Ethical Consulting in an Unethical World

We live in a Trumpian world of corruption and uncertainty, where ethics and trust struggle to survive and the norms of society are challenged like never before. This is a difficult landscape for consulting professionals to navigate without a moral compass. Have we lost our way?

BCG India former chairman, Arun Maira, posed a haunting question back in 2019 – which remains just as relevant today – when commenting on a high-profile conflict of interest case involving McKinsey:

“In the race to generate wealth for their partners, are management consulting firms in danger of losing sight of their original purpose – to be trusted advisors to CEOs?”

Our entire profession is built on trust, so the question of whether we are still “trusted” advisors – and whether that trust is deserved – cuts uncomfortably deep.

The trust we ask clients to put in us is supported by four pillars:

• Knowledge – from qualifications and experience
• Skill – from training and practice
• Insight – from active inquiry, critical thought, and empathy
• Objectivity – from focusing on clients’ needs and addressing conflicts of interest

Without an ethical foundation, these pillars crumble, client relationships die, and hard-earned reputations are destroyed.

Establishing and maintaining this ethical foundation requires recognising that ethics is not just a list of rules, but rather a system of moral principles founded on personal values. Crucially for us as consultants, being ethical means weighing up our actions beyond what the law alone requires.

There are two main ways to weigh up the ethical implications of our actions.

First, Consequentialism, which focuses on the outcome – the ‘greatest good’. The risk here is that Consequentialism can justify harm if the majority benefits.

Second, Deontology, which is a duty-based theory. Followers of this school believe that people base their decisions on deeply held values of duty and obligation to others. Deontology is about following principles and obligations regardless of the outcome.

In practice, these two schools of philosophy often converge for a professional consultant.

Over the years, there have been many high-profile examples of when the ethics of consulting firms have been called into question, conflict of interest brought into the spotlight, trust eroded and a high price paid.

They extend from the Arthur Andersen and Enron scandal to the McKinsey conflict-of-interest inquiry, plus more recently in Australia the PwC breach of confidential government information and investigations into the actions of other Big Four firms.

Major ethical failures in Australia and elsewhere have exposed deep cultural issues. Public trust in consultants is under immense pressure. In this country, we’ve seen at least one of the Big Four firms devastated – losing careers, future business, and professional status.

One outcome has been a significant shift from employing external consultants to retraining and boosting internal resources by both governments and businesses. Long-standing impacts of this shift on the consulting industry are unclear, except to say that, thus far, they have been largely negative, especially for those firms found wanting.

From historical examples to cases currently in the headlines, there are common threads: such as the overlap of auditing, accounting, and consulting roles, and the inappropriate sharing of confidential information gained in one role to provide financial or competitive benefits to another role.

Such scandals follow the same trajectory:

• A duty-based obligation of independence, confidentiality and objectivity
• A commercial incentive that conflicts with that duty
• A cultural shift, where revenue trumps ethics
• A breach, or series of breaches, of professional obligations
• Systemic consequences for clients, the public, and the firm itself

Each firm violated a non-negotiable duty, not a grey area. As a result firms collapse, individuals lose careers, clients face business risks and the consulting profession’s standing as a whole is damaged.

Governments, and therefore taxpayers, are not immune either. Governments must share some responsibility for their willingness to abdicate their duties and for their failure to monitor, in real time, the consulting activities they have facilitated.

Conflicts can come from anywhere – working for industry rivals and former clients, or even personal financial interests and staff relationships. When a conflict arises, you must seek consent with full disclosure. You can use Non-Disclosure Agreements or separate teams, but if the conflict cannot be mitigated, you must terminate the assignment. Sometimes, doing the right thing comes at a cost.

Here are ten questions each consultant needs to ask themselves when taking on an assignment:

1. Have I reflected on, or consulted with my institute about, whether I am compromising my responsibilities under its Code?
2. Have I considered the issue from a legal perspective?
3. ave I investigated whether my behaviour aligns with a policy or procedure of my institute or CMC-Global?
4. Could my private interests or relationships be viewed as impairing my objectivity?
5. Could my decision or action be viewed as resulting in improper personal gain, financial or otherwise?
6. Could my decision or action be viewed as furthering the private interests of someone with whom I have a significant personal or business relationship?
7. Could my decisions or actions be perceived as granting or receiving preferential treatment?
8. Have I disclosed all conflicts of interest to my client(s)?
9. Am I proud of my decision or actions?
10. If they knew the circumstances, would my family be proud of my decision or actions?

In short, ask yourself: Is this resulting in personal gain? Am I granting preferential treatment? Most importantly: Am I proud of this decision, and would my family be proud?

As consultants, ethical behaviour isn’t just a rule, it’s a privilege. Those high-profile breaches did not occur due to a lack of rules and standards, but rather a failure of their underlying ethical foundations.

We certainly have standards like the IMC Code and “guidelines” like ISO 20700, plus each of the consulting firms in question has its own code of conduct.

Part of the problem is that too many consultants operate outside professional associations. This needs to change, the days of just hanging up your shingle and calling yourself a “consultant” must end.

For the profession to continue and to be a “profession”, a registration process, like that used by peak industry bodies in accounting, law, and auditing, is essential for both individuals and firms. Institute membership and registration must become mandatory prerequisites to practise as a professional management consultant.

My additional challenge to governments is: make adherence to the IMC’s Code of Conduct a legal requirement for professional practice.

Of course, it is worth noting that in 2001, at its eighth congress in Sydney, the International Council of Management Consulting Institutes proposed adopting assessment standards and a Code of Professional Conduct. However, some of the major accounting and consulting firms, which were at that time members of the IMC, withdrew their memberships on the basis that their codes were supposedly superior to the international body’s own efforts.

It is clear that standards and codes of conduct are not enough, what is also required is a process for enforcing standards and creating a culture that ensures adherence to codes of conduct. Here lies a challenge for the IMC.

The IMC code requires us to maintain the dignity of the profession and act in the client’s best interest with independence. We must also respect our peers and ensure our teams comply with these standards. However, there is a tension here: the institutes rely on membership fees for their revenue – revenue that is essential to providing training and other services that benefit members. That tension limits the power of the institutes to enforce codified behaviour, for fear of membership loss.

It is time – past time – for professional registration of individuals and firms to be made the law, for IMC membership to be a mandatory prerequisite to practise. The Institute must be given lawful support to fine, suspend, or expel members who are found to have acted unlawfully, or to be in breach of its code.

Internationally, such changes will take many years: vested interests will see to that. However, it can be achieved – if need be, one country at a time. Austria appears to have achieved it, as does Singapore. Australia is well-placed to be the next, if the will and the government support are there.

Ethical consulting protects everyone – clients, firms, and society. Your moral compass is essential in this complex world and the future of our profession depends on your leadership.