Ethics and entrepreneurs: Why E&C is crucial to start-up innovation

What you'll learn on this podcast episode

The worldwide surge in start-up culture, from venture capital and angel investors to equity structures and fundraising rounds, has transformed business today. But why have so many well-funded start-ups—like FTX and Theranos—imploded in a cloud of scandal? In this episode of the Principled Podcast, host Susan Divers discusses the role of ethics in start-up companies with Tammy Mah-Fraser, an executive director for Alberta Innovates, and Shai Dubey, an assistant professor and distinguished faculty fellow at the Smith School of Business at Queen's University Ontario. Listen in as the three examine how entrepreneurs, investors, and funders can better integrate ethics and compliance at the beginning of their business endeavors. 

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Guest: Tammy Mah-Fraser

Tammy Mah-Fraser – Grayscale

Tammy Mah-Fraser, DrPH, MSc is the executive director of Health Platforms at Alberta Innovates. As executive director, she tackles system barriers involving multiple organizations for better health outcomes to enable a learning health system and to accelerate commercialization. As a former genetic counselor, she is passionate about incorporating the end-user whether patient, public, or provider early in the process—as well as equipping individuals and companies with tools and training to support their research and product development. She is a project sponsor of several provincial programs—Alberta Clinical Research Consortium and Alberta SPOR SUPPORT Unit—and two ethics programs: A pRoject Ethics Community Consensus Initiative and the Ethics of Innovation Consortium. 

Guest: Shai Dubey

Shai Dubey – Grayscale

Shai Dubey is an adjunct assistant professor and distinguished faculty fellow of business law at the Smith School of Business at Queen’s University. He teaches courses in negotiations, cross-cultural management, ethics, domestic and international business law, and entrepreneurship. He is the academic director for project courses in various MBA programs and the MIB program. Shai has served as the director of the Cornell-Queen’s EMBA program (now EMBAA), the MIB program, the Graduate Diploma in Business program, and the full-time MBA program. 

Shai earned his bachelor's degree from the University of Toronto and his Law Degree from Queen's University. Shai is also a graduate of the aviation Flight Technology Program at Seneca College. After graduating from Seneca College in 1984, he began his working career as a commercial pilot. In 1985 he founded and ran both an executive aircraft charter company and a flight training school based in Toronto. After selling this company, Shai worked as an aviation consultant providing strategic and regulatory advice to Canadian and foreign clients.  

Upon completing law school in 1994, Shai articled and practiced law with two major law firms in Toronto, specializing in corporate commercial law with an emphasis on mergers and acquisitions, corporate finance, and aviation. In 1999, Shai became the Chief Operating Officer, General Counsel, and a member of the Board of Directors of Quicklaw Inc., the leading provider of legal online data base services to the legal profession in Canada. In 2002, upon the sale of Quicklaw to a multinational corporation, Shai returned to the private practice of law. In 2006, Shai joined Smith on a full-time basis. 

Host: Susan Divers


Susan Divers is a senior advisor with LRN Corporation. In that capacity, Ms. Divers brings her 30+ years’ accomplishments and experience in the ethics and compliance area to LRN partners and colleagues. This expertise includes building state-of-the-art compliance programs infused with values, designing user-friendly means of engaging and informing employees, fostering an embedded culture of compliance and substantial subject matter expertise in anti-corruption, export controls, sanctions, and other key areas of compliance.

Prior to joining LRN, Mrs. Divers served as AECOM’s Assistant General for Global Ethics & Compliance and Chief Ethics & Compliance Officer. Under her leadership, AECOM’s ethics and compliance program garnered six external awards in recognition of its effectiveness and Mrs. Divers’ thought leadership in the ethics field. In 2011, Mrs. Divers received the AECOM CEO Award of Excellence, which recognized her work in advancing the company’s ethics and compliance program.

Mrs. Divers’ background includes more than thirty years’ experience practicing law in these areas. Before joining AECOM, she worked at SAIC and Lockheed Martin in the international compliance area. Prior to that, she was a partner with the DC office of Sonnenschein, Nath & Rosenthal. She also spent four years in London and is qualified as a Solicitor to the High Court of England and Wales, practicing in the international arena with the law firms of Theodore Goddard & Co. and Herbert Smith & Co. She also served as an attorney in the Office of the Legal Advisor at the Department of State and was a member of the U.S. delegation to the UN working on the first anti-corruption multilateral treaty initiative.

