Innovating Leadership:
Co-Creating Our Future

Resources:

Our host, Maureen Metcalf, posts a newsletter every week on LinkedIn. You can subscribe here.

Maureen’s latest book is Innovative Leadership & Followership in the Age of AI. You’ll find details about it at https://bit.ly/LeaderInAI. Her other 10 books are available on Amazon here.

Books we’re reading for fun or personal development right now include:

• Everyday Ubuntu: Living Better Together, the African Way by Mungi Ngomane. Hardback (https://amzn.to/48Doh6j) and audiobook (https://amzn.to/48YCRF4)
• Nerve: Lessons on Leadership from Two Women Who Went First by Martha Piper & Indira Samarasekera. Paperback (https://amzn.to/3tOtzg4) and audiobook (https://amzn.to/41OYdT5).
• Jilly Truit murder mysteries by Beverley McLachlin:
  • Full Disclosure – https://amzn.to/46TxW6Q (paperback) https://amzn.to/46VDL3Q (audiobook)
  • Denial – https://amzn.to/46YCbhs (paperback) https://amzn.to/3GJc0AA (audiobook)
• Women and Leadership: Journey Toward Equity by Sherylle J. Tan & Lisa DeFrank-Cole

NOTE: As an Amazon partner, we may make a small commission from books you buy through these links.

Guest(s):

Guest(s) Bio:

Greg Moran is a C-level digital, strategy and change leadership executive with extensive global operations experience. He led corporate strategy for Ford and designed the plan that Alan Mullaly used to turn around the company. Greg held C-level IT positions in app dev, infrastructure, and core banking applications at Ford, Nationwide Insurance, and Bank One/JPMC, respectively. He began his career in consulting with Arthur Andersen Accenture, working across industries with 100 companies over the course of a decade. He is passionate about leadership and culture, and teaches part time on the topic at Ohio University.

Transcript
(auto-generated)

Maureen: [00:00:00] This is Innovating Leadership Co-Creating Our Future. I’m your host, Maureen Metcalf, founder and CEO of the Innovative Leadership Institute, where we help leaders be future ready. Helping us on this mission today is returning guest and executive in residence with the Innovative Leadership Institute, Greg Moran.

We’re gonna be talking about ethics and business, starting with some of the underpinnings that will help us ground the concepts of ethics in a business arena. So welcome, Greg. I’m delighted to have you with us.

Greg: It’s great to be back, Maureen. I’m really looking forward to this discussion. It’s a topic that’s kind of near and dear to my heart because I think it’s so essential to the outcomes that come later in any social construct, not just a business context.

Maureen: Let’s start by level setting the word ethics, and what do you specifically mean by that as you reference it.

Greg: There are a [00:01:00] number of frameworks that have been posited as ethical frameworks, and they’ve emerged over the years based on people either interpreting the behavior of those they see around them or trying to take a standard.

Or known ethical framework and then apply it inside of the world of business. So just a couple of quick examples along that path. Utilitarianism is an ethical framework that people espouse and it’s been researched and studied, and it’s basically. Actions that provide the greatest good for the greatest number from a cost benefit standpoint is therefore ethical.

It would not be difficult to see some of the potential problems in that, but that is an espoused ethical framework that people can and sometimes do apply. In business content ethics is evaluating the motivations that adhering to moral obligation. Virtue ethics is cultivating good character traits like honesty and integrity.

And then you can look at longstanding [00:02:00] ethical frameworks that have been applied in the world of business in various different cultural contexts like Judeo-Christian Ethics inside of American Commerce, at least for some meaningful part of our early history. And so there are ethical frameworks of various kinds that get applied to the world of commerce.

And those ethical frameworks then have. Huge implications on how business is done, and often get reflected in the regulatory and legal frameworks that emerge inside of those business systems.

Maureen: In our most recent book, we grappled with the question of, do we include virtuous character, so the virtuous side that you’re talking about, so it captures all three of the things you talked about, justice, accountability, transcendence, all balanced with judgment in the middle.

What we came to was, at this point in history, it is crucial to include what we’re calling virtuous character in [00:03:00] leadership education. That it’s something we can’t set aside to just maximize whatever outcome we’re trying to maximize.

Greg: Absolutely, Maureen. And when we think about virtuous, the rub of that is to figure out what we mean by virtue.

It is, in today’s world, extremely difficult for us to try and impose a specific definition of virtue at a societal level. Quite frankly, we have so much discord on that topic and so much disagreement about what virtue actually looks like. That. I think as leaders, it’s incumbent on us to operate inside of the frame that we have influence over.

