The Business Ethics Blog

Ethical Corporation magazine has an interesting article today about How business can lobby responsibly.

Some experts on ethical lobbying offered some tips at a London conference this week
Allegations of undue corporate influence of government officials are never far from the news these days.

Recently the UK’s Guardian newspaper detailed how mobile operators are aggressively lobbying Brussels over EU plans to limit expensive roaming charges.

Partly in response to greater awareness of business lobbying, one of the City’s biggest investors, F&C asset management, which manages over £110 billion for various clients, sponsored a report last year on responsible lobbying.

Speaking at the Business in the Community annual conference in London on Tuesday, Karina Litvack, head of governance for F&C, said that the US lobbying system is viewed by many as “institutionalised bribery”.

The issue of lobbying is an interesting & complicated one, and one worthy of more attention than it’s received in the business ethics literature.

On one hand, lobbying is just a particular kind of expression of an opinion, and thus ought to be protected by freedom of expression.

On the other hand, we all realize that the lobbying efforts of a company like Shell or Wal-Mart or GlaxoSmithKline (or of an entire industry association) is quite different from the letter written by the average citizen to his or her elected representative. Corporations often have the money required to hire very, very good lobbyists, who are well-compensated for being very, very convincing.

I think the interesting philosophical question here has to do with what limits (if any) should be placed on the ability of companies to influence public policy. Even quite radical defenders of the free-market (people who often deny that companies have any significant social responsibilities) typically agree that companies do have a responsibility to play according some fairly narrow interpretation of the written and unwritten rules of the game. OK, so, gotta follow the rules of the game. We all agree on that. The question at hand, though, has to do with the ability of companies to influence — indeed, sometimes to determine — what the rules of that very game will be.

Panel Faults Pfizer in ’96 Clinical Trial In Nigeria: Unapproved Drug Tested on Children (by The Washington Post’s Joe Stephens)

A panel of Nigerian medical experts has concluded that Pfizer Inc. violated international law during a 1996 epidemic by testing an unapproved drug on children with brain infections at a field hospital.

That finding is detailed in a lengthy Nigerian government report that has remained unreleased for five years, despite inquiries from the children’s attorneys and from the media. The Washington Post recently obtained a copy of the confidential report, which is attracting congressional interest. It was provided by a source who asked to remain anonymous because of personal safety concerns.

The report concludes that Pfizer never obtained authorization from the Nigerian government to give the unproven drug to nearly 100 children and infants. Pfizer selected the patients at a field hospital in the city of Kano, where the children had been taken to be treated for an often deadly strain of meningitis. At the time, Doctors Without Borders was dispensing approved antibiotics at the hospital.

Pfizer’s experiment was “an illegal trial of an unregistered drug,” the Nigerian panel concluded, and a “clear case of exploitation of the ignorant.”

Pfizer says it did nothing wrong. Regarding an apparently falsified letter of approval from a hospital ethics committee, Pfizer states:

“Obviously this should not have occurred and the company very much regrets that it did,” …. “It is important to point out, though, that Pfizer thought proper procedure had been followed at the time of the clinical study.”

This raises important issues about the background conditions and infrastructure in developing nations, the backdrop against which corporate activities are carried out. There are lots of safeguards built into the background, institutions, social conventions, etc. in developed nations, that add several layers of relative safety to clinical trials conducted here. Developed nations, for example, tend to have stable institutions (local and central), educated populations, and a plethora of watchful consumer- and patient-rights groups. Not all places are so fortunate.

Nigeria, for example, scores prett badly on the Fund for Peace’sFailed States Index 2006. The Index ranks Nigeria as #22 (i.e., the 22nd WORST nation-state on earth). This might suggest that companies doing business (or conducting research) in places like Nigeria bear an additional burden, additional responsibilities, and should realize that they cannot simply assume that local safeguards are adequate.

Here’s an interesting website that allows you to post anonymously “the most unethical thing you’ve done in business”: Ethics Crisis Confessions.

