Deeply Responsible Leadership at Cornell
June 12, 2024
I’m still filled with the spirit of commencement weekend’s connections and reflections. What an honor to be once more with our graduates as they head out into their lives with our best wishes and the best training we could offer. It’s an important life moment. Check out the selfie from the dais at Schoellkopf Stadium together with Deans Kate Walsh (Nolan Hotel School), Vishal Gaur (Johnson School), and Jinhua Zhao (Dyson School), all smiling and joyful. A good memory.
My commencement remarks go to Cornell’s origin story
In my own commencement remarks in our various ceremonies, I decided to share an 1840 letter I found in the Morris Bishop book, A History of Cornell, from Ezra Cornell to his son Alonso, which has stuck with me. In the letter (written 25 years before founding Cornell University!) he invites Alonso to consider the virtue in establishing what he calls a “character upon a fixed principle—to do right because it is right, for the sake of right and nothing else. Every act should be measured by that rule: is it right? Let a pure heart prompt an honest conscience to answer the question and all will be well.”
I choose to believe Ezra Cornell wanted Alonso’s awareness to be based in this golden rule of awareness of the effects of his actions, as he took flight with his own business aspirations and goals.
Ezra Cornell was an industrialist, a self-made American business leader whose fortune came from telecommunications and who, in the tradition of successful industrialists of the time, sponsored an educational institution in his name. Much of the tradition of excellent European and UK liberal arts colleges and universities descended from inherited ecumenical and generational wealth. America’s new-world barons of business success were inspired to follow suit with a sense of purpose to build and to share knowledge, and perhaps parochially to include making charitable donations of money for the betterment of others. You’ll have to look far, however, to find a university whose mission includes the sharing of skill and opportunity with those not born into it. Cornell university was founded in 1865, a profound year in American history, the nation war-torn and divided, its president just assassinated. This was the era in which Ezra Cornell directly stated that this university was for ANY person and ANY study – a time when women could not vote and people of color were only beginning to emerge from enslavement.
We who are fortunate to work and study at Cornell are charged to address the big issues. We’re not just supposed to do the easy things. It is our privilege to pursue success at its highest levels, and we are obligated to do so in accordance with a definition of success that includes Ezra Cornell’s “fixed principle” of doing right by considering our impact on others.
The purposes and responsibilities of business leaders
I go on in my remarks to offer that, for decades now, business leaders have been told that their responsibility was to the bottom line. To elevate profits and returns to investors over all else—as embodied in one of my favorite Milton Friedman quotes: “There is one and only one responsibility of business: to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game.”
The truth is that businesses and business leaders have struggled with understanding their ultimate responsibilities for a couple of hundred years. What we are seeing today is that society is challenging us to re-think the fundamental responsibilities of business leaders.
In his 2022 book, Deeply Responsible Leadership, business historian Geoffrey Jones asks us to reflect on the histories of groundbreaking business leaders through case studies and careful research. My own reading of his conclusions are that deeply responsible leaders are agile, with a mindset that can quickly understand opportunities. They assess situations, use data as discipline, formulate strategies, make decisions. They take bold action. They have a growth mindset and strive to remove roadblocks. They are people-centered leaders who value inclusivity and belonging because organizations make better decision when they harness collective wisdom. They always consider the communities in which they operate and the implications of their operations for the natural environment. And they think about all stakeholders, not just shareholders.
Seeking Virtue in a Conflicted Industry
This month, another book has captivated my thinking about deeply responsible leaders. It is well worth reading. Author JC de Swaan, a lecturer at Princeton, takes on the topic of doing right by doing well with calm clarity in Seeking Virtue in Finance: Contributing to Society in a Conflicted Industry (2020). The book takes clear lessons from the Global Financial Crisis of 2008-2009 and thoughtfully weighs the relative social value of certain professions based on internal and external effects.
In the chapter “Social Wealth Creation”, he draws attention to
“the concept of economic and social wealth creation as one that is separate from, and at times in conflict with, the management of a client relationship. This distinction is often overlooked by finance professionals given the primacy of achieving client satisfaction, or, more simply, generating revenues from clients in the evaluation of their performance. The ‘narrow’ goal of focusing exclusively on client satisfaction is all but inevitable given how finance professionals’ incentives are set. But finance professionals can pursue activities that generate high private gains, for both their client and themselves, and negative social returns.” (69)
He muses that while the “social impact of any individual finance professional pursuing his siloed interests defined by his fiduciary responsibility may be negligible, the collective impact can be disastrous if incentives are defined without any regard to effects outside of the client relationship and finance professionals remain oblivious to the indirect impact of their activities.”
