Leading With Courage: Top Industry Trailblazers Discuss Pathways to Restoring Trust in Business
Kathy Phillips, Senior Vice Dean delivers the Welcome Address and Bruce Kogut, Director of the Bernstein Center introduces the conference theme at the "Restoring Trust: New Realities and New Possibility for Business Leaderhip" Conference. For more videos from the conference, please view our video library
by Samantha Marshall
February 1, 2017
When it comes to the lack of ethics plaguing business today, NBA Commissioner Emeritus David Stern doesn’t mince words:
“We should do more than talk about it. We should come up with solutions and shove them down the throat of American industry.”
Mr. Stern was speaking at a recent Columbia Business School forum -- “Restoring Trust: New Realities and New Possibilities for Business Leadership” -- hosted by The Sanford C. Bernstein & Co. Center for Leadership and Ethics, which brought together some of the most prominent thinkers and practitioners from the world of business to exchange ideas with students, alumni, faculty and the greater Columbia community on ways to improve the fairness, value and productivity of our economic system, both in the U.S. and abroad. The event, which was held at the Italian Academy, included the presentation of the inaugural Alumni Ethical Leadership Award, given by the Student Leadership and Ethics Board to Kesha Cash ‘10, Founder and General Partner of the Impact America Fund.
Attendees at the 2016 Restoring Trust Conference at Columbia Business School. For more photos, click here.
Ms. Cash was part of a diverse gathering of participants involved in an impassioned discussion that touched upon everything from the NFL’s deflate-gate to the importance of community relations in building a new green energy business model for the inner city. The common thread running through these conversations was that it takes courageous leadership to do not only what’s legal, but ethical, despite the relentless pressure to score goals, sell products or turn a quarterly profit.
Taking place just days after the U.S. election, when it became clear just how disaffected huge swaths of the American population had become with the U.S.’s most critical public and private institutions, the event could not have been more timely. A litany of corporate scandals -- from price gouging for the EpiPen and other major treatments (Valeant’s heart drugs, Turing’s Daraprim), to Wells Fargo’s defrauding of account holders and Volkswagen’s falsification of emissions tests -- has shattered the public’s faith in industries of all kinds. Indeed, trust has dropped precipitously since the Great Recession, according to Young & Rubicam’s latest Brand Asset Survey, with over 50% of major brands defined as trustworthy in 2007, versus less than one in four today. After more than seven years since the subprime crisis, “you’d think some of that trust would have been restored by now,” observed Peter Stringham, former Chairman & CEO of Y&R, and moderator of the industry panel. “To my astonishment, it hasn’t.”
“You'd think some of that trust would have been restored by now. To my astonishment, it hasn't.”
Bruce Kogut, director of the Bernstein Center and Sanford C. Bernstein Professor of Leadership and Ethics, kicked off the discussion by asking, “Why is the voice of business quieter today than before?”
Amid this multitude of unfolding scandals, standing up and acknowledging the root causes in a highly regulatory environment is not in the self-interest of a CEO, he went on to explain. Particularly in a fractured industry landscape where business associations are weak and regulatory and political tensions are high, the incentives for public discourse are low. “It’s easy to understand why many do not speak up in times of crisis,” concluded Professor Kogut, adding that it is incumbent upon business schools to encourage this kind of dialogue to rebuild the trust link between private enterprise, consumers and the wider public.
So what would those best known for their leadership, integrity and ethics in running their companies recommend, and how would they do things differently?
Some of the world’s most notable titans of biotech, sports, retail, telecommunications, venture capital, and energy attempted to answer this question. They shared their own experiences, analyzing the economic and social costs of this broken covenant and suggesting actions that could resolve many of these issues, or at least bring various industries back to a place where egregious cases of fraud and corruption are the rare exception, not the norm.
Trust in Sports
Sports has always served as a metaphor for leadership and teamwork in the business world, so it was fitting that the discussion kicked off with a panel featuring David Stern ‘66LAW, NBA Commissioner Emeritus, and Sunil Gulati ’86GSAS, president of U.S. Soccer, who discussed recent IOC doping scandals, Colin Kaepernick’s refusal to stand for the national anthem, and the blurred lines between playing by the rules or winning at all costs.
Both agreed that sports business leaders and athletes have a unique opportunity to model ethical behavior and change the conversation, as Mr. Stern did when he supported Magic Johnson at the height of the HIV/AIDS epidemic in 1992. When Johnson was voted by fans to be the starter for the 1992 NBA All-Star game, many people, including former teammates, argued that he should not be allowed to play for fear of contamination.
“In my view this was an opportunity,” Mr. Stern explained. “You stand with a family member regardless of how he got ill.”
“There needs to be an Interpol effective law enforcement to keep games fair and with as much integrity as possible.”
When Mr. Johnson helped lead his team to a victory, “I got to hug his big sweaty body. I knew what sports had the power to do and that goes to social responsibility. That’s easy!”
