Archive for the ‘competition’ Category

Price Fixing: Not Just Business

Canada’s Competition Bureau has charged several candy companies with price-fixing. Nestle Canada, Mars Canada, and wholesale distributors network ITWAL stand accused of conspiring to manipulate the price of chocolate here in Canada. According to a press release from the Bureau, charges have also been laid against several individuals, including Robert Leonidas, former President of Nestlé Canada; Sandra Martinez, former President of Confectionery for Nestlé Canada; and David Glenn Stevens, President and CEO of ITWAL.

It’s interesting to note that price-fixing is one of the few pricing-related topics that comes up with any frequency in business ethics — one of the few that makes even a token appearance in any business ethics textbook. For the most part, pricing simply isn’t discussed as an ethical issue, probably because most companies are seen as having so little choice to exercise in the matter.

But price-fixing — attempts by erstwhile competitors to arrange not to compete on price — is a serious ethical as well as legal issue. It is also the subject of considerable cynicism. Many people seem to take for granted the idea that certain kinds of companies — gas companies come to mind, for instance — collude in an attempt to squeeze more money from consumers.

Another kind of cynic will see price fixing as not just common, but justified. After all, it’s just business, right? A manager’s job is to make a profit. And so if price-fixing is a route to profit, wouldn’t that just be part of a manager’s job?

But there is of course a good reason why price-fixing cannot be thought of as just part of doing business. And you don’t need to have a particularly warm-and-fuzzy view of business in order to see it.

But first it’s important to see that the reason why price-fixing is wrong is not just the bare fact that it hurts consumers. In market economies, there is no general prohibition against doing things that hurt other market participants. Markets are supposed to be win-win, but only in the big picture. There’s nothing unethical, for example, about developing a new and better product, one so good that it drives competitors out of business and hence leaves some people unemployed. Likewise, there’s nothing wrong with raising your prices in response to rising costs of production, even if that leaves some people unable to afford your product.

So the reason why price-fixing is illegal, and also unethical, is not that it hurts consumers. The key reason is that it violates one of the basic requirements for markets to work efficiently. In order for markets to function with anything approaching efficiency — never mind fairness — several conditions must obtain: for starters, there must be sufficient information in the hands of both buyer and seller, and the costs of transactions must be borne by the participants, rather than spilling over onto bystanders. But most important for the present case, markets can only be efficient if buyers have real options — that is, if no seller has the power to bully the market. Behaviour aimed at letting one seller, or a group of sellers, bully the market is contrary to the requirements of efficient markets.

And when markets don’t operate efficiently, they lose much of their fundamental ethical justification. So when companies engage in price-fixing, then, they’re not just acting unethically. They’re acting as bad capitalists.

Can SNC’s Reputation Recover?

Canadian engineering giant SNC-Lavalin continues to provide plenty of fodder for ethics classroom discussion, and making news in all the wrong ways. Over just the last three days, the company has made headlines for making over $1 million in illegal political donations in Quebec, for disguising dodgy payments to an agent in Angola, and for police searching the home of a former executive as part of a prosecution involving more than a dozen criminal charges.

Against this backdrop, slightly less attention has been paid to an announcement last week that the company had hired a former Siemens executive to take over the role of Chief Compliance Officer, a portfolio that ostensibly puts him in charge of ethics, too.

I was interviewed about this recently on BNN, (see video here) and the key question not surprisingly was whether having hired a new Compliance Officer is going to be enough to turn the company around, either in terms of ethics or in terms of reputation. In this regard, I think three key points need to be made.

First, a word about the relationship between ethics and compliance. The new guy SNC has hired (Andreas Pohlmann) is first and foremost in charge of compliance. Compliance with the law will of course be a very good start for SNC, but it’s just a start. Ethics has to be part of the picture. For that matter, even if Pohlmann’s only goal is to get the company consistently onto the right side of the law, there’s good reason he should pay attention to ethics, so that employees at SCN understand the ethical underpinnings of the laws the company has been breaking.

