Why Building an Ethical Culture Must Start at the Top

Integrity must be a priority for leadership if it’s to be taken seriously companywide.

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Developing an Ethical Technology Mindset

The demands of a digitized workforce put transparency, ethics, and fairness at the top of executive agendas. This MIT SMR Executive Guide explores how managers and organizations can apply principles of ethical and trustworthy technology in engaging with customers, employees, and other stakeholders.

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Image courtesy of Laura Wentzel

Ask corporate leaders what values drive their organizational culture, and they’ll likely cite integrity — or a closely related principle — near the top of the list. But as Robert Chesnut points out in his book Intentional Integrity: How Smart Companies Can Lead an Ethical Revolution, such assertions can often ring hollow. After all, companies like Barclays, Wells Fargo, and Volkswagen claimed to value integrity while nonetheless allowing major ethical lapses that resulted in scandal.

Chesnut knows firsthand what goes into cultivating a culture that values ethics and trust. As one of the first lawyers hired at eBay, he helped shape the company’s trust and safety program for users. He’s gone on to work with many platform companies in the sharing economy, including serving as Airbnb’s general counsel and first chief ethics officer.

I recently spoke with Chesnut about his experience shaping ethical technology policies and what companies and leaders should be focusing on today. The following is an edited and condensed version of our conversation.

MIT Sloan Management Review: How do you define intentional integrity, and how do you see it helping companies and leaders address the gap between what companies say they value and what their corporate culture actually reflects?

Robert Chesnut: For most companies, integrity has to get off of the corporate website and into the actual language of the leaders. The issue with integrity is that companies and leaders think they have it because they’re in favor of it. Everyone will tell you how important it is. But in reality, very few leaders actually speak about it in everyday work. And that’s a problem.

If you want to make an impression, you have to be human and authentic. For leaders, it can be uncomfortable to talk to people about integrity, because they know they’re not perfect themselves. They don’t want to preach it. There’s the question of “Do I want to impose my values or my morals on people?” I think the answer is, at work, to some extent you do.

You have to start by defining your company’s North Star — its purpose. How you measure integrity has to connect back to that idea. This means that integrity can mean different things to different people in different companies, and that’s OK. You and I can probably agree that lying, cheating, and stealing lack integrity. But a lot of issues that arise are more nuanced than that. This is the challenging part. The value of intentional integrity is making these kinds of discussions part of the language of the company.

You founded the trust and safety team at eBay back in the company’s early days on the frontiers of e-commerce. In your book, you detail the challenges of writing rules and policies for a largely unregulated ecosystem. One example that I found interesting was the issue of lawn darts. These were banned in the 1980s in the U.S. (and many other countries), but many people still had them lying around their garages by the early 2000s. When these items began showing up on eBay, you and your team did something that many tech companies might not do today: You went to the government and worked out how to regulate recalled and prohibited items.
How did that work? Can this proactive approach be a model more companies lean into when it comes to ethical technology considerations?

Chesnut: It’s been in vogue to move really quickly — this idea that you’re going to beat regulators just by overwhelming them with your speed. That can work to some degree in the short run, but there’s also too much short-term thinking in business.

I think better companies, great companies, think about what leaders such as Brian Chesky [CEO of Airbnb] discuss as an infinite time horizon. The idea here: You do the right thing, and in the long run it’s going to work out. It may still have a negative impact in the short term.

At eBay, I recognized that, even back then, having a number of recalled, dangerous consumer goods for sale online was ultimately going to get people hurt. It was important to get ahead of the issue, which might mean banning more items and losing some short-term profit. There were also the costs of throwing extra resources at solving the problem. But in the long term, we were focused on building a trusting relationship with customers and other stakeholders.

I think that’s an approach that more companies need to consider.

It’s interesting that you mention stakeholders. There’s a lot kicking up in business discussions about stakeholder capitalism and what it means for a company to operate in a way that delivers value beyond profit for shareholders. What role do ethics and trust play here?

Chesnut: I think shareholder capitalism has encouraged bad behavior, but encouraged it in a way that made people feel like they were being ethical. There’s this idea that the only ethical thing to do is the thing that’s right for the shareholder. But that doesn’t work. In fact, in many cases, it does the wrong thing for customers, employees, and other stakeholders in the name of getting the stock price up.