Mrs. Divers is a member of the DC Bar and a graduate of Trinity College, Washington D.C. and of the National Law Center of George Washington University. In 2011, 2012, 2013 and 2014 Ethisphere Magazine listed her as one the “Attorneys Who Matter” in the ethics & compliance area. She is a member of the Advisory Boards of the Rutgers University Center for Ethical Behavior and served as a member of the Board of Directors for the Institute for Practical Training from 2005-2008.

She resides in Northern Virginia and is a frequent speaker, writer and commentator on ethics and compliance topics. Mrs. Divers’ most recent publication is “Balancing Best Practices and Reality in Compliance,” published by Compliance Week in February 2015. In her spare time, she mentors veteran and university students and enjoys outdoor activities.



Principled Podcast transcription

Intro: Welcome to the Principled Podcast brought to you by LRN. The Principled Podcast brings together the collective wisdom on ethics, business and compliance, transformative stories of leadership and inspiring workplace culture. Listen in to discover valuable strategies from our community of business leaders and workplace change makers.

Susan Divers: The 21st century has witnessed a surge in startup culture worldwide. Venture capital, angel investors, equity structures, and fundraising rounds are an important part of business today. But why have so many well-funded startups with seemingly credible business plans backed by sophisticated investors imploded in a cloud of scandal? Thinking about FTX, Wirecard in Germany and Austria, Theranos, Luckin Coffee in China, Zenefits, WeWork, and more. What's missing? Why is this happening? Hello, and welcome to another episode of the Principled Podcast by LRN. I'm your host, Susan Frank Divers. 

Today, we're talking about two experts in this area. Tammy Mah-Fraser is the executive director for Alberta Innovates, an Alberta Provincial Government Corporation set up to promote innovation. And Professor Shai Dubey, the assistant professor distinguished faculty fellow of business law at the Smith School of Business at Queen University Ontario, and a successful entrepreneur and investor in his own right. I had the pleasure of participating on a panel with them about the importance of ethics for startups at the Alberta Innovates Conference in Calgary. Tammy, Shai, welcome. 

Tammy Mah-Fraser: Hi, Susan. Thanks very much for inviting me to your podcast. 

Shai Dubey: Yes, thank you very much, Susan for having me here. 

Susan Divers: Great. Well, let's jump right in. Tammy, Shai, first tell me a bit about your work in the entrepreneurial area. Tammy, can you briefly describe Alberta Innovates and your work there? 

Tammy Mah-Fraser: Sure. Alberta Innovates supports research and innovation in the areas of emerging tech, clean resources, and health through funding, connecting, as well as being a catalyst and convener. We work with researchers, entrepreneurs, organizations, and the public, along with research and innovation and the commercialization continuum. Particularly if you think about the journey of conducting research or developing innovation, there are several steps and components involved, and there are also going to be barriers. 

This is where my team steps in. We go beyond a single organization to tackle system barriers, whether in areas of clinical research, patient-oriented research, access to data. And let's talk about today's topic of ethics. And conducting quality improvement evaluation in health and human service projects, this may be a product an entrepreneur's introducing [inaudible 00:03:00] the healthcare system are looking to evaluate the implementation. 

In the evaluation process, there may be ethical issues such as power imbalance, concerns about patient harm, or staff burden in the collection use of information. The program ARECCI's co-developed program is to help sponsors identify and mitigate those ethics risks in their project. If you're celebrating 20 years, what has become an internationally recognized program? 

Susan Divers: That's awesome. It's so good to have found out about the good work you're doing there. Shai, I know you have a long and distinguished career as a faculty member at Queens, but also, as I mentioned, an entrepreneur and an investor as well. Can you give us a quick overview? 

Shai Dubey: Certainly, I can, Susan. So I started my career many years ago. I won't give my age away, but starting my first business at the age of 22. I've had several successful businesses and several maybe not so successful. I'm also a corporate commercial lawyer, and one of my focuses in practice was helping entrepreneurs because they typically don't have the resources to pay for advice when they need it the most. 

