The Business Ethics Blog

Child labour is always bad, but it’s not always wrong. And here’s why.

Of all of the issues that fall under the very broad heading of “business ethics,” child labour is among those least likely to be seen as grey. Most people agree, I think, that play, and learning, rather than labour, should be the dominant features of a child’s life. For a kid, learning to tidy up your own room is a fine form of “work,” as is taking out the garbage or helping dad rake the leaves on the weekend. But kids, most will agree, shouldn’t be working in factories or toiling in the fields.

Unfortunately, the world isn’t like that. Bloomberg yesterday featured an utterly heartbreaking story about child labour in the cotton fields of Burkina Faso. The story, which focused on the hard life of 13-year-old Clarisse Kambire, resulted in an avalanche of tweets aimed at Victoria’s Secret.

Why Victoria’s Secret? Because the lingerie company buys almost all of the cotton produced by Burkina Faso, under a deal that features 3rd-party monitoring intended to ensure that the cotton is organic and fair-trade. The root of the story is that the monitoring system failed, and cotton that was supposed to be harvested without the use of child labour was not. Desperately-poor farmers in Burkina Faso, it turns out, have been using their children (and the children of relatives and neighbours) in their cotton fields.

In other words, the company tried to do something good, and the good stuff it did turned out to be less-good than they thought it would be. But if all you saw were the breathless tweets and the headlines of the me-too stories, you’d swear that Victoria’s Secret models themselves were out in the fields, beating children to work faster, faster, to feed the world’s hunger for thongs.

The case of Victoria’s Secret’s cotton supply illustrates a clear failure of third-party supply-chain monitoring, but it is also an illustration of the complexity of third-party supply-chain monitoring. It’s a lovely idea to promise your customers organic, fair-trade cotton, but making good on the promise is another thing altogether.

The fundamental problem, though — the one that makes the life of a parentless child in Burkina Faso so miserable — is that Burkina Faso is a miserably poor country. The sad truth is that for some kids there, labour in the cotton fields is their best alternative; their families can’t really afford to feed them, let alone to send them to school. This is why I say that while child labour is always bad, it’s not always wrong.

So consider: what will the effect be of the spotlight currently being shone on the use of child labour in Victoria’s Secret’s supply chain? One possibility is that the rule will now be enforced. Clarisse Kambire will then be out of a job, and then what? Another possibility is that companies like VS will decide to keep their hands clean, and abandon Burkina Faso altogether. That would let them avoid nasty headlines in the future, but it would also mean a significant economic hit for a country that can’t exactly take it in stride.

But if Victoria’s Secret is truly committed to keeping its supply chain free of misery, couldn’t it simply offer to pay more for cotton, so that kids like Clarisse Kambire could get at least one solid meal a day and maybe attend a bit of school? Perhaps. But it’s not obvious how effective that would be. Pouring more money into a supply chain has complex effects. As I’ve pointed out before in regards to fair-trade coffee, paying more for something draws more people into the business, which increases supply, which drives down prices. Note also that if VS customers are willing to pay more for the cotton in their panties, that inevitably means they’re spending less money on something else — and spending less on something else means someone else, somewhere, is earning less money. Will that be someone who needs it more, or less, than Clarisse Kambire? I have no idea.

We should never, ever be complacent about child labour. But nor should we delude ourselves into thinking that good intentions, or a few extra pennies spent on a pair of panties, can make the problem go away.

I spent the last two days at a workshop on the human rights responsibilities of business, being held at Duke University’s Kenan Institute for Ethics.

It was a wide-ranging discussion, involving representatives from academia, NGOs, and industry. The discussion was focused on the “Guiding Principles on Business and Human Rights,” developed by UN Special Representative John Ruggie. The Guiding Principles are rooted in a “Protect, Respect and Remedy” framework, which says that governments have obligations actively to protect human rights, that businesses have an obligation at least to respect human rights, and that all individuals ought to have access to remedies when their rights have been violated. The hard part, of course, is putting that framework into action, a task that has fallen to a Working Group recently established by the UN, two members of which were at the Duke workshop in an unofficial capacity.

Here are three questions — food for thought, really — related to the implementation of a human rights regime intended to apply to transnational corporations. There’s nothing special about this short list of questions (many more arose over the 2-day discussion here at Duke), but it’s a starting point if you’re new to the topic.

