Archive for the ‘accountability’ Category
Business Ethics in China
Filed under: accountability, honesty, international, product safety |
Comments (4) 
There are significant problems with business ethics in the world’s second biggest economy, China. Witness the recent scandals involving tainted milk powder. Before that, lead paint used in toys was the big issue. Last year, there was a scandal involving injecting water into meat to increase its weight. And it’s not just a matter of a few scandals. According to Transparency International’s 2009 Corruption Perceptions Index, China ranks 79th (just a couple of notches below Columbia, and just above Swaziland and Serbia. (New Zealand is #1 — i.e., least-corrupt. The U.S. ranks 19th, and Canada is tied for 8th.)
Here’s an interesting piece on the topic of the special problems of business ethics in China, on Russell Flannery’s blog on Forbes: On The Front Line In China: Challenging Business Ethics. It’s well worth reading.
Here are just a few thoughts and questions:
1) It’s worth thinking about the relationship between ethics and success in the Chinese context. Three years ago, I blogged from a conference in Latvia, and I pointed out that many countries that were formerly part of the Soviet Union “are still struggling with establishing democratic institutions, and establishing the kinds of background conditions — including the rule of law and traditions of basic trust — that allow their populations to prosper.” In other words, at least some basic business ethics is necessary in order to have a flourishing economy. It’s a truth that many economists (including Nobel prize-winners like Ronald Coase and Amartya Sen) have written about. But China’s economy is booming, apparently despite serious problems related to basic integrity in business. Why?
2) Will foreign trade help? In particular, I wonder about the role of companies like Apple and Walmart. Apple and Walmart (and especially the latter) provide mechanisms for Chinese companies to sell stuff to wealthy westerners. But Apple and Walmart are also high-profile American companies, subject to constant, intense scrutiny. And both have the economic muscle to force Chinese suppliers to do things their way, if they decide to. In other words, if Apple and Walmart insist on (and verify) certain kinds of behaviour, it will happen. In some cases, of course, a company like Walmart — with its constant pressure on suppliers to cut costs — may be part of the problem. On the other hand, dealing with a company like Walmart is going to make all sorts of basic dishonesty very hard to get away with. Walmart famously pays close attention to the details.
3) What about western companies selling things in China? A while back, I blogged about the fact that there’s a lot to be gained by, for example, North American companies that figure out how to do business in China in a way that’s ethically acceptable to the folks back home. In this regard, Google and various pharmaceutical companies come to mind. Again, those are companies subject to significant scrutiny. Is there hope that those companies can raise the ethical tone of the Chinese industries they work in or with? Again, some may find it ironic to see anyone looking to Big Pharma to improve ethics anywhere. But despite its many failings, Big Pharma is heavily regulated, and those regulations (and the threat of litigation) force those companies to avoid behaviours that are likely very tempting to companies operating in places, like China, where regulations may be more lax.
BP’s Faked Photos
Often when a person or company does something bad, it’s most reasonable to assume that stupidity is the cause, rather than malicious intent. Some behaviour of course is both stupid and unethical. At BP, it’s getting harder and harder to tell the difference.
Everyone’s least-favourite oil company has now been found to have been posting faked photos on its website. (A small excerpt of one photo is above. Lots of others can be found online, including in various news reports on the story. Even at low resolution, you can see tell-tale signs of photo-alteration. The bits of brightness around both men’s heads is evidence of a sloppy cut-and-paste job. Also, the image on the screen shown at bottom-centre of the photo is slightly crooked.)
MSNBC tech blogger Wilson Rothman provides this good, brief summary:
A site called Americablog spotted a press photo of BP’s Houston command center, ostensibly taken on July 16. The image had quite visibly been Photoshopped — badly — to include more on-screen camera action.
Once word got out — the story was picked up by the Washington Post, where it was then spotted by the tech blog Gizmodo and others — BP ‘fessed up. A spokesman admitted that the image was altered, said that a photographer had inserted shots where the TV screens were blank, and provided the original image….
(Here’s the Washington Post version, by Steven Mufson: More doctored BP photos come to light)
Now, it’s worth noting that the changes to the photos are not actually misleading in any material way. Nothing important is hidden, and the faked photos don’t really tell any lies. The changes are basically cosmetic. (In a sense, the photos were merely enhanced to make them more authentic.) But as MSNBC’s Rothman points out, “Though the command center alteration doesn’t seem to be an attempt to hide facts or confuse the public, it heightens skepticism for the company at a time when it should be trying to build trust.” And as WP’s Mufson points out, “While the changes were minor, the embarrassment was major, coming at a time when the oil giant is trying to convince the American public that it is being open and transparent about the oil spill.”
