Rob Chesnut is the former General Counsel and Chief Ethics Officer for AirBnB and now a current advisor for the company. In this episode, Rob shares his experience with the company and talks about his new book, "Intentional Integrity" that Inc. Magazine ranked as one of the Top 10 New Business Books in 2020.
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Episode Transcript:
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0:00:13.0 Cindy Moehring: Hi everybody, welcome back to another episode of the Biz. And today I'm very excited to have with me Rob Chesnut, who's the former general counsel and chief ethics officer of Airbnb. Hi, Rob.
0:00:25.3 Rob Chesnut: Cindy, thanks for having me.
0:00:26.6 Cindy Moehring: Absolutely. Rob has also just published a new book recently entitled Intentional Integrity, and Inc. Magazine has ranked that book as one of the top 10 new business books of 2020. Now for Rob, prior to his time at Airbnb, he had a number of other assignments, but he spent time at eBay in the early 2000s as SVP of trust and safety, and before that, Rob spent 10 years as an assistant US Attorney in the eastern district of Virginia where he supervised the major crimes unit for four years. Rob's a graduate of Harvard Law School, and he received his BA from the University of Virginia. So once again, Rob, thanks for being here today. We are excited to continue the conversation with you.
0:01:07.9 Rob Chesnut: It's great to be here, always good to talk about integrity and looking forward to the podcast.
0:01:15.1 Cindy Moehring: That's great. So Rob, we are just starting season three of our podcast, and in season two, we talked to 15 different thought leaders about the future of business ethics, and those thought leaders were all in the realm of academia, and they were from all over the world. And I was asking them essentially for their views on Andy Stark's article that was in the Harvard Business Review a little over 25 years ago, and it was titled "What's the matter with business ethics?" And at the time, it was seen as too general and too theoretical and really too impractical to be of any use to up-and-coming business managers. [chuckle]
0:01:56.9 Cindy Moehring: And in a lot of ways, that may have been true about 25 years ago, but we've come so far since then. And so what I asked those thought leaders to do in season two was to share with me whether they thought that the criticisms that Andy Stark had still had any validity today, talk about how far we had come and really most importantly, predict the future. Where do they think business ethics needed to go in the next 25 years? And so in season three, what we're doing is, again, talking to about 15 different thought leaders, but this time we're talking to business leaders to get their views on what the future of business ethics should look like and how academics can best prepare new business managers to enter that working world, so that we don't have to worry anymore about what's the matter with business ethics. [chuckle]
0:02:46.0 Cindy Moehring: So let me start by just asking you about both Airbnb and eBay, both of whom were very young companies when you joined them, and a lot of business ethics and integrity just comes down to culture. Sometimes it isn't so much what the code says, it's what the culture is. So tell me a little bit about what the culture was like at both of those companies and whether or not and how you got integrity to be a part of that.
0:03:14.7 Rob Chesnut: Well, yeah, I think that Airbnb and eBay actually had a lot in common, and I was really fortunate to be part of those companies, 'cause I think both saw what they were doing and broader than just financial terms. I mean look, money and profit, it's important, obviously it's critical to doing business, but I think that each company sort of felt that there was something bigger going on. At both eBay and Airbnb, there was a strong sense that we were building a community, a global community, and connecting people and providing real value to the world in terms of bringing the world closer together over shared passions. And like with eBay, of course, it was about bringing people together over commerce. In Airbnb it was actually about literally bringing people together under the same roof. But I think both companies believed in this mantra that people are basically good. That was actually what we talked about explicitly at eBay, and what I think is at the heart of Airbnb, a fundamental faith in human nature and a belief that with the help of a platform, we can encourage the best in people and really connect people over common interest.
0:04:44.0 Cindy Moehring: And so many times when people talk about business ethics or integrity, it's always a focus on the negative instead of the inspirational side of creating the right kind of culture and embedding integrity in a positive way, and building it in and in a way of explaining to folks how it's really part of the... If you do it right, it's part of the strategy for a company going forward and believing in the good of people, there's always gonna be a few bad apples, but if you focus on what's good and what you expect to see in terms of behaviours and people, oftentimes you can move the dial quite a little bit. But when you're in a small company like eBay and Airbnb back in the day, how did you get folks to really focus some of their time and attention on this idea of integrity and make it central, when so much about a young company is about product and getting it out the door on time and hitting kind of the financial milestones, that too is a sea change, I think for a young company, isn't it?