I come back to Covey’s idea of circle of influence, circle of concern, and circle of control. From an ethical standpoint, chasing a holy grail of a shared definition of virtue at a societal level is a lost cause. I don’t think we can achieve it, at least in today’s environment. [00:04:00] We have profound disagreement on what virtue looks like, and we have profound animosity being expressed on a daily basis on social media and through other formats on that very topic.

So I think when you refocus this question of virtue, this question of what’s right and wrong. It starts with us as individuals, then as leaders. How do we then be transparent about what we consider to be ethical and not ethical inside of the context that we actually have influence and or control over.

One specific example of that could be if you’re starting a company, if you’re doing a startup, it is incredibly important for the founding team to get together and define what its culture is gonna be, and inside the context of creating that culture, be super specific about right and wrong for that company.

And some of it’s gonna be easy. Like we’ll never break the law. Okay. That’s kind of a [00:05:00] giveaway, but it’s important ’cause not every company doesn’t break the law. Some companies do break the law and they break the law by intent, and there’s very specific and obvious examples of it. Uber is maybe one of the more obvious examples, and there’s a documentary out about it right now in which you can see very clearly.

Travis Kanick, who in real life said specifically, we’re going to break the law to found Uber. That’s an ethical decision that they made, and they believe that in order to innovate in the way that they wanted to innovate, in order to make the change that they wanted to make, they had to break the law to do it.

You and I could disagree with that, and we could disagree that that’s a reasonable ethical principle to have in place for a company operating in a society, but they made that choice.

Maureen: We’ve just created company policies, so I’m looking at things like anti-harassment, anti-discrimination, equal opportunity, safe workplace culture.

The [00:06:00] guiding principles that encompass how we think about our work, and they are things like diversity and inclusion, adaptability and resilience, collaborative learning. All of those together for us capture a sense of, if not everything, about how we expect people to behave.

Greg: The only thing I would do to push back on that is I would look for the underlying principles that drive what are essentially outcomes for you.

Diversity, equity and inclusion at one level are all outcomes. They’re not principles. They’re things that happen if you’re following principles consistently over time. And so I do think it’s instructive that while you may have those objectives as a company, we want to be a diverse company. We want to be a company in which.

People who contribute, achieve equitable outcomes for that contribution. Recognizing that not everybody’s contribution will be equal. And then inclusion. We [00:07:00] want a company where everybody that works here feels included. Those are all outcomes, but they’re not principles. They’re not underlying ethical principles.

There’s something deeper that causes you to want that. The better conversation is the one that gets at those principles and makes sure you’re all aligned on those principles because then it’s super easy. Agree on the outcomes that you’ll achieve.

Maureen: Can you give some examples? I know I read one of your documents a few years ago as you were engaging in that process with a new company.

Greg: Yeah, so talking about some principles that would drive those outcomes. Ultimately, an underlying principle, and I’ll steal from the founding fathers of the United States, is that all people are created equal. That’s an underlying principle, and if you start with that principle that all people were created equal, there’s a lot embedded in that statement.

First of all, it implies that people were created. Second of all, it addresses this question of [00:08:00] equality. Like we all start on a level playing field as people. We all have the same worth. Doesn’t mean we all have the same outcomes, but we all have the same worth. So if you start with that premise, it gets really easy to take the leap to.

Okay, so what would that look like if we really believed that and we ran a company based on that belief? What would it look like? Well, it would look like everybody has equal opportunity to succeed. It looks like everybody has equal opportunity to participate in our company independent of immutable characteristics that they have no control over.

And then, okay, well then what does that look like? And then you can begin to get into processes, practices, and policies that really then lead to those outcomes. Which means when we post a job, we’re going to intentionally cast the net broadly and ensure that we’re encouraging the broadest slate of candidates that we possibly can attract.

Which then will [00:09:00] lead you to, you know, particularly in the startup world, and this is one of those practical things that when you have principles like that, that have led to policies and you’re trying to implement them, it actually allows you. To see clearly when there’s a mismatch between, for example, the labor pool that you have access to and your objective of diversity.

So I’ll give you a specific example of that. For us as a company, it was super easy to see this because we had this underlying principle, whereas I think a lot of other companies that haven’t done the hard work of really laying out a moral framework and knowing why their policies are what they are.

Don’t even see the problem. And so one of the things I saw early on in founding an enterprise software company was that the labor pool of people who are willing to work for a VC funded software startup are not diverse. So it becomes incredibly difficult to attract a diverse workforce when your labor pool is not [00:10:00] diverse, because the people who can take the quote unquote risk of working for a venture backed startup.

