Episode 408 – Higher Ground with Alison Taylor

Alison Taylor‘We basically treated legal compliance as a proxy for ethics, which has never really been a particularly good fit.’

I think we can all agree the world is ready for some fresh perspectives on the ethical obligations of the business world: Alison Taylor is here to provide them. 

All too often there are stark differences between company statements and their day-to-day actions, as they perform the delicate dance between ethical decisions and turning a profit. Alison questions long-standing business beliefs, including the assumption that compliance is a proxy for ethical behaviour, proposing a new approach that accounts for companies’ internal systems and also their role within broader society. 

She also reveals how she went about writing her book ‘Higher Ground’, including how she workshopped her thoughts in the classroom and sparked dialogues online as a sounding board.

Insightful, challenging, practical and energising – classic Extraordinary Business Book Club stuff. 

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VIDEO

Alison Taylor’s site: https://alisontaylor.co/

Alison Jones on LinkedIn: https://www.linkedin.com/in/the-alison-jones/

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Alison Jones: I’m here today with Alison Taylor, who is a clinical professor at NYU Stern School of Business and the Executive Director at Ethical Systems, a research collaboration of prominent business school professors working on ethical culture. She’s spent decades advising large multinationals on risk, corruption, sustainability, and organizational culture, and she’s the author of Higher Ground: How businesses can do the right thing in a turbulent world.

Which is, may I say, Alison, a great title.

Alison Taylor: It’s a hard topic to find a title for because one thing that we can probably all agree on is when it comes to questions of responsible ethical business, there is a ton of jargon. So people don’t tend to react well to the word ethics, interestingly, but purpose, ESG, sustainability, corporate responsibility, there’s a lot of terminology and I think that’s kind of one of the problems, is that we don’t even have a common language to discuss what we’re talking about.

Alison Jones: Well, let’s talk, I mean, the principle ‘higher ground’. I’m guessing you chose that because it is something people feel they can get behind. It isn’t jargonistic, but what was your intention in choosing that title?

Alison Taylor: Well, one is that it’s the title of a Stevie Wonder song that came out before I was born. So there’s that reason. But the premise of the book is that we have become very confused about the question of what it means to be a responsible, ethical business. And we’re sort of trapped in these thickets of confusing rhetoric.

So I wanted to express an idea of kind of getting above the morass and seeing things a little bit more clearly. And that’s also what the cover is about. So, that was the metaphor we landed on. I’m also a very dedicated hiker. So I like the idea of thinking about kind of climbing mountains and seeing beautiful views.

The book is supposed to be very practical, but also provide a big picture perspective. And so, you need both practical tools and big picture views if you’re going to have a good hike.

Alison Jones: It’s a multi layered metaphor. We love a good metaphor. Yes. Brilliant.

I’m guessing that many, that there’s a sort of difference, isn’t there, between espoused values and values in practice when it comes to ethics. So how do you kind of square that circle? Because I’m guessing people are here for being ethical and ticking their ESG boxes and so on, but actually, if it were a choice between having the moral high ground and having a good bottom line, I’m guessing most business leaders tend to err towards the latter.

Alison Taylor: I mean, yes. I think one of the questions we need to interrogate is what the question of being ethical in a business context even means. So we had a consensus, for a very long time, that comes from Milton Friedman, that people now, he’s become a fashionable topic again, which is that you focus on the bottom line, you focus on generating shareholder value, and you don’t break the law.

So we basically treated legal compliance as a proxy for ethics, which it’s never really been a particularly good fit, but I think if you think about the rise of discussion on topics like climate change or human rights then we can see that the question of what’s legal or illegal is no longer a good guide to public perception.

And then, as you rightly say, there is in general, an enormous gap between stated values and actual behavior. And that is one of the things I think that really degrades culture and degrades the sense of that a business is responsible. The second thing that I run into all the time is the idea that there’s one set of rules that applies to the senior leadership team, and another set of rules that applies to everybody else.

Alison Jones: Oh, that’s interesting.

Alison Taylor: Yes, and so human beings, I think we’re very, very good at picking up on these kind of implicit signals. We’re very good at understanding what the corporation is saying it values versus what it’s signalling it actually values, and I don’t think human beings you know, are oblivious to that at all. And so I think that’s kind of part of the problem.

 We’ve got into this situation where our expectations of business arguably have never been higher. We’re expecting them to do something about all these really fraught, intractable social problems, but at the same time, we don’t trust them. So there’s a real kind of gotcha mindset. There’s a real sort of eye roll. There’s a lot of exhaustion with greenwashing and overpromising. And so there’s this paradox that we’re expecting more, but we do not trust anything that businesses are telling us.

