Navigate difficult decisions, maintain trust, and uphold strong core values.

Explore the complexities of ethical leadership with Tina Seelig and John Hennessy as they share their experiences and insights. From handling ethical dilemmas to maintaining core values amidst challenges, John highlights the importance of honesty, trust, and organizational integrity. Tina leads a profound discussion on navigating gray areas where legality and ethics might conflict.

Together, they uncover strategies for fostering trust, inoculating oneself against unethical decisions, and how a leader's values impact the culture of an entire institution.

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Chapters:

(00:00:00) Introduction

Host Tina Seelig introduces the topic of ethical and trustworthy leadership with John Hennessy.

(00:01:05) Maintaining Ethics in Leadership

How reputation and core values play crucial roles in leadership.

(00:01:43) Dealing with Ethical Dilemmas

Encountering unethical requests and the importance of standing by one’s principles.

(00:03:46) Preventing Ethical Pitfalls

Advice on preparing for ethical challenges.

(00:05:04) Organizational Accountability

The challenges of ensuring ethics within large organizations.

(00:07:40) Ethical Decision-Making in Gray Areas

Navigating situations that fall in the gray areas of legality and ethics.

(00:10:48) Ethical Leadership and Core Values

The importance of staying true to core values in leadership.

(00:13:18) Trust and Crisis Management

Why trust is crucial for managing crises and driving change within organizations.

(00:16:00) Rebuilding Trust After a Crisis

Rebuilding trust and the importance of addressing issues head-on.

(00:18:19) Organizational Ethics and People

How ethics rely on both leadership and individual actions within the organization.

(00:20:05) Episode Takeaways

Four key lessons for listeners from this episode.

(00:20:36) Conclusion

Welcome to Leading Matters, a podcast from Knight-Hennessy Scholars, a multicultural and multidisciplinary graduate fellowship program at Stanford University that focuses on leadership.

I'm Tina Seelig, your host and executive director of Knight-Hennessy.

Throughout these six episodes, I'll talk with John Hennessy about his experiences in different leadership roles.

Including as a faculty member, entrepreneur, president of Stanford University, and founder of Knight-Hennessy Scholars.

Hi, John.

Hi, Tina.

Today, we're going to focus on what it means to be an ethical and trustworthy leader and why that's important.

This is a topic I actually spend a lot of time focusing on in my courses that I've taught on entrepreneurship and leadership.

It's really important to think about these issues before your values get tested and to develop ways to inoculate yourself so that you don't end up on a slippery slope.

So John, what are the things you do to make sure that you don't give in to temptation to cut ethical corners?

I think each of us has our own set of core values and ethics we start with.

But I think the other thing for me is I've told people, assume everything you do could appear on the front page of the New York Times.

What is your risk personally?

What is the risk to the reputation of the institution?

And as a leader, what obligation do you have?

If you're going to be a successful leader going forward, you have to maintain the strength of your reputation and the trust of your community that comes with that.

Well, that's all well and good, but I know that we can get influenced by those around us.

And sometimes you're in a situation where you're might be in a junior position and there's someone more senior who's doing things that, you know, you might question, but they have a lot of authority.

I remember when I was in graduate school, right after I got out, I had a job where I had a manager who asked me to do something that I didn't think was ethical.

And because I was new in the role, I was new to business, I trusted what they did and I thought it was fine.

And, you know, they asked me to, attend a conference and essentially misrepresent who I was, to say I was Tina Seelig from Stanford, as opposed to Tina Seelig from this company.

And I ultimately got caught and it was really embarrassing.

I learned a tremendous amount and thought, gosh, I never want to end up in that situation again.

So I'm wondering what advice would you give to a young person when they're asked to do things that they think are unethical?

I think they can vary.

When it gets into the range of being asked to do something that's unethical then one has to be prepared to say no, and even in some cases to possibly resign.

You'll recall when we had a Tyler Shultz come to speak, one of the two whistleblowers at Theranos that eventually quit and helped get visibility of what was actually going on inside the company.

I think he related, that they started out aspirationally.

But he quickly realized that there was deception going on and then later what you would call outright fraud.

