The Business Ethics Blog

Business ethics isn’t always about multinational corporations, high-stakes finance, and multi-million dollar lawsuits. This story is sort of a tempest-in-a-teapot compared to big stories like Enron, but I think it usefully illustrates some interesting points:

Here’s the story, from CBC news, about the Samosa stall at a farmer’s market in Fredericton, New Brunswick.

Fredericton’s four-week samosa drought ended Saturday when Samosa Delite reopened at its usual location at the Boyce Farmers’ Market.
But the popular vendor will move outside to a trailer in the parking lot in two weeks.
For the first time in 30 years, there had been no samosas available at the market Saturday mornings as the treats became a victim of their own popularity. Lineups clogged the market’s walkways, obstructing stalls belonging to other vendors and causing market officials last month to ask the two samosa vendors in the market, Samosa Delite and Patel’s, to move to an outdoor food court.

So, a few random observations:

1) This is a classic, small-time example of “externalities.” Third parties (other vendors) were suffering negative consequences of the simple market transactions being conducted at the samosa stall. Crowding is a form of pollution. Samosa Delite was able to “externalize” that pollution, extruding it into public space. It would be hard (though not, I think, impossible) to measure this negative externality and have Samosa Delite compensate the owners of adjacent stalls.

2) Notice the complexity of the interests involved…other vendors were being affected (negatively) by the lineup for samosas, but presumably they also benefited from the additional foot traffic near their stalls.

3) Notice that Samosa Delite was apparently unwilling to act on its own to limit the effect its business had on others. (Question: how much negative impact — measured how? — would Samosa Delight have to have before it would have been morally obligatory for them to do something to mitigate their own impact? What could/should they have done?)

4) Notice also the (for better or for worse) authoritarian solution: the managers of the market forced Samosa Delite to switch locations.

5) Notice (perhaps most importantly) that this ethical issue probably has nothing to do with wrongdoing. Too often businesses think that ethics is all about avoiding wrongdoing. But the owner of Samosa Delight was likely just trying to make an honest living, serve his customers well, keep his employees employed, etc. Nonetheless, his interests conflicted with those of people around him, and so something had to give. The point is that identifying this as an ethically interesting case doesn’t immediately mean that anyone did anything wrong.

This one’s got everything it takes to soak up public attention: race, healthcare, and paternity. It’s like a perfect storm. Add in the word “lawsuit” and you’ve got everything a good scandal needs.

The story is about a couple suing a New York fertility clinic for a sperm mixup that resulted in a baby racially unlike its supposed parents.

As one faithful reader of this blog asked, “Is this a business ethics issue, or a bioethics issue, or are the parents just being jerks?”

Here’s the story as reported by one NBC affiliate: Fertility Clinic Sued Over Too-Dark Baby

After they saw a baby girl they had gone to a fertility clinic to conceive, her parents became convinced something was wrong, according to court papers.
The girl’s skin was darker than either parent’s, a judge wrote in allowing the parents to proceed with a lawsuit that claims the clinic botched the insemination of the wife’s eggs.

The title of the story obviously refers to the fact that the reason the girl’s paternity came into question in the first place is that she’s darker skinned than either parent. But the point here isn’t that the clinic gave the parents a black baby. The point is that the clinic did such sloppy work that they gave the couple a baby that’s not related to her own supposed father. (The parents have actually tried to sue both for malpractice and for emotional distress, etc. The court is proceeding with the former, but not the latter.)

Now, certain corners of the web have been awash in commentary about the parents being jerks. And it’s easy enough to sympathize with that conclusion. It might not exactly be great for this kid to know she was at the centre of this kind of controversy. The girl (whom the parents say they love dearly) is too young to understand now, but she’ll understand eventually. (Paging Dr. Phil…!)

But we shouldn’t let that distract us from the fact that the clinic was seriously sloppy and completely botched the job they were paid to do. They should be held accountable. It seems unlikely that we want fertility clinics to be the only commercial entitites that still get to resort to the old standard of “caveat emptor.” Are the parents supposed to not hold the clinic accountable, out of fear for this little girl’s dignity?

