| Jo-Ellen Pozner: | There are good and bad ways of conducting yourself in any domain, there are multiple ways of enacting any goal. And we as a society for the past 200 years have been pushing people to maximize profit at all their costs, and then to enact their values privately, through philanthropy or whatever. And I think there’s received wisdom, or at least assumed wisdom, that that’s the only way to do things, or that’s the correct way to do things, and that there’s no possible way of acting otherwise. But in fact, there are many possible ways of acting otherwise. |
| Robyn Fadden – host: | Craft business, such as micro breweries and ethical chocolate companies, has seen a rise in the past several years, with many claiming to put values over excessive profit. Meanwhile, larger, economically driven businesses, such as Silicon Valley Bank, have imploded in the wake of questionable decision making. Are craft businesses somehow more ethical or moral than others? Or is business ethics an oxymoron? The answer really depends on values. |
| Robyn Fadden – host: | Welcome to the Delve podcast. On this episode, Jo-Ellen Pozner, a professor at the Leavey School of Business at Santa Clara University, joins Desautels Professor and Delve Editor-in-Chief Saku Mantere in an inspired conversation that asks how ethics affects the ways that businesses fundamentally function, from everyday operations to how leadership and boards make strategic decisions. |
| Robyn Fadden – host: | Pozner’s research focuses on questions of organizational ethics, corporate governance, social evaluation, and social movements. In that, she examines how we make sense of and evaluate others. Most recently, she investigated social movements and markets related to craft production, such as bean-to-bar chocolate, micro-breweries, low-power FM radio, and organic farming. She has also studied wrongdoing, scandal, and organizational misconduct by management and boards of directors. So on both counts, she’s well-equipped to define business ethics in both broad and specific terms, and open up a larger conversation about its future. |
| Robyn Fadden – host: | Delve would also like to thank the Desautels Faculty of Management’s Laidley Centre for Business Ethics, which invited professor Pozner to speak about her research at McGill in March 2023. |
| Saku Mantere: | Jo-Ellen Pozner, welcome to the podcast. |
| Jo-Ellen Pozner: | Thank you so much for having me. |
| Saku Mantere: | Let’s start with an easy question: Business ethics, is there such a thing? How do you view that? |
| Jo-Ellen Pozner: | I think that there are plenty of folks who assume that business and ethics are incompatible. And I take a very different view. And I think my view is actually quite mainstream for folks who are not thinking about it so specifically. I think most people want to be good people, most people like to think about themselves as good people, and most people don’t think about it very often. So we get ethical lapses, not because folks are intentionally doing things that they know to be wrong, but because they don’t often enough interrogate their motives, their values, and their actions, and they make heuristic decisions that then contradict their values. |
| Jo-Ellen Pozner: | There are also pressures that create incentives to make moral compromises. To take shortcuts, there are performance pressures. There’s the fraud triangle theory that explains why some folks in some organizations are more likely to engage in misconduct than others. But fundamentally, I think most people go to work every day wanting to make good, thoughtful, value-consistent decisions—and sometimes they miss the mark. |
| Saku Mantere: | What I’m hearing is that you don’t automatically become Darth Vader when you enter the executive suite, so the role doesn’t corrupt you immediately, at least, but it’s a bit more subtle than that. |
| Jo-Ellen Pozner: | When we’re talking about upper echelons, it gets a little bit more complicated and nuanced, because I don’t think that you become Darth Vader overnight. But at the same time, the kinds of people that are promoted into upper echelons positions are people who are comfortable making heuristic decisions in the first place. That’s what makes them look like leaders and makes them look decisive. They take risks that are difficult for folks who are more deliberate, to undertake. And those are the kinds of leadership qualities that get rewarded. So a lot of people who are promoted into upper echelons are kind of predisposed to making moral compromises that others might not. So there’s a kind of interaction between a selection issue and then an interaction of the position and the person that that might make it more likely. But I don’t know that I truly believe that most upper managers are immoral or unethical people, that sometimes we’re put in situations where we have to make quick decisions, and they’re not always value consistent. |
| Saku Mantere: | There’s this notion that the role is such that it favours a certain personality type perhaps. Upper management involves making decisions that impact on a lot of people’s lives. Those kinds of decisions might be painful for a person who’s very sensitive to particular values. So that might be one aspect of what you’re talking about. Then I think the other aspect is what do you get socialized into when people start sucking up to you, so that you don’t get accurate feedback on your behaviour? |
