Archive for the ‘law’ Category
As the 1-year anniversary of Occupy Wall Street approaches, it looks as if Twitter is finally on the verge of handing some key protestor tweets over to a New York judge. The tweets have to do with the timing and planning of a march across a New York bridge, a march that ended in mass arrests.
And, even setting aside the legal consequences of failing to do so, it’s the right thing to do. Companies have a general obligation — a part of good corporate citizenship in the most literal sense — to obey the law. There are of course exceptions, for instance in situations approximating some form of civil disobedience. Civil disobedience is best thought of as a situation in which an individual, or perhaps a company, openly defies what it takes to be a bad law or an unjust legal ruling. In classic cases, the party engaging in the disobedience does so in an attempt to effect legal change, and shows its commitment by being willing to suffer the consequences of standing on principle.
Now, tech companies like Twitter do have a principled stance to take, here. They are rightly concerned about protecting users’ data. But tweets are decidedly and emphatically public, so the present case is quite unlike the case of a company being asked to turn over customers’ emails or other private communications.
Twitter is in a sense duty-bound, of course, to put up some resistance. Being overly cooperative with law enforcement tends to look bad on a tech company, even if it’s only because people fail to distinguish between private and non-private information, or fail to distinguish between New York and Beijing. But a year’s worth of resisting is likely sufficient for Twitter to show that it takes privacy seriously. It’s time for Twitter to do its duty as a good corporate citizen in a society governed by the rule of law.
When employers terminate an employee as punishment for wrongdoing, it is important that they proceed in a way that pays attention to fundamental principles of justice. The firing can’t be arbitrary, or be carried out without sufficient evidence. The firing should be a penalty proportionate to the wrong committed — that is, the punishment should fit the ‘crime.’ And the employee to be terminated ought to be allowed a reasonable opportunity to respond to the accusations. These are fundamental ethical principles, ones that happen also to be entrenched to a greater or lesser degree in HR law.
In that regard, here’s an interesting story about a civil servant in Connellsville, Pennsylvania, who successfully appealed her dismissal, on the grounds that the right process hadn’t been followed. More specifically, she’s a city employee who stands accused of doing work on behalf of other employers on city time. Interestingly, the court that overturned City Council’s decision to fire her didn’t disagree with Council’s reasons — the court merely disagreed with the process that was followed. In particular, the employee hadn’t been given enough time to prepare for the Council meeting at which her case was considered and a guilty ‘verdict’ issued.
The key point to understand, though, isn’t about the legal standard the court applied. Or at least, the legal standard isn’t the only interesting part. Because the legal standard applied — one according to which someone accused of something deserves a decent amount of time to prepare a defence — isn’t just a legal principle, but also a fundamental principle of justice. It’s a moral principle that is embedded in our legal system, and that ought to have been embedded in Connellsville’s HR policies. In other words, the city’s policies ought to have stipulated that an employee accused of wrongdoing be given sufficient time to mount a defence before being asked to stand ‘trial.’
Last Friday I spoke at the annual Client Conference for the big Toronto HR law firm, Hicks Morley. The talk was entitled “The Ethical Core of HR Law.” The basic idea was one that is nicely illustrated by the story cited above. Laws exist to protect rights and to promote human wellbeing. Organizational policies are in a sense a kind of private law, albeit a kind of law designed to support achievement of organizational goals. Thus every policy an organization puts in place ought to be thought of as grounded in one or more ethical principles or values. Organizations ought to give as much thought to the ethical content of their policies as they do to promulgating and enforcing them.
The recent allegations of bribery at Walmart de Mexico are, if true, a damning indictment of a significant handful of senior executives. But they tell us little about the company as a whole, and even less about capitalism.
One of the most pervasive, and least endearing, characteristics of human beings is our tendency to project instances of failure on the part of one or a few individuals onto entire groups or institutions, and to use such individual failures as evidence confirming deep, dark suspicions to which we are already committed. The nationalist and racist versions of this pattern are too familiar to need description. But this tendency plays a role in our evaluation of various corporations, too.
This is precisely the risk with regard to the recent Wal-Mart bribery scandal.