I mean, sending results back, which medical results, which were not accurate, which is dangerous, obviously.

And I think that final step pushed him to the decision to resign.

And then when he was contacted by the reporters to share what he had learned about what was happening at the company.

So I think in the end, he felt very strongly that he had a personal obligation to be honest and to come forward and to relate what was going on.

Because people's lives were endangered by the behaviors that were occurring.

Absolutely.

And I've learned after thinking about this and teaching this for so many years, that there are a number of things you can do really to inoculate yourself against this.

Having fallen into that pit myself, I realized how important it is to think about it ahead of time.

One is, actually to put yourself in that position in your mind in advance so that if you are confronted with a request to do something that doesn't match your values, that you question it.

To have a personal board of advisors, you know, people you can go to who are outside of that situation, who you can ask for some sanity check.

Like, does this make sense?

Does this seem like it's the right thing to do?

Also, it's really helpful if you can to have enough resources so you can walk away.

If you've, you know, bought a big expensive house or a car or have taken on a lot of debt, there's a temptation to keep going down that road because it's very difficult to walk away.

So try not to get yourself overextended.

And finally, to not take the bait for small ask.

You know, if you get yourself on that slippery slope and the first thing you do it often leads to the second or the third.

And so being very aware that you don't want to get on that slope in the first place.

So, John, how do you know?

I mean, you've run very big organizations.

How do you know that everyone in your organization is following ethical guidelines?

Well, the truth is in a large organization, you don't know.

Your goal as the leader of the organization is to make clear what the values and goals of the organization is, and to hold people accountable.

I used to tell my staff that what you'll get fired for is trying to bury or hide a problem, an ethical violation or something that could create a reputational risk for the university or a company.

Problems occur.

If you bring it to the point of view where we can deal with it and put it out, while it's still just a small flare up, as opposed to a forest fire or a wildfire.

Then we can solve the problem together.

But you will be held accountable if you try to bury that and it turns into a crisis for the institution.

Are there some examples you can think of?

I remember many, many years ago, we had a coach that was verbally abusing students.

And that's something that is not supportable in a university.

Students are the core of what we do.

And in that case the head of athletics came to me and told me this, and I said, well, what are you going to do about it?

He said, I'd like to fire him.

And I said, that's the right answer.

And we did end up firing him because we thought the situation was not salvageable.

We've seen in the last year or two issues of research integrity.

People are highly competitive in research, particularly in scientific research.

There's a lot of competition going on.

People are trying to get results.

They're trying to be the first ones to publish in an area, obviously get recognized for it.

And I think that's led quite frankly to some shortcuts with pressure, particularly on younger faculty whose careers are just building and sometimes even on postdocs.

And in some cases, postdocs have been encouraged to violate ethical principles by a principal investigator.

I have a great appreciation of what my colleague, Frances Arnold, uh, Frances is a faculty member at Caltech who won the Nobel Prize.

And she discovered there'd been some data manipulation by one of the people working in her lab on a paper.

And she didn't wait for somebody else to discover it.

She went directly to the journal and said, I want to retract the paper.

And the journal said, oh, you can fix it, you can fix it.

She says, no, I want to retract the paper.

I'm not proud of it anymore, I want to retract it.

And she became a hero for admitting that there was a mistake made and her reaction was the right one.

Yeah, I think that takes a tremendous amount of courage to be able to do that.

Helps to have won the Nobel prize first.

They're not going to take it away from her, hopefully.

So one of the frameworks that I created for my class when I was teaching about ethical decision making is a two by two matrix.

Vertical, ethical, horizontal, legal.

And you can put any decision into one of these four quadrants.

It's very easy to make decisions when something is both legal and ethical, and it's super easy to make a decision when it's not legal or not ethical.

But there's this gray area.

There are times in which things are not ethical, but they're legal or not legal, but they're ethical.

And I'm wondering if you've encountered any decisions in the leadership roles you've been in, where you have to make a decision when it's not clear.

And you're in one of those gray areas.

We get pushed sometimes into doing things that violate either what you might think of as an ethical framework or an ethical framework that's shaped by what our values are.

You can almost think about a third column in your example that talks about values where what is being proposed violates a core value of the institution.

