Archive for October, 2009|Monthly archive page
Sugar Subsidies, Fraud, and Rationalization
Today in class I taught Joe Heath’s wonderful paper, “Business Ethics and Moral Motivation: A Criminological Perspective” (J. Bus Ethics, 2008. 83:4, 595-614). It’s a paper that draws on the criminology literature to debunk several ‘folk theories’ regarding what it is that motivates wrongdoing, theories too often drawn upon by scholars and other commentators in business ethics.
Coincidentally, this item in today’s news illustrates one of Heath’s key points about the role that rationalization plays in fostering wrongdoing in business.
From the NY Times: Fraud Plagues Sugar Subsidy System in Europe
It began when Belgian customs officials examined shipping records for dozens of giant tanker trucks that outlined an odd, triangular journey across Europe. The trucks, each carrying 22 tons of liquid sugar, swung through eight nations and covered a driving distance of roughly 2,500 miles from a Belgian sugar refinery to Croatia and back — instead of taking the most direct, 900-mile route.
Along the way the trucks made a brief stop in Kaliningrad, a grim and bustling Russian border checkpoint on the Baltic Sea.
Suddenly the sugar triangle made sense to them. Because Russia, and not Croatia, was listed as the intended destination, the shipments qualified for valuable special payments known as export rebates from the European Union’s farm subsidy program.
The “explanations” given by sugar industry executive quoted in this story are terrific:
Sugar companies claim their activities are misinterpreted because they are governed by a byzantine European Union system that invites confusion. “It’s very complicated” and difficult for anyone to understand, said Dominik Risser, a spokesman for the Südzucker Group, a German company…
This looks like a classic example of what Heath (citing criminology literature) calls the “denial of responsibility” method of “neutralizing” one’s wrongdoing. It’s not my fault, they say, because it’s all really complicated.
Heres another:
August Töpfer’s lawyer, Klaus Landry, maintained that the company had not mixed sugars, and said that this summer’s raids were politically motivated. He said that prosecutors did not understand the arcane sugar subsidy system.
This looks like a classic case of “condemning the condemners.” I didn’t do anything wrong; the authorities are just evil and are out to get me.
Next time you’re reading a story that quotes people accused of wrongdoing, watch for what it is they say about the reasons for what they’ve done. Most likely, if Heath (and plenty of criminologists) are right, you’ll see an attempt to “neutralize” the wrongdoing, along the lines of the rationalizations offered by the sugar execs above.
Can Life-Saving Decisions Really Be “Tough Calls”?
Big business means big decisions. Tough decisions.
In some industries, those decisions affect whether people live or die.
Here’s a story that gives insight into the thought process that goes into such a decision.
From BNET: How I Made the Toughest Call of My Career
Not many CEOs run companies whose products have saved the lives of family members; Bill Hawkins does, and his connection with Medtronic, the $14.6 billion Minneapolis-based medical device maker, runs deep. His father has had eight coronary stents implanted; his father-in-law has both a Medtronic heart valve and a pacemaker; and his uncle received Medtronic deep brain stimulation to control tremors caused by a World War II combat injury. “Medronic’s mission — to alleviate pain and to extend life — is something I take very seriously,” says Hawkins.
That sense of mission would be tested in October 2007, only two months into his tenure as CEO, when he learned that the company’s Sprint Fidelis lead might have been malfunctioning at an unacceptably high rate….
(FYI: The ‘Sprint Fidelis lead’ is a thin wire connecting an implanted defibrillator to the patient’s heart.)
Some of the people who left comments posted under BNET‘s story ridiculed Hawkins. How could it be counted as a difficult decision, they demanded, when lives are on the line? That should count as an easy one. Right?
No.
The criticism is badly off-target. What the people launching that criticism miss entirely is that the evidence in this case was ambiguous.
…data showed Fidelis’ rates of resistance to fractures had been comparable to that of other Medtronic leads (97.7 percent for the Fidelis vs. 99.1 percent for the previous model, the Sprint Quattro). This difference was not statistically significant. However, trends suggested that the Fidelis might not perform as well over time.