I've been heavily involved in the entrepreneurial space in the Kingston area, and I do the same at Queens. I currently chair the Investment Review Committee for a fund that invests in innovation in the Southern Ontario region. And so we put out money to companies that can't get money elsewhere to continue innovation going. And so I'm listening to pitches constantly. I also teach in the space. In fact, I'm about to begin teaching a Innovation and Creativity course in... several days after this podcast is recorded. 

Susan Divers: Well, let's start focusing on the role of ethics in startups because, obviously, both of you have a lot of experience in that area. Why is ethics important at the outset, Tammy and then Shai? 

Tammy Mah-Fraser: Well, I think ethics is critical in all businesses. And most people think of business ethics as having a code of conduct or a series of policies, but it's more having a set of moral principles and values that guide decision-making and behavior, both with internal and external conduct. 

Recently, Harvard Business Review did a piece, this summer actually, on the importance of business ethics and mentioned some of the benefits, including attracting and retaining employees as well as customers. And so, ethics actually is the underlining component that's needed in all businesses. 

Susan Divers: Yeah, we see that in our research too, that having those moral principles and values not only helps attract talent but it also helps people succeed in the end. Shai, can you share your perspective? 

Shai Dubey: Absolutely. I'm just going to build a little bit on Tammy's side. Businesses only are as good as the employees that they have, and in today's world, people tend to be much more focused on the ethical outcomes. I'm talking about employees as well. So if you're losing talent, that's a problem. From an investor standpoint, there's actually two different issues that we're looking at. Let's talk about the business itself. Is it doing something that is ethical? And I think Tammy brought that up in terms of the research that's involved. 

I mean, the rules are there. The law does not keep up with innovation. Innovators are way ahead of where the law is, and the law plays catch up. And so are you in a business that at some point is going to violate some ethical norms, be it privacy, be it how you treat people, et cetera, and will the law come down. And you mentioned FTX earlier, and these are the things that start to happen. The law does catch up, and then there are issues for the investors and the company and, quite frankly, the staff who are relying on the salaries to support their families. 

But also from the ethical standpoint is when invest... or when companies come to pitch to investors, they can't have all the answers. And when they start making things up and crossing the ethical boundaries, it sends flags up. And so my advice to companies when they're pitching is, "If you don't know the answer, say, 'I don't know, and I'll get back to you.'" And that's probably a much stronger message than making something up because that gets investors, and I know my committee will get their backs up when they get an answer like that. 

Susan Divers: Well, that's as good a description of why it's not so good to fake it until you make it that I've ever heard. So Tammy, let's dive in on how Alberta Innovates came to focus on ethics as an essential part, startups, and what are you doing to help instill that in your efforts. 

Tammy Mah-Fraser: Thanks, Susan. So, as mentioned, Albert Innovates helps support research and innovation and commercialization, and there was a lot of discussion around what's the market size. Who are your competitors? What's your value propositions? What are some of the regulations? As Shai outlined earlier, there's not necessarily the regulations around ethics. And so what happens is in I was noticing there's not necessarily that explicit activity on ethics. And so the question came around is how do we play a role in assisting companies? 

Last year at Inventures, we had this ethics booth that's similar to Lucy's The Doctor Is In on Charlie Brown. And while ethics is like oil in a machine is absolutely necessary, it's not necessarily conversation that people jump into and [inaudible 00:08:15] engage. So this year, we are very pleased to have both of you on a panel talking about business ethics, but we needed to have something ongoing. So when a sea of tools and templates and webinars are available to innovators, we decide to take a more pragmatic, fundamental approach and have created with the University of Alberta a workshop called Ethics for Innovators, applicable to all disciplines, not just health. 

So an innovator can be a company, an individual, policymaker, a member of the public. And we're currently [inaudible 00:08:42] to the course, which is designed to teach ethics leadership through building skills in critical thinking and ethics competency. So our goal is not to only to create awareness about ethics but also to help innovators identify the ethics, risk, and potential mitigation strategies, which then determines which tool or template... what are some of the things that you should be using to actually then mitigate those risks. In innovation, the ethics risks change throughout the design development to implementation-based decisions that are made. 

This is a living conversation. It's not a one-and-done. So not just designers and developers but society needs to be engaged and needs to provide more input, particularly upfront, asking the questions of, "Should we consider doing this?" And then co-design the innovation. So our contributions is to help the ethics competency and help build that culture so that people know how to identify and think through ethics before an issue even happens. 