Both Rothman and Mufson are correct as far as P.R. goes. Being caught in even a trivial fib is pretty bad for BP at this point. But what about ethics? Are the faked photos a sign that we generally can’t trust BP? Or rather, since there’s pretty little trust for BP in the first place at this point, does the revelation that they faked these pics give us new, ethically-relevant information about the company? Probably not.
Perhaps most disturbing about this whole fiasco is BP’s attempt to blame the (unnamed) photographer involved. As some have already pointed out, the photoshopping is so clumsy that it’s hard even to believe that it was done by a professional photographer. But at any rate, passing the buck and blaming the photographer is the wrong way to go. If there’s anything the public wants from BP now even more than honesty, it is evidence of willingness to take responsibility.
Should Consumers Trust Big Pharma?
Filed under: accountability, conflict of interest, consumers, honesty, pharma, product safety, profits, risk, science |
Comments (9) 
Lots of people don’t trust Big Pharma. And to a significant extent, that’s for good reasons. (I’ve blogged about some of those reasons here, here, here, here, here, here, here and here, just to cite a few examples. See also some of the entries on the other blog I co-author, the Research Ethics Blog.)
Trust in big pharma is an important issue. Pharmaceuticals are responsible for saving and improving a huge number of lives. Vaccines alone have prevented literally millions of deaths. Survival rates for many cancers are better than they used to be. And AIDS, once a death sentence, is now regarded as a chronic disease. So there’s real benefit from pharma, but also an undeniable track record of scandals and general unethical behaviour. What should we think?
The first thing worth noting is that the question in the title above is vastly oversimplified. The question isn’t “should consumers trust big pharma?”, it’s more like “To what extent, and under what circumstances, on what issues, should consumers trust big pharma?”
Setting aside the industry’s spotty track record, the main reason people tend not to think Big Pharma trustworthy is, of course, the fact that Big Pharma consists of profit-oriented organizations. And the general assumption is that money corrupts. Of course, money isn’t the only thing that corrupts judgment (so does love, reputation, ideology, etc etc), and big pharma is far from the only industry where big money is at stake. But still, there’s a real worry here (one I’ve blogged about before).
Now, what about the reasons in favour of trusting Big Pharma? What factors would tend to make Big Pharma trustworthy, to at least some extent?
Now I cannot emphasize this strongly enough: what follows is not intended to imply a general conclusion about the trustworthiness of Big Pharma. It’s just a list of important factors to keep in mind when assessing the trustworthiness of a particular claim, by a particular company, on a particular issue.
1) Ethics. Don’t just think about the organizations; think about the people who work at them. They’re mostly people like you & me. Most of them got into the business to try to help people (and, yeah, to make a living). And most of them were raised by their parents to be decent, honest folks. Most people tell the truth about most things most of the time.
2) Regulation. The pharmaceutical industry is heavily regulated, subject to lots of laws regarding the efficacy and safety of their products, as well as regarding advertising. Criminal and civil sanctions are possible when pharma companies misbehave. Now, that’s not to say that the current level of regulation is sufficient, or that enforcement is adequate. But companies (and individuals) have been subject to serious sanctions. Companies generally want to stay out of court, and so they’ve got a reason — not always a sufficient reason, but a reason — to behave in a trustworthy manner.
3) Peer Review. In few other industries is fundamental information about what makes your product work (or not work) open to public scrutiny. In order for a new drug to receive approval to be marketed, it has to show itself to be safe and effective in clinical trials, and the results and methods of those trials have to be published in peer-reviewed medical journals. Drug companies are not allowed to make claims based on secret data. “Peer reviewed” means that the articles reporting on the trials have to be vetted by a panel of qualified experts if they are ever going to see the light of day. It’s an imperfect system (all systems relying on human judgment are) but bad science tends to get weeded out pretty quickly. Then, once a study is published, it’s there for assessment, and potentially criticism and rebuttal, by hundreds or thousands of other experts.