So, this wasn’t a clear case of ‘our product is killing people’. When Hawkins made his decision, all he had to go on was that there was a small statistical difference between the failure rate of the Sprint Fidelis and his company’s previous model of lead, the ‘Sprint Quattro.’ In fact, the lack of statistical significance means that it’s entirely possible that the Fidelis leads were every bit as good as the older leads. Pulling them off the market prematurely could have signalled to physicians — wrongly — that the leads were actually unsafe. This could have led to ‘explantations’ (removal of the defibrillator), which is a very risky procedure. In Medtronic’s case, it was very far from clear that taking the Fidelis lead off the market would save lives.
No health product is 100% safe-and-effective. Judging when evidence is sufficient to warrant taking a product off the market is a difficult thing, in part because risk assessment is not a cut-and-dried science. It seems to me that Medtronics’ Hawkins understands this better than his critics do.
Should Consumers Trust Big Pharma?
Filed under: accountability, conflict of interest, consumers, honesty, pharma, product safety, profits, risk, science |
Comments (9) 
Lots of people don’t trust Big Pharma. And to a significant extent, that’s for good reasons. (I’ve blogged about some of those reasons here, here, here, here, here, here, here and here, just to cite a few examples. See also some of the entries on the other blog I co-author, the Research Ethics Blog.)
Trust in big pharma is an important issue. Pharmaceuticals are responsible for saving and improving a huge number of lives. Vaccines alone have prevented literally millions of deaths. Survival rates for many cancers are better than they used to be. And AIDS, once a death sentence, is now regarded as a chronic disease. So there’s real benefit from pharma, but also an undeniable track record of scandals and general unethical behaviour. What should we think?
The first thing worth noting is that the question in the title above is vastly oversimplified. The question isn’t “should consumers trust big pharma?”, it’s more like “To what extent, and under what circumstances, on what issues, should consumers trust big pharma?”
Setting aside the industry’s spotty track record, the main reason people tend not to think Big Pharma trustworthy is, of course, the fact that Big Pharma consists of profit-oriented organizations. And the general assumption is that money corrupts. Of course, money isn’t the only thing that corrupts judgment (so does love, reputation, ideology, etc etc), and big pharma is far from the only industry where big money is at stake. But still, there’s a real worry here (one I’ve blogged about before).
Now, what about the reasons in favour of trusting Big Pharma? What factors would tend to make Big Pharma trustworthy, to at least some extent?
Now I cannot emphasize this strongly enough: what follows is not intended to imply a general conclusion about the trustworthiness of Big Pharma. It’s just a list of important factors to keep in mind when assessing the trustworthiness of a particular claim, by a particular company, on a particular issue.
1) Ethics. Don’t just think about the organizations; think about the people who work at them. They’re mostly people like you & me. Most of them got into the business to try to help people (and, yeah, to make a living). And most of them were raised by their parents to be decent, honest folks. Most people tell the truth about most things most of the time.
2) Regulation. The pharmaceutical industry is heavily regulated, subject to lots of laws regarding the efficacy and safety of their products, as well as regarding advertising. Criminal and civil sanctions are possible when pharma companies misbehave. Now, that’s not to say that the current level of regulation is sufficient, or that enforcement is adequate. But companies (and individuals) have been subject to serious sanctions. Companies generally want to stay out of court, and so they’ve got a reason — not always a sufficient reason, but a reason — to behave in a trustworthy manner.
3) Peer Review. In few other industries is fundamental information about what makes your product work (or not work) open to public scrutiny. In order for a new drug to receive approval to be marketed, it has to show itself to be safe and effective in clinical trials, and the results and methods of those trials have to be published in peer-reviewed medical journals. Drug companies are not allowed to make claims based on secret data. “Peer reviewed” means that the articles reporting on the trials have to be vetted by a panel of qualified experts if they are ever going to see the light of day. It’s an imperfect system (all systems relying on human judgment are) but bad science tends to get weeded out pretty quickly. Then, once a study is published, it’s there for assessment, and potentially criticism and rebuttal, by hundreds or thousands of other experts.
