With tens of thousands of people making their way to the 2019 J.P. Morgan Healthcare Conference in San Francisco, we realized that there is one topic that is rarely discussed at these type of conferences, but should be on a regular basis - and not just reactively but proactively- ETHICS.
In order to give you a solid dose of it, we plan to post back-to-back blog entries on incorporating ethics in Silicon Valley and in startups, so there will be at least one voice discussing the need for ethics in healthcare businesses.
In this and the next post, we discuss why ethics is now in the spotlight more than ever, the difference between ethics and compliance, proposed use of ethics officers, why employees are pushing back against “bad” company actions, and why use of an ethics committee is a better solution for all stakeholders. Finally, the post concludes with how Venture Catalyst can help you with your company’s ethics needs.
Ethics in the Spotlight
2018 seemed to be a nonstop news cycle of companies behaving badly. Data/privacy breaches, controversial contracts with law enforcement or government agencies, executive hubris, or mishandling of #MeToo cases by tech companies and/or startups are splashed all over the news. Many companies have a “move fast and deal with consequences later” approach, where profits are the ultimate goal and a sheepish mea culpa is offered only if a transgression is caught. In reaction, employees of these companies are starting their own movements to protest their employer’s actions. Which leaves people thinking- maybe there should be an ethics officer at these tech companies?
What is Ethics? The difference between Ethics and Compliance
Before discussing the idea of an ethics officer, it’s important to know what ethics is and why it is different from compliance. Ethics and compliance are often used interchangeably, and while they often intersect, they are separate and have different ramifications. Compliance is about following policies, rules, and laws required by internal and external entities, including regulators. Compliance often revolves around paperwork and checkboxes; it is about dotting the i’s and crossing the t’s. It is “black and white”, meaning it is obvious what one is required to do and not complying or breaking the rules results in penalties, i.e., discipline, fines, or imprisonment.
Ethics is about the values of an organization as a whole and the organization’s actions based on its values. In addition to the rules and laws associated with compliance, ethics adds values, morals, and beliefs into the mix. Ethics includes social, political, technological, religious, and philosophical issues and how they intersect with business, i.e., how they guide a company’s conduct and decisions. With ethics, the process is just as valuable as the outcome. Ethics is about talking and listening, grappling with issues, and seeing different perspectives, not checkboxes. It is a nebulous, moving target that requires gentle guidance and patience. The “answer” is rarely obvious, but instead takes creativity and careful analysis to find a set of acceptable solutions. A careful and thorough ethics discussion can result in a course of action that is ethical, compliant, and successful. Ethics is about doing what is right, which sometimes may conflict with what the law states.
While compliance is required legally, unfortunately, ethics is not. Compliance is often the bare minimum; one can be compliant but not ethical. In most cases, being ethical also includes being compliant. For example, compliance is when a tech company spends the bare minimum, i.e., requirements of the HIPAA Security Rule, to meet cybersecurity requirements and is simply hoping a breach does not occur. A competitor, in addition to HIPAA requirements, thinks about security holistically and addresses controls that would be considered security best practices. The competitor who devotes resources to go above the basic cybersecurity requirements by constantly looking for gaps in its system is being both compliant and ethical.
While companies understand the necessity of compliance, only a minority of companies are moving to actively incorporate ethics within the business. Some companies who have a compliance officer role attempt to incorporate ethics. However, there are challenges of combining ethics and compliance into one department, primarily because often the compliance consumes all the attention to the detriment of ethics. In response, some of these companies are turning to ethics officers as a solution.
What is an Ethics Officer?
An ethics officer is a person who serves as the company’s point person for anything related to the company’s ethical culture or code of conduct. An ethics officer would have the authority to develop a code of ethics for the company’s culture, investigate possible ethics breaches, issue penalties when appropriate, and protect those who report ethics violations. Responsibilities would include ensuring that ethics are applied in all aspects of the company, reviewing business and strategy decisions for potential conflicts with the company’s culture and code of ethics, shaping the company’s position on controversial issues such as privacy, data rights, immigration, climate change, private/government partnerships that enable government to infringe on human rights, LGBTQ issues, gender parity, and investors from questionable sources. These examples are only a few of the ethical issues facing businesses, and in today’s context, often require companies to have and act on their positions. An ethics officer would also be responsible for helping to craft the messaging regarding the company’s positions on these topics.
Advantages and Disadvantages of Using an Ethics Officer Model
Supporters of the ethics officer model argue that it is important to have a person other than the company’s chief executive be the ethical and moral conscience of the company. Companies are realizing that ethics is often an overlooked aspect of a business and it is necessary to have someone devoted to ethics in order to emphasize its importance. The chief executive has competing responsibilities and may not have the time to address ethics properly. Having a person in charge of creating the company’s ethical culture sends a formidable message throughout the business. Ethics is an essential aspect to the company; important enough to have someone devoted to it. Furthermore, having an ethics officer – and more importantly a C-level executive, a Chief Ethics Officer – to turn to when ethical questions arise or when questionable behavior is revealed, buoys the idea that ethical issues are not merely an HR issue, but something serious that affects the company as a whole. For example, if the company is contemplating renewing a federal defense contract where the company’s technology could be used in drone warfare, the ethics officer would conduct an analysis and provide a recommendation on the proposal to both the chief executive and the board. Or, if the chief executive is pushing the company to enter into a murky questionable arena, the ethics officer would push back by pointing out the action is contrary to the company’s mission and values and ensure the proposal is modified in order to meet the ethical standards of the company.
