The Business Ethics Blog

It happens all the time, in business and in the professions. A senior member of the team instructs a junior member to do something that the junior member thinks is plainly unethical. And sometimes, maybe often, the junior person will comply. After all, being the junior person typically means being vulnerable to losing your job, and it also means being liable to question your own judgment when faced with a competing opinion from someone older & more experienced. So, the order gets obeyed.

The best explanation I know of for how wrongful obedience happens is the one given by law prof David Luban, of Georgetown University, in his paper “The Ethics of Wrongful Obedience.” Basically, Luban’s idea is that once the junior person agrees to do some very minor questionable thing, the next slightly-more-questionable thing becomes easier to do, and then the next, and the next, and so on. He calls this the “corruption of judgment” theory. But that’s an explanation of how wrongful obedience happens, not a defence of it.

So, what about the rationalization, the claim that the junior person really has to just toe the company line? The first thing to notice about the rationalization is that it is a rationalization — something to make you feel better — rather than an full-fledged justification (i.e., something that would fully justify your behaviour).

As a justification, it doesn’t really work very well. Doing the wrong thing is still wrong (and in some cases, illegal!) even when you’re pressured to do it.

That being said, junior people really can find themselves in very difficult positions. They may tend to question their own judgment when faced by odd orders from superiors. And sometimes their jobs really are at stake. So it’s very hard for me, looking in from the outside, to say “always do the right thing, regardless of the cost to yourself.”

When I talk about this problem, the advice I usually give to students, in all professions, is this:

1) Do your best. Recognize the problem and be honest with yourself about it.
2) Pick your battles. Sometimes you’ll have to give a little. Only be rigid on matters that are really worthwhile. But be careful: as Luban points out, sometimes small transgressions lead to bigger ones.
3) Ask questions. One of the benefits of being junior is that you can get away with asking “naive” questions, even ones that embarrass your superiors sometimes. For example: “I know I’m new here, but why are we doing it this way…?” If you diplomatically question what’s going on, you might embarrass someone into a change of plans.
4) You won’t be the junior person in the group forever. Start thinking now about what kind of boss you are going to be, when you finally get there, and what kind of pressure you’re going to put on the young people who you see below you on the corporate ladder.

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This blog entry began as an email discussion with Blake Sunshine.

The word “greenwashing” is getting a lot of play these days. For those of you who haven’t come across it, “greenwash” is a play on “whitewash”. Whitewash is cheap white paint used to cover dirty walls in industrial and agricultural settings. Metaphorically, to whitewash something is to cover something up, to make it look pretty when there’s actually dirt underneath. Greenwash is the environmental version. These days, lots of companies want to pretty up their images when it comes to being environmentally responsible (i.e., green). That leads to a lot of claims to being green, some of which are entirely unwarranted, and that’s maddening both to those who care a lot about the environment, and those who merely care about truth in advertising. What can be done?

From the Sydney Morning Herald: No greenwash, please – industry introduces its own code

Advertisers will no longer be able to use images of nature and call themselves “environmentally friendly” unless they can back up any green claims under new proposals put forward by the advertising industry.

The new self-regulatory green marketing code – thought to be the first of its kind in the world – will also prevent companies from passing off a mandated environmental initiative as something it has voluntarily adopted.

Advertisers will have to prove that the benefits to the environment are “significant” too….

This seems like a good move.

It’s not clear, though, that what they’re talking about is really greenwashing. In some cases it may be. Not all dishonest or overreaching environmental advertising should be counted as greenwashing. Remember, greenwash, like whitewash, attempts to cover up dirt. True greenwashing is when a company with a bad environmental track record points to some meagre environmental achievement as a way of distracting consumers from the truth.

False or misleading environmental advertising of any kind ought to be stamped out (and if self-regulation works, that’s great). But our harshest moral condemnation ought to be reserved for the true greenwashers, the companies that have the gall to brag about what is, in fact, a lousy track record.

(More food for thought: The “Green” Hypocrisy: America’s Corporate Environment Champions Pollute The World. They’re a bit off-target on the definition of “greenwashing” but it’s a useful article nonetheless.)
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Thanks to Development Crossing for pointing this story out, on Twitter.

Wall Street Journal’s health blog: Merck CEO Calls On Pharma to Repair its ‘Trust Deficit’

To the applause of fellow drug-company officials today, Merck CEO Dick Clark told executives that the industry needs to fix its “trust deficit” with the public.

Industry leaders have complained privately about the public shellacking of drug makers, which have been criticized for the safety of drugs like Merck’s Vioxx that eventually were withdrawn, as well as for undisclosed payments to doctors and misleading advertising directly to consumers. The corporate leaders say the industry’s good works developing life-saving medicines have been unfairly overlooked in all the criticism.