4) Scientific Overlap. You sometimes hear it implied that physician-researchers (the ones who do most clinical research, as well as doing all that peer reviewing mentioned above) have all been corrupted by corporate money. And it’s true that there really is cause for worry here. Too many docs get too much money (and other perks) from pharma, and are insufficiently transparent about that. So: it’s good to worry…up to a point. Here’s the problem with the pharma-controls-everything theory. Physician-researchers publish in scientific journals that are read not just by other physicians (some of whom don’t have industry funding), but also by biologists, chemists, epidemiologists, statisticians, and so on, most of whom have no corporate funding whatsoever. Further, modern science more generally is an enormously complex process for finding mistakes and exaggerations in each other’s research. And it helps that there’s significant overlap between the sciences, so no one group of scientists is ever truly isolated and free from scrutiny. Oversimplifying, you could say that biologists are double-checking the work done by the physicians, chemists are checking up on the biologists, and physicists are checking up on the chemists. (That’s why any physician who tries to use “quantum theory” in writing about disease had better be careful: there are armies of physicists waiting to explain just how irrelevant quantum mechanics is to human physiology.)
5) Competition. People often talk about Big Pharma as if it’s a monolith, one big organization, rather than a bunch of companies with divergent interests competing savagely with each other. That competition gives them every reason to attack each other’s weaknesses, and to point them out to the public. Add to that the fact that there are hundreds of smaller firms nipping at the heels of the big players. It’s far from a cozy conspiracy. This vicious competition of course means that there’s sometimes an incentive to cut corners in unscrupulous ways; but it also means that when you cut a corner, there’s always someone out there ready to point it out.
Now, again, this list is not supposed to lead to any particular conclusion about just how trustworthy Big Pharma is. It’s just a list of social and institutional mechanisms we need to take into consideration, in addition to the obvious bad track record and obvious financial incentives. Each of those mechanisms will apply to a greater or lesser degree with regard to specific situations. For particular issues, we need to think carefully both about what’s at stake, and about whether the above factors are likely to be sufficient to reassure us.
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Late-breaking Note:
I’ve been getting (and rejecting) comments full of unsubstantiated, and in some cases very dangerous, claims on some topics related to the above. When it comes to matters of health, if you’re not going to cite reliable sources, I cannot take responsibility for allowing your comments on here. There’s too much at stake, in terms of public health.
Micro-Philanthropy on Zynga’s “Farmville”
Video game developer, Zynga, has just launched an interesting project that stands to bring significant benefit to the poor of Haiti.
Zynga’s products include the popular “Farmville” application on Facebook (currently listed as having over 53 million active users). The game lets users play at being farmers — plowing fields, planting seeds, and harvesting crops. The game includes a virtual economy, with virtual cash: seeds have a price, and the crops players eventually “harvest” are sold for virtual money. Players also have the option of ponying up real money (via credit card or PayPal) to augment their virtual bank accounts.
Farmville took an interesting turn last week, when it was announced that players would now be able to buy “Sweet Seeds for Haiti.” In virtual terms, these are sweet potato seeds to be planted and harvested on the player’s land. When players spend (real) money on Sweet Seeds, 50% of the proceeds are going to 2 charities in Haiti.
Here’s an explanation of where the money is going, from the Sweet Seeds page on Facebook:
Haiti is the poorest country in the Western Hemisphere and the 7th poorest in the world. Zynga’s mission of connecting the world through games is enhanced by our opportunity to support the health and education of these children and their families. For additional information on the recipient organizations, please see www.FATEM.org and www.FONKOZE.org.
FATEM is a non-profit organization based in Mirebalais, Haiti… [and is currently working] to ensure that… [Haitian] children have the necessary meals that will permit their young bodies and brains to learn and grow.
FONKOZE, based in Port-au-Prince, is an alternative bank for the poor. It is Haiti’s largest micro-finance institution and is committed to the economic and social improvement of the people and communities of Haiti and to the reduction of poverty in the country.
