Archive for February, 2011|Monthly archive page
Charlie Sheen as Toxic Asset
Filed under: employees, entertainment, media, professionalism, risk, values |
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While actor Charlie Sheen may not be a ‘toxic asset’ in the technical sense, he’s clearly become too much of a liability for the companies who have thus far been profiting richly from his services.
In case you don’t already know all the gory details, here’s one version of the story, by Bill Carter, writing in the Business section the NY Times: Sheen Tantrum Likely to Cost in the Millions
Charlie Sheen’s latest antics may leave CBS and Warner Brothers with a quarter-billion-dollar headache.
The two companies decided on Thursday to halt production of the hit CBS comedy “Two and a Half Men” after Mr. Sheen, the star of the show, unleashed a barrage of vituperative comments about the sitcom’s creator, Chuck Lorre.
The loss of next season’s episodes would mean forgoing about $250 million in revenue between Warner Brothers, which produces the show, and CBS….
Sheen, of course, was already a famously problematic ‘talent’ long before his decision to publicly and viciously bite the hand that feeds him. Sheen has a long history of handing the tabloids easy headlines through his penchant for drugs and booze and prostitutes and property damage and domestic violence.
Several writers have already suggested that all of that should have been enough to make Sheen persona non grata, but it wasn’t. As the LA Times’ Mary McNamara put it,
If you are the star of a hit comedy on CBS, you can keep your job in spite of accusations of: threatening your pregnant second wife; holding a knife to your third wife’s throat on Christmas Day; and indulging in cocaine-fueled weekends during which your bizarre behavior causes your female companion to fear for her life.
I think from a Business Ethics point of view, we can look at this in two ways.
1) Employment. From an employment point of view, this is a question of CBS and Warner Brothers having an employee with serious behavioural problems, most of which have been after-hours problems rather than on-the-job problems. As McNamara reports, Sheen’s bosses referred to his domestic abuse troubles as “very personal and very private.” Of course, any employer needs to recognize that it will always be the case that at least some of their employees will have personal troubles, and it’s not entirely clear that such problems are grounds for dismissal. But what employers cannot ignore is insubordination, and that’s basically what Sheen’s recent outburst amounts to.
2) Production methods. In an age of conscious consumerism, people are paying a lot more attention to the way in which the products they enjoy are produced. The average consumer is more likely than ever to want to know whether their clothes were made in third-world sweatshops or whether coffee was made with beans that were traded fairly. For the bizarrely popular product that is “Two and a Half Men”, Charlie Sheen is a major part of the means of production. And all available evidence suggests that consumers of that product just don’t care that, in order to produce it, CBS and Warner Brothers had to turn a blind eye to behaviour that was by turns childish, unethical, and criminal.
Utility Monopolies: Who Pays for Mistakes?
Filed under: consumers, corporations, energy, ethics, excuses, government, pricing, profits, shareholders, stakeholders |
Comments (3) Naturally, when any organization suffers unanticipated expenses, it’s going to have to find ways to make up the shortfall in its budget. That’s exactly what happened to Ontario Power Generation (OPG), the provincially-owned power company responsible for generating about 70% of all the power consumed in the Canadian province of Ontario. A legal battle with customers ended up costing the company nearly $20 million. So, where did the company turn to recoup that amount? Well, to its customers, of course.
Here’s the story, via the CBC: Ont. electricity rates expected to rise next week
Electricity ratepayers in Ontario, already reeling from soaring prices, should brace for more increases.
The Ontario Energy Board agreed Tuesday to let utilities raise rates to recover $18 million they paid in fines and legal costs after charging consumers excessive interest on late payments….
Now most companies could only dream of passing along such costs to their customers. Some might even succeed. But most wouldn’t. Most would be hindered by the fact that, if they raise the prices they charge to customers, customers would simply buy from someone else. But electricity in Ontario (as in most places) is a monopoly: an organization called Hydro One has a monopoly on distribution of electricity throughout Ontario, and the power it distributes is produced by a small handful of organizations, the most significant of which by far is OPG. So, with the consent of the Ontario Energy Board (the relevant regulatory agency) all OPG has to do is raise its prices, and the company’s customers end up paying for the consequences of its legal tussle with…the company’s customers.
I don’t know much about the original lawsuit, but I do know that this was a predictable result of it. And that puts customers of utilities in a strange position. Sure, customers can sue the a utility when they screw up, but all the utility is going to do is turn around and raise your rates to get the money back out of you.
