A Publication of WTVP

What role does the board play in the ethical stance of a business or organization? Corporate governance is a hot issue in the wake of major business scandals at Enron, Tyco, Boeing, and many smaller businesses. In a recent issue of The Chronicle of Philanthropy, an article detailed a study of the many perks-including large personal loans-that some nonprofit organizations give their executive directors.

Have the members of the boards of directors been asleep while personal agendas are advanced? Do they have the personal perspective to set boundaries with employees, even if the employee they handle primarily is the CEO? What are the ethical expectations board members have of themselves, as well as the leadership of the business or organization?

There are two policy matters any board needs to address to fulfill governance responsibilities, whether the business or organization is large or small. First, does the enterprise have a values statement? In previous columns, I've discussed the importance of values statements. They guide management decision-making as well as customer service. Values are the principles by which enterprises and organizations live or die. They're the true bottom-line of business policy-making and decision-making.

From a governance standpoint, a board needs to do a values audit periodically. In a retreat or conference format, board members can look at some of the difficult situations or decisions they've faced during the time in question, and determine the extent to which the organization or business was able to adhere to the actual stated values. This audit is a 360-degree audit, so the board audits itself and management, and the board is audited by management and management audits itself. Sometimes a skilled facilitator from outside the organization must conduct this audit to ask key questions and challenge prejudicial opinions.

Since corporate values, if they're real and true, guide the ethical path of the organization, the second policy matter is to evaluate the currency of the ethics statement. What have been some of the ethical dilemmas the organization or business has faced in the past year? What standards were applied to the situation? What situations fell outside of the ethics statement? Do we even have an ethics statement?

For example, in a nonprofit, one of the values could be the proper stewardship of other people's money. An ethical standard from that value might be: "Management will not use organizational funds to address personal needs or advance personal desires." In 2003, one of the management team sought a personal loan at a low interest rate to buy a home. The audit will ask: Was this decision appropriate? How was this decision handled? What was the outcome? How was organizational integrity maintained?

In a business, a value could be a devotion to quality in products and services. An ethical standard might be, "We will not utilize parts we know to be defective to get a job done on time." In the past year, a demanding customer wanted a product immediately, but a worker couldn't complete the task because a key part had a big problem. How was the matter handled? Was the employee rewarded for astuteness even though the customer wasn't happy? What happened to the customer as a result?

If we've learned anything from the scandals of the last decade, it's that little ethical lapses, if left unhandled, can turn into major problems for the company or organization-and even for the industry. Also, we've learned that, if greed and short-term gain are the major driving forces of organizational life, some very poor decisions very well may result because personal gain is put ahead of everything and anything else.

The board is the guardian of values and ethics in the organization or company. Board members need to be well versed in the values and ethical standards of the company or organization so they can make long-term policy decisions that will be in line with the soul of the enterprise. There will be increased attention to corporate governance in the next few years, for board members are in a unique position to require adherence to ethical standards while demanding excellence in corporate performance. The board begins by requiring these things of the leaders of the enterprise.

If you're asked to be a board member, keep in mind you must ask tough questions and sometimes even make difficult decisions to maintain the integrity of the operation. Are you up to this vital calling? IBI