Spot the 8 lurking ethical risks


Tesco’s CEO received an unwelcome pre-Christmas shock. One of the Xmas cards it sold included a hidden message from a Chinese prisoner. It claimed the card came from forced labor. Yet the supermarket relies on a “comprehensive auditing system” to ensure it only hires ethical suppliers. A company spokesperson admitted:

We were shocked by these allegations and immediately halted production at the factory where these cards are produced and launched an investigation.”

Like a hungry alligator lying in wait for its prey, ethical risks can lurk unseen. They may strike without warning, to ambush an unwary CEO. How can a responsible business leader safeguard users, communities, and society from unsavory ethical threats?

For those at the top of an organisation it can be a challenge to decide exactly the best actions that will protect the company from serious damage arising from such risks? Some may be unexpected, others mysterious. Even visualizing the sort of risks that exist out of sight and then devising counter measures can prove an elusive process.

For example, a CEO may be enthusiastic about adopting new technology. Yet this is a place where associated ethical risks may be hard to predict. AI, Block Chain, Robotics and Surveillance for instance, all create unfamiliar ethical dilemmas. What seemed attractive technology may unexpectedly prove to be harmful to people.

Smile you’re on camera

In a large organisation there may be hundreds applying for jobs. Getting help from computers to deal with the onslaught can seems entirely sensible. Narrowing down the most interesting ones for instance, can now be done by a machine. The next “sensible” step is to do interviews on line. That too can be supportive.

Then along comes a company that manages interviews on line. “Our machines can also analyse the applicants and identify your best candidates.”

HireVue for example, claims its technology uses machine-learning algorithms to select the “best” candidates. The system apparently draws draw “conclusions” about applicants based on facial expressions, and sentence construction.

Such claims rightly gives many people the creeps. Not many warm to the prospect of computers deciding job applicants, according to a 2017 Pew Research Center report. Many were spooked by the experience and worried at the though of companies doing the hiring.

More to the point are such practices ethical? Interviewees assessed by HireVue’s AI told the Washington Post that it felt “alienating and dehumanizing to have to wow a computer, before being deemed worthy of a company’s time.”

They also wondered whether their recording might be used without their knowledge. Several applicants reportedly passed on the opportunity. Thinking about the AI interview, one said “it made my skin crawl.”

Having used such an approach what are the chances of experiencing decisional regret ? What seemed a relatively small change could later prove to have unacceptable ethical consequences. Serious damage to the firm’s reputation for fairness and judgement may also follow.

To help deal with such tricky situations the Ethical Operating System (Ethical OS) provides a useful new framework. It helps identify and tackle ethical unknowns.

It’s a systematic way of anticipating the diverse dangers a company may be running–perhaps unknowingly. Though aimed at technical experts business leaders, can adapt it to unravel real ethical risks their companyh may face.

Eight risk zones direct attention to where important ethical problems might be lurking, hidden from view:

  1. Truth disinformation and propaganda
  2. Addictions
  3. Economic and asset inequalities
  4. Biased machines
  5. Surveillance issues
  6. Data control and monetization
  7. Trust and user understanding
  8. Hateful and criminal actors

Ethical risks and machine ethics (Zone 4)

Of these eight kinds of risks, some may be more worrying than others. For example, as mentioned above, lately we see growing concern about the ethics, or lack of them around machine learning.

Or take the risks arising from governments and companies seeking ever deeper levels of surveillance. The intrusive nature of this technology already raises widespread legitimate concern.  Some employees have jointly resisted their employers’ involvement in such activities.

Worksnaps sells software that takes regular screenshots of a worker’s computer screen, with their full knowledge. It counts their mouse and keyboard clicks each minute, and even offers the option of capturing webcam images.

Current surveillance technology that governments of all persuasions may adopt can monitor peoples’ behavior and actions. Often it’s without universal consent. There may not even need to be a spy physically present. Such power used within companies can profoundly impinge on corporate ethics.

Since many of our actions can now be covertly observed, recorded, made searchable, and traceable, surveillance becomes ever more intrusive and ethically dubious. This places a greater onus on responsible business leaders to sharpen their ethical awareness of such hard to penetrate issues.

One way of tackling these kinds of risks is through leaders making themselves available for wider consultation within their company. For instance, it may be tempting to adopt the rapidly evolving face recognition technology. Yet an ethically-driven business leader will rightly demand a pause before the entire enterprise moves in that direction. A leader needs to be willing to face awkward questions such as:

“Is this something we really want to initiate?”
“How will such actions fit with our ethical compass?”
“Could using this technology do us more harm than good?”

In this area, events and capabilities move so fast that formal regulation lags far behind. Business leaders with integrity must therefore be willing to expose and explore potential ethical dilemmas. They will rely on their moral compass as a guide for decisions.  

The O-ring Problem

The diverse nature of the eight zones of the “Ethical OS toolkit”  presents a challenging landscape. Companies need to find a way to prioritize these for possible action.

Image result for Michael Kremer, the latest 2019 Nobel prize winner
Nobel prize winner Michael Kremer

Enter Professor Michael Kremer, the latest 2019 Nobel economics prize winner. He is also chief economist at the UK’s Department for International Development.

Kremer’s O-ring Theory of Development came from the original analysis of why the US Challenger space craft blew up, killing the astronauts on board.

Scientists concluded it occurred due to the failure of the “O” rings that connected the fuel supply to the body of the rocket. Uncovering “O-ring vulnerability” in a company can prompt deeper thinking about:

Where could we face a catastrophic failure?
One so powerful it could, destroy our reputation, or place our commercial life in jeopardy? 