Of course, this double-bind is fodder for the folks who argue against the commodification of fertility services. “Tsk, tsk, parents! You wouldn’t have unseemly little binds like this, if you weren’t out buying babies to start with.” I’m not saying that would be my conclusion, but this case is a pretty good example of a few of the consequences of commercializing repro-medicine. At very least, this stuff ought to be foreseen & dealt with preemptively.

I’m not sure why I haven’t blogged about this case before. Everyone in the world of bioethics / health-care ethics knows about it, but maybe not everyone with an interest in business ethics, though it’s as much a story about corporate ethics as it is about health.

It’s a story about 6 healthy young British men who were paid to be part of what’s called a “Phase 1” clinical trial, to determine whether a new drug was safe for use in humans.

It was not safe. Definitely, devastatingly not safe.
Indeed, the 6 men “ended up in intensive care, their heads swollen like balloons and their immune systems seriously damaged.”

Here’s the story, from The Mirror ONE YEAR AFTER DRUG TEST HORROR…NO APOLOGY NO MONEY

The drug is called “TGN1412,” and was developed for treatment of leukemia and certain inflammatory conditions. The young men were each paid £2,000 (about $4,000) for their work as human guinea pigs. For this, they were to undergo several injections and a few days in hospital under observation. That much is pretty standard. Every new drug has to be tried on someone first (following, of course, trials in animals — which, unfortunately, don’t always give definitive evidence of a new drug’s safety for humans).

The result in this case was very nearly a worst-case scenario: all 6 men had nearly immediate, serious reactions to the drug. All of them ended up in the intensive care unit, in excruciating pain. As the Mirror puts it, “The drug was destroying their immune systems and shutting down their vital organs.”

Here are some of the ethically interesting elements of this case:

1) The company running the study had an insurance policy to help in case of adverse outcomes — but the policy is too small (£2million, or about $4 million) to cover the health-related expenses the 6 men are likely to face as a result of the drug trial.

2) The manufacturer of TGN1412, a German company called TeGenero, has gone out of business. As a corporate entity, it no longer exists. An American firm, Parexel, was running the drug trial, but has refused to accept responsibility. (This highlights one of the down-sides of the limited liability corporation. Once a corporation has folded, no one is left to take responsibility.)

3) From what I can read, the consent the men gave to participate in the trial was pretty far from the standard of “free and informed.” Well, it was free, but not terribly well informed. According to the Mirror, the men were told that the only risks were things like nausea and headache. The physician in charge of the trial apparently reassured the men that this was “certainly” not a risky trial.

I don’t have a lot to add by way of analysis, except this:

One important note has to do with the role of physicians. There’s some dispute, in the research ethics literature, about the role of physicians in clinical trials. In conducting such trials, is a physician “primarily” a health-care provider, with overriding fiduciary obligations to the patients involved, or is she “primarily” a researcher, with an overriding obligation to the advancement of science? Or, again, is she “primarily” a corporate employee or consultant or contractor? I don’t have space to offer a full argument here, but I’m of the view that physicians cannot — ever — shed their role as trusted providers of healthcare. A physician conducting a clinical trial is still a physician. (In the eternal words of Marge Simpson, “A professional in a gorilla suit is still a professional.”) No matter how useful it might be, in some circumstances, for corporations to be able to treat physicians as their private consultants, physicians remain publicly-licensed professionals, trusted and generally held in high esteem by the patients in their care. It’s quite likely that the young men in the TGN1412 were greatly reassured by the presence of a physician, and trusted that physician to protect them.