Many critics of Wal-Mart, or of the corporate world more generally, are, I suspect, secretly or not so secretly pleased at the revelation that executives at the highest levels of the company are (allegedly) implicated in this scandal. It supports, after all, a thesis that critics believed all along. It proves, doesn’t it, that the company is rotten to the core. And perhaps it even proves, or at least adds substantial weight to the thesis, that capitalism itself is inherently evil. After all, we now see credible allegations that the most senior executives at one of the world’s biggest companies — that very paragon of ruthless efficiency and expansionary capitalistic zeal — were engaged in a practice so thoroughly discredited that it is illegal even in places where, unfortunately, it is still common.
It’s a tempting conclusion, but also a very bad mistake.
First, it’s a mistake because the (alleged) behaviour of Eduardo Castro-Wright (president of Walmart de Mexico during the events in question), Mike Duke (CEO of Walmart Stores, Inc.), and other top executives tells you nothing about the other 2.2 million people who work there. It tells you nothing about the character of the people who stock the shelves and work the cash registers. And it certainly tells you nothing about the sincerity of the people hard at work to implement the company’s ambitious sustainability and CSR goals. Nor do the recent revelations help with the big question about Walmart’s overall impact. Some people hate Walmart; others literally think the company deserves a Nobel Peace Prize. The corrupt actions of a handful of executives tell us nothing about whether the company is, on net, a force for good or evil. Walmart serves as a go-between, joining poor factory workers in Asia with (mostly) poor consumers in North America. It improves lives at both ends, while notoriously squeezing the middle-man. Whether that is on balance a good thing has nothing to do with who bribed whom to do what.
Nor do the recent accusations tell us anything, factually or ethically, about capitalism itself. Bribery isn’t a feature of capitalism; rather, it is anti-capitalistic, the very opposite of proper, competitive, capitalist behaviour. The accusations, if true, don’t prove that capitalism is inherently corrupt, but merely that a handful of executives at one particular company were corrupt.
Not to be clear: none of this is exculpatory, nor is it intended to trivialize the very significant impact that this scandal might have on Walmart, its employees, and its suppliers. None of what I’ve said above excuses the reprehensible behaviour that seems to have gone on at the world’s biggest retailer. That behaviour violated fundamental moral principles. It violated the law. It violated the company’s own standards of ethics. It violated the fundamentals of capitalism. But we must not confuse the actions of individuals, even highly-placed individuals, with the virtues or vices of entire organizations or of the market itself.
Most of us rely on accredited professionals for a range of services. Doctors, lawyers, accountants and so on play a huge role in our lives, giving us advice and rendering services that we would be foolish to provide for ourselves. Some topics, in other words, are beyond the ken of even the dedicated do-it-yourselfer. Financial planning is in that category. If you plan to do anything much beyond storing your money in a mattress, you probably want help from a professional. And you hope — really, really hope — that that professional is on the ball and has your best interests at heart.
A recent story highlights some of the difficulties in this regard. The story is about an independent insurance agent facing jail time for selling a particular kind of investment — an indexed annuity — to an 83-year-old woman. The catch: prosecutors say the woman showed signs of dementia, and the implication is that the agent took advantage of the fact that the buyer may not have understood the limits and disadvantages of the investment instrument she was buying.
Even minus the question of the buyer’s competency, there are worries here. For perspective on this story, I talked to Prof. John Boatright, who literally wrote the book on ethics in finance. He pointed out to me that Equity-Indexed Annuities are so complex that they’re a dubious product quite generally. He also pointed out that such annuities are investment instruments sold by people in the insurance industry who are not truly investment specialists. Most investment instruments are regulated such that they can only be sold by investment professionals with suitable training and credentials.
But regardless of the kind of professional you go to for investment advice, the underlying ethical question is whether that professional is going to have your best interests at heart. When the thing you’re buying is too complex to understand, you have to put your trust in the seller. Such trust is best underpinned by what are called fiduciary duties. A fiduciary, roughly speaking, is someone to whom something of value is entrusted. And a professional who bears a fiduciary duty has a stronger obligation than a mere salesman. Someone out to sell you something — a car, a stereo, whatever — has a plain obligation not to deceive you, but generally isn’t obligated to make sure that the product is right for you. Whether the product is right for you is up to you to decide. But a fiduciary is held to a higher standard. As Alexei Marcoux points out, we are vulnerable in various ways to professionals of various kinds, and that vulnerability generates duties on the part of those professionals, not just to be honest to us but to put our interests first. The transaction between a professional and a client is not a regular market transaction; rather, it is (or ought to be) governed by the higher standard implied by a fiduciary relationship.
