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Beyond Compliance: Lynn Paine's Visionary Approach to Business Ethics

Lynn Paine

As a trailblazer in the field of business ethics, Harvard Business School Professor Lynn Paine believes that ethics and responsible conduct at work can strengthen organizations, but that corporate leaders must rethink their approach to compliance. Her decades of work, along with books and papers, have shaped contemporary understanding of leadership and corporate governance, informing her position that business ethics is not just about avoiding litigation and wrongdoing — it’s also about aspiring to do good and fostering a culture of integrity and respect.

“When I think about ethics, I have an extremely broad view,” Paine said in an interview with Alphy last week. “I start with the fundamental question of ethics, going back to ancient Greece and ancient China: How should we live? So, ethics to me is about that question.” Paine’s expansive view challenges the often rigid lines around compliance tools that catch wrongdoing only after the harm has occurred. 

Paine shares an anecdote about the late John Gutfreund, an aggressive investment banker who headed Salomon Brothers and was often referred to as “the king of Wall Street,” to illustrate her point. “A statement was made about Gutfreund that underscores the complexities of ethical behavior in business,” she recalls. “One of his colleagues described him as someone who could be ‘brutal to people’ but was ‘very sensitive to ethical issues.’ That made no sense to me because respect for people is itself fundamental to ethics.” (Gutfreund was famously forced out in 1991 after Salomon disclosed misconduct by its trading desk in U.S. Treasury auctions.)

She challenges the conventional corporate ethos that places shareholder value as the top priority. “There is an error at the heart of corporate leadership,” she says, “which is this belief that your sole responsibility, above all else and at all times, is to maximize value for shareholders.” Such narrow, short-term thinking often leads to costly litigation, damage to a company’s brand and industry trust, and even economic tumult that spirals into financial distress.

“I actually think written codes are meaningless unless their tenets are embedded in the culture and actively lived,” she says. “After Enron’s collapse, my husband bought me a copy of the Enron code of conduct online — it was advertised as ‘Never been read.’” (The Houston energy trading company went bankrupt in 2001 after carrying out one of the biggest accounting frauds in U.S. history.)

Paine’s journey into the field reflects a deep and lifelong engagement with big moral questions. Drawn to philosophy amid the Vietnam War protests, Paine pursued an academic path through Oxford University’s moral philosophy program, followed by law school, and then law practice, until she was invited to teach business ethics. She co-founded Harvard Business School’s required course Leadership and Corporate Accountability and currently teaches Corporate Governance and Boards of Directors in its MBA program. She co-chairs the school’s executive programs on corporate governance, including Making Corporate Boards More Effective, Women on Boards, Preparing to Be a Corporate Director, and the Advanced Corporate Director Seminar.

“I started long ago as a teenager, wondering how I should spend my life,” Paine says. “And in the middle of all of these student protests against the Vietnam War, everybody seemed so morally confident about what should or shouldn't be done. And I felt that I didn't know. So that got me to go into philosophy and to start thinking about these questions.”

Her books Capitalism at Risk and Value Shift broke new ground by urging business leaders to adapt their business models to focus on values and being a force for good. “You'll get better compliance if you focus on the positive than if you focus on the negative,” she says. “If you don't go in with some affirmative vision of what it is you're trying to be, then all of these ‘Don't do this, don't do that’ becomes something that people reject.”

Paine’s work also delves into the psychological aspects of ethical decision-making in organizations. “Employees’ ethics are influenced as they look around at who’s getting promoted and who’s getting the good assignments,” she says. “And if the people who cut corners get good assignments and get promoted, other employees are probably going to start doing the same thing — or leave.”

Bottom line: Paine says decades of research support the importance of establishing an ethical culture and new technologies that do two things: encourage integrity and respect while also holding people accountable. “By affirmative,” Paine says, “I mean treating ethics as goals to strive for rather than just lapses to avoid.”

By Julian Guthrie, CEO and Founder of Alphy

In this occasional series, Alphy will interview leaders in business ethics to get their perspectives on trends and innovations around compliance and ethics at work, including new technologies and approaches, patterns in ethics breaches, and the role communication plays in ethics and compliance.

Reflect AI by Alphy is an AI communication compliance solution that detects and flags language that is harmful, unlawful, and unethical in digital communication. Alphy was founded to reduce the risk of litigation from harmful and discriminatory communication while helping employees communicate more effectively.


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