Author Archive
Progressive Garment Factory, or Charity?
Filed under: aid, charity, employees, international, labelling, profits |
Comments (23) What’s the difference between a progressive factory and a charity?
Here’s the story, by Steven Greenhouse, for the NYT: A Factory Defies Stereotypes, but Can It Thrive?
…Ms. Castillo had long dreamed of a bigger, sturdier house, but three months ago something happened that finally made it possible: she landed a job at one of the world’s most unusual garment factories. Industry experts say it is a pioneer in the developing world because it pays a “living wage” — in this case, three times the average pay of the country’s apparel workers — and allows workers to join a union without a fight.
“We never had the opportunity to make wages like this before,” says Ms. Castillo, a soft-spoken woman who earns $500 a month. “I feel blessed…”
There’s lots that’s interesting, here, but what most struck me was the similarity between the factory described (which produces apparel under the label “Alta Gracia”) and the controversial (Product) RED campaign. As you may already know, (Product) RED is a project that attempts to leverage consumerism into charity, by donating a small portion of profits from certain consumer goods — RED-branded iPods, for example — to the Global Fund (to fight AIDS, tuberculosis, and malaria in needy countries). I wrote about RED here and here.
See the similarity? Red asked consumers to pay a premium so that money could be donated to the Global Fund. Alta Gracia asks consumers to pay a premium so that the money can be donated to the company’s workers. In both cases, there’s an attempt to advance a worthy cause (disease prevention on one hand, poverty alleviation on the other) by appealing to affluent consumers via value-laden branding.
Two questions occur to me.
1) Will Alta Gracia be subject to the same kinds of criticisms that (Product) Red has been subjet to? If not, why not?
2) It seems to me that the choice of workers as beneficiaries of the Alta Gracia scheme is but one option. Who are other potential beneficiaries of schemes like this? If RED helps out by donating profits directly to third parties (i.e., via the Global Fund) and if Alta Gracia helps out by donating higher wages to its workers, are there other parallel mechanisms that would work? Here’s an example. What if the company that owns Alta Gracia (Knights Apparel) were publicly-traded (instead of privately-held). And what if it gave shares to poor families, so that they could receive dividends when the company makes a profit? Would that be ethically the same thing? Would people who generally think profit-seeking is evil suddenly think profits are a good thing?
Chiropractic Referral Fees & Conflict of Interest
Filed under: conflict of interest, health, honesty, professionalism, regulations |
Comments (4) Sometimes, when consumers need two different, but related, goods or services, they rely on the advice of the provider of one product to select a provider of the second. That often makes sense, because providers in related businesses often have specialized knowledge that lets them give good advice (e.g., the guy who sells you your carpet likely knows who would be good at cleaning that carpet.) In such a case, people in related businesses can be a good source of expert, independent advice.
That is, if the advice is truly independent. And the most obvious way to eliminate independence is to inject a financial interest into the scenario. If the person you’re relying on for advice is financially beholden to the person he or she is recommending, you have every reason to doubt that advice.
And if that advice you’re after isn’t about something mundane, like carpets (something about which a great many non-experts know quite a lot) but is instead about your health, you have every reason to worry — especially when one of the service providers involved is taking active steps to put the person you’re relying on for advice into a Conflict of Interest.
Here’s an article (in which I’m quoted) about just such a situation. It’s by Yoni Freedhoff, MD, writing for the Canadian Medical Association Journal, Chiropractic clinic offered referral kickbacks
A chiropractic clinic with locations in Ontario, Nova Scotia and Manitoba offered lucrative kickbacks to physicians for referring clients to its five outlets until the College of Physicians and Surgeons of Ontario (CPSO) apparently stepped in to scuttle the payments as a result of CMAJ inquiries.
The offer of kickbacks, which were in the form of financial compensation, arising out of referrals from doctors, came to light as a result of a CMAJ request for a “doctor’s information kit” in accordance with instructions from an advertisement placed in the journal by the Low Back Clinic.
The kit included a document detailing appropriate patient referral criteria, which was followed by the proclamation: “In compliance with the C.P.S.O. standards, a $300 documentations fee will be provided once the patient completes care….”