1. How does human rights fit into the range of other issues related to “business doing the right thing”? This is both a conceptual question and a question about the practicalities of implementation, especially for companies already engaged in measuring, tracking, comparing, and training for performance in terms of CSR, sustainability, compliance, good governance, etc. Are there performance metrics typically understood as part of CSR reporting, for example, that could be repurposed as human rights measures?

2. How large does a company have to be in order to have “serious” human rights obligations? Obviously, all companies should respect human rights. But demonstrating respect can be done in a variety of ways. Big companies are increasingly expected to do much more than stay out of trouble: they’re expected to evaluate the risks their operations pose to human rights, and sometimes to report on such evaluations. Big companies — the Coca Colas and Walmarts of the world — have the resources to do this. But companies are enormously variable in size and capacity, from the sole proprietor through the SME all the way up to Walmart, ExxonMobil, and Toyota. Smaller companies may have neither the financial resources nor the know-how to implement rigorous human-rights monitoring and policy-making. Guiding Principle #15 says that “In order to meet their responsibility to respect human rights, business enterprises should have in place policies and processes appropriate to their size and circumstances….” But the word “appropriate” leaves a lot to be figured out.

3. Who will pay for increased monitoring, reporting, and policy-making within particular supply chains? Note that this is only loosely related to the question of who should pay. When a new set of costs are imposed on a value chain, which participant in that value chain foots the bill is an empirical question, but (as economists Tyler Cowen and Alex Tabarrok point out) the answer is likely to be determined in part by the relative (in)elasticity of supply of, and demand for, that particular product or service. Roughly speaking, a powerful retailer is likely to be able to force a less-powerful manufacturer to suck up the costs of making sure there are no downstream human-rights risks. This may bring about unanticipated consequences, including unintended reductions in the well-being of average workers. That’s not to say that such reductions in well-being wouldn’t be justified (after all, we’re trying to protect human rights, here). But it is to say that such risks ought to be considered.

No one questions very seriously the significance of human rights. But rights aren’t the only ethically-important constraint on business behaviour, and that raises problems. By their very nature, rights tend to resist efforts to achieve balance: they tend to be understood as absolutes, lines beyond which we must not step. That gives rights-based arguments a lot of potency. But it also means that businesses face serious challenges in doing the socially-responsible thing, namely balancing the pursuit and protection of human rights with other, arguably equally important moral obligations.

Every product poses risks. Just how safe does your product have to be, in order for you to market it in good conscience? How unsafe does it have to be in order for you to take it off the market or redesign it?

Case in point: NPR recently ran a story on Why Burn Doctors Hate Instant Soup. The basic problem is that some brands of soup sold in styrofoam cups pose a hazard to kids. They’re tippy, and have a tendency to spill when kids grab them. And when boiling-hot water and noodles spill on a kid, serious burns can result.

What are we to say, ethically, about a risky product like this?

Part of the problem here is that risk is not an objectively-measurable quality. Sure, you can count the number of burns in a relatively objective manner. But you can’t objectively determine which burns were caused by bad design and which were caused by either unreasonable parental behaviour or pure accident. And while you can measure the angle at which various brands of soup tip, you cannot measure what degree of tippiness is reasonable.

But still. It’s kids, here. Kids getting seriously burned. And the NPR story notes that there’s a relatively simple solution: making the soup containers low and wide, rather than tall and narrow, reduces the risk of tipping considerably. But are companies morally obligated to redesign their soup packages?

I think this is a good example of a question best posed in terms of corporate social responsibility, rather than in terms of obligations to particular consumers. Consider the more individualistic alternative: is Nissin Foods obligated to reduce the risks of the soup they sell to me? To the average consumer? To the average parent? To the super-conscientious parent? To the negligent parent? After all, tippy containers might be perfectly reasonable as a product to sell to super-conscientious parent, and entirely unreasonable as a product to sell to the negligent parent.

But big companies don’t design their products for individuals; they design and sell them to a society of consumers. That effectively washes out the kinds of questions about individual contributory negligence that would be entirely appropriate in the context of an individual’s claim that she has been hurt by a product.

From a social point of view, a worst-in-class product that results in a pattern of harm to consumers seems to imply a clear obligation on the part of the manufacturer: redesign the product, or at very least take a long hard look at the tradeoffs involved between the cost of manufacturing and the risks of consumption.

I bought lunch for a colleague yesterday, and left the restaurant without paying. Or at least, to an untrained eye, it would seem that I had done so. Rather, I had of course paid by means of a credit card. The restaurant, in other words, trusted the credit card company, which in turn trusted me, to pay up. None of this required that I have any cash at all in my pocket, nor even that I have money in my bank account. All that it required was trust rooted in knowledge of financial capacity. The financial capacity part, of course, was up to me. But all the capacity in the world would not have been enough without the relevant institutional mechanisms to verify it.

