'Doing well and doing good’ in the age of purpose

Friday, 12 July 2019  @Business School

AGSM 2019 Professional Forum: Ethical leadership in an accelerating world panel discussion

In his 1962 book Capitalism and Freedom, American economist Milton Friedman famously stated, “There’s only one social responsibility of a business and that’s to increase its profits.”

As Dr Tracey Wilcox, Academic Director of Postgraduate Programs at the UNSW Business School and facilitator of a panel discussion at the AGSM 2019 Professional Forum: Ethical Leadership in an Accelerating World explained, the world has changed since Friedman spoke of shareholder primacy. In today’s accelerated world, global political, economic, social, technological and environmental disruption is causing a significant shift in public sentiment and human consumer behaviour, forcing many organisations to rethink their purpose.

“The current age of purpose has turned our attention to stakeholders,” she said. “The Hayne Royal Commission is a clear example of how things go wrong when businesses don’t think about their stakeholders. We know that businesses have the capacity to do great harm, but they also have the capacity to do great good.”

Joining Dr Wilcox on the panel, Phil Vernon, CEO of Australian Ethical Investment, Emma Weston, CEO and Co-Founder of Agri-Digital and Amanda Wallace, Head of Corporate Communications for IAG, discussed ethical leadership as a type of change agency. “Ethical leadership is having the courage to speak the truth and accept the challenge that comes with that,” said Weston.

Profit and positive social impact can co-exist

When it comes to ‘doing well and doing good’, Phil Vernon described superannuation fund Australian Ethical as being founded on a set of beliefs that incorporates both. “There should be no compromise between the two,” he said.

Unfortunately, social good does not naturally correlate in a world formerly focused on profit only. “We’ve convinced ourselves there’s almost a binary connection between economic outcomes and doing the right thing. This thinking needs to change,” he said. “When the corporation was first designed it wasn’t designed to have influence in the way it does today.”

He believes the problematic corporate outcomes we see today need to be reversed. “With limited liability and joint-stock companies, shareholders can invest and reap all the rewards of the upside while having no accountability for the damage they might be creating,” said Vernon. “The company needs to have other, better attributes. You need to embed a company with the ability to be conscious of the impact it has around it.”

And this is the case for IAG’s Amanda Wallace who places competence and character as priorities for ‘doing well and doing good’. “I think of it from the point of view of the business I work in, then myself as an individual,” said Wallace. “For IAG, our mission is to ‘make your world a safer place’ – and we have to balance financial performance with the way we treat our customers and people, to ensure we live our purpose.”

Taking a stakeholder-first approach

Emma Weston is the CEO and Co-Founder of AgriDigital, a tech startup that aims to solve problems in the agricultural supply chain by using blockchain to ensure farmers are paid for what they deliver, when they deliver.

“For some reason many people thought this idea was very revolutionary,” said Weston. “Supply chains are complex, and the average person doesn’t understand the difficulty farmers face in getting paid within this system.”

Weston identified empathy as a huge component to achieving ethical practice. “Step into the shoes of every stakeholder, and build your knowledge of their position in the context of your business. That’s your starting point.”

Wallace agreed, reminding the AGSM audience that, “As people in business, we’re very privileged. Conscious empathy means you can understand the thoughts behind a decision, even if you disagree with it.”

She gave the example of the recent federal election results, particularly in Queensland where there was apparent support of the Adani coal mine.

“You might ask ‘why did people take a short term view rather than voting for the overall health of the earth?’ But for these families it might have been a matter of ‘how can I support my family?’ over something that may seem hypothetical. It doesn’t mean they don’t care, it might simply mean they chose to focus on their immediate need.”

Wallace says IAG incorporates active questioning within its business practice. “One of our CEO’s leadership principles is to ask why, and then to keep asking why. This helps break the continuous cycle of accepting the norm.”

Balancing an ethical charter with human dignity

Australian Ethical Investment’s ethical charter focuses on social and environmental concerns. Vernon understands the need for conscious empathy when making decisions – that’s why the investment fund has a set of frameworks providing the boundaries these ethical decisions can be made within. “We absolutely care about the environment, but we also care about human happiness and dignity,” said Vernon. “We come against these ethical dilemmas everyday, so it’s a fine balancing act.”

The panel agreed climate change is the issue of our times, and Vernon recommended businesses consider investing in a transition strategy.

“Companies can do a lot more, and faster. They need to stop rationalising inaction,” he said. Giving the example of Australian Ethical divesting from fossil fuels, it used to be the case that they accepted the argument of gas as a transitional fuel. “We no longer believe that. If companies invest in a transition strategy over a number of years, they can address climate change with the urgency it deserves whilst also addressing the human happiness and dignity that we need to preserve in any transition”

And as Dr Wilcox said, the end game of ethics is a world where humans flourish. “Try and imagine a world where businesses flourish, communities flourish, where individuals flourish. We all have the capacity through our own leadership practices to bring about a better world,” she said.

The panel spoke at AGSM @ UNSW Business School’s 2019 Professional Forum: Ethical Leadership in an Accelerating World in Sydney on 20 June.

Find out more: www.agsm.edu.au

Any questions, call or email: +61 2 9931 9490 or admissions@agsm.edu.au