Adam and James dreamed of making social change, to design a product to improve lives. They had seen the damage done by cigarettes and wanted to find a safer alternative. After successfully building their e-cigarette company and selling the vaping device for four years, it has recently come to light that people are dying from issues related to that product.
“Today’s leaders need to be much more cautious and purposeful about the choices they are making.”
When faced with the news that your business is not the social good agent you wanted it to be, one might think that the logical response would be to halt operations, call for further investigation, and try to make the product safer.
Instead, the company’s response was to install a CEO who knows how to push sales of goods known to kill people – an executive from big tobacco. And, in the face of legislation that limits what the company can sell, the solution was to shift focus overseas, where governments have done less to protect people. This, of course, is the story of Juul.
Juul’s mission statement is to improve lives. Its list of company values includes, “positively impact global health and be worthy of the highest social trust.” How does a company launched with this noble sentiment end up at the centre of a youth e-cigarette epidemic?
Behaving badly
Everyone thinks of themselves as the good guy, as the hero of the story. But good intentions aren’t enough. As they say, the road to hell is paved with them. Today’s leaders need to be much more cautious and purposeful about the choices they are making as they build their companies. ‘The corporation’ is the greatest force the world has ever seen, with enormous capacity for good – as well as for evil.
We seem to be seeing an onslaught of headlines about bad behaviour by CEOs and tech companies these days. Questions about decisions made by WeWork’s now-former CEO Adam Neumann led to the implosion of the WeWork initial public offering (IPO). A few of Neumann’s many decisions include a personal loan from the company of $700 million, used to invest in properties that were then leased back to WeWork, his sale of the trademark ‘We’ to the company for a whopping $6 million (which he has since returned), and the purchase of a $60 million personal, private jet. WeWork’s stated mission is to “elevate the world’s consciousness.”
Employees at Google have conducted walkouts, resignations, and other forms of protest in their demands for changes to the company’s approach to sexual harassment claims, military contracts, and censored search in China. Google’s unofficial motto (until recently) of “don’t be evil” seemed like a very low bar, but one that many employees feel has been breached.
Just last week a local Toronto company was accused of acting inappropriately in response to a former employee’s complaints of sexual harassment by a C-suite executive. One of the accusations was that the CEO suggested removing said executive would hinder the company’s ability to raise capital. Years of working to build a strong company culture and brand had been damaged overnight.
Social media sites Facebook and Twitter have been taken to court, both literally as well as in public opinion, for their role in enabling the spread of fake news and swaying elections.
And of course, Uber, who has notoriously flouted local legislation, jeopardized the employment of hundreds of thousands of taxi drivers, and ignored repeated claims of sexual harassment.
Taking action
In all fairness, many of these companies have since taken remedial action to address their most egregious errors. But how did we get to a place where these headlines seem to be commonplace?
I believe at the heart of the matter is what Kickstarter co-founder Yancey Strickler has called, ‘the default position of financial maximization’. Our current system values the maximization of shareholder value above any other factor, regardless of the costs. This default position leads people to build harmful products, engage in unethical marketing practices, sell to customers with morally questionable aims, and ignore negative societal or environmental impacts – all while absolving responsibility for the implications.
“We need to see stronger corporate governance, where leaders are willing to ask and address tough ethical questions.”
Recently we saw an important step forward with The Business Roundtable, a group of chief executive officers from nearly 200 major US corporations, redefining the purpose of a corporation to include serving all stakeholders. This broader definition of success includes delivering value to customers, investing in employees, dealing ethically with suppliers, and supporting communities.
If this new definition is truly applied, where each of these factors was given equal weighting alongside serving shareholders and maximizing profits, capitalism could finally embody its long touted virtues of being a force for good.
There are shining examples of companies that prove ethical operations are not at odds with company success. Salesforce is a company that has continuously prioritized ethical behaviour: launching the 1-1-1 model of integrated philanthropy, achieving net zero emissions, and its swift, multi-million dollar correction to address the company’s gender pay gap. A values-based company ethos has not only led to Salesforce being consistently named at the top of Fortune’s 100 Best Companies To Work For list, but also to annual revenues of over $13 billion USD.
We need to see stronger corporate governance, where leaders are willing to ask and address tough ethical questions, policies are put in place and followed, whistleblowers and complaints are taken seriously, and executives with a record of bad behaviour are no longer protected above the safety and wellbeing of the broader workforce.
When ethical breaches do happen, we should expect that they are followed by swift and decisive action, admission of wrongdoing, an apology, and the implementation of measures to ensure that it won’t happen again.
Canada’s burgeoning tech ecosystem sees hundreds of new companies launching each year. Early-stage companies have an opportunity to take steps to ensure the company has an ethical foundation from day one. This includes forward-thinking governance, philanthropic commitments to embed impact into their DNA, and asking tough questions about business models and the impact of business operations. Investors also have an opportunity to demand and uphold these values in the companies they choose to invest in.
Individuals also have an opportunity to shift from unknowing accomplices to proactive champions. It’s important to ask yourself where in your life your default position is financial maximization, and what unethical activities you are supporting because of this. As consumers, as employees, as investors, as voters, we have the power to demand transparency and principled action on the part of our leaders. Let’s take that responsibility seriously.