The New Ethics Economy

Savonnah Roberts Schreiber: Well, I'm super excited. How are you feeling?

Doug Reigelhuth: I'm a little bit cold, Savonnah.

Savonnah: Okay, well stay awake.

Doug: But, let's do this.

Savonnah: Okay, we're ready. So, Doug is the attorney and chief compliance officer at TriNet. And in your capacity, you're not just focused, but you're laser-focused, right?

Doug: Pretty much.

Savonnah: On continuously improving TriNet's ethics and compliance culture and programs in ways that are mindful of all of the regulatory standards and a company's ethical aspirations. In addition, he is the executive sponsor of TriNet's Green Team employee resource group, which is focused on environmental issues. Doug started at TriNet in the legal department in 2011 and you were a partner at a law firm before joining TriNet.

Doug: In my previous life.

Savonnah: In your previous life.

Doug: Yes.

Savonnah: This is the better version?

Doug: This is my TriNet life.

Savonnah: This is your TriNet life.

Doug: It's much better, yeah.

Savonnah: All right. Well, as you know, I am in the business of words, so whenever I'm having any kind of conversation, I like to start with a shared meaning to make sure we're saying the same thing. So today we're gonna talk about the ethics economy.

Doug: Yes.

Savonnah: So let's define it.

Doug: Absolutely. That's a good place to start. So there's a couple layers to this. So let me just start with the first one, which is really that there are a whole lot of folks nowadays focusing more than ever before on corporate ethics. And those people, if you will, are stakeholders of businesses such as investors, customers and employees. And as a result of that focus and the increase in that focus, businesses have to start focusing on corporate ethics more than they have perhaps in the past. Because at the end of the day, people want to see certain ethics profiles in those businesses that they're focusing on and businesses have to make that happen.

Savonnah: Right.

Doug: So one other thing I just wanna say is I didn't come up with the term ethics economy. This is something that's been floating around for a while. People have been talking about it for a little while. So, if you don't like my definition, you're welcome to look it up elsewhere. But, I do want to talk about this theme today because it's so important for a number of reasons.

One of the reasons is that it ties in, I think, really well to the rest of this PeopleForce event. A lot of the topics that have been touched upon involve ethical issues. I've heard a lot of the speakers talk about ethics, ethics with respect to AI, ethics in all kinds of contexts. So I think it's a good theme for PeopleForce, but I also think more importantly, it's really important for small and medium-size business owners and leaders and founders to be thinking about this.

There's so much that SMB leaders have on their plates, right? It could be how do we get a product to market? Could be how do we become profitable before the VCs start asking for their money back? It could be, you know, any number of things. How do we scale and grow? But the bottom line is: even though those are all incredibly important things to be thinking about, so is this topic, because this can undo all of that good work, if you're not careful. And finally, the last reason, and maybe the most important reason, is that this is absolutely critical to business success in this day and age, in this economy that we're in, because the ground has shifted. And this is a much more high-profile topic for all businesses.

Savonnah: So let's go a bit further there. Because there was a time when many organizations would talk about all of the great work they were doing, whether it was, you know from ethical standpoint, for their colleagues, the community, etc. But it may have seemed like lip service, but now seems like what you're saying is that no longer works.

Doug: Yeah, there's real scrutiny now that's being applied to this theme. It's not about lip service, right? You have companies and we saw this way back when during the dot-com bust and boom. Burton talked about that in one of the other sessions earlier yesterday. You know, a lot of people talk about how they're changing the world and making it better but if they're saying that while at the same time ignoring the laws that apply to their business, because they're disruptors, or they're burning through their workforce that they're working 24/7 without benefits, Burton talked about that as well. He said people don't want to work in that kind of company anymore, really. There might be some folks early on in their career that might take that gamble, right? Maybe it's gonna pay off.

Savonnah: Right.