Is this corporate philanthropy? Well, no, not really. It’s a profit-generating venture for Zynga. But it’s also a way for the company to connect tens of thousands of game players to important charities. Call it corporate-facilitated philanthropy. Those of you who are long-time readers of this blog may recall my discussion of (Product) Red. (Product) Red, too, is a mechanism by which consumers buy things they want, and a share of the proceeds go to charity (in (Product) Red’s case, the money mostly goes to buying AIDS drugs for people in Africa). Both (Product) Red and Farmville function on 2 basic principles. First, you can get people to donate money if you make it easy for them to do so, in small amounts attached to things they want. And second, a lot of micro-donations can add up to a lot of money.
Though the donations may be “micro,” the results are not. After one day of sales, Zynga CEO Mark Pincus (full disclosure: he’s a relative of a friend of mine) was able to announce via Twitter:
70,000 peeps purchased sweet seeds for haiti generating $175k to feed school kids. That’s a win for us all!
As it is, Sweet Seeds for Haiti is an interesting and novel approach — a way for Zynga to make a real contribution not by simply giving away money, but by both helping thousands of individual donors contribute to a worthy cause, and, perhaps more importantly, raising the profile of that worthy cause at the same time. But there’s room for improvement, here. Zynga has found a creative way to use a feature already built into its product to facilitate donations. But it hasn’t fully leveraged the fact that its product is an online game, and a social game. Hopefully a next iteration of the Sweet Seeds idea will do more to inform players and give players a way to get involved. Why not have a way for players to click on their Sweet Potato plots to get more information about Haiti and its troubles? Why not have pop-ups when a crop matures, giving bits of trivia or maybe a hyperlink to yet more worthy Haitian charities? That way, the company would be not just facilitating one-time donations, but facilitating the kind of involvement that leads to long-term benefit.
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If you’re on Facebook, you can check out Farmville (for free) here: Farmville, and here’s the Farmville page on Wikipedia.
Barriers to Talking About Doing the Right Thing
This past Wednesday I had the pleasure of giving a talk at an excellent event held by the Conference Board of Canada’s Corporate Ethics Management Council.
The substance of my talk was not about business ethics per se but about lessons I’ve learned in blogging about business ethics over the last 4 years.
In my talk, I noted that I’d run into a trio of key challenges, ones that I strongly suspect pose challenges for people trying to talk about ethics within their own institutions.
One problem is familiarity or comfort with talking about ethics. For some people, talking about ethics just doesn’t come naturally. For some people, I think, it’s just not polite to raise questions about values or matters of right and wrong. To talk about ethics constructively, you need to be able to put the topic on the table. That’s a challenge.
A second problem is vocabulary. To have a conversation, well, you need to use words, and you need some agreement on how words are to be used. Under this heading, I noted two key problems. One is the problem of “the E-word,” or “ethics.” Some people unfortunately find the E-word off-putting, typically because they misunderstand the term. (I blogged about this a few months ago, under the heading, What’s Wrong With “Ethics”?) The other vocabulary problem has to do with the plurality of other terms used to talk about the basic idea of doing the right thing in business. I’ve blogged before about terms like Corporate Social Responsibility, Triple Bottom Line, Corporate Citizenship, and Stakeholder Theory. There are serious problems with each of those terms, but each of them is typically intended to encompass the whole topic of doing-the-right-thing in business. It can be hard to have a good conversation about a topic if you can’t agree on what the name of the topic is.
The third problem I talked about was fear. It’s hard for people to engage in constructive dialogue if they feel that their livelihoods, their control over their own lives, their most deeply-held beliefs are being challenged. Discussions about business ethics inevitably touch on one or more of those things.
Now, it’s a good thing if we can talk about these issues constructively, and in a way that minimizes people’s fears and anxieties, but we can’t wish away conflict. Our actions, our choices, just do affect other people, and we very frequently disagree over the appropriate limits on our actions when they do so. Anyone who talks about business-ethics as if it’s conflict-free, or as if it’s just about achieving ever-higher levels of niceness in commerce, is glossing over some very important questions.
The Business Ethics Blog 