Ethical Management

By Tore Audun Høie

Ethical management means that management should be based on ethics. Ethics includes social responsibility, quality, security/safety, professionalism and Nature as argued in my book Ethics (2015).

One reason for this is many ethical trespasses and crimes. They include the finance crisis, wrong use of medicines and manipulation of car emissions. Many have destroyed Nature or exploited people. The Norwegian Oil Fund has introduced the concept ethical risk. This can be a company without ethical awareness or management breaking laws or guidelines.

Ethical risk contributes to the possibility that something goes wrong, like an exploded oil platform, a finance crisis, angry customers or poor services. Valeant, a pharmacy, operated according to the formula “buy a competitor, sack researchers, increase prices (sharply), go on to the next competitor”, the formula developed by McKinsey. The CEO of Valeant was in 2014 ranked as the world’s number eight best boss, according to Harvard Business Review. A reason for the award was that Valeant «delivered solid results over long time».

Valeant was probably the reason why criteria were radically changed next year. Then the boss of Novo Nordic was awarded the top spot. Novo trains all employees in ethics. Valeant’s share price dived when their practices became known. A miserable investment!

The total indicates that bad ethics is not limited to rotten apples in a basket, but most of the basket, meaning systemic. Harvard trains leaders, is ethics included? Perhaps, but not in systematic manner. Norwegian business schools introduced ethics after political pressure around Valeant time, but the subjects taught were not adjusted to ethics as far as I know. Finance is for earning money, not to perform a service for society. The latter interpretation is better for society, and for finance.

A positive development is that a group of investors lead by Norwegian Storebrand is in dialogue with Brazil to stop deforestation of the Amazon. It is said that Brazilian politicians listen, perhaps because the group commands 17 trillion dollars.