A second point to make is that this case should be studied by business ethics scholars and taught in business ethics classrooms, just as it ought to be (and likely will be) talked about by scholars and students of bioethics (and, in particular, of research ethics). It’s a case about health, and about health research, but it’s clearly also a case about corporate responsibility. How much should health-research corporations do to protect the people who participate in drug trials? How much insurance ought they carry? What attitude ought such corporations adopt with regard to the physicians (or other professionals) in their employ? And what is the pharmaceutical industry as a group going to do to better self-regulate, so that incidents like this don’t happen, given that such incidents are clearly detrimental to the industry as a whole, as well as to the public interest?

See also:

From the New York Times (last April): British Rethinking Rules After Ill-Fated Drug Trial

Relevant Books:
Case Studies in Biomedical Research Ethics
The Ethics of Biomedical Research: An International Perspective
Belmont Revisited: Ethical Principles for Research with Human Subjects

Just in case you ever wondered, here are what are currently the Top 10 Most Popular Business Ethics Blog Entries (stats were collected over the first half of this month, i.e., March 1- March 15, 2007).
According to my site stats, these are the most-viewed blog entries…mostly, that means these are the ones most often sought out via Google (and other search-engine) searches. And no, listing my own top-10 isn’t entirely narcissistic…it provides a bit of a window into what sorts of business ethics topics folks out in the google-sphere is interested in.

So, here they are, starting from my most popular blog entry ever…

#1. Exploitative Videos: Bumfights & Girls Gone Wild (Why is that such a popular entry? I’ll leave that to your imagination…)
#2. Continuing Trouble at HP (presumably popular because the HP trial was in the news this week)
#3. What Causes Unethical (corporate) Behaviour? (This one’s been in my top-10 list forever. I guess people just google the causes of unethical behaviour a lot.)
#4. Disney & Sweatshops in China (This is a classic business ethics topic, and probably the topic of a gazillion ethics class assignments.)
#5. Wal-Mart’s New Policy on Shoplifting (Wal-Mart is always a popular topic. No idea why this entry is so much more popular than a dozen other times I’ve blogged about Wal-Mart.)
#6. Enron: Accepting, Without Taking, Responsibility (Again, Enron is a popular topic. But no idea why this entry is more popular than others about Enron.)
#7. McDonalds CSR Blog
#8. Pavlo on Skilling (the business ethics blog interview)
#9. Wal-Mart Movie
#10. Enron: Bad apple or poisoned orchard

I’m getting to it a bit late, but here’s a really interesting editorial from the Financial Times from about a month ago:
Profitable principles

The gist of the editorial is this: companies that undertake “socially responsible” initiatives almost never do so for noble, principled reasons. They do it because they think it will contribute, in some way, to the bottom line. That’s OK, says the FT, because “…as long as they produce results, there is nothing wrong with these self-interested motives.” The obvious follow-up question is this: what about when such efforts don’t produce results? The FT’s view on this is unclear. So, what should we think of self-interested corporate behaviour of the kind that seems socially responsible, but turns out not to have a positive impact?

To make any headway, we need to distinguish between two kinds of cases. In one kind of case, a corporate initiative that seems both socially responsible and profitable turns out not to have a positive social impact after all. Such cases are not necessarily cause for condemnation. Sometimes, things don’t turn out as planned, and decisions need to be judged based on the information the decision-makers had at the time the decision was made. Sometimes perfectly good decisions lead to bad outcomes. In a second kind of case, a corporate initiative that seems both socially responsible and profitable turns out never to have been intended to have a positive social impact. (This category includes many instances of greenwashing.) Clearly, we should be more worried about these cases. In these cases, the (normally justifiable) pursuit of profits is carried out by unethical means, namely by deceiving the public (and the market) about just what it is that they’re buying.

The other thing I wanted to point out about this FT editorial is that it helpfully reminds readers that some social problems are well-suited to remediation through market mechanisms (perhaps driven by conscience-driven consumerism), and others are simply best left to careful government regulation:

Voluntary standards will leave serious gaps. Consumer outrage has ensured that fair trade coffee is widely available, but seems to have made little impact on pollution from aeroplanes. It is hard to see how it could.
If customers are willing to pay for greener products produced to higher standards, then companies will respond. Such market demands, though, can be whimsical. Market leaders such as Nike will face strong incentives to do business ethically, but consumers put little pressure on smaller firms in anonymous sectors. We demand ethical trainers, but not yet ethical staplers or ballpoint pens.