Doug: In Burton's experience, it didn't. And it usually doesn't, right? So, that's another problem, right? And if they're ignoring like environmental impacts, polluting unnecessarily, or, you know, strip mining some place where nobody's paying attention, that just doesn't work. So, people are really looking at this stuff. And so, what the ethics economy is about is actually doing the right thing within reason, right, when it's possible for your company, for your customers, your employees, even for the environment, and that is driving business outcomes. That's actually changing a business's, you know, trajectory because folks are so focused on this topic.

Savonnah: So I want to paraphrase just to make sure that I have it clear. So companies doing the right thing for colleagues, community and clients. This is now at the forefront. So again, it's no longer lip service; that no longer works. From your perspective, what are you hearing? What kind of conversations are your clients or just even within the walls of TriNet? What type of conversations are happening in the marketplace around this? How are companies responding to this ethics economy now being something that they really do have to show and prove?

Doug: Yeah. Well, I'm seeing a whole lot of business activity around this theme. Within TriNet, for example, but also throughout the rest of the economy. Let's face it, right, like in 2020, things really changed. Not only did we have the pandemic, which was a huge disruptor in its own right, but we had a whole bunch of other things that sort of followed on that. We had the murder of George Floyd, which and all the other bad things that were happening at that time that led to the Black Lives Matter movement becoming giant. That's something that impacts workplaces, because it impacts people that go to work. We went through January 6th, not too long ago. That's also impacting workplaces. And then above and beyond that, like one of the biggest outcomes from the pandemic has been the remote work theme, right, or flexibility, if we're calling it that now, because maybe folks don't want it to be so remote.

Savonnah: Right.

Doug: But that's a huge thing. And there's a whole bunch of issues associated with that, right? And we're also, I think, in the era of pretty much undeniable climate change at this point. Like there's smoke all over the East Coast this summer, the water temperature off the coast of Florida was 100 degrees this summer, which is not supposed to be happening. Coral reefs were dying left and right. So, there's all these issues, and even before 2020, there was the Me-Too movement. Ashley Judd talked about that this morning. And that was sort of the beginnings of all of this focus on ethics in the corporate sphere, as was Occupy Wall Street, which happened after the Great Recession.

So, there's all of that kind of activity that is driving this, and going forward, companies are being compelled to address these issues. These are issues that are impacting their workplaces, they're impacting their operations, they're impacting their people. And as a result, there is literally almost no way for companies to ignore these issues anymore because it's affecting the bottom line.

Savonnah: Right.

Doug: And so, that's the ethics economy in a nutshell.

Savonnah: So one of the speakers yesterday, toward the end of the day, went through consumer trends. And if you were in the session, you may remember, one of the trends was that most consumers, or the people of the 3,000 people that were a part of that research, said that they felt that it should be a right to be able to have a hybrid working environment situation. 79%. Very interesting and high. The person that was sitting next to me said, Hmm. So from…

Doug: The same with the person sitting next to me, they were like, "wow, right."

Savonnah: Right. So we talk about colleagues, clients in the community. Well, for an organization, it always starts with colleagues. Like here, we're PeopleForce. We're always talking about people because you need people to do all the things. How do you think that statistic, just that one, as it relates to the ethics economy and how companies might respond to this overwhelmingly clear people want the option they want to be able to work in these hybrid environments. So what are your thoughts on that?

Doug: Right. So I remember that slide very well. Really dramatic information there, right? And I think what that speaks to is that we are in a new world. We're never going back to the way it was before 2020, especially with respect to that issue. That ship has sailed. People are too used to having flexibility. They've proven in most cases that that works, right? I mean, it's just working at TriNet just fine. And the reality is companies, therefore, need to respond to that. And they need to find out how they can get comfortable with the flexibility that people need, how they can strike the right balance. But at the end of the day, that's the new paradigm and then they have to deal with that.

Savonnah: And then so, you know, we're talking about the ethics economy and this idea that ethics and compliance, so that, the fact that with this particular remote work or hybrid working environment, the survey said that the respondent said, "It should be a law," right, they should have the right to. And so it's essential, of course, that companies are following the laws and all, and this is what you lead the effort around at TriNet, is all of the compliance and regulatory. And it feels like now, so we have, on one hand, the hybrid environment and employees saying this is absolutely something we want. Then we have technology transformation with AI. So you have two big major things that are happening. Like you said, it'll never be how it was. We're in a new environment.

