Keynote address: Business Ethics and the Veil of Ignorance

Tags: Corporate governance, Speak Up, Decision-making, Ethical Values

IBE Chair Flora Page KC delivers the Keynote Address at the 2025 ICAEW Conference

Speaking at Global Ethics Day, I want to start with John Rawls, a famous philosopher and ethicist. John Rawls devised a thought experiment – the idea is that in order to develop a just society, the people devising it need to be put behind “a veil of ignorance”. They should be ignorant of the social position they will have in that society.

They should not know -

• what generation they will fall within
• what class, race, gender or sexual orientation they may have

But also they should not even know -

• what natural abilities they may have,
• what their psychological characteristics will be - such as whether they are optimists, risk averse, etc. –

This means that the people coming up with the just society will not tailor the social contract to their own advantage. The test, then, of a just society, is whether a person sitting behind the veil of ignorance would agree to the terms of the social contract in use in that society. It’s a high bar, isn’t it? Would you agree to the social contract in use in our society if you didn’t know where you would find yourself once you were on the other side of a veil of ignorance?

Rawls reached an interesting conclusion from this experiment. His vision of the just society is this:

All social values—liberty and opportunity, income and wealth, and the social bases of self-respect—are to be distributed equally unless an unequal distribution of any, or all, of these values is to everyone’s advantage.^[1]

It’s quite a breathtaking idea when you think about it. It’s important to note that it recognises that unequal distribution is permitted, because sometimes that is to everyone’s advantage.

Imagine, for example, a society where everyone is given the same sum of money at the same age on the condition that they must use it to start a business. Some people would hate the idea and not use the money, some people would love the idea but be no good at it and waste the money, and some people would have the potential to build a much better business if they received a larger sum of money. So actually it would be to everyone’s advantage if the third type of person received all the money for business start-ups. Because the other two types would benefit from the taxes that bigger and better business would pay, and

• they might enjoy a job in those better businesses
• or enjoy the goods or services they deliver.

We all have different personal characteristics, so Rawls tells us that a just society needs to try to distribute goods fairly, but not necessarily equally. There’s a lot more in this idea, but let’s put it into a business context, in fact an accountancy context:

Some of you will know that I’ve spent a chunk of my recent life working on the Horizon scandal. Horizon is, of course, an accountancy tool. A very large one, recording millions of transactions in thousands of Post Office branches to this day. (I know, amazing.) Subpostmasters are required to use Horizon to produce their branch accounts at the end of each trading period. When Fujitsu was tendering for and designing the system, they knew the purpose – Horizon was to be a system of record. It needed absolute integrity.

Because at root Horizon represented a transfer of power and control.

Where previously the Subpostmasters owned their own paper records and signed off on them knowing that they were in control of every aspect of them, with Horizon they were ceding that control to Fujitsu. And they didn’t even have a direct relationship with Fujitsu. Their relationship with Fujitsu was mediated by Post Office.

Now, it’s worth thinking about that:

When Fujitsu was tendering for the contract, there were no Subpostmasters on the Board of Post Office. Post Office was owned by the Government, but none of the officials or ministers who represented the Government shareholder interest were Subpostmasters. So it’s probably no coincidence that decisions were taken which were against the Subpostmasters’ interests. Post Office chose to go with the cheapest bidder, even though their own technical staff were pointing out serious issues with Fujitsu’s approach. A very protracted development period followed, during which it became clear to anyone willing to acknowledge it that Fujitsu was making an unreliable product.

In the end Post Office agreed an extraordinary amendment to the contract with Fujitsu which actually allowed and accepted that there would be a small percentage of unreliable Post Office branch accounts. This worked at the higher contractual level because Fujitsu had deliberately made sure that they were not contractually obliged to make sure that Horizon was fit for purpose. There was an extraordinary moment when the former Chief Executive gave evidence at the Post Office Inquiry - he seemed almost proud of that.

But no one told the Subpostmasters that Horizon might produce unreliable branch accounts for a small percentage of them. And bear in mind that there was no part of the Horizon system that allowed a Subpostmaster to challenge the accounts if they believed them to be inaccurate. Originally there was at least a facility to get to the end of a trading period and assign that period’s figures to a suspense account, so the branch could carry on trading while the Subpostmasters tried to get problems rectified.

But Post Office decided they didn’t like that.

Within a couple of years, they required Fujitsu to remove that option from the system so that at the end of each trading period the Subpostmaster had only two choices – accept the accuracy of accounts, and roll over into the next trading period, or don’t. If the Subpostmaster didn’t accept the accuracy of the accounts they simply couldn’t roll over. 

So having been obliged to cede control of their accounts to Fujitsu’s system, and trust Post Office to mediate on their behalf, Post Office thoroughly abused that trust. It was just easier to allow Fujitsu to get away with providing a bad system.