Alison Jones: And I suppose we’re at a very interesting point in time as well, aren’t we? Where a few, very large tech businesses have got such an astonishing impact on the way we live our lives.

Alison Taylor: Well, yes, I mean, one, so a couple of things there, you know, it used to be that the biggest kind of business titans were in things like oil and gas and manufacturing, people like GE, companies like GE. Now, yes, it’s Facebook and Google and those kinds of companies. And so one, that’s a really interesting expression of the shift from tangible to intangible value.

And then two, you know, the fact that we have these huge, arguably monopolistic businesses that control what we see and hear and understand online is I think, you know, one of the big problems and one of the big societal debates we’re having is that we’ve become much more aware of these enormous negative externalities of business.

And we’d like something to be done about them. And we no longer trust regulation. We no longer trust the law to get the job done.

Alison Jones: Yes. And that’s, when you were talking about the Milton Friedman kind of approach of, well, you know, your first obligation is to your shareholders and maximizing the value for shareholders and as long as you don’t break the law. What we measure is shifting, isn’t it? Because there’s an awful lot that hasn’t historically appeared in a company’s accounts, but actually we are now expecting them to take account of the impact on society, the sustainability factors and all that. How close are we, do you think, to having those metrics?

No, right. That’s depressing.

Alison Taylor: So you’re absolutely right. The rise of ESG is essentially that. What ESG says is we, as investors will take a number of metrics traditionally considered non financial, we will take environmental and social indicators, we will measure and quantify those indicators, we will compare companies and we will use those metrics to design better investment approaches.

For sure, one of the problems that we’re having is the traditional metrics, traditional thinking about financial accounting, you know, a very obvious and powerful example would be we treat human beings, we treat employees as a cost. If we invest in training employees, we don’t treat that as an investment, we treat that as a cost.

And so, if you are thinking of human beings as a cost, then you’ve obviously got an impetus to try and get wages as low as possible. So certainly that’s part of the issue. And then there are a chorus of very credible business leaders saying exactly what you just asked. You know, if we can just agree that companies should disclose this set of metrics, then we’ll have apples to apples comparison and then the problem will be solved.

And that certainly will help, but I think we need to be honest that even if you were to have directly comparable data about, let’s say the water use of Pepsi versus Coca Cola. They’re different businesses with different product models. And so it’s even difficult to compare to very direct competitors like that without you know, thinking about everything else.

So context matters, where and how the business is operating matters. And I certainly wouldn’t say that the effort to get more consistent, comparable ESG data is worthless, it’s useful but I think it’s very interesting that that conversation, you know, the debate about whether ESG drives alpha and the debate about how to get better ESG metrics, sort of suck up 90 percent of the conversation on this topic.

I’m not saying they’re not important, but I don’t think they should dominate to the degree that they do.

Alison Jones: So what are we not talking about that we need to get leaders engaged with?

Alison Taylor: I think we need to talk about the moral and ethical questions. I think whether it’s ESG or purpose or ethics or any of these conversations, what we’re really having is a debate about what we would like the role of business in society to be. That is a should question. That is a normative conversation. And people have opinions on that, but it’s sort of fascinating that whether you are pro or anti sustainability, you are highly inclined to be out there saying, this has nothing to do with ideology, this is not political, this is just rational capitalism, this is good for the bottom line.

And so there’s a very interesting sort of collective denial that we ought to cover these moral and ethical questions. And then a tendency, if you start to try and talk about them to equate questions of ethics with ideology. So people will say, well, business shouldn’t be ideological. But that is not the same thing as saying, what would we like business to do and not do when it comes to the impact on human beings.

So, for sure, values are contested. For sure, people disagree. For sure, we’re in a fragmented, polarized world where we don’t even agree on questions of democracy, for example. But at the same time, there are numerous examples. We can think of the Boeing scandal that’s ongoing at the moment. I think we all agree, regardless of our political affiliation, that Boeing should make safe planes.

And there are many examples.

Alison Jones: Oh, I don’t know, that seems quite ideological to me, Alison.

Alison Taylor: Amazing headline in the New York Times a couple of days ago, actually, I’m going to find it for you. I’m going to try and find it for you. That said, hang on a minute. It said Boeing faces tricky balance between safety and financial performance. Well, I’m sorry. I don’t think Boeing really should be weighing up those issues if it would like me to get on its aeroplanes.

Alison Jones: Yes, and that is interesting because that is a really great example, isn’t it, of a sort of false dichotomy, which we’re so good at setting up.

