Trust & Ethics
Our guest in episode 67 of the podcast is Alison Taylor, clinical associate professor at New York University Stern School and Business Executive Director of Ethical Systems, a non-profit research collaboration focused on bringing the best ideas on business ethics from academia into the corporate sector. She has had a diverse career working in corporate investigations in emerging markets, leading her to question the role of culture and leadership in businesses. Her background in political science, history, and organizational psychology has given her a unique perspective on business ethics. She believes that society has lost consensus on what it means to be a good business and her upcoming book aims to clarify this confusing debate.
She argues that organizations should focus less on rules and compliance programs and more on building ethical decision-making capacity. They should bring in the wisdom of the collective and have debates about gray areas to jointly make decisions based on the collective’s wisdom. Rather than treating ethics as a fundamental black-and-white issue, she suggests building thoughtful capacity for ethical reasoning among the workforce and in society in general.
We talk about Elon Musk’s decision to lay off the director of Ethics, Transparency, and Accountability at Twitter, she believes that he may have underestimated the complexity of content moderation and is now facing the consequences of his decision.
She raises the topic of transparency and questions the notion that more transparency leads to more trust in businesses, despite the increase in the level of information available about corporate conduct over the past two decades. She argues that businesses need to change how they think about ethics and be more transparent and honest, while also being more restrained in what they promise to achieve. She suggests corporations should have a more focused strategy on what they can and cannot solve and stop exaggerating and spinning a story to deflect scrutiny. Finally, she explains how leaders can navigate ethical dilemmas and make decisions in the best interest of their organization.
About Business Ethics
(…) the things we name as business ethics are very often really efforts to protect the corporate person and to deflect scrutiny. So to protect the organization and protect corporate value from reputational and regulatory risk. So it is about legal contracts and it is about forms of PR that are designed to shield the organization from scrutiny. And one of the problems is that given the rise of social media, given shifts in values, shifts in expectations about what we want from business, and then particularly the rise of employee activism and employee voice, those metaphors, those defenses aren’t working very well anymore. So we really need to change how we think about our ethics efforts. We certainly need to be more transparent and honest, but maybe we also need to be more restrained and exaggerate less in terms of what we think businesses can really achieve. So I would rather see a corporation be more cautious about the problems it can and cannot solve, have a more focused strategy on the problems it can and cannot solve, and stop exaggerating and stop spinning a story in an effort to pull the wool over our eyes.
Stop Obsessing about Rules
I think that what we really have to do is to stop obsessing on rules and compliance programs and to start to build ethical decision-making capacity among the organization. So a good approach to ethics is less about a compliance process. It is less about rules, it is less about leaders barking orders from the top, and it is more about bringing in the wisdom of the collective to make better decisions. It is more about building ethical muscles. It is more about having debates about gray areas. You are based in The Netherlands, and I know that several Dutch banks have got ethics committees that are really based on this model. So they bring in young employees, they debate the questions, they are honest about their strategic trade-offs, and they try to then jointly make decisions based on the wisdom of the collective. I think that is a better approach to ethics than treating this as a fundamental black-and-white issue that is all about law or is all about right and wrong. Different people agree and disagree on what the ethical course of action is. We need only think about something like the oil and gas industry to see this. So I think we are maybe not benefiting from this very rigid 20th-century view of ethics and that what we need to do is to really build thoughtful capacity for ethical reasoning among the workforce and in society in general
On regulatory action, bribery and corruption
There’s lots of regulatory action, particularly on bribery and corruption that is still going on. I think here the points I’d make are twofold. We have very often in the white-collar crime realm, at least in the US, punishments and fines that are not in proportion with the damage that a company has caused. PG&E, the electric utility in California was responsible for dozens of deaths and no one has been to jail and the fine isn’t even that significant. We have Hertz, the auto rental company, accused its customers of stealing cars that were in fact lost in lots somewhere and has paid a fine of only 168 million. So there’s a real problem with regulatory accountability. Perhaps an even bigger problem is that via lobbying and political spending and campaign finance companies are influencing the regulatory process for their own needs and in their favor. So if we go back to Milton Friedman, who envisaged that a corporation should just make profit and is the role of the government to protect other stakeholders, the reason that that doesn’t work is that corporations have increasingly, in the last 50 years, been able to interfere behind the scenes in the political process, undermining democracy as they go.