Ethics in the boardroom: second edition

The four lenses: surfacing ethical considerations

At the centre of the publication is the ‘four lenses’ model, a structured way for boards to work through ethical considerations. The lenses encourage directors to examine decisions from multiple perspectives, reducing the risk of narrow reasoning. 

1. The first lens is general influences — the organisation’s role as a participant in society, including the strategic environment and broader social norms or expectations. This lens prompts boards to consider how decisions align with the organisation’s values and expectations beyond legal compliance.  

1. The second lens examines the board’s collective culture and character. It asks directors to reflect on how board behaviours, norms and shared assumptions influence ethical judgement. This includes recognising how pressure for consensus can influence decisions.  

1. The third lens covers interpersonal relationships and reasoning within the boardroom. Power dynamics, the quality of challenge, and the role of the chair all affect how ethical issues are explored.  

1. The fourth lens turns inward, focusing on the individual director as an ethical actor. Directors are encouraged to acknowledge their own motivations, biases and vulnerabilities.  

Ms Mulhern reflected that the board’s ethical perspective is often profoundly shaped by what is happening outside of the organisation. She stressed that community expectations and norms often move faster than government legislation and hence the board should adopt a ‘compliance with the law is a bare minimum’ mindset.  

The ‘can we/should we’ ethical principle  

The publication highlights the continuing relevance of the ‘can we/should we’ ethical principle.  Mr Gergis reflected that this has been a central governance consideration in Australia since the CBA Prudential Inquiry in 2018.   

Ms Mulhern noted that a ‘should we’ principle should ultimately be embedded in an organisation’s risk frameworks and risk appetite overseen by the board. She added that for listed companies she has observed that some institutional investors do seek to account for the ethical track record of the company.  

Mr Longstaff stressed that he has observed boards, particularly in highly regulated sectors, relying far too much on a narrow compliance mindset.  

Confronting ethical challenges with technology  

A notable addition in this second edition is a focus on the complex and unique ethical challenges that can emerge with an organisation’s adoption of technology. Mr Gergis noted that how organisations adopt technology, and communicate this adoption to employees and customers, has increasingly become a focus of public debate.   

Currently the boards of many Australian organisations are facing complex considerations around AI adoption that go beyond organisational benefit or technical feasibility. Ethical considerations such as fairness, accountability, transparency and human wellbeing can all surface as boards discuss an organisation’s embrace of AI.  

Mr Longstaff considered that AI adoption will present very profound challenges for many Australian organisations and their boards, in part due to the limited explainability of many AI models. Mr Longstaff encouraged boards to be honest with employees, customers and shareholders and focus on what about the organisation makes it distinctly human.  

Ms Mulhern reflected on the rapid pace of AI development and adoption, and boards being asked to make decisions on technology whose long-term impact is unknowable.

Board culture and the role of the chair 

Each board comes with its own unique culture shaped by the personalities of the directors, history and characteristics of the organisation itself. The culture of the board affects the way directors raise, discuss and resolve ethical issues. Mr Longstaff advised that board discussions should come from a place of mutual respect and vulnerability on the part of individual directors, including asking ‘this may be a dumb question’ when appropriate.  Mr Gergis noted that there can be challenges when the incentives of the board and management are not aligned, particularly where management may be focused on short term results rather the long-term health of the organisation. Ms Mulhern considered that this can in part be addressed through setting appropriate remuneration frameworks. Mr Longstaff added that the board can insist that ethical issues are routinely addressed in board papers.  The publication gives particular attention to the role of the chair in creating the conditions for ethical deliberation. Chairs are encouraged to foster environments where questioning is welcomed, all voices are heard, and evidence based disagreement is seen as a strength rather than a disruption. Ethical governance is as much about how boards make decisions as the decisions themselves.  

AICD resources  

• Ethics in the boardroom: A decision-making guide for directors (2^nd Edition) 

• Ethics in the Boardroom eLearning module