It also allows others to rate just how unethical whatever you’ve confessed to is — on a scale from 1 (“Always Acceptable”) to 5 (“Never Acceptable”). The average of all past ratings is displayed for each confession.

As it stands, the site is pretty interesting (in a voyeuristic kind of way, I guess). It would be even more interesting if the site collected richer statistics from those who vote (Do you work for a big company yourself? Is your objection to this practice based on a) Respect for Property Rights, b) Respect for persons, c) social welfare, etc.)

The site also lets you leave comments after any of the confessions. The comments make for great reading. Though the site is pretty new, the comments already range from very sensible through to preachy outrage, etc. I’m sure they’ll only get more fun as time goes on.

Finally, I can’t help pointing out that a lot of what’s reported on the site is not just unethical, but illegal. Take, for example, this person, who admits that stealing expensive items from the office is “probably not ethical.” Um, yeah.

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(Thanks to Rebel Sell for the heads-up.

What a great story: it’s got titilation, philanthropy, and executive malfeasance. It’s downright Shakespearean.
From Reuters: “Charity exec who stole to pay dominatrix gets jail”. [Dead link deleted Nov. ’08]

An executive at a heart disease charitable foundation who embezzled close to a quarter of a million dollars over two years to pay a dominatrix to beat him was sentenced Tuesday to two to six years in prison.

Abraham Alexander, an accounts payable executive at the Manhattan Cardiovascular Research Foundation, admitted to stealing $237,162 and spending most of it on services provided by a Columbus, Ohio-based dominatrix called Lady Sage.

Manhattan prosecutors said Alexander, a Singapore-born citizen of India, had forged or altered checks payable to himself, to two credit card companies and to an online-based dominatrix company called Through the Looking Glass.

Not much to say about this one, except maybe that this story will get WAY more attention than it deserves (and yes, I’m guilty here) because Alexander spent the stolen money on a dominatrix, rather than on something passé like sports cars or cocaine. Oh, and this story also shows that the term “business ethics” needs to be interpreted broadly, as referring to ethical issues that arise in all sorts of organizations (not just for-profit corporations).

Links:
Lady Sage’s website (warning: mild sexual content)
Cardiovascular Research Foundation
Books on ethics for non-profit organizations
Books on sexual ethics

From yesterday’s Guardian: Stem cell firm uses Swansea ferry to evade Irish block on controversial treatment

The first 3 paragraphs give you most of what you need to know:

A company offering controversial “stem cell” injections to hundreds of people from the UK with multiple sclerosis and other neurological diseases is planning to get around a ban on treatment in Ireland by carrying it out in international waters on an overnight ferry.
Advanced Cell Therapeutics (ACT), which has an address in Geneva and a London telephone number, has been supplying stem cells from umbilical cord blood to 12 clinics around the world, of which two are in the Netherlands and one in Spain. Demand from the UK – where the treatment is illegal – has been huge, following tabloid newspaper stories about apparent remarkable recoveries and an interview with a clinic doctor on television’s Richard and Judy programme.

Scientists, however, dismiss ACT’s claims, saying that nobody has yet been able to trick stem cells into repairing the spinal nerve damage that causes MS.

Two key ethical issues arise, here:
1) The first issue regards the selling of unproven medical treatments. The treatment being offered in this case is highly dubious. Not that anyone knows, for sure, that it couldn’t work…that’s not the point. The point is that no one has demonstrated that it does work. And to charge customers — i.e., in this case, desperate people with devastating diseases — money for an unproven treatment is a pretty bad thing.