It’s not an approach that’s going to go away quickly. But I think it’s one that has to go away.

The chief ethics officer role has started showing up in the C-suite of many major companies — Target and Salesforce, for instance — but it’s still not common. Even when the role itself doesn’t exist at a company, people need to be accountable for managing these issues. How do you see the responsibility of ethics and integrity at the different levels of an organization?

Chesnut: There must be a very visible leader at the top of the company who talks and thinks about integrity. Now, it can take different forms in different types and sizes of organizations. Take a 30-person company: You don’t need a chief ethics officer, but the CEO needs to value integrity and talk about it throughout the organization.

But remember: A company that has a chief ethics officer doesn’t necessarily have integrity, and a company that doesn’t have a chief ethics officer doesn’t necessarily lack integrity. The chief ethics officer job is meaningless unless the rest of the leadership team has really bought in.

Every CEO had better be a chief ethics officer, in a way, and all leaders had better understand that integrity is part of their job. If so, a dedicated chief ethics officer can do a lot of work — to set processes in place and to keep a constant drumbeat of communication about integrity going. And that’s very valuable. But they can’t make up for a lack of integrity that may exist at the top.

As the operator of the marketplace, ensure that it’s being used in a way that you’re proud of as a company. That would be my advice: Embrace it.

Over the course of the pandemic, with the shift to remote and hybrid work, many companies and their employees have become more physically distanced and disconnected at a time when culture really matters. This environment can make it more difficult for managers to identify issues related to integrity and ethics. How should leaders monitor for problems when they might not be walking by everyone’s desks anymore?

Chesnut: I think it’s hard. Communication is key. You have to communicate in a human and authentic way, even though we’re living in a Zoom world.

You also need to create an environment where people are comfortable talking about how they feel, so that they’re comfortable raising their hand and saying, “This doesn’t seem right to me. Should we be doing this?” Employees want to work in a place that they feel good about and that has values aligned with their own. Working for paychecks is just not good enough anymore.

If you have issues inside your company, they’re not going to stay buried. In the old days, it was easier for things to get swept under the rug, but that’s not the case anymore. The real issue is now: How are you going to hear about these problems? Are you going to hear about them because you have a great culture where employees are free to speak their mind and raise their hand? Or are you going to hear about issues because they get floated on social media or employee sites, where your brand might suffer criticism?

At Airbnb, we created an ethics advisory program. We recognized that the chief ethics officer shouldn’t be the one person to own ethics; it needs to be a responsibility felt more broadly across the company. We assembled a group of people from different backgrounds in the organization — engineers; marketers; people from finance, legal, customer support, and HR — who could represent the integrity group locally on their own team day to day. So now, when employees have a problem, instead of having to go to legal, which might feel scary, they can talk to someone on their own team about it. We provided multiple ways for people to address issues — from going to legal, to calling a hotline, to providing ethics advisers — but we found the No. 1 avenue people preferred was talking to their own peers in the ethics advisory program.

The platform companies that you’ve worked with and advised in your career, such as eBay, Airbnb, Poshmark, and Turo, are not just businesses, they’re communities. People use these platforms for different experiences in the sharing economy, but they also use them as a place to connect with others. How do organizations solve for potential issues related to community behavior happening on their platforms?

Chesnut: Well, I think the temptation, particularly in the early days of the internet, was to say, “We’re only a platform; we’re not going to get involved,” right? But that doesn’t work. People want you to be involved. Running a marketplace means taking responsibility for order, and for building trust among strangers.

It also means taking responsibility for misuse of your platform and for bad behavior on your platform. Frankly, the world is going to force you to do it, whether you like it or not. We’ve seen that with Facebook and YouTube. If you’re going to be forced, you might as well own the responsibility from the start. As the operator of the marketplace, ensure that it’s being used in a way that you’re proud of as a company.

That would be my advice: Embrace it.

Topics

Developing an Ethical Technology Mindset

The demands of a digitized workforce put transparency, ethics, and fairness at the top of executive agendas. This MIT SMR Executive Guide explores how managers and organizations can apply principles of ethical and trustworthy technology in engaging with customers, employees, and other stakeholders.

Brought to you by

Deloitte
More in this series

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