Whether financial advisors and financial planners proclaim and live up to such a high standard is another matter. It certainly seems they should. In some places, financial professionals are explicitly expected to live up to the standard applied by a fiduciary duty, and other jurisdictions are moving in that direction. If ever there were a circumstance in which we were vulnerable, a situation in which we are trusting a stranger to tell us what to do with our life’s savings seems to fit the bill.
Cheng Yi Liang, a chemist for the US Food and Drug Administration, has been found guilty of Insider Trading and sentenced to 5 years in prison. (I first blogged about this case back in March, when Liang was arrested.)
As it happens, the Liang verdict dovetailed nicely with the topic covered yesterday in the Management Ethics class I teach at the Ted Rogers School of Management. The class was led by a terrific guest speaker, compliance consultant and retired RBC compliance officer Georges Dessaulles.
The Liang case serves as a great example of one of the points Georges emphasized in his presentation, namely that when it comes to Insider Trading, highly-placed executives are far from the only concern. In the Freeport McMoran case in the mid-90′s, for example, the central figure was a consulting geologist, not an employee of the mining company itself. In the 2001 case related to Nortel’s acquisition of Clarify, the central figure was an executive working at a public relations firm that had a contract with Clarify. And now, in the Liang case, the guilty party not only didn’t work for the company in question, he didn’t have any contractual or other financial relationship with the company. Instead, he was a scientist at a regulatory agency. Other cases have involved administrative assistants, or even employees at companies printing corporate reports.
This highlights an important point about the ethics of insider trading. The stereotypical cases of insider trading involve executives, making use of undisclosed knowledge to gain an unfair advantage over outsiders in buying or selling stock. In taking unfair advantage, executives not only perpetrate a basic injustice, but also violate their duties to shareholders. But the kinds of cases cited above point to a different reason for the wrongness of insider trading. In the Freeport and Nortel cases, and now in the FDA case, the central figure wasn’t someone with direct obligations to corporate shareholders. There was thus no breach of fiduciary duty (at least not in the usual sense). What’s really at stake, in such cases, is the undermining of the basic principle of free-and-voluntary exchange on which the a free-market economy is based.
The challenge for organizations is to make sure that employees and contractors with access to sensitive information understand the definition of — and penalties for — insider trading. But that’s a serious challenge, especially at big companies. Better still would be for more people to understand the moral underpinnings of free markets quite generally, and to have the moral reasoning skills to figure out the rest from there.
If there’s serious academic topic and social issue that might generate more stupid jokes than Business Ethics, it’s Legal Ethics. Which is too bad, since it’s an important topic. And that’s the topic raised by a recent story in the Boston Globe about lawyers who specialize in defending drivers accused of drunk driving.
Anyone with a broad interest in business ethics is almost inevitably going to run into questions of legal ethics, for a couple of reasons. One reason is that many corporations employ lawyers, and so businesses have to know about the ethical constraints on these very special employees. The other reason is that lawyers who don’t work for big companies are, themselves, either partners in law firms or owners of their own small businesses. And whether you work for a business or run one, questions arise regarding the intersection of, and perhaps conflict between, legal ethics on one hand and business ethics on the other.
One of the crucial ethical question that must inevitably arise for lawyers is this: what are a lawyer’s social responsibilities? In other words, what are a lawyer’s obligations to the society she lives in, while she goes about trying to ply her trade and make a living?
There’s a very strong argument to be made to the effect that the key way in which lawyers serve society — their key social responsibility — is by serving their clients well. Ours is an adversarial legal system, under which all parties to a dispute are entitled to legal representation. A key presumption of the system is that we are most likely to arrive at a just outcome if all parties to the dispute are represented by lawyers who vigourously pursue their clients’ interest. So the morality of whole system effectively stands or falls with the practice of zealous advocacy. We can never be 100% confident in the outcome of a trial, perhaps, but at least we know each side had its bulldog.