Doug: Right.

Savonnah: What are some, I know you know, you're steeped in this. So, are there any data points that you can think about that sort of prove out that, yes, this ethics economy is real? These things around hybrid work environment, around AI and digital transformation and what does that mean? It's here. What are some data points that you have around this idea of the ethics economy?

Doug: Yeah. Well, thanks for asking, because that's important, right. We can talk about it, it's a theory maybe. You know, and theories are interesting, but is it real, right?

Savonnah: Yeah.

Doug: So, I think there is plenty of data to suggest that it is real. And I'll start with sort of the easiest entry point to that discussion. Which is, there's data to show that, companies with extremely high ethical cultures and ethics programs actually outperform their peers who don't have that same level of ethical excellence in the stock market. So this comes from the public company, Sphere, right? So, it's not directly relevant to most SMB situations, but it's still a really interesting point.

This comes to us from a company called Ethisphere and we work with them at TriNet. They are very much inspirational for our ethics and compliance programs. They provide meaningful data to us, like the data I'm sharing with you. And they also do a lot of benchmarking for us. So, what they do every year, they benchmark a whole bunch of companies that are working with them. And the way they do that is they ask us to fill out, it feels like thousands of questions, like, answer thousands of questions about our business, about our programs, about what we're doing in this space. And they do that with all the companies. And they ask us to send in documentation to support our responses. They look at everything. So, it's not just us telling them what we are doing. They're actually validating it. And then they're doing a quality assessment. Like, if you tell them you have a good code of business conduct and ethics, then they're like, "well, let's see it."

And then they look at it and they decide whether it's really good or not. Right? And there's a lot that goes into that, just as an example. But they take all this data and then they compare all the companies that are participating and they select a few at the very top that are, according to them, the world's most ethical companies. And it's those companies that they put up against their peers and that's where this data comes from. And it's pretty compelling.

Savonnah: So as an SBE, what, or SMB, I'm sorry.

Doug: SMB.

Savonnah: SMB. Yep. So what are some of the applications? Like you said, even if, okay, you're not a publicly traded company, however, the data still shows that companies that are operating in this ethical way and have these cultures that are really steeped in ethics perform better. So, what are some sort of applications that a smaller business can take from that and say, "You know what? Maybe we can do something like this as well and build that type of culture"?

**Doug:**Yeah. Well, here's what I would focus on. For SMBs, you don't have to worry about what's happening in the stock market with companies' share prices, right, typically. But what you can look at is the fact that underlying all of that data is additional information. So, there's a survey that's been done by a firm called Edelman, and they do a global survey about ethics and its impact on decision-making. They have looked at this issue across the world, North America, Europe, Middle East, Africa and Asia. The outcome of that survey is very clear. More than 50% of employees choose where they're going to work based on alignment of their own values and beliefs with company values. Right? And that's not the only thing they use in making their decisions.

They want to know how much they're going to get paid. Are there any sort of benefits? But that values and beliefs alignment is a huge factor. The same thing happens, according to this survey, with consumers. So, the majority of consumers across the world are deciding where they're going to spend their money and who they're going to spend it on, or which business they're going to give it to based on alignment of values and beliefs.

So, that's something you can take to the bank as any business. It doesn't matter whether you're a public company, the smallest company on earth. If you know that, and you understand that, you can start taking action based on that. That's to say nothing about what the survey showed with respect to investors, but we can get to that.

**Savonnah:**I was just about to say, we haven't talked about investors. So, where do you see them fitting into this conversation around the ethics economy? We haven't talked about investors.

**Doug:**Right, right. Well, so the investor part of it is huge. Obviously, you know, investors are very meaningful to companies, right, whether it's a public company or not. So you need to have folks like that in your stable and backing your company, typically. Investors have created really a whole construct around corporate ethics, which is called ESG. And a lot of you already know about ESG, you've heard about ESG. For those of you who haven't, I'm just going to talk about it real quickly.