But both Mr. Stern and Mr. Gulati agreed that ethics in sports can be dicey territory. Depending on what’s at stake, soccer coaches in particular have been faced with pressure to look the other way on numerous occasions. The question often comes up, If a player is willing to accept the punishment when caught, is that cheating?
ldquo;If it’s a national team and it’s a question of making the World Cup, that’s tough,” concedes Mr. Gulati. “If it’s my daughter’s team and the coach asks me, the answer is simple: don’t cheat.”
As panel moderator Steven Mandis, Chairman and Senior Partner of Kalamata Capital and Adjunct Professor at Columbia Business School noted, sports can be “a forum in which we can see some of the best things about ourselves as human beings and what is possible.” Which makes the Olympic doping and FIFA corruption scandals all the more tragic.
One of the conclusions of the panel: the business of sports needs to crack down.
“There needs to be an Interpol effective law enforcement to keep games fair and with as much integrity as possible,” concluded Mr. Stern. “The fans expect it.”
Amazing Startups and Inclusive Growth
The conversation shifted gears with the introduction of young entrepreneur Donnel Baird ‘13, by Richard Witten, Special Advisor to the President of Columbia University. Mr. Baird’s energy firm, Blocpower, shows what is possible when a business is built on the founding principles of providing clean energy and giving back to the community.
“There is an increasing trend, particularly among Millennials, seeking a social and environmental return,” said Mr. Baird, adding that these consumers like to see 35% of investment going towards public benefit – a percentage that represents a potential $500 billion in investment dollars.
“It’s easier to recruit new clients because we’ve built a set of operations that demonstrate how much we care about their community.”
The young entrepreneur’s New York City-based startup develops portfolios of clean energy retrofit opportunities in underserved communities and connects those opportunities to investors seeking social, environmental and financial returns. It’s a classic example of social enterprise. But he came to the idea in a less conventional way – through his role as a community organizer in the projects of Brownsville, Brooklyn, where he witnessed the same inefficiencies he experienced as a child in a one-bedroom apartment that relied on the oven for heat. He did some research and learned that, across the country, these inner-city buildings are a leading driver of climate change. He then turned to Silicon Valley and applied tech trends such as the Internet of Things, cloud computing and mobile data analysis to install smart pumps and solar panels, measuring efficiencies and lowering costs along the value chain.
The result was greener buildings, with reduced carbon emissions and profits from solar electricity sales, 51% of which went back to residents. Mr. Baird did what many thought impossible in a such a fragmented market of low-income customers. Today he’s expanding the business model to smaller buildings, bodegas, restaurants, churches and, soon, hospitals, creating jobs for ex-offenders, and helping to reduce local childhood asthma rates while creating value for investors, employees and customers. BlocPower gets access to these opportunities because he’s already laid the foundation of trust.
“It’s easier to recruit new clients because we’ve built a set of operations that demonstrate how much we care about their community,” explained Mr. Baird.
For more videos from the conference, please view our video library
Trust in Industry
The next panel grappled with how to rebuild that trust in older, more established enterprises which have been plagued with corruption scandals. Leaders of three widely different industries – pharmaceuticals, energy and venture capital – weighed in on poor transparency, corporate malfeasance, tax loopholes and the income gap. The forum took place just as the morning news broke about Volkswagen’s layoff of 30,000 people. Each leader had his own take on the solution, but the common thread was accountability at the top.
“The CEO has to bear the ultimate responsibility,” said Alan Patricof ‘57, Co-Founder and Managing Director of Greycroft LLC.
“Volkswagen’s CEO should be shot as far as I am concerned,” added Roy Vagelos, M.D., ‘54PS, ‘83PS Chairman of the Board of Regeneron and former Chairman of the Board and CEO of Merck & Co.
Dr. Vagelos went on to condemn the examples of price gouging in Big Pharma but defends the industry as a whole, arguing that it has been tainted by a few bad actors. He talked about the decision his company took to price drugs in parallel with the CPI, which set the industry standard. Dr. Vagelos courageously defied his board with his decision to provide free drugs to cure river blindness in Sub-Saharan Africa while at Merck. “You don’t have to be a startup, you just have to know what to do…”
“The market economy is predicated on trust, but you have to tell the story in a straightforward, unvarnished way to make sure everybody gets it.”
Leaders must also know how to communicate, argued James Rogers, former President, CEO and Chairman of Duke Energy who was one of his sector’s leaders in acknowledging climate change. In 2007, in his role as Chairman of Edison Electrical Institute, Mr. Rogers broke industry ranks, getting his company to support federal climate change regulation. His company invested $5 billion in solar and wind power, and led a movement to get 89 cities in the U.S. to commit to reducing energy use by 20 percent in five years. Customers, employees and other stakeholders got behind him simply because they believed in his message and leadership.