| Jo-Ellen Pozner: | The social psychology literature is pretty decisive about this. Not only do we not get accurate feedback, but even if the feedback were accurate, we’d be bad at interpreting it. Cameron Anderson’s work on power and approach and avoidance suggests that when you’re in positions of power, even when you have the phenomenological experience of power, we’re less attentive to the possibility of social sanction, we’re less attentive to ideas that we may be doing something wrong. We assume because we’re doing it, we’re doing the right thing, because of the kind of environment in deference that that attends to those positions of power. |
| Saku Mantere: | Yeah, people want things from you. They’re going to be nicer to you or sort of less critical of what you do because they depend on you. There are these corrupting influences that come with executive positions, but then there might be an antidote to those influences? |
| Jo-Ellen Pozner: | I don’t have any data to suggest that values are the antidote myself. But I certainly think that we are better equipped to be thoughtful when we have already engaged in the process of being thoughtful for ourselves. My definition of ethical behaviour is really about making value-consistent decisions. That suggests that implicit in that definition is the idea that everybody has values, and that it’s possible to act in accordance with those values. Note that I’m not making judgments about a hierarchy of values or which values are more noble—and that does allow for the idea that some people are purely motivated by the profit motive, and that anything they do in pursuit of profit is therefore ethical. That’s a debate that I’m personally not going to engage in: I prefer to say, your values might differ from mine, but you probably have reasons for valuing those things. And I don’t think it’s my job to judge whether you’re right, or I’m right, but rather, do I agree with the decisions that you make at the end of the day? |
| Jo-Ellen Pozner: | As long as you’re making decisions that are consistent with your own values, the stated values of the organization, I find it difficult to argue with that; I’m not going to question your process. I might question the outcome. Implicit in that definition, is the idea that we have been thoughtful about our own value systems. What is important to me, what do I think puts the right good into the world? What do I think is creating value for the constituency that I am thoughtful about? That varies from person to person and from organization to organization. If we are in a shareholder value-maximizing world, that will lead to a very particular set of decisions and outcomes. And if we’re in a stakeholder-service world, that will lead to a different set of values and decisions and outcomes. I think both allow for people to be thoughtful and make ethical decisions, but they’re going to look very different. |
| Saku Mantere: | There’s been a lot of interest in craft industries of late. It seems that it’s a field of research that’s blossoming. And you’ve been one of the pioneers in breaking new ground in studying craft-based organizations. It seems that’s one context where you have the value of making a profit, often as one value among many. What kind of a view of business ethics emerges from that type of context? |
| Jo-Ellen Pozner: | I’m really grateful for that question. Because one might look at my portfolio of research and say, these things have nothing to do with each other. But in fact, I think they do. Craft production is all about not just the use value of the product, or the value of the money that I earn from it, but the values that are contained in the production of the product, the meaning, the symbolism, the significance, culturally and historically, of the product itself. And the means through which it’s produced, where the maker, because of their investment in human capital and skill and discernment, imbues the product with value. And the production process that they use, which is often small batch and using traditional or quasi traditional methods is value-laden itself, and that creates additional value for the product. |
| Jo-Ellen Pozner: | So in chocolate it’s not just about is this chocolate delicious, but does it represent my values in the idea that chocolate makers are people with skill that have something creative to say that’s not about homogeneous generalist production. That my own palette, my personal preferences for flavor, which come from my childhood, my cultural influences. All these kinds of things that make up me as the consumer, or me as the producer, are there, embodied in the product itself. And that in itself is a value statement. So what do I think is important? Is it making money off of chocolate, because then I can just be a mass producer of maybe low-quality, maybe high-quality chocolate, but the meaning of the product itself is less important than for somebody whose value is not about profit but is about cultural conveyance or triple bottom line concerns, and their product is going to turn out very different. And so then what a good product and a good process looks like, will be really determined by my starting point my values based starting point. |