**Savonnah:**Sure, please.

**Doug:**The “E” stands for environment, “S” stands for social and “G” stands for governance. And what the investment community has done, and this was led by some of the world's biggest institutional investors, pension funds, you know, giant money managers, it was spearheaded by the U.N. This was decades ago, but the U.N. sort of got folks involved and they said, "Let's create principles for responsible investing. Rather than just investing, let's do it responsibly." And this is what the community of investment bankers and others came up with was ESG. And they use that rubric to put into their investment decisions things that typically in the past were not included.

These are like externalities, right? If you're an economist, that's what you would typically call those. Environment, you know, the impact on the environment, societal impact, corporate governance that sort of underlies all of those decisions. None of that was really factored into investment decisions, but investors, and the biggest ones in the world, are now using it extensively. I read an article just a couple weeks before this conference about the fact that a lot of bankers especially in the U.S., where everything is politicized, a lot of bankers don't like to use the term ESG anymore because they just don't want to, you know, get into that discussion.

**Savonnah:**Right.

**Doug:**But they are absolutely all in on ESG. They just don't talk about it in those terms.

**Savonnah:**Right. Well, and you know, there's been a bit of backlash, right? There's been a bit of backlash around ESG. And even, you know, additional ethical efforts. For example, Florida just recently outlawed certain types of D and I training.

**Doug:**Yeah. No, there's a lot of examples.

**Savonnah:**And for states, you know, that many states are prohibiting now the public pension funds from...

**Doug:**Considering.

**Savonnah:**Even considering. So how is a person able to sort of navigate within that? Where you have states that are saying, nope, you know, we're not participating in this. And yet you have investment bankers, you have consumers, you have people who are saying, but this is important. Like, help us navigate. How? How could one? Give us some ideas, Doug. Oh wise one.

**Doug:**I hope I'm wise enough for this one. No, you're right, Savonnah. It's sort of a mess out there right now when it comes to this topic. There is backlash. There's pushback. And so, you know, I would say, obviously, you do have to be mindful of whatever local laws might apply to your particular situation. Most of those laws don't prevent companies from doing what they are interested in doing in this space. Although you did mention Florida, you know, prohibiting certain types of training. That one's a little tricky, but there are ways to move around that without violating that law.

It's to be expected, frankly. Let's be honest, right? When we're talking about the ethics economy, that's a shift, that's a mind change, and you're talking about going from whatever you want to call, like, traditional capitalism to something that I would call something more like ethical capitalism, right? And anytime people are forced or even asked to consider a change, you know, that creates discomfort. Most people don't like change.

**Savonnah:**One of the speakers said that this morning, right? Even if it doesn't work, you're like, "No, stop."

**Doug:**Yeah, "No, just make it stop. I want everything to be the way it always was."

**Savonnah:**Even if it didn't work.

**Doug:**Even if it was broken. Right? So, I think that's part of what we're seeing here. We're going through a transition, I believe.

**Savonnah:**For sure.

**Doug:**And I believe it's going to continue. I don't think it's going to go backwards. And what I would say is the one thing to keep in mind, because you might be wondering if this is a good idea yourself, or you might run into people that oppose it, and you may want to try to explain it to them. The one thing I would say is, this is not an example of government intervention. This is not the government regulating business activity, or the economic environment. This is all created by the fact that stakeholders, the participants in capitalism, namely, for most importantly, the investor class, as well as customers and employees—the key players in capitalism.

They are insisting on this. There's no government intervention. I will say—the SEC, and this is applicable to public companies, the Securities Exchange Commission is trying to roll out reporting requirements for publicly traded companies that would require them to report annually on their greenhouse gas emissions, so it's related to climate change. It's very controversial, and a lot of folks are pushing back, but that's the only sort of regulatory effort that's even going in this realm right now, and it's not even off the ground. This is being driven by capitalism.

**Savonnah:**So what would you suggest to facilitate that conversation? Like you said, someone may talk to you about it and you would like to have a conversation that is balanced and factual. So any, you know, sort of suggestions around, like, how do you open up a dialogue with stakeholders in your organization about this?

