Our key takeaways from the Governance Institute of Australia's 2022 Ethics Index.

Key takeouts

  • The Governance Institute's latest annual Ethics Index has found that public perceptions of Australia as an ethical society have dropped for the second year in a row, in part because public expectations of ethical behaviour have increased
  • Public perceptions of the financial services and corporate sectors remain low 
  • Directors of Australian companies, directors of foreign companies operating in Australia, mortgage brokers, funds managers and senior executives were ranked among the top ten least ethical occupations  
  • Climate risk was ranked in the top three ethical challenges facing Australia, with the majority of respondents considering there is an urgent ethical imperative for the government and the private sector to act on the issue

Overview

The Governance Institute's seventh annual Ethics Index tracks changes in public attitudes to the importance of ethics generally and also changes in public perceptions around the extent to which certain groups can be trusted to behave ethically.

The findings are based on a survey of 1000 people conducted during August-September 2022. Our key takeaways are below.

Australian society is perceived as overall less ethical than last year

Overall, the 2022 Index found that public perceptions of how ethical Australian society went backwards for a second consecutive year with the overall Ethics Index Score now at 42 (down from 45 in 2021 and 52 in 2020).

The report attributes this in part to an increased community expectations around what constitutes ethical behaviour. In support of this, the report points to both:

  • the widening gap between public expectations of how ethical something should be and how ethical the public think it actually is. This year, this overall gap widened from -28 in 2021 -37.
  • the shift in the value placed on ethics this year with the perceived 'Overall Importance of Ethics' increasing to 79 (up from 73 in 2021).

In light of these findings, Governance Institute CEO Megan Motto called for a national 'ethical reset' to address the downward trend in public trust. Ms Motto stated:

'Following two years of poor results, it’s time for an ethical reset for the nation. Organisations must reaffirm their commitment to ethics and creating a positive culture. If culture is not deeply entwined with your overall strategic plan, then there is more work to be done. It is essential we are promoting good ethics in organisations, as well as good conduct'.

Climate action is ranked among the top ethical challenges facing Australia

Top three greatest short term ethical challenges

Respondents nominated the following issues as the top three greatest ethical challenges facing Australia in the next 12 months.

  1. Major reform and overhaul of the aged care sector came is as the top concern. Interestingly, aged care reform did not appear in the list of 12 top priorities included in the 2021 index. It ranked third on the list of top concerns in 2020.
  2. Reducing our reliance on global supply chains by increasing local manufacturing ranked second
  3. Ensuring climate change and environmental issues continue to receive attention and action ranked third.

'Balancing freedom of movement and individual liberties as a result of COVID-19' dropped from the top issue last year to fourth in the list this year.

Acting on climate is considered to be an urgent ethical imperative for the public and private sector

  • When asked to nominate who has an ethical obligation to tackle climate change the majority respondents indicated that the Federal government, multi-nationals, international bodies (eg the UN), State governments, Australian businesses and local councils have an urgent ethical obligation to act.
  • Interestingly, the report also found that the public considers that that organisations have an ethical obligation to act on climate change even if this results in a reduction of profits, job losses or fewer jobs.
  • Though most respondents (80%) consider individuals to have an obligation to act on the issue, just 47% consider individuals have an 'urgent ethical obligation' to do so suggesting that most people see it as 'a task for everyone else'.

The corporate and financial sectors still have work to do…

The corporate and banking sectors ranked in the bottom three sectors in terms of perceived ethical behaviour. Only the media sector is perceived as less ethical.

Looking more closely:

  • At an organisational level, public companies are seen to be less ethical than in 2021, declining from 28 to 21, but are still seen as more ethical than Australian unlisted and private companies (14) and foreign companies operating in Australia (-9).
  • Company Secretary is perceived to be the most ethical occupation within the corporate sector with a net score of 28.
  • Directors of foreign companies operating in Australia, Senior executives and Directors of Australian companies ranked as the three (perceived) least ethical occupations within the sector.
  • Turning to perceptions ethical behaviour within the finance sector, accountant is perceived to be the most ethical occupation with a net score of 37, while funds manager is perceived to be the least ethical with a net score of 7. For context, funds manager is among the ten occupations perceived to be the least ethical of all occupations overall (together with mortgage brokers and directors and senior executives as previously highlighted).
  • At organisational level, industry superannuation funds were perceived as the most ethical organisations with at net score of 34, while payday lenders ranked as the least ethical with a net score of -30.

The public considers leaders have the greatest ability to set the tone from the top

  • Perhaps unsurprisingly, most respondents consider that senior roles within organisations have the most impact on influencing ethics within an organisation. CEOs were ranked top in terms of having the greatest influence with a net score of 64 (down from 71 in 2021), followed closely by the board of directors (62 down from 69) and senior management (at 61). This is perhaps concerning given the negative public perceptions of Directors and Senior executives in particular (flagged above).
  • Interestingly, given the discourse around 'licence to operate' and the potential risks associated with falling foul of public expectations, survey respondents ranked customers and the general public in the bottom five groups in terms of the level of influence they are perceived to have over company ethics, together with 'the general workforce' and suppliers.
  • Activists are perceived to have the least influence over companies' ethical behaviour.

Top five ethical issues for corporate Australia

  • Corruption remains the top issue facing corporate Australia, followed by company tax avoidance, misleading and deceptive advertising, bullying in the workplace and discrimination.
  • Environmental responsibility ranks seventh on the list.
  • Treatment of suppliers ranked as the lowest priority.

[Sources: Governance Institute media release 17/11/2022Governance Institute Ethics Index 2022]