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100 Most Influential People in Business Ethics, 2010
For the third year in a row, I’ve been honoured by Ethisphere Magazine as one of the “100 Most Influential People in Business Ethics.” I was recognized in the category of “Thought Leadership.”
Once again, I’m humbled but also encouraged that my 5 years’ worth of blogging is seen as having some impact on the world, however indirect.
MBA Ethics Education Roundup
Back in November I did a 4-part series on ethics education for MBA students. I thought it might be a good idea to collect all of them, plus a couple other relevant blog entries, on a single blog entry. So here they are:
- MBA Ethics Education: Designing the Designers (…whether we are thinking about training MBAs to make particular decisions, or training them to build the contexts in which particular decisions are to be made, business schools are in the business of designing designers….)
- MBA Ethics Education: Avoiding Excuses (…Sometimes, doing the right thing simply requires that we avoid the temptation to do the wrong thing. Positive role models are definitely a good thing, but we also need to understand why things sometimes go wrong…)
- MBA Ethics Education: All Decisions are Ethics Decisions (…there really is no clear distinction between “ethical” decisions in business and straightforward business decisions…)
- MBA Ethics Education: Speaking Up (…too often, bad things happen because good people don’t speak up….)
And see also these earlier blog entries by me:
Socially Responsible Investing & Value Alignment
Filed under: corporate citizenship, CSR, ethics, finance, investing, stakeholders, sustainability, trust |
Comments (11) Socially responsible investing (SRI) is a big topic, and a complex issue, one about which I cannot claim to know a lot. The basic concept is clear enough: when people make investments, they send their money out into the world to work for them. People engaged in SRI are trying to make sure that their money is, in addition to earning them a profit, doing some good in the world, rather than evil.
There are a number of kinds of SRI. For example, there are investment funds that use “negative screens” (to filter out harmful industries like tobacco), and there are “positive investment” (in which funds focus on investing in companies that are seen as producing positive social impact). We can also distinguish socially-responsible mutual funds from government-controlled funds, such as pension funds.
(For other examples, check out the Wikipedia page on the topic, here.)
Setting aside the kinds of distinctions mentioned above, I think we can usefully divide socially responsible investments into two categories, from an ethical point of view, rooted in 2 different kinds of objectives.
On one hand, there’s the kind of investment that seeks to avoid participating in what are relatively clear-cut, ethically bad practices. For example, child slavery. Trafficking in blood diamonds might be another good example. Responsible investment in this sense means not allowing your money to be used for what are clearly bad purposes. In this sense, we all ought to engage in socially-responsible investment.
(Notice that investments avoiding all child labour do not fall into the above category, because child labour, while always unfortunate, is not always evil. There are cases in which child labour is a sad necessity for poor families.)
On the other hand, there’s what we might call “ethical alignment” investments, in which a particular investor (small or large) attempts to make sure their money is invested only in companies or categories of companies that are consistent with their own values. Imagine, for example, a hard-core pacifist refusing to invest in companies that produce weapons even for peace-keeping purposes. Or picture a labour union investing only in companies with an excellent track-record in terms of labour relations. In such cases, the point is not that the corporate behaviour in question is categorically good or bad; the point is that they align (or fail to align) with the investor’s own core values.
I’m sure someone reading this will know much more about SRI than I do. Is the above distinction one already found in that world?
HuffPo, AOL and the Ethics of Unpaid Labour
Filed under: activism, advertising, blogs, brands, employees, intellectual property, pay, profits, protest, technology |
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AOL bought the Huffington Post this week. Now, many of HuffPo’s volunteer bloggers are up in arms, accusing the left-leaning news-and-aggregation site of two related crimes: selling out to a (presumably) evil corporate media giant, and failing to share the wealth with thousands of volunteer bloggers who, over the years, have contributed probably millions of words to HuffPo’s archive of content.
But criticism was not limited to the volunteer bloggers themselves. Tim Rutton, of the LA Times, wrote:
To grasp its business model, though, you need to picture a galley rowed by slaves and commanded by pirates….
Adbusters — the slightly-past-its-best-before-date organization whose sole purpose is to bash capitalism and consumerism — put it this way:
Socialite Arianna Huffington built a blog-empire on the backs of thousands of citizen journalists. She exploited our idealism and let us labor under the illusion that the Huffington Post was different, independent and leftist. Now she’s cashed in and three thousand indie bloggers find themselves working for a megacorp….
