The Business Ethics Blog

Patricia Dunn is getting the boot as Chairwoman of Hewlett-Packard’s Board. And then there’s the issue of criminal charges…
California AG may indict within a week in HP case

What’s this all about?

HP, the storied technology firm founded in 1939 by William Hewlett and David Packard, has been enveloped in a scandal ever since it disclosed last week that an outside investigator may have used illegal methods to spy on some directors and reporters as the company probed leaks of sensitive corporate information.

According to Dunn:

“Unfortunately, the investigation, which was conducted with third parties, included certain inappropriate techniques. These went beyond what we understood them to be, and I apologize that they were employed.”

What were those “inappropriate techniques?” The technical term, we are told, is “Pretexting.” As in, private investigators acquired the phone records of the directors and reporters targeted in the probe by calling up phone companies on the “pretext” that they (the P.I.’s) were those directors & reporters.

As Wired put it,

“Pretexting is a method whereby a third party calls a phone company and poses as a specific customer of the phone company in order to request records of the customer’s phone calls. Such records generally contain the phone numbers of people called, the date and time of the call and the duration of the conversation.”

“Pretexting,” huh? For anyone confused by this sophisticated jargon, let me explain: in layman’s terms, it’s called “lying.”

From on-line news source The Raw Story: Labour campaigners accuse Disney of using sweatshop factories

Labour rights campaigners have protested outside Hong Kong’s Disney theme park accusing Disney of using sweatshop factories in China, a news report said Monday. Workers at three factories making Disney merchandise in China’s southern Guangdong province are being paid below the minimum wage and forced to work up to 14 hours a day, according to the protestors.

Nothing really “new”, here. Disney has faced this kind of criticism for years, as have many other companies. Monitoring labour practices throughout a supply-chain is no trivial task, though clearly some companies do better at it than others. Some companies, such as Nike, were notorious offenders back in the early days of the anti-sweatshop movement but have turned themselves into model citizens. Disney is generally not thought of as being among the success stories.

What should managers of multinational corporations learn from stories like this one? I guess one lesson is that conditions in your factories will be monitored, either by you or by someone else. Wouldn’t it be better for you to monitor & manage your own supply chain, rather than waiting for an NGO to do it for you?

Related Links:
From the China CSR website: Hong Kong Disneyland In Middle Of Sweatshop Protest
The Maquila Solidarity Network’s Disney page.
Here’s my review of A Decent Factory, a film about the practical and ethical complexities of monitoring supply-chain labour standards.

And in related news…Disney tops BusinessWeek list. Interesting, huh?

Relevant Books:
Rising above Sweatshops: Innovative Approaches to Global Labor Challenges
Students Against Sweatshops: The Making of a Movement
Slaves to Fashion: Poverty and Abuse in the New Sweatshops
Disney War

Many of you will already be aware of the problems with BP’s corroded pipelines (at its Prudhoe Bay oilfield in Alaska). This week, senior execs at BP accepted responsibility for the troubles while testifying before the U.S. Congress’s energy and commerce committee.

Here’s the story, from The Guardian: Contrite BP bosses admit blame for Alaskan oil leaks

Senior BP executives owned up yesterday to “unacceptable” operating failures as they faced a barrage of attacks from US politicians over the company’s leaking pipelines in the Alaskan wilderness.
The British oil company’s US president, Robert Malone, and its head of Alaskan operations, Steve Marshall, ate humble pie in an appearance before members of Congress’s energy and commerce committee. “We have fallen short of the high standards we hold for ourselves,” Mr Malone said. “BP America’s recent operating failures are unacceptable.

I hope someone is out there writing this up as a full-length business ethics case-study. It’s got plenty of the classic elements:

• “…ignoring warning signs…”
• “…cutting back on maintenance…”
• employees who expressed “…fear of intimidation and harassment if they spoke out…”
• and significant “…staff turnover and a poor working culture…”

Uh-huh. Pretty disappointing, given that BP (“British Petroleum”) has lately been rebranding itself as a “green” company, in part by claiming that “BP” stands for “Beyond Petroleum.”

So, the discussion question of the day: are BP’s corroded pipeline more, or less, forgivable because of its recent attempts to rebrand itself as environmentally friendly?

See also BP’s Environment & Society page.

Check out this current item from Wired, by Bruce Schneier, “Quickest Patch Ever.” The story is mirrored on Schneier’s own blog under the title, Microsoft and FairUse4WM.
It’s a story about Microsoft’s sometimes-slothful and sometimes-speedy response to security gaps in its software.