0:05:47.0 Rob Chesnut: Sure. It is. And look all those things are obviously really critical, but I think what it is, companies of all sizes, but particularly when they're smaller, they've got to be very thoughtful about their North Star. Why do you exist? What is your mission? And I think you need to carefully formulate that and put it on the wall, literally put it on the wall, so that everyone is aligned around it, and everyone understands that this is what drives us, this is what drives the decisions we make, this is what drives the product. And in other words, I think it has to be deeply embedded in everything that you do from the very beginning, and so therefore it's not, "Well, let's talk about purpose or integrity versus product." It is they're inseparable. It is literally a part of everything that you do. And that doesn't mean that you somehow sacrifice profit. It may mean that you make decisions that may sacrifice some short-term financial gain in order to build something for the long run that's consistent with your mission. Profit is critical in a part of business, but profit isn't purpose. You don't build a company just to make money. You should build a company to solve a problem and to do good in the world, and making a profit is a necessary part of that operation, but it doesn't have to drive everything that you do.
0:07:17.0 Cindy Moehring: Yeah. Listening to you, you may have read, I don't know recently, if you've read Ed Freeman's new book, The Power of And, from the University of Virginia, but yeah, that is the sea change, I would say.
0:07:29.2 Rob Chesnut: Well, yeah, I went to the University of Virginia, and in fact, Ed Freeman just interviewed me in a fire side chat for the University of Virginia. I'm a big fan of what Ed's been doing. I mean, Ed's been talking about stakeholders and arguing against this notion of shareholders for decades.
0:07:52.1 Cindy Moehring: Yes, he has.
0:07:52.3 Rob Chesnut: And it's really gratifying to see that the things he's been talking about are finally being recognised and now being institutionalised in companies like Airbnb.
0:08:03.3 Cindy Moehring: Yeah, I agree. I had the chance to visit with him recently too, on his stakeholder podcast, and he had come to Walmart several years ago, and it's really great to hear him talk a fair amount about The Power of And, which is something I know you and I would agree in. So one of the things you talked about in your book were these 6Cs, and you described them as kind of critical steps to fostering integrity in the workplace. So what do you think those six Cs are, and why are they so critical?
0:08:32.7 Rob Chesnut: Oh, 6Cs are a very practical way of answering the question, "Well, how do I drive integrity into my company's culture?" And the first issue is you've gotta get your North Star, your purpose right, like why your company exists in the world. And then you turn your focus inside and what practical steps can you do to get everyone in your company operating in the same direction and operating with integrity in the way they treat each other, 'cause you can't have integrity in your mission and have no integrity inside your company or vice versa. There has to be consistency, right? So the 6Cs are just a practical roadmap. So the first C for example is, you gotta have a code of conduct, but the code of conduct... Not a code of conduct that I think some companies think about, I propose doing it a little differently.
0:09:23.0 Rob Chesnut: So often, Cindy, what happens with companies and their code is, they pick up the phone and they call their law firm and say, "Hey, we need a code of conduct." You send one over to 'em. Or even worse, to save money. They just go online and they find somebody else's code of conduct, and they copy it, and then they put their own company's name at the top, right? And then they email this thing out to everybody in the company, and they say, "Check a box, certifying that you've read it and you will abide by it." And then, "Thank goodness, Look, we got a 100% certification." Success, right? And in reality, you haven't accomplished anything but increasing cynicism in your company, right? Everybody knows we're just doing this to check a box. Nobody's really reading this thing. We're just doing this to make people happy, and it doesn't mean anything.
0:10:09.0 Cindy Moehring: Right.