Tend to be people that have a safety net and that don’t have to have to have to have a job. Right? Well, guess what that looks like? It’s not a particularly diverse group. But that then led us to this new insight, which was really fun to see the team grapple with is, okay, we gotta create our own labor pool.

So now you’re solving different problems because you have this underlying principle that’s so important to you that in order to implement it, you have to solve a different problem, and now you start working on that. So that then led to working with organizations like Color Coded here in Columbus. To say, how do we partner to drive more diversity into the labor pool that we’re trying to attract?

That’s a lot of logical links in the chain, but I lay that out because I want our listeners to really see. How it’s not an impractical conversation to be talking about these underlying moral principles. It’s [00:11:00] incredibly important because if you do that well, it gets operationalized in real time at your company.

In ways that would never happen if you didn’t have that framework in place and hadn’t had these rich conversations about why you believe what you believe.

Maureen: You mentioned another one that we’ve discussed. How does the company get involved or not get involved in supporting political causes? Because it seems that many executives are grappling with that question right now.

Greg: So that’s another one that to hunts back to an underlying principle, if in fact it’s important to you that. Everybody in your company has an equal opportunity to succeed, and that everybody that has an opportunity to work in your company given that opportunity, that then implies that you want a workforce that reflects the community in which you operate, and that implies diversity at some level.

If in fact you look at diversity through a [00:12:00] broad lens. That should include not only diversity, with respect to immutable characteristics of people, you know, skin color, ethnicity, all that sort of stuff that we don’t get to choose, but we have. It also includes diversity of thought, diversity of perspective.

That can come from all kinds of socialized sources that affected somebody’s life as they’re raised, you know, how they were parented, how they were educated, where they went to school, what degree they studied, all those sorts of things. And if I truly value diversity, then I as a company. Should never make a decision or should never take a position that eliminates valid categories from society, from getting to operate inside of my organization and have the opportunities that we want to afford to them.

That means I don’t get to pick sides. And so what we explicitly said as a company is we’re not going to divide our potential workforce. By taking [00:13:00] political positions because we think our greater contribution to the world is to enable everybody that works at our company to participate in the political process the way they see fit, to stand for the causes that are important to them.

And if I make it clear that as a company we only welcome people who agree with this point of view, I’ve definitionally cut. A huge swath of my community out of the game. At the highest level, you could argue it’s 50 50. Do I really want to alienate 50% of the people that are in my community from wanting to work at my company because they feel like they’re not going to be welcome there because I, as a quote unquote company, have taken a political position.

First of all, I think it’s very sketchy to think about a company taking a political position. It’s people within the company. We often let ourselves off the hook and sort of say, you know, well, it’s a company’s position. No, there’s people in the company that make those decisions and say those things. We can’t let [00:14:00] ourselves off the hook on that.

So even when a big company says something, it’s somebody at that company has agreed to say it.

Maureen: I would say similarly for our clients, I would eliminate half of the workforce, but I would also eliminate half of my client group.

Greg: Quite potentially. Yes. And I think we’re beginning to see that bifurcation happen in the world of social media.

I’m gonna carefully not take sides in the context of this discussion because I want the discussion to be really about the underlying impact of ethical frameworks on company decision making, but you definitely don’t have to be a rocket scientist to be able to see that. Where Elon Musk stands on the concepts of free speech is very distinct from where other social media companies stand on that topic.

And I’m just using that as an example. I’m not advocating for either. I’m just saying it’s pretty obvious that he has an underlying set of [00:15:00] principles that he’s operating from. That are completely distinct from what say Google is operating on.

Maureen: Or Facebook.

Greg: Or Facebook, and it’s been in the news today.

Google actually has had to turn off access to their latest iteration of generative ai. Because it’s been shown to be incredibly discriminatory, and that was in today’s news

Maureen: when people searched for pictures of the founding fathers, and they made it a diverse group of women and people of color, not just the founding fathers.

Greg: Those are choices, and those are now choices that are embedded in code. But the same thing applies to how filtering happens on social media. You know, the decisions that Google makes in the context of, for example, YouTube are quite different than the choices that Twitter makes. Again, nobody gets to be let off the hook.

There are people making these decisions. Companies don’t make decisions. People in companies make decisions on the company’s behalf,

Maureen: and then we as consumers get to decide which [00:16:00] platforms we use and, and specifically also choose to not use.

Greg: I agree with that. Just to stipulate. I think that’s where we are.