Microsoft has suffered plenty of criticism in this regard. Why is that? According to Schneier:

…no software vendor likes to issue patches. Every patch is a public admission that the company made a mistake. Moreover, the process diverts engineering resources from new development. Patches annoy users by making them update their software, and piss them off even more if the update doesn’t work properly.
For the vendor, there’s an economic balancing act: how much more will your users be annoyed by unpatched software than they will be by the patch, and is that reduction in annoyance worth the cost of patching?

Microsoft’s usual practice is to gather up & analyse reports of problems, and then to issue one “mega-patch” on the second Tuesday of each month.

Why? Because it makes near-term financial sense to Microsoft. The company is not a public charity, and if the internet suffers, or if computers are compromised en masse, the economic impact on Microsoft is still minimal.
Microsoft is in the business of making money, and keeping users secure by patching its software is only incidental to that goal.

The story gets its title, and its point, from the fact that when Microsoft recently discovered a security gap in its own digital rights management (i.e., anti-piracy) software, PlaysForSure, it was able to issue a patch three days later. So, a slothful response represents a choice on the part of Microsoft, not an inevitability. This is just one example of a larger phenomenon, namely the huge variability in corporate customer service. Companies often can get away with customer service that is, from a customer’s point of view, pretty shabby. This presents companies with an ethical choice.

A few points:
1) This example serves as a pretty decent reply to skeptics who deny the need for, or relevance of, ethics in business. The decision whether, and how soon, to respond to security gaps clearly effects the wellbeing of consumers. Security gaps represent risks of data loss, data corruption, identity theft, etc.
2) This case also serves as a good response to anyone who thinks that normative issues in business can be exhaustively dealt with through regulation, or through the courts. Does anyone actually think that the best way to resolve cases of unsatisfactory customer service is to wait until enough customers are angry enough to launch a lawsuit?
3) Finally, this example puts pressure on the idea that corporate managers’ only obligation is to maximize profit (and to avoid breaking the law). It might be profit maximizing for Microsoft to issue security patches, say, every 2nd month. But it would expose customers to (lemme do the math, here) roughly twice as much risk as their current practice does. Exposing people to additional risk (which for some will translate into additional harm) is a bad thing, right?

Related posting:
See also my previous posting on customer service at Dell.
[Thanks to Bryn for the heads-up.]

Corporations often rely on all kinds of expert advice: they hire consultants to advise them on management strategies, finance, HR decisions, team-building, marketing, and even ethics. At one level of analysis ethics advice is just one more type of expert advice, the integration of which into corporate strategy and decision-making is part of the challenge of management.

Nowhere is that challenge more, well, challenging than in the world of biotech.

See this current posting by Glenn McGee on the Bioethics Blog: The Kevorkianization of Stem Cell Research. Glenn is harshly critical of the way the company Advanced Cell Technology (ACT) has “handled” the controversy over stem cell research. In a paper due to be published in Nature, ACT reports (per a company press release) that “company scientists have successfully generated human embryonic stem cells (hES cells) using an approach that does not harm embryos”.

Glenn’s 2 main objections:
1) ACT seems to be using Ronald Green, chairman of ACT’s Ethics Board, as a PR mouthpiece.

Here’s the quote from ACT’s ethics advisor, included in the press release:

“One of the major ethical objections of those who oppose the generation of human embryonic stems cells is that all techniques, until now, have resulted in the destruction of the embryo,” stated Ronald Green, Ph.D., Director of Dartmouth College’s Ethics Institute and Chairman of ACT’s Ethics Advisory Board. “This technique overcomes this hurdle and has the potential to play a critical role in the advancement of regenerative medicine. It also appears to be a way out of the current political impasse in this country and elsewhere.”

2) ACT seems to be choosing a path that is adding fuel to the stem cell controversy, under the guise of trying to be responsive to the moral views of people who oppose such research. Glenn writes:

The controversy proves unambiguously that ACT can cause half of the U.S., including the intended audience to be appeased, to believe that the people with whom they disagree are not so much trying to respect their beliefs as to create monstrous half-embryo things using technologies that only Frankenstein could love – and then to duck and cover when things go badly. And to sell it all with the ethicist who is “unpaid” doing PR.

What interests me, here, is that this is a collective action problem. ACT (and every other firm doing stem-cell research) has an individual interest in hyping its own work, grabbing some limelight and maybe attracting some more venture capital, etc. But the stem cell “industry” (including corporate and public-sector researchers) and potential patients of stem-cell-based therapies have an interest in slow, steady, un-hyped progress. So, individually rational behaviour holds the potential to result in what are, for the group, very bad outcomes, especially if too many companies engage in that behaviour. (And, if ACT management has misjudged things, the bad outcomes may even be sufficiently bad eventually to outweigh, from ACT’s own point of view, the short-term benefit ACT gains from the hype.)