Prescription for Pharma

No, you don’t need to remind us how much good you’re doing. We know, & we appreciate. Thanks.

Stop promoting off-label use.
Stop paying excessive “consulting” fees
stop paying excessive “speaking” fees
Stop getting slammed by FDA for advertising w/o sufficient attention to side-effects

Admittedly: regulatory compliance is hard in a highly-regulated industry

Patents, Trademarks, and other forms of intellectual property play an important role in the world of commerce. Like legal protections on real, physical property, protections on intellectual property reward hard work and promote innovation. But they are also subject to abuse.

From The Wall Street Journal: The Scariest Monster of All Sues for Trademark Infringement

When Christina and Patrick Vitagliano dreamed up their Monster Mini Golf franchises — 18-hole, indoor putting greens straddled by glow-in-the-dark statues of ghouls and gargoyles — they never imagined that a California maker of high-end audio cables would object.

But Monster Cable Products Inc., which holds more than 70 trademarks on the word monster, challenged the Vitaglianos’ trademark applications. It filed a federal lawsuit against their company in California and demanded the Rhode Island couple surrender the name and pay at least $80,000 for the right to use it.

“It really seemed absurd,” says Ms. Vitagliano.

The legal actions were nothing new for Monster Cable, which was granted its first “Monster” trademark in 1980. Since then, the company has fought more monsters than Godzilla did….

As I understand it, normally trademark protection only protects the use of a particular name in a particular industry. So, for instance, I’m free to set up a company called “MacDonald’s Pool Cleaning Service,” but if I tried to set up “MacDonald’s Hamburgers and French Fries,” the lawyers for McDonalds Corporation would very soon come knocking (minor variations in spelling notwithstanding).

So Monster Cable’s strategy is clear enough: build brand value by seeking a very broad recognition of the word “monster” as belonging to Monster Cable. The WSJ article points out that some very famous brands — Visa, for example — are legally considered “famous marks” and have been granted very broad protection by the courts. So don’t try to open up your own Visa Hotdog Stand. That is the kind of brand protection Monster Cable is trying to achieve. But the company’s methods are, needless to say, highly suspect. Never mind the fact that they’re making a practice of dragging small businesses into court, putting hard-working entrepreneurs at risk and wasting valuable court time. At least as unseemly as that is the sheer gall of the company thinking its name already has the kind of widespread prominence and salience that would give it a plausible claim to being a ‘famous mark.’ I bet most people have never even heard of the company.

It’s hard to see how gaining a reputation for being litigious and self-important constitutes a good way of building brand

Ironically enough, the t-shirt pictured above is an actual Monster Cable T-shirt, for sale on the company’s website. Monster attitude indeed!
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Thanks to Michael Parekh for pointing out this story.

Here’s a cool story about unanticipated consequences (at least I think they’re unanticipated). From the Washington Post: Public Interest Groups Decry Obama’s Strict Lobbying Rules.

President Obama’s war with K Street is escalating, this time over stringent new rules on lobbyists attempting to land federal stimulus money for their clients.

An unlikely alliance of groups — including one co-founded by Obama’s chief ethics adviser — argue that the restrictions will penalize those who play by the rules while doing nothing to curb the influence of large corporations and campaign donors.

Leaders of the groups, which include Citizens for Responsibility and Ethics in Washington and the American League of Lobbyists, also said yesterday that they are preparing to challenge the guidelines on First Amendment grounds if the administration does not agree to revise them.

“President Obama has managed to unconstitutionally ban American citizens from one of our most sacred rights, and it’s flat-out wrong,” said Dave Wenhold, president of the lobbying league, which has joined CREW and the American Civil Liberties Union in demanding a repeal of the gag rules. “This is not how a democracy works; this is how a totalitarian regime works….”

The basic problem is how to limit excess influence without limiting free speech. Everyone decries the influence of lobbyists in Washington, but most of us can probably think of some group or cause we’d like to see promoted in Washington, and we probably think it’s a bad thing for those lobbyists to go unheard. But in effect, Obama’s well-intentioned restrictions on lobbying mean not just restrictions on lobbyists for Walmart, Exxon, McDonalds, etc., but also restrictions on lobbyists for Ducks Unlimited, the Boyscouts, and Anytown USA.

(By the way, I posted about lobbying last month — Lobbyists, Ethics, Earmarks — and Dave Wenhold posted a long & interesting comment on it.)

Last week I blogged about a probably-spoof website for something called Cyclone Dairy, a dairy supposedly guaranteeing that 100% of their milk is from cloned cattle.

Well, appropriately enough icecream makers Ben & Jerry have chosen today (April first) to reveal that they’re behind the shenanigans.

Here’s their press release: Ben & Jerry’s Lifts the Lid on April Fool’s Day Cloning Stunt.