So as consumers, you ultimately have to make the choice. What saddens me is because we don’t have. Any essential shared ethical frameworks that we’re operating from inside of our, call it social structure inside of the United States and the world at large, because we don’t have those shared ethical frameworks, the consumer is left to make the decision based on, at best, very incomplete information, and in a lot of cases, very little information that they would even know how to evaluate.

How many. Consumers of ChatGPT have any idea how a large language model is constructed?

Maureen: Statistically, very few.

Greg: Very few people. And then even if you did know how that happened. You have no visibility at all. At most, not all companies. Uh, [00:17:00] there are exceptions, but at most companies, they give you zero visibility into the data that they’re using to train and into the biases that they’re building into the training model.

You don’t train from zero bias. You train from a place of bias. It’s inherently impossible to do otherwise. Unless a company is truly open source, and some have committed to doing that, but we recently saw the hoopla at, uh, OpenAI last fall around Sam Altman and his job as the CEO. All of that was about the debate between whether or not OpenAI was going to continue to be open or whether they were gonna focus on commercial objectives and cease to be open and not share that information and the argument for open lost and Sam got his job back.

But other companies are committed to that openness and will remain so it’s just much harder and you can make way more money if you don’t do that, which is why Google’s not open either in their YouTube or in any other place in their business. [00:18:00] Microsoft’s not open. OpenAI is not open. You can go down the list ’cause you can make way more money if you don’t, and you can move way faster.

But you do leave the consumer with very little basis on which to choose. And it’s only when you get it egregiously wrong like we saw this morning that you get caught.

Maureen: Is there a framework you propose? ’cause I also see the trickiness in using any religious structure. In a country that has quite diverse population.

Greg: The short answer is no. In a country that is not fundamentally based in, at least in its current form, in a specific ethical framework that emerges from some religious construct, then you’re left. I think as a society. At a somewhat micro level to be very explicit about doing the work for your world, which is where I started in this conversation, suggesting that, look, if you’re [00:19:00] starting a company.

Or if you’re taking on the role of being the CEO of a company or leading a significant component of the company, being explicit about what the ethical framework that you’re gonna operate from might be, is gonna be very, very important work for you because it will create transparency and clarity about policy, process decisions, all of that.

Now. That being said, I think we remain in a world where we will be, particularly if you’re a global company, where you will be interacting in commerce with companies that operate inside of a very clear moral framework that is determined by a religious structure.

Maureen: You know the other one that strikes me as global companies.

Where do you pay bribes? In which countries is that required to do business? So even if our corporate policy is we don’t pay bribes, my understanding is that presents quite a limitation in some geographic situations.

Greg: Yeah, it’s a [00:20:00] great example of where a specific definition of virtuous can be very problematic in implementation.

So in the United States, it’s not only considered unethical to pay bribes, it’s against the law. And if you do it as a company and you get caught, you can go to jail. And by the way, funny thing about back to that conversation about companies and people, companies don’t go to jail, people in companies go to jail.

So the law contemplates that people are making those decisions and there’s no way to get off the hook. But to that specific question, it’s a great example of where. A very narrow definition of virtue can be very problematic when it tried to implement inside of a larger context of other countries where what we call bribes is actually just a fundamental part of their business system, and they wouldn’t define it as a bribe.

I’ll give you an example. I did some work a few years ago with an organization that [00:21:00] was looking to implement. At a very high level of scale, global relief supply chains for natural disasters, big natural disasters. And this is, this is a very, very complicated business as you might expect. It’s a very global business.

It’s a business that has to deal with very, very diverse business systems. And sadly, it’s insanely corrupt. But the specific example that we were grappling with was in Haiti. And in Haiti, if there’s a hurricane in Haiti, which happens relatively often, and they’re pretty devastating in Haiti for all the obvious reasons, what follows on one of those disasters is a lot of relief organizations sending shipping containers into Haiti.

And trying to get those relief supplies through customs and into the country to help people out. The reality is that the only way for you to get [00:22:00] a container through customs in Haiti is for you to pay a fee to the customs agent, or they’re not gonna let your container in. And you might say, well, that’s a bribe I shouldn’t have to pay.

In reality, it’s not a bribe. Because the way that customs agents got his job was he actually had to propose to his potential boss how much of that bribe revenue he was going to pay them in order for him to get selected for that job as customs agent. And if he compromises on how much he’s charging for a container to get in, he can’t make his payments.

He’s gotta make his payments. Now, is that a bribe or is that just a business system that’s been defined a very specific way? We don’t have that different of a system in place for taxi medallions, but we don’t call ’em bribes. It’s just the cost of a taxi medallion. Well, the cost of a taxi medallion in Columbus, Ohio and one in New York is pretty different.