Now, just to be clear, I generally have nothing against this sort of monopoly. Electricity distribution is what economists call a “natural monopoly.” It’s crazy to have multiple competing sets of power lines running down to street. And, for that matter, it might well be crazy to let many multiple competing companies all run nuclear power plants (OPG runs several of those). But at any rate, it’s worth recognizing the effect that this monopoly (or quasi-monopoly) situation has in the event that the company screws up (say, by overcharging customers). The expenses incurred are entirely likely simply to be passed along to their captive customers.
By the way, Ontario Power Generation (whose only shareholder is the government of Ontario) had a profit of $333 million for the 4th quarter of 2010.
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Thanks to NW for the story.
Russian Business Ethics
Filed under: accountability, corporations, economics, ethics, international, transparency, trust |
Comments (3) 
We can learn a lot about the fundamental nature of business ethics by looking at its operation in various countries at different levels of economic development and with very different histories. Former members of the USSR are a good place to start. Russia, for example, was once at the heart of the Soviet empire, yet today — 20 years after the fall of that empire — Russia continues to struggle. The country’s per capita GDP is middling (i.e., about 1/3 of American GDP), and the economy has been growing steadily for years, but it’s far from free of problems. Law and order (including the functioning of its basic democratic institutions) continues to be a challenge there. Note also that Russia fares very badly on Transparency International’s Corruption Index.
So what about the role of business ethics in civilizing (and hopefully growing) the Russian economy?
See this story by Khristina Narizhnaya, for the Moscow Times: Business Ethics Get Codified
Business ethics are improving in Russia, on paper at least.
More local companies are emulating Western standards and adopting ethics codes to help them operate in a corrupt environment and create the appearance of trustworthiness.
Such codes regulate everything a company’s employees do, from how they dress to how they act in case a bribe is offered….
In the last three years, state companies, including Sberbank and Rosneft, have established codes for their workers as part of President Dmitry Medvedev’s initiative to increase transparency. Gazprom has begun putting together its ethics guidelines, which could take more than a year to deploy. Private companies have followed suit….
The entire piece is interesting and well worth reading, but I think couple of issues in particular are worth thinking about. First, what is the point of all this explicit attention to ethics? Interestingly, at least some Russian business people seem to be aware that ethics is a fundamental building block for real success in business:
“It is good for the image — and clients, investors and partners respond with trust,” said Econika chief executive Andrei Iliopulo.
(The reference to “image” is a distraction, there. Iliopulo’s main point is about trust.)
Others see ethics as an absolute necessity on a macro scale, for the Russian economy as a whole:
Some experts see the ethics code trend as an example of transforming the economic model from wild capitalism to socially responsible business.
“Business feels this need and tries to fulfill it,” said Alexander Sergeyev, a professor at the School of Higher Economics. “It might seem strange, but people like to live by the rules….”
And then there’s the question of scope, and focus. What are the key issues to focus on? As the story notes, ethics codes can cover everything from conflict of interest to social responsibility:
[British-Russian conglomerate] TNK-BP’s code outlines a set of principles covering ethical conduct, employee behavior, external relationships, health, safety, security and environmental performance, control and finance.
That’s quite a range of issues. And when thinking about a country still struggling to “find its feet” in terms of business ethics, we might well want to ask about priority-setting. So, question for discussion: of the various issues mentioned above, which one should Russian businesses be focusing on? I’m not suggesting single-mindedness. But for the good of the Russian population as a whole, which business ethics issues is likely to be the most important?
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(For more on the importance of business ethics for economic development, see Nobel Prize-winning economist Amartya Sen’s “Does Business Ethics Make Economic Sense?”)
Ethical Constraints on a Corporation Without Humans
Filed under: accountability, decision-making, personhood, technology |
Comments (11) 
The buzz over the appearance by IBM’s computer, Watson, on Jeopardy last week has me thinking about the capacities of computers.
Could a computer run a company, and if so what would we want to say about the ethical constraints on such a company? Well, one obvious worry is that ethics requires exercising judgment. Stanley Fish, in an editorial in the NY Times a couple of days ago (“What Did Watson the Computer Do?“) argues that while computers (from laptops on up through to Watson) are very good at is following rules. What they’re bad at, Fish points out, is adapting to new situations and figuring out whether the current situation is a valid exception to the rule.
