UB Insider #23: Business Ethics: Looking Beyond the Bottom Line
About this episode:
For decades, businesses and the people who built them were taught that profit was paramount, and just getting it was far more important than how you got it. But the tide has shifted, with a growing call to do the right thing even when it’s not easy. In this episode of UB Insider, Dr. Abe Bakhsheshy, Daniels Fund Ethics Initiative Professor at the David Eccles School of Business at the University of Utah, talks about why being ethical in business is so important, how businesses can be ethical and make a profit at the same time, and what happens to companies and executives who conduct their business unethically. Subscribe to our podcast or download this episode on iTunes and Stitcher.
Lisa Christensen: Hello and welcome to UB Insider. I’m Lisa Christensen, online editor at Utah Business magazine. Questions about fairness and ethics are introduced to us as children on the playground and they only get more complex as time goes by.
Finding our moral and ethical compass instead of becoming easier as we grow, becomes more difficult as we discover that life is less black and white than it is shades of grey. And the stakes get higher when we enter into the business world where right and wrong have to be balanced with profit and revenue. Dr. Abe Bakhsheshy is a Bill Daniels professor of ethics and professor lecturer of organizational behavior at the management department of the David Eccles School of Business at the University of Utah. Welcome.
Dr. Abe Bakhsheshy: Thank you very much miss Lisa, it’s a pleasure to be here.
Lisa Christensen: So tell me a little bit about your position as the Bill Daniels professor of ethics. What did you do and how did you get to where you are?
Dr. Abe Bakhsheshy: You know, that’s a great question. I came here to this great country in the early 70s. I was planning to further my education, get my doctoral degree and go back to the country that I came from. But in those days, the government of this particular country collapsed. And I could not go back to where I came from.
I pretty much lost every financial means that I had. I was a graduate student at the time and really I don’t think I was smart enough to bring any money with me from the old country. I ended up being all alone in this country without any means. I was extremely shy, bashful, timid, naturally an introvert. And since I didn’t have any jobs, I didn’t have any opportunities, I had to start as a pot washer in this country. That’s the only job that was offered to me in those early days in a kitchen of a hospital. If you think that dishwashing is not, I suppose, a prestigious position, no matter how important it is, pot washing is actually several degrees below dishwashing.
But nevertheless, I started as a pot washer and because of kindness, empathy, compassion and a love of people in those days, those early days in this country, I ended up to be promoted to dishwasher. And I ended up working on the tray line sending food to patients on the floor. And then I became assistant manager, I became manager, I was promoted to associate director and not long after that, I ended up to be responsible for major department in that particular institution. And again, not because I was smart or not because I was intelligent. It had nothing to do with that because I was just an ordinary human being struggling in this country. Because of kindness of people, collaboration, support, compassion, I was able to make it.
I finished my degree. I was able to pursue and be promoted to different positions within different organizations. And like every human being, I had two passions. Many have as many as 50, 30, 40. I had only two passions. Number one, to be a father. Number two, to be a teacher.
As you well know, no matter what type of position you have as a teacher, teaching really doesn’t pay. So I had to go and make the money somewhere else. And it is astonishing that I was able to make it. I was able to financially become prosperous enough through different types of opportunities that I was given in this great country that later on, I was able to pursue my passion of teaching.
So in early 90s I was given an opportunity to start teaching as a really adjunct within the David Eccles School of Business at the University of Utah. And then later on I was promoted to assistant professor, associate professor and now a professor and lecturer. And I think it’s really a privilege to be the beneficiary of that level of kindness and empathy and compassion. And frankly, one of the reasons that I was so passionate about ethics and morality in the workplace is because like everybody else I learned a great deal of lessons as I pursued my career. But at the same time, I felt that the very least I can do is to give something back to the very people that helped me to achieve my dreams.
Now, this has nothing to do with this particular interview. My, obviously, number one passion was to be a father. And those early years of my life were spent on pursuing education and my career. And at a very late age I ended up to be able to find my soulmate and I’m proud to tell you that I have a daughter who is twelve years of age now, and I was able to achieve my passion, my dreams. Now, the point of giving you all this explanation is this: I do not believe throughout these entire years of living since I lost everything, I do not believe I have ever compromised my principles, my ethics.
