In his delivery of the David J. BenDaniel Ethics Lecture, corporate attorney Brackett Denniston referred to the U.S. presidential elections as reminder of the need for ethical behavior.
by Jay Wrolstad
Election Day 2016 was an apt occasion for a talk on ethics and civility, and was recognized as such by attorney Brackett Denniston, who touched on good and bad behavior in the private and public sectors when he delivered the 2016 David J. BenDaniel Ethics Lecture, “Ethical Leadership in Global Companies … and in Presidents,” at the Samuel Curtis Johnson Graduate School of Management on Nov. 8.
“This is a historic day, marking the end of the bitterest and most unpleasant election in U.S. history,” he said. “The rhetoric has been very raw, and the election was more about character — troubling character — than the issues we care about most.”
Denniston, senior counsel in Goodwin Proctor LLP’s litigation department and former general counsel for General Electric, noted that the tenor of the political campaign served as a reminder that ethics reflect the true nature of a country, or a company. “Good intentions are not enough; it takes hard work and execution to implement and abide by proper behavior,” he said.
For businesses, that behavior includes toeing the line with compliance, and creating a culture that stresses moral principles, Denniston said. He cited the recent crises at Well-Fargo and Volkswagen, resulting from fraud, as prime examples of the drastic impacts unethical actions have on companies, noting that the bank suffered a $35 billion loss of market capitalization while the automaker took a $50 billion hit.
“Companies are always under pressure to meet their financial goals, but no pressure is great enough to break the rules,” Denniston told students. Legal troubles also put a negative spin on reputations, he added, adversely affecting individual careers and corporate brands.
It was not always thus. In a brief rundown of legal milestones, Denniston pointed out that bribery was common in the U.S., with magnates such as John D. Rockefeller using payoffs to secure government permits while engaging in widespread price-fixing, until passage of the Sherman Anti-Trust Act at the turn of the 20th century. Banking regulations followed the Great Depression, and the next government correction addressed international bribery and corruption.
“Companies now need to create a culture of compliance, not just policies addressing those directly involved in fraud or other violations,” Denniston said. “They have to manage compliance and ethics. GE had a bad history with price fixing charges, which led to a corporate compliance system and a common vision on a compliance culture. That’s important because people want to do business with people who are honest.”
Investing in a compliance culture helps protect profits and builds public trust. “You must have common values and integrity among all employees who buy into the culture. That starts with the CEO, who lives the values and demonstrates them to ensure that employees adopt the same philosophy.”
The common objectives for businesses are to prevent ethics violations, to detect them if they occur, and to respond promptly to crises, Denniston said. This requires a warning system, with people assigned to measure compliance and enforce penalties for violations. Responses should be quick and effective, including internal investigations and public disclosures when appropriate, and identifying who is responsible for the company culture.
“The key is to protect the brand. Businesses are often demonized, but this is the most innovative country in the world and the most ethical, with the best character among CEOs and other executives,” he said. “Companies need to meet the highest standards of character, with civility.”
In paraphrasing comments made at a recent Starbucks annual meeting, and in a nod to the 2016 campaign, he added, “Rather than fear, division, and despair, we need compassion and hope and inclusion.”
The David J. BenDaniel Lecture in Business Ethics was established and endowed to emphasize to the Cornell community Johnson’s strong interest in ethical business leadership and our commitment to educate moral leaders. Past lecturers have included Gretchen Morgenson, Mark Bertolini, and John Bogle.