This paper is a practical resource for directors that guides ethical decision-making in boardrooms. Directors are bound to apply the values and principles of the company while having the power to amend its ethical framework. Directors are also bound by the duty to act in the best interests of the company, which can be challenging to navigate due to the variability in the positions people hold. As stated by Dr Simon Longstaff, Executive Director of The Ethics Centre, directors are required to make decisions that may polarise opposing groups. To combat these difficulties, the report outlines three ways in which directors can be guided in their decision-making: understanding ethics, framing ethical issues through different lenses and by applying an ethical decision-making framework.

Understanding Ethics

Ethics is concerned with questions about what should be done and what decisions are right and good. Values and principles shape all decision-making, for this reason, there are no aspects of directorship that are exempt from ethics. However, the difficulty arises when we ask questions of ‘who determines what is right and good?, ‘who is the arbiter of truth?’ and when personal and organisational values don’t align. Such challenges may deter directors from discussing the ethical dimensions of decision-making, whether it concerns issues relating to business operations or an organisations place in society. The field of ethics provides us with tools to better inform our decision-making abilities and assist us in improving the quality and character of decisions.

The Lenses of Ethics

After understanding the ethical implications of the decision-making process, the report identifies four different lenses from which to view ethical dilemmas in the boardroom.

1. General influences: seeks to understand the issues and factors that affect the organisation by being an active participant in society. It encourages directors to frame issues and question what aspects of an organisation’s strategic environment are relevant in the decision-making process.
2. Collective Culture and Character: When considering the ethical implications of a decision, the culture and character of the board must reflect the purpose, values and principles of the organisation. This may solicit questions such as ‘does the board have a culture that enables ethical considerations?’
3. Interpersonal Relationships and Reasoning: urges directors to be cognisant of the diverse outlooks each director brings to the boardroom and how certain group dynamics may lead to cognitive blindspots in decision making.
4. Individual Director: this lens calls upon each director to reflect and consider the personal biases, motivations, modes of thinking and vulnerabilities that directors bring to the boardroom.

Decision-Making Framework

The ethics framework serves as a reliable and replicable way of making decisions and follows a five-phase process. 

• Frame: define and understand the precise nature of the issue
• Shape: develop options that could resolve the issue
• Evaluate: apply the organisation values and principles when evaluating options
• Refine: adjust the options/proposal to eliminate its weaknesses
• Act: Give effect to the best option and monitory its outcome

Through understanding ethics, applying the four lenses and utilising the decision-making framework, directors can better manage the ethical complexities that arise from their duties and ensure the fulfilment of their governance responsibilities.

1. Applying ethics in the boardroom provides an organisation with a competitive advantage by minimising risks associated with unethical decisions. For example, a mining company has offshore operations in a country with laws that impose only minimal safety standards. Management calculates that the company could substantially increase profits by adopting lower safety standards. Should the board approve a standard of safety that complies with local laws or insist on standards that exceed the minimum required?
2. Ethics asks the question 'what ought one do?' By considering this question, an organisation can go beyond the law and create greater value for all stakeholders.
3. When seen as an analytical tool, ethics can allow directors to dive deeper into decisions at hand and view issues with unique frames of reference.
4. By establishing a decision-making framework, the boardroom can ensure that outcomes are consistent with the ethics and values of the organisation.
5. The combination of the four lenses and the five phases framework ensures that directors are well-equipped when it comes to managing ethical complexity.
6. Ethics is considered a double-edged sword. When invoked as a tool to evaluate decisions, it needs to be applied to all other decisions for the sake of logical consistency.
7. What is considered morally right or virtuous may be seen as a matter of opinion, entirely subjective depending on individuals own values and morals.
8. Ethical failure consistently destroys value, especially in companies where significant value is in intangible assets.
9. Attempts to prevent ethical failures by relying on increasingly comprehensive systems of regulation, surveillance and internal compliance are insufficient.
10. Ethical challenges identified by directors relate to people, relationships and perspectives, business practices and decisions, and to an organisation's place in society.