The Business Ethics Blog

Here’s a story worth looking at, by Will Evans, in Slate:
It’s All Good: Beware of corporate consulting firms offering awards for corporate ethics.

Evans casts a skeptical eye on corporate ethics rankings. The article focuses in particular on the rankings issued by Ethisphere (the same organization that has honoured me twice in the last 2 years). I should also note that I’m mentioned in the story as someone who was technically a member (though not an active member) of the advisory board for its corporate ethics ranking.

I’m also quoted by Evans as saying that such rankings should be taken “with a grain of salt.” (Note, though, that the sentence that contains that quote might be taken, wrongly, to imply that I think rankings are window dressing. That’s an accident of sentence structure, and doesn’t represent my view.) But it’s true that such rankings shouldn’t be taken too literally. Corporate ethics is complex, and any ranking methodology is going to involve compromises and is going to be inherently controversial.

Now, I’ve been blogging about the limitations of corporate ethics rankings for years. Just a few examples:

• Corporate Social Responsibility Ranking (March 2006)
• Tobacco Company Smokes the Competition on Corporate Citizenship (July 2006)
• Ranking Corporate Ethics Campaigns (October 2006)
• Battle of the Corporate Ethics Rankings (February 2009)

A few quick points to make about Evans’ article:

First is that, to be fair to Ethisphere, the article doesn’t give any particular reason for singling out Ethisphere’s rankings, among the many similar rankings. I suspect an article could easily be written about each of the other rankings, with similar results (though perhaps not with precisely the same set of complaints).

Second, the key worry that Evans cites about Ethisphere’s corporate rankings is that Ethisphere’s sister organization, Corpedia, is an ethics and compliance consulting firm. And it’s not clear how (or to what extent) Ethisphere manages to insulate its ethics ranking from Corpedia’s interest in gaining new clients. It’s a fair worry, and I imagine we’ll see improvements from Ethisphere (at least in terms of transparency, and perhaps in terms of process) in the coming months.

Third, it’s worth noting, as in other cases involving conflict of interest, that there’s no accusation of actual malfeasance, here. Nowhere does Evans imply that Ethisphere has done anything dishonest, or that its rankings have actually been biased. The worry, rather, is in…well, in the worry. We worry about C.O.I. not just in situations where we think someone has actually been biased, but also in situations in which we think that bias could be likely to occur. It diminishes our faith in the system, though not necessarily in the people working within it.

Fourth, it’s also worth noting that the concern highlighted by Evans in his article mirrors quite directly the worry about financial consulting firms that (at least prior to Sarbanes Oxley) provide both auditing and other consulting services to the same company. Prior to Sarbanes Oxley’s harsher limits, accounting firms did at least have a range of mechanisms in place (such as Chinese Walls) to insulate their auditors from the profit-hungry consulting branches of their own firms. Groups that do rankings might learn from that example.

Finally, a point about the point of ethics rankings. Evans ends his article with an anecdote about a company that had done well on an ethics ranking, and that used that achievement as a way of trying to deflect questions about a more recent scandal. That, of course, is an utter misuse of such a ranking. Corporate ethics rankings, at their best, acknowledge — and hence reward — achievement in certain measurable ethically-relevant behaviours. They are not an eternal benediction, and neither corporate insiders nor outsiders should treat them that way.