Second, the company needs to see that its reputation has to be built on more than its ability to pull off big engineering projects. SNC needs to be a company all stakeholders – including investors – can trust, because trust is the foundation of business. Given its track record so far, if I were looking for a big engineering contractor I wouldn’t put much trust in SNC at all. If they play fast-and-loose with the rules as much as they seem to, what’s to say they aren’t going to play fast-and-loose with their obligations to me, too?

Finally, the company needs to get past its apparent belief that bribery is just part of doing business. Bribery isn’t just illegal — illegal pretty much everywhere, even in places where it’s tragically common — it’s also bad business. And by “bad business,” I mean it is bad capitalism. It’s the opposite of free and open competition.

If SNC is going to regain its place as a rockstar Canadian company, it needs to show that it can go out there and compete and win on quality, rather than on its ability to bend and break rules.

Are Smaller Restaurant Portions Ethically Better?

Should restaurants aim at serving smaller portions? Many are doing so, these days, and it’s easy to see why. Some of this is motivated by calorie-labelling requirements that are now in force in some jurisdictions. But there are other reasons, too.

Regardless of regulations, smaller portions are appealing proposition, in many ways. Other things being equal, smaller portions mean fewer calories, which is good for customers’ waistlines. And, other things being equal, smaller portions means less money spent on ingredients, which is good for restaurants’ profits. Looked at that way, smaller portions look like a win-win.

But obviously there are limits to that argument. Some customers may appreciate smaller portions, just as some will choose ‘lite’ beer, child-size portions, and salad with dressing on the side. But plenty of other customers still appreciate bigger helpings, with extra cheese, please. So while offering choices in terms of serving size may be a no-brainer, smaller portions generally can’t be assumed to be a crowd-pleaser at all.

An argument could be made that there’s a social obligation here. Regardless of what individual customers want, it’s pretty clear that, as a society, we could all stand to eat less. North American waistlines keep expanding, and the effects that is having on our health and our healthcare costs are by now pretty familiar. Do restaurants have an obligation to help stem the tide of the obesity epidemic? Do they have such an obligation even if smaller portions drive customers to the restaurant down the street, the one that’s more than willing to supersize it?

This is a question that pits social obligation against a company’s interest in making a profit. But note, of course, that “profit” here is a misleading term; if it is to be used at all, we need to understand it broadly. Not all restaurants are mega-chains like McDonalds and Subway, and not everyone who benefits from restaurant profits is a stereotypical wealthy shareholder. For your average restaurant or even small chain, “profit” might really just mean “staying in business.” For a small business, staying in business can itself be an obligation; staying in business means fulfilling obligations to investors, to employees, to suppliers, and to creditors.

Add to that the limited impact of unilateral action. Few if any restaurants or even chains have the ability to make a dent in the obesity epidemic. Your typical restaurant owner is faced with the fact that downsizing portions just isn’t going to have any real effect. Only a collective effort can do that, and that can only really happen through regulation.

The other interesting, and perhaps counter-intuitive, route, is for restaurants to get creative. They can look for ways to reduce portion sizes — and hence calories — in ways that aren’t going to be noticed and resented by those customers who are accustomed to judging restaurant servings according to a ‘bigger is better’ mentality. I’m not suggesting anything deceptive here. But if there are differences in composition or process or plating that can leave customers feeling well-fed without dumping excess calories into their systems, that seems to be a good thing.

One last note. If you’re running a restaurant and the best way you can think of to bring in customers is to serve gut-busting portions, then shame on you. You’re just not as good at your job as you should be. The very best restaurants typically have very small — but incredibly satisfying — servings. Clearly there’s more than one way to make customers happy. So while it’s hard to defend an obligation to promote social welfare in a way that risks profits, it’s much easier to say that restaurants have obligation not to take the easy way out. After all, innovation, efficiency, and creativity are core market values, aren’t they?