So, let’s imagine a corporation without humans. It’s not science fiction, and it’s not far-fetched. I don’t know of any in operation today, but they’re certainly possible. There are some corporations today that, while they currently do have significant human personnel, could likely survive and continue to generate revenue for at least several days without human intervention. For example, basically any company that sells a product that can be bought and shipped via the Internet, such as ebooks or music files, can operate for at least a while without humans. (If you’re skeptical about that, please accept it for now, for the sake of argument.)
So imagine a guy named Dave sets up a company selling audio books. He builds a website, which allows customers to search, find the books they want, pay online, and receive the audio book as a download. Maybe he has a web-roaming software ‘bot looking around the web to find out which print books are popular enough for his online store to feature, and maybe even a decent piece of text-to-voice software to generate the voice files, without the need for human input.
Now, as long as Dave is around, monitoring the system, we’re likely to say that Daves “is” the company, and the computer is a tool he uses. And any ethical questions about the company’s conduct should be addressed to Dave. But what if Dave dies? The computer system would keep on chugging along, making money (barring failures of hardware or software). What ethical questions does such an autonomous electronic corporation pose? If the computer harms no one, and violates no rights, is it acting “ethically”, or does that notion require the kind of judgment that Fish says is impossible for computers? Would this robo-corporation have ethical obligations, or is the very idea of a non-human construct having ethical obligations nonsense? And if it’s nonsense, then does it make sense for corporations to have obligations, or are a corporation’s obligations merely the obligations of the persons that make it work?
Credit Card Laws & Ethics
Filed under: banking, complexity, consumers, ethics, honesty, regulations, transparency |
Comments (4) Credit cards: we love them, and we hate them. We love the convenience, but we hate the high interest rates. But really, based on our patterns of usage, it seems like the love/hate relationship is tilted in favour of love; it looks like our fondness for those super-convenient pieces of plastic is getting the better of us. The result: many North Americans are utterly buried under credit card debt. The natural temptation is to blame the banks, and certainly many financial institutions have preyed upon both our fondness of convenient purchasing, and our lack of attention to fine print, to turn credit cards into a cash cow.
But see this story, by Jennifer Liberto, for CNN Money: Credit card laws working, says bank critic
A year after new credit card laws curbed interest rate hikes and forced new disclosures, consumers are paying fewer late fees and have a better understanding of what their cards cost, according to a federal study released Tuesday.
White House official Elizabeth Warren, best known for her outspoken criticism of the banking industry, is expected to praise that same group during a Tuesday conference on the one-year anniversary of the credit card laws….
Now unless I’m mistaken, what banks are being force to disclose is stuff that would previously likely have been buried in the notorious ‘fine print’ of credit card agreements. And fine print is a hard problem, ethically. We all know that consumers should read the fine print; there can be important information there. But we also all know that almost nobody does read the fine print. Fairness requires at least some attention to what we can reasonably expect consumers to do. But on the other hand, is it really a bank’s fault if they disclose something important and you simply don’t bother to read it? While you could argue the fairness point back and forth, it’s also worth pointing out that there’s an economic efficiency argument here, too. Information asymmetries are the enemy of economic efficiency. (An “information situation” is any situations in which one party to a transaction understands that transaction much better than the other.) So we have here the foundation for an argument that says that, even if it is fair to expect consumers to read all the fine print, the fact that they do not do so is resulting in socially sub-optimal patterns of purchasing. This means a social reason, not just a paternalistic reason, to want to help consumers by forcing banks to change how it is that they disclose information.
The other interesting aspect of this story has to do with the persuasive force of law. According to Warren, “much of the industry has gone further than the law requires in curbing repricing and overlimit fees.” In other words, this may be a case in which the law not only prescribed a certain set of behaviours, but also set the tone for the industry. I think this aspect of law is too often overlooked. This suggests that even when we are skeptical about a new law because, for instance, we are skeptical about the potential for strict enforcement, we ought to consider the possibility that an industry will take the passage of a law as sending a signal about the overall tenor of society’s perspective on their business. We also ought to consider also the possibility that the law will give those subject to it an excuse to do what they thought they ought to be doing in the first place.
Certifying Virtue
Filed under: accountability, brands, certification, consumers, labelling, standards, virtue |
Comments (2) 
Two weeks ago I was at Duke University’s Kenan Institute for Ethics, in part to participate in a panel discussion called “Certifying Virtue.” The panel was basically about the challenges faced by various attempts to certify particular consumer goods as having been ethically produced.
My excellent co-panelists were Greg Dees (director of Duke’s Center for the Advancement of Social Entrepreneurship) and Tim Büthe (Assistant Professor in Duke’s Political Science department). The panel was organized and moderated by Kenan’s Lou Brown.