0:10:10.3 Rob Chesnut: So what I propose is that companies need to slow down for a moment and actually come up with a code that is appropriate for their own company, in their own company's language, with their own values reflecting the mission of the company. Now, this doesn't have to be a month-long project that takes the stracks from getting a lot of the other work done. But I think it is important to stop for a moment and reflect on how you wanna operate as a company and how you wanna treat each other. Because I think that what that's doing, that's actually building a foundation, and with that stronger foundation, you can actually get a lot more done than in a world where everybody's racing around, making assumptions we are not talking about integrity.
0:10:53.9 Cindy Moehring: That's right.
0:10:54.9 Rob Chesnut: And I think having that conversation about integrity, what it means to you, and what it means to the culture of your company, it's really important, and I think lays the ground work for important works still to come.
0:11:07.3 Cindy Moehring: Yeah, it creates a touchstone, right? A touchstone for everyone to refer back to in difficult times.
0:11:13.9 Rob Chesnut: And it's part of this insanely difference between compliance and integrity. The first is an example of compliance. Well, yeah, you've complied with the law as a public company, you've got your code of conduct. And yep, everybody's checked the box, everybody in HR is happy, but you haven't touched people's hearts, you haven't really moved minds. And if you want to have a great company, I think you need to have a culture where people are bought into the idea and understand that integrity really is important, and if you're gonna do that, you gotta do more than check a box.
0:11:45.8 Cindy Moehring: But you gotta reach their hearts and changing people's behaviour and reaching their hearts is ultimately much harder than just explaining what the law would say in terms of complying, right?
0:11:57.9 Rob Chesnut: That gets us to the second C, which is you gotta communicate what you've done it. And so one thing that we did at Airbnb, we actually had an orientation class, called integrity. Every employee worldwide went through a week-long series of classes. And we slowed down and took an hour to talk about it, what integrity meant at Airbnb, to talk about our code of ethics, but not in a legal sense. Videos aren't effective here, sending a mid-level manager from HR into this isn't effective either. People need to hear from a leader. When I was at eBay, for example, Meg Whitman used to come to every orientation week herself, and talked to all the new employees. And people would say, "Meg, you're the CEO of the company, you don't have time for this." And Meg said, "Oh no," she said, "Talking to the new employees and making sure they hear directly from me what's important to me and what I want them to focus on, that's actually crucial to building the kind of culture that's going to make us successful."
0:13:00.2 Cindy Moehring: That's right.
0:13:00.3 Rob Chesnut: Throughout Airbnb, I taught the class as the general counsel, I taught the classroom integrity myself, and I didn't give 'em any legal jargon, we actually just took real life examples of things that actually happened at Airbnb, mistakes that people made from an integrity perspective, integrity dilemma. And the interesting thing is, when I first said that I wanted to teach the class, people looked at me and said, "Rob, an hour on integrity from a lawyer, we don't wanna drive people away." But I said, "No, you know what, I actually think this could be something that is inspiring to people." And it turned out... We do blind surveys at the end of the week, and of the 25 classes, the number one ranked class, every week, was the class on integrity, it even beat out the class on the history of Airbnb.
0:13:47.5 Cindy Moehring: Wow.
0:13:49.1 Rob Chesnut: It turns out, Cindy, that people want more than a job. Now everybody wants a paycheck and everybody wants to make money, but I think everybody wants to feel like they're doing good in the world. They wanna feel like they're working in a place that has values that align with their own.
0:14:03.6 Cindy Moehring: That's right.
0:14:04.2 Rob Chesnut: I'm used to people come up to me after the class saying, "Rob, I've never been in a company that actually talked about this. You have no idea how it feels to work at a company where a leader is actually coming in and talking about these sorts of things. That makes me feel so good about where I work." And I think people are starved for this, frankly. They want leaders to talk about the subject that too often I think is simply ignored and is left in silence.
0:14:30.5 Cindy Moehring: Right. But you hit on a really important point there. So let's just talk about it. Let's talk about it in a practical way with real-life examples of how to do it the right way and how to do it the wrong way, so they can relate to it. Sometimes integrity is a topic that feels like it's not relatable, right? So if you break it down to make it practical, you rain a man a little bit and they can see themselves in those examples.