| Saku Mantere: | Let’s explore that a little bit further. You’ve talked about taking a paradox lens to try to understand how people in such industries make decisions where they’re trying to balance between these different value bases. What is a paradox perspective when we talk about ethics in particular? |
| Jo-Ellen Pozner: | There is little paradox created or experienced when we’re producing a well-known product using well-known technology for a kind of homogeneous generalist audience. I know what to do, I know how to do it; my identity isn’t called into question, my motives aren’t called into question. When we get into something like craft or small-batch production, or even just very niche production, irrespective of production technology, then the motives sometimes look a little bit more ambiguous. |
| Jo-Ellen Pozner: | Staying in the realm of bean-to-bar chocolate, one might imagine that chocolate makers are interested in making money, right? They’re creating a business for profit to support themselves and their families and have something to retire on. And that when they charge $15 for a bar of chocolate, it’s because it’s fancy chocolate that they want to sell at a premium, because they’re trying to convince you that it’s a premium product. |
| Jo-Ellen Pozner: | That understanding of the product and the production comes from an economically rational worldview: we do things to make money, we do things because that creates profit. The right decision, that ethical decision, is the one that creates the most monetary value, most material value for as many of the stakeholders as we’re concerned with, which might be just ourselves. But things become more complicated when we understand that some people are motivated not by material outcomes, not by monetary outcomes, but by values-driven outcomes. This is what we call a value-rational approach to business, where again, I am consistent with my own perspective on ethical decisions. The right thing to do is the thing that maintains and upholds the values that I associate with the act of production, and possibly even the act of consumption. |
| Jo-Ellen Pozner: | An ethical way of making chocolate if you’re a profit maximizer is to buy cheap commodity beans on the commodity market, blend them so you get a consistent product so that you can engage a consumer who wants to eat the same thing over and over and they know what they’re getting from every bar of chocolate, and then to collect your money. If you’re value-rational producer, and this is what we find in the bean to bar chocolate space, what’s motivating you is the desire to create a high-quality product that is a kind of good for not necessarily nutritious, but kind of morally values relatedly healthy for the consumer—it is also more nutritious because it has fewer chemicals involved in production and fewer additives. So it’s objectively a kind of higher quality, nutritious project product. But also that creates value for the raw materials producers. |
| Jo-Ellen Pozner: | Cacao farmers are awfully underpaid. Most cacao farmers have never tasted finished chocolate. There’s an excessive use of chemicals and fertilizers and pesticides. They’re slave labour entailed there’s often child labour. It’s a problematic raw materials market. And a value rational producer takes that into consideration and says the right way to engage in this market is to pay a farmgate price for the producer that reflects the actual use value of their product, so that they’re getting a price that’s reflected in the price of the final good. And we’re paying that directly to farmers instead of to certifiers or to agents, middlemen on the market. And we’re also making sure that they understand their role in the supply chain so that if they don’t want to sell to me, if somebody’s willing to pay them more, they know what to ask for. They know what a fair contract that treats them as human agents in the world looks like and that gives them a little bit of agency and control over their own outcomes. |
| Jo-Ellen Pozner: | So that doesn’t look economically rational. And you could argue if you’re a profit maximizer that that is unethical. We should be making the most money that we can from this. If you’re a value-rational producer, the idea that we should be exploiting labour and paying them the cheapest rate possible for their cacao beans is entirely unethical. We can ourselves have value judgments about which resonates more with us and which we would like to be ourselves. But both regimes might entail ethical action with very different outcomes. |
| Saku Mantere: | One of the reasons why the craft movement has been so compelling, I think, for many of us as scholars is that it questions these practitioners, they question the assumption that it’s only the outcomes of your activity that means. What also has significance is how you do things. So, when you talk about value rationality, I’m thinking about the very practice of business is infused with value. A dramatic example is, he’s a philanthropist who has a cultural business, that makes a big buck out of that, and then distributes that. The Carnegies of this world were robber barons in their time, and then they did a lot of good supposedly afterwards. And I think the craft movement is a way of challenging that that’s the only way that you can do it, that you can actually care about ethics in the way that you’re practicing your business. |