“The market economy is predicated on trust, but you have to tell the story in a straightforward, unvarnished way to make sure everybody gets it.”
That kind of transparency and candor in leadership is paramount in the venture capital business, added Mr. Patricof, founder of one of the largest venture capital firms that effectively started the industry. The thousands of young startups VC’s support have to be able to trust that their information will not be stolen or given to a competitor. He noted that, during his career, he has never been sued, nor sued anyone, which could be considered a benchmark for fairness and integrity in business.
Author of the New York Times Op-Ed “Close My Tax Loophole,” Mr. Patricof also addressed income inequality, which further taints public perception of businesses. “When you look at the C-suite of a big corporation and you see a differential between the CEO salary and the lowest paid employee, who gets 500 to 1,000 times less, how do you justify that? It’s a troubling part of the problem.”
Changing the Conversation
And yet, as the career of Lucy Quist, Managing Director of Airtel Ghana, demonstrates, it’s possible to set the example and change the way business is done on a personal level. Ms. Quist, Ghana’s first female and Ghanaian to head up a national office for a multinational telecommunications company, trained as an electrical engineer before transitioning to an executive leadership position. An MBA graduate of INSEAD, she has a truly global background, having lived and worked in the U.K. and the U.S. before returning to her native Ghana. Since then, Ms. Quist has led the change of the business culture in her country by strictly adhering to ethical standards and connecting to customers in a personal way. She’s become the face of the brand and something of a local celebrity – demonstrating the power of her position and the impact her conduct has had on public perception.
“I cannot understand how it’s possible to have a test result and decide to hide or ignore it. These old companies were bastions of truth and trust. What has happened along the way?”
The pioneering executive added a fresh perspective to the discussion, humorously recalling how animated her own children were by the antics of the recent U.S. election. “Do business and political leaders really get to say that and get away with it?” they asked their mother.
Quist went on to acknowledge “Volkswagen and Wells Fargo, they shock me. As an engineer I cannot understand how it’s possible to have a test result and decide to hide or ignore it. These old companies were bastions of truth and trust. What has happened along the way?”
The Narrative for Business Leadership
In a panel moderated by Senior Vice Dean, Kathy Phillips, the forum ended with a discussion of the building blocks of leadership, featuring Lew Frankfort ‘69, Chairman Emeritus of Coach, Inc., and Impact America’s Kesha Cash ‘10. Ms. Cash, whose company invests in startups that have not only committed to a social cause, but whose mission drives revenues, has effectively created a business model predicated on ethics. Since 2014, IAF has deployed $3 million across five companies that are improving quality of life among low and moderate-income communities.
Kesha Cash '10 speaks with Lew Frankfort and Kathy Phillips during the Narrative for Business Leadership Panel. For more photos, click here.
Ms. Cash says there must be a level of trust when she invests in these businesses, and it’s in their interests to remain progressive because “When these companies grow into large competitors they will be the chosen ones for the consumer.”
Mr. Frankfort, who developed Coach into a multi-billion-dollar global brand, has sought to exemplify this kind of ethical leadership by leading by example. He nurtures trust within the organization through corporate governance and hiring, making sure that the next generation of executives carries these principles forward.
“When we recruit, we place a strong premium on emotional intelligence, self-awareness, values, commitment and work ethic. It’s hard if people are not centered in terms of who they are…”
Mr. Frankfort’s progressive values as a corporate leader stem from his background in the public sector, where he spent ten years in New York City government serving as Commissioner for the Agency for Child Development, and helped restore New York’s Head Start and day care programs during the fiscal crisis of the mid-1970s.
“You have to reinforce the values that have brought you to where you are today, and say you are going to continue to live by a code of conduct that is positive and inclusive no matter what.”
It’s a mindset that served him well in business. Mr. Frankfort helped Coach grow from a cottage-industry manufacturer with $6 million in sales in 1979, when he joined as Vice President of Business Development, to a global brand with more than $5 billion in sales by the time he retired as CEO in June, 2013. As the veteran corporate leader explains, if values weren’t part of Coach’s DNA, such growth would not have been possible.
With evidence of so many executives and entrepreneurs at the conference sharing these values, the day concluded on a decidedly optimistic note about the future. Conceived from a conversation between Peter Stringham, Ellen Kaden, former Senior Vice President at Campbell Soup, and Bruce Kogut, this event provided business leaders with a public forum in which to offer their candid views on the fundamental role business can play in creating a prosperous and inclusive society. And, in his closing remarks, Dean Glenn Hubbard echoed the importance of public discussion with the hope that the Bernstein Center, and other business schools and universities, continue to seize the opportunity to provide frank exchanges on the issues pertinent to a healthy and thriving economy.
As Mr. Frankfort aptly stated “You have to reinforce the values that have brought you to where you are today, and say you are going to continue to live by a code of conduct that is positive and inclusive no matter what.”