Where’s the bribe? It can be a slippery slope. When you get super specific about saying [00:23:00] that thing is virtuous or not virtuous, when it can mean something very different in other contexts.

Maureen: How would you go about step by step actually doing this? So I’d like to go back and re-look at our underlying principles.

Where do I start, Greg?

Greg: If you’re starting a company, I think it’s Job one. You should have that work done before you have a pitch deck. And I think it’s that essential, and I think you should be transparent with your investors about what your framework is gonna be because it’s gonna define decision making.

Go back to the Uber example. I think it should have been clear between Travis and his investors that he was intending to break the law in order to achieve his outcomes. I actually suspect it might have been extremely clear and they were on board, but imagine if they had not been on board. So imagine if it was Travis’s plan to break the law.

Maureen: Mm-hmm.

Greg: But the investors were very uncomfortable with that. Like how would that have gone? Ultimately Travis would’ve lost his job. Now he didn’t, which makes me [00:24:00] think that they were on board. Because he didn’t break the law once. He broke the law a bunch of times in a bunch of cities. Like that was the business plan

Maureen: with the intent of changing the laws.

Right?

Greg: Right. But these were not laws that you and I would look at and through your lens of virtue, these would never pass the test of virtues. They may have been inefficient. But these weren’t laws that were repressing a specific ethnic group. These were laws that were in the way of putting in place a business model that one can argue ultimately was gonna create market efficiencies, but they weren’t evil.

They wouldn’t have fallen under the 10 Commandments anywhere. That was just a choice. And my view is that’s a thing to do very early on if you’re starting a company. I think the trickier challenge is what happens if you’re taking over the reins of a company that’s already existing. And what if you find things there that you are concerned about or that you think the company can only succeed the way that [00:25:00] the owners of the company want to succeed if some changes are made?

We’ve had some fairly significant examples of that in recent history. Look at the leadership changes at Disney over the past three years. Look at the leadership changes at Starbucks over the last five years where you see clear disconnects between new leaders of companies and the shareholders of those companies.

And some of them were based on things that one can trace back to an ethical decision or an ethical framework that is operating inside the company. And again, I’m not taking sides, but you can see the clear evidence of that strife in those two companies and shareholders stepping in and saying, yeah, this won’t do whatever the reason this won’t do.

We want the other guy back in this case, they were both guys.

Maureen: Another example, it’s an older example, is the Arthur Anderson collapse after auditing Enron, [00:26:00] there’s a generally accepted accounting practices, also changing industry. Building trading floors for utilities at that point in time was new.

Presumably there were conversations between the company and their accounting firm about what would be acceptable.

Greg: There’s a lot at play in Enron, but that one I have a little bit of insight into having started my career at Arthur Anderson and the seeds of that debacle really began with the breakup of Arthur Anderson and what is now Accenture.

And at the heart of that was maybe the oldest motive in the world, avarice. what happened is you had a group of partners in Arthur Anderson who had founded the consulting division way back in the early sixties, and they had lost money on that venture for a long time, but ultimately, we’re very successful with that investment.

And that piece of the business, which at the time was originally called [00:27:00] the Management Information Consulting Division, and then became, Anderson Consulting was eventually producing more revenue and more profit per partner than the traditional audit and tax business because there’s some inherent efficiencies in the consulting.

And the consulting partners led by a guy named George Shaheen at the time, got kind of greedy and said, we want more than our fair share of partner unit income because we’re generating more than our fair share of revenue and profits. And the Arthur Anderson partners said. Wait a minute. We carried this division for 25 years before it started making any money.

This is just the return on our investment for having founded the consulting division in the first place. Big Fight ensues. Ultimately, Anderson Consulting successfully spun off and with it. They took a whole bunch of revenue and a whole bunch of profit. And so Arthur Anderson was now left trying [00:28:00] to find its way back to those levels of revenue and profitability.

Without Anderson Consulting. And so what happened is in the interest of trying to recoup that consulting revenue as fast as possible, Arthur Anderson changed how it handled the account responsibilities for major accounts like an Enron by creating a global partner who is in charge of total revenue for that account.

And having the audit and tax partners subject to the leadership of that global revenue partner for that major account. What that did is created a potential perverse incentive where that global managing partner for that account was now focused on top line revenue and rewarded on top line revenue. Not on preserving the integrity of the audit and tax work, so it doesn’t take long for those incentives to have the desired [00:29:00] effect and drive behavior.

And again, I’m not suggesting that any individual had evil intentions in the same way that no drop of water ever thinks it’s responsible for the flood. But when you set up the incentives that way, what happened, particularly in the Enron case, is you had compromises being made in the audit and tax work.