Pharma and the Spirit of Competition

Once again, the pharmaceutical industry is under attack, and once again it is for all the wrong reasons.

The problem this time is this: many of the new generation of blockbuster drugs are jaw-droppingly expensive, costing tens of thousands of dollars per patient per year or even per treatment. Part of the reason is that many of them are from a category of drugs known as “biologics.” Such drugs aren’t made with old-fashioned chemistry, but are instead produced inside living cells, typically genetically modified ones, inside giant vats known as bio-reactors. It’s an expensive new technology. And the big biotech firms that make these drugs are not fond of competition.

According to the New York Times, “Two companies, Amgen and Genentech, are proposing bills that would restrict the ability of pharmacists to substitute generic versions of biological drugs for brand name products.”

The companies claim they’re just trying to protect consumers. The generic versions, they argue, are typically similar, but not identical, to the originals. These aren’t simple drugs like Aspirin or the blood thinner, Coumadin. These are highly complex molecules, and the worry is that even slight differences in the manufacturing process could lead to problematic differences in form and function.

The makers of generics, for their part, acknowledge that worry, and say they’re fine with pharmacists limiting substitution to cases in which the Food and Drug Administration has declared two drugs to be interchangeable. But they oppose any further restrictions, including ones that might be imposed at the state level and for which the name-brand manufacturers are lobbying mightily.

What are we to say, ethically, about efforts by name-brand manufacturers to limit competition and thereby keep prices and profits high? Is it wrong of them to do this in a context in which health spending is out of control, and in which patients can die from being unable to afford a life-saving drug?

But as strange as this may seem, there is arguably nothing wrong with pharma behaviour that harms patients and strains private and public healthcare budgets. They aren’t responsible for the fact that people get sick, and they’re not (usually!) responsible for the decisions made by governments or by insurance companies. A lot of the behaviour on the part of pharma that people complain about is no more wrongful than the behaviour of the woman who invents a better mousetrap, thereby putting employees of the less-good mousetrap maker out of business. Innovative, competitive behaviour is good in the long run, but net social benefit is consistent with less-good outcomes for some.

The real sin, here, isn’t against consumers or governments, but against the market itself.

Markets, and the businesses that populate them, can only promise to be socially beneficial when there is competition. When governments move to foster competition, businesses that profess to believe in free markets cannot rightly cajole governments to do otherwise. The same goes for using lobbyists to encourage government to make a market less competitive. After all, playing by the rules of the game is the fundamental obligation of business. But when it comes to changing the rules of the game, we have to look to the limits implied by the spirit of the game. That’s where pharma is going astray here. Using government to limit competition isn’t just bad ethics; it’s bad capitalism.

Lance Armstrong: How the Mighty (Book) Has Fallen

It's not about the bike.

Lance Armstrong: It’s Not About the Bike.

What are we to make, at this point, of Lance Armstrong’s best-selling 2000 book, It’s Not About the Bike: My Journey Back to Life? I have to admit that I never read the book, and my interest in doing so has not increased in the wake of accusations of doping. But why? After all, the book was a best-seller, one by an athlete whom many regard — still regard — as a hero.

The picture above is one I took, of a box of free books a neighbour of mine left outside on the sidewalk. When I ran by one recent Saturday afternoon, only one book remained: Armstrong’s book. Funny but sad, I thought. When I passed again roughly 24 hours later, the box looked exactly the same: just one book, unwanted even for free. I snapped a picture.

(Another perspective on the book’s value: Amazon is still selling the book, for about $11, though you can also buy a used copy via Amazon for just a penny — in other words, for the cost of shipping it.)

The book, as you can surmise from reading any of a number of reviews, tells the story of Armstrong’s rise to prominence in cycling, his battle with and ultimately triumph over cancer, through to his victory at the 1999 Tour de France. It is, in short, the story that made him a hero to so many.

