between options that may be of equal merit and in a pressured environment.
She believes it’s essential to have an agreed framework for decision making, which includes guidelines, guardrails and non-negotiable principles. “These make it easier for people to understand, trust and commit more fully to the decisions being made.”
But most importantly, Mulhern believes in relying on your own values.
“Values are fundamental to everything we do,” she says. “You may not even realise it most of the time, but where I’ve found that I’ve relied on values most is when making those really hard decisions. When there is no black and white and I’m operating in the grey, I turn to values for the moral compass to steer me to the right ethical answer.
“Written policies and procedures aren’t enough. They need to be embedded. There needs to be tone from the top.”
When consensus breaks down
Kelsall cautions there’s often no right answer. “It is whatever is the best thing for our organisation in all the circumstances we find ourselves in today’s environment.”
She says the chair becomes really important when a consensus isn’t reached. “If something is very controversial, you probably need more than one bite of the cherry and perhaps some time outside to talk to individual directors or seek external advice,” she says.
“But you must have cabinet solidarity after a decision has been made. Also, how you communicate the decision is crucial.”
Like Kelsall, Hawkins believes sometimes the only option is to resign.
“Even if you think you’re right and everyone else is wrong, if they’re not going to agree with you and you can’t convince them for whatever reason, you should leave. Sometimes, you’re just in the wrong place, because you’re not doing yourself, the board or the organisation any good,” says Hawkins.
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