In the interest of larger consulting revenue from Enron that ultimately led to not Enron’s demise. Enron’s demise was caused by bad people at Enron. We should be clear on that.

Maureen: Mm-hmm.

Greg: But Arthur Anderson ultimately was sort of perceived to be complicit in the crime because they failed to fulfill their duties as an auditor.

And it was ultimately exposed that that was in part because they were trying to maximize consulting revenue from that same customer. So long story, but it really shows how all these dots are connected. That story hunts back 10 years prior to Enron,

Maureen: and I was at Anderson Consulting [00:30:00] the same time you were at Arthur Anderson.

So we saw that from both sides. And I was in the utilities industry helping set up trading floors. Is the company’s responsibility to maximize profit? And on the surface we would say yes, but using that example, power Company X withholds space generation doesn’t put it into the system during. A snowstorm bids up the price to a crazy amount from $50 an hour to $700 an hour, drops the energy.

Then after brownouts, the system has to claim that energy and turn the power on in houses. That’s maximizing profit. Is there a counterbalancing ethic or just concept that this isn’t sustainable and we’re gonna break the system?

Greg: What you’re illustrating is exactly why companies have to have explicit and understood ethical frameworks that drive them.

Because otherwise you can [00:31:00] have those types of imbalances getting created, and there’s hundreds of examples of that. The financial inversion of 2008 happened fundamentally because you had a lot of mortgage companies that were putting out products that we now look back on and call unethical. At the time, they were legal and nobody was calling them unethical.

They made a lot of money. In retrospect, when we saw what went wrong, we’re like, oh yeah, those were terrible. But if you don’t have any guiding principles that create guardrails for what you will do as a company, you often will have those unintended consequences. Wells Fargo, they had 5,000 people inside of their bank create fake accounts on behalf of customers.

’cause the only way they could get their bonus was to do that. Was the intention of that bonus plan inherently evil? No, but it had unintended consequences that hadn’t been thought through. And there wasn’t obviously a strong enough ethical underpinning in the company and in the culture of the company to prevent people from [00:32:00] making the decision to create fake accounts.

5,000 people. 5,000. That’s staggering. That’s a small town. Clearly there was something in that culture that gave them permission to do that. If you had asked those 5,000 people when they graduated from college or from high school. If they would ever break the law to get a bonus, I bet you a hundred percent would’ve said no, or close to a hundred percent, and yet there they were hitting enter.

And to me, that’s why this work is so important, even at the macro level. You can go look at interviews with Charlie Scharf today and it’s, you know, 10 years on from those incidents at Wells Fargo, or seven or eight years anyway, and he’s still saying we’re years away from having the frameworks and tools in place to make sure that that never happens, and for us to still be an efficient competitor in the marketplace.

Of course you can [00:33:00] prevent bad things happening, but it can come at such a high cost that you can no longer compete, and Wells is gonna pay the price for that. Then I’d come back to your original premise. Did the shareholders really win at Enron? Did the shareholders really win? No.

Maureen: You just made an interesting point that if we weave this now into ai, we can put such strong guardrails around that.

Nothing happens wrong. But often nothing happens. And then on the other end, no guardrails. We know stuff’s gonna, you know, run fast and break things. Whatever those phrases are yet, break things should not be, break the law, blow the company up. Sometimes I think we don’t make enough of a distinction that run fast and break things does not mean there are no guardrails.

Greg: Yeah, I agree. And I think to illustrate your point of sometimes nothing happens. I look at how. The government is responding to this recent incident with a Boeing airplane where part of [00:34:00] the fuselage blew out, and thankfully nobody was hurt, but there was a lot of attention put on that. And as recently as this week, you’ve seen announcements from the Department of Transportation saying, I’m paraphrasing for effect, but we’re gonna smother Boeing with all kinds of oversight to make sure that they never ship an airplane with a quality problem.

What I hear is it’s pretty unlikely Boeing will ever ship an airplane, right? I’m joking for effect, but we’re not systemically solving the problem there. All we’re doing is adding cost and adding time to the delivery of every airplane. Boeing was already operating at less than half of their target monthly output for seven 30 sevens.

I happen to have been in their factory personally last fall, and they told us specifically, they were shipping, I think at the time, about 28 airplanes a month, and they wanted to get to 60. Do you think 28 is gonna go up or [00:35:00] down? With all of this added government inspection happening at every single point on the.

Manufacturing line in Renton, it’s gonna slow ’em down. And I’m not saying that when death is on the line, you don’t do things like that. But I would love to see the Department of Transportation sit down with Boeing and say, how do we really solve this problem? The answer can’t be, we’re gonna inspect everything twice.