In another chapter titled “Humanistic Leadership,” de Swaan pursues understandings of virtue within finance in terms of the treatment of colleagues and the building of a responsible culture, considering the size of the community affected by one’s actions.
But I particularly found the chapter “Engaged Citizenship” to be full of insight related to our work at the SC Johnson College of Business. We work intensely with our students to base perspectives on outcomes vs. intentions. Here, de Swaan gives acutely appropriate examples — e.g., who earns more “virtue:” the nurse who gives her intelligence and attention but doesn’t give money, or the “highly paid investment banker who can fund many other not-for-profit workers”?
A Cornell take on financial market ethics
Reading JC de Swaan’s treatise reminded me of an important paper published by one of our own finance professors last year in the Review of Financial Studies. Professor Maureen O’Hara has been deeply interested in the contours of motivation within our financial services industry, the relationship between ethics and self-interest. In the paper, Financial Market Ethics (February 2023, Review of Financial Studies), she and Cornell economist David Easley observe that “ethics is conspicuously absent in standard economic models.” And they go so far as to assert that this omission is “not inadvertent” but to interpret the prevailing view of ethics as a “last resort, as an overlay needed only when the system is broken,” reliant upon the “traditional belief in economics that markets work best when rational agents all act in their own self-interest.” Yet, in actual markets, ethics (or the lack thereof) seem to play a large role in affecting not only the performance of a market, but also its viability. The modelling is based on psychological games played on a network which guides the authors to examine evidence of contagion in ethical and non-ethical behavior around the global financial crisis. Well explored and innovative.
Is it easy?
At the end of my commencement address, I ask: Is it easy to be a deeply responsible leader? Hardly. As Jones points out, balancing conflicting stakeholder concerns amidst global political-economic uncertainty, legal risks, and too-hard-to-comply-with inconsistent regulatory regimes make for complex and competing priorities. They present a test for leaders.
At Cornell—and throughout the SC Johnson College of Business—our complex, nuanced, and much debated understanding of what constitutes deeply responsible corporate leadership, what drives deeply responsible leaders—and honestly why it all matters—is embedded in our mission to develop the responsible business leaders of tomorrow—agile, people-centered, data-disciplined and broadly stakeholder motivated.
In doing this, we respect Ezra Cornell’s intention at the same time that we refine, edit, adapt, and re-create it to match the needs of our time.
Congratulations to all of our 2024 graduates!
And I couldn’t leave without mentioning:
- Associate Professor Ivan Rudik’s new appointment as Chief Environmental Economist at the White House Office of Science and Technology Policy. Ivan will work within OSTP and across other federal agencies, including the National Oceanic and Atmospheric Administration and the United States Department of Agriculture, to bring wide-ranging environmental economics measures under the National Capital Accounts umbrella and develop processes for systematic reporting in the future. Ivan is well-prepared for this work, and is especially enthusiastic to promote the ongoing Natural Capital Accounts Initiative, which will measure the value of environmental assets, such as air quality, that have never been quantified and tracked at the national level. “If GDP is going up, but natural capital resources are deteriorating, we might not be doing as well as we think. Or if the environment is improving and GDP doesn’t capture that improvement, we might be understating actual growth.”
- Reunion weekend for the Fours and Nines was awesome. In addition to our Nolan School brunch, the Dyson School luncheon, my fireside chat with Trustee Chair Kraig Kayser, the Johnson School Dinner, and the College’s Wine Tasting Event in the Carrier Ballroom led by Dean Emeritus Joe Thomas (where I was thrilled to be a server!), we had a special dedication ceremony in Sage Hall for Joe where we named the Office of Diversity, Inclusion and Leadership after him.
- The annual Nolan Hotel School Hospitality Icon and Innovator Awards event in NY last week celebrated three hospitality leaders who have mastered and extended service above and beyond, throughout their careers. So great to recognize Keith Barr ‘92, former CEO of IHG, as the Icon and co-founders of the José Andrés Group and World Central Kitchen, Rob Wilder and Chef Andrés. Superb event, wonderful speeches, and great camaraderie in true Hotelie spirit. Read more here.
