Markkula Center of Applied Ethics

Silicon Valley Executives Discuss Building an Ethical Organization

These comments are excerpts from presentations at the Ethics Center's third biennial global business Ethics Conference, "The Accountable Corporation," held February 18-19, 2005, on the Santa Clara University campus.

Almost 200 academics from 24 states and eight foreign countries attended the conference in addition to businesspeople from across the Bay Area. The conference was sponsored for the second year by Cisco Systems and gained support from Hewlett-Packard and the Saga Foundation.

Ned Barnholt
Edward W. (Ned) Barnholt is chairman emeritus of Agilent Technologies and the company's former chairman, president, and chief executive officer. Agilent ranked Number 9 in Business Ethics magazine's "100 Best Corporate Citizens" list.

People want to work for a company they can be proud of. They want to work for a company that gives back. I'm convinced that there is a direct link between employee morale and the efforts the company makes in social responsibility. In addition to helping employee morale, these efforts also help us to attract and retain top talent.

Even during the worst of the downturn in our industry, when we had to lay off about a third of our workforce just to make sure the company survived and when our revenue dropped very dramatically, we continued to encourage our employees to give back to the community. Even though at a reduced level, we continued our corporate philanthropy program. Our employees spirits were lifted during that period by the way we conducted our business and continued to give back.

When I talk to investors, many of them ask me how I know that all over Agilent there are people who are acting in ethical ways. How do I ensure the integrity of the company? I think it's important for boards of directors and investors to ask questions about what the company is doing in the community as well as what it is doing to build a culture of ethics and values.

The most important thing is the tone at the top. Leaders need to make sure there are explicit objectives and strategies around social responsibility. You have to have clear metrics and goals, and then you have to hold people accountable. Employees watch if you back up in actions what you say in words. If you're not prepared to fund and staff programs in social responsibility, people will see through that very quickly. If you as a leader aren't involved in the community, then people figure out that they don't need to either.

Dan Warmenhoven

Dan Warmenhoven is the chief executive officer of Network Appliance, Inc. Network Appliance has been ranked as one of Fortune magazine's 100 Best Companies to Work for in America for the past three years.

What is business ethics? It really does start with a value system inside the company, a value system that the leadership of the company establishes and describes as an expectation for employees.

At Network Appliance, I'm not a founder, but within my first year, I collected the executive team, and we had a very in-depth discussion about what kind of company we were trying to build. Unanimously, we said let's go build a great company, a model company. We asked, "How would you know such a company if you saw it?" and the answer was, you'd probably have to ask at least five constituencies:

We put these in rank order. The first was customers. We have to ensure customer success. The second was our shareholders. We have a fiduciary obligation to try to maximize shareholder value in a long-term context. The third was our employees, the fourth was our business partners, and the fifth was the community in which we live, which is in fact a very global community.

The second thing we did was to think about the kind of culture we wanted to build. We set a goal to double our sales every year, which we, in fact, did with an 87 percent growth rate between 1996 and 2001. But if you're going to double every year, you can't do it through control systems and tight management and hierarchy. That would stifle growth. So we concluded that it had to be management by objectives and management by value system. We were going to give our employees the challenges and let them figure out how to meet them within the context of the value system we set.