Susan Divers: I love your description that ethics really can't be a matter of one and done. That's something we talk about quite a lot at LRN as well. Shai, I know you have some compelling examples of what happens if ethics and compliance are an afterthought. Can you share those with us? 

Shai Dubey: Well, Susan, now that we're talking about ethics, obviously, there's some things that are confidential and may have an impact on people who may not have crossed the line. But I can tell you this. There have been, unfortunately, enough instances where people have made things up, or people have made statements that we know aren't true or can be proven that aren't true, and the investment decision has not been made, and which has had a negative impact on smaller communities. Most of our investments go into smaller communities, and it has an impact. 

And so we see companies that actually had products or services that could do well because of the behavior of those that came in front of our committee impacted an entire group of individuals. And it's very hard to separate that behavior from the benefits that the company can make. And it's always a difficult decision for investors to make and one that they have to make because our fund, for example, is also government-sponsored, and if we make a bad decision, there's not just the implication of a failed business, there is a reputational hit potentially that goes much, much higher and deeper. And so, we're balancing many things in that space as we make decisions. 

Susan Divers: Let's delve into that just a bit more, and I'm going to start with you, Shai, given what you just said, because I know you're an investor as well as an educator and an entrepreneur. Let's talk about the roles of other seemingly sophisticated investors and how they seemingly don't, in many cases, take ethical commitment and behavior into account when they're making major investments. 

Shai Dubey: Well, I can't be inside of people's heads, but what I will say, and having lived through the dot-com boom as well, where I saw this and taking a company that I was running public, is that the profit motive seems to override sometimes the long-term view. We have a market, especially in the public market, that looks from quarter to quarter and doesn't look to sustainable growth. So we have behaviors, unfortunately, that are driven by short-term gain, not long-term gain. 

And so this is where things tend to cross the line, unfortunately, and it's the same thing for investors. "Can I get in? Can I get out?" We don't have hold periods. And the other thing that I've noticed and this is a personal observation, and I don't have any actual data to support this. But being in MBA programs, I see the financial industry where there isn't longevity for the people that are in that industry. There are some that stay for a while. And so what happens is that lessons learned seem to be forgotten, and we go back down that cycle, unfortunately. 

I look at FTX, one of our major pension funds in Canada, not only invested once but doubled down and invested a second time in something that has proven to be ethically unsound. But I think the warning signals were there way ahead of time. So once we start measuring certain things, people's behavior starts to go towards those measurements. And so if we start measuring the ethical side of things, maybe it's possible that we will start looking at it from a different perspective. 

Susan Divers: I would certainly agree with you, Tammy. Tell us how Alberta Innovates takes ethics into account in its funding efforts because, again, as Shai was saying, you are a public entity, as is some of the work he does. So how do you take that into account when you're making decisions to provide funding? 

Tammy Mah-Fraser: Yeah, I'm just going to build on what Shai has said because, equally, so we're in the public eye in terms of the funding that we make. But looking at governance, looking at what's our governance structure. How's the decisions made? Was reporting sound? Do they have sound financial and business practices? 

Do they demonstrate corporate social responsibility, are all good attributes? Delving into essentially what the specific ethics requirements, we're still kind of looking at what that would look like. But a lot of it you can tell is, does it make sense? Are the pieces matching up? Are they saying what they're doing? 

Susan Divers: Well, that makes sense too because we're again getting to the question of are they being truthful and are they sticking to what are the facts. Shai, before we leave this, how do you actually evaluate ethics as a factor when you're making investments? 

Shai Dubey: That's an interesting question, Susan. But before I answer that, I just want to come back to something that Tammy has said. We seem to go through what we call the flavors of the month, and so everybody jumps on board of those flavors of the month and says that they're doing things. It kind of ties into the question you've asked. And so what happens is they make claims about certain things, could be during the dot-com era about how many clicks. Now, it's about AI. And the reality is that once you look behind and actually do your due diligence, you can see that the claims aren't often valid. 