| Jo-Ellen Pozner: | I think that’s exactly right. I think that is, in fact, what my kind of overall research project is about. There are there are good and bad ways of conducting yourself in any domain, there are multiple ways of enacting any goal. And we as a society for the past 200 years have been pushing people to maximize profit at all their costs, and then to enact their values privately, through philanthropy or whatever. And I think there’s received wisdom, or at least assumed wisdom, that that’s the only way to do things, or that’s the correct way to do things, and that there’s no possible way of acting otherwise. But in fact, there are many possible ways of acting otherwise. Whether it’s through social enterprise, through social entrepreneurship, through value-rational business practice. Even in a very traditional business, you can create more value for your employees by just paying them a better wage. And that feels like anathema to a profit maximizer. But is very rational from a values-driven perspective. |
| Saku Mantere: | When we actually think about it, the quality of work in itself is essentially a values-rational domain. How we value the quality of what we do—you can translate it into a Six Sigma, quantifiable process, which some people feel that we do—but I think that that’s kind of corrosive of that values rationality, in any context where the quality of work matters, then that is a domain for craftsmanship of a particular kind. Once we start measuring, then we end up perhaps avoiding that possibility. But what you’re saying is that for a culture of a team, for instance, one pretty important question is, how do we do work here? How do we approach the client? Do we take pride in the quality of our work? So those are actually the repeating classical craft-based questions that have a wide range of application. But we often forget them because we start looking at the numbers. So how do you feel about this quantification issue, then? Is that antithetical to craft? |
| Jo-Ellen Pozner: | I don’t think it is. I think we just need to be much more thoughtful about what we put into our KPIs. The problem is that we’re all heuristic thinkers, we’re all cognitive misers. If I’m starting a new organization, or I’m a new HR professional, for example, moving into an established team, creating a set of performance indicators that are going to measure values-consistent behaviour, could be an overwhelming task. |
| Jo-Ellen Pozner: | The problem is that we are embedded in an economically rational world. And to really imbue our organizations with value-rational practice kind of requires an act of creative destruction. And it’s absolutely possible. And it’s certainly possible at small scale within your team. But we first need to think about it. And then we need to be very intentional about enacting it, and that that takes time and effort. Fundamentally what I’m saying is, the way that we’ve always done things does not define the realm of what’s possible. And if we only ask the question, “What if? What if we did it differently?”, a whole world opens up to us. |
| Saku Mantere: | But isn’t it actually that in so many aspects of corporate life, the possibility to ask, how about if we did it differently? It’s basically narrower and narrower. There’s this whole discussion about surveillance capitalism, for instance, there’s new metrics that come in all the time. It seems that we have fewer and fewer possibilities, actually, of how about if we did this differently? Because we exist in this this kind of technological surveillance framework. |
| Jo-Ellen Pozner: | This surveillance model was really created in large part by the disruptors: we want to get rid of the old way of doing things, we can do it better, faster, more efficiently, and then we’re going to spy on you to make sure that you’re doing it better and faster and more efficiently. I don’t know how much they disrupted—maybe they disrupted progress. But I don’t believe that that’s necessary. And I think the anti-shareholder value maximization movement is gaining acceptance, is gaining mainstream adherence. And if it inspires new entrepreneurs and smaller businesses, and even some large businesses I’m thinking about Patagonia that really does embody the values that its founder started the business with. It’s possible, it’s possible, you just have to be willing to do it. And part of the dissemination of that sort of practice will require a change in the metrics that Wall Street uses or that investment funds use right there. There are all kinds of constraints imposed by external actors. And at some point, we have to be willing to say, I’m okay with a lower stock price, or I’m okay with a lower bonus, because these are things that I think are important. |
| Saku Mantere: | And perhaps this is one of the reasons why the craft movement, both for those who practice it, and those who studied it is inspirational, because that’s kind of a clear way of pushing back against that type of thinking. |