Summary of problems:
- The payments put referring physicians into a conflict of interest;
- The payments, which are based on completion of a course of care, induce physicians to encourage patients to complete a course of care independent of whether that’s in the patient’s best interests;
- The payments risk jeopardizing patients’ trust in their physicians;
- The payments risk the professional reputation of the medical profession quite generally;
- Referring to the payments as being “In compliance with the C.P.S.O. standards” falsely implies that the payments are required by the C.P.S.O.
All in all, this scheme was a pretty bad idea. Perhaps the clinic offering the fee could be excused for not knowing that doing so was contrary to regulation. But health professionals certainly ought to know enough about conflict of interest to recognize that such a scheme is seriously ethically problematic.
Ethics and the SME
Here’s a very nice short article on business ethics, with a particular focus on SMEs (small and medium enterprises).
By Hendri Pelser, writing for Times Live (South Africa), Play fair and you will win:
With the effects of the global credit crunch still with us, it is pertinent to consider business ethics – the lack thereof helped create the recession.
But how does one approach business ethics? In the academic world, it is a philosophical discipline. For companies, it’s often a large volume of rules and regulations.
In the arena of small and medium enterprises, however, it simply comes down to the way you and your business behave – and decision makers face a myriad ethical challenges every day. These range from the way the tea lady is treated to the non-payment of suppliers or even bribes and kickbacks….
This piece is nice in a number of ways. Too little has been written, generally, about ethical challenges faced by SMEs, and this article says a lot of smart things about that. But the article really is a good brief primer on business ethics, and an interesting read throughout.
My one quibble is with the title of the article, which is misleading (but which probably wasn’t chosen by Pelser, so it’s not his fault). Nothing in the article actually implies that if you play fair, you’ll win. Certainly there’s a suggestion that good ethics leads to a good reputation, which in turn can help a business achieve success. But the relationship between ethics and business success is clearly complicated. In some cases, success is what gives a business a bit of leeway to engage in the kind of overt ethical behaviour that will build its reputation. In such cases, the truth is closer to “win, and you can afford to play fair.” Also, it just cannot be denied that in at least some cases, you’ll play fair and lose. Or, more generally, there are situations in which you’ll lose no matter how you play — perhaps because other companies have better products, better staff, better marketing, economies of scale, whatever. That complexity, of course, is precisely what makes ethics in business a challenge. If acting ethically were a straightforward recipe for business success (and if it were uncontroversial just what counted as acting ethically), we’d see a lot less unethical stuff going on in the world of commerce.
Oxford Handbook of Business Ethics (Reviewed)
Here’s a useful review of an excellent new reference volume: “The Oxford Handbook of Business Ethics, Reviewed by Matt Zwolinski, University of San Diego”.
I’ll admit right away that I’m biased: I’m co-author of a chapter in the Handbook (the chapter on Conflict of Interest) and Matt has nice things to say about our chapter in his review. But I’m pointing to the review as a way to make a point about the breadth of this thing we call “Business Ethics.”
Regarding the likely audience for the Handbook, Matt says the following:
The book will obviously be of interest to those for whom philosophical business ethics is a main area of interest. But the entries are clear and accessible enough to make the book of special value to at least two other groups: those whose approach to business ethics is not primarily philosophical will find here a useful ‘crash course’ in an alternative methodological approach to their own subject, and those philosophers who are not primarily interested in business ethics will be treated to a volume that makes clear the connection between business ethics and more standard philosophical subjects, and that will almost certainly provide them with new ways of thinking about both business ethics and other topics in value theory and political philosophy that are connected with business ethics in ways they might not have previously recognized.
Matt’s analysis of potential audiences is insightful, but I’d like to propose a further audience, namely those people who have a particular interest in business ethics, but who don’t know they’ve got a particular interest in Business Ethics. The people I have in mind here are the many many management professors, consultants, writers, and activists who have a deep (and sometimes professional) interest in ‘business doing the right thing’, but who do not (for one reason or another) identify with the term “Business Ethics.” That includes at least some professors who teach courses on “Business and Society” or “Corporate Social Responsibility,” and others whose work involves terms like “sustainability,” or “social responsibility” or “corporate accountability.” People working in those areas may, through an unfortunate fluke of language, be intellectually cut-off from mainstream academic Business Ethics, and a volume like the Oxford Handbook could be an excellent remedy for that.