Like everybody else I make error, I make mistakes, but I try to learn from those errors and mistakes. I don’t think that I’ve violated anybody’s rights and I have never really, and I’ve tried to refrain from misleading people or cheating or lying. And I’m hoping that at some point in time I’m able to be sort of, articulate this series of principles to my daughter who happens to be twelve years of age. And frankly, I have tried for the last several years as well.
So the Bill Daniels ethics initiative is supported and funded by the Daniels Fund. The Daniels Fund was established by a great human being, Bill Daniels who was a cable television pioneer. It is a private charitable foundation dedicated to making life better for the people of Colorado, New Mexico, Utah and Wyoming through the grants program, scholarship programs and ethics initiative.
So one of my major responsibilities as the Daniels Ethics Initiative professor at the School of Business and leading the University of Utah as the Daniels Ethics Initiative professor is to spend that fund that has been graciously extended by the Daniels Fund and be able to make a difference in the lives of young education seekers, men and women that want to pursue their education at the University of Utah. And hopefully try to educate them and let them know that number one, after all we’re a business school, you have to make money. Because if you don’t make money for your organization they’ll fire you. They’ll let you go. But also it is important to comply with the legal requirements. And last but not least, do what is fair, just and right.
So it is never wrong to do the right thing. So these are a series of sort of efforts that I would be more than happy to later on elaborate as to what else Daniels Ethics Initiative has done for the University of Utah and what are the types of programs we have put in place to create more of an ethical organization, corporations and companies. And frankly, make life better for each and every one of us in this great country.
Lisa Christensen: So you mentioned teaching students to do what is lawful and also what is ethical. And that kind of sounds like a letter of the law versus the spirit of the law when it comes to ethics and business. Can you elaborate on that on the difference between those?
Dr. Abe Bakhsheshy: Absolutely. When we talk about law, we are required to follow the law. If you don’t follow the law, obviously they’ll put us behind bars. But following ethics and morality are really expected, they’re not required. So in essence, when people talk about following laws, there’s a sharp difference between laws and principles of ethics. Laws are written based on minimum standards of society. But ethics and morality covers a much bigger arena. It’s a much bigger umbrella.
So when we say, if you follow the law, we’re also doing the right thing. Maybe based on the principles set by the legislators and lawmakers. But there are incidents and situations in life that we are engaged in that appear to be legal, yet they may not be ethical.
Remember the time in this great country, and today still in certain parts of the world that people continue to pollute air quality and water resources. Well there was a time in this country when there were no laws against it. But then today, and even then, we knew that it is unethical, it is immoral to pollute the air quality and also to destroy the water resources. So the point is that there is a sharp difference between laws and ethical. Something that we follow and we 100% comply with, and we say, we follow the law. There are situations that they may not be morally or ethically right.
Lisa Christensen: What are some examples of, you know, companies or instances that are following good ethical principles?
Dr. Abe Bakhsheshy: Good questions. Corporations and companies. First of all, ethics apply to businesses as well as personal behavior. So as a president, as a CEO, as a founder of the organization, as executives, we set the tone. Another way, I genuinely believe, that’s my personal opinion and I think many ethicists will agree with that. There is no difference between personal ethics and business ethics and professional ethics of whether you tell the truth, whether you do what is fair, just and right in your personal life. You do the same in your business and in your profession.
So business ethics is the application of ethical behavior by a business or in a business environment. Corporations, companies that they have the best interest in heart for multiple stakeholders, that not only they are looking in maximizing the shareholder values and also making themselves rich and prosperous financially, but they also have to consider other stakeholders. Meaning their employees, members of the community, state, federal agencies in terms of paying their taxes fairly, justly and also even dealing with their vendors. They should really make sure that they have been proper in their practices.
So to me, these are a series of practices that corporations, companies, that are considered ethical are following. And I’ll be more than happy to give you plenty of examples including right here in this great state of Utah. So number one, respect and fair treatment of employees, customers, investors, vendors, communities and all who have a stake in and come in contact with the organization. So anyone that we’re dealing with, we’ve got to learn to treat them with fairness, justness and rightness.
Number two, honest communication to all stakeholders internally and externally. Not only we consider effective communication an honest and truthful communication with our internal employees, internal customers, employees, but also we should extend the same level of integrity and respect to the external customers that are buying our product and services. Next, integrity in all dealings with all stakeholders. It takes a lifetime to establish credibility, respect, good names, but it takes only one single error, mistake, and I suppose misdeed, that all of a sudden that entire reputation is ruined.
