In This Issue
Spring Issue of The Bridge on Engineering Ethics
March 3, 2017 Volume 47 Issue 1

Ethics in Business Every Employee’s Character and Behavior Count

Thursday, April 6, 2017

Author: Chad Holliday

Nearly ten years ago, Emmanuel Mignot, a Shell employee, was driving on a highway in a developing country when he was pulled over by a policeman, allegedly for speeding. The policeman asked him to pay $10 to avoid an official fine. The sun was beating down, there was no one else around, and he had enough money in his wallet. But he refused.

This prompted the policeman to initiate a process, which involved Mignot appearing at a tribunal a few weeks later. He waited for his case to be called in a metal shed surrounded by wire fencing, with men accused of a range of crimes. Some urinated on the floor. Others hassled him for money and cigarettes. At the end of the day, he stood before a judge and was released because the policeman failed to show up to testify.

When Mignot told his friends about this experience, they questioned his actions, arguing that it would have been much easier to pay the bribe. But Mignot, who was driving a Shell-owned car, was proud of the way he had behaved. “I felt it was important to make a contribution—no matter how small—to stopping bribery,” he explained. “And although I was driving on a weekend, I represented Shell.”1

Mignot demonstrated the highest ethical standards. By this I mean he showed an unwavering and uncompromising adherence to his company’s ethical principles, regardless of the situation or personal impact. This is what I consider the benchmark for all employees working for businesses throughout the world.

It’s no good simply having some ethical standards. Even organized crime has its own brand of values. Nor is it impressive to claim highly ethical standards, as this suggests there’s some wiggle room. Achieving the highest standards throughout a company is possible, but only if all employees act like Mignot did, and never yield when making an ethical decision.

State of Play

Companies that set the bar this high will be trusted by their employees, the public, customers, governments—the list goes on. This trust is the cornerstone of a healthy business model. If a company is trusted for its ethical standards, it will encourage the brightest minds to apply for jobs, for example. It will also give people confidence to invest. Essentially, trust feeds into a virtuous circle.

The progress made by businesses in recent decades suggests that this view is widely recognized. Think of the companywide codes of conduct that have been introduced all over the world. While these codes alone are far from enough, they have brought much more consistency of approach to businesses.

Yet despite the steps that have been taken, the highest ethical standards are not being adopted in all companies all the time. The 2015 Volkswagen emissions saga and the steps taken by Mitsubishi in 2016 to falsify fuel economy data, far from isolated incidences in the global business community, are some evidence of this. The consequence is that trust of businesses, and those who work for them, is low. A Gallup poll conducted in December 2015 shows that business executives are seen as less honest and ethical than many professions (figure 1). Only 17 percent of respondents rated their honesty and ethical standards as high or very high.

  Figure 1

The last time Gallup looked into the perceived honesty and ethics of engineers was in 2012, when engineers got an honesty score of 70 percent, tying them with doctors in third place. It was much better than some previous scores for engineers, who got a rating of 45 percent in both 1983 and 1991. These scores show that progress has been made. But not enough.

The research from Gallup confirms in my mind that the only way to boost trust is if every single person working for every single company has the highest ethical standards. So the pertinent question for all businesses is, How do they move the dial from the majority of employees behaving ethically to all employees behaving ethically, day in and day out?

In answering this question I will share examples of ethical practice from different companies, including Shell. I am in no way suggesting that Shell is a poster company when it comes to demonstrating ethical values. Shell has had its issues, notably overbooking its reserves just over a decade ago and the bribery matter Panalpina that resulted in a deferred prosecution agreement in 2010. Since then, the company has invested significant time and effort at all levels of the organization to improve its ethical standards and move from compliance to commitment in the heart and mind of each employee.

While I will focus on what individual companies should do, it’s important to stress that companies must work together, not in isolation, to achieve the highest ethical standards. If an ethical company does some work with a partner or supplier that is unethical, this undermines its credibility.

Companies should ensure that they go into business with those that operate to the same ethical standards they have. This can be done, for example, through due diligence into the ethical performance of the company as well as its owners, audit rights to confirm that the company is operating in accordance with the agreed ethical standards, and the right to terminate the contract if that is not the case.

Tone from the Top

A business can ensure that all employees behave to the highest ethical standards only if its senior executives set an example. As the adage goes, what interests my boss, fascinates me. This point was emphasized by Andrew Fastow, the former chief financial officer of Enron who spent more than five years in prison for his part in the institutional accounting fraud that caused the company’s downfall. In an interview with the Association of Certified Fraud Examiners (Useem 2016), he said:

Culture starts at the top. But it doesn’t start at the top with pretty statements. Employees will see through empty rhetoric and will emulate the nature of top-management decision making. . . . A robust code of conduct can be emasculated by one action of the CEO or CFO.