Today, Ben & Jerry’s lifted the lid on an April Fool’s Day event aimed at raising consumer awareness of the government’s recent approval of cloned milk and meat within the human food supply chain. In late-March Ben & Jerry’s went undercover through the launch of Cyclone Dairy, a fictitious dairy company marketing milk made from 100% cloned cows, to gauge consumer reaction surrounding this issue. The make-believe company was launched via the Web site CycloneDairy.com and street sampling initiatives in Manhattan, with support from the Center for Food Safety, a nonprofit public interest organization based in Washington, D.C….

The press release goes on to advocate the creation of a “national clone tracking system” for the benefit of consumers who want to be able to choose whether or not to consume products from cloned animals.

It’s a bad idea. A national system would be costly, and those costs would be borne either by taxpayers or by consumers (perhaps via fees charged to food companies, which they would inevitably pass along to consumers.) All that to track a product already believed to be safe. Why make all consumers (or taxpayers) pay more for something that only some are concerned about?

The reason, according the Ben & Jerry’s press release: “Americans should have the basic right to choose the foods they want to eat.” Is there such a right? Well, yes and no. You have the right to decide what you put in your mouth; but that doesn’t imply a right to be provided all the information you could ever want about that food. (See my blog entry here for the basics of my argument against there being a right to know if your food is genetically modified. I think the same argument applies to cloned food.)

I hear all too often this really dumb joke: “Business Ethics? Isn’t that an oxymoron?” No, in fact, ‘business ethics’ isn’t a contradiction. Business just isn’t possible without some kind of ethics, some kind of reason to trust each other. Do unethical things happen, in business. Yes, sure. But those instances simply must be the exceptions that prove the rule. Of course, it’s easy to take for granted just how many little details of commercial & professional life require us to simply assume that other people are going to do what they say they’re going to do. Here’s an example.

From the Vancouver Sun: Lawyer’s embarrassing antics are a drain on public purse

Vancouver lawyer Sheldon Goldberg has appeared in court while the wrong accused was in the dock as his client.

He recently precipitated a mistrial causing months of expensive court proceedings to be thrown out the window.

Yet for two days last week, a Law Society of B.C. disciplinary panel considered judicial complaints only about his apparent overbooking of court time and his refusal to properly reply to the provincial regulatory body’s inquiries.

Suspended for three months over incompetence last year, Goldberg has been a thorn in the side of the legal system for a long time. He was also suspended for a month in 2005.

Goldberg is in regular conflict with judges, and Provincial Court Judge William Kitchen triggered these latest proceedings.

In July 2007, Goldberg made arrangements for three conflicting court appearances in Surrey and Vancouver on the same day.

I don’t have any particular point of view on Mr. Goldberg’s behaviour, or of the Law Society’s apparent inaction. My aim here is just to point out how much a system like the legal system — or any business — takes for granted, in its everyday operations, that people are going to do simple, straightforward things like keep their word, show up when & where they say they will, etc. And to point out that when people simply stop doing so, things tend to fall apart pretty quickly.

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Thanks to JD & JB for pointing out this story.

Hard economic times bring about a desperate search for solutions, both local and global. Some of the ideas that arise are good; others aren’t. Here’s a story about one such supposed solution, namely the idea of supporting local business.

From the WSJ’s Independent Street blog: How the Locals are Trying to Save Small Businesses

Fed up with seeing local small businesses being ravaged by the economic downturn, some people are taking matters into their own hands. They’re trying to reverse the fortunes of mom-and-pop stores by becoming more organized in “buying local.”

– In Fort Myers, Fla., people driving by Clancey’s Restaurant saw this huge sign outside: “Support the local economy. Patronize locally owned businesses.” Local businesses there say that for every $100 spent at a chain or national business, only $14 stays in town, but when spent at locally owned businesses, the amount triples to $45.
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In Chicago, two entrepreneurs established a Web site this month, SupportREconomy.com, to sell $2 green “R Local Stimulus” wristbands to benefit designated 10 small businesses and charities in the area. The grassroots effort aims to donate 20% of the profits to local pharmacies and grocery stores. Since the launch in mid-March, 250 wristbands have been sold, said Joana Fischer, the co-founder.

What the blog doesn’t explore is whether this is a good thing. Some will take that as obvious. But I don’t think it is.

First, such efforts seem to be rooted in the notion that economic benefit to own community are more important than economic benefit to other people’s communities. Now, stores and factories and jobs in your own community might well be more important to you than stores and factories and jobs in other people’s communities. That might make it individually prudent for you to support local business, but that doesn’t (by itself) make it ethical. Ethically, the jobs (for example) of employees of a factory in a neigbouring community are just as important as the jobs of employees of a factory in your home town. If you buy local, you’re helping someone locally, but you’re hurting someone, somewhere, too. That doesn’t make buying local bad — you’ve gotta spend your dollars somewhere, and can’t spend them everywhere. But you shouldn’t think buying local is automatically great.

Second, think about such efforts from a big-picture point of view. Picture not just your community coming together to buy local, but every community doing so. The result would be very little change in net purchasing, but there could be serious reductions in efficiency and hence a net decrease in total utility (i.e., in total wealth or total happiness). Example: People in Town A are good at making shirts, but bad at making pants. People in Town B are good at making pants, but bad at making shirts. Trade between the two towns allows everyone to get higher-quality goods, at lower prices. Buying locally means people in Town A get good shirts and lousy pants, and people in Town B get good pants and lousy shirts. In effect, efforts to promote buying locally raise barriers to trade, and barriers to trade usually hurt all concerned. And when you’ve got behaviour that is individually rational but collectively damaging, you’ve got the makings of a classic social dilemma.

(Note that the notion of supporting local business overlaps only incompletely with the recently-popular idea of eating locally. Eating locally can be — but isn’t always — a way to reduce carbon footprint. From an ethical point of view, the effect on efficiency of production needs to be considered, too. But that’s a blog entry for another day.)

Some of you may have noticed that I run another blog, the Biotech Ethics Blog. It’s mostly a place where I post news stories, with minimal commentary and minimal discussion. But one item I posted recently has clearly touched a nerve. It was an entry called CyClone Dairy: “Perfect Cows. Perfect Milk.” It’s about a website I found for something supposedly called Cyclone Dairy, a dairy that brags that all of its milk is from cloned cattle.

Now, it’s true that the FDA has given approval, in principle, for the sale of milk from cloned cattle. But contrary to what this website implies, it’s not actually on the market yet. (I blogged about that here.)

Note also that the CyClone Dairy website includes no contact information — this apparently is supposed to be a company that wants to sell milk, but not to be contacted by buyers.

Note also that their Frequently Asked Questions page raises the question of ethics, but says simply “Are there any ethical issues about cloning? No.”

Add to that the fact that the domain name “cyclonedairy-dot-com” has been registered via a proxy, effectively rendering the true registrant anonymous — which a real company basically would not do.

So, the site is clearly a spoof, presumably by someone trying to stir up opposition to milk-from-clones or to biotechnology in general. Or maybe it’s some kind of art project. Who knows?

But the comments on the blog posting have also been interesting. There’s been some clear posturing & baiting, and one accusation of astroturfing (i.e., an effort at giving the fake impression of grass-roots concern.)

So, someone is messing with us. And I realize I’m playing into their hands by posting this, raising awareness of their site. I’m sure whoever’s behind it will unveil the secret, eventually…presumably after milking it for all it’s worth.

The retention payments kept some A.I.G. employees around longer than they otherwise would have stayed. Ask yourself this: would you stay, and try to save the company, under the current conditions?

The New York Times today published this letter, from Jake DeSantis, an executive vice president of the American International Group (A.I.G.)’s financial products unit: Dear A.I.G., I Quit!. The letter is addressed to CEO, Edward Liddy. Here are the first paragraphs:

DEAR Mr. Liddy,

It is with deep regret that I submit my notice of resignation from A.I.G. Financial Products. I hope you take the time to read this entire letter. Before describing the details of my decision, I want to offer some context:

I am proud of everything I have done for the commodity and equity divisions of A.I.G.-F.P. I was in no way involved in — or responsible for — the credit default swap transactions that have hamstrung A.I.G. Nor were more than a handful of the 400 current employees of A.I.G.-F.P. Most of those responsible have left the company and have conspicuously escaped the public outrage.

After 12 months of hard work dismantling the company — during which A.I.G. reassured us many times we would be rewarded in March 2009 — we in the financial products unit have been betrayed by A.I.G. and are being unfairly persecuted by elected officials. In response to this, I will now leave the company and donate my entire post-tax retention payment to those suffering from the global economic downturn. My intent is to keep none of the money myself.

I take this action after 11 years of dedicated, honorable service to A.I.G. I can no longer effectively perform my duties in this dysfunctional environment, nor am I being paid to do so. Like you, I was asked to work for an annual salary of $1, and I agreed out of a sense of duty to the company and to the public officials who have come to its aid. Having now been let down by both, I can no longer justify spending 10, 12, 14 hours a day away from my family for the benefit of those who have let me down….

I’m not sure I’ve got anything new to say on this. But do read the whole letter. It puts a human face on the notion of pulling the rug out from someone, after you’ve promised to compensate them for their work; and it provides some support for my suggestion that failure to honour the contracts would do serious damage to A.I.G.’s prospects.

Some of you will scoff at the letter, or at the idea that a wealthy man like DeSantis could in any sense be a ‘victim.’ Fine. My guess is that the shareholders of whatever company employes Mr. DeSantis next will be a happier lot than the shareholders of the company he’s leaving.