Markkula Center of Applied Ethics

CEOs: Setting the Ethical Tone

The role of the CEO in setting a company's ethical culture was the focus of a panel at the April 6 meeting of the Business and Organizational Ethics Partnership, a program of the Markkula Center for Applied Ethics and 13 corporations.

Tony Ridder, CEO of Knight Ridder, Russell Howard, CEO of Maxygen, and Keith Krach, former CEO of Ariba represented three very different approaches, reflecting three diverse organizations.

While all agreed that the ethical tone is set at the top, they had each developed their own approach to infusing high ethical standard throughout their organizations.

Ridder, who heads the second largest newspaper company in the United States, described his company's requirement that the top 20 managerial personnel at every paper sign a code of ethics every year. The code deals with conflicts of interest, self-dealing, gifts, and outside employment. It prohibits political contributions, service on for-profit boards, and the use of confidential information for personal benefit.

As a newspaper company, Knight Ridder also has an extensive code of ethics for all of its journalists. It also forbids political contributions as well as setting out a zero-tolerance policy for plagiarism and sexual harassment.

At Ariba, Krach explained, the challenge was to promulgate the company's values while the software producer was growing at a rate of 100 percent per quarter for the first two to three years, and then 25 to 50 percent thereafter.

Krach began with what he calls his "playbook," a step-by-step guide to the company's vision, mission, values, team rules, and objectives.

For example, Ariba's key values were respect, integrity, courage, and ambition. Team rules included

  • Direct, honest, and open communication
  • No idea is a dumb idea
  • Always raise standards of performance
  • Team first, functional specialists second
  • Hire the best people, especially if they're better than us

To get these ideas out to their ever-growing workforce, Ariba developed a 'cascade process. The playbook was developed by the executive team, who taught it to the directors, who taught it to the managers, who taught it to the workers, with each level of management being encouraged to put the playbook into their own words.

Krach gave several examples of how the playbook worked out in practice. Early in the company's history, the original marketing vice president stood up at a regular Friday roundtable and told his colleagues that, based on the team rule, "Hire the best people," he thought he should step aside because he no longer had the breadth of experience to handle marketing for a company that was growing so quickly and becoming so large and complex. He encouraged the executive team to hire a world-class marketing person and let him concentrate on strategic alliances. The company acted on his recommendation. "You could have heard a pin drop in the room that day, but it set an example that became part of the tribal lore of Ariba," said Krach.

Krach's example dovetailed with the main point of Howard's presentations: "I have a profound belief that ethics flow from actions. Whatever plans or words or principles you set up, if you don't follow through, they don't mean anything."

Howard, who heads a 200-person biotech company, has lunch with every new Maxygen hire, where among other topics, he discusses the company's values. But Howard also expressed doubt that any company process could "take a scoundrel and turn him into an ethical person." Integrity, he argued, comes from some interaction of genes and environment that he believes is formed well before an employee comes to Maxygen. In his view, the trick is to hire people who share the company's values of "honesty and believing passionately in what you do."

Howard also pointed out some of the specific ethical challenges facing biotech companies, which by nature have a very long lead time before they ever produce a profitable therapeutic. As he put it, "How does a biotech tell the truth over 15 years, while it burns other people's money?" How forthcoming should the company be about the prospects for its therapeutics and about potential problems in clinical trials? At a biotech, he said, "you're selling a story," and the temptation is always there to hype results. Ultimately, he added, "you're always worried, Will our product cause harm?"