Alison Taylor: And I think as the world has become more polarised, and this is an extreme issue in the US, it’s somewhat of an issue also in Britain where you are, but yes, that’s a really good example. Another example is the recent Norfolk Southern Rail train derailment that covered a part of Ohio in toxic chemicals. Is it really partisan to think that that’s okay?

Or we can think of Amazon warehouse workers being forced to work next to a dead body all day. Is it partisan to think that that’s a problem? So I think it’s kind of fascinating that we’ve got embroiled in all these debates about ESG and whether it’s driving value and purpose and whether it’s bullshit and that kind of thing.

And we’re not kind of getting to the point, which is what are we going to do about this unethical behavior by business?

Alison Jones: Your role strikes me as a quite uniquely fascinating one, because on the one hand, you’re a professor, you’re doing research, you are in the weeds, looking at policy, looking at what it is that we measure when we’re, you know, preparing accounts. Yes, there’s lots of detailed stuff there.

And there’s almost a sort of activist role in there as well. There’s a real sort of manifesto for, you know, people, we have to do better. How do you, how consciously, I guess, do you access those different parts of yourself when you’re writing a book like this?

Alison Taylor: Oh God, what a lovely question. Well, I’m not really an academic. That’s the first thing to say. I spent 20 or 30 years, in consulting both for and non profit businesses in a lot of different dimensions of this area and so everything that I write and say is grounded in real life experience.

There are a lot of academic books on this topic. A lot of the time, academic debates tend to skew abstract and theoretical and much of the business world largely ignores great, great ideas coming out of academia. So the first thing is that I’ve tried to say, you know, if you are in good faith trying to run a good business, what would you actually do? Because I think that is oddly enough a conversation that’s lacking.

At the same time, yes, I’m trying to encourage people or persuade people that a lot of the ways that we are thinking about these topics and even a lot of the metaphors that we use when we try to describe business as sort of odd are not working anymore.

And so, I’m trying to create or start a new conversation. I’m hoping a lot of people disagree with the idea of the book but I’m trying to say what we have done historically is treated business ethics as a sort of reputational or regulatory defense mechanism. We’ve said if we tell a certain story to stakeholders, a certain story to the general public, we will protect shareholder value, we will protect the corporations from legal scrutiny.

And those defenses, those boundaries are crumbling because we’ve seen the rise of transparency. Social media has had a profound impact on what we can see and learn about companies. We can all kind of peer under the hood and understand what’s going on. There are constant leaks out of companies.

We can think about recent videos, you know, of employees filming themselves being laid off on TikTok as an example. We’ve seen business becoming much more willing to speak up on controversial social, political, and environmental questions. And then we see…

Alison Jones: ..In fact, obliged to….

Alison Taylor: …yes, yes I mean, it’s absolutely true that when I ask my students, you know, what should business do on this or that conversation, they do not see neutrality and staying out of the conversation as being a realistic approach anymore. And so then those shifts in values, those shifts in expectations of what business should and shouldn’t be doing, I think are also extremely important here in describing the picture and how the landscape has shifted.

Alison Jones: How does that translate into pulling your argument together? When you sit down in front of your computer screen and you know the scope, you know the direction of travel, you know the stories, the evidence you want to present. How do you go about pulling that into a book that is going to shift the needle?

Alison Taylor: Well, it took a long time and it was pretty difficult.

I have, so the book is structured you know, I set up the problem, I describe how the landscape for ethical business has changed, and then my argument is that we’re using sort of rusty, worn out tools to try and tackle these new problems. So we’ve got tropes and cliches and ideas about responsible business. And my chapter two describes those.

And so the book is really structured around these myths and cliches. So there’s a number of them laid out in chapter two, and then each of the subsequent chapters corresponds to one of these myths and says, here’s why this is now not working anymore, and here’s what we should do instead.

And so I spend the second part of the book talking about business’s role in society. So what it should do about questions of environmental and social risks, stakeholder trust, transparency pressures, pressures to become involved in politics, that kind of thing. And then the last part of the book is more about culture and voice and employees and speaking up and leadership and those kind of questions.

So I’ve also tried to write the book so that each chapter is a standalone essay on a particular topic and you would not need to read the whole book to be able to read one chapter and see it, see the argument in there.

Alison Jones: Which is interesting because of course people do dip in and out of business books in a way that they would never think to do with the sort of, you know, historical non fiction or biography or anything like that.

Alison Taylor: Well, I actually don’t read that many books, I mean, I have to read a lot of business books to write this book, obviously, but I don’t read business books for fun on the whole. And I think a lot of…

Alison Jones: Alison!