Such trust-based transactions happen billions of times each day. They are so much a part of everyday life that we take entirely for granted just how remarkable, and just how essential, they really are. This is probably the most important function of financial institutions. They make possible the wide range of commercial transactions that permit our modern standard of living. And that is what makes this next story worth reading.

Bloomberg reports that Visa, Inc. has “agreed to help develop Rwanda’s payments system and connect the African nation’s 11 million citizens to the global economy….”

And Rwanda is a country deeply in need of increased commerce, both domestic and international. In, 2010 the country ranked 165th in the world in terms of per capita GDP. (Not coincidentally, Rwanda also ranks among the worst countries in the world for infant mortality.) Giving its consumers and businesses a greater range of ways in which to receive and make payments is a step in the right direction.

The financial industry has received more bad press than good lately. But on the face of it, at least, this particular story seems like good news.

It’s no exaggeration to say that trust is the foundation of all commerce. Any company that gives people a mechanism that promotes trust, and hence facilitates commerce, is doing a genuine public service. But what are the chances that devotees of Corporate Social Responsibility will see this move by Visa as an example of that?

Ethics is often thought of in terms of rules: things we must do, and things we must not do. But ethics is also inevitably contextual. As moral agents we have to apply rules in a way that is sensitive to the situation. That doesn’t mean the rules go out the window. It just means that rules need to be interpreted, and applied to the particularities of the case at hand. This requires some judgment, and imagination.

Ethics is, in other words, a matter of improvisation.

The improvisational nature of ethics is particularly plain when a company is faced with an organizational crisis. A crisis is, by definition, an unexpected set of circumstances. And it requires, I think, a set of skills quite closely aligned to the skills required for musical improvisation of the kind manifested by, say, a good jazz musician.

Now let me be clear: when I refer to “crisis management,” I’m not talking about PR, about saying the right things to placate an angry public. I’m talking about genuinely figuring out the right thing to do, in a novel situation that requires urgent action. When your product is suspected of causing deaths, what should you do? When an executive is charged with a financial crime, how should your company respond? When disaster strikes in your community, what should your company do to help out? That a company has responsibilities in such contexts is clear; just what those responsibilities are is less clear.

Here are 5 specific ways in which ethical crisis management is like musical improvisation:

1. Perhaps most obviously, ethical response to a crisis must be creative. The right thing to do won’t be found in any pre-established script; it’s going to require an ability to adapt to the situation, and to exercise some moral imagination.

2. Ethical crisis management must be grounded in structure. Improv doesn’t mean hitting random notes. For a musician, improvisation (typically) means deviating from the melody while continuing to follow an underlying structure of some sort. Similarly, an organization is going to want to draw upon the relevant ethical principles, as well as its own basic ethical structure, consisting of things like its Code of Ethics and its Mission, Vision, and Values statements.

3. Responding ethically to a crisis requires collaboration. Improvising jazz musicians take their cues from, and draw inspiration from, each other. The best improv happens among musicians who have played together before and who trust each other. Likewise, response to ethical crisis is going to require close collaboration between senior leadership, the company’s technical experts, and perhaps its ethics-and-values staff.

4. Ethical response to crisis must be grounded in knowledge. In music, amateurs don’t really do well at improvising; their ‘improvisation’ is pretty hard to tell from, well, a series of beginners’ mistakes. The expert musician knows how to play the expected notes, knows how to stick to the melody, but chooses to deviate. The CEO responding to a crisis must likewise work from knowledge: knowledge of the nature of ethical obligation, knowledge of her company’s own values, and knowledge of the interests of various stakeholders.

5. To respond well to ethical crisis requires comfort with the relevant concepts and vocabulary. A master jazz musician reaches for unexpected notes and makes it look easy, natural. Likewise the CEO responding to crisis needs a degree of comfort with the material at hand. To respond well to ethical challenges requires that the CEO be comfortable talking about ethics and about moral responsibilities. She needs the comfort that comes from having thought about this stuff before. As I often tell my students, when the media cameras show up at your doorstep to ask about your company’s choices, the worst answer you can give is an awkward, “I’ve never really thought about it!”