My own comments focused on:
- The large number of value-dimensions along which different consumers might want assurances about the things they buy.
- The epistemic problems involved in figuring out how to measure the things you might want to certify (e.g., measuring “environmental impact”).
- The moral problem that arises when 2 or more desirable characteristics conflict (e.g., “wild” vs “organic” salmon — you might want both, but no one fish can be both wild and organic.)
- The role of brands and certification schemes as “value-alignment” mechanisms, helping consumers find producers with whom they want to do business.
The panel was videorecorded, and the resulting 90-minute video is here, on YouTube: Certifying Virtue
Ethics of Inefficiency
Filed under: consumers, corporations, energy, productivity, quality, sustainability, technology |
Comments (13) 
The current way of thinking seems to imply that small-scale production is the way to go. Of course, for much of the 20th century, small-scale production was a sign of affluence: only the wealthy could afford to have a craftsman dedicate hours, perhaps days, to the task of custom-making an item just for them. Today, everyone from yuppies to hippies is clamoring for just that, in their rush to grab for things perceived as local and green and anti-commercial. We don’t want multinationals to get between us and the skilled hands that make our loafers, and we want no agrifood giants mediating our relationship with the farmer who lovingly raised the goats that gave the milk that made the cheese. We want our business small, and indie. We want our consumer goods “bespoke,” and “artisanal.”
And the reason for this seems to be some vague impression that those kinds of businesses, and those kinds of products, are somehow more ethical. And in some cases, along some ethical dimensions, that may be true. But if anyone thinks that products produced by a small, local artisan are likely to be environmentally superior, well excuse me for being just a tiny bit skeptical.
This vague association of the small with the ethical misses the fundamental truth that, when it comes to production methods, size brings efficiency. Mass production tends to be efficient in its use of energy, materials, and labour. There are of course tradeoffs and exceptions: it’s entirely possible for a factory mass-producing something to be highly efficient in the use of labour, but to be highly inefficient in the use of, say, water — especially if water is had at no cost. But generally, mass production is efficient; that’s its raison d’etre. Consider: a local tailor spending an entire day hand-stitching a jacket has to use, to begin with, an entire day’s worth of energy to light and heat his workshop. Alternatively, the same jacket could be made in a garment factory in a matter of minutes, using a few minutes’ worth, rather than an entire day’s worth, of energy.
Now that’s not a blanket endorsement of all mass production. It’s entirely possible for production processes to be set up so that they are highly efficient in their use of whatever resource is particularly costly, and highly inefficient in its use of whatever happens to be cheap, regardless of the ethics of doing so. Note also that mass-produced goods tend to cater to the lowest common denominator. It should also be noted that assembly lines may tend to result in repetitive strain injuries among workers — and, if you believe some critics, in feelings of alienation as the worker whose job is reduced to some trivial aspect of production is effectively cut off from any connection with the product as a whole.
But (generally) efficiency is good. Certainly no one is in favour of inefficiency, with the possible exception of those of us who revel in a well-earned “inefficient” weekend. At any rate, the very reason we engage in mass production is that it is efficient: it produces the most output per unit of input. And that’s a good thing. So while there may be reason to value the small, the local, the artisanal, we ought at least to be aware that such goods are liable, at least in general, to be the product of highly inefficient — and hence environmentally unfriendly — production methods.
Madoff, Accomplices, and Complicity
Filed under: accountability, excuses, finance, fraud, investing, white collar crime |
Comments (1) It takes two to tango. How many does it take to sustain a ponzi scheme?
See this tantalizing piece by Diana B. Henriques, for the NY Times: From Prison, Madoff Says Banks ‘Had to Know’ of Fraud
In many ways…Mr. Madoff seemed unchanged. He spoke with great intensity and fluency about his dealings with various banks and hedge funds, pointing to their “willful blindness” and their failure to examine discrepancies between his regulatory filings and other information available to them.
“They had to know,” Mr. Madoff said. “But the attitude was sort of, ‘If you’re doing something wrong, we don’t want to know….’”
Of course, as Henriques notes, “Mr. Madoff’s claims must be weighed against his tenuous credibility.”
But Madoff’s claims that others, including financial institutions and sophisticated investors, “had to know” something was wrong will ring true to anyone who knows the Enron story in detail. For a wonderful, if exhausting, tour through the Enron scandal, see Bethany McLean and Peter Elkind’s Enron: The Smartest Guys in the Room. As McLean and Elkind make clear, Enron’s shenanigans only went on as long as they did because a lot of people, at a lot of financial institutions (and accounting firms and law firms) spent years and years with their eyebrows raised but kept their mouths shut.