Now, it’s widely recognized among legal scholars that there are limits to zealous advocacy. Lawyers are forbidden from directly breaking the law in attempting to help their clients, and from derailing the court’s processes by, for example, suborning perjury or destroying evidence. But beyond that, lawyers are entitled — indeed, required — to do their damnedest.
Yale legal scholar Robert W Gordon wrote a nice piece a few years back called “Why Lawyers Can’t Just Be Hired Guns.” Gordon’s basic argument is essentially that lawyers play too important a role in modern society for them to think of themselves as solely beholden to their clients. In particular, Gordon argues that a lawyer’s right to engage in zealous advocacy only makes sense to the extent that lawyers also help support the system within which such advocacy ends up being constructive:
…lawyers’ work on behalf of clients positively requires—both for its justification and its successful functioning for the benefit of those same clients in the long run—that lawyers also help maintain and refresh the public sphere, the infrastructure of law and cultural convention that constitutes the cement of society.
(You’ll find Goron’s piece in a very good book called Ethics in Practice: Lawyers’ Roles, Responsibilities, and Regulation, edited by Deborah L. Rhode.)
It’s worth noting that Gordon’s argument about social responsibility is essentially an argument about the limits that apply to the fundamental moral obligation that lawyers have to faithfully play their role in the larger legal system. And it’s equally worth noting that that obligation cannot be described without reference to that system, and to the role we want lawyers to play within it.
There’s a general lesson, here. We shouldn’t think of ethics strictly in terms of the human micro-implications of a particular situation. We need also to look carefully at the roles individuals play in important social structures, and the roles those structures play in society as a whole.
Tobacco giant Philip Morris is doing its best to get its hands on research about teen smoking, and encouraging some UK academics to violate ethical standards along the way.
Here’s the story, by Andrew Hough for the Telegraph: Philip Morris: tobacco firm using FOI laws to access secret academic data
Philip Morris International has tried to force the University of Stirling to hand over secret data into teenage smoking and cigarette packaging gathered over more than a decade.
The manufacturers behind the popular Marlboro brand, have used Freedom of Information laws to [attempt to] gain access [to] about 6000 confidential interviews undertaken with teenagers as young as 13, which discuss their views on smoking and tobacco….
The researchers are rightly fighting the request.
It’s a shocking move on Philip Morris’s part, even just from a PR point of view. To be seen seeking information that the company clearly hopes to use in marketing to children will do nothing to improve anyone’s opinion of the firm or the industry.
But there’s a second wrong, here, and that lies in the attempt to get the researchers in question to violate their obligations to the research subjects — the children and their parents — who participated in the research in question.
When university-based researchers conduct any kind of research on human beings, they are required to adhere to pretty strict standards for research ethics. The most fundamental of those standards has to do with obtaining informed consent from research subjects. Such consent may be obtained only after research subjects are fully informed about the goals of the research, as well as about what sorts of privacy protections they can expect. In the case described here, it is almost certainly the case that the children interviewed, and their parents, would have been assured that while the researchers would of course eventually make public the aggregate results of their research, the raw data — the interview transcripts that Philip Morris seems to be seeking — would of course be kept confidential.
So Philip Morris is asking these researchers to break their promise and to breach the trust placed in them by research subjects. The company is attempting to get the researchers to violate their duty. This puts the company’s behaviour into the same moral category as suborning perjury or intentionally putting another party into a conflict of interest. It’s a bad thing when a company violates its own duties; but it is especially corrosive to work so hard at encouraging other people to violate theirs.
I’m returning home today after spending the weekend at the Annual Meeting of the Society for Business Ethics, the world’s foremost association for academics engaged in the study and teaching of issues related to business ethics, corporate social responsibility, and so on. (It was a fantastic meeting and anyone with a professional interest in these issues should consider joining SBE.)
