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People like Frances Haugen and Chelsea Manning are household names for going public about their employers, but ethical behaviour has to come from the top

illustration Nikki Ernst (Source photos: LARS HAGBERG/AFP/Getty Images; AP Photo/Virginia Mayo; Jabin Botsford/AP photo /The Globe and Mail

There are few spectacles as riveting as the public unburdening of a whistleblower, those lone (or lonely) souls who come forward to call out the misdeeds of formidable corporate or institutional actors, often fully aware of the blowback that awaits. Yet even in this deeply compelling sphere, few have dished salacious secrets quite like Frances Haugen, the former Facebook executive whose October 2021 revelations before Congress about the social media giant’s algorithmic predation shocked even the most jaded tech watchers.

Having leaked thousands of pages of internal documents even while insisting she never set out to become a whistleblower, Haugen walked away with a book deal and harbours plans to set up a non-profit geared at social media’s abuses. But given her profile and notoriety, one wonders whether she’ll ever again work for another company.

Haugen joins a strange truth-tellers club populated by bureaucrats, utility managers, pharmaceutical brass, mobsters-turned-state-witness, and one-of-a-kind figures like former justice minister Jody Wilson-Raybould and Chelsea Manning, formerly of the U.S. Army.

“Former,” in fact, may be the only common denominator among all these characters.

Facebook’s stock lost 10% of its value during Haugen’s testimony (though that has mostly returned since November). Still, the inverse question begs: Are companies that conduct themselves ethically—or at least don’t leak salacious details about dubious business practices—rewarded with stronger profits and share performance?

Many assessments suggest they are. A 2008 Journal of Business Ethics study of the largest companies on the TSX found a “statistically significant” correlation between corporate values and performance. More recently, IndustryWeek reported that firms scoring high on a 2019 ranking of ethical companies outperformed other large-cap stocks by more than 10% over three years.

Between the pandemic and skyrocketing interest in environmental, social and governance (ESG) investing, there’s more pressure than ever otn companies to do the right thing, from ensuring workers are safe from COVID-19 to reducing their carbon footprint. Less clear is how the leaders of large organizations should go about fostering a culture that prizes ethical conduct and encouraging employees to speak up if they witness wrongdoing—without fear of reprisal.

Organizational behaviour expert Tunde Ogunfowora, an associate professor at the University of Calgary’s Haskayne School of Business, has sought to peel back the workings of organizations that reward what he describes as “morally courageous behaviour” among employees. In a new study based on surveys with dozens of leaders and workers, Ogunfowora and two co-authors, Addison Maerz at Queen’s University’s Smith School of Business and Christianne Varty of York’s Schulich School of Business, offer some insights into what makes such organizations tick. For starters, they tend to have leaders who model ethical behaviour, hire managers who share their values, and encourage employees to take moral ownership of what they do and see. The study also cites evidence that leaders should take care to send out the message that working in ethically responsible ways is a means for employees to help their firms “do the right thing.” According to Maerz, a post-doctoral fellow in organizational behaviour, ethical leadership tends to have a “trickle-down effect.”

All of which is easier said than done, especially if the problematic conduct is coming from the people signing paycheques. But Maerz says the pandemic has altered this calculus because every company now faces issues of workplace safety that have life-and-death implications. Some have responded by clearly signalling their desire to ensure health and safety protocols; others, not so much. Ogunfowora points to stories over the past two years about employees facing blowback simply because they insisted their co-workers wear masks or observe physical distancing protocols. “Prior to the pandemic, many corporate leaders might never have considered role modelling and promoting morally courageous behaviours, especially if they do not operate in traditional ethically sensitive industries where misconduct and whistleblowing are [the norm],” he says. “Today, all organizations have to deal with pandemic-related morally courageous behaviours in one form or another.”

Ogunfowora stresses that ethical leadership isn’t merely a communications issue. He points to a growing body of evidence showing the onslaught of firms seeking to cloak themselves in the soft glow of a well-resourced ESG program is mostly promoting skepticism. “People tend to question the underlying motives of such organizations,” he says. “Is the company talking about its commitment to social justice or the environment now because it’s good for business or because it truly believes in the cause? Or is there a mix of motives?”

photographs (whitacre) Sue Ogrocki/REUTERS; (wigand) ap; (shultz) Frederick M. Brown/Getty; (fowler) Ben Gabbe/Getty/The Globe and Mail

Yet Concordia University associate professor Claudine Mangen, the RBC Professor in Responsible Organizations, argues the tone at the top is critical. Messaging from the CEO, even when aimed at outside stakeholders, will send a potent signal to internal audiences about the state of their “moral reasoning.” In a recent essay in The Conversation, she noted that Air Canada CEO Michael Rousseau’s inability to speak French in a French-speaking province signalled to subordinates which language truly matters.

She also makes the point that silence (or the proverbial turning of the blind eye) is another form of communication that can incite ethically problematic or even criminal behaviour. “Perpetrators are encouraged, victims silenced; bystanders know about the behaviour but don’t stop it,” she wrote. Mangen’s examples include revelations about Uber founder Travis Kalanick, whose tolerance of rampant sexual harassment at the ride-hailing giant led to his resignation.

Quite apart from the long-standing debate over the relationship between ethics and profits, there’s little doubt the publicity associated with ugly disclosures can harm a company’s reputation. In the aftermath of Haugen’s disclosures, for instance, Facebook raced to change the channel by hyping its new Meta brand. Another recent example: Qantas, the Australian airline that has bragged for years about its unblemished safety record, is fighting criminal charges after an employee went public with allegations about the company’s lax cleaning practices and the risk of catching COVID-19 during flights.

Maerz adds that social media has made it far easier for employees to go public anonymously. He also speculates that pandemic work-from-home rules may have made it less socially awkward for employees to speak out against co-workers they no longer see daily. “The hesitancy that comes with speaking up and harming your fellow employees might actually not be as big of a factor.”

One point seems increasingly clear in this whistleblowing moment: Companies that stray from the moral straight-and-narrow will likely be hearing from the growing ranks of activist shareholders that have made huge reputational bets on good governance. BlackRock springs to mind—with US$10 trillion in assets under management, it has the power to bend a large swath of the corporate world to its sustainably focused will. As Mangen says, “You have shareholders who actually care about the conditions in which companies operate.”

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