2) The second issue involves doing business in international waters to avoid legal restrictions. Of course, there are other kinds of businesses that use such tactics: casino boats come to mind. Here’s a rough & ready rule of thumb for your consideration: doing business in international waters to avoid legal restrictions on your business is ethically defensible if (and only if) the law you’re working so hard to avoid complying with is itself seriously controversial (i.e., it has serious, well-informed, thoughtfuly detractors). So, going into international waters to avoid complying with laws prohibiting sexual exploitation of children: deeply unethical (because there just IS no well-reasoned disagreement about whether sexual exploitation of children should be legal). Going into international waters to avoid complying with laws prohibiting abortion: ethically permissible (because there IS well-reasoned disagreement about abortion). According to this rule of thumb, going into inernational waters to avoid legal restrictions on stem cell therapies per se would not be unethical (because there is deep disagreement, in some places at least, about stem cells). But going into international waters to sell unproven medical treatments would be unethical, because there simply is no reasoned disagreement about the propriety of laws forbidding that. Selling unproven “therapy” to desperate patients is purely predatory, and indefensible.

(Of course, you might reasonably ask whether the law-avoidance aspect, here, adds anything, ethically speaking, to the case. If selling snake oil is unethical (which it is), then isn’t that all we need to know? I’m not sure about that. On one hand, citizens of a given country (and companies operating in that country) have a strong prima facie obligation to obey the law…even laws they disagree with. Then again, some laws really are stupid, sometimes because they are outdated, and sometimes because they reflect the will of influential interest groups, etc. So going off-shore to avoid the law is at least worrisome, and perhaps ought only to be done openly, as part of an explicit program of conscientious objection. But for clearly unethical practices, it seems like heading for international waters to avoid the law just seems to make the practice all the more unethical.)

Links of interest:
StemCells.ca
Info on clinical trials (i.e., the most credible way to test new therapies)

Glenn McGee is a thoughtful guy, and I almost always find his arguments convincing.
In his recent column in The Scientist, he argues that the use (and abuse) of human research subjects in India by western pharmaceutical companies amounts to a kind of “imperialism.” (Salt in the Wound: Will India rise up against the oppression of foreign clinical trials?)

But I think it’s important here to separate our legitimate moral outrage about indefensible abuses (such as failures of informed consent, or the conducting of unacceptably risky trials), from our sense that there is, in some hard-to-describe way, something unjust about people in developing nations serving as research subjects in clinical trials that Westerners are unwilling to participate in.

In particular, the charge of “imperialism” seems out of place, here, for it stretches a metaphor beyond recognition. We shouldn’t use the word “imperialism” to refer to just any situation in which particular Westerners (or Westerners in general) profit from the labour (even undesirable labour) of folks in the 3rd world. Imperialism, after all, typically involves a central authority (usually, but not necessarily, a government) trying to exert control over foreign entities (either other countries or colonies). Further, imperialism typically involves oppression. So, for a charge of imperialism to be apt in this case, we would have to see evidence that the pharmaceutical industry is acting oppressively, making a concerted effort to profit specifically through frustrating the interests of Indians.

I see no evidence of such oppression, So what does McGee say the real problem is?

…the problem [is] the outsourced clinical trials that have enrolled tens of thousands of Indians in a $1 billion business aimed not at the improvement of Indians’ health or technology, but at providing deep discounts to pharmaceutical companies in other nations.

But why is the question, according to McGee, one of whether the clinical trials are aimed at improving Indians’ health or technology? Shouldn’t the question more simply be whether Indians enjoy a) improved welfare and/or b) increased autonomy as a result of having Western pharmaceutical companies running (or contracting research firms to run) clinical trials in India? Now, generally the fact that such trials are happening reflects the fact that the Indian government, Indian physicians, and (ultimately) Indian citizens see them as being, on the whole, beneficial. In particular cases, of course, the view that enrollment in a clinical trial is a good idea might be mistaken (say, due to failures of informed consent). But it’s hard to see that that is generally the case.

Is it, in some sense, regrettable that there are people in India (or anywhere) who feel compelled to either a) earn an income, or b) acquire basic healthcare, through enrollment in clinical trials? Sure it is. But we need to be careful with words like “compelled.” It is their regrettable situation that is compelling them to enter clinical trials, not pharmaceutical companies. Do pharmaceutical companies (and their Western customers) benefit from the enrollment of Indians in clinical trials? Of course they do. But that, in itself, isn’t morally wrong.