The answer has to be, how do we not build airplanes that have problems? And how would that look different? If we’re gonna spend all of this taxpayer money to make sure Boeing never ships an unsafe plane, shouldn’t we be doing that in a way that makes sure Boeing never builds an unsafe plane? Wouldn’t that be a better use of money?

Maureen: I worked with a program office for an advanced medium range missile decades ago, and the government organization at that point, I remember the general saying, the missile costs X dollars and your oversight is to X. Your job [00:36:00] is. To figure out how to do what you do, ensure that missile is still safe and still has the advances you need, but you cannot triple or add two times more to the cost.

It’s just not sustainable.

Greg: Right. And particularly in the world of a commercial venture like Boeing, you know, Boeing’s not a government agency.

Maureen: Mm-hmm.

Greg: I personally, as a taxpayer, if we’re gonna invest hundreds of millions of dollars in making sure Boeing never ships a bad airplane. I would way rather spend hundreds of millions of dollars making sure Boeing never builds a bad airplane.

I feel like that would increase the competitiveness of Boeing. That would increase its underlying employment base. It would have the same effect on quality, if not better. And you’d end up with a competitive company on a global playing field that benefits all Americans, but that’s not our mindset. So we’re a little bit off the topic here, but it’s a second order impact of this conversation.

And again, [00:37:00] I’ve thought about doing an in-depth white paper on the whole Boeing situation because like so many of these stories, the decisions hunt back 20 years at Boeing. That produced this outcome. The fuselage that had the problem is not made by Boeing. It’s made by a company called Spear Aircraft Systems in in Wichita, Kansas, which was spun out of Boeing in 2005, as a cost cutting measure by McNerney, who was the then CEO, who’d come from ge.

And guess what Boeing’s done over the years, put the screws to spirit to reduce cost again and again and again and again. Should we be surprised that corners could get cut in a supplier to Boeing that was once part of Boeing that was spun out specifically to save money and make sure they hit their quarterly earnings numbers?

I’m not, that’s an ethical framework decision.

Maureen: I work with clients and have a number of continua that we look at to build the operating model. And one is how do we work with our partners? And there’s the [00:38:00] end of the spectrum that says we put the screws to ’em and squish ’em like a bug if we can. And the other end that is we partner and yes, we will pay more money and yes, that supplier will continue to produce high quality output and they’ll stay in business.

Greg: Right. In this case, you had somebody coming into the airplane business from outside the airplane business who’d been A CEO less than a year, and who’s looking at it through a lens that may not have been grounded in the historical ethical framework of Boeing. Did that then lead to decisions that.

Somebody who understood and had truly espoused the ethical framework of Boeing would’ve never made. Now we can’t outsource fuselage. It’s too much at stake. I’m not saying that would’ve happened, but it’s a reasonable question to ask.

Maureen: Let’s move a little bit to ethics and ai. How do you frame that? ’cause that’s a big question.

Greg: It’s interesting when we operate in a world where we have no shared ethical [00:39:00] framework, societally. We’ve got a lot of variation.

Maureen: Mm-hmm.

Greg: And you’ve got an emerging technology that is not very well understood. I think that is an extremely challenging environment in which to develop. A meaningful shared ethical framework for ai.

I am fairly confident that the best way to do that is probably not to rely on the government to develop a regulatory framework to mandate an ethical framework. By the way, that doesn’t mean I don’t think the government shouldn’t be involved in creating regulatory frameworks. That’s not the point. But that can’t be the only way we grapple with this question.

Maureen: You helped found a company that develops AI as part of their offering. What did you do specifically with them and can that provide insight to our listeners?

Greg: I’m actually on the board of two companies that are fundamentally AI driven. I think [00:40:00] it does start with having a clear, ethical framework for that company so that you can be confident inside the company that nobody’s running outside the lines and making sure that all of your product decisions get put through that framework.

Now, does that mean you’ll never make mistakes? Of course not. Mistakes will get made and there will be unintended consequences. But when you’ve got that clear moral framework and you see that consequence, you fix it really fast. ’cause you’re like, that’s not consistent with our framework. So if you’re working at a company that.

Has AI as a fundamental element in its product set. Being explicit about the ethical framework is super important. As I mentioned earlier, we’ve seen that play out with great strife at OpenAI as recently as last fall. The whole debate. Was rooted in that ethical framework that had been used to create OpenAI in the first place.

. It’s still called OpenAI. [00:41:00] It’s no longer open.

Maureen: It’s just ai.