| Jo-Ellen Pozner: | Absolutely. And in fact, if you read Richard Ocejo’s book on craft movements, what he found in talking to crafts people, was that they were trained, they’re college educated, they worked in finance and consulting and profit maximizing, very economically rational businesses. And because of disruptions to the economy, realize that that was not everything there was or everything that carries meaning in the world. And they wanted to find a spot for themselves that really had more value, that was more reflective of their personal values. And that is a strong driver of craft entrepreneurship and certainly of academic interest in craft. |
| Saku Mantere: | Let’s switch gears and look into the second stream of research that that you’ve done that has a fascinating article on ethics, which is organizational misconduct. When does an organization or a corporation, let’s say any organization, when do they misbehave? How could that be defined? |
| Jo-Ellen Pozner: | In my research, I was defining it as corporate earnings were statements. So, material irregularities in financial statements that reflect either mistakes, which happens sometimes, or misinterpretations of regulation, or something from sins of omission to outright fraud. That’s one area of organizational misconduct—you can think of many, many more of them. But really anything that violates norms of propriety, whether they’re legal or normative, can be defined as misconduct—something that is as antithetical to the rules as we understand them. |
| Saku Mantere: | There’s a saying that what’s immoral isn’t always illegal. How does that square with the definition of misconduct? |
| Jo-Ellen Pozner: | There are lots of varieties of misconduct that are not illegal behaviour, but they’re unethical or they’re slips or they’re creative or selective interpretations that adhere to the letter of the law but violate the spirit of the law. Part of what contributes to the phenomenon of organizational misconduct in a sense, is that even the laws as they exist are very haphazardly and inconsistently enforced. |
| Saku Mantere: | What would you say are some of the biggest insights that you’ve got gotten around business ethics from your work on misconduct? |
| Jo-Ellen Pozner: | The rules are there to tell us what to do and what not to do, but if the rules are kind of really decoupled from organizational life, then how do you know what to do? You have to start from values. The right thing to do is what comports with my own personal values with the values of my team with the values of my organization. And so how do we avoid organizational misconduct? We create a culture of accountability, where it’s safe to blow the whistle and say that I see something wrong, or we could do something better, where experimentation and innovation of process or of tasks is acceptable and safe. And then we’re less concerned about am I violating rules or am I acting correctly, implying value consistency. |
| Saku Mantere: | If I go back on your research on craft, I suppose one of the core values of a craft-based approach is care, putting care into what you’re doing. If you think about many organizations, they’re not necessarily great at caring for things. How could some of the appreciation of care as a core value, how could that be translated more broadly into business? |
| Jo-Ellen Pozner: | I think there’s a really important way that it’s being translated into business right now. And that’s through inclusion and diversity on boards of directors. So how do we care for the customers that we serve, or the clients that we serve, or the stakeholders with whom we engage, we need to be able to relate to them to empathize with them to take their perspective. And it’s very difficult to do that if we’ve got a group of homogenous people who maybe don’t resemble those stakeholders, who are sitting in a boardroom making decisions, but based on their own perspectives and their own priors and their own goals. When we bring more people into the conversation, we are showing very clearly that we value different types of people that we’re going to take them into consideration. And that consideration implies care. The expression of values around diversity is not just a social issue. It is an important social issue, but it’s also an issue that translates into stakeholder engagement in all kinds of ways. And that allows us to better care for by empathizing with, by taking the perspective of more stakeholders than our when there’s a homogenous board. And by the way, that would be the same as you know, for a group of, of white men as it would for non-white women, right? Homogeneity in any form is detrimental to deep engagement. |
| Saku Mantere: | I think this is a great place for us to conclude. Thanks so much. |
| Jo-Ellen Pozner: | Thanks for having me. Thank you so much. |
| Robyn Fadden – host: | Our guest today on the Delve podcast was Jo-Ellen Pozner, a professor at the Leavey School of Business at Santa Clara University, in conversation about business ethics with Desautels Professor and Delve Editor-in-Chief Saku Mantere. You can find more about Professor Pozner’s research on delve.mcgill.ca. |
| Robyn Fadden – host: | Thank you for listening to the Delve podcast, produced by Delve, the thought leadership platform of the Desautels Faculty of Management at McGill University. You can follow DelveMcGill on Facebook, LinkedIn, Twitter and Instagram. And subscribe to the DelveMcGill podcast on your favourite podcasting app. |