Employment, Smokers, and Fundamental Ethical Conflicts
Filed under: employees, health, productivity, risk, values, workplace safety |
Comments (2) 
I’ve seen two interesting stories recently about smokers — of various kinds — facing trouble with their employers. Both stories raise difficult, perhaps intractable, ethical difficulties, because in both cases the objectives sought by employers are, on the face of things, entirely reasonable; and yet the freedoms sought by employees in these cases are also, I think, very reasonable ones to seek.
First, this piece by A.G. Sulzberger for the NY Times: Hospitals Shift Smoking Bans to Smoker Ban
…More hospitals and medical businesses in many states are adopting strict policies that make smoking a reason to turn away job applicants, saying they want to increase worker productivity, reduce health care costs and encourage healthier living….
I’ve blogged about this issue before. (See: “Smokers Need Not Apply”, from January of 2009.) My conclusion back then was that an employer, no matter how well-intentioned, has no right to tell employees what to do on their own time. They have a right to demand a certain level of performance on the job, and that might have implications for what employees do at home. But what employers have a right to is performance, rather than to a particular lifestyle in pursuit of that performance. Besides, there are lots (and lots and lots) of things employees can do at home that will limit their performance at work. I don’t see smoking as being unique among those, and letting employers screen for (and monitor?) all such behaviours would obviously constitute a massive invasion of privacy.
And then there’s this Reuters piece, reported by Clare Baldwin: Wal-Mart employee fired for medical pot loses case
A federal judge in Michigan on Friday upheld Wal-Mart Stores Inc’s dismissal of an employee for testing positive for marijuana, even though he was using the drug under the state’s medical marijuana law.
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Former Wal-Mart employee Joseph Casias said he was using the marijuana to treat pain from an inoperable brain tumor and sinus cancer, and was doing so legally, with a medical marijuana registry card…
This one is trickier because the implications of marijuana — cannabis — for workplace performance are much clearer. Pot (even pot prescribed for very good reasons by a physician) is very likely to affect judgment. And the effects of smoking it can last 2-3 hours — so smoking just before work, or during a break, could reasonably be expected to have a negative impact on performance. But in the case above, the employee involved had what sound like very good reasons, if ever there were any. Wal-Mart is a company that is trying hard to polish its image, and firing people for trying to deal with the pain from their inoperable brain tumor seems inconsistent with that objective.
For me, this is one of those short news stories that immediately makes me wonder what’s really going on here. Is the employee one of “those” employees that a company looks for reasons to fire? Or was his manager an unsympathetic jerk? Or what? Because surely this is an issue that could have been sorted out among reasonable adults, without resorting to lawyers. Could the worker be moved to a position where the possible effects of at-home cannabis use would not be as problematic? Could the employee agree to limit the hours during which he would use cannabis, in return for an exemption from the company’s testing regimen? I don’t know the answer. But living and working together means that we find ways of getting along together, even when we cannot find ways of agreeing.
Most Ethically-Significant Consumer Decision?
OK, this is one where I pose a question.
What is the most ethically-significant purchasing decision a consumer can make?
Most consumer choices make very little difference in the world, taken on a purchase-by-purchase decision. In the aggregate, of course, consumer decisions are enormously important. But I’m thinking today about individual decisions.
Take the decision to buy a low-energy lightbulbs for your house. The net impact on the environment will be roughly zero. Same goes for, e.g., not eating certain kinds of tuna that are on the verge of being listed as endangered. Whether you buy tuna or not really isn’t going to make any difference to the fate of the species.
On the other hand, if you decide not to buy meat this week, the net impact is that a bunch of critters get to live (and if you think animals matter, ethically, then that’s a good thing). Of course, even that is questionable, because in most cases it’s not as if those animals were going to be killed just for you. If you don’t eat them, they’re still going to be killed, and it’s only long-term trends in consumer demand that will make a difference.
Another kind of example might include the decision to purchase, for example, a piece of art from a homeless person. In that case, a single purchase (say, for $20) might make the difference between that person eating and not eating for a couple of days — something clearly ethically significant. But those kinds of opportunities are relatively rare.
So what are the best examples of purchase decisions that individual consumers can make that will have a real, concrete impact on the world?
The Business Ethics Blog 