The ethics of business

I've been asked to write an article for the Toyota Believe magazine on the importance of business in society and the importance of values in business.

This is something I’ve reflected on deeply in the past decade, in particular during my time as CEO of Warehouse Stationery between 2009 and 2011 and then as CEO of The Warehouse Group between 2011 and 2016. In addition to the iconic Red Sheds, The Warehouse Group includes Warehouse Stationery, Noel Leeming and Torpedo7. It is a major New Zealand business employing more than 12,000 people in hundreds of stores across New Zealand.

One of the roles I now have is part-time ‘CEO in Residence’ at Massey Business School. As I interact with students, one of the most common questions I get is about ethics in relation to leadership and business. Young students have many questions about values, justice, fairness and social responsibility. Often there is even a question about how you can be a CEO and work in business and still be ethical at all! So what’s my response?

First, I’d like to focus on the function of leadership in an organisation. I strongly believe that leadership is not about status and position. I believe that leadership is a function, and has three main roles:

1. TO CLARIFY THE PURPOSE OF THE ORGANISATION.
   Why do we exist as a business?
   What are we trying to achieve?
   
   
2. TO CLARIFY THE PRIORITIES OF THE ORGANISATION.
   What should we focus our time, energy, resources and finances on to achieve our purpose in line with our principles?
   Our priorities are basically our strategy.
   
   
3. TO CLARIFY THE PRINCIPLES OF THE ORGANISATION.
   How should things be done around here?
   How should we treat each other?

So if that’s the function of leadership in a business, one can step back and ask just what is the purpose of business? What should be the principles that business operates by and what should be the priorities of business? For me business should deliver long-term sustainable, profitable growth that helps society flourish. Businesses don’t exist in isolation.

Good businesses need good societies and good societies need good businesses. The only money Government has is from the corporate taxes paid by businesses, the taxes paid on the sale of goods and services by businesses and the employment tax paid on the wages of those employed in businesses. Oh, I forgot and debt - which must be repaid - eventually!

This economic reality often comes as a surprise to many people I talk with and such economic literacy is endemic in those who too easily demonise businesses. Having said that though, businesses must also realise that they need good flourishing societies in which to flourish.

We need law-abiding, hardworking, well educated, skilled, honest people in our society. Our customers are those people, our suppliers are those people and our employees are those people too. We need each other, we are deeply intertwined, and businesses must face up to their broader role in helping society flourish.

This played out in many ways during my time as CEO of The Warehouse Group. We revitalised our community programmes. Our Red Shirts in Schools programme now offers employment experience to more than 2,000 young people every year.

Our decision to take R18 products off our shelves was based on the fact that they did not fit with our brand and didn’t contribute to society flourishing. These, and the domestic violence support we put in place for our team and finally the introduction of the Career Retailer Wage, which significantly lifted the pay of our team members.

All these actions were part of recognising the broader role of our business. This was all built on the original DNA in the business by founder Sir Stephen Tindall. The Tindall Foundation has distributed over $130 million to New Zealand charities to provide a hand up to those less fortunate. I don’t say this expecting praise – it’s just the right thing to do!

That phrase the ‘right thing to do’ brings me to my final point.

You can’t separate all this discussion from the leader’s own values, their own sense of purpose, principles and priorities. Where do these come from? What do they believe about what is right/wrong, good/evil, fair/unfair, just/unjust and why do they believe it? Why should we do the right thing, why ought we be fair, why should we care? Are such principles just social constructs or are they some objective realities that we ought to follow?

I am a Christian, I believe that ethical principles are objective realities grounded in the character of God. Our ethical obligation to God is to follow God’s ideals of rightness, goodness, fairness, justice and love in how we treat each other. He made us for a purpose and he has shared clear principles, which if followed will allow all people to flourish, to fulfil their potential and be the best they can be. This is ultimately why I put ethics at the centre of my leadership and at the centre of my views on the positive role that business can play in society. This view was widely held by those who helped to build this great country. We don’t need better systems and more rules and red tape to force compliance, rather we need a revival of ethics and virtue, we need better people.

Mark Powell

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