On the face of it, this sounds like a strong criticism. Use unpaid labour to build a truly massive (and profitable) online presence. Keep that unpaid labour in the fold by espousing values they believe in. And then sell out for hundreds of millions to a corporation that almost certainly could not care less about the aforementioned values. It really does sound tantamount to slavery, with a touch of ideological treason thrown in for good measure. But to understand this better, we need to know a little more about the economics of blogging. As a good starting point, see this piece by stats guru Nate Silver: The Economics of Blogging and The Huffington Post
The fact is, however, that sentiments like [the LA Times’s] Mr. Rutten’s reflect a misunderstanding of The Huffington Post’s business model. Although The Huffington Post does not pay those who volunteer to write blogs for it, this content represents only a small share of its traffic. And, to put it bluntly, many of those blog posts aren’t worth very much….
Silver goes on to be much more specific, calculating the likely dollar value of the contribution of the average volunteer HuffPo Blogger.
The point is that for something over 99% of bloggers, blogging is a hobby. The contribution of most HuffPo bloggers to the website’s success is minimal. Those thousands of volunteer bloggers on whose “backs” HuffPo was supposedly built were likely more important as audience than as generators of content. Should the volunteer bloggers feel jilted? I’m reminded of a commercial from a few years back, in which a mom consoles her 8-year-old boy whose team just lost a game of soccer or hockey or something. “Did you try your hardest?”, asks the mom. “And did you have a good time? That’s all that really matters.”
Of course, if the volunteer bloggers are worried about the integrity of HuffPo’s editorial voice, you would think they would be somewhat consoled by the fact that Arianna Huffington is retaining the reins in that regard, and in fact will be gaining the key editorial role at AOL as a whole. But then, that’s reason why the rest of us should be deeply concerned, given Huffington’s penchant for featuring dangerously bad pieces related to things like healthcare, including some that are the intellectual equivalent of evolution denial.
Groupon Does the Right Thing
Filed under: accountability, advertising, decision-making, ethics, marketing, protest |
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On Monday I blogged about the controversy over the Groupon.com ad that played during the Super Bowl, which made light of the plight of the people of Tibet. I suggested the ad was deeply disrespectful, and even played (perhaps unintentionally) on some unfortunate stereotypes. (See Groupon Super Bowl Ad: Unethical.)
Now it seems the company is taking the widespread criticism to heart, and pulling both the Tibet ad and the others in that series. Here’s the story, by Wailin Wong for the LA Times: Groupon pulls controversial ads
Groupon Inc. Chief Executive Andrew Mason said the Chicago-based daily deals provider is pulling all of the Super Bowl ads that had provoked a negative reaction online over the weekend.
“We hate that we offended people, and we’re very sorry that we did – it’s the last thing we wanted,” Mason wrote in a blog post on Thursday, adding: “We will run something less polarizing instead. We thought we were poking fun at ourselves, but clearly the execution was off and the joke didn’t come through. I personally take responsibility; although we worked with a professional ad agency, in the end, it was my decision to run the ads….”
Now, Groupon (and in particular, CEO Mason) seem genuinely contrite; they appear not to have foreseen the public reaction to their ads. Some might speculate, cynically, that they were actually banking on the controversy and the free publicity it would bring, but I see no evidence of that. Well, better late than never I guess. But even better would be a corporate culture that empowered insiders to say, at some point during the planning & production process, “Hmm, is this really a good idea?”
Death by Pizza Delivery: Domino’s Korea
Filed under: brands, employees, food, international, marketing, pay, pricing, workplace safety |
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During most of the 80’s (starting in 1984), customers of Domino’s Pizza in the U.S. enjoyed the benefits of a catchy promise of speedy delivery: Domino’s promised to deliver your pizza in “30 Minutes Or It’s Free.” The only problem: soon after the slogan was introduced, a rise in deaths due to accidents involving Domino’s drivers was noted. The assumption was that drivers were facing pressure to make good on the promise, and were therefore driving faster, which meant they were more likely to have accidents, some of which were fatal. Lawsuits ensued. Big ones. As a result, the “30 Minute” delivery promise ended back in 1991, in the U.S. But apparently the same can’t be said for Domino’s Korea.
Here’s the story, by blogger Lee Yoo Eun, blogging at Global Voices: South Korea: Backlash After ‘30 Minute’ Pizza Delivery Death
A popular Domino’s Pizza marketing strategy promising pizza delivery within 30 minutes of an order has met with a public backlash in South Korea, following the deaths of several young delivery personnel.
The Young Union, the union For Occupational and Environmental Health (FOEC) and several labor unions held a press conference on 8 February, 2011, in front of Domino’s Pizza’s headquarters in South Korean capital Seoul, pressuring the company to abolish the ‘30 Minute’ delivery system….