While an ethics officer sounds like a good idea on the surface, we disagree that an ethics officer is the only answer. As others have stated, an ethics officer is often just window dressing, and often without any authority. For example, an ethics officer disagrees with plan X. The chief executive or board will say thank you for your input, perhaps make a few superficial tweaks, follow through with plan X, and say that yes, they ran the plan by the ethics officer who gave input (which implies the ethics officer approved plan X). Should plan X go south, then all the fingers point to the ethics officer who will likely be fired. Furthermore, putting all your eggs in one basket relies too heavily on one person to be the moral compass of the company. Maybe you can sleep at night if your ethics officer is a rockstar, but what if your ethics officer is meh? Then your ethics code of conduct is probably mediocre because it hasn’t been properly implemented and infused throughout the company. Your ethics analysis is only as good as the person who is your ethics officer. This increases risk, instead of reducing it.
Those not in favor of an ethics officer often suggest that the company’s chief executive should be setting the moral tone and culture of the company, not an ethics officer. It is of course vital that the CEO encourage only ethical behavior, set a positive example/tone, demonstrate how to deal with bad apples. This is an important point, because if the chief executive isn’t condoning or participating in unethical behavior, then employees probably won’t either. However, this perspective is a bit naïve, because it goes back to the eggs in one basket concept. Let’s be honest, most chief executives of tech and startups are younger and have limited ethics experience; often because they haven’t weathered enough years in the business, or as recent grads, ethics was not emphasized at their school. For example, most MBA programs have a requirement to take one ethics class, but one class is not enough exposure to effectively infuse an ethical culture into an organization. In addition, a chief executive/top down only approach isn’t going to work either because the days where employees simply accepted the will of their employer without questioning are waning. Just because the “boss” said the wrong ethical path was ok doesn’t always translate into employee acceptance. In response, some employees, armed with social media tools, can now highlight and call out bad behavior as a way to push back against their employer.
The Corporation as a Person
While most people suggest that tech employees who push back against their employer are able to do so because there is a shortage of people with tech skills, which gives these employees the sense they can push back without fear of termination. We would also like to suggest another reason- the concept of corporate personhood.
The “personhood of corporation” was established officially through Supreme Court decisions, most notably in 1886 and expanded in 2010 and 2014. Basically, a corporation, in certain contexts, has the same legal rights as a living person. Among the rights corporations are granted are equal protection, free speech in the form of political contributions, and limited religious rights.
The phrase “corporations are people” is a popular phrase from the documentary, The Corporation (2003), which went on to suggest that corporations are psychopaths. The film concludes that corporations conform to the usual characteristics of psychopaths, such as “callous unconcern for the feelings of others; incapacity to maintain enduring relationships; reckless disregard for the safety of others; deceitfulness (repeated lying and conning others for profit); incapacity to experience guilt; and failure to conform to social norms with respect to lawful behaviors.” While not all corporations fall under the psychopath label, it is a useful framework to analyze why employees are pushing back against their employers. Put simply, employees may be pushing back when witnessing psychopathic behaviors.
If a tech company/startup (corporation) is a person who has rights, it is safe to assume that with these rights come responsibilities. This could include an expectation for it to not interfere with other rights, or an expectation that it proactively do something. Companies have a moral responsibility as a “person” to act in an ethical manner. The “person” in a company is not one individual, or a few people at the top; instead, all individuals at the company make up the corporate “person.” As stated above, a top down/single source of wisdom on ethics, whether it be an ethics officer or from the chief executive, doesn’t work when the company as a whole is a “person”. When senior officials at the company make decisions where the company’s actions seem to be psychopathic, it should not be a surprise that employees, an integral part of the corporate “person,” revolt because the action is in direct opposition to what the majority of the corporate “person” believes. For example, using the company’s technology to enable the separation of families at the United States border can be perceived as psychopathic because it involves callous disregard to the feelings and safety of others and the incapacity to experience guilt.
While a fiduciary responsibility drives the company to engage in actions that will result in profit, the moral responsibility of a company, as driven by its employees, may temper the need to place profits over everything else. In fact, this ability to draw back from the psychopathic act, is the action of what we would typically call a conscience.
When a person acts like a psychopath, social norms people will respond to the bad behavior. Reactions will vary along a spectrum from ignore to confront. Unfortunately, the standard model is to ignore the employer’s unethical practices, keep one’s head down, and just do the work, because employees are fearful of losing their jobs. With the exception of a few whistle blowers, employees are silent.
Recently, more and more employees are responding to unethical corporate behavior by drawing attention to it. A company that acts in a manner contrary to the company and employees’ ethical code and values now faces employees who are increasingly speaking out. Perhaps, because of the current political climate where bullies are being confronted and stood up to, employees are following the example and standing up to their employers. They identify their employer’s “psychopathic” behavior and explicitly state how it is harmful not only to others, but also to the employees themselves. People see bad behavior and no longer ignore it. When a company acts badly, they risk the wrath of its employees. Employees’ individual and collective conscience are compelling them to act.
With this conscience beginning to act as a regulator on the unbridled psychopathic tendencies, the question becomes how do we harness it in a positive and useful manner.
The Solution?
If an ethics officer is not the solution, then what is?
See the next post in the next few days for the answer. Hint: it’s not one person, but many people.
Key words: ethics, Silicon Valley, startups, compliance, ethics officers, corporation as a person, unethical corporate behavior