(p.s., for a previous blog entry by me concerning the vocabulary of business ethics, see Barriers to Talking About Doing the Right Thing.)
(You can buy the Handbook via Amazon, here: Oxford Handbook of Business Ethics.)
World Cup Fever and Employee Productivity
The FIFA World Cup is one of the few events capable of diverting the world’s attention from the BP oil spill. I’m sure for many it’s a relief not to have a world-class disaster as the focus of their attention during every waking moment. In that regard, even for non-soccer fans, the World Cup is a welcome diversion. Of course, for many, it’s much more than that. It’s an obsession. It’s also a month-long diversion from other obligations.
Here’s a story about how businesses are dealing with the ways in which World Cup fever is affecting employee productivity. By Susan Krashinsky and Iain Marlow, for the Globe & Mail: The World Cup in the workplace – no keeper can stop it
[A]t its call centre in Brampton, the Canadian telecommunications giant [Rogers Communications] has wheeled in four giant projection screens to allow employees to catch World Cup games.
In Brampton, Rogers has opted to face head-on the possibility of lost productivity during this global sports event. Almost all World Cup matches will take place during regular work hours in North America. Rather than pretend employees won’t be focused on the tournament, Rogers is supplying the screens – some playing silently for those taking calls, and one that will sit in the cafeteria, volume cranked up….
Two main ethical questions arise, here. One: what do employees owe their employers? The other: what do employers owe their employees? Alternatively, we can combine the two into the single question, ‘How should an important-but-time-consuming cultural event like the World Cup be integrated into the workplace? Obviously, cases will differ. In an Air Traffic Control tower, where distractions could be fatal, no one (hopefully) is going to make an argument for installing a big-screen TV to watch whatever game is on. On the other hand, if you happen to work in a sports bar, the question is again kind of trivial but for the opposite reasons.
Setting aside those extremes, what about your average, middle-of-the-road office environment? Clearly any sensible solution has to involve a formulation of shared expectations. Managers and employees need to come to an understanding about how (as opposed to “whether”) employees are going to check in on World Cup games. In principle, any mutually-agreeable solution is ethically acceptable. But I would think really wise managers would find ways to turn employees’ interest in the World Cup into a benefit, rather than a liability. The most obvious way is by using the World Cup as part of various morale-boosting activities. More subtly, companies might draw on sports analogies — analogies that should be particularly vivid during the World Cup — in order to create training activities, perhaps ones that provide lessons on teamwork and courage. Indeed, they could even draw on the world cup to create training activities that focus on ethics, building on the analogy between sports and business as two competitive domains that can and should be productive endeavours, but that are more likely to be so when played within the boundaries of a well-thought-out set of rules.
Flexible Ethics in the Wake of Disaster
What do businesses in the tourism industry in areas affected by the BP oil spill owe to customers and potential customers? Or, to put it another way, just how closely do businesses in the stricken region need to adhere to the “usual” ethical rules of commerce?
Many businesses along the Gulf Coast have of course been very hard-hit. At this point, large stretches of the Gulf Coast are essentially unthinkable as vacation destinations, unless you happen to be into eco-disaster tourism. As a result, businesses there are fighting for their lives — all due to circumstances beyond their control, but very much within the control of a certain oil company whose name, by now, is all too familiar.
In such circumstances, businesses are likely to do just about anything to draw what tourists they can. Though I don’t know of particular cases, it wouldn’t be at all surprising to see some companies cutting corners, ethically speaking. For example, imagine a potential vacationer calls up a resort on the fringe of the affected area, wanting to know whether that particular stretch of beach is still vacation-worthy. And imagine that the usability of the beach is borderline. What answer should the owner of the resort give, over the phone? How scrupulously honest does she have to be, when the survival of her business (and the livelihood of her employees) is on the line?