We are now all but certain that Armstrong’s meteoric rise to the pinnacle of the cycling world was aided by pharmaceuticals, a sophisticated and rigorous doping program that he not only stuck to but bullied his teammates into adopting. Should he still be regarded as a hero in any sense? And is his book still worth reading? We all know now that the book left out crucial details, but as far as I’ve heard there’s no reason to doubt the basics: he had cancer, he had surgery, he “beat” the cancer, he trained hard, he won the Tour de France. So the basics of the hero story remain as valid today as they were when the book came out over ten years ago. So why is the book now effectively — literally! — consigned to the trash-heap?

For some, the explanation might be simple personal disillusionment. When a hero falls, he falls really hard. So some who previously lionized Armstrong may not want even to think back upon what they now see as their own naiveté. Others may not want to be ‘inspired’ by someone they see as a liar: perhaps they just don’t want to listen to life lessons and inspiring stories, no matter how useful, told by someone who cheated and then lied about it.

The best answer, I think, lies in the loss of trust. Armstrong’s message was one of hope and courage, and it can only really bring hope and courage to the reader if the reader trusts Armstrong’s words. Armstrong’s message was like that of the kind, experienced physician in whom the cancer patient puts his or her faith. “We’re going to take good care of you,” says the physician. Armstrong’s message: You too can triumph over adversity. Neither messenger can guarantee results: surviving cancer is much more a matter of luck, and good medical care, than it is of gutsy determination. But the other half of the message — the reassurance, the comfort, the message of hope — requires that the patient put their faith in the messenger. And that is the part of his own message that Armstrong so effectively killed.

‘Do Your Best’ in The Tangle of Global Business

I spoke recently to a corporate audience on the topic of Ethics for Leaders. One of the sub-topics I touched on was the fact that leaders need not only to make good ethical decisions, but also to help others make good ethical decisions. As a practical example, we looked at techniques a leader might use to help someone else understand what is ethically problematic about bribery. Sure, someone in a leadership position might have the authority simply to give orders; but in many cases it will be much more effective to explain the values and principles that underlie a particular prohibition.

One of the attendees at this session pushed back in a useful way. “I get the ethical argument against bribery, and I agree. But I’ve talked to Sales Managers overseas who say it’s just not realistic to avoid everything that could be construed as a bribe. How do I deal with that, beyond simply pointing to the FCPA?”

This is a tough challenge, one that needs to be taken seriously. Whether it’s bribery or nepotistic hiring practices, local practices that violate the rules of business “back home” can seem hard to avoid. Business is a competitive game, and it sometimes really is the case that scrupulously following the written rules puts a company at a significant — maybe even definitive — disadvantage.

It’s far too easy to play Monday Morning Quarterback and to speak in idealistic terms about integrity in business. But ethics isn’t about being a saint; it’s about finding a way to do your best to find suitable limits on profit-seeking behaviours when those behaviours put other people’s legitimate interests and rights at risk. So, if we are to avoid sounding preachy, what can we say about the Sales Manager above?

First, make sure the “when in Rome” argument isn’t just being used as a fig leaf to cover up what is really an appeal to convenience. Sometimes it may be easier to follow local custom, but that’s not quite the same as necessity.

Second, if — if! — it really is necessary, when doing business overseas, to engage in practices that wouldn’t be allowed back home, are you at least doing what you can to a) minimize the frequency of such violations and b) working, in at least some small way, to improve standards in the local business community? Bribery and other forms of corruption are truly corrosive, and economies in which they are common would be much better off without them. Are you part of the problem or part of the solution?

Third, ask whether unscrupulous (or merely ‘grey zone’) behaviour is being used to cover up poor performance. It may be that the Sales Manager who feels the need to offer bribes simply isn’t very good at his job and is looking for ways to succeed without having sufficient talent or making sufficient effort. Sometimes lack of ethics suggests lack of competency.