Some of these terms are fairly nebulous that sit out there. And so, how do we find out? I think it's just by questioning. It's about being curious, and it's about making sure that the people who are making those investment decisions are one diverse in their viewpoints so that different questions get asked because we have this tendency to bring people together that are just like us, and it's very difficult to have people contradict our points of view. A second thing is if something doesn't make sense to ask the questions. We're also sometimes afraid to ask those questions that may go against the status quo. 

I think the governance training that Tammy was talking about, we talk about that within organizations, but investors, especially if it's a group of investors, need to have that same model set up so that we don't end up being like Lemmings and following each other off the cliff because there are other people we hear about those that go wrong, but we don't talk about those investors that said, "No, thank you." And if we could actually go and talk to them and say, "Why did you say no thank you?" You might be surprised by the answers that you get and the insights that you get. 

Susan Divers: That's a very good perspective to bring to bear on this discussion. And speaking of flavors of the month and fear possibly of missing out on part of investors, with the advent of ChatGPT and other large language AI and the problems that have been surfacing with the unintended consequences of algorithms, how should entrepreneurs address those broader issues within their work? And then let's also talk about what's the role of investors in addressing that type of risk. Tammy, can you go first? 

Tammy Mah-Fraser: Sure. This is a great question, Susan. Something that we've... Shai and I've been talking about is, first of all, have ethics principles. What are some of the things that you, as investors, hold and guide your decisions? What drives you in terms of your values or defines essentially what you would be investing in? But if you recall, it's not too long ago we were debating and still, to some extent, the autonomous vehicles. Should they be there or should not be there sort of thing. So ChatGPT is another thing that's going to come on. 

There's several other technologies that's going to come along, and it's really not just a role investors, but everybody involved has a role and accountability. And we're entering an age where it's not just necessarily us interacting with technology, but it's oftentimes technology with other technology. For instance, a computer directing a robot. And in this case here, ChatGPT, it's really artificial intelligence creating something that we are now watching happen. And really we need to be diligent, as Shai said, asking questions as an investor, applying an ethics lens. 

We teach in our Ethics for Innovators course, applying the lens of beneficence. Who does it benefit? Does it benefit others? Now malfeasance. Does it harm others? Autonomy. Do we do things without a person's informed consent? Justice. Does it discriminate and fairly distribute resources fairly? [inaudible 00:17:40]. Do we all the parties understand the general way the technology is working? And accountability. Who is assigned and accepts responsibility for that technology? These are all important to think about as we look at it. 

But it's not just important, as I said, that individuals who are developing it or innovators, we also think about how does the technology have... what's the effect essentially or impact on people, society and the environment? And once that's identified, oftentimes it comes down to balancing the different values, the different tensions sometimes exists. Shai mentioned earlier about the profit [inaudible 00:18:12] in some cases may be privacy versus highlighting security. And then we have to look at essentially how do we start to mitigate or how do we start to address these ethics risks? 

Susan Divers: Those questions that you mentioned are a great guide to doing just that. That's very helpful framing. Shai, could you talk about this topic a bit? 

Shai Dubey: Susan, that's a great question, and Tammy, thanks for your insights. I'm going to address that, and then I will also talk about what goes on in the university environment because it's become a major issue for students and for assignments. But I view ChatGPT as just another tool for business to accomplish things. So let me step back and let me talk about the dot-com boom. Everybody thought there was a new paradigm in the way business was going to get done. In reality, what it was was just a different marketing tool. There still had to be the business structures behind the scenes to deliver products. 

Amazon just didn't suddenly have this transporter that dropped goods off at your home. There still was the whole logistics side, but they were able to get to you in terms of marketing. And if we look at ChatGPT as getting functions done more quickly like the computer running the robot and observing what happens and doing real-time fixes so that things become easier, smoother, there's less iteration time for upgrades coming, then the tool is actually very valuable. 

Where it becomes a problem is when ChatGPT is used to steal ideas to take from somebody else that doesn't belong to you, which it can be done, or to take credit for an idea that doesn't belong to you as well. And there's where the challenge is coming in the university environment is how do we deal with students plagiarizing. And really, I just had an assignment due in, and my course outline says, "You are free to use ChatGPT. Just like any other academic integrity issue, if you use it, quote it. 

