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The Peter P. Dhillon Centre for Business Ethics promotes research and learning on ethics and responsible business, and how these concepts can positively contribute to societies. The Centre is excited to welcome Dr. Carol Liao, an assistant professor at the Peter A. Allard School of Law, as its inaugural UBC Sauder Distinguished Scholar.

"For years I've followed Dr. Liao's work on topics which are fundamental to the Centre,” says Executive Director Christie Stephenson. “She has been influential in the business community as a result of her research, media commentary and relationships with some of the country's most important business organizations."

Dr. Liao’s body of research covers a broad spectrum of legal issues including corporate governance, corporate social responsibility, and business ethics.

We spoke with Dr. Liao about her new role, the emergence of ‘values-driven’ business, and her take on some of the biggest news stories of 2017.

How do you see your role at the Allard School of Law converging with the Dhillon Centre?

Topics like business law and corporate governance are inextricably linked to business ethics. We are at a critical juncture in corporate history, and the intersection between law, ethics, and business is growing more apparent each day. I believe the next few decades will be a critical period of regulatory reform as increased global pressures for sustainable businesses reach a tipping point.

Working with the UBC Sauder School of Business gives me an opportunity to influence the next generation of business leaders in their understanding of the legal institutions that regulate corporate behavior, and to help them navigate emerging business megatrends.

Tell us about ‘values-driven’ business. How does it interact with more responsible and ethical business practices?

Corporations are facing mounting expectations to minimize negative repercussions as a result of their actions, and to even play a role in advancing socio-economic development. I see values-driven business as being one step ahead of the traditional ‘corporate social responsibility’ (CSR) approach.

Mainstream companies are still catching onto the notion of CSR, largely as a reactive measure to improve their brand or to limit their corporate risk, but the leaders at the forefront of the CSR movement are transforming the concept into one of “social innovation” and the integration of business concepts with social activism. It’s not just “How do we increase our profits this quarter?” but rather, “How can our business positively impact the world?” These values-driven businesses are turning traditional thinking related to the purpose of the corporation on its head.

Values and ethics are immeasurable and can’t necessarily be enforced. Do you believe there are ways to treat these concepts in the same way that companies treat laws?

There’s a misconception that the law consists of a bunch of black letter rules that are carved in stone. The law evolves and develops alongside interactive social movements and diverse understandings within our society. The formal legal and regulatory frameworks that businesses operate in are only a part of the equation. Often, there are other rules that become ingrained as industry standards, and deviating from those standards can sometimes have far more immediate detrimental effects on one’s business than any possible legal consequences would.

There are several internal governance mechanisms that companies can put in place to prevent mission drift. They can make policy commitments that they share publicly, conduct annual third-party audits, cultivate their shareholder base, dedicate resources to ensuring sound governance practices – the list is endless. This goes hand-in-hand with various carrots and sticks that can be put in place to ensure a company is adhering to its stated values. 

The recently leaked Paradise Papers uncovered over 3,000 Canadian names, trusts, companies and individuals. In your opinion, what is the takeaway from this discovery?

The Paradise Papers – and the Panama Papers before them – exposed some of the inherent challenges in tax policies governing tax avoidance (which is lawful) and tax evasion (which is not). This has been dubbed tax ‘avoision’ by some. It also shines a light on the underbelly of privilege. The wealthy have limitless access to sophisticated advisers who can exploit regressive tax loopholes to provide them with every advantage, effectively denying the public with billions of dollars in tax revenue. This is both a legal and ethical problem. Even if actions are regarded as legal, they may remain highly unethical.

This is why we need to think more about principles-based rules and values-based business practices, rather than depending solely upon strict legal rules to regulate behaviour, which may be woefully inadequate in ensuring fairness and justice.

BlackRock’s chairman recently wrote a pointed letter to thousands of CEOs highlighting the need for corporations to ‘make positive contributions to society’. What are your thoughts on this?

I think we are watching the global shift to values-driven business in real time. BlackRock is the world’s largest investment firm, with over $6 trillion in assets under management. I am hopeful that the BlackRock letter reflects a turning point in corporate mindsets that will transform how businesses operate in the future. Some are calling it a watershed moment – let’s hope.