Even if it doesn't rise to the level of an ethical dilemma.

And many of the instances arise are of that form.

So for example, a donor comes with a large gift to the university, but wants to dictate how that gift is used, either who gets hired, for example, or what gets taught in the classroom.

The core values of the university are that faculty and faculty alone make decisions about what gets taught and what research gets done.

We've been tempted like that.

I mean, with large gifts and we've said, no, we can't do that.

And I think maybe it's ethically okay, but it clearly violates the value of the institution.

I know that clearly having strong core values helps you do the right thing, as opposed to the quote unquote smart thing.

I'm reminded of a case I was on a jury for ten weeks, this was a number of years ago.

And the verdict in the end let the person off, but I really felt that even though it was legal, that it was not ethical.

Tina, tell me more about this.

Why did you feel it was unethical, even if you didn't convict the individual?

Well, this was a wrongful termination case.

And this CEO of this company fired this employee the day before any of her stock had vested.

And she had worked there quite a number of months or years, I can't remember the specifics.

But literally the day before any of her stock vested, he fired her.

And in addition, she was a salesperson and every time a deal was about to close, he moved her to a different territory so she didn't get her commissions.

And so even though he was in legally able to move her territory and to fire her, it really felt that it was unethical to really harm her in that way.

Surprising case because this is the case typically you would try to settle it with the employee rather than let it go to a lawsuit.

Company easily could have lost that lawsuit.

Yeah, it was very interesting.

And the reason it went on for ten weeks is that the CEO of this company did not want to lose this case, was very strident that he was in the right.

It was very interesting.

I have to tell you for me personally, it drove home the point, the values are an important part of the equation when making personal decisions.

So, John, what are your core values and how did they develop?

My core values are around trust and honesty, fairness, equity.

Those are the things I would say are core values in how I treat people and treat people within an organization.

And I would say, working with you, I would agree.

I think that those come through.

I'm wondering are there situations where you did the right thing, even when you could have done the smart thing.

You know, something that would have been legal, but that you, your values pushed you in the direction of doing something that was ethical.

Probably one of the best examples was when we were entering the negotiations around the general use permit.

The general use permit is the permit that lets the university operate, as well as build new buildings and things of this sort.

I had just started as president.

I was meeting with a political leader, the local supervisor.

And they really wanted us to dedicate a large amount of land permanently as parkland.

Basically open space that would be accessible to the public.

It would have been legal.

It would have been easy.

I could have gotten the entire deal done basically in an afternoon by agreeing to this.

But it violated a core principle, namely the fact that the Stanfords had given us the land in use for the university and the future of the university and its education and research mission.

And so I suspect that my trustees would have vetoed me had I said yes to that agreement in any event.

But it was wrong, it was the wrong thing to do.

Now that caused us a lot of pain because it meant that the negotiations went on for another nine months, roughly.

And ended up costing the university a lot of money, but money is fungible.

Money is something I can replace.

The loss of institutional autonomy and a decision about use of our land is something I couldn't replace and would create a precedent for the university going forward that would be extremely negative.

I remember those discussions and it was in the news week after week after week as the university was negotiating.

Now, being consistently ethical, one of the side effects is that it builds trust with those around you.

They can see what you're doing.

Why is trust so important to maintain in an organization?

So I think trust plays two different roles depending on where an organization is historically and what's going on in the greater world.

Trust is critical when you go through a crisis.

Because going through a crisis, you're going to have to ask your team, the members of your community to do something really difficult.

They have to believe that you have searched for a solution that wouldn't involve this difficult task.

It might be a layoff, it might be reductions in salary.

It might be closing a program, for example.

They have to believe that you've really thought hard about it and they trust that after contemplating all the possibilities, this difficult route is the best thing they can do.

So that's in a crisis situation.

The other situation is you're trying to change an organization.

You're trying to stretch the organization to do something new, to move in a new direction.

That's obviously, they're trusting some combination of vision, some notion of that you're going to help provide the resources and that you're going to back the people that emerge as the change leaders within the organization to make that change occur.

That kind of trust is critical to get the team to stretch and do the things.