0:14:53.2 Rob Chesnut: Well, you know, I think so many people when they show up at the class, they're thinking, "Ah, I don't really need to worry about this. I'm a good person, and I'm not gonna ever have to deal with one of these situations." As I explain to them, as I say everybody in this room is gonna have an integrity moment at Airbnb, and it may well be in their first six months and it may be well with alcohol, it may be with a romantic relationship, it may be a gift from a vendor, it may be with pressure from a boss to do something that makes you uncomfortable. But everybody's gonna have that moment. The key is, are you ready? Are you ready to make the right decision when you're confronted with it, because if you aren't, this is the sort of thing that can ruin your career and send our brand into a spiral. I need everybody to be ready for this moment and to be ready, I wanna share with you some stories of people that weren't ready and let's talk about what went wrong. That gets people's attention because it brings it up in a very real way.
0:15:55.7 Cindy Moehring: Yeah, because as you describe it, it's one of the great myths out there, is that people think, "Ah, that's not gonna affect me. I'm never gonna have to deal with it." But the fact of the matter is these situations arise almost day in and day out in a company, and people will be faced with them on almost a daily basis, some larger than others, but there's always gonna be these situations where, to your point, I have to figure out is it a, "What's the right thing to do, and am I ready to deal with it?" First of all, am I even going to recognise it as an integrity moment when it arises, so that I know then, "Oh, this is something I actually need to deal with."
0:16:32.1 Rob Chesnut: The small stuff matters. And part of the issue is that silence is the enemy of integrity, so is ambiguity. And if nobody ever talks about these things and no one never really understands what to do, then everybody's kind of on their own to make their own decisions about things, what they think is okay in the moment. And that's where problems really occur. I spent some time with Dan Ariely when I was working on this book. Dan Ariely is a behavioural scientist at Duke University.
0:17:02.4 Cindy Moehring: Yes.
0:17:03.5 Rob Chesnut: And so, I used to think, I think it's part of my federal prosecutor background, Cindy. I used to think that there were good people and bad people. Most of us were good people, and then you have these people that don't have integrity. And maybe I'll ask an insightful interview question and weed them out, or they'll make a mistake and I'll get them out of the company. And that's how we'll deal with this. Dan Ariely helped me understand that I had it all wrong. Dan studies, he's a behavioural scientist that studies integrity, studies dishonesty, and what he taught me really comes based from an experiment. Let me explain what he did in this experiment. Fills a room up with people, hands out a sheet of math problems, and he says, "I'm not gonna give everybody enough time, but I want you to start and do as many math problems as you can until I say stop." And he does this by the way, he's done this experiment over and over again, all over the world, tens of thousands of people.
0:18:00.7 Cindy Moehring: Oh my.
0:18:02.1 Rob Chesnut: Alright. So the people are filling out the sheet, he says, "Stop." He then says, "Now, I want you to come up one by one. I want you to put your sheet with your math problems into the shredder at the front of the room, and now you can leave. And as you leave to tell the proctor how many problems you did, and we're gonna give you a dollar for every problem that you did." So people come up, they stick the paper in the shredder, they then walk over and they tell the proctor how many problems they did. They get their money and they leave. What Dan doesn't tell them is that he modifies the shredder a little bit. The shredder only shreds the outer edge of the piece of paper, so Dan knows exactly how many problems everybody did. The question is, "How many people lie when they go to the proctor and they say how many problems they did?" Now me, I would have guessed 10%, right? The actual answer, 70% of people lie, 70%.
0:19:00.5 Cindy Moehring: Wow.
0:19:01.1 Rob Chesnut: Now, most do what Dan calls fudging. That is they'll fudge by one or two or three problems a little bit, not too much. And what Dan explain to me is that everyone, when they are confronted with an ethical decision, tends to want to do the thing that is in their own personal interest. That's a natural human tug toward doing it. On the other hand, they still have to feel good about themselves as human beings. They're still gonna be able to feel like, "I'm a good person." So the question is, "What can they do and be able to rationalise to themselves, talk themselves into? So with the math problems, for example, it might be, "Oh, my pencil broke," or "I saw some other people still doing another problem or two after the proctor finished, so I'm just evening it out." Or it might even be pride like, "Yeah, I actually was making sure my problems were right, and I was checking it. So in reality, I did a few more," or "They're not paying me enough for this experiment, so I'm gonna add a couple." Really. That's the sort of rationalisations you get.