Greg: It’s just ai. And essentially the board in its current form was disbanded because that board was put in place specifically to ensure that the company never operated outside of that very clearly stated ethical framework.

And then you had a CEO who started to play outside of that ethical framework and went to war with the board and won. We can debate the outcomes, but there was at least a real attempt in that case to do exactly what we’re talking about. Create a clear ethical framework, put in place governance systems that ensure that the company adheres to it so that you never stray.

Because if you don’t put in the governance, it doesn’t matter if you have the framework, there’s no ability to provide oversight. And in the interest of commercial success, they blew up the oversight.

Maureen: That ties back to the board as well, that there needs to be alignment between the board, the [00:42:00] executives, philosophically, behaviorally, and incentives.

That would’ve helped also the Wells Fargo issue.

Greg: Absolutely and clearly there was not alignment and the CEO took on the board. And one with the backing of Satya Nadella, who owned 50% of the company in Microsoft, and now we have no idea what the ethical framework is for OpenAI. Sam can say all he wants.

There’s nothing that actually exposes the underlying drivers of that business. And the same way, we have no idea what’s driving Google. We just see the outcome. We know that their AI produced some goofy stuff. We have no idea how they arrived there. And we have no insight or confidence in the guiding principles that operate.

We had that at OpenAI until last fall. ’cause you could go read it. And then you could go see that they had a board in place that enforced that framework inside the company. We don’t have that anymore when we come to ai. I think it’s a very, very difficult [00:43:00] problem, and I do think it is good, and I think it is important that governing bodies at the country level, at the market level, like the EU, are grappling with these questions.

But if you’re asking me if I think it’s sufficient, I don’t think it’s even close to sufficient. At the end of the day, it’s going to take responsible people choosing to impose limits on themselves until they understand the implications of what they’re doing. And sadly, my confidence that that’s gonna happen in light of recent events is pretty low.

Maureen: And then we have implosions, and let us hope that then the legal frameworks actually do impose consequences. Are these rule breakers within companies, leading companies and setting the cultures?

Greg: Will we meander our way to reasonable outcomes over time? Probably that is the history of humanity. And when we look back on it historically, we will think it all happened in a [00:44:00] day, but it won’t.

It’s gonna happen over the course of probably a couple of decades. And during those couple of decades, a lot of people are gonna get hurt and you’re gonna get a lot of uneven impacts. It’s like if you ask a 20-year-old today about the Industrial Revolution, they will talk about it as an event. It was not an event.

It took place over 30, 40 years, and one can argue that we ultimately meandered our way with some pretty big inequities on the way, but we meandered our way to a better outcome for humanity. But the journey there was messy and cost a lot of lives over a lot of decades. Because we weren’t thoughtful about how we implemented those quote unquote advances.

I think it’s more likely than not because historical patterns would suggest this, that we will be on another messy journey around ai. And it will have a lot of unequal impacts and a lot of unintended consequences, but we will make our way towards a reasonable set of [00:45:00] solutions around how AI gets used.

Maureen: If I am a leader or a person, how do I protect myself and my organization, either my ability to continue to earn an income? The investments I make, I’d like to know that as I exit the workforce, I have some savings left, that I’m not living on cat food. How do I manage how I think about this so that I’m not part of the casualties?

Greg: First of all, go back to your ethical framework. AI is a technology. Like any other technology, it can be applied for good or evil. And I think inside of the context of your business, you want to make sure that you’re using those ethical principles to define how you’re going to leverage AI in your company.

So that the impacts of it are consistent with your ethical framework. And I think that will give you lots of degrees of freedom to take advantage of the potential efficiencies that AI can offer [00:46:00] without violating the underlying principles that are important to you and your business. But it will also mean sometimes you gotta say no.

People generally are like, well, I don’t want ever have to say no. Well, if you have a moral framework, there are for sure going to be times that you have to say no. But we tend to focus on the times we say no instead of the 80 or 90% of the time that we get to say yes. And so I’d say, let’s be positive.

Let’s be optimistic. But that’s also hunt back to our ethical principles and occasionally say no when we don’t know the consequences or we know the consequences and they’re not consistent with our framework.

Maureen: So a lot to digest, and I do encourage our listeners to comment. What do you think about what Greg’s saying?

Greg: Yeah, I’d love to hear feedback. It’s a tough, tough topic, but one that I think doesn’t get enough airtime. So thanks for taking some time and really being able to explore the topic in a rich way.

Maureen: Thank you for joining the Innovative Leadership Institute’s Innovating Leadership Co-Creating our Future with [00:47:00] the executive in residence, Greg Moran.