Nobody, and no business, is perfect. Recent corporate scandals have involved companies from Google to Goldman Sachs, as well as some firms whose leaders have spoken at the Bernstein Center for Leadership and Ethics about the importance of organizational values. Given that even the most ethical leaders and businesses will stumble, how they respond to crisis can signal their deeper commitment to doing the right thing, says Todd Jick, a senior lecturer in the discipline of business and Faculty Leader of the Bernstein Center.
"Organizations that pronounce such commitment are inevitably going to be tested, and those are the moments that will demonstrate the authenticity of their commitment," says Jick. As a new crop of MBAs prepare to graduate, it behooves them to take a hard look at their potential employers’ record to determine if they actually walk their talk in regards to living out their organizational values. As Kravis Professor of Business Paul Ingram says, job satisfaction and performance is intertwined with having your personal values aligned with your employers’ values.
Two examples of firms being challenged on their values can be seen in the responses to recent scandals at Johnson & Johnson (J&J) and Point72 Asset Management, whose executive leaders have both spoken at the Bernstein Center. J&J Chairman and CEO Alex Gorsky, guest speaker at the Leadership and Ethics: Military in Business Speaker Series in 2018, has recently been challenged to take a renewed look at his company’s values and ethics amid a rash of lawsuits claiming that Johnson’s Baby Powder and other talc products caused cancer, sparked by a Reuters investigation that alleged J&J kept this information from regulators and the public. Gorsky personally responded with a rigorous defense of J&J’s mission and transparency standards in the industry, relying on its credo as the bulwark against any accusations of corporate misdeeds.
In the case of the hedge fund Point72, former President Doug Haynes was forced to resign last year after he was listed as a defendant in a sexual discrimination lawsuit that accused him and the firm of creating a culture that was discriminatory toward women. The scandal around Haynes, who spoke as part of the Montrone Seminar Series in 2017, caused a wider review of Point72’s corporate culture. These responses to scandals at J&J and Point72 are worth highlighting because doing good is, increasingly, big business.
Asset management giant BlackRock announced in January 2018 that it would only invest in businesses that are promoting the betterment of their communities, arguing that a firm can better weather the ups and downs of market conditions and ultimately enjoy stronger profit growth by incorporating environment, social, and governance (ESG) insights into investment portfolios. BlackRock’s call underscored a larger business trend around ESG. Firms cite ESG-related terms in earnings calls nearly twice as often as a decade ago, while ESG-dedicated mutual funds and exchange-traded funds in the U.S. and Europe grew nearly 50 percent from 2013 to 2017.
Whether firms are committed to doing good, however, will be determined in part by their responses to the scandals sure to come. "Of course," says Jick, business leaders "would hope that nothing ever challenges or violates their values and that they are always on the 'right' side, but human beings will conspire to stray occasionally over the red line, and leaders at that moment are in the spotlight and will be tested."
