On Saturday there was an interesting, provocative piece in the Telegraph by Charles Moore on the ‘Crystal Methodist’ Paul Flowers/Co-operative Bank scandal. He argued that the Bank’s much lauded ethical stance is what got it in trouble – that by emphasising ‘compliance’ with ethical/corporate social responsibility systems, they took personal judgement, or ‘conscience’, out of the system, freeing individuals to act in an unethical way. He scales this up to claim “this obsession with Ethics is one of the great curses of our time.”

Here’s where I agree with Moore:

• Some people do use ticking boxes as a shield to avoid taking personal responsibility.
• That if the Co-operative were truly ethical, it would ensure that a qualified competent person was in charge of its customers’ money (BTW: I am one of those customers & so is Terra Infirma Ltd).
• Far too many organisations that have a CSR/ethical policy still screw up.

But on the fundamental point, that the bank was corrupted by an obsession with compliance with its ethical systems, I must disagree.

For a start, there is no evidence that the crash was due to Flower’s political leanings or beliefs. Indeed, the first bank to go belly up in the 2007 credit crunch was Northern Rock, then chaired by Matt Ridley. Ridley is almost the antithesis of Flowers – right leaning, highly pro-market, a climate change sceptic and, we must presume in the absence of evidence to the contrary, clean living. The only thing the two of them have in common is that both were almost entirely unqualified and inexperienced to run a bank. It was incompetence that put both institutions in peril, not politics.

Then, imagine trying to run a large organisation in the absence of a compliance system and relying entirely on personal ethics and judgement? How could you ensure there was no slave or child labour in global supply chains without a system of audits? How would you ensure that your waste wasn’t ending up in a lake somewhere without a duty of care process? How would you know that your recruitment process is not discriminatory without monitoring diversity? None of these things can be delivered simply by individuals in organisations acting spontaneously on their conscience – even if they all had spotless halos shining above their heads.

What Moore is guilty of is the classic newspaper columnist’s false ‘or’, because you can have both compliance AND conscience. And of course you can have neither  as we see in so many organisations, and plenty of scandals there too.

I would go so far as to say the modern organisation needs both. You need policies so people know what is expected and the systems to make sure you are following through on your policies. But those systems should never insulate any of us from making the right ethical judgements. That’s ethics.