One of the dominant themes of this year’s meeting was the role of the corporation in the political realm. It’s an old topic, one revitalized by the US Supreme Court’s decision last year in the Citizens United case. Corporate involvement in the political sphere takes many forms (from lobbying to campaign donations to participation in collaborative approaches to regulation). Such involvement is probably inevitable, but definitely controversial, and so there’s lots to sort out regarding how we should understand corporations in the political realm, and what rights and responsibilities they should have in that world. Among several dozen scholars presenting their research at the SBE meeting, a striking proportion of them presented work related to this set of topics.
David Ronnegard and Craig Smith, for example, presented work that elucidated the connection between competing theories of business ethics, on one hand, and competing theories from political philosophy, on the other.
Anselm Schneider and Andreas Scherer presented their work on the changes in corporate governance necessitated by (what I would call) the quasi-governmental responsibilities that corporations sometimes take on in the international sphere.
Pierre-Yves Néron presented work arguing that the way we think of corporations in the public sphere ought to be strongly influenced by thinking about the kinds of corporate behaviours (including regulatory lobbying, for example) that can either improve or frustrate market efficiency.
Waheed Hussain presented his work on what it might look like to “civilize” the corporation to make its participation in the political realm less worrisome — essentially, by fostering among corporations a “public interest” ethos, and insisting that lobbying etc be framed in terms of the public good.
Wayne Norman encouraged his fellow business ethicists to pay more attention to regulation, rather than focusing (as the typically do) on the corporate ethical obligations that go “beyond mere compliance”.
I myself presented some of my current thinking on the various ways we might think of corporations in their interactions with government. In particular, I argued that while, in some cases, it makes sense to conceptualize the corporation as an agent in its own right, there are other cases (perhaps many more cases) in which it makes sense to think of the corporation as a tool or technology used by citizens to advance their goals. (This is something I’ve touched on before, informally, in a blog entry.)
Although I don’t want to speak for my colleagues, it seems safe to say that the scholars whose work is noted above share an interest in better understanding what it means, and what it should mean, for corporations to be political agents. They are part of a trend — I don’t yet want to say movement — that sees scholars attempting to take seriously the complexity of the practical and philosophical problems raised by having limited-liability, joint-stock corporations participate in a realm that is generally thought of as being rightfully the place of flesh-and-blood citizens.
Here’s another “tempest in a teapot” story with much larger implications.
By Daniel Wiessner, for Reuters: Deaf man complains nudists would not provide interpreter
A deaf man has accused a nudist park in upstate New York of violating federal law by refusing to provide him with a sign-language interpreter at an annual festival.
Tom Willard, 53, of Rochester, filed a complaint with the U.S. Justice Department claiming Empire Haven Nudist Park violated the Americans with Disabilities Act (ADA) by refusing his requests for an interpreter.
“I am fed up with being turned away every time I try to do something, by idiots who somehow feel the ADA does not apply to them,” Willard wrote in the complaint….
Now it’s true that the ADA‘s “Public Accommodations” does require businesses and nonprofits to take reasonable steps to reduce barriers for the disabled. But according to this page explaining the application of the ADA, Willard is probably out of luck, legally speaking:
Q. Will a bookstore be required to maintain a sign language interpreter on its staff in order to communicate with deaf customers?
A. No, not if employees communicate by pen and notepad when necessary.
In other words, a business doesn’t have to provide a customer’s chosen accommodation, as long as they do something to achieve a fair outcome. (If someone reading this understands the application of the ADA better, please comment!) At a bookstore, you don’t need a translator as long as you’ve got a pen and paper. The same would pretty clearly apply at a nudist park.
Now all that is about the law, not about ethics per se. Ethics and the law are two different things, and that goes for the legal and ethical responsibilities of business, too. But that doesn’t mean that legal issues are “merely” legal issues. The legislation with regard to how businesses need to accomodate disabilities is right there, in black and white. But such legislation is must be interpreted, and interpretation inevitably involves the application of ethical principles, and the relevant ethical principles here include not just the principle that we ought to do more to lower barriers, but also a principle of reasonableness that says that the needs of the disabled have to be balanced against the legitimate interests of businesses and other organizations (and of their other stakeholders). Judges and juries end up having to apply such principles, among others, when discrimination cases reach court. In the 99.999% of cases that never end up near a courtroom, it’s up to businesses — and the people who work for them — to do their best to apply those principles too.