Here’s another version of the story, from the Korea Times: Quick delivery jeopardizes drivers.
In often discuss the story of “30 Minutes or It’s Free,” as it played out in the U.S., in my business ethics class. I use the case to illustrate 3 key points:
- A simple business decision can have large and unforeseen consequences, ones that result in a major ethical challenge for a company. In this case, a simple (and frankly brilliant) marketing slogan resulted in Domino’s executives being called killers and the company facing multi-million dollar lawsuits.
- The ethical thing to do is not always obvious. We spend a lot of time chastising companies for bad behaviour, but in at least some cases it is genuinely difficult to know what to do. In the Domino’s case, my students are typically unified in the opinion that something had to be done to reduce the rate of accident-related deaths involving Domino’s drivers, but they’re typically deeply divided on a) how far the company needs to go and b) just what strategy they should adopt.
- Putting an ethical decision into action can be very difficult. Back in the late 80’s, there were several thousand Domino’s pizza franchises in the U.S., and tens of thousands of drivers. Any decision made by Head Office was going to have to be implemented by all those franchisees and acted on by all those drivers. Making that sort of thing happen is anything but straightforward.
As for Domino’s Korea — frankly I’m stunned to find out that the people in charge of the Domino’s brand haven’t done more to make sure that a lesson learned 20 years ago, at great expense, is reflected in their international operations.
Groupon Super Bowl Ad: Unethical
Filed under: advertising, brands, character, consumers, ethics, food, international, marketing, virtue |
Comments (9) 
A collective gasp could be heard at one particular moment last night during the Super Bowl. No, I’m not talking about the gasp following Nick Collins’ 37 yard touchdown run in the first quarter. I’m talking about the gasp that issued at the punchline of the now-infamous Groupon.com commercial featuring Timothy Hutton.
You can see the 30-second spot here, on YouTube: Groupon – Tibet
And here’s the entire transcript:
“Mountainous Tibet — one of the most beautiful places in the world. This is Timothy Hutton. The people of Tibet are in trouble, their very culture is in jeopardy. But they still whip up an amazing fish curry. And since 200 of us bought at Groupon.com we’re getting $30 worth of Tibetan food for just $15 at Himalayan Restaurant in Chicago.”
Immediately following the commercial’s appearance, Twitter lit up with comments about how “offensive” and “tasteless” the Groupon.com commercial was. Media outlets today have been abuzz with criticism and commentary. The headlines tell the tale. According to NBC Chicago: “Groupon Super Bowl Ad Not a Good Deal”. CNN Money.com‘s headline was “Groupon spends big on controversial (tasteless?) Super Bowl spots”. Time asks: “And the Most Offensive Super Bowl Ad Goes To: Groupon?”
But the ad was more than just tasteless. It was unethical. To recruit — and then trivialize — the plight of the people of Tibet to sell Groupon’s services shows a jaw-dropping level of disrespect. And while we often think of disrespect as a matter of bad manners, showing suitable respect for other humans’ basic needs and interets is a core moral principle.
It’s also worth pointing out that the commercial played, perhaps unintentionally, on the unfortunate fact that, for many westerners, complex Asian societies are often most closely associated with exotic dinner fare. Yes, yes, Tibet is exotic and troubled. But hey, they make a yummy curry!
Who knows just what the fallout will be? There have been predictions that Groupon will lose business over this — it’s been suggested that the company may have found the limit of the notion that “there’s no such thing as bad PR.” And, predictably, there have already been calls for a boycott of Groupon.com. Timothy Hutton (once an Academy Award winner) will likely have to go into the spokesperson’s equivalent of rehab, perhaps by working with a pro-Tibet charity of some sort.
Of course, some will cling to the notion that Groupon.com intended all this — that they knew the ad would be controversial, and were aiming directly at the enormous amount of free media coverage they’re now getting. Maybe that’s true. But it was a helluva gamble to take. And, if it was a gamble, it was a gamble that treated the people of Tibet as just another Asian trinket to be tossed in among the poker chips.
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Addition:
It’s been pointed out to me (by @Changents on Twitter) that Groupon is apparently donating money to the causes featured in its commercials. See: http://savethemoney.groupon.com/. I’m not at all sure that that’s sufficient to overcome the worries discussed above, especially given that the disrespectful commercials is all that most people will see or know about. What do you think?
