KEY CONCEPT

No leader wants to wake up to discover a major disaster that their organization is responsible for has taken place. But crises can be unavoidable and this Idea considers the role of ethics in crisis management, and how an ethical corporate culture can help when disaster strikes. Using the 2010 BP oil spill as an example where ethics were not applied in crisis management, it also shows how applying ethics to management decisions can avoid disasters occurring in the first place.

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IDEA SUMMARY

In April 2010, an explosion on an oil rig connected to BP in the Gulf of Mexico threatened the fate of the company forever. The disaster resulted in the death of 11 workers, and approximately five million barrels of crude oil ended up being discharged into the ocean by the time the well was finally capped in July 2010.

This, the largest offshore oil spill in US history holds many lessons for leaders, particularly in terms of ethical management in a crisis. It demonstrates that it is not just the competence of managers that determines the success of a firm, but also the extent to which they ground their responses in a set of core ethical values. These values include the following (and more):

• Trustworthiness: BP learned the hard way that having noble aspirations to behave in an ethical manner is one thing, but putting them into practice is another. A number of management-level failures showed that BP did not live up to its professed commitment to safety and people development, which undermined trust. However, under new leadership, the company has now created mechanisms to ensure its Code of Conduct is upheld, such as OpenTalk — a confidential helpline for employees.
• Responsibility: this means accepting your mistakes, apologizing, and being prepared to compensate those that have been harmed as a result of the crisis.
• Respect: treat people as an end and never use them as a means.

Other core values include citizenship (i.e. abiding by the law in the jurisdictions in which you operate, as well as taking steps to protect the environment/community), caring and fairness.

BP is not alone as an example of a firm demonstrating holes in their ethical values during a major crisis; Nike, Starbucks, Johnson & Johnson and many others have also been in the same position. But these crises can serve as defining moments rather than engulfing companies into oblivion. Through a commitment to core ethical values, leaders can put their company in a better position to survive and generate long-term goodwill, as well as reduce the potential of further crises in the future.

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BUSINESS APPLICATION

How do you go about constructing an ethical corporate culture, so that you not only reduce the risk of a crisis happening in the first place, but respond adequately when and if it does?

1. Establish asset of core ethical values: regardless of firm size, this is the fundamental starting point in developing an ethical corporate culture. Core values must be infused throughout the policies, processes and practices of the organization.
2. Implement a comprehensive ethics program: engage in some sort of ethics training for all employees and managers. Designate an ‘ethics officer’ responsible for the code of ethics.
3. Give ethical leadership: avoid the pursuit of profits and bonuses and other short-term financial gains. Be aware of the symptoms of ethical leadership failure and address immediately, as ethical leadership is crucial to and ethical corporate culture.

These steps will go a long way to ensure that your firm emerges from a crisis stronger and more respected.

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REFERENCES

An Ethical Approach to Crisis Management, “Shwartz, Mark”, “Cragg, Wesley” and Hoffman, W. Michael”, IESE Insight, Issue 15 (2012), p. 36–43

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