The problem posed by the expectations of tourists and the way those are handled by resort owners is illustrated in this article by Mike Esterl, for the Wall Street Journal: In Alabama, a Fight for Tourists
“This is not what we expected,” said Clint Pope, 27, who drove his family to Gulf Shores from Thomasville, Ala., Friday for a weekend at the beach.
Mr. Pope’s 10-year-old son, Drew, and nine-year-old nephew, Nathan, still swam in this stretch of the Gulf on Friday afternoon, along with other tourists. But nobody was going into the water Saturday.
Now it’s tempting to say that the obligation of businesses to deal honestly with customers (and potential customers) is unchanged by current circumstances. But compare: many people thought that the looting that took place in the aftermaths of both Hurricane Katrina and the earthquake in Haiti was morally excusable. Some said it doesn’t even count as “looting” at all, when you’re fighting for survival. Does that principle hold true when the party in question is a small business owner, rather than an individual consumer? If stealing (within reason) is ethically permissible in the aftermath of a disaster, is bending the truth (or even lying) ethically permissible, too?
Now there are of course differences in the two cases. In the Katrina and Haiti cases, people were literally fighting for survival — it was literally life-or-death. Presumably no one in the Gulf Coast tourism industry is literally going to starve to death. But still, the general question remains interesting: to what extent can ethical rules legitimately be bent, when someone’s interests are seriously threatened?
Soccer Ball Ethics
Filed under: advertising, quality, sponsorship, sports, technology |
Comments (5) 
Amidst all the excitement over the start of the FIFA World Cup, one of the oddest bits of excitement has surrounded the innovative ball being used in the tournament, namely Adidas’ new “Jabulani.” Although the ball was designed to have superior aerodynamic properties, critics have attacked the ball for the particular way it flies though the air. Here, for example, cites Brazilian goalkeeper Julio Cesar as saying “It’s terrible, horrible. It’s like one of those balls you buy in the supermarket.”
Two things are interesting about this controversy.
One has to do with fairness. The controversy over the Jabulani — the ball that all teams will play with during the tournament — reminds us that the “level playing-field” metaphor so often appealed to in business is a sporting metaphor. It’s a reference to the fact that we think it desirable, generally, to make sure that no team has an unfair advantage. We want a level playing-field because if we play on a hill, one team is seriously disadvantaged by having to attempt to advance the ball up-hill, which requires considerably more effort. The point generalizes to any factors (including changes in the game) that give one side an unfair (dis)advantage. A change in the game is one thing, but a change that creates a differential advantage is quite another. And with regard to the Jabulani, even some critics have admitted that the fact that this change affects everyone equally mitigates the criticism. As English goalkeeper David James put it, “It’s horrible, but it’s horrible for everyone.”
But it’s worth noting the limits of this level-playingfield argument. While it’s true that all teams are subject to the same change, it’s not true that everyone is affected equally. First, it seems to be goalkeepers that are complaining most, suggesting that there’s a differential impact on them compared to other players — and that matters, at very least in terms of the ego of goalkeepers vs the egos of those scoring the goals. (In fact some suspect that this is an intentional outcome of the change in the ball: it will result in more goals, and hence more excitement, hence making it a better TV sport for North American viewers in particular.) Second, it’s not clear that all teams will be affected equally. Particular ball characteristics are liable to suit some teams’ strengths and strategies better than others. So why the “field” may be “level” at a superficial level, we may need to look deeper if we’re really interested in deciding whether this particular change is, in fact, a fair one.
The second interesting thing about the controversy has been the response from Adidas, the company that designed the ball. The response from Adidas has mainly focused on the science, and on pointing out that change is always difficult at first. But Adidas also had a more interesting defence, namely accusing (some) critics of conflict of interest. (See this definition of ‘conflict of interest’.) In particular, the claim is that most of the critics are subject to a possible financial bias. According to this story,
[Adidas spokesman Brueggen] pointed out that if you look closely at the players and goalies making these accusations you’ll notice one common thread among them: the all have contracts with Adidas’ competitors.
