Business ethics often seems impractical and hard to grasp, but here are examples and practical tips on how to better understand and apply business ethics. This episode provides insight into the 6 principles for practicing business ethics effectively.
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Episode Transcript:
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00:03 Cindy Moehring: Welcome to this edition of The BIS, The Business Integrity School, your resource for practical tips from a business ethics pro who hass been there. I'm Cindy Moehring, the founder and Executive Chair of The Business Integrity Leadership Initiative at the Sam M. Walton College of Business. Joining me today, is Dr. Matt Waller, Dean of the Walton College.
00:22 Dr. Matt Waller: Cindy, last time we talked about why business ethics is failing in industry, and why it's needed in business schools, and you mentioned the six principles, you've told me about them. Would you mind, let's talk about that a little bit.
00:40 Cindy Moehring: Sure. So part of making business ethics understandable for our stakeholders is to make sure that it's very practical and how we talk about it. And part of making it practical is breaking it down into its most basic and I'd say simple form, so that people and leaders in business can find their true North and organize all of this noise in a way that makes sense. And then they can deal with it. So there are these principles that a professor at Georgetown, John Hostas, he teaches in the McDonough School of Business there, and also an attorney, he teaches at the law school, he really picked up on that Harvard Business Review article that we talked about last time and took a stab at then recognizing what he found were basically five business ethics principles that just exist in business today. Just implicitly have existed. There's another one I think needs to be added. And he agrees these five aren't all there is, but these five are implicit. And we'll talk about a sixth one with technology today that needs to be added to that list.
01:43 Dr. Matt Waller: And that sixth one you came up with, through dialogue with Mary Lacity?
01:48 Dr. Matt Waller: Yes with Mary. Yeah, she's one of the members of the academic advisory board and works in the blockchain center and well-known professor in the Information Systems area but with technology so pervasive in society today, we just didn't feel like it was one that could avoid being recognized.
02:06 Dr. Matt Waller: You know these principles seem like a great idea. Because as a leader, part of the purpose of a leader is to set direction.
02:14 Cindy Moehring: That's right.
02:15 Dr. Matt Waller: And if you adopt these principles or some form of them, then you're setting the direction towards ethical behavior in the organization.
02:26 Cindy Moehring: That's right.
02:27 Dr. Matt Waller: So let's start with the first one.
02:30 Cindy Moehring: Sure. So the first one is remembering that everyone has the inalienable right and responsibility to use their own voice so you've gotta speak up. Essentially saying my boss told me to do it, it's never going to cut the mustard. That's just not gonna be an okay answer. When you saw that in the news just recently with the Astros and with the sign-stealing scheme they had for the 2017 World Series, their shortstop actually, careerists said just recently in the paper that they all knew, they all knew the whole team knew that it was going on. And any of them have the opportunity to speak up and for some reason, they didn't.
03:08 Cindy Moehring: But suddenly it's dangerous to speak up, isn't it? You might get fired, you might not get promoted. You may be sort of pushed out of the inner circle if you will.
03:20 Cindy Moehring: Yeah. So there are ways there are strategies. That's a whole another series of topics that we can talk about, but yeah, the fear of retaliation is one of the main reasons that people don't speak up. So you have to figure out how can you overcome that fear of retaliation because it is real, it is definitely real, but now they're walking around with World Series championship rings, and I'm not sure that anybody really believes that they should have that ring.
03:48 Dr. Matt Waller: Well, I think with these principles, as we said, it's helpful for leadership because it's a way for a leader to clearly set direction.
03:57 Cindy Moehring: That's right.
03:58 Dr. Matt Waller: But in addition to that, leaders have to gain alignment, they have to get people on board. And so you would have to get people on board with these principles in order to actually be able to move forward. And they seem very reasonable.
04:12 Cindy Moehring: They are.
04:12 Dr. Matt Waller: There's none of them that seem unreasonable.
04:14 Cindy Moehring: Yeah, so the second one is avoid fraud and improper deceit. So the first thing that comes to mind there would be like the Wells Fargo situation. You had... Just call it what it is, it was fraud and improper deceit because they were opening accounts for customers that never asked for those accounts to be opened. So they were doing it without the consent of the customers and sending them credit cards that they never asked for. So avoiding fraud and improper deceit sounds great in principle, but pressures of business can cause that to creep in ways that you might not expect. And it's not that you have a bunch of bad apples. It's just decisions get made because they're not aware, really, of dealing with a situation and then it's one step and another step and another step. And before you know it, you've gone so far that it actually is fraud and improper deceit.
04:57 Dr. Matt Waller: And again, I think leaders have to be so aware of this. So what's the third one?
05:01 Cindy Moehring: So the third one is respecting everyone's autonomy. So essentially, that means there are no second class citizens in a business relationship. So that really brings to life the whole Me Too movement and a lot of what we've heard about lately with sexual harassment in the workplace and discrimination. So that's really what that principle is all about is respecting everyone's autonomy.