First it was energy efficient lightbulbs. Now, retailing super-power Wal-Mart has set its sights on solar energy.

According to the Financial Times,

Wal-Mart (NYSE:WMT) , the world’s largest retailer and the largest private employer in the US, is regularly beset with superlatives. It may be now on the way to adding another, as it takes the first steps towards becoming the US’s largest user of solar power.

At the end of next month the retailer will receive proposals from companies that are interested in installing solar power equipment at a yet-to-be-determined number of its stores in as many as five US states. Initial projects would be carried out this year, but the retailer has also asked bidders for “expansion or build-out plans, including projected prices and costs, over the next five years”.

Just one more reason to believe my prediction about Wal-Mart, namely that, before long, the much-maligned company will be at the top of business ethics / CSR rankings. Anyone taking bets?

What do private companies owe the public when they profit from public subsidy or tax-dollar investment?

This question has been especially salient in health-related industries. Drug companies, for example, have been accused of charging the public twice for pharmaceuticals: citizens pay once for drugs through public investment in research, and then again at the pharmacy counter. But it’s not just pharma, of course: this criticism could be leveled against any company in any industry that benefits from substantial investment from government.

Grad students Matthew Herder and Jennifer Dyck Brian have commented on this in detail, in their paper “Canada’s Stem Cell Corporation: Aggregate Concerns and the Question of Public Trust.” [Abstract] The biotech company in question — Aggregate Therapeutics — is unique in that it was created not by private entrepreneurs, but by the Canadian Stem Cell Network (part of Canada’s federally-funded Networks of Centres of Excellence). The company brings together under one virtual “roof” the research — and intellectual property — of key research scientists and labs from across Canada. The idea is that many individual labs and individual researchers, on their own, don’t have the resources to bring key stem cell research to fruition. But joined together as Aggregate Therapeutics, they have enormous potential. Essentially, the company is an attempt to achieve economies of scale in an otherwise small and fragmented Canadian stem cell research community.

One of Matthew and Jennifer’s key worries about Aggregate Therapeutics is that the governance structure of the company does nothing to guarantee its supposed purpose, namely to push stem-cell research forward for the benefit of all Canadians. Set up as a private corporation, Aggregate Therapeutics will naturally seek profit for shareholders, and Matthew and Jennifer point out that those backing the company have little to say about what would happen in circumstances where the interests of shareholders failed to coincide with the interests of Canadians more generally. So, the owners of the company will benefit from aggregating publicly-funded research, without ensuring any return on investment for the public that funded it.

I’m not entirely convinced by this argument: governments invest public money in research (or in other kinds of infrastructure) because they believe — rightly or wrongly — that doing so is in the public interest. It’s not obvious that there’s a problem when companies that benefit from such investments fail to guarantee a specific return on that public investment — after all, typically none is promised. If government invests in education in Computer Science, for example, the result is high-quality employees for computer companies. No one expects computers to be sold any cheaper, though.

But this point is certainly debatable, and ought to be open for debate. And Matthew and Jennifer are certainly right that the lack of transparency here is appalling. Chances are that very, very few Canadians have even heard of the company. The website for Aggregate Therapeutics is a single-page thing that gives very few details. A few more details are available in various newsy and PR pieces online, such as this one. And so far, the media has failed to take notice of this strange new company, and to ask the kinds of tough questions that Matthew and Jennifer are asking.

(To find out more about their research, you can contact Matthew, at mherder@stanford.edu. Jennifer can be found here.)
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(Full disclosure: Matthew and Jennifer’s paper is part of a Special Issue that I edited for the Journal of Business Ethics, dedicated entirely to ethical issues in the biotechnology industry. So, I’m not an unbiased commentator on their work.)