**Doug:**Well I don't know that I have the best possible answer for that, but I think I would do it sort of along the lines of what we're doing right now in this session. Like you talk about what's really behind this trend. You talk about some of the data points which show that this stuff matters to the key stakeholders in businesses.

**Savonnah:**Not just compliance officers.

**Doug:**Not just compliance officers. Exactly. Because no one wants to hear that. No one wants to hear from the compliance officer. They're pouring…

**Savonnah:**That's not true.

**Doug:**Well, I try to liven it up.

**Savonnah:**You've just disproven that.

**Doug:**Thank you. But no, I mean, seriously, one of the ways you could think about it also is that it's a little bit like a shift from, sort of, more short-term corporate focus to a longer term focus. You even see this, I read a big article in the New Yorker, I don't know, six months ago about effective altruism. There's all these people out there, a lot of them are involved in the tech community and they're trying to bring, you know, tech company principles to philanthropy. So it's data driven, it's rigorous and it's all about like, where can we do the most good in philanthropy, for the greatest, you know, for the greatest good?

Right. And, they've determined that sometimes it's not the things that people are focused on right now. So, it's sort of similar to that, I think. One way to think about ESG and the ethics economy is, rather than having corporations get caught up in, you know, maximizing quarterly profits, you know, every time they report to the street, you know, "Oh, we've got to make sure our numbers look like this or whatever." That's still important, right? You're not going to get away with missing your numbers for very long before the street punishes you. But, in addition to all of that rigor, they need to be thinking about, are they a sustainable business? Does this have legs for the long term?

**Savonnah:**Right.

**Doug:**So I think this is a little bit of long termism. And I like it because our CEO at TriNet, Burton, always talks about wanting to make sure that TriNet, and this is a direct quote, "is an enduring company." He wants it to be around way beyond his tenure. He wants it to be around by the time we're all dead and gone. He wants TriNet to continue. And that's really important to him. And I think, really, when you, boil it down to its essence, that's what a lot of this is about. It's about creating businesses that actually make a meaningful difference in the world and that's why they will sustain themselves rather than sort of slash and burn capitalism.

**Savonnah:**Well, and I think that applies whether you're a for-profit, not-for-profit, public, private. I think creating enduring businesses that are ethical. The people who work there want to work there. They feel like they're respected and seen and treated well. I think that applies, period.

**Doug:**I think that's right.

**Savonnah:**For any business.

**Doug:**Yep.

**Savonnah:**With that being said, I know we had a QR code. So if anyone had questions, but then if there are questions that have come up here in the room, we would love to take them.

**Doug:**Yes.

**Audience member:**Thanks so much. I really enjoyed the session. What you were just talking about with shifting the focus to the ethics and the alignment of values and sustainability and future looking, where there is a law that you have a fiduciary responsibility to your stakeholders and so it is not people first or environment first or any of that first. How can we start to reconcile this, especially in the absence of some kind of regulations?

**Doug:**I love that question.

**Savonnah:**Great question.

**Doug:**That is brilliant. So let me just, I mean, let's just touch on what you just said there for a moment because you're absolutely right. I mean, the idea that a corporation has a fiduciary duty to its shareholders is written into the law. Right? I mean, that's recognized in the law. And so a lot of folks, especially folks who don't want to see any of these changes go through, we'll cite that and they'll say, "Look, you have a duty to your shareholders. That is your primary duty. You can't start worrying about the environment, worrying about people."

**Savonnah:**You can't worry about people.

Doug:
You just need to maximize profits for the shareholders. Right? And that's all true. What I would say is, and this goes back to what I was saying just a few moments ago, I think when you step back and think about some of the things we've been talking about, you actually will be maximizing returns for your shareholders. If you're doing this stuff the right way, and you'll be doing it over a long period of time, not for the next quarter only, and then you go out of business, right? That's where I think people get confused, and people think that these two things, like that fiduciary duty concept to shareholders and this ethics economy concept are incompatible. Right. I don't think they are, but that's just me. Yes?

