Are Ethics Incompatible With Entrepreneurial Rule Breaking?

Bobby Parmar (left) and Edward Freeman, leading experts in corporate ethics at UVA’s Darden School of Business

Byrne: Many leaders, when confronted with an ethical crisis, will blame it on the bad apple because they will never admit that it was an organization’s culture or processes that are responsible. If they did admit that, they have to assume they have responsibility for what went wrong.

Parmar: It is a tough pill to swallow. But, one thing that leaders can do a much better job of is anticipating the kinds of moral risks that their people will face. If we’re developing new software, how could the software be used? Can we identify the problems we want people to avoid just as much as the targets we want them to hit. Whether it’s 10% year over year, quarter over quarter growth, are we talking about the risks that we don’t want people to take? We don’t want them to cut corners. We don’t want them to burn trust with our customer. So, responsible companies do a good job of enumerating those issues, having clear plans about how they’ll avoid them, and then if they are faced with those issues, what will they do. They have contingency plans and strategies for mitigation.

Think about operating a nuclear power plant. Think about operating an aircraft carrier. Everywhere in the organization, there are values, whether it has to do with safety or reliability. And, the reason they show up everywhere is because it allows you to catch mistakes or deviations much more quickly and to bounce back when mistakes do occur.

Byrne: And then there are decisions that go into the making of a product that raise serious ethical issues. The two of you teach a fascinating case at Darden on driverless cars. And a central decision that an organization had to make involved who should be protected in the event of a fatal accident, the occupants of the car or the pedestrians. In a driverless car, the software has to decide.

Freeman: When you write the software code for what drives the car, you’re doing ethics.

Parmar: People are now questioning the role of technology to society in a way that they haven’t been before.

Developers are saying, “Look, the products and services that we’re developing have effects that we had not anticipated.” So, in order to prevent that, we need to think more carefully about how it is that we develop what it is that we develop and bake ethics into those processes so that there aren’t these unforeseen consequences that nobody likes.

Freeman: There’s nowhere to hide so that the effects of your action aren’t going to be known, amplified by social media, critiqued. You’re going to have what a colleague of mine calls roving gangs of stakeholders out after you the very next day.

Great companies create value for their stakeholders. They understand that customers, suppliers, employees, communities, and the people with the money have got to get going in the same direction. Think about the vocabularies we had to invent, the problems we had to overcome to get to an iPhone. What’s metal? How do you figure out glass? How do you figure out the magic physics on the inside of this thing? And, how do you cooperate together to make it happen? That’s what business is.

Byrne: How hopeful are the two of you that in fact what you’re teaching can become reality?

Parmar: At Darden, when we teach our MBA students, we want them to have a toolkit so that they can help build a better world but also be able to cope with the complexities of the actual world that they’re going to work in.

Freeman: In the businesses you are building, you can be the generation that makes business better. You can be the generation that builds a capitalism that’s worthy of our children. I’m incredibly optimistic, if we can come to see business as this system where we cooperate together to figure out ways to solve our problems. If we can think about it like that rather than a problem of scarcity and what we really are is a bunch of greedy little bastards out trying to do each other in. I’m optimistic.

Byrne: Well, thank you gentlemen. And, thanks for coming to the Bay area to talk about the new story of business.


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