0:20:04.8 Cindy Moehring: Yeah, right.
0:20:05.7 Rob Chesnut: So what Dan explained to me then is everyone is tempted and everyone faces integrity issues all the time and everyone is tempted to fudge. And what happens is organisations where people are really smart or really creative are even more vulnerable. Why? Because creative work environments, people who are creative are better at rationalising things. They come up with more creative reasons why what they're about to do is actually totally fine. So you end up working at a particular company that's got smart, creative people, everybody wants to naturally fudge. And once you start fudging, the data shows, you fudge a little bit more, fudge a little bit more, fudge a little bit more, and pretty soon you're out there doing some things that you really should never have been doing, but you've managed to talk to yourself into. So how do you deal with this? How do you deal with this natural tendency toward fudging? Well, the answer is, you have to create an environment where people feel like everyone around them is acting with integrity, because everybody wants to feel good about themselves.
0:21:16.4 Rob Chesnut: If they understand that integrity is valued, that others are acting with integrity, then they will feel like they need to do it too because they wanna feel good about themselves like all those around them. Leaders play a critical role here, Cindy, because people watch what leaders do. Integrity is contagious in this sense. If leaders are acting with integrity, and leaders are talking about why integrity is important, that actually lifts everyone up. It makes it harder for people to fudge and encourages doing the right thing. On the other hand, if leaders are not acting with integrity, then people can say, "Well, so-and-so is doing it, so it must be okay." Then that encourages bad behaviour. So if you want to drive integrity into the culture of your company, you gotta talk about it. You've actually then gotta follow up. And if leaders do the right thing, and I think that recognition then that this world where no one talks about it, and it's all, "Let's ignore process and let's just go on and assume everybody is good," that's what gets you in trouble.
0:22:19.3 Cindy Moehring: Yeah. It totally gets you in trouble. Again, it's back to the silence and the ambiguity. So if leaders are talking about it, that's the opposite of being silent, they are explicitly talking about it, and then they have to follow through, obviously with their own actions. And then both of those things create an environment of, "They're talking about it, so it's important here, and they're showing that it's important with their actions." And then that kind of creates this dynamic of, "Well, I wanna fit in here," and that's the expectation and takes away those kind of rationalisations. Makes perfect sense.
0:22:49.2 Rob Chesnut: Let me give you an example of two leaders. I like to say that leaders are the thermostat for integrity, not the thermometer. A thermometer takes the temperature of a room, a thermostat sets the temperature. So a leader, by their words and actions, is actually setting an environment, creating an environment in which everyone needs to live and that's everyone is in with that. So a CEO that stomps around and says, "We have to hit this deadline no matter what," or "We have to hit this number. You have to figure out a way to get it done." They're setting a thermostat in a direction that's not healthy, because they are basically saying, "If you gotta cut a corner or two to do this, get it done. I don't care."
0:23:31.2 Cindy Moehring: That's right.
0:23:31.7 Rob Chesnut: And that's why you ended up with problems like with Boeing by hitting a deadline when you're flying or Volkswagen by hitting an emissions number that wasn't hittable. Let's take the other CEO. This is an example Ben Horowitz told me. Every quarter when Ben Horowitz was a CEO, Ben Horowitz used to sit down with his CFO, with the numbers, physically had the numbers in their hands, they sat down physically next to each other. Ben would always look at his CFO and say, "Is there anything in these numbers that makes you uncomfortable? Anything in here that you were pressured to do? Anything in here that's misleading? Anything that makes you feel that it might mislead others?" 'Cause Ben would say, "We might miss a number. Our stock might go down. I might even lose my job, but I'm not going to jail."
0:24:25.3 Cindy Moehring: So powerful.