**Audience member:**I love what you said because what that entails is a shift in perspective that actually aligns with the truth. Where the original driver, just my observation or my thoughts, is that because of that fiduciary responsibility, that conscious capitalism or the drive and the passion that starts a company may have moved away from being whole and complete in its approach.

And also, you know, we're humans. We are biologically, and this is a truth, engineered to be affiliative and to connect. That's just, I'm a neuroscientist, so that's just pure science. And having given that, then suddenly there's this pressure on this driver, and a different perspective, a skewed perspective, that now says, just productivity, just productivity, and then not realizing that, in fact, what they were sacrificing, they were working against their own best interests, like you just said. So I think bringing that back up is incredibly powerful and pivotal to changing the narrative. So thank you so much for that.

**Doug:**Thank you so much for your comments. I had actually wanted to touch on the concepts that we just discussed in the presentation, but you brought it out in the questions. The one other thing I will say is, and I'm getting a little bit into the, you know, theoretical realm right now, but you've sort of inspired me to go this route. Capitalism is just a construct. It's not a thing that's like built out of stone. And a lot of people, I think, especially in America, for whatever reasons, I won't get into them, sort of tend to treat it like it's a thing that can never be changed. It's just a construct of the human imagination.

**Savonnah:**Absolutely.

**Doug:**And I would like to think that as our collective thinking as humans evolves, that we can change the way we operate these constructs.

**Savonnah:**Right.

**Doug:**They're our own inventions. And so I would like to think that as we progress as a species and start to like figure a few things out, you know, we've got a long ways to go in my opinion, but like, as we start to become a little more conscious about what we're actually doing…

Savonnah:…and maybe what's not working…

Doug:
…and what's not working, right? Like we've talked about in the other sessions, you know, things are broken. Like, why do we want to hang on to the broken things?

**Savonnah:**That's right.

**Doug:**How about we just tweak it a little bit? How about we fix it and make it work better? Why don't we optimize capitalism? That seems like a pretty capitalistic concept to me.

**Savonnah:**Agreed.

**Doug:**And I do. If there are other questions, we're happy to take them. Yes.

**Savonnah:**Austin.

**Austin:**With there being, everyone kind of having their own ethical compass to navigate the world of the social constructs of having different ideas of good and bad, usually based on their worldview. How do you take an organization that is taking a bunch of these, you know, a diverse basket of people and worldviews and different ethical compasses? How do you then create a shared ethical compass when everyone's compass points north, differently?

**Savonnah:**I think we should put that in ChatGPT and see what it says. Because that is the question.

**Doug:**That would be interesting.

**Savonnah:**I mean, that is foundational. What do you think?

**Doug:**It really is, Savonnah. Yeah, it's a great question.

**Savonnah:**Great question.

**Doug:**We're doing that at TriNet, right? Everybody's trying to do that to some extent, right, in their own company. And it may be on a grand scale, it may be on a smaller scale. It may just be about D and I, maybe just about, you know, some other training, something else. But I think what you have, and it boils down to this, and I said this before—like companies are being compelled to enter the fray, if you will. Right? Because if the fray is impacting their bottom line, so they have to engage with these topics, and the best thing I can tell you is you have to have governance around how you decide what to engage with and how to engage with it, when to engage with it, how much to engage with it.

So you have to have people and processes around, you know, keeping you on the rails because those discussions and decisions are going to be really hard. But what I think you can do, ultimately, is figure out a way to, within your corporation's value system, right? And you have to define those, that you use those as the starting point: mission, vision, values and then you build out from there.

And you're going to lose some people. You're going to lose some people along the way. Some people in your company will not like what you're doing. And they will eventually find their way to another job. But you have to take a stand at this point, I believe as a business leader.

**Savonnah:**Thank you so much. I think that is a terrific place to end. I know this conversation is so rich in that we can probably sit here all day, but we cannot. Doug.

**Doug:**I could.

**Savonnah:**Thank you so much. It has been such a great conversation. I have so many more questions and I'm sure you all do too. Thank you very much and thank you all for your attention and enthusiasm.

**Doug:**Thank you.