And if you quote it, I have no problem with you using it." Because if it is speeding up the learning process and getting students to focus in on things that are more important, I think it's actually a valuable tool, and it's not a negative. But we seem to focus in on the negative. And I think we can control the negative if we define what is acceptable and what is not acceptable. Right now, we are trying to take a much broader view that this is sort of some form of evil or the world is going to end. And I don't believe that that's the case, but that's a personal opinion. 

Susan Divers: Well, and a lot of the ethical frameworks and considerations that both of you have articulated in this podcast are examples of ways in which ChatGPT can be used ethically as long as people are thoughtful and ask the right questions. So last question. Let's try to look around the corner at what's coming down the pike. [inaudible 00:21:09] we just saw, ChatGPT certainly was a bit unexpected, and its impact was tremendous. What else is out there? Tammy, what are you seeing shaping up for entrepreneurs and investors and funders such as Alberta Innovates? 

Tammy Mah-Fraser: Sure, and I'll just take a personal look at this one comment. Just speaking to what Shai was saying, that technology is here, and technology is designed to essentially [inaudible 00:21:36] to assist people. And I think what one of the biggest things that's going to be coming down the pipeline is trust. Is trust about what is this tool doing? What is this tool accomplishing? Whose values are being highlighted in this? And I think this is a question. 

And Shai's right. The legal has not caught up with this, but it's not just that it's a societal conversation that hasn't really happened or is not happening at the pace of innovation. And so having trust, having an understanding of what the purpose of these tools are, what's the potential of these tools, having these ethics conversations around it where multiple people from different disciplines come together and discuss it, I think that sets us up to take advantage and actually then put almost guardrails on some of this technologies coming out that builds that public trust that will then help. 

It's oftentimes people say, "It's not a technology problem." And it really probably isn't a technology problem. It really largely is a sense of how do we introduce it in a way that respects people and respects individuals in their lives that they're doing that brings value to them. 

Susan Divers: Well, and that gets back to what you were saying at the very outset and what Shai was saying too about a moral compass and letting that guide what you're doing. Technology, it's like a car. You can use it for good, or you can use it for bad, to use a terrible analogy. But Shai, what's your take on what's around the corner for the future, and what advice are you giving your students? 

Shai Dubey: I mean, ChatGPT has many limitations, and that's what people also don't focus on. The data that it's reading is up until 2021. And so, anything after 2021, the data is not there. And AI requires good data, and it needs to be able to sort out what's good and what's not. There's lots of fake data that's out there as well. So the next iterations, and I don't know how many iterations are going to happen, is when AI becomes a learning machine rather than one that just takes data that's out there where it can start to shift. 

And maybe also from the ethical standpoint, what is good and bad. And really, we have so much information out there. And what happens is that we have people, organizations, countries working on same projects and not even realizing they're doing it. And so if we can get to the point, whether it be ChatGPT or some next variant of that, but something that will allow us to see what's going on and rather than working in competition with each other, forming more collaboration because we have a better sense of what's going on. 

Now, I know many will argue, "Well, that's our competitive advantage to make money in the business world," and you can still do that, but there'll also be ways to get the foundational things in place so then you can build on that, which will accelerate innovation tremendously. It won't be an incremental. The disruptive innovation that we've seen in the last 10 years with Airbnb, Uber, a few other companies, we will start to see more and more of that because companies don't have to work through the baseline. They can now say, "Where can we take this?" So it's quite exciting to see where this might go in the future. 

Susan Divers: Well, that's a wonderful set of comments to close with, as it's inspirational. And it's also challenging for the next generation of innovators and entrepreneurs. Tammy, Shai, thank you so much for joining me on this episode. It's been wonderful having you on the podcast, and I hope you'll come back and speak with us again soon. 

Shai Dubey: Thanks very much, Susan. 

Tammy Mah-Fraser: Thank you. 

Susan Divers: My name is Susan Divers, and I want to thank you all for listening to the Principled Podcast by LRN. 

Outro:   We hope you enjoyed this episode. The Principled Podcast is brought to you by LRN. At LRN, our mission is to inspire principle performance in global organizations by helping them foster winning ethical cultures, rooted in sustainable values. Please visit us at to learn more. And if you enjoyed this episode, subscribe to our podcast on Apple Podcasts, Stitcher, Google Podcasts, or wherever you listen. And don't forget to leave us a review.


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