0:24:25.7 Rob Chesnut: So by the very act of talking to the CFO and sending that message, Ben was setting the thermostat in the right direction. He was sending the message that "We're gonna do things the right way."
0:24:36.2 Cindy Moehring: That's right.
0:24:36.4 Rob Chesnut: That's what it's about. That's what leadership is about, and that's what creating the environment of integrity is all about.
0:24:42.1 Cindy Moehring: Yeah. So with that, let me just ask you then, If I had to ask you for three words to describe the future of business ethics and integrity, what would those three words be and why?
0:24:58.9 Rob Chesnut: I think infinite in that you need to have an infinite time horizon as a leader. You cannot be thinking about what's going to drive your stock price up today or tomorrow, or what's gonna be good for the company's numbers this year. If you're faced with a choice between doing what's right for the long run of the company or what's going to bring up the stock price in the moment, you've gotta be willing to take that infinite time, that infinite horizon, that infinite view of things. I think number two is mission. You have to let your mission guide you, and your mission, profit is not purpose. You've gotta have front and centre why your company exists and make decisions based upon that. I think what I'll do with the last one, I'll pick at Friedman's word and that's stakeholders.
0:25:53.8 Cindy Moehring: Yeah, yeah.
0:25:55.1 Rob Chesnut: Not to identify all of your stakeholders and then measure how all of your stakeholders are doing. And if there are stakeholders that are struggling, you gotta go back and examine whether you're making decisions with integrity, because if the stakeholder that's winning is always the shareholders and your employees are hurt and your customers are hurt, then you're probably not acting with integrity. So I'm gonna go stakeholder, mission and infinite.
0:26:23.9 Cindy Moehring: I like them. Those are great words and great things I think for the academics to keep in mind as they're training the future business leaders for the world that they're gonna be entering is how to think about it. So those are great takeaways.
0:26:38.4 Rob Chesnut: I'm looking to the academics 'cause I think the academics played a key role in creating this problem to be honest with you. When you go back and look at, "Where does this notion of shareholder value come from?" Well, it comes from Milton Friedman and another leading academic, who came up with the ideas, right? And I think this idea of the shareholder theory has actually done more damage to integrity in the world than anything else. Why? What the shareholder value thinking did was it told leaders, "Only one thing matters leaders, and that is your shareholders. You must always make a decision that's right for your shareholders, and it's frankly unethical for you to do anything but." So let's think about that for a moment. Who's the shareholder? Well, often the leaders are the shareholders themselves. So when the stock price goes up, who benefits? The leaders. So in essence, I think, encouraged and justified very selfish thinking and very short-term thinking.
0:27:42.9 Cindy Moehring: Yes.
0:27:43.9 Rob Chesnut: Whatever gets the stock price up this week, I've got no choice, I have to do this. I don't like the fact that we're putting all this carbon into the air, but to make a change would cost the company money and hurt shareholders and I can't hurt shareholders. So what we should have been doing was we should have been asking ourselves, "Hey, wait a minute. Why are shareholders king? Why are shareholders the only people that matter? Sure, they should matter and their voices should be important, but shouldn't customers voices be important too? Shouldn't employees voices be important? Shouldn't the communities that where these companies operate, shouldn't they be an important factor as well?" So, I think that what we need is we need academics to step up and teach the new way of thinking, the stakeholder way of thinking that I think now, at least in word, companies are now accepting. And we now need to evolve to a place where in practise they are operating that way.
0:28:48.0 Cindy Moehring: That's right, completely agree. Rob, this has been a fascinating conversation. Thank you so very much for your time. I really, really appreciate it, and we will talk again soon.
0:29:00.0 Rob Chesnut: Great discussion. Thank you, Cindy.
0:29:01.4 Cindy Moehring: Alright. Thanks. Bye-bye.
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Cindy Moehring is the founder and executive chair of the Business Integrity Leadership Initiative
at the Sam M. Walton College of Business at the University of Arkansas. She recently
retired from Walmart after 20 years, where she served as senior vice president, Global
Chief Ethics Officer, and senior vice president, U.S. Chief Ethics and Compliance
Officer.
