Author Alison Taylor, a clinical associate professor at New York University’s Stern School of Business, explains the reasons business ethics has become a “confused topic” and why treating ethical problems as “tick-the-box PR” can make leaders look directionless.
Taylor’s book, Higher Ground: How Business Can Do the Right Thing in a Turbulent World, opens up a discourse on new ways to approach this complex landscape and highlights the importance of prioritising fundamental values, with the impact on human beings at the centre of decision-making.
What you’ll learn from this episode:
- Why business ethics is a complex issue.
- The problems arising from conflating ethics and ideology and treating “CEOs as politicians”.
- How to cut through the noise by taking a people-centric approach.
- The reasons that leaders should avoid treating ethics and impact issues as public relations problems.
- The importance of understanding and focusing on your core values.
— To comment on this episode or to suggest an idea for another episode, contact Steph Brown at
Stephanie.Brown@aicpa-cima.com.
Transcript
Steph Brown: Welcome to the podcast. I’m Steph Brown. Today I’m joined by author Alison Taylor, a clinical associate professor at New York University’s Stern School of Business. We are talking about why doing the right thing has become an ambigious concept for organisations today.
Taylor’s book, Higher Ground: How Business Can Do the Right Thing in a Turbulent World, discusses how senior leaders can simplify their approach to this complex issue.
Alison, welcome to the FM podcast.
Alison Taylor: Thank you so much for having me.
Brown: In a few words, what does it mean to be an ethical business today?
Taylor: Hard to summarise that in a few words. I’ve just written a book trying to answer that question. The premise of the book is that we are very confused about this topic. I did 200 interviews when I was writing this book, [and] one thing I found very interesting is how many ethics experts try to avoid using the word “ethics”.
We hear a lot of jargon out there about purpose and sustainability, and ESG, and values. But I think one of the problems is that we don’t agree as a society on what the role of business should be. I wrote the book to try and clear up some of that confusion. But to summarise, my conclusions are: make your core product well, consider your impact on human beings, and treat people with dignity and respect.
Brown: On the title of your book, Higher Ground: How Business Can Do the Right Thing in a Turbulent World. I suppose the right thing often depends on who you ask. But how can leaders begin to identify what the right thing is for their business?
Taylor: Well, I think that’s also a complicated process. I think, again, it’s a good idea to focus on problems that you can actually solve. It’s a good idea not to over-promise. It is a good idea to be responsible about the influence that you are having on the political process and encouraging your employees and stakeholders to participate in the political process, rather than pressuring you to solve unrelated social and environmental problems. Then it is about being transparent and honest and restrained about what you say you are and are not doing.
Brown: I’d like to discuss something you said on The Crux of the Story, a Boston University podcast, that was interesting. You said that, and I am paraphrasing, the Edelman Trust Barometer draws, or has drawn in the past, CEOs to comment on political issues out [of] the scope of their business.
Can you tell me a little bit more about that today and what problems that is causing for expectations on senior leaders?
Taylor: There was a lot of rhetoric from Edelman in particular, but not just from Edelman, particularly in 2018 and 2019, saying that what we want is for business leaders to stand up and represent us on social and political questions.
If you ask the public, “Would you like CEOs to do that?” Many people will say, “Yes, we can’t trust politicians anymore. We can’t trust politicians to get the job done.” Many of the problems we’re facing, whether it’s climate change or inequality, are big, global problems that national regulations can’t solve, and so we’ve turned to business to solve these problems.
The problem is, as we’ve been talking about, many of these problems are contentious. Of course, we want CEOs to stand up on things we agree with, but we are less keen for them standing up and taking positions on topics we disagree with.
I think what we have to be careful about is suggesting that a CEO is like a politician, and stakeholders are like the electorate, and that CEOs can somehow represent their stakeholders, or represent their employees, when they don’t have the mechanisms to do that. And we might, if we’re not careful, be undermining the democratic process.
I think it’s appropriate for companies to try to solve social and environmental problems directly related to their business. But what many CEOs have got drawn into is taking positions and taking stands on a load of issues that aren’t directly related to their business and trying to suggest that they can tackle 40 things.
The reality is no business I’ve ever worked with can tackle that many things. We shouldn’t treat this as tick-box PR. We should treat these questions as strategic and focus on problems that the corporation can actually address.
Brown: Can business leaders take an ethical stance without overtly taking a political position? And if so, how can they tell the difference between those two things?
Taylor: I love this question, because there is a big tendency out there, [going] back to the beginning of our conversation about how difficult it has got to say what it means to be an ethical business today. There is a tendency to conflate ethics and ideology. If you start talking about ethics and doing the right thing, people will say, “Well, that’s ideological, and that’s about values”, and people disagree.
But, Steph, let me give you a couple of examples. There was an example of Hertz, the car rental company, that has just paid a fairly big fine in the US for having its customers arrested for stealing cars that they had in fact not stolen. A woman in [the US state of] Florida spent over 30 days in jail after being accused by Hertz of stealing a car she had not stolen and that the car company had just lost in a lot somewhere.
We can think of Norfolk Southern, that train disaster recently in [the US state of] Ohio where local residents got completely engulfed by toxic chemicals, partly because the company had been lobbying against safety regulations.