Many cases support this point. In 1979, for example, James Burke, chief executive of Johnson & Johnson, challenged 20 senior managers about the merits of the company’s principles—titled Our Credo—which had been in existence for nearly a century. “If we’re not going to live by it, let’s tear it off the wall,” he said. There was a frank exchange of views, which resulted in the decision to keep the credo and use it as a moral compass for the company.2

Three years later—when seven people died after taking a Johnson & Johnson painkiller, Tylenol, that had been laced with cyanide—the company’s response was swift, decisive, and correct. The company removed every bottle of capsules from shops in the United States and warned the public. A couple of months later, the product was relaunched in tamper-proof packaging.

The way the company acted has been heralded as an example of effective crisis management. But I believe its actions also reflected its ethical standards. Burke and his team were clear in their communication to the media and the public. And they did not wriggle free from their responsibilities to consumers, who had placed trust in them when buying Tylenol. Effectively, Burke acted in accordance with the company’s credo, which begins with the following statements: “We believe our first responsibility is to the doctors, nurses and patients, to mothers and fathers and all others who use our products and services. In meeting their needs everything we do must be of high quality.” Burke’s actions set the tone for how all employees should behave throughout the crisis.

Burke led by example. In a very different way, so did Peter Sharpe, Shell’s executive vice president for wells. After the explosion on BP’s Deepwater Horizon oil rig in the Gulf of Mexico in 2010, Shell updated a key manual with the engineering lessons learned from this tragic accident. It was important to Sharpe that all of Shell’s 2,500 well engineers learned the fresh content, but he recognized that sending a blanket email with a hefty attachment was not the way forward.

So Sharpe sat down, along with the other senior managers in his department, and took an exam that tested their understanding of the updated manual. Shell’s principal technical engineer set and invigilated the exam, and posted the leadership team’s results on the company’s intranet. Once Sharpe and his team had passed, he said to all of Shell’s well engineers: “We’ve done it, now it’s your turn.” Shell’s view runs counter to the Dilbert comic strip (figure 2): if well engineers do not pass the necessary tests, they are out of the company.

Culture

One of the main responsibilities of leaders like Burke and Sharpe is to influence the overall culture of a company. Crucially, they must make sure, through their words and actions, that there is complete alignment between a company’s code of conduct and its culture. After all, as the Dutch athletics coach Charles van Commenee put it, “Nobody is going to jump higher if you lower the bar” (Kessel 2011).

This point is emphasized by the organizational psychologist Kilian Wawoe, who worked in human resources for a bank for a large part of his career. He observed that “there is a culture and there are rules. If these rules do not reflect the culture, rules are useless” (Jacobs 2014).

In countless codes of conduct there are clear statements about whistleblowing and the actions employees should take if they come across improper behavior. But this counts for nothing if a company’s culture makes employees feel unable to report to a manager what they have seen.

It comes down to having a culture in which all ethical dilemmas can be discussed in an open and transparent way, without fear of reprisal. Ann Tenbrunsel, professor of business ethics at the University of Notre Dame, experienced a very different type of culture a few years ago. She was invited to speak with staff at a big business about the importance of ethics in organizations. But when a few employees caught wind of the fact that Tenbrunsel was going to point out so-called ethical blind spots in their sector, they immediately cancelled the talk.

Tenbrunsel, who has spent the past two decades looking at why good people make bad moral decisions in the workplace, says this action is indicative of a culture where there is little or no appetite to discuss potentially sensitive subjects. It is similar to a child putting his hands over his ears and screaming in an effort to ignore what’s going on around him.

The trait of looking the other way to avoid seeing unethical behavior is something Tenbrunsel has come across regularly during her research. “The vast majority of the time, it’s never as simple as one individual being unethical in an organization,” she explained. “It may start that way. But their actions perpetuate because people around them turn a blind eye—consciously or unconsciously.” A culture that encourages “motivated searching, versus motivated blindness,” she contends, would help stamp out this attitude.

As important as openness is, an ethical culture should extend much further. This gets to the heart of how ethics is interpreted. For me, business is about people, not just kit, molecules, technology, and suchlike.

The Shell General Business Principles3 lay out Shell’s core values as honesty, integrity, and respect for people. Ethical decisions grounded in those values must be at the core of all energy projects—from ensuring that there is no place for bribery to instilling a transparent culture.

But a company’s ethical culture is also about the way it behaves in each country where it does work. This means employees must think about how their work impacts society, the environment, and the safety of coworkers.

In Iraq, as with every other country where Shell works, the company’s commitment to operate in accordance with its Business Principles extends beyond how it operates in oil and gas fields to how it works alongside governments, local communities, and others affected by its projects.

One way Shell does this is through its partnership with the AMAR Charitable Foundation, formed to help address the need for emergency medical care among Iraqis living near Majnoon, one of the largest oil fields in the world. The partnership has set up healthcare projects, one of which involves a team of Women Health Volunteers conducting home visits. In 2015 Shell supported 64 such volunteers in Basrah, and they carried out more than 13,000 visits throughout the year.

Ethics in Education

What other steps can be taken to ensure that a broad interpretation of ethics is understood by employees? Schools and universities have a role in fostering in students the importance of ethics in society. An ethics test even makes an impression on Calvin, the six-year-old boy who was the brainchild of the American cartoonist Bill Watterson (figure 3).