And finally, ask what your company can do to change incentives such that a Sales Manager isn’t so single-mindedly driven by numbers that he feels compelled to bend or break the rules. No one within an organization should ever think of themselves as having just a single objective. Yes, a Sales Manager is in charge of Sales. But he also has responsibilities that include risk management (including avoiding bringing the company into shame or into court) and managing morale within the sales team. People will behave according to how you reward them, and so reward mechanisms ought to be as balanced as you would like their performance to be.

The challenges posed by doing business in the global marketplace are never easy. Only by avoiding both naïveté and cynicism can you hope to do good while still doing well.

The Ethics of Changing the Rules of the Game

Daniel WeinstockWe all agree on the need to play by the rules of the game. But what do we do when the rules need changing? Under what circumstances should the rules be changed? What should the process be? What are the rules of the game with regard to changing the rules of the game?

These kinds of questions arise in any competitive, rule-governed domain, whether organized sport or politics or the world of business. In sport, the rules in question are the ones established by various leagues. In politics, the rules are legislative and sometimes constitutional. In business, the rules in question are the ones established by government regulators.

Last week, McGill philosopher Daniel Weinstock gave a talk on this topic, in a Business Ethics Speakers’ series that I host at the Ted Rogers School of Management. His talk was called, “Should business dictate the business of rule change in sport?” He was taking aim at the suspicion on the part of many sports fans that rule changes are sometimes effected by for-profit professional leagues for mere financial reasons that have nothing to do with the spirit of the game.

Along the way, Weinstock suggested that if you look at the patterns of rule changes in professional sport, you see that there are basically four kinds of reasons given to justify such changes. They are:

1) Increasing safety;
2) Closing loopholes in existing rules;
3) Increasing entertainment value of the game;
4) Improving the precision of adjudication by referees.

Sports fans will find it easy to think of examples of rules being changed by various professional leagues for just the reasons cited. But Weinstock’s framework can also be applied usefully to the broader question of how and when rules are changed in rule-governed domains more generally.

Weinstock’s first category is easy to apply to business: there are plenty of occupational health and safety regulations and consumer protection legislation that fall under this heading. Rule changes that fit the second category — loopholes — are also plentiful. The third category, entertainment, seems out of place at first glance. But think of it this way: Weinstock is basically referring to rule changes that are aimed at keeping the game productive, making sure it continues to produce the ‘good’ it is intended to produce. Seen this way, any regulatory change intended to promote efficiency or competition fits something akin to Weinstock’s third category.

Finally, there’s the fourth category, which has to do with improving the accuracy of referees. In regulatory terms, this includes rule changes that make it easier for regulators to do their jobs, including record-keeping and disclosure requirements of all kinds.

Are these the only valid reasons for effecting regulatory changes in the world of business? Probably not. But using something like Weinstock’s framework as a lens gives us a good start at making sense of the overall pattern of regulatory requirements to which business is subject. Not all rules are good ones, but neither are they arbitrary. Seeing the patterns is the first step towards sorting the good from the bad.

Capitalism and Bad Behaviour

Contrary to what you have heard, there is nothing immoral about capitalism.

A couple of weeks back, the New York Times published a truly scandalous opinion piece by essayist William Deresiewicz with the provocative title, Capitalists and Other Psychopaths. The views expressed in the piece are not just false, but dangerous.

The central claim of Deresiewicz’s essay is that “capitalism is predicated on bad behavior.” This claim is entirely untrue. Capitalism in no way requires bad behaviour. Indeed, to function even moderately well, capitalist markets rely on a general pattern of basic goodwill and honesty of its participants. Commerce of any kind requires trust, and trust is predicated on the expectation that the other person is going to follow some basic rules of decent behaviour. The niceties of the rules that ought to govern business are up for debate, the basic need for some sort of rules is not. Capitalism, in other words, presumes ethics.

Deresiewicz is right of course that bad behaviour does go on within capitalist systems. That’s not exactly a news flash. Nor is it unique to capitalism. There’s no evidence that either feudalism or communism magically turns humans into selfless and cooperative purveyors of peace, love and understanding.

