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“In the short run, there may be a competitive advantage in doing something immoral or unethical, but sooner or later, businesses that are not operating ethically are going to get in trouble.”
“We believe in integrity, in ethics, as a foundation to building our business,” agrees Paul Romano, the president of OneBeacon Professional Insurance. “How we select and bring our products to the market are choices we get to make, and we don’t believe these issues are negotiable.” Doing the right thing, Romano insists, is the only way both organizations and individuals can build trust, whether in the marketplace or in their personal lives. Moreover, Romano says, it pays to do the right thing.
“Studies show that the more ethically companies act, the higher their return on investment, the higher their stock prices remain over time,” he explains. “Being ethical and trustworthy builds great businesses over the long haul. It’s rewarding personally and professionally.”
That’s why, Kensicki says, vast numbers of companies have adopted some kind of statement of core beliefs or ethical beliefs over the past 20 years. Many insurance companies require employees to sign ethics statements annually. Kensicki says he deals with more and more midsize and small insurance agencies that are adopting ethics codes. He also notes that Sarbanes-Oxley regulations require publicly traded companies to make provisions for ethical whistleblowers and “many companies that take it seriously actually appoint an ethics officer.”
Grappling with Multiple ‘Right’ Choices
But regulations and codes of ethics don’t necessarily translate into companies and individuals making the right choices. Why can it still be hard to be ethical?
Ethical business practice seems simple enough: Do what the law says and follow your business’s code of ethics. But it only takes a moment for Kensicki to undermine that assumption.
“Almost every code of ethics I have seen says that if you break the law, you are unethical,” he explains. “I think the 1968 Democratic convention in Chicago and the civil rights movement proved that’s not always correct. Civil disobedience is premised on the law being wrong.”
Maybe that’s an obvious caveat. But Kensicki goes on to point out a challenge global companies face every day: “In some countries it is perfectly ethical to bribe. In this country it isn’t. So what do I do with my office in that country?” Moreover, he adds, even in one country, ethical practice varies according to your profession. “You can see this best in the law, where attorneys must, by their ethical code, faithfully and vigorously defend their clients, whereas we might say it’s unethical to defend criminal behavior.”
These examples underscore Kensicki’s more sweeping point: The challenge of ethical business lies not in deciding between obviously right or wrong choices, but in deciding among several apparently “right” choices, or what he describes as “grasping a cloud,” when everyone sees the cloud differently.
In practice, “You try to make the best decision that you can and learn from it,” he says. Education and training also can help, but they must explicitly confront “the gray areas that always exist.”
Kensicki cites recent efforts by the Chartered Property Casualty Underwriters (CPCU) Society to address real-world ethical conundrums in its own ethics code and continuing education programs. (Kensicki is a member of the CPCU ethics committee.) Gray areas are addressed explicitly from the very beginning of a continuing education course, “Ethics Considerations for Property & Casualty Insurance Professionals,” offered by CPCU in conjunction with the International Risk Management Institute, Inc. (IRMI).
Leadership by example and frequent, explicit practice are also essential to translating ethical codes into actual conduct.
“You really need to make ethics and integrity a part of the organization’s dialogue and help people make choices along the way that reflect the value system of the organization,” Romano says. “You have to keep it at the top of the dialogue. It has to be there, as part of your organizational DNA.”
If organization’s incentives and success criteria support ethical behavior, then that behavior will occur more frequently, Romano adds. “We want our insureds to embrace that notion as well, because they can better manage their risks when they operate their businesses on the foundation of ethics and integrity.”