Alison Taylor: …lot of them are, you know, anecdotes and nice stories and nice case studies. But I read them and they don’t bear that much resemblance to my lived experience of being in real life corporations.

Alison Jones: Yes, all those abstract ideas we were talking about, Yes.

What I love about the way that you, and what’s interesting as well, I always find when you look at a book, a good book, you look at it and you think, well of course it couldn’t have been structured any other way, but that’s not your experience as you write it. It feels like there’s an infinite number of ways of pulling this stuff together.

So what I love is that when you take those myths, you’re essentially starting where your reader is. You’re saying, you know, here’s what we’ve believed, here’s why it’s wrong. And that’s a really helpful way in to a topic, I think, if you’re trying to shift people’s perceptions.

Alison Taylor: Yes. And I mean, I tried to do it that way. And my hope is, as people read the book, they’ll see these myths, a lot of these myths and be like, well, what’s wrong with that? That’s right.

Alison Jones: We’ve always said that.

Alison Taylor: Exactly, so I’m trying to kind of be counterintuitive there. And then the other, you know, the other really important thing here, I think, which is where we started the conversation, is there’s so much confounding jargon in this space.

And one of the reasons I’ve tried to write this book is I spent a lot of time working in more kind of ethics, compliance, risk, investigations, fraud, corruption problems where there’s a certain type of legalistic jargon and frameworks and thinking. And then I moved into sustainability where there are very different ideas about what it takes to be an ethical business.

And that in itself is fascinating, that we’ve got these two very different, somewhat opposing ideas of what we need to do to drive change and sort of fascinating we’re treating those as separate functions that don’t have anything to do with each other.

Alison Jones: And actually they are paradigms, aren’t they? One’s based on compliance and as long as you tick, tick, tick, tick, then you’re fine. And the other one is based on making a difference. It’s based on something active. It’s, yes, really interesting. Yes, and what you said about metaphor, I thought was really interesting as well, because when you have a metaphor in use, you stop seeing it.

And actually you don’t realize how it is constraining your thinking.

Alison Taylor: Exactly. And so our metaphor for a company, I mean, one, we personify companies. We talk about what they think and do and dream and feel. We talk about whether they’re hypocrites or not. We talk about whether they’re good or bad, as if they’re people with a singular brain. And that comes from the assumption, you know, back to Friedman, that a business is a sort of self interested, profit maximizing black box that doesn’t need to pay any attention to the external context. And can just move through life, you know, driving this kind of singular goal. People sometimes say, you know, if a business was a person, they’d be a psychopath.

And so, that’s super interesting and it has all sorts of implications. So then when we’re talking about stakeholder pressures, what we’re really implying is, these stakeholder perceptions might undermine corporate value, so we need to defend the corporation from these perceptions.

And then that tendency to talk about a business as if it’s got a singular brain, means we can’t really solve a lot of these problems, because, let’s take the example of a business being a hypocrite. Well, a business is a hypocrite because it hasn’t got alignment between its government relations team, its HR team, its sustainability team, its ethics and compliance team, and its senior leadership team. It’s very, very common, for example, for businesses to be out there yodeling about all their wonderful climate change commitments, while their government relations team down the hall is lobbying against a carbon tax or lobbying against meaningful climate action.

So that’s certainly hypocrisy, but that’s an internal systems, you know, if we understand that an organization is a social system that sits within other social, environmental, and political systems, then it’s a little bit easier to see the problem and a little bit easier to deal with it.

Alison Jones: Certainly to fix it. Yes.

Alison Taylor: Yes, and if you understand that an organization is a social system, then, you can think about the role of employees in a little bit more of a clear way.

And you can start to explore, you know, a company is an actor in our wider systems. That doesn’t imply it can cut itself off from wider societal trends. If racism is an issue in society, racism will be an issue within companies. At the same time, it also does not imply that a corporation can take on and solve all of our societal challenges.

You hear a lot of, well, business is the only entity with the reach and scale to solve climate change today. And I think that rhetoric, that idea that what we really need is business to step up and solve all these problems is also wildly unrealistic and has the often unintended impact of undermining the political process.

So I think we also need to think in a clearer way about what is the role of the corporation in these wider systems and consider that. Which is very, very difficult to do if we’re thinking about it as a singular self interested actor?

Alison Jones: Yes. And of course, until you highlight that, until you say, look, the consequence of us thinking about it in this way is X, Y, and Z. And if we would think about it in this way, we would see more possibilities. For me, that is one of the most foundational privileges and obligations of somebody writing a business book because it helps you see things that you thought you knew about in a different way. And that makes new things possible, which is really exciting.