And before we come back to Post Office letting Fujitsu get away with it, let’s just focus on Fujitsu for a bit longer, because where Post Office gave an inch they took a mile. The only way that Subpostmasters could raise concerns about Horizon was by phoning a helpline. We all know how awful helplines can be, and all the usual problems were there – going round in circles, no one seeming to have the ability to fix the problem, people reading out scripts that didn’t solve the problem, etc.

But there was a worse problem than that. If you did manage to get your call escalated to the people who could actually do something, you may have been even worse off. Because those people could and did hack into the Subpostmasters branch accounts. They were secretly using the Subpostmasters personal log in credentials, and inserting phoney transactions into their branch accounts. This power was given to them on a “needs must” basis, because the system was so bad. If there was an intractable problem in a set of branch accounts the support staff would secretly insert phoney transactions in order to make the numbers balance, and allow the branch to roll over. There is no way of knowing how many more bugs and problems this practice introduced into branch accounts, or the Horizon system more broadly. And there is no way of knowing what inaccuracies it covered up.

But this, of course, completely destroyed the notion that Horizon was a system of record. It had no integrity whatsoever.

As time went by it is clear that Fujitsu was seeking and gaining Post Office authorisation for whenever they used this power to “remote access” into branch accounts. And yet for years and years and years Post Office completely denied it was happening. It was not even admitted when a Fujitsu whistleblower gave evidence about it in the Bates case in 2019. Post Office counsel tried to discredit him in cross-examination. Yet at the Post Office Inquiry Fujitsu staff came and admitted it was possible, and that it happened.

So why did the Post Office side with Fujitsu against their own supposedly trusted Subpostmasters? Frankly, it was easier to do so because Fujitsu were a big multinational company, and the Subpostmasters were usually very small businesses. And because they were small and dependent, Post Office was able to pass the risks associated with Fujitsu’s bad system on to them. The standard, non-negotiable Subpostmaster contract said that they were responsible for making good any losses in their accounts, pretty much without exception.

That made sense when Subpostmasters were in control of their own paper accounts. But once Horizon rolled out, that clause obviously should have been amended to ensure Subpostmasters were not held responsible for Horizon generated errors. In fact, instead of amending that clause, time and again, Post Office relied upon it to force Subpostmasters to make good losses, however inexplicable they may have been to the Subpostmaster. Post Office staff even misquoted the clause to make it harsher than it actually was.

And as you know, no quarter was given. People were sued, bankrupted, prosecuted and imprisoned.

So where does ethics sit in all of this? What about the need for accounting records to have integrity? It’s an interesting use of the word – we talk about records having integrity, or systems having integrity. In the end, of course, it is only people who have integrity. But what we mean when we talk of accounting integrity or system integrity is the records must be reliable and trustworthy. They must be a true reflection of the transactions recorded.

And in order for that to happen, the people responsible for the accounting system must have integrity. They must be ethical. How does the Rawls veil of ignorance help us with this?

Well imagine all the people affected by Horizon – it was not just Subpostmasters. It affected branch customers. And whether it was any good affected the value of the Post Office business, which was Government owned. As we now know, the taxpayer is footing an enormous bill due to Horizon’s failures. That was foreseeable. If you make a huge accounting system for use in thousands of branches for a state-owned business, and if it lacks integrity, we all know who will pick up the tab in the end.

If the Fujitsu people had been obliged to sit behind the veil of ignorance when designing and building Horizon, not knowing which affected person they would be when they came back out from behind the veil, they would have designed and built it very differently. If they had thought they might be at risk of having to rely on it, or at risk of having to pick up the tab for failures, they would have made it reliable. Or at the least, they would have made Fujitsu contractually liable for making it reliable.

What about Post Office people? What about Post Office accountants? Some of you may have picked up on the role of Rod Ismay, who was head of Post Office’s back office, where they reconciled branch accounts with all the other money coming into and out of the Post Office. Rod Ismay’s team were the ones who systematically pushed the consequences of Horizon’s faults on to the Subpostmasters. If a loss showed in branch accounts, they didn’t question it or worry about it, and they didn’t let the Subpostmaster do so either.

They simply obliged the Subpostmaster to pay it. If the Subpostmaster didn’t pay, the accounts team referred that Subpostmaster to the lawyers, which meant either civil enforcement or criminal prosecution.

It was members of Rod Ismay’s team who signed off on the Fujitsu support staff tampering with branch accounts. Emails show that Rod Ismay knew about it himself in 2010. Yet that same year he wrote a report on Horizon saying that it had “no back doors”, and it could be relied upon.