Now certainly not all critics have been affiliated with Adidas’ competitors. The soccer-gear website ‘Soccer Cleats 101,’ for example, reviewed the Jabulani back in January, and expressed some of the same concerns. Still, it’s an interesting accusation. And as always with such accusations, interesting questions arise. First, can Adidas’ claim be backed up empirically? If we actually count up the critics and look at what companies they’re sponsored by, will we see the pattern that Adidas claims? If Adidas hasn’t done such a tally (but is simply working from a rough impression) is it fair to make the accusation? Is the suspicion enough? And if we do confirm such a pattern of bias, what’s the specific explanation for it? Is it a matter of players consciously promoting the interests of companies they’re affiliated with, or is it more likely to be a more subtle, subconscious bias? And, finally — setting aside the fact that professional sport is, itself, a big business — what lessons can we learn from this sports story, and apply to the world of business more generally?
(p.s. Those of you with an interest in ethical dimensions of sports should be sure to check out Wayne Norman’s blog, This Sporting Life.)
What Does BP Owe its Shareholders? Nothing.
People have generally been dismayed at the behaviour of BP execs in the wake of the disastrous oil spill. CEO Tony Hayward has been roundly criticized, both for his overall handling of the situation, and for asking dumb questions like “What the hell did we do to deserve this?” The unmistakable impression is that BP’s ‘heart’ really isn’t in it when it comes to fixing this mess, and that they’re more interested in preserving what’s left of their reputation and in protecting profits.
How, ethically, ought BP’s execs to be behaving? Where do their obligations lie? Should they be focused 100% on cleanup? Should they be trying to preserve and build shareholder value? Should they be balancing those 2 objectives?
Generally, the task of corporate managers is to build wealth for shareholders. Don’t forget, executives are hired to run a business they don’t own, so it’s not up to them to decide how to run it. The standard view is that their job is to serve the shareholders. As long as they do so in constructive ways — through innovation, efficiency, etc. — and as long as innocent bystandards aren’t hurt, such profit-seeking is in fact socially beneficial. So one way to think about business ethics is that managers are free to compete aggressively, focused primarily on shareholder value, as long as they’re not misleading customers, abusing monopolistic power, or foisting costs on bystanders (i.e., imposing what economists call “negative externalities”). Those behaviours represent the boundaries of the ‘game,’ as it were. Within those boundaries: play ball!
This view implies that as long as a company keeps its nose clean, they don’t need to feel bad about pursuing profits, even when doing so means, for example, putting a competitor out of business, resulting in a loss of jobs, etc.
OK, so now consider BP. A year ago, BP’s managers might have been able to say something like this: Our job is to build shareholder value. We do that by producing a product society needs and is willing to pay for. As long as we don’t pollute too much (after all, all industry creates at least some pollution) it’s ethically OK for us to focus on our the interests of our shareholders.
Now, fast-forward to right now, to June of 2010. BP’s managers can’t exactly help themselves to the above argument, can they? The condition that normally justifies the zealous pursuit of profits doesn’t obtain, here, because BP’s managers haven’t been anywhere near sufficiently careful about avoiding imposing costs on others. Indeed, they’ve imposed massive costs (massive negative externalities) on the people of the Gulf Coast states, and (less directly) on the rest of us too.
So, when BP’s managers look around them, at the wide range of individuals and groups with a stake in their current decision-making, how much weight are they justified in giving to the interests of their shareholders, i.e., to the people who benefited from their profit-seeking behaviour in the first place?
I’d say “roughly zero.”
(The philosophical version of the argument for the basis, and limits, of profit-seeking behaviour can be found in Joseph Heath’s “An Adversarial Ethic for Business: or, When Sun-Tzu met the Stakeholder,” Journal of Business Ethics, 69, 2006. A downloadable version is on Joe’s page here.)
Boycotting BP is Futile and Unethical
Do not boycott BP.
I know you’re mad. I am too. But a boycott won’t accomplish any of the things you’re trying to accomplish. And it’s unethical.