I’m going to ask you, for your best tip, if you like. So for somebody who is, who has a really strong idea, who’s passionate about what it is they want to communicate, but perhaps they are right at the start of that process of pulling it all together into a book, what would you tell them?

Alison Taylor: For a writer you mean?

Alison Jones: Yes, for somebody wanting to write a book that moves, but helps people see things differently.

Alison Taylor: To me, I mean, this is such a good question. To me, the challenge I ran into over and over again, which I think would be the challenge faced by anyone that has deep knowledge of a subject and wants to write a book about it, is, and it sounds like such a basic question, but what’s obvious and what do you need to explain?

So suppose, a friend of mine at the moment is writing a book about the history of Western business in Russia. It’s going to be amazing. And so, you know, I have this conversation with him, like, are you assuming that your readers know who all the big oligarchs are, that know all this history? Or do you need to explain it?

And so it’s like that with me. Do I need to spend time exploring the background and history of compliance and describing that or can I assume that the reader will be familiar with that? And so, I think you need to have an idea about who’s reading the book, but it’s very, very difficult I think with the best will in the world, if you’re very deep in a world, to kind of take a step back and to try and describe it in a compelling way without either being too obvious or being too obscure.

So that was not the only challenge I faced writing this book. I mean, writing a book’s painful and isolating and emotionally draining, but very fulfilling. But that’s probably the biggest challenge I ran into.

Alison Jones: And how did you meet that challenge?

Alison Taylor: Oh, many, many drafts and much walking in the woods and many critical readers from different disciplines and a lot of the time, well, I did two things, I road tested my ideas in the classroom, so I thought about my brilliant MBA Stern students. I thought about the questions they ask, I thought about the ideas they’re familiar with, and what I would need to explain to them.

The second thing I did and this really sort of took off during writing the book is I have a really nice network on LinkedIn. So very often what I would do at the beginning of the day, I’d put out some article or put out some idea, or I’d ask people what they thought. And by the end of the day, I’d often have 80 comments and new ideas and new takes. So I sort of crowd sourced as well. I’d be thinking about, you know, transparency is this real dilemma and I’d be like, I wonder what people think?

And I really found that that really helped me kind of calibrate and understand what people’s immediate reactions were. So, I think you know, you sort of do need to go and sit in a room and think deeply about these topics, but I found it really beneficial to reflect my ideas as I was forming them. Or at least kind of put the ideas out there and see how people reacted to them. And then I learned a lot about what I needed to explain and what I didn’t.

Alison Jones: Brilliant answer. I love the idea about just having that conversation in public on LinkedIn, just getting clear in your, yes, and of course, as you are forcing yourself to articulate things that’s moving your own thinking forward as well, isn’t it? So, win, win, win, win, win. Yes, brilliant.

And Alison, I always ask my guests to recommend a book as well.

It doesn’t have to be a business book, but what book would you love to put under the noses of anybody listening and tell them, read this.

Alison Taylor: I mean, it’s an absolute classic, but if people have not read Moral Mazes, it’s written in the 80s. It’s a sort of anthropological discussion of leaders and managers in business in America. It’s got incredible, it’s such a page turner. I mean, it’s just, it transformed how I think about business ethics and think about these questions and thought about how to describe these problems.

The other book I would recommend there’s a German Korean philosopher called Byung-Chul Han . I’m sure I’m butchering how to say that name, but he’s written a lot of very short books about problems in society. He wrote a book called the Transparency Society that transformed how I think about transparency and disclosure.

It’s not about business at all, but it’s an amazing book where you have to read each sentence three times to think about what he means and it’s really, yes, really an incredible read.

Alison Jones: Brilliant. Fantastic recommendations. Thank you so much. Amazing.

So Alison, if people want to find out, I guess more about you, more about your thinking, more about the work that you’re doing, more about the book, where should they go?

Alison Taylor: I have a website, alisontaylor.co, so that’s Alison with one L. That’s got a lot of my recent writings, podcasts, a description of the book chapter by chapter. You can also Google me. I mean, I’m out there talking about and writing about this stuff all the time. But, alisontaylor.co, you would get a lot of information about me and my book and the ideas in it.

Alison Jones: Brilliant. I will put that link up on the show notes at extraordinarybusinessbooks.com.

Just brilliant talking to you today, Alison. Thank you so much for that. And for just being so generous about what you grappled with and how you resolved it. That was so helpful. Thank you.

Alison Taylor: Wonderful conversation. Loved talking to you. And thank you so much for having me.

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