If you saw his evidence at the Inquiry you would see that this man knows nothing of accounting integrity because he knows nothing of integrity. There would be no point suggesting he put himself behind the veil of ignorance, because he wouldn’t know how to be honest, even by way of a thought experiment. But that tells us something else – what about all the people under him?

Most of the Post Office witnesses at the Inquiry were so schooled in Post Office culture that they appeared unable to connect with their own consciences. They weren’t necessarily as scurrilous as Rod Ismay, but they just seemed blank. Their default responses were “I can’t remember” or “that wasn’t my responsibility”. This was indicative of the rot across the whole institution.

It came from the top down. On the one hand, the Post Office Board treated the Subpostmasters as “the enemy”, instead of listening and learning from their feedback; and on the other hand, they focussed obsessively on reputation management – being seen to do the right thing instead of doing the right thing.

The really important thing is they never created space for themselves to step back, and ask themselves if they were doing the right thing. That was the culture – it was all about closing problems down. Post Office people from top to bottom got the message:

1. Don’t be curious.
2. Don’t ask challenging questions.
3. Do as you’re told and keep your head down.

So what would things have looked like with a different leadership?

Let’s pretend that Post Office’s hierarchical culture of denial didn’t exist, and instead of Rod Ismay, the accounts team had an enlightened manager. Let’s say this person of integrity wanted to know whether their accounting systems had integrity. This person could have asked the accounts team to go behind the veil, and pretend not to know if they would come back from behind it as a Subpostmaster, a Fujitsu engineer, a Post Office customer, a Post Office client, or an otherwise unconnected taxpayer. They could then have been asked to think about how to ensure the Post Office accounting systems were reliable and trustworthy.

If they had engaged in that exercise conscientiously, you can bet they would have stopped signing off on any more Fujitsu requests to tamper with branch accounts. And you can bet they would have started asking a few more questions about the cause of losses in branch accounts. They would have been less keen to oblige the Subpostmasters to pay those losses, and far less keen to refer them to the lawyers. And not long after that, the inexplicable losses would have started gathering in Post Office accounts, instead of being passed on to Subpostmasters. And not long after that, Post Office would have had serious words with Fujitsu.

That didn’t happen because no one, at any level of Post Office, was used to thinking responsibly and ethically. The John Rawls thought experiment is just a structure to help us shed bias and think about what’s fair for all participants in any given situation or system. That doesn’t mean everyone should be treated the same, not everyone will need to be equally resourced or empowered, but any inequalities in the situation should benefit everyone. Because obviously if we think through what is fair for everyone it helps us to ensure that the decisions we make are ethical.

When doing this in your own businesses and with your own clients it might help to remember whichever postmaster has struck a chord with you.

• It might be Lee Castleton. He was sued and bankrupted because he dared to question the reliability of his branch accounts.
• Or it might be Seema Misra. She was sent to prison while pregnant with her second child. That was on her first child’s birthday.

Or it might be any number of others. But if you try to conjure that person up when thinking about the far-reaching impacts your work might have, it may help you to keep your integrity. Because even if your work has nothing to do with the Subpostmasters, it helps to imagine a human face on the people who might be affected by the work you are doing.

It’s hard to do this when your workplace culture doesn’t encourage it. This means that ethical business leaders and professionals have to think all the time about creating an ethical work culture. Although this is global ethics day, ethics isn’t for one day, or any number of days, it’s for everyone, every day.

It’s about how you empower those around you. It’s about deliberately making connections with others to talk about the impact your work has. It’s about encouraging others to tell you if they think what they’re doing or what you’re doing will have a negative impact.

It’s about trying to stay calm and be thoughtful.

Remember this - when Horizon was being developed, Post Office leaders had got themselves into a state of panic. The Government wanted to use new tech to pay pensions and benefits into bank accounts, where previously they were paid in cash in Post Office branches. This was going to lead to a radical drop in Post Office income. So leaders were desperate to automate in order to move into other areas of business. This has resonance today – I suspect many boards are in a panic about how AI will affect their businesses. Some will be in a mad rush to adopt new tech. Others will be frozen in panic, not sure which way to jump. That may be the even more dangerous position, because meanwhile their staff will be going on co-pilot, or chat GPT to help them do their work anyway. The genie is out of the bottle.

So it’s important to stay calm. And take thoughtful decisions.

Can I finish with a shameless plug. Talking with others may be the best insurance against ethical failures. All of you know the value of membership of the ICAEW, because it connects you to like-minded others. It helps you to stand back, pause, and ask yourself if you can be proud of the work you do. Well, the Institute of Business Ethics is another great organisation which helps businesses to insure themselves against ethical failures.

Supporting organisations such as the IBE is a great way for businesses to say to their people that ethics is for everyone, every day. The conversations about ethics which we convene at the IBE are interesting and engaging for everyone in business.

So please tell others and join the conversation yourselves.”

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