Opioids for instance, might be an “O-ring” source of severe commercial vulnerability for pharma companies.

The fake emissions scandal at VW might be another. Or the incentives paid by Wells Fargo that encouraged its staff to “cross sell”. The strategy changed the culture to one of cheating its customers.

Another example is the faulty gas tank that doomed the Ford Pinto. Boss Lee Iacocca, in charge of the car’s launch, refused to leave his office and hear feedback.

People died because of his failure to expose himself to unwelcome news. Information threatening the vehicle’s sales became anathema. Yet the need to replace the tank was the new car’s O-ring vulnerability. The Pinto never recovered from the ethical and human consequences. .

It may seem easy to suggest one significant unethical area in a company that might prove to be fatal. Until you try doing it. Start listing O-ring problems and you begin seeing them everywhere. The above graphic offers eight “risk zones” where this kind of vulnerability may happen. On closer acquaintance though, none may prove to be life-threatening.

Meet & greet to discover ethical risks

This is where Kremer’s other observation comes in handy. He argues that there’s a limit to what you can see, or understand about vulnerability. Especially sitting comfortably in an office chair.

You must leave the cosy C Suite and delve into the heart of an organisation, meeting people doing everyday jobs. It’s the only reliable way to make sense of the hidden ethical risks and learn where they may eventually lead.

For an ethical business leader, Kremer’s theory converts into a strong argument for “walking the talk.” In terms of a question it’s:

“Do you know which ethical risks could come to haunt us?”

“Are we truly open to hearing how others see the situation–
they’re probably closer to the action ?”

Insight, complacency and arrogance

Around the world most senior managers (68%) believe they have ethical insight. This includes “a good understanding of key ethics and compliance (E&C) risks.” Most (84%) even claim to actively promote the importance of these to their companies.

Yet we should treat such positive opinions with caution. Many business leaders still regard ethics as confusing, or having a low priority. (see next month’s forthcoming article at this site). Such leaders tend to be less than enthusiastic about ethics training for themselves or others.  

The best kind of ethics training guides senior leaders to consider their own ethical leadership. The learning encourages them to examine the signals they send through their everyday behaviors. And how these encourage or deter employees to voice ideas and concerns. A lack of insight about the diverse nature of ethics, can surface as complacency or arrogance.

For example, in GM‘s starter scandal managers accepted a spurious cost-benefit calculation.

Assuming GM did nothing about the faulty gas tank the bean counters calculated how many deaths the company could afford in terms of legal damages. The spurious measure reduced an important ethical choice to a mere accounting procedure.

Complacency and ethical risks

Whatever the cause, many devote less attention to mastering emerging ethical risks facing the company. Even when known, complacency can sap energy to deal with them. Complacency often arises when a CEO sits firm in the saddle and begins to relax their grip. After several years at the top, some become distracted by outside activities, such as empire building. Or they lose personal energy.

One of the best example of complacency taking its toll, occurred with the VW emissions scandal. At the time of issuing false emission scores, the company’s CEO almost certainly knew it was happening. Why didn’t he act? We may never know exactly why, but complacency led him to ignore the information placed before him.

Arrogance and ethical risks

Leadership arrogance may also cause the CEO and the top team to deceive themselves that they already do enough to avoid potential ethical risks.

This leadership failing went on display at the recent US Senate hearings into Boeing’s two crashes of its 737 Max liner, killing 346 people.

Concerns about Boeing’s culture had already surfaced in the media. For example, a Washington Post article described Boeing’s lack of transparency and its culture of defensiveness. Other reports describe the company as arrogant and holding the belief that rules did not apply to it.

An Australian aviation expert declared “Boeing has blood on its hands”. Neil Hansford argues “arrogance” led to the deaths of hundreds of people. According to him the company didn’t respond appropriately to safety concerns

Dennis A. Muilenburg, Boeing’s chief executive, faced withering criticism from Congress

In his testimony before the Senate committee, Boeing’s CEO Dennis Muilenburg admitted that the company culture deserved scrutiny. His less than impressive performance, and the company’s continuing problems led to him being fired.

The company’s leaders seemed to operate with the philosophy that they only put safe planes in the air. So if something went wrong, they blamed others, rather than problem-solving internally. Quite simply, Boeing suffered from a broken moral compass.

From arrogance to tyranny

Ghosn leaves Tokyo jail,
Ghosn leaves Tokyo jail, later to escape Houdini-like to Lebanon

An internal Nissan investigation came to a simple conclusion. Ghosn the master strategist, generated a culture where no one could make objections or say “no” to him. The result was an environment of complacency. Ghosn felt he could get away with anything, including it seems, unethical behavior.

Later this maser of strategy organised a spectacular escape from an impending trial in Japan. He now resides in his home country of Lebanon.

“CEOs realise that the business world cannot be guided by profits alone at the expense of ethics, fair treatment of people and environmental stewardship,”
Korn Ferry Senior Client Partner

Human rights generally keep raising ethical concerns. CEO’s have the responsibility to ensure these play a part in decision making. For example Norway’s wealth fund was a top shareholder in G4S the global security firm. An investigation found migrant workers harassed and paid unfairly. Consequently the fund ceased being a shareholder.

CEOs in Europe see their role as having more emphasis on moral and ethical leadership. More CEO’s get the boot for ethical transgressions than for financial reasons. By 2025 greater attention on ethical, people-oriented leadership will be a new company norm.

When an alligator strikes it attempts to drag its victim below the surface of the water. Rather than falling victim to hidden ethical risks CEOs need to grow their awareness of its many and varied guises.


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