I would just ask you, how ideological are any of those questions, really? How partisan are any of those questions, really? I think most of us would agree that all of those things relate to not treating human beings with dignity and respect, not considering the impact of the company on human beings.
I think one of the problems is we actually all agree that companies shouldn’t be doing that kind of thing. But there are a lot of actors in society with a vested interest in spinning these topics as political or ideological when they’re in fact not. Society does agree that those are not acceptable ways for a business to behave, and I think we need to get to the point there.
Brown: All press is good press does not seem to be the consensus anymore. Social media is driving this spread of information, and it’s not always good news for companies.
You said in your book: “Wise executives now assume that anything they say or do may become public knowledge.” With this in mind, how can senior leaders minimise the reputational risks they face today?
Taylor: Well, I think part of the problem is managing to reputational risk. I would start off by saying you don’t manage reputational risk by managing reputational risk.
The reason you have reputational risk is very unpredictable. Companies can have wildly different reactions on social media to the same behaviour. It’s not really that reputational risk is a good way to say who’s doing a good or bad job. It’s not a linear accountability mechanism, it’s more of a fun-house mirror.
I think one of the problems with the concept of reputational risk is it encourages executives to treat problems as PR problems where they’re not, in fact, PR problems. They’re ethics or impact problems.
If you know what your values are, you know what your priorities are, and you align your speaking up with what your priorities and values and commitments are, I certainly can’t say that you’ll avoid backlash entirely, but it will make you look less skittish and directionless and self-serving because you will be able to base what you’re saying on something that your organisation is actually doing.
Then, if you do experience the backlash, at least people won’t be able to say you’re a hypocrite, and then you can steer into the skid. The good news about today’s horribly polarised, hysterical social media environment is we’ll all pivot to a new topic in five minutes. I think there needs to be a bit more courage. I think, in general, there needs to be less of a focus on what will be the consequences for our reputation and more of a focus on what our actual core values and commitments are.
Brown: In the book, there is a lot of mention about transparency, what that means, and where it becomes detrimental. You discuss how companies are less likely to fully disclose practices and problems that may put them under scrutiny or reveal any shortcomings. And it can leave “well-intentioned leaders struggling over how to disclose problems whose solutions are unclear or do not yet exist”.
With that in mind, how can companies create a more focused and well-grounded ethos that is transparent to stakeholders, consumer groups, and others?
Taylor: I wouldn’t want to give anyone listening the impression that I think transparency is bad. It can be powerful. It has transformed the business environment. It has certainly transformed how business needs to interact with society.
But I think there’s a bit of a tendency out there to treat transparency as a solution to every problem going. One of the things that’s really interesting is climate change has been a big problem for a long time. We have been talking about climate disclosure since at least 2000, probably before. And we still don’t really agree on what companies should and shouldn’t disclose, and we don’t seem to be any closer to taking meaningful action. I think there’s a bit of a problem with treating transparency as a solution and treating disclosure as an end in itself.
Then there’s also a problem with the idea that as long as we disclose more and more things, we will somehow solve the problems. We spend a lot of time talking about disclosure and not lot of time talking about action. It also leads to, as implied in your question, the tendency to treat disclosure as PR and be reluctant to disclose challenges.
I think the book has a lot of advice about how you can handle this better and how you can handle these constant demands for transparency. But I think again, more kind of limited, realistic commitment, and less over-promising — I think it is less risky than executives think it is to say: “Actually these things are very difficult, and we can’t do them alone, and here is how far we’ve got and here is what we need to go further.”
There’s a tech company called Atlassian that has done a really good job talking about this in the context of climate change. Google has done a really good job of talking about the disclosures it needs to give to the government, about requests for information, and there are lots of other examples in the book. I don’t think transparency is bad, but I don’t think we’re having a very helpful conversation about it at the moment.
Brown: You suggest in the book that some of the problems that businesses are facing come from trying to please everyone and, in turn, causing them to over-promise and under-deliver.
How can leaders implement more strategy into planning and putting those words into action, those strategies into tangible actions, rather than just well-intentioned pledges?
Taylor: Again, there’s a lot of rhetoric about how you’ve got to keep all your stakeholders happy and think about all your stakeholders’ interests, and it tends to translate into this idea that if any of your stakeholders care about this, you ought to be doing something about it.
Then there’s a bit of a tendency to deny that thinking about stakeholder interest has trade-offs and to say it’s all a win-win. If stakeholders like you, that’ll be good for the bottom line and good for your reputation, and there’s nothing to worry about. That’s not true. Any business leader needs to think about trade-offs. You need to think about instances where pleasing one stakeholder or one stakeholder group is going to come at the detriment of another.
I think this, again, all comes back to a more limited set of commitments. A more limited set of issues that you claim you’re working on and trying to solve, and much more honest acknowledgment of those trade-offs and an honest acknowledgment of what your business will and won’t prioritise.
Brown: Thank you very much, Alison. It’s been a very informative and thought-provoking conversation today. Do you have any closing thoughts you would like to leave listeners with?
Taylor: I would love any listeners to read the book and send me their critiques and let me know what I got wrong and let me know what I missed. I’m really trying to start a new conversation about ethical, responsible business that’s more realistic, more honest, more focused, and that acknowledges we’ve been doing the same thing for a long time, over and over again, and expecting a different result. And we need to stop and try something different.
I would like all your listeners to help me make those efforts better. That’s what I would most like.
