3 Issues at the Intersection of Business and Ethics

by Diana Drake

In a recent conversation with Wharton Global Youth about business ethics, the Wharton School’s Amy Sepinwall said she had observed today’s youth approaching business as a force for good, a way to make the world better.

As you begin to think critically about how and where you want to use your business acumen and skills to influence change, here are a few Wharton-informed issues at the intersection of business and ethics – where influencers in all areas of organizations are navigating the balance between profit-driven goals and what is best and just for society.

👩🏽‍💼 Boardroom diversity. Promoting diversity and inclusion in the workplace is a cornerstone of corporate social responsibility.  And in the broader conversation of Diversity, Equity and Inclusion (DEI), corporate governance plays a critical role. Corporate governance describes the rules, practices and processes used to direct and manage a company, often overseen by a board of directors. Research suggests that a diverse boardroom reflects the experiences of customers, employees and other stakeholders, and ensures that a range of perspectives drives decision-making.

Before retiring as a top executive of Booz Allen Hamilton, a management and information technology firm, Penn grad Lloyd Howell Jr. told Wharton Business Daily, “At our board level, we have five female directors out of a total of 11. In our executive management team, we have six women out of a total of 10. And people of color are also a part of that. We have two African Americans on the board. Certainly, we’re looking to improve upon that, not just for the African American community, but also for other underrepresented classes.”

Mary-Hunter “Mae” McDonnell, an associate professor of management at Wharton, revealed the research behind these types of diverse teams during a corporate governance conversation with Wharton’s dean, Erika James. (Wharton Global Youth has streamlined this and other ESG topics for high school students in our Explore Business mini-sites.)

“What the research suggests is that diversity improves the quality and accuracy of teams’ decision-making,” noted Dr. McDonnell. “If you walk into a team and everyone has a similar background as you, then you’re going to assume that everyone understands the issues similar to the way you do and assume it will be easy to sell your point of view. But when you walk into a room where everyone has a different background than you, then you know that you might have to do some convincing. You might meet some people who see the situation differently than you. So, you prepare more before the meeting and you deliberate more during the meeting. Diversity is improving the performance of every team member. That’s absolutely part of what’s going on in linking board diversity to the quality of boards’ decision makers. You’re expanding that diversity of thought in the room and you’re making the board prepare harder and deliberate harder around the hard issues.” Watch the video HERE.

“The first thing that firms frequently are but should be doing is looking to manage and measure their own emissions from their on-site operations and their purchases of electricity. How are we as a firm emitting greenhouse gases during our production processes…and could we purchase renewable energy to power our operations?” – Dr. Sarah Light, Wharton Professor

👨🏼‍💻 Technological innovation. As new technologies are created and enhanced, issues arise about their impact on people, the planet and society. Are these techs amplifying existing biases and inequalities? Are they threatening safety and security (driverless cars!)? Are they taking opportunities away from people that might lead to income inequality? Questions around artificial intelligence, which has been developing rapidly, lead this debate. Scott A. Snyder, a senior fellow at Wharton, has said, “As AI becomes an integral part of our lives, it’s imperative to examine the ethical and responsible principles associated with its presence in society.”

In an episode of Knowledge@Wharton’s Ripple Effect podcast, Wharton’s Kartik Hosanagar said, “AI is going to be like electricity, or like the steam engine or computers, meaning the kinds of technology that change the world forever, that change humanity forever.”

And yet, ethically speaking, is AI progressing too fast? “This is a technology that is unlike other technologies we’ve seen in terms of the rate of change and progress,” noted Dr. Hosanagar. “Especially given its implications for simple things like employment, employability, all the way to things like use of AI in warfare, or AI going out of control, there is a range of concerns here. I think the concerns are real.”

The solutions to these heavy ethical questions are perhaps more long-term, he added. “What needs to happen is investments in education at school levels, where people are trained to understand AI, to understand things like deep fakes, to understand issues around ethics when building technology,” suggested Dr. Hosanagar. “This is not something you solve in six months. This is something you solve over 10 years and change curriculum. You need to retrain engineers. You need to retrain managers. You need to also retrain your congressmen and senators and all of the politicians and lawmakers.”

You can listen to more of Professor Hosanagar’s thoughts on AI, including its impact on the labor market and potential bias in algorithms here.

🌳 Environmental impact. Where the planet and ethics meet, you will find a concoction of acronyms like ESG (Environmental, Social & Governance factors) and CSR (Corporate Social Responsibility). Behind this language of business dwells an important priority that also involves ethical implications: environmental sustainability. Companies play a critical role in both contributing to and helping to solve threats to our planet, namely the climate crisis. But are they making the necessary investments toward carbon neutrality and other solutions? Wharton’s ESG Initiative released a research report looking at how well the business world is doing with its social responsibility practices.

Turns out, noted Wharton’s Witold Henisz, vice dean of the ESG Initiative, that companies have made “substantial progress” in integrating social responsibility into business operations – with an important exception. Fewer than half of the 400 employees surveyed reported that their organization had a climate-action plan.

What might that climate-action plan look like for businesses making ethical environmental decisions? Sarah Light, a Wharton legal studies and business ethics professor, spoke with Erika James about how companies are responding to the calls to address climate change during a broader discussion on ESG: Tackling the Climate Crisis.

“Business firms are indeed responding to the call to address the climate crisis…overall I think firms should be doing three things,” said Professor Light. “The first thing that firms frequently are but should be doing is looking to manage and measure their own emissions from their on-site operations and their purchases of electricity. How are we as a firm emitting greenhouse gases during our production processes…and could we purchase renewable energy to power our operations? The second thing that many firms are doing is looking beyond their on-site operations to their value chain…for example, Walmart has adopted Project Gigaton to attempt to reduce more than 1 billion metric tons of greenhouse gases from their global value chain…The third step, that not all firms have [achieved], is to put their money where their mouth is when it comes to advocating for public policies that will support a transition to a net zero economy by 2050.” Learn more about issues related to climate change and ethics in this Ripple Effects podcast conversation with Dr. Light.

Conversation Starters

What is the value of having a diverse corporate boardroom?

Dr. Hosanagar says that addressing ethical issues related to AI will take time, not 6 months. What do you think can be done to slow the pace of tech innovation and the issues that arise as a result of it?

Dr. Light says that firms are responding to the call for climate action, even though some may be slower than others. What example of climate action in business is most inspiring to you and why?

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