And next, high standards for personal accountability and ethical behavior. Do the due diligence. And last but not least, create a communication of internal and external policies to appropriate stakeholders. So whatever practices, whatever principles, whatever policies, protocols you have, you should make sure that they are uniquely and equally communicated to each and everybody. You want some examples? Absolutely.
The 3M corporation is a national company. They are famous for creativity and innovation. Google happens to be one of the Fortune 100 best employers year after year, is another example. Procter & Gamble. The next is Colgate Palmolive. If you want me to give you some examples in the state of Utah, take a look at O.C. Tanner, WesTech right here in Utah. Health Catalyst and numerous other corporations and companies.
So in order to find ethically and morally oriented organizations, you do not have to go to the moon. You do not have to look nationally. They are right here in the state of Utah, which by the way, if I may. Every year, Daniels Fund, Daniels Fund Ethics Initiative of the University of Utah, as well as Utah Business magazine who happens to be a supporter of University of Utah School of Business, immensely, and the Ken C. Gardner Policy Institute, we are celebrating and recognizing the most ethical companies here in the state of Utah. In businesses, nonprofit, and government and state agencies.
This September 9, this year, September 9, Friday, September 9, 2016, we are recognizing the top ethical organizations right here in the state of Utah at the School of Business. Not only they are making money, they are financially great. But also, they haven’t had one single issue with regulatory agencies, which means they are following the law. And last but not least, they have the lowest employee turnover, they have the highest level of respect in terms of ethics and morality in the state of Utah.
Lisa Christensen: When you talk about these companies that have built up a lot of trust, but then one, you know, misdeed or slip can really bring down their reputation, one of the companies that came to my mind was Volkswagen which said that it had been following EPA or environmental regulations. But then when there was further testing done of their cars by an independent testing company it found that their emissions levels were off the charts. So can you speak about how something like that damages a company?
Dr. Abe Bakhsheshy: Absolutely, ma’am. If you notice, first of all, I have numerous examples for you to talk about. To talk about the same series of errors and mistakes similar to what Volkswagen committed, which is an excellent example you’ve brought up. As you’ve noticed as a journalist, you’ve noticed for the last few days that EpiPen has been absolutely at the point of discussion as a major corporation here in this great country and abroad.
EpiPen, this is a medication as you know that is a life, for patients with life threatening allergy reactions, and all of a sudden, overnight, they’ve raised prices 400 times. The president and CEO of this company, from $4 million income ends up to have $18 million income. Meanwhile, all those patients, parents of those patients, relatives of those patients that have no other choice but they really have to have this medication are suffering as a result of it.
So why would EpiPen choose to decide to engage in overnight 400% increase and end up now to be point of all different types of allegations and anger by the consumers, one would never know. But I don’t think there are any laws against it. After all, this is capitalism. We have every right to set the price. Supply and demand. But morally, ethically, for that family who happens to have a child, 6, 7, 8, 9, 10 years of age or even younger, that has allergies and all of a sudden needs this medication, how can that family who happen to be the least among us, financially, what I’m referring to, how can they afford to pay for medication that all of a sudden is 400 times more today?
One of the, in 2007 and 2008, I’m sure you remember the poster child of corporate misdeed – Enron. These were a series of bright, intelligent, smart people from Jeffrey Skilling to Kenneth Lay who had a PhD. To a whole series of other executives, well educated. What happened that all of a sudden, all those dreams, all those efforts were shut down and Enron ended up to be such a poster child of corporate greed?
HealthSouth, WorldCom, Tyco International, this is the case of the famous Dennis Kozlowski, the president and CEO who spent a million dollars on his wife’s birthday party. But then, the money did not come from his own pocket despite the fact that he was a well-compensated executive. It came from Tyco. And then, later on, this is the $6,000 shower curtain, $15,000 umbrella stand, $6,000, I’m sorry $5,000 wastebasket. This is the guy who ended up being imprisoned and just a year ago in January he was paroled and was able to be given some time off.
Lehman Brothers and even Martha Stewart that over 6,000 shares, I don’t know, $58,000 or $59,000 ended up being jailed for seven to eight months. It is interesting that despite the fact that we know there is a large body of evidence to suggest that if your aim, if you goal in the long term is to be financially prosperous, the system works. What you have to do is to make money. That’s what the whole essence of capitalism is all about. But also be sure to follow the law and do what is fair, just and right. Do the right thing.