The beauty of a free market, as Adam Smith taught us, is that it can generate benefits even even among mean-spirited. The taxi driver who took me to the airport this morning doesn’t have to like me, and he doesn’t have to be a particularly lovely human being. All that’s necessary, in order for me to get to the airport, is that he wants to make a living. But in no way does capitalism require that people be vicious or even indifferent to each other’s fates. As Nobel laureate Ronald Coase put it, “The great advantage of the market is that it is able to use the strength of self-interest to offset the weakness and partiality of benevolence.” We are limited in our sympathies for others. The good news is that, in the marketplace, our commitment to our own welfare, and the welfare of those we hold dear, inspires a great deal of creative and industrious activity that has as its very useful side-effect the provision of benefits to others.

Deresiewicz’s essay also takes a particularly gratuitous pot-shot at business school education. “I always found the notion of a business school amusing,” he writes. “What kinds of courses do they offer? Robbing Widows and Orphans? Grinding the Faces of the Poor?” This may be a joke, but it’s a baffling one. Is business management really so trivial a task that it couldn’t possibly require any advanced training? (The old-guard communists thought so, and look where it got them.) Say what you will about business schools, there’s little doubt that the better ones, at least, teach a serious and difficult curriculum. Deresiewicz’s slam here is also terribly and unnecessarily insulting to millions of business school graduates who work diligently and honestly to produce a bewildering array of goods and services. Yes yes, we all know about Ken Lay and Bernie Madoff. Those men deserve, and have already received, ample criticism. But why impugn the honesty and integrity of every single executive, mid-level manager and accountant along the way?

The key to understanding Deresiewicz’s error is to see that he thinks ethics should be exactly the same in all situations. Not just present, but the same. The virtues of the marketplace, he suggests, should be the same as those of the Christian bible. The norms we apply to commercial exchange, he suggests, should also be (or include?) those of civic life. But does anyone really believe that? If a company rips you off should you really “turn the other cheek,” in good Christian fashion? Should Apple and Dell really debate the qualities of their competing products and then have us all vote for the one winning product that we will then all buy? To expect the same behaviour in the market as in a townhall meeting makes about as much sense as to expect people to behave on a football field the same way they do in a church pew.

It goes without saying that Deresiewicz is not alone in his misunderstanding of the fundamentals of capitalism. But his misunderstanding is especially fundamental, and especially corrosive. The really troubling thing about Deresiewicz critique is that it suggests that there’s nothing about capitalism worth saving. If capitalism is intrinsically unethical — if it has the immorality baked right in — then why try to fix it? Why try to make things work better? We all might as well just settle in and enjoy our smug cynicism. Because like a lot of really trenchant critics, Deresiewicz offers us no alternative.

Hockey’s Ken Dryden on Business Ethics

OK, so hockey legend Ken Dryden’s recent editorial, “The anatomy of three hits”, technically wasn’t about business ethics, but about the ethics of that business known as “hockey.” But you could essentially take the entire essay, substitute suitable examples from the history of business ethics, and the fundamental lessons would be the same.

Dryden’s basic point is about the nature of adversarial contexts. Hockey, like commerce, is a fundamentally adversarial context that also happens to be socially beneficial. That is, the rest of society benefits from the fact that both hockey players and business executives regard the other team as “the enemy,” and try their best to outdo them. Try, that is, within certain limits.

The hockey player, you see, is, like the business executive, subject to a strong duty of loyalty. The hockey player has a duty of loyalty to his team. The executive has a duty of loyalty to the corporation. But in both cases loyalty has its limits. Even the toughest of hockey’s tough guys know that.

These few sentences of Dryden’s, about tough-but-fair hockey players, sum up everything you need to know about the honourable business executive:

Players commit themselves to their teammates and to their teams. It’s what they love about their teammates, and what their teammates love about them. It’s what the fans love about them too. If these players are asked to do more, they will do more. Yet something keeps them from committing to what they shouldn’t commit.