Authentically Unethical
Filed under: character, ethics, excuses, leadership, values, virtue |
Comments (1) Authenticity is the among the favourite buzzwords of the day. (My pal Andrew Potter’s recent book, The Authenticity Hoax, is a wonderful take-down of the concept.)
There are lots of ways the feel-good word, “authenticity”, can fail us. See, for a start, this blog entry by Deborah Gruenfeld and Lauren Zander, for the Harvard Business Review: Authentic Leadership Can Be Bad Leadership.
…being who you are and saying what you think can be highly problematic if the real you is a jerk. In practice, we’ve observed that placing value on being authentic has become an excuse for bad behavior among executives….
Gruenfeld and Zander’s basic point is that while authenticity (being who you really are) is great in principle, is authenticity the right goal if “who you really are” is a jerk? And in fact, there’s a fine line between being a jerk and being unethical. For starters, although most of us have our moments of rudeness, it is unethical — a serious character flaw — to consistently act like a jerk. Consistently acting rudely demonstrates a lack of respect for other people, and that’s unethical. So aiming for authenticity might not be all it’s cracked up to be, especially when compared to the more obvious aim of being a decent human being.
(See also Andrew’s Authenticity Hoax Blog.)
Critical Thinking in Business Ethics, Part 2: Argument Analysis
Filed under: critical thinking, ethics, sustainability, taxation |
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This is the 2nd in a series of postings on the role of critical thinking in business ethics.
(Coincidentally, a story has been in the news recently about how poorly most US college students do at acquiring critical thinking skills during their post-secondary years. See: Study: Students slog through college, but don’t gain much critical thinking.)
One of the absolutely fundamental skills of critical thinking is argument analysis, or the interpretation of argument structure. And the fundamental elements of argument structure are argument premises and conclusions.
In everyday language, the word “argument” means a heated debate. When 2 people are “having an argument,” they’re disagreeing with each other. But the other meaning of the word “argument,” the one with which critical thinking is especially concerned, is this: an “argument” is a series of statements, in which some of those statements (called “premises”) are offereds as support for or reasons to believe another of the statements (called the “conclusion.”) It takes 2 to tango, but it takes just 1 to put forward an argument.
Understanding the structure of an argument is a very good step towards understanding its strengths and weaknesses. Knowing, for example, that a given argument has 3 distinct premises rather than just 1, is clearly pretty fundamental to looking for its weaknesses: the more premises it has, for example, the more possible points of critique. But more fundamental than that, even, is the idea that we simply gain a better appreciation of someone’s point if we can picture — even in a simplified graphical way — the shape of their argument.
Look, for example, at this argument:
The definition of “sustainability” is unclear. Also, sustainability is just one of many important ethical values. So, we should not judge a business entirely by its sustainability ranking.
We can represent this argument graphically, by means of a diagram, as follows:
The arrows in this diagram represent the author’s intended logical “flow” — they can be read as representing the word “therefore.” This argument has 2 premises, each of which lends at least some support to the conclusion. (The fact that there are 2 arrows indicates that there are 2 separate chains of logic here; each premise gives some reason to believe the conclusion.) At this stage all we are doing is sketching the shape of the argument; we are not yet engaging in a critique. But from a critical perspective, this means that if you find fault with one of the premises, the conclusion is still supported — at least to some extent — by the other.
Next, compare that one to this argument:
A tax on dividends means that corporate profits are taxed twice. And taxing the same money twice is unfair. So, a tax on corporate dividends is unfair.
That argument can be diagrammed as follows:
This argument also has 2 premises. But notice that (as implied by the line joining them, and the single arrow flowing from that line to the argument’s conclusion) these 2 premises are working together. They need each other in order to lend support to the argument’s conclusion. This means that a convincing criticism of either one of those premises robs the argument of all of its force. That’s not to say that the conclusion is false; it’s just to say that this argument can’t support the conclusion, if even one of its premises is in doubt.
Now, those are very very simple arguments, and the style of analysis suggested here is not exactly profound. But the simple act of sketching out the shape of an argument — your own or someone else’s — is useful in making clear just how much support the argument does or doesn’t have, and where its critical weak points may be. And agreeing on that is a crucial part of getting debates over business ethics beyond the foot-stomping stage.
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The diagramming method used here is adapted from Lewis Vaughn and Chris MacDonald, The Power of Critical Thinking, 2nd Canadian Edition, Oxford University Press, 2010.
Ethics & Corporate Taxes
Filed under: corporate citizenship, corporations, ethics, finance, government, profits |
Comments (7) 
How much tax do corporations pay? Ask most people and I’m guessing they’ll say “not enough.” But seriously, how many people know what the actual corporate tax rate is? And then complicating things, there are the loopholes, those little tricks o’ the accounting trade that — as “everyone knows” — allows most big companies to pay next to nothing. Right?
