The solution isn’t the problem!

In business, the subject of business ethics has developed over the past 15 years from the status of a neglected orphan into an essential priority. Dr. Edgar Karssing, associate professor at Nyenrode’s European Institute for Business Ethics, has brought together his insights of this period in the book “De oplossing is het probleem niet! Reflecties op ethiek, integriteit en compliance” (The Solution is not the Problem! Reflections on Ethics, Integrity and Compliance). 
   
According to Edgar Karssing, the subject of business ethics got really off the ground in Europe with Nyenrode’s appointment of Henk van Luijk as a professor in this field. In 1984 he was the first in Europe. In 1994, Van Luijk founded the European Institute for Business Ethics, which Karssing joined a year later. Henk van Luijk emphasized to Karssing that people have all kinds of negative ideas when they hear the term ‘business ethics’: “It is a waste of money... ethics are for in church on a Sunday... it is moralistic". For that reason, Van Luijk preferred to speak of Corporate Social Responsibility and, in the case of the government, integrity. To Karssing, he passionately emphasized the need for practicality.
 
 

Integrity on the financial sector agenda 
In the mid-nineties, the concept of integrity was still mainly associated with the government, explains Karssing. “Then towards the end of the nineties, it came up in the financial sector. The term had never been used there before although, of course, integrity had to exist previously. But at that moment something apparently changed, making it important to put integrity on the agenda.” In his opinion, the change was largely brought about by the entry of private individuals into the equities market. He elaborates: “Until then, the equities market was populated by professionals who knew each other. When a lot of people who didn’t really understand the ins and outs entered the market, this brought with it an additional responsibility for the financial institutions because new opportunities also arose to abuse the situation.” 
 

“It was for that reason that integrity became an issue in the financial market at the end of the nineties. That led to the rise of the compliance officer, who were generally older, white men. In 1999, I made my first acquaintance with such a compliance officer at a major bank. His job was to devote two hours a week to the matter. At that stage, compliance was seen as a matter of ensuring that external regulations were complied with in the organization. It was approached entirely from a legal perspective.”
 

Professionalization through rules versus moral responsibility
Around the turn of the century there were several accountancy scandals. In response, full-time compliance officers were quickly appointed in all kinds of companies in order to put the concept of compliance into practice. Karssing: “As an occupational group, they quickly became very professional. However, they mainly did so by focusing sharply on the rules and hence opting for a purely legal approach.” In Karssing’s vision, this way of working is much too limited. “Many people understood that compliance had something to do with ethics, but found this a rather vague concept.” Because they had difficulty dealing with ethics, they preferred to adopt a risk-based approach; looking to see what could go wrong and taking preventive measures. He continues: “With a purely legal approach, your reasoning is based on the organization. You try to keep the employees on a leash. Those employees often find that moralistic. Nobody makes an appeal to their sense of personal responsibility.”
 

So that is what the title ‘The Solution is not the Problem’ refers to. People look for a solution to a problem, but in fact the problem is defined wrongly. The problem is viewed as a matter of how to prevent harm to the organization. How do we stop our company breaking rules and incurring penalties? I would like to turn the question around: How can we make sure that our organization takes its moral responsibility more seriously? Now that is a completely different perspective. Then you stop viewing employees as the problem, as people who need to be kept on a leash. Instead, when you take moral responsibility you regard your employees as assets of the organization, to be supported in this important task.”
  

‘Leviathanization’ of the market
To demonstrate the price paid for a lack of ethics and integrity, Karssing refers in his book to the 17th-century philosopher Thomas Hobbes. The latter outlines a situation in which everyone is at war with everyone else, the only rule being the right of the strongest. In Hobbes’s words: “And the life of man [is] solitary, poor, nasty, brutish, and short.” Not exactly something to strive for, in Karssing’s opinion. On the other hand, we could also choose to ‘Leviathanize’ the market, to create new rules and regulators, but that is not what he would choose either. However, there is a third possibility. Karssing: “And that is to take ethics more seriously. I think that would improve everyone’s lot. But then we do have to know what ethicsis about and that is the subject of my book. In the book, I try to make ethical questions easier to deal with. When do ethics and integrity hit the news? Well, we rarely hear of them until something goes wrong. As a result, many people associate ethics with infringements, whereas as I view them positively. Ethics is about taking responsibility or doing your work well. And you have to help people to do this.”
 

Soft and hard controls
He continues: “It gives me the shivers when people say that we now need soft controls as well as hard controls. That immediately turns ethics into a ‘soft subject’. I think these soft controls are much harder than the hard controls.” He refers to research by Kees Cools seeking to explain why things went wrong in some organizations but not in others. “This has little to do with control systems, governance or rules. These were in order in every case. It was much more down to bonuses, ‘Sun King’ behavior at the top and unattainable targets. For me, the most important thing is that measures should be effective. This means taking people seriously and working on the basis that people can take personal responsibility and are willing to do so.”
 

Training, leadership and culture
If organizations are to act ethically and with integrity, it is important to train employees. However, something also needs to change in the culture on the shop floor and in management, otherwise employees will be more cynical than before precisely because their eyes have been opened but nothing really changed. The stimuli and the targets in a business can also encourage or discourage ethical behavior. Karssing: “The more the culture is oriented towards bonuses, the more people will focus on these. There is still no research to prove that bonuses help, unless you are talking about piecework. In general, targets are more likely to encourage fraudulent behavior than to encourage people to do their work better.” He adds: “Language is also very important. Is the customer simply somebody to gain maximum profit from; a mere number for the organization? If so, you will never build up a genuine relationship with your customer.”
 

Seminar
At Nyenrode on September 14th 2011, a seminar on the theme of integrity and culture will be held to coincide with the publication of the book “De oplossing is het probleem niet! Reflecties op ethiek, integriteit en compliance”. Speakers will include Joanne Kellerman, the Director of DNB, Nyenrode’s Prof. André Wierdsma, and Frans van Oostrum, Head of the UWV Integrity Bureau and winner of the Ien Dales Award.