05:23 Dr. Matt Waller: Now with the Me Too movement, I know I've seen a timeline of what will happen with that. But that clearly was disrespecting their autonomy.
05:36 Cindy Moehring: Yes.
05:37 Dr. Matt Waller: At what point do you think people started to realize that's what was going on?
05:44 Cindy Moehring: That's a great question. I think it's a... My own personal opinion is that it's been known that it's been going on for a long time. The question is whether or not someone was gonna speak up about it and whether or not they were gonna be heard and be believed. And I think we finally hit a tipping point in about 2017, when the whole kind of #MeToo movement started with Harvey Weinstein and then the thing just exploded with a number of big stars in the entertainment industry primarily, but not just there. It's definitely bled over to the business world as well. And we'll talk more about that in some of the upcoming episodes.
06:26 Dr. Matt Waller: And it's another example of what leaders need to make sure that people recognize that they can speak up safely.
06:34 Cindy Moehring: That's right, safely. Right.
06:37 Dr. Matt Waller: So the fourth one, what's the fourth one?
06:39 Cindy Moehring: So the fourth one is making sure that you honor all the terms of your contract, both the explicit and the implicit terms of your contract for any other products or services that you have to offer. That one may sound like, "Well, of course, who wouldn't do that?" Well, what comes to mind for me on that one is Boeing. Just cut it right down to its most basic point, Boeing had a responsibility to make safe planes. And they didn't make safe planes, and that was the basic implied term in their contract.
07:07 Dr. Matt Waller: Absolutely.
07:08 Cindy Moehring: But that's for the flying public.
07:09 Dr. Matt Waller: Same with airlines.
07:11 Cindy Moehring: And with airlines and with the pilot.
07:12 Dr. Matt Waller: And I think Southwest. Southwest didn't have an accident. But Southwest has this tremendous cultural history. They've got one of the best cultures in the industry, but their planes had flown I don't know how many passengers but it was a large number without maintenance verification that was required. And it was simply a lapse.
07:36 Cindy Moehring: It was a lapse. Now the FAA did contribute to that particular situation by allowing this long period of time in order for Southwest to get their maintenance records in place. But the question I have there is, should Southwest have really relied on that low bar when they're known as a company that typically goes above and beyond to meet the customer expectation?
07:57 Dr. Matt Waller: You wouldn't expect that they would.
08:00 Cindy Moehring: You wouldn't.
08:00 Dr. Matt Waller: Because their culture is so phenomenal.
08:03 Cindy Moehring: Exactly.
08:03 Dr. Matt Waller: And their leadership is so phenomenal. We would think, "Yeah, of course, they probably go above and beyond what the FAA requires. So what's the next one?
08:14 Cindy Moehring: Yeah, so the next one is refrain from physical coercion or threat of physical harm, basically, it's no forced labor. And that one, the other one you may think, "Well, that's obvious. Honor the terms of your contract." This one no forced labor. I think some people think really?
08:29 Dr. Matt Waller: Yeah, we don't have any that.
08:31 Cindy Moehring: We don't have any of that. Actually, we do here still in the United States, which we'll talk about and get into in the future, but it's definitely still prevalent in some of the developing countries. And it's a real challenge for big companies who have several steps in their supply chain and don't have direct relationships with all of those suppliers to have visibility through their entire supply chain and make sure that there is no forced labor. But the tech companies, in particular, are facing that. And we'll talk about that with some of the minerals that they're trying to mine.
09:01 Dr. Matt Waller: Yeah. And even recently, a Chinese company was blacklisted by the US because they were using laborers from North Korea. And North Korea is known to sell laborers or lease them out. And they got blacklisted. So that means that all of their assets in the United States are frozen. And no US company can do business with them.
09:32 Cindy Moehring: That's right.
09:33 Dr. Matt Waller: But the thing is, with some of the new technologies coming on online, like Blockchain Technologies, together with Internet of Things, kinds of technologies and sensors, I think eventually it will get easier. But companies are resistant a little bit to this kind of transparency as well. But I think if they thought through the implications of it, they might not be.
09:57 Cindy Moehring: That's right. So that'll be a challenge. And then the last one is really the principle about technology and making sure that technology is pervasive in our lives today. And so it just makes sense that we think about technology in a way that is explainable, and that's gonna be transparent. I think people have a real fear about machines kind of taking over the world and not understanding how decisions get made. So that's really the sixth principle is making sure that algorithms, when they are used, are explainable and are transparent so that the decisions that occur through the use of artificial intelligence is understandable to those who are using it.
10:38 Dr. Matt Waller: I look forward to talking about that. That's a really interesting one. I'm glad you added that to the list.
10:43 Cindy Moehring: Yeah, it is very interesting and timely.
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10:47 Cindy Moehring: Thanks for listening to today's episode of The BIS, The Business Integrity School. You can find us on YouTube, Google, SoundCloud, iTunes, or wherever you find your podcasts. Be sure to subscribe and rate us and you can find us by searching The BIS. That's one-word T-H-E-B-I-S. Tune in next time for more practical tips from a pro.
