The Business Ethics Blog

Here’s a story that will warm the hearts of all who think more should be done to hold corporations responsible for their bad behaviour:

“Judge Rejects Plea Deal on Guidant Heart Device”

A federal judge in Minnesota on Tuesday rejected a plea agreement between the federal government and the Guidant Corporation, saying that the deal did not hold the company sufficiently accountable for an episode in which it sold potentially flawed heart defibrillators.
…
Judge Frank said that prosecutors should have sought probation for Guidant and its parent, Boston Scientific….

Hey, but wait! This judge is treating Guidant — a corporation — like it’s a person or something. But that’s clearly crazy, right? I mean, “probation”? How can you put something like a corporation on probation?

Remember all the hullabaloo over the Citizens United case back in January? (One of my blog entries on the topic is here.) In that decision, the US Supreme Court effectively expanded the free speech rights of corporations and unions. Much of the criticism of that decision was leveled at the Court’s implicit assumption that corporations are in some sense “persons.” Critics claimed that rights can only be held by persons (which is perhaps true), and being a person meant being a human (which is not necessarily true) and if we admit that corporations are persons, then there’s nothing to stop them from having the right to vote, adopt children, etc. (which is utterly false).

The Guidant case cited above provides a nice illustration of how important it is for corporations to be treated as legal persons — as entities with some range of rights and responsibilities. Now, as I emphasized in the aftermath of the Citizens United case, to think of corporations as persons is not in any way to argue for a specific set of rights or responsibilities. There’s plenty of room for debate about just which rights and which responsibilities make sense. Not all persons have exactly the same range of rights and responsibilities. (Compare adult persons with infant persons, for example.) But there’s no denying that if you want to hold corporations responsible for their behaviour — behaviour that might not be attributable to any particular executive, or at least to any executive still with the company — you need for courts to be able to see the organization as an entity, a person, in its own right.

I’m currently in New York, at the Conference Board’s Business Ethics and Compliance Conference.

This is the second of 3 blog entries I’ll be doing from the conference.

I went to two very different sessions this afternoon. The first was on “Enforcing Ethics and Compliance in Your Supply Chain.” Speakers from Texas Instruments and El Paso Corporation (a natural gas pipeline company) talked about the challenges faced by their companies in making sure the companies they buy things from have their own ethics-and-compliance affairs in order. Both T.I. and E.P.C. are publicly-traded companies, subject to a range of “ethics” regulations, and are required by law to have in-house ethics programs. But many of the smaller firms they deal with are privately held, and hence aren’t legally required to have such programs. But in effect, in seeking to do business with big firms like T.I. and E.P.C., these smaller firms are in effect required to meet standards set by the SEC. Interesting questions from the audience during this session included:

• Do big companies go beyond monitoring their suppliers, to monitoring their suppliers’ suppliers?
• If a small company supplies goods and services to more than one large, publicly-traded company, are there ways for those big companies to avoid duplicating efforts (in terms of the time and effort expended to verify that the small company’s affairs are in order)?

The second session I attended was called “In Search of the Good Corporate Citizen,” a session about the documentary that bears that name (see the website here.) The show was originally aired on Connecticut Public Broadcasting, and was sponsored by Altria. The producers (Denny and Win Swenson) were at the session this afternoon, along with Frank Geovannello, Manager, Compliance and Integrity, for Altria. They showed a few segments of the video — real-life stories of corporate malfeasance, mostly, along with some panel-discussion segments. (It looks like a great teaching tool, both for university teaching and for corporate training.) The discussion today, sparked by the video, focused on issues such as the significance of excuse-giving and herd mentality in facilitating wrong-doing. Keep an eye on this blog for a review of the entire video in the coming weeks.

I’m currently at this U.S. Conference Board conference in New York: Business Ethics and Compliance Conference: Priorities in Today’s Regulatory and Enforcement Environment.

I’m here as a guest of the Conference Board. I was invited so that I could blog about the event. This will be the first of 3 blog entries (1 per half-day).

Reflections on what I saw this morning:

I’m a bit of a fish out of water at this event. I’m the only academic here, as far as I can tell; the attendees are overwhelmingly corporate, and overwhelmingly lawyers. This latter fact, of course, mirrors the complaint that many people (including many philosophers who do business ethics) have about the particular way in which the corporate world has tried to put ethics into practice, namely by creating Departments of Ethics & Compliance, and by creating positions like “Director of Ethics & Compliance” or “VP, Ethics & Compliance.” Now, compliance is about following laws & regulations. The scope of ethics is broader than that. So the worry is that when you pair “ethics” with “compliance” and put lawyers in charge, you’re going to end up focusing on the “compliance” part and forgetting about “ethics”, broadly understood.

But what I’ve seen here so far, today, is heartening. The lawyers I’ve heard speaking thus far today (including speakers and audience members) are very clearly interested in much more than narrow legal compliance. It’s clear that legal compliance is fundamental, here, but it’s also clear — clear to people at this conference — that other stuff matters too. It matters both for its own sake, and because of the role that ethics plays assessing legal culpability. Both the US federal sentencing guidelines, for example, and the US Air Force’s standards for contractors, essentially imply that corporate character matters.

So, this is a field dominated by lawyers. But it’s good to see that they care about more that just the law, narrowly construed. Of course, there’s a self-selection effect at play here: lawyers who go into this field are likely to be precisely the lawyers who don’t think narrowly about the law. There’s also the possibility, I suppose, that what I’m hearing is rhetoric rather than true belief. But given the audience, here, I’m effectively seeing how Ethics-and-Compliance-oriented corporate lawyers talk to each other. And if they talk as if they truly care about ethics, I doubt it’s because there’s a blogger in the room.

(FYI, so far I’ve heard Win Swenson (godfather of the US corporate sentencing guidelines) and Donna Boehme speak about “Priorities in Today’s Regulatory and Enforcement Environment” and Steven Shaw (Deputy Counsel, US Air Force) and Timothy Schultz talk about ethics in government contracting. Swenson and Shaw were particularly great.)

(p.s. I’m also Tweeting about the conference. If you’re on Twitter, you can follow at #tcbethics )

Here’s a guest posting I’ve just done, for the Science-Based Pharmacy Blog: Homeopathy and Consumer Protection.

Here’s a snippet:

I’m going to pose two questions for homeopaths to answer, questions that I would likewise pose to any other kind of reputable business, especially any other reputable business in the field of health.

1. How do we detect phoney homeopathic preparations? In order to protect consumers, we need to be able to detect fake remedies — fake versions (sold by counterfeiters) that are really just inert look-alike copies of genuine remedies. In an age of international trade and Internet-based pharmacies, phoney pills are a big problem. …

2. What advice would you give a potential patient/customer who is trying to choose among various alternative therapies? How should a potential customer/patient choose between homeopathy, Therapeutic Touch, acupuncture, Angel Therapy, and so on? In other words, how can consumers know that they’re about to buy something good, rather than something bogus? “Trust me” won’t do…

Basically, the blog entry is an attempt to have a constructive conversation about consumer protection in a realm typified by name-calling and mutual mockery. The online “debate” over homeopathy typically involves science-minded folks smacking their foreheads at the scientifically-implausible claims made by homeopaths, and homeopaths smacking their foreheads at how skeptics “just don’t want to see” the truth. But the topic is too important to leave at that level. The two sides are never going to agree about how (in)effective homeopathy is. But they must agree on the importance of protecting consumers. The question, then, is how best to do that.

When is a voluntary transaction between consenting adults not permitted? Well, there are a few cases, but one interesting one is where one of the consenting adults is an unpaid intern at a for-profit company.

Now, the usual presumption is that people only consent to something if they see it as being in their interests, broadly construed, to do so. So why does the law frown on these voluntary unpaid internships?

For a bit of context, see this story (from last week) by Steven Greenhouse, from the New York Times:

Growth of Unpaid Internships May Be Illegal, Officials Say

With job openings scarce for young people, the number of unpaid internships has climbed in recent years, leading federal and state regulators to worry that more employers are illegally using such internships for free labor.

Convinced that many unpaid internships violate minimum wage laws, officials in Oregon, California and other states have begun investigations and fined employers….

So the central ethical issue is this: how can the law prevent me from accepting an unpaid internship if I see it as being in my interest to do so?

Well, there are two potential reasons. One is that the law is effectively preventing companies from taking advantage of people with few other options. If you really need to get your foot in the door of your chosen industry, you might be willing to undergo significant hardship — including unpaid labour — in order to do that. And a company preying on that desperation might be seen as exploitative. But then, “exploitation” is a lot easier to say than it is to explain. Someone who is being paid in opportunities and connections, rather than in cash, is still being paid.

The other potential reason is that we have minimum wage laws — which generally preclude a wage of “zero” — not to protect the person whose wage is at issue, but in order to protect others from having the price of labour driven downward. That is, the law forbidding me from working for $2/hr (in Canada or the U.S., for example) isn’t merely to protect me. That law is really there to protect you — it’s to make sure that I don’t accept (for whatever reasons) such a brutally low wage, and thereby bring about the expectation that you, too, should work for that little.

Still, it’s interesting to note that non-profit organizations are (mostly) exempt from such laws. You’re allowed to donate your time to them. But what’s the difference, really? As Henry Hansmann points out in The Ownership of Enterprise, the essential difference between for-profit firms and charities lies in the separation of buyer and beneficiary that typifies charitable organizations. When a customer gives money to a store, he or she receives some benefit in return; but when he or she gives money to a charity, it is so that someone else can receive some benefit. It’s not clear how that difference justifies a categorical difference in labour standards.

Who’s task is it to oversee ethics in a corporation? It’s tempting to say “everyone,” and at some level that of course is correct. Everyone is ultimately responsible for their own behaviour. People in management positions have some responsibility for those working under them. And anyone with the relevant knowledge and power has some responsibility for the behaviour of their organization as a whole.

But in 2010, many companies have also created special positions with the word “Ethics” (or some near synonym) in the title. So, which department should be home to that person? It’s not a trivial question. The Department that person is assigned to will to some extent determine the resources he or she has access to, and signals the company’s attitude towards the position. What’s the best choice? Here’s a terrific little article by Gina Passarella giving some insight into just that question:

Compliance Officers Play to Bigger Room

In a world of regulations, recession and corporate scandal, the creation of compliance and ethics roles has been on the rise. But what is dropping is the number of those newly created positions that are in any way tied to the legal department.

Because it was written for a legal publication, the article is mostly about how the issue looks from the point of view of lawyers, their job opportunities, etc. But it’s well worth reading for anyone with an interest in understanding how ethics, CSR, compliance, etc., are interrelated and institutionalized within corporations.

Life is priceless, right? Well, no, actually. No matter how often it is said, no one actually believes that life is literally priceless. If we accept the assumption, common within the social sciences, that what we really believe is reflected in what we do (rather than in what in we say) then our actions demonstrate that we actually believe that the value of human life is quite finite. We can, and do, put a price on human life. Examples are not hard to find. Lives cannot — in any civilized place — literally be bought and sold, but there are other ways in which the concept of pricing gets attached to human lives. The notion of life insurance is based on the question of how much one person’s life (namely, that of the insured) is worth to another (namely the beneficiary), and courts routinely place a value on lost human lives in cases of wrongful death. And governments and individual consumers implicitly put a price on life by means of all sorts of spending prioritization decisions.

So, what’s a human life worth, then? Well, that depends quite a lot on context. So, let’s be more specific: how much is a corporation — say, a mining company — obligated to spend on rescuing an employee in peril? This isn’t a random question, but a sadly poignant one, given the tragic recent events at a coal mine in Virginia, where 25 miners have already died and 4 more remain missing.

Here’s the latest on this story, from the NY Times: No Signs of Life From 4 Missing in Mine.

Rescue workers continued the precarious task early Wednesday of removing explosive methane gas from the coal mine where at least 25 miners died two days before, but they had not received any signs of life from the four people still missing….

So, how much is the company that owns this mine (The Massey Energy Company) obligated to spend on the rescue? I suspect that, for practical purposes, the answer to “how much must the company spend?” is “whatever it takes.” The only thing that stops that amount from climbing without end is the sad fact that, eventually, hope will run out.

Now, it may be relevant that the mining company is not exactly blameless in all this:

The mine owner’s dismal safety record, along with several recent evacuations of the mine, left federal officials and miners suggesting that Monday’s explosion might have been preventable….

So, their safety record is pretty bad. And we generally thing that when you make a mess, you have some significant obligation to clean it up. So Massey arguably has more of an obligation to spend (and spend and spend) on rescue than they would if this were a freak accident that they could not have prevented.

Now, it’s worth pointing out that there is (for better or for worse) a strong social norm, here. We are often, collectively, willing to spend vast sums of money on rescue. I wouldn’t be the first to point out that we’ll spend far more (socially) to treat a sick child than we would have spent to keep that child healthy in the first place. Our spending patterns here are not, at least in any straightforward sense, rational, though it might be that these patterns have some use in signalling, socially, in a very public way, the extent to which we value human lives, or our attachment to compassion more generally. From that point of view, spending what would otherwise be insane amounts of money to rescue a single human (or, in some well-publicized cases, a horse or dog) makes a certain amount of sense.

The problem, of course, lies in the economic notion of “opportunity costs” — roughly speaking, the idea that every dollar spent on one thing (like rescue) is a dollar not spent on something else (like making mines safer in the future). So, in principle, a million dollars spent on rescuing a small number of miners could instead be spent on safety improvements that could save many more lives than that, in the future. But then, it’s not an obvious either/or decision: it’s not like the vast sum of money spent on rescue is going to be subtracted from some actual or hypothetical mine-safety budget for next year. But still…there has to be some limit on what a company should spend on rescue. The question is, what is that limit? Or, more generally, how should a company calculate that limit?

p.s. note that my intention here is not at all to suggest that, at some point, we ought to let the company off the hook. My point is just that, no matter what you value, there’s always going to be some alternative use to which money spent on rescue could, otherwise, be put. So it’s worth at least considering whether or when money ought to be conserved to be spent on other things. It’s a hard question, but it cannot be avoided.