So now, I think the best model that was developed by a great colleague of mine who unfortunately is not among us any longer, Larue Hosmer from University of Michigan. He said that before you engage in any particular action that you know or you think it is going to have a major impact on other people, think about it. Who’s going to benefit from this decision? Who’s going to be harmed? Whose rights are going to be exercised? Whose rights are going to be denied? It is only after analyzing these four questions that you can propose your ethical complexity. Then you ask yourself, okay, now that I know this, should I make this decision? It is only after that that you have to look at economic outcome, legal requirement and last but not least, what is morally and ethically acceptable. So make the money, but also make sure to do what is fair, just and right.
Lisa Christensen: You know, it seems like with the Volkswagen thing that was a shortcut taken to make money. With the EpiPen thing that you mentioned, EpiPen released a new delivery system of the medicine. The medication itself is pretty cheap and the delivery system that they had been using was also cheap. But they rolled out a new delivery system and shelved the old one and that’s the one that’s quite a bit more expensive. So these things seem like shortcuts to make money. So thinking about what’s right is all well and good, but do students seem to understand the balance between making money and being morally and ethically right?
Dr. Abe Bakhsheshy: The question you’re bringing up is a great one. All my colleagues around the country that are actually engaged in the teaching of business ethics or fascinating seminars or discussions on this topic, they want to make sure that the faculty members do not end up out there just talking about research and theory and talk about what is right, what is wrong.
Students, particularly undergraduate students, they have to internalize it. They have to see the cause and effect. They have to see the fishbone diagram. They have to understand what happens when you engage in a misdeed or an unethical action, what could happen as a result of it. More than anything else, I can tell you the David Eccles School of Business at the University of Utah, we have been trying to apply experiential learning. We have been trying to bring in theory into practice.
It is not just sufficient enough to come and talk about a philosophy or ethics or examples. You suppose, to put the theory into practice. So as we engage in discussion, we are presenting applications of ethical standards in business decisions or in personal decisions, case based. So we use real case studies that basically have been famous, prevalent, that are based on actual events and we use those case studies and let students first read a series of theoretical readings, then read the case study, then come to class to debate, to discuss this series of real case studies.
So when you teach in a manner by which theory is actually applied into a practical setting, it has an impact right away. So I can tell you, who would have believed that business ethics becomes a required course in the business school? After all, all these years, for the last 80, 90 years we’ve been telling them all you have to do is make money, make money, make money. Your only obligation is to the stockholders, shareholders. But can you imagine, now business ethics is a required course for all of our professional MBAs, all executive MBAs and now for every single management major. They have to take business ethics.
So again, the answer, the long answer to a great question you asked is that the more theory into practice, the more experiential, the more you’re able to use the real case studies and show what it did to these individuals. Many of these corporate executives by the way, they were financially in great shape. And now many of them are either behind bars or many of them happen to be waiting for their day in court.
So we can and we have a whole series of initiatives as a part of Daniels Fund Ethics Initiative that talk about, we do field studies, we do internships, they go as an intern to different corporations, companies, they audit their ethical system. They look at the promises that they are making to their customers. They put ethics education training for employees.
We have case and raise competition. We have undergraduate case competitions where the students come in and try to convince a series of business executives that the solution I’m proposing to this ethical dilemma, to this case study is this. So they are engaged in all different types of activities. We have some of the greatest lecturers, speakers and also practitioners that they actually have been involved in corporate America. And they have the lessons, learned lessons or two and come to speak to our students to open their eyes. We have the Center for Public Trust managed by our own student leaders that they bring in a whole series of wonderful speakers to educate our business students, because after all, the more we try to educate them that they can still make the money, but they have to do what is fair, just and right, the more we think we create a better world for each and every one of us.
Lisa Christensen: Alright, well thank you so much Dr. Bakhsheshy for joining us and talking to us about this. Thanks to Mike Sasich for production help as well as Chris Sasich and Adva Biton. Tell us what you think at firstname.lastname@example.org or on our Facebook, Twitter or Instagram pages. Thanks for coming in.
Dr. Abe Bakhsheshy: It is my pleasure. Thank you very much for the opportunity.
Lisa Christensen: Absolutely. And thanks for listening.