Pharmaceutical companies do lots of lousy things, and deserve harsh criticism for many of their behaviours. But running clinical trials in India is not, in general, one of them.

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Two places to point you for further reading:
First, see the substantial literature on sweatshop labour. Oversimplifying greatly, I’d say that the general tone of that literature is that the garment industry provides an overall benefit to people in developing nations by operating factories there, though care needs to be taken to make sure that abusive practices are avoided. One good example is this book: Rising Above Sweatshops: Innovative Approaches to Global Labor Challenges.

See also James Stacey Taylor’s book, Stakes and Kidneys: Why Markets in Human Body Parts are Morally Imperative, for a convincing argument about why offering the world’s poor jobs that most Westerners wouldn’t want doesn’t have to be counted as exploitative or coercive.

A couple of months ago I blogged about the launch, led by U2’s Bono, of a new “socially responsible brand,” called “RED”: U2’s Bono Rocks Corporate Philanthropy

Now, American Express has joined the project, and launched its new RED American Express card. When consumers use the card to make purchases, 1% of the purchace price goes to the Global Fund to help in its fight against AIDS, TB and Malaria.

Cynicism was not long in following:
The RED Card: American Express pretends to be charitable

On the surface, it’s a brilliant idea. Since RED is like any other credit card offered by American Express, you’re not subsidizing a charity’s advertising campaign with your donation. 100% of your donation is going to the Global Fund.

But there’s a devil in the details.

Make no mistake about it, the donation is from you, not from American Express. Every credit card offer has some kind of deal where you get free things or money back, and a good way to choose a credit card is to calculate the exact percentage cash back that you are getting. For example, if you get one Air Mile for every dollar you spend, and it costs 25,000 Air Miles to buy a domestic flight in the United States (say, $400-500 max), then you’re effectively getting between 1.6% and 2.0% off of your purchases. ($400/$25000)

In my experience, most credit cards offer effective discounts of 2-3%. The RED card gives 1-1.25% of your purchase value to the Global Fund, and there are no other discounts. Two things are eminently clear: (1) American Express is not hurting at all from this, as they are offering a lower implicit discount than that on their other cards; and (2) Your donation is real, since that 1% going to the Global Fund would eventually be cash in your pocket if you used any other card.

You are making a donation to the Global Fund every time you use the RED card. So why don’t you get a receipt for a tax deductible charitable donation? Because American Express is getting it. Which makes the RED card little more than a way for American Express to get money out of you, foolish consumer.

Three things need to be said:
1) I’m glad someone did the math. Reward cards of any kind are always a mixed blessing, and smart consumers should always, always figure out just what they’re getting, and just what they’re paying for it.
2) It’s still not foolish to want one of these cards, if you want a simple and effective way to contribute to worthy causes. Yes, it would be more effective, in principle, to carry a cash-back rewards card, save up the cash rewards and donate them (and enjoy the tax benefits, too). But not many people are that dedicated & organized. Much simpler to let Amex handle the details for you.
3) Why be surprised (or saddened) that the money is coming from YOU, rather than Amex? What they’re contributing isn’t a percentage, but rather the infrastructure. They’ve got relationships with a gazillion merchants, which means they’re providing a gazillion opportunities for consumers to make charitable donations. Why would anyone even think this is about Amex giving money? This isn’t corporate philanthropy. But who said it was?
4) If, alternatively, Amex said “OK, we’ll just give a million dollars to the cause,” or “OK, we’ll donate our profits from the RED card”, where would that money actually come from? Ultimately, it would come from consumers (either in the form of higher credit card rates, or in the form of lower dividends for investors, including the pension funds of blue collar workers & so on.)

Is RED a good business opportunity for Amex? Sure it is. In fact, according to the RED website‘s page about the Red Amex…

American Express is a founding member of RED because they’re convinced it makes good business sense.