Bringing ethics into the classroom or lecture hall supports the following reasoning (paraphrased from C.S. Lewis): “Education without values, as useful as it is, seems rather to make man a more clever devil.” It also ensures that ethics is in the psyche of employees on their first day on the job.

This matters, especially for professions such as engineering where it might appear that day-to-day decisions are ethically neutral. But such a view ignores wider considerations, such as the impact of drilling for oil near a village.

“Universities have a significant role to play in instilling the idea that ethics is a central part of all problems engineers grapple with,” says John Baldari, a former engineer in the US Army and now a doctoral candidate at the University of Leeds. “This will help eradicate employees saying things like ‘This is only an engineering challenge’ or ‘Ethics are a compliance officer’s issue.’ Every aspect of a project should be every employee’s concern,” he argues.

There are many cases of great harm being caused when workers do not adhere to ethical principles. In May 2008, for example, more than 5,000 students died as a result of the magnitude 7.9 earthquake in China’s Sichuan province. Reports stated that schools crumpled because construction companies had ignored civil engineering standards.

The disaster is a reminder for all engineers of the potential consequences of their actions. Whether an employee is a civil, aeronautical, mechanical, electrical, computer, petroleum, or chemical engineer, the highest ethical standards must be upheld. It’s vital for schools and universities to play their part in reinforcing this point.

Of course, education in ethics should not stop when employees join companies. At Shell, for example, Robert Patterson, executive vice president for engineering, set up informal presentations on “design and engineering practices.” Modelled on TED talks, the idea is that engineers speak openly about dilemmas they have faced and how they addressed them. The talks, on subjects such as the installation of subsea equipment, are recorded and the videos shared in Shell’s engineering community. “They get to the heart of what it means to be a professional engineer,” explains Patterson:

Yes, you have to be technically competent and you need to have broad knowledge of the subject. But you must also ensure your work lives up to the highest possible ethical standards. You have to take account of the impact of what you do on everyone affected by a project, from the local community to the government.

Character Counts: Three Questions to Guide Behavior

If businesses fail to focus on each of these three elements—leading by example, culture, and education—then dubious ethical decisions will creep in. Even if it’s only a few employees in a company behaving unethically, the ramifications are potentially huge. But if companies do successfully address these areas, they stand a chance of being able to operate consistently to the highest ethical standards.

And the higher a company’s ethical standards, the more it is trusted. Around 20 years ago when working for DuPont, I was on a business trip to Southeast Asia. DuPont was about to announce a partnership with a company from the region. A few days before the deal, I paid a visit to the US ambassador. We were chatting with government officials and representatives from different companies when the ambassador lured me away, saying he wanted to show me some prize rosebushes.

When we arrived at a couple of scrawny-looking shrubs, it became clear the ambassador wanted an excuse to talk in private. He warned me about the unethical standards of the company I was about to sign a contract with. He sought me out because of his experiences working with DuPont over the previous decade, which made him trust me. I would never have received that forewarning if that trust was not there. After this conversation with the ambassador, I took the decision to pull DuPont out of the project.

Gaining trust like this comes from never yielding in the face of ethical dilemmas—no matter how small the issue seems. The consequences of doing so are potentially massive. Think of Emmanuel Mignot. If he had paid the bribe to the policeman that Saturday morning, he may have broken local and international corruption laws. That one small action may have sparked a series of events that could have eroded trust in Shell’s ability to operate in the region.

You never know the consequences of seemingly inconsequential acts. This means that the character and behavior of every single employee working for a company count, more than anyone imagines.

Ultimately, it comes down to all employees asking themselves three questions:

  1. Would I be happy with it if my actions were reported accurately in a newspaper?
  2. Would I be proud of myself if I did something that my manager, an ethical individual, found out about?
  3. Would I be proud if my family found out about what I had done?

If the answer is no to any of these questions, the response is simple—say and do the right thing.

Acknowledgments

I appreciate support from Thomas Baird, my Shell colleague, in developing this article and finding examples to illustrate the message.

References

Jacobs E. 2014. Tales from an overworked city. Financial Times, January 16. Available at https://www.ft.com/content/8469a7f2-7dd8-11e3-b409- 00144feab dc0.

Kessel A. 2011. Charles van Commenee impressed with
Jessica Ennis and Jenny Meadows. The Guardian, January 30. Available at https://www.theguardian.com/sport/2011/jan/30/charles- van-commenee-jessica-ennis.

Useem J. 2016. What was Volkswagen thinking? The Atlantic, January/February. Available at www.theatlantic.com/magazine/archive/2016/01/what-was- volkswagen-thinking/419127/.

FOOTNOTES

1 Here and throughout, unless otherwise indicated, quotations are based on personal conversations or email communications.

2 The Johnson & Johnson credo is available at https://www.jnj.com/about-jnj/jnj-credo.

3 These are available at www.shell.com/about-us/our-values.html.

About the Author:Chad Holliday (NAE) is chair of Royal Dutch Shell plc and former chair of the US National Academy of Engineering.