That “something” is this: an understanding that despite the adversarial context in which they play, they are still human beings, as are their opponents.

Or at least, says Dryden, that’s how things generally have been in the world of professional hockey. But there are worrisome signs, of late, that the frequency and severity of dirty hits is ramping up. Here, the analogy continues: many people believe that bad behaviour in business is on the rise. Is there a role for enforcement here, to push behaviour back into line? Sure, says Dryden, but such external incentives can only go so far. What’s essential, then, both in hockey and in business, is that the players understand, and internalize, a basic respect for each other, and for the game.

Football and Commerce: The Importance of the Rules of the Game

It’s often pointed out that business is a tough, hard-hitting game. In fact, that’s often cited as a reason for skepticism about any role for ethics in business. After all, ethics is (so they say) about good behaviour, not about aggressive competition. And there’s just no role for nicey-nicey rules in the rough-and-tumble world of business.

But, of course, nothing could be further from the truth. Rules are endemic to commerce, as they are to all other competitive games played by people in civilized societies. The rules of the game, after all, and the fact that most people play by them most of the time, are what differentiate commerce from crime.

This point is nicely illustrated by the serious scandal in which Football’s New Orleans Saints are currently embroiled.

The facts of this scandal are roughly as follows: players on the team, along with one assistant coach, maintained a ‘bounty pool’ amounting to tens of thousands of dollars, from which bounties were paid to players who inflicted serious injuries on players from opposing teams. This violates the NFL’s “bounty rule,” which specifically forbids teams from paying players for specific achievements within the game, including things like hurting other players. Why would the League have such a rule? Don’t they understand that football is a tough, hard-hitting game?

A game like football in fact has a couple of different kinds of rules. One kind of rule is there merely to define what the game is. The rule in football that says you can only throw the ball forward once per down is such a rule. The rule could easily be different, but the rule is what it is, and it’s part of what constitutes the game of (American) football. Other rules — including those that put limits on violence, and those that prescribe the limits on the field of play — have a more crucial role, namely that of ensuring that the game continues to be worth playing. Football (and hockey and a few other sports) involve controlled aggression and controlled violence, of a kind that would be considered seriously problematic, even illegal, if it took place outside of a sporting event.

The reason we consider such ritualized violence acceptable is that it is conducted according to a set of rules to which all involved consent. Players recognize that they might get injured, but they presumably feel it worth the chance of being injured in return for some combination of fame, glory, and a sizeable income. In addition, there are significant social benefits, including especially the enjoyment of fans who are willing, in the aggregate, to spend millions of dollars to patronize such sports. So the deal is basically that we, as a society, allow aggressive, violent behaviour, as long as it is played by a set of rules that ensures that a) participation in the game is mutually-beneficial and b) no one on the sidelines gets hurt.

The New Orleans Saints’ bounty system violated that social contract. It undermined the very moral foundation of the game.

And that is precisely how we ought to think of the rules of business. Yes, it’s a tough, adversarial domain. Apple should try to crush Dell by offering better products and better customer service. Ford must try its best to outdo GM, not least because consumers benefit from that competitive zeal. Indeed, failure to compete must be regarded as a grave offence. But competition has limits. And the limits on competitive behaviour are not arbitrary; nor are they the same limits as we place on aggressive behaviour at home or in the street.

The limits on competitive behaviour in business, however poorly-defined, must be precisely those limits that keep the ‘game’ socially beneficial. And it’s far too easy to forget that reasonably-free capitalist markets are subject to that basic moral justification. When done properly, such markets offer remarkable freedom and unparalleled improvements in human well-being. Behaviour that threatens the tendency of markets to produce mutual benefit effectively pulls the rug out from under the entire enterprise. Such behaviour is an offence not just to those who are hurt directly, but to all who enjoy — or who ought to enjoy — the benefits that flow from such a beautiful game.


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