HR has key role in improving the ethical health of UK firms, say experts

Corporate tax avoidance, executive pay and environmental responsibility are the biggest issues undermining public trust, Institute of Business Ethics poll finds

The number of people who believe businesses behave ethically has declined since last year, prompting calls for HR to help their organisations adapt to modern expectations of corporates. 

A survey by the Institute of Business Ethics (IBE) found that 57 per cent of the 2,000 adults polled believed that businesses behaved ethically, down from 62 per cent in 2018. This is the first time since 2016 that perceptions of business ethics have worsened in the IBE’s poll. 

Corporate tax avoidance emerged as the issue most concerning respondents, with 33 per cent citing this as a problem UK businesses needed to address. The number of people concerned about executive pay and environmental responsibility increased, with 29 per cent citing the former, and 28 per cent the latter (both up from 24 per cent in 2018). 

David D’Souza, director of membership at the CIPD, said HR had a key role to play in improving the way business is conducted. This was about more than having “the right posters laminated in the right way”, he added. 

“HR's opportunity is to help senior teams to genuinely change the way that we operate, to make sure organisations are fit for the modern world,” he said.

However, D’Souza noted that public perception was just one element of assessing the ethical health of UK businesses, and didn’t necessarily reflect the exact reality. “I think it's healthier to be concerned about the reality, because I think that's how you shift the perception over time,” he said. 

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“It's important that people keep calling out where businesses aren't doing things well. In the short term this undermines trust, but in the longer term it provides an incentive for organisations to be better.”

Although the IBE research showed a drop in trust in business this year, these figures were still higher than in 2016 and 2017, when 48 per cent and 52 per cent of respondents respectively felt businesses behaved ethically. 

The survey also found fewer respondents than in previous years felt companies needed to work on issues of discrimination (14 per cent in 2019, down from 20 per cent in 2013), openness of information (9 per cent in 2019, down from 21 per cent in 2016) and employee work-life balance (18 per cent in 2019, down from 21 per cent in 2016).  

D’Souza said this showed HR had “definitely played a critical role in helping organisations think more proactively about some of the key issues around unfairness and equality in society and in organisations”.

Opinions among young people were more polarised than among other age groups, the research found. Respondents aged 18-34 were more likely to believe businesses either behave ‘very ethically’ (12 per cent) or unethically (33 per cent). 

Chadi Moussa, client partner at Let’s Talk Talent and former HR director, said young people generally held businesses to a higher standard, highlighting how crucial it is for organisations to maintain strong ethical reputations to attract the best talent.

“People have an expectation that [businesses] operate ethically, and if that means that companies pay more voluntary tax, or if that means that companies now show clearly how they’re addressing some corporate social responsibility issues, then that's something they need to do – because it's about attracting and keeping the best people,” he said. 

Philippa Foster Back, director of IBE, said businesses must ask why public perception of how they conduct themselves has declined. “Business appears to be increasingly proactive in addressing certain issues of public concern, such as discrimination in the workplace and openness of information,” she said. 

“However, the fact that corporate tax avoidance, executive pay and environmental responsibility remain top of the list – and the latter two at increased proportions – indicates that business is not doing nearly enough to address the ethical issues that the public are most concerned about.”