The analogy between musical improv and ethical crisis management is not perfect, of course. For the CEO responding to crisis, the stakes are considerably higher than for the musician on stage. But I think it’s a useful way of framing the task of applying ethical standards to novel situations. Ethics should be neither rigid nor random. Responding to ethical crisis requires a sound understanding of the underlying principles, and a comfort and willingness to adapt them responsibly to the needs of the present situation.

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(This blog entry is based on a presentation I gave at a workshop called “Making the Changes: Ethics and the Improvising Business,” held at the University of Guelph on December 2, 2011. Special thanks to Mark Laver for the invitation to participate.)

Back in October, I wrote about the small conflict of interest case revolving around Toronto mayor Rob Ford’s purchase of new business cards. The reason why non-Torontonians ought to be interested in that story — a local story about a very small COI — is that it illustrated important points about the principles that ought to guide decision-makers through the treacherous waters of conflict of interest. The point wasn’t about Ford himself, certainly.

But the conflict of interest problems at Ford’s office continue.

Today’s controversy involves the fact that Ford has decided that one , the Toronto Star, is effectively black-listed as far as communications from his office goes.

The back story is that The Star ran an unflattering series of articles on Ford, back before he was Mayor. According to CTV News,

Ford has refused to talk to Star reporters since a 2010 article in the paper concerning his conduct as a football coach.

The Star says that’s the mayor’s prerogative, but adds the paper is also being denied notification of public events, briefings or announcements from Ford’s office.

Ford says he’ll continue to snub The Star until the paper apologizes. The paper says that’s an abuse of power. That sounds right, but even prior to the actual abuse, there’s a conflict of interest implicit in the idea that the Mayor would exercise discretion in this way over which papers to communicate with.

It’s important to see that a conflict of interest doesn’t have to involve money, though it often will. All that is required is for someone in a position of trust be required to make some decision in a situation in which he or she has some personal interest that could reasonably be seen as influencing his or her judgment.

Ford clearly has demonstrated that he has a personal interest here, specifically an animosity towards a particular newspaper that he feels has besmirched his reputation. And it’s pretty hard for a reasonable observer to think that that interest isn’t affecting his judgment.

Of course, this is surely not the first time that a politician’s (or business leader’s!) communication strategy has been swayed by his personal agenda. But that doesn’t make it ok, and it doesn’t mean we can’t learn from the example. People in positions of power are trusted to make decisions on behalf of others, and that affect other people’s interests. That implies an obligation to make those decisions for the right reasons, not personal reasons.

A recent AP story reported on the David-and-Goliath battle between a Vermont folk artist and the Chick-fil-A restaurant chain. The dispute is over Bo Muller-Moore’s use of the slogan “Eat More Kale,” which the Chick-fil-A says is just too darned close to their trademark “eat mor chikin” [sic]. The company’s lawyer has told Muller-Moore that his kale slogan “is likely to cause confusion of the public and dilutes the distinctiveness of Chick-fil-A’s intellectual property and diminishes its value.” The company apparently failed to comment as to what sorts of idiots they think are likely to confuse kale with chicken.

OK, so let’s get the obvious out of the way: yes, intellectual property is important and firms have every right zealously to protect their brand and its accompanying slogans.

But that’s quite different from bullying an entrepreneur who poses no imaginable threat.

This kind of behaviour is more than a simple wrong being committed against a single entrepreneur, a mere victimization of David by Goliath’s over-zealous lawyers. This is a matter of socially irresponsible behaviour.

As I’ve argued frequently on this blog, we ought to reserve the term “corporate social responsibility” to refer to obligations that a company owes to society at large, in some sense, rather than responsibilities it owes to particular individuals. And social responsibilities are precisely what Chick-fil-A is violating here.

In particular, Chick-fil-A is violating two different social responsibilities, here.

The first is the responsibility not to waste the legal system’s time. If Muller-Moore fights this in court, as he says he will, Chick-fil-A will be needlessly clogging up an already-overburdened legal system.

The second is the responsibility, albeit a weaker one, not to contribute to a pattern of overzealous — some would say frivolous — use of lawyers to scare smaller businesses. In acting this way, Chick-fil-A is setting an example for other companies, and contributing to an overall pattern that is liable to have a chilling effect on free speech and entrepreneurship.

Such legal actions, in other words, constitute a kind of pollution, a negative externality imposed on people not directly involved. Now of course in legal actions as in pollution, some effect on third parties is unavoidable and ethically permissible. But a socially responsible company at very least takes note of such externalities, makes sure that they are kept to a minimum, and makes sure that they are proportionate to the permissible goals they are trying to achieve.