4) Scientific Overlap. You sometimes hear it implied that physician-researchers (the ones who do most clinical research, as well as doing all that peer reviewing mentioned above) have all been corrupted by corporate money. And it’s true that there really is cause for worry here. Too many docs get too much money (and other perks) from pharma, and are insufficiently transparent about that. So: it’s good to worry…up to a point. Here’s the problem with the pharma-controls-everything theory. Physician-researchers publish in scientific journals that are read not just by other physicians (some of whom don’t have industry funding), but also by biologists, chemists, epidemiologists, statisticians, and so on, most of whom have no corporate funding whatsoever. Further, modern science more generally is an enormously complex process for finding mistakes and exaggerations in each other’s research. And it helps that there’s significant overlap between the sciences, so no one group of scientists is ever truly isolated and free from scrutiny. Oversimplifying, you could say that biologists are double-checking the work done by the physicians, chemists are checking up on the biologists, and physicists are checking up on the chemists. (That’s why any physician who tries to use “quantum theory” in writing about disease had better be careful: there are armies of physicists waiting to explain just how irrelevant quantum mechanics is to human physiology.)
5) Competition. People often talk about Big Pharma as if it’s a monolith, one big organization, rather than a bunch of companies with divergent interests competing savagely with each other. That competition gives them every reason to attack each other’s weaknesses, and to point them out to the public. Add to that the fact that there are hundreds of smaller firms nipping at the heels of the big players. It’s far from a cozy conspiracy. This vicious competition of course means that there’s sometimes an incentive to cut corners in unscrupulous ways; but it also means that when you cut a corner, there’s always someone out there ready to point it out.
Now, again, this list is not supposed to lead to any particular conclusion about just how trustworthy Big Pharma is. It’s just a list of social and institutional mechanisms we need to take into consideration, in addition to the obvious bad track record and obvious financial incentives. Each of those mechanisms will apply to a greater or lesser degree with regard to specific situations. For particular issues, we need to think carefully both about what’s at stake, and about whether the above factors are likely to be sufficient to reassure us.
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Late-breaking Note:
I’ve been getting (and rejecting) comments full of unsubstantiated, and in some cases very dangerous, claims on some topics related to the above. When it comes to matters of health, if you’re not going to cite reliable sources, I cannot take responsibility for allowing your comments on here. There’s too much at stake, in terms of public health.
Bailouts, Corporate Jets, and Moral Outrage
Filed under: accountability, ethics, excuses, government, taxpayers |
Comments (5) 
Last year I saw a talk by economist Robert Frank, on “Moral Outrage.” His overarching theme was that moral outrage is a useful thing, and that we therefore ought not to squander it by aiming it at undeserving targets.
That talk came to mind when I read about how the CEO’s of the big 3 automakers got raked over the coals for showing up in Washington to plead for a government bailout — and arriving in 3 sleek corporate jets.
For a glimpse, see this story from Business Week: Auto Bailout: Seeking Signs of Sacrifice
Maybe it would have been a good idea for the chief executives of the U.S. Big Three auto companies and the president of the United Auto Workers to save a few dollars and share a ride to their appearance before Congress, where they are asking for at least $25 billion to keep from going bankrupt.
Three different members of the House of Representatives pointed out on Nov. 19 that the three CEOs and the union chief were flown to Washington in separate, private planes. The representatives used that example to express skepticism that the executives are prepared to make the needed changes in their operations, accountability, and culture to turn around their sinking industry.
(See also: Big Three auto CEOs flew private jets to ask for taxpayer money, from CNN.)
For some people, the initial flash of moral outrage comes from the apparent contradiction involved in showing up in an expensive jet to ask for a handout. But (using rough numbers here) a single CEO to spending $20,000 to fly to Washington to ask for $20billion is spending 1 one millionth of the proposed bailout of his company. For a company the size of GM or Ford or Chrysler, $20 grand just isn’t a lot of money. Pocket change. (Or look at it this way: a CEO who makes $20 million a year is making about $10,000 an hour. Waste 2 hours of time waiting for a commercial flight and you’ve “paid” for your flight on a corporate jet.)
Some people will realize the above — surely the angry members of congress did — and still express moral outrage at the symbolic aspect of the flights. How could these execs each spend, on a single flight, the equivalent of a few months’ salary for one of their workers? Why such a visible show of wealth? Isn’t that unseemly? Perhaps. But at least a partial response to that lies in the surprising fact that these CEOs may not have had much choice. As is the case at many large companies, the Boards of the Big Three actually require their CEOs to fly by corporate jet, for reasons of security and efficiency. See this story from the Chicago Tribune: For many CEOs, private jets the only way to fly.