So, I’d say this is a pretty decent example of Corporate Social Responsibility. Amex is doing something it is genuinely good at (gathering & processing payments) and thereby doing some real good in the world. As for their “real” motives…who knows? Who cares?
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(Thx to Rebel Sell for the heads-up.)

I’ve mostly avoided blogging about the trial of former Enron executives Ken Lay and Jeff Skilling, on the (maybe weak) grounds that the trial is about law, not ethics. But every once in a while the testimony in the trials raises interesting ethical issues.

See, for example, this story in yesterday’s NY Times: Folksy Lay Opens Up to the Jury.

I want to focus on just one bit of testimony, given by Ken Lay regarding his own responsiblity (or lack thereof) for the collapse of Enron:

“I’ve said before, I accept full responsibility for everything that happened at Enron,” Mr. Lay testified. “Having said that, there’s no way I could take responsibility for the criminal conduct that I didn’t know about.”

So, Lay “accepts” responsibility (for everything), but can’t “take” responsibility (for criminal conduct). Is this just verbal slight of hand, or is the hair that Lay is trying to split really that finely divisible?

There’s at least some grounds for thinking the two really can be divided.

The belief that a leader should “accept responsibility” is a moral notion, having to do with the idea that when one takes charge of, and is tasked with managing, an organization, one thereby accepts responsibility for whatever goes on there. In part, we hold leaders responsible because they have the power, if not to control everything that goes on in their organizations, at least to set the tone and direction of the organization, and to set an example for appropriate behaviour. But in part, this idea that “the buck stops here” is also a reflection of the idea that someone needs to be accountable — that is, someone needs to be ready to answer for the activities of the organization. So, even if the leader bears no direct causal responsibility, they can still be considered morally responsible. (This set of norms is seen most clearly, perhaps, in parliamentary systems, in which cabinet ministers are traditionally seen as responsible for everything that goes on in the Departments they run, and may be expected to resign in the wake of a wrongdoing, even if they had no direct involvement.)
This might bear some resemblance to the legal notion of strict liability. Under the strict liability doctrine, some activities (like owning a dangerous dog) are so risky that people engaging in such activities must accept responsibility for all untoward outcomes, even ones they didn’t intend and took steps to avoid. Would it be overly cynical to say that the notion of a CEO “accepting responsibillity” for eveything that goes on in a given corporation follows from the generally responsibility-diffusing nature of the corporate form, and the idea that if we’re to allow (and foster) incorporation (because of the productive capacity of corporate structures), we at very least need to be able to hold someone responsible for bad outcomes?

Here’s a press release from pollsters Ipsos Reid and Canadian Business for Social Responsibility: Corporate Social Responsibilty (CSR) In Canada

A new Ipsos Reid/CBSR poll of Canadian businesses and the Canadian public shows that 68% of Canadians pay attention to issues related to corporate social responsibility (CSR). The poll also shows that three-quarters of leading Canadian companies are actively engaged in key CSR activities. What’s interesting, however, is that while corporate Canada invests time and money in developing CSR policies and programs, Canadian consumers, despite their claim to be paying attention to these issues, are somewhat in the dark about the specific practices companies adopt.

Of course, this is an area where we should be wary of polls. There are well-known gaps between people’s readiness to claim an “interest” in an issue, and their willingness to actually do something about it. For example, surveys say that something like 90% of Canadians are against genetically modified foods, but studies have shown that, when given the option, most Canadians are unwilling to pay much of a premium for non-GM foods. (Technically, this is a difference between “expressed preferences” and “revealed preferences.”) This is particularly likely to be a problem where respondants to a poll have reason to exaggerate their own knowledge of, or attention to, an issue. Even when filling out a survey, how many people are going to feel good about saying, “Naw, I don’t care about companies being socially responsible?” Even if you don’t care, how likely are you to be honest about that?

As for consumer awareness of specific corporate initiatives:

Three-quarters of business leaders (76%) surveyed say their firms have “made an explicit commitment to CSR”. Almost the same proportion asserts that their companies have “developed formalized policies for CSR activities” (72%); this includes 50% whose policies are fully developed. And, 75% have “created and implemented programs related to CSR” (75%), with 56% saying implementation is fully underway.

Canadian consumers, however, remain considerably unaware of companies’ practices and initiatives. Only a third (33%) say they know of any companies in Canada who’ve “made an explicit commitment to CSR”. A similarly low number (31%) are aware of any companies who’ve got “formal policies in place that require companies to take on socially responsible activities and initiatives”, and 38% know of companies who’ve “created and carried out socially responsible activities and initiatives based on their policies”.

I’m not sure what to think of this data. 10 years from now, maybe CSR will be just another background condition for doing business, so that it won’t be at all surprising when the public can’t name particular examples. But for now, most companies engaged in serious CSR activities do try to advertise the fact. But the relative lack of public awareness may have something to do with:
– the fact that many (most?) CSR activities are advertised only to key corporate stakeholders (through, for example, annual reports) rather than to the general public;
– we can likely be aware of a corporate activity, recall it when it’s mentioned, and even be influenced by it (say, in our purchasing decisions) without being able to name that activity, off the top of our heads, when asked by a pollster.

I’d like to know how those numbers compare with statistics about people’s demonstrable awareness of other issues? Is the fact that only (?) 31% of Canadians are aware of companies with formal CSR policies a meaningful statistic? For example, what percentage of Canadians are aware of (i.e., can name when asked) the policy platforms of the major political parties? What percentage are aware of which makes and models of cars get the best mileage, or have the best crash-test ratings? And do any of those percentages reflect either a) the competence of the relevant organizations’ advertising campaigns, or b) the likelihood that members of the public will have internalized, or will be able to seek out, the information they need in order to make good decisions (whether about voting, buying, investing, or whatever).

I just recently got wind of this story, which appeared last week in Yahoo News:
“Egypt’s illegal organs trade thrives on poverty” [Broken link repaired Nov. 24, ’08]]

On the back of dire poverty, legal shortcomings and religious conservatism, a new mafia is prospering in Egypt and turning the country into the regional hub for the human organs trade, experts say.

There are no official statistics but in a country where social inequality is high and a quarter of the population is believed to live under the poverty line, more and more destitute Egyptians are falling prey to the phenomenon.

The large scars slicing the sides of many Egyptians in impoverished Cairo neighborhoods most probably testify to an illegal kidney sale to a rich fellow countryman or a Gulf Arab who could not find a donor.

Such sales are legally dubious, but the “donors” are at least nominally willing. This, apparently, is not always the case:

While most donors are poor and hoping for a better life, not all are volunteers, with grisly accounts of forced organ ‘donations’ earning Egypt the sinister reputation of ‘Brazil of the Middle East.’

Like millions of Egyptians, Abdelhamid AbdelHamid, Ahmed Ibrahim and Ashraf Zakaria were seeking better paid jobs in the Gulf but their quest cost them a kidney.

In a recent interview to the independent Al-Masri Al-Yom daily, they explained how they had been promised jobs but were requested to undergo a medical examination beforehand.

The doctor “discovered” they were all suffering from a kidney infection requiring immediate surgery. They woke up later in hospital with a missing kidney. The go-between had vanished but they feared to speak out.

Interestingly, the story begins by talking about voluntary sale of organs, then switches to talking about the market in organs stolen from unwilling ‘donors,’ end then ends by squishing the two into one category, citing an Egyptian religious group’s argument that “Legislation is the only way to stem organs trafficking.”

As it happens, I’m currently reading James Stacey Taylor’s recent book, Stakes And Kidneys: Why Markets In Human Body Parts Are Morally Imperative. It’s a challenging book, with a conclusion that few will find attractive. But, as always, the challenge for those who find the conclusion distasteful is to do the hard work of pointing out to Taylor just where they think his reasoning goes wrong.