Culture of compliance legalistic rather than ethical

BUSINESS OPINION:IT IS hard to know what wider conclusions can be drawn from Bill Shipsey's report into the Fyffes-DCC insider dealing affair, writes JOHN McMANUS

One suspects they are not great. The idea that there is some sort of positive read through for corporate Ireland from the clean bill of health Shipsey has given to DCC seems absurd.

You would only have to spend a morning at the Commercial Court to realise that. Likewise, the little we know of the goings-on at Anglo Irish Bank, Irish Nationwide and elsewhere in the Irish banking sector make it hard not to harbour very serious concerns about ethical standards at high levels in Irish business.

That said, if you dip into the transcripts of the various interviews Shipsey conducted you can at least understand how he formed the view he did, although the enthusiasm with which he dispenses his absolution still seems a little puzzling.

He interviewed more than 20 people involved in the controversy, ranging from Jim Flavin himself down through the board and executive of DCC and on to the company’s corporate advisers. Laurence Crowley – who is as close as Ireland comes to having a business grandee – was roped in to provide a perspective.

What emerges is that as far as Flavin’s peers are concerned his actions were reasonable and understandable. Many agree with Flavin himself that the information he had was not price-sensitive and thus he could not have been insider dealing. Others – and this is the position that Shipsey himself arrives at – took the view that the breach of the law was inadvertent. Flavin had taken some legal advice, concluded the information he had was not price-sensitive and thus he believed what he was doing was lawful.

The Supreme Court may have ultimately ruled that he was wrong, the information was price-sensitive and he committed a fraud on the market, but for most of the people interviewed their knowledge of Flavin, the workings of the market or the surrounding circumstances seems to allow them to discount the significance of the Supreme Court’s ruling.

It is tempting to characterise all of this as simply members of close-knit elite closing ranks to protect one of their own in their own self-interest.

While it’s true that none of the people interviewed had much to gain from seeing Flavin further flagellated by the Shipsey inquiry, the idea that they are part of some vast conspiracy is simply far-fetched.

A more useful way to see the view taken of Flavin’s actions by his peers – as expressed to Shipsey – is as a litmus test of ethics in Irish business. Indeed, when you realise this, you can understand why there is such public interest in and public anger about what emerged.

What emerges very clearly is that, by the standards of his peers, Flavin did not do anything

terribly wrong. His behaviour was in keeping with the well-developed culture of compliance that Shipsey was so pleased to find existed. The problem is that this culture seems more concerned about the letter rather than the spirit of the rules.

The report is full of examples of situations where the main point at issue seems to be whether something financially lucrative is technically legal rather than whether it is the correct thing to do. The arbiter in most of these dilemmas was the opinion of some legal or accounting expert.

This is of course the “real world” of business. Every day business people are confronted with decisions of this sort. There is no rule book or guide to this particular moral maze. Each individual arrives at the decisions they arrive at for all sorts of reasons, guided, one presumes, by their own internal compass.

But at the same time, the sum of all these decisions is the ethical standards of Irish business and the DCC affair is as close as we have come in a long time to actually capturing them.

You could spend a lot of time arguing about whether they are high enough, but you then enter the realm of moral philosophy (and we have strayed far enough into such territory already). What you can do, however, is look at what sort of wider impact these standards have had and simply ask if that was of benefit to society as a whole.

It is very hard to answer yes to this question. Ethically suspect decisions without a doubt played a part in the rise and fall of Anglo Irish Bank and related events which in turn contaminated the wider banking industry and the economy. One suspects that if we ever really find out what happened at Anglo, it will involve a good deal of “compliance” and legal advice being given in good faith and taken in good faith. The actual consequences of these decisions highlight the fallacy of substituting legal backside-covering for proper ethics.

It’s a moot point, but it follows that if we had somehow managed to set a higher bar for ourselves when it came to ethics in business, we might not be in quite the mess that we find ourselves.