Actually, Glenn’s analysis points to two different collective action problems, two different ways in which ACT’s profit-seeking hype may do harm to the world of stem-cell research. The first involves ACT’s apparent willingness to play the “embryos-are-sacred” game, by finding creative new ways to create pseudo-embryos from which stem cells can be extracted. Glenn seems to be arguing (and he knows a heckuva lot more about this stuff than I do) that companies doing stem-cell research ought instead to challenge frankly the idea that a cluster of 8 or 12 cells is a human life, rather than accepting that controversially conservative premise. The second collective action problem involves the apparently ham-fishted way in which ACT has approached the appeasement of anti-stem-cell lobby. ACT itself — an industry leader — might have something to gain (or at least not much to lose) from bungling their efforts at appeasement. But the world of stem-cell research, as a whole, might have much more to lose.

I’ll give the last word to Glenn:

I continue to be amazed at the degree to which this company manages to do more harm to the battle to get embryonic stem cell research funded than could any concerted right wing campaign against the research. ACT is the Kevorkian of stem cell research.

Relevant Links:
ACT’s press release

The 2005 flim, Side Effects , is a romantic-comedy-slash-corporate-critique, an awkward cross between a spunky-girl comedy (think Julia Roberts in Pretty Woman, or Jennifer Aniston in just about anything) and a moralistic after-school special.

The film stars Katherine Heigl (of tv’s Grey’s Anatomy) as Karly, a drug rep torn between her distaste for the industry she works for and her zest for the things her ever-increasing paycheques can buy. There’s a love interest, of course — earthy and earnest “Zach” (played by Lucian McAfee) — as well as a ne’er-do-well dad and a room-mate who tries to keep Karly grounded.

The film is pretty uneven: some of the actors are apparently first-timers, and it shows. As for the script, the attempt to sugar-coat the strident criticism of a much-maligned industry by putting it at the centre of a romantic comedy never quite works: there are too many times, for instance, when either the romance or the comedy is interrupted by one of the characters speechifying about how nasty drug companies are. But Heigle herself is sufficiently charismatic that she can very nearly carry the whole shebang. And the subject matter — the shenanigans that are the bread-and-butter of drug reps, and the disreputable activities that have sometimes gone into bringing “blockbuster” drugs to market — will be enough to keep a certain number of viewers glued to the screen.

Side Effects was directed by one-time drug rep Kathleen Slattery-Moschkau. While it may not be a great cinematic achievement, the film is a useful introduction to the whole panoply of criticisms launched at the pharmaceutical industry over the last few years. Among the disreputable activities portrayed in the film:

• “Bribing” clinicians with free lunches, product give-aways, etc.;
• Having under-informed drug reps “educate” physicians on the virtues of new drugs;
• Inflated pricing;
• Playing up small increases in “efficacy,” while failing to mention side-effects;
• Manipulation of research results to cover up dangerous (even fatal) side-effects.

A final note: the least plausible element of the movie: at the annual “Drug Rep of the Year” banquet at the film’s end, Karly is the only beautiful 20-something blonde in attendance. To understand how odd that is, see this story in the NY Times.

Relevant Links:
Side Effects @ Internet Movie Database
Side Effects official website

Amazon Links:
Side Effects (DVD)

[Full disclosure: This review is based upon a free copy of the DVD, solicited from the production company.]

It’s a good thing when businesses are guided by social values, right? Well, that kinda depends on whether you endorse the particular social values in question.

See this recent short article about a Turkish company, Hasema, selling bathing suits that comply with conservative Islamic values:

Turk takes Islam-inspired swimwear to pious bathers

An unusual type of swimwear is standing out on Turkish beaches this summer — Islam-inspired swimsuits — which buck the trend of the past 100 years for swimsuits to get smaller.

Turkish businessman Mehmet Sahin has designed what he says is the world’s first Islam-inspired swimsuit and sells head-to-ankle bathing gear to devout well-heeled Muslims, including the wives of Turkey’s leading politicians.

The company offers full-length swimwear for men, women, & kids. But the products for women are the ones most likely to raise eyebrows. For many non-Islamic Westerners, the conservative dress code for Islamic women seems repressive. Now, while Turkey is a secular republic, the vast majority of its citizens are Muslim. According to the article, in Turkey “most women wear headscarves” but wearing them is banned “in public buildings such as at universities and parliament.”

This seems like an under-explored issue in business ethics & corporate social responsibility. To whose social values ought companies be responsive?

Links:
Hasema‘s website.
An Islamic Perspective on Women’s Dress

I’ve blogged on the general issue of companies catering to particular social values:
Wal-Mart & Brokeback
Wal-Mart & the Morning After Pill

Relevant Books:
Islam: Religion, History, and Civilization
No god but God: The Origins, Evolution, and Future of Islam
Sunkissed: Swimwear and the Hollywood Beauty