The push to boycott BP (as a punitive response to the Deepwater Horizon oil spill, obviously) comes from the advocacy group Public Citizen, which encourages you to: “Boycott BP: Take the Beyond BP Pledge today!” There’s also the inevitable Facebook group, Boycott BP.
This move is well-intentioned, but entirely wrong-headed, for a number of reasons.
The first reason has to do with alternatives. Sharon Begley at Newsweek, with the sarcastic title “Boycott BP! Because it’s much better to give your money to Exxon.” It’s highly unlikely that those who participate in this boycott are going to eschew gas purchases altogether. With a few exceptions, they’re much more likely to simply start buying their gas at the non-BP station down the street. And, as Begley points out, as far as the oil companies providing the oil go, good luck finding one that meets your high ethical standards — or even minimally decent ones. Every oil company you can name is in roughly the same moral category. So boycotting BP just means jumping out of the frying pan and into the fire.
Second, there’s the fact that a boycott of BP gas stations won’t actually hurt the organization you’re trying to hurt. In practice, “boycotting BP” means boycotting BP-branded retail outlets. And as an editorial in the LA Times pointed out, “BP stations are independently owned, so a boycott hurts individual retailers more than London-based BP.” So, sure, boycott BP stations — that is, if your goal is to hurt a bunch of small businesses already operating on razor-thin profit margins. Put a few minimum-wage gas jockeys and cashiers out of work. The difference simply will not be felt at BP’s head office. (The same naturally goes for vandalism of BP stations, which is both unethical and criminal.)
Finally, there’s the question of tokenism. Buying gas for your car is far from the only way many of us indirectly buy from BP on a regular basis. As “DanH” points out in the Comments section of this blog entry, (see comment at June 3rd, 2010 2:52 pm) BP also makes home-heating fuel, airline fuel, ingredients for plastics, and the natural gas from which much electricity is generated. Oh, and solar panels — BP makes those, too. If you want to make this boycott real (which you shouldn’t) you’ve got to boycott those things, too.
Can consumers take action? Sure they can, by doing things — long-term things — to reduce their reliance on fossil fuels. They can also write their elected representatives to encourage tougher regulation of risky practices like deep-water drilling. And so on. I know, I know: in the immortal words of Homer Simpson, “But I’m mad now!“ Well, then direct the righteous indignation you’re feeling now toward change that will make the world better for the future.
It’s fine to be angry about this disastrous oil-spill. Being angry is entirely appropriate. And it’s good to want to do something. But do the right thing, not the first thing that comes to mind.
(Tip of the hat to AP.)
BP: Not Really “Beyond Petroleum,” Just Greenwash After All
When British Petroleum rebranded itself a few years ago as just “BP,” it adopted the tagline “Beyond Petroleum,” in an attempt to signal a commitment to new energy technologies, and to new ways of doing business.
Of course, there were skeptics. Back in 2000, CorpWatch had this to say about the rebranding:
BP’s re-branding as the “Beyond Petroleum” company is perhaps the ultimate co-optation of environmentalists’ language and message. Even apart from the twisting of language, BP’s suggestion that producing more natural gas is somehow akin to global leadership is preposterous. Make that Beyond Preposterous.
So, the accusation was basically one of greenwash — essentially, an attempt to mask a lousy environmental record with a thin patina of environmental commitment. Had I commented back in 2000, I might have suggested that it was too early, then, to confidently accuse the company of greenwash. Sometimes companies do undergo substantial changes — changes in policy, in culture, and in leadership. The worry then is that if we criticize or mock a company’s stated intention to turn over a new-and-greener leaf, we may actually be doing more harm than good by taking the wind out of the sails of what might actually be positive change.
OK, fast-forward to 2010, to the biggest oil spill in U.S. history and to the Center for Public Integrity stating that BP accounts for “97 percent of all flagrant violations found in the refining industry by government safety inspectors over the past three years”.
Greenwashing? Case closed, as far as public opinion of BP is concerned. And perhaps more importantly, it now becomes just that much harder for the public to take seriously any big company’s claim that it really wants to improve its environmental performance.
The Business Ethics Blog 