For insight into these questions, see this useful piece by David Leonhardt, for the NY Times: The Paradox of Corporate Taxes.
OK, so a few answers. In the US, the federal corporate tax rate is 35%. (For comparison: in Japan it’s just over 40%, in Germany it’s 29.8%, and in Canada it’s 16.5%. In Ireland it’s just 12.5%.) So, on an international scale, the US corporate tax rate is actually fairly high. (For more, see Taxes Around the World.)
What about those loopholes? Sure enough, there are American companies that manage to dodge almost all taxes. The most egregious examples are from the cruise-line industry. As the NYT story points out, Carnival Cruise Lines is a prime example:
Over the last five years, the company has paid total corporate taxes — federal, state, local and foreign — equal to only 1.1 percent of its cumulative $11.3 billion in profits. Thanks to an obscure loophole in the tax code, Carnival can legally avoid most taxes.
That’s an extreme case, but lots of other companies manage to avoid paying anything close to the full 35% too. According to the NYT:
Over the last five years, on the other hand, Boeing paid a total tax rate of just 4.5 percent, …. Southwest Airlines paid 6.3 percent. … Yahoo paid 7 percent; Prudential Financial, 7.6 percent; General Electric, 14.3 percent.
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What’s more surprising, though, is how much tax corporations pay, in total, on average:
The average total tax rate for the 500 companies [in Standard & Poor’s stock index] over the last five years — again, including federal, state, local and foreign corporate taxes — was 32.8 percent.
So while some corporations pay very little tax, there’s also considerable variation.
From an ethical point of view, is this situation fair? Do corporations, in general, pay enough? Too much?On the face of it, that’s a basic issue of distributive justice: is 35% (or some fraction of that, after deductions) the right share of the overall tax burden for corporations (as opposed to individuals) to bear? That’s obviously a big question.
Fundamentally, corporations are a conduit, facilitating the flow of cash from consumers to employees and investors. To some, this implies a fundamental criticism of current patterns of taxation in the corporate world. Such critics point out that there’s a sense in which the money that flows through corporations is taxed twice: corporate profits are taxed, and then any dividend (i.e., a portion of after-tax profit) that is payed out to shareholders is taxed, too. In principle (as far as I can see) the same could be said about the money paid out to employees in the form of salaries (though the tax on profits is paid on the amount left over after expenses, including salaries, are paid). To the extent that I understand it, this criticism seems odd to me: after all, money flows around (and around and around) the economy, and is taxed at various points along the way (and is then injected back into the economy, of course, in the form of government spending). The point is that we (via government) levy taxes at specific points in this flow, and at specific rates, based on whether we want to encourage or discourage particular behaviours. If you tax a behaviour, then, other things being equal, people will do less of it. And if you offer a tax deduction for y, you are encouraging people to do more of it. We tax at various points in the corporate “process”, if you will, in order to encourage or discourage particular activities like investment. So in a sense, there is no “corporate share” of the tax burden — there’s just the question of whether various taxes and deductions operating in the corporate world broadly understood are effective in achieving our goals. (Although there is a question of justice regarding any difference in the way dividends are taxed as opposed to employment income.)
But again, back to the issue of loopholes as a way of reducing a corporation’s tax burden. Now, it’s worth considering the point of loopholes, from a public policy point of view. In some cases, at least, “loophole” is just the pejorative term for a tax exemption or deduction that a government has put in place to encourage or deter certain kinds of behaviour: deductions for investments in equipment or buildings are an example of this. But you don’t have to be either a tax lawyer or even a keen observer of politics to guess that some such mechanisms are astute ways for government to mould the economy, whereas others are almost certainly boondoggles resulting from savvy corporate lobbying. Then, of course, there’s also the question of gaming the system. A particular incentive (or loophole) might have been put in place for sound public-policy reasons, yet be abused by corporations as a way of dodging taxes (say, by investing in new equipment in order to reap a tax benefit and then selling the equipment off as soon as it can within the letter of the law). The most obvious ethical litmus test here is the “intent-of-the-law” test. It is prima facie unethical to misuse a tax deduction that is intended to be socially beneficial in a manner that is cynically aimed at simply minimizing corporate tax burden.
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p.s., I’m not an accountant or tax lawyer. If anyone with relevant expertise can correct any of the factual assumptions above, please do help out. Thanks.
The Business Ethics Blog 