I remember when we had Michael Tubbs visit us, who's the former mayor of Stockton, who was a Stanford student.

And he quoted Stephen Covey as saying, change happens at the speed of trust.

I remember that was such a profound thought.

Do you think that's true?

Oh, I definitely think it's true.

And in particular, with the last example I just talked about, getting the institution to do something that's really new and novel.

How quickly that change can occur really depends on whether people trust the leader.

And the leader, you know, the leader's job in that role is to take the team to a place where they will be better off.

They know it's a good idea.

They're just concerned about the difficulty of going there and what that change implies.

And so having a trust relationship where they understand that you as the leader will be doing everything you can to ensure that you get to that new, better place.

That's crucial, you can't get the change to occur otherwise.

Absolutely.

There are times though, when things happen and trust gets broken, you know, maybe a mistake gets made or things don't turn out as hoped.

How do you rebuild trust when it's been broken?

Well, I encountered in my first startup that I was the co founder of, we encountered a problem along these lines.

We imported a CEO who didn't trust the founders to some extent.

So he insisted that the founders not be on the board of directors.

Primarily because he had had a bad situation with insiders on his previous board.

But that led to several difficulties.

One was that the board didn't really, only heard from the CEO.

So they didn't really understand the complexity of what was happening in the company.

And as the CEO's relationship with the employees began to sour and we started to lose technical people, the board really didn't understand what the problem was.

In the end, the co founders had to go to the board of directors and get them to fire the CEO.

But then of course you fired the CEO.

Now you have to rebuild trust.

You have to rebuild the ability of this company to thrive, or you can close your doors.

So we had to go and hire a new CEO, and then we had to really say, look, we're going to double down on the core technology of this company.

This is what this company is really about.

It can be successful.

It's still in a significant leadership position, and we're going to put the mistakes that we made in the past behind us and move forward.

So how long did that take?

It took several months, primarily because hiring the CEO was the difficult thing.

And then when we got the new CEO, he came in.

He looked at the books, he realized we were about to run out of money, we had less than a month's worth of payroll left.

So we had to do a layoff, and then he said, look, you and I need to get up at the next meeting and inspire the employees about why this company is going to still be successful.

Even though we've laid off about a third of the employees of the company.

And we did, it worked out in the end.

It was a time when you really had to rise to the occasion and double down and rely on the trust you had built with the people in the team to really carry you through.

Can you define an organization as being ethical and trustworthy?

What does that look like?

Well, I think the best organizations have that property.

They deal with problems and it comes down to people in the end.

Because an organization, when people say Stanford should do this, Stanford should do that.

Stanford isn't a third party, innate body that somehow exists.

It's a collection of people, it's a collection of faculty and students.

The behavior of the organization is dependent on those people.

Now, I'll say in a large organization, like a university with tens of thousands of people.

Or a company like Alphabet now with more than a hundred and fifty thousand employees.

Things will go wrong.

People will do things because, not necessarily because they are intentionally misbehaving.

But just sometimes because they haven't thought about it.

Or as you pointed out earlier, they take the shortcut solution.

The one that kind of carves through off some values and neglects those in order to get to a quicker solution.

I think the key thing is for the leadership of the institution and the employees to help keep each other honest.

Let's stick to our core values and to have that infused throughout the organization so that if things begin to go awry, it gets caught early rather than turning into something that becomes a public reputational risk or damage to the institution.

This has been so interesting, John.

It's a reminder that culture of an organization is set both from the top down and the bottom up.

And if you want an ethical and trustworthy organization, it starts at the top, but it needs to get reinforced by everyone.

Thank you so much.

Thank you, Tina.

There are four takeaways from this episode.

First, have a personal board of advisors to help you make tough decisions, especially ethical ones.

Second, having strong core values helps you do the right thing.

Third, as a leader, make the values clear and make people accountable to bringing problems forward rather than hiding them.

And four, being consistently ethical within an organization builds trust, which helps you weather crises and move in new directions.

Thank you so much for joining us on this episode of Leading Matters.

Please follow and like us wherever you listen to podcasts.

And stay engaged with Knight-Hennessy Scholars through social media @KnightHennessy and on our website KH.Stanford.Edu.