So, is moral outrage totally misplaced here? The money is a drop in the bucket, and the CEOs were simply following what are arguably reasonable corporate policies. Probably. Outrage is likely better reserved for other aspects of their performance as CEOs, or perhaps for having the gall to ask for public money in the first place.
Still, it’s hard not to find something unseemly here. These CEOs apparently didn’t even see the irony, superficial as it might be. They didn’t even think ahead enough to apologize for their lavish trips, or to make some symbolic act of contrition. Now that’s not reason for outrage. Being out of touch with the sensitivities of regular people on a particular day isn’t necessarily a grave sin. But it’s not exactly great, either. I was once asked if it’s unethical to be rude. The answer to that question seems relevant here: we might not want to label a single lapse in manners as unethical, but we’re quite justified in calling it unethical when we see a pattern of rude — or insensitive — behaviour.
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Thanks to Laura, Lori, Jared, and Ralph on the SBE list for their thoughtful discussion & helpful links. Inadequacies in the stuff above are all mine.
Google on Google in China
Filed under: accountability, corporations, decision-making, ethics, government, international, privacy, technology |
Comments (3) Here’s an amazing story about a company (well, a founder & senior executive) ruminating — publicly — about the ethics of a recent corporate decision. In particular, it’s Google co-founder Sergey Brin, talking about Google’s activities in China:
From the Detroit Free Press: Brin Says Google Compromised Principles (by By Ted Bridis, writing for the Associated Press)
We felt that perhaps we could compromise our principles but provide ultimately more information for the Chinese and be a more effective service and perhaps make more of a difference,” Brin said.
…
“It’s perfectly reasonable to do something different, to say, ‘Look, we’re going to stand by the principle against censorship and we won’t actually operate there.’ That’s an alternate path,” Brin said. “It’s not where we chose to go right now, but I can sort of see how people came to different conclusions about doing the right thing.”
Most of you already know about Google’s controversial move to offer version of its search engine in China that meets the censorship requirements of the Chinese government. (If not, see the blog entries listed below.) What amazes (and impresses) me most about the latest installment in this story is the casual transparency of (some aspects of) Google’s decision-making. Here’s the co-founder and co-president of one of the most powerful companies in the world chatting with reporters about ethics. Like, not reading a prepared statement, but thinking it through, out loud, and admitting that he’s not sure the company is on-track. Some would read this as a sign of weakness. I take it as the opposite. Who wouldn’t be uncertain about a path as clearly fraught with ethical peril as Google’s current path in China? Say what you will about the substance of Google’s strategy, you have to admire a company with the moral courage to be open about its own doubts.
Earlier Business Ethics Blog entries on this topic:
- Does Google’s “Dont Be Evil” Apply in China? (January 27, 2006)
- Update: Google in China (January 29, 2006)
- Becker & Posner Blog on Google in China (February 22, 2006)
Triple Bottom Line — the bad idea that just won’t die
I just got a bulk e-mail ad for yet another conference on so-called Triple Bottom Line Investing. Triple Bottom Line Investing is just one more incarnation of the more general “Triple Bottom Line” (or 3BL) notion.
(Wayne Norman and I wrote about the 3BL back in the April 2004 issue of Business Ethics Quarterly, pointing out problems with the concept, the lack of academic attention to those problems, and the concept’s seemingly inexorable rise in popularity. Since we began tracking usage of the term in 2002, its popularity — based on Google hits — has continuted to grow exponentially.)
The “Triple Bottom Line” is roughly the idea that corporations can, and should, measure performance not just according to the good-old-fashioned financial bottom line, but also according to two more “bottom lines,” namely the social and environmental bottom lines.
This idea is of course ridiculous. It’s ridiculous not because companies can’t or shouldn’t track performance in those areas — they can, and they should. It’s not even ridiculous because such performance can’t be quantified — many environmental and social impacts can be measured, and companies’ performance on various measures can be tracked from year to year.
No, the problem with the 3BL is that it’s a terribly misleading metaphor. It’s an accounting metaphor, used in domains that don’t satisfy some of the basic assumptions that make financial accounting work. (In my Critical Thinking class, this is what we call the “False Analogy” fallacy.)
In particular, the 3BL implies two things beyond the idea of measuring and tracking social & environmental performance.
- 3BL assumes that social and environmental plusses & minuses of different kinds can be totalled up, the same way income & expenditures can. This, of course, is false. It is practially difficult, and indeed probably conceptually impossible.
- 3BL implies that the social & environmental “bottom lines” