Who Will Teach Silicon Valley Ethics? We Will — With the Board’s Help

Kara Swisher wrote a New York Times piece called “Who Will Teach Silicon Valley to be Ethical?” Apparently, a number of tech companies are considering hiring Chief Ethics Officers.

In my eleven years as CEO of AppNexus, I confronted many ethical challenges, large and small. These decisions have major strategic and economic implications, and they’re never made in a vacuum.

Here’s an example we faced in the early days of AppNexus: should we allow ads to run on sites funded by piracy (for instance, bit torrent or open file sharing sites)? On one hand, it’s not our job to police the internet for copyright violations. On the other hand, it’s pretty obvious when you go to a site and it says “watch new release movies for free” it’s piracy, and the revenue from ads is enabling it.

Our largest competitor at that time was a division of Yahoo called Right Media. They had a laissez faire policy: their clients could pretty much do whatever they wanted on the platform. This put even more pressure on us to leave pirate sites alone. If we kicked them off the platform, they would happily move their business back to Yahoo.

From a personal perspective, it made me sick that we were running ads on these sites. I knew it was unethical and didn’t need a Chief Ethics Officer to tell me. After reaching out unsuccessfully to Yahoo on multiple occasions to try to jointly ban pirate sites, I decided I had no choice but to make the unilateral decision to do the right thing.

I went on stage in February 2012 at the largest trade organization meeting for the ad industry and announced that we were going to unilaterally stop advertising on sites that were engaged in content piracy. I called upon our competitors, especially Yahoo, to follow suit. Over the next few months, our revenue dropped by a few percent after we shut down tens of torrent and filesharing websites. What was Yahoo’s response? Silence — and a nice tick up in revenue. I felt better about myself as an ethical businessperson, but I had harmed our business. Was it worth it?

You might ask, how did the AppNexus board feel about the decision I made? One of our board members at the time, Brian McAndrews, made a point of raising the question of ethics on a regular basis in our board meetings. This was so important because it changed the conversation from “how do we make the most possible money” to “how do we make the most possible money in an ethical way”. This meant that when I told the board about the financial impact of the decision, it wasn’t the passioned decision of a partisan CEO. It was the only reasonable decision for an ethical CEO. My board expected me to do the right thing, even if it cost us money.

Eleven months later, the USC Annenberg Innovation Lab published a report that named and shamed the ad companies that were contributing to piracy through advertising. Near the top of the list? Yahoo’s Right Media. Suddenly, Yahoo leapt into action. By the time the second edition of the report was released a few months later, Yahoo had completely revamped their policies. Many of their sketchy clients were forced off the platform or out of business. Our competitive disadvantage went away and our business skyrocketed. Within two years, Marissa Mayer shut down Right Media and AppNexus was a unicorn.

I would love to call this a success story. We acted ethically, took a business hit, and it all worked out. However, what would have happened without the Annenberg report? I honestly don’t know if our decision made a difference. I do know that I made that decision because being ethical was part of my job description and something we actively discussed in the board room.

So, who is going to teach Silicon Valley to do the right thing? I think open, public discourse is still the best teacher. When we have a society that will name and shame companies that aren’t ethical; when we have governments that will force difficult conversations about ethics; when we have consumers that care about ethics and vote with their ballots and pocketbooks — we have all of the raw materials. What Silicon Valley needs is for boards to make ethics a priority for management teams. Boards need to create space to have hard discussions about ethical issues, recognizing that good ethics may be bad for profits in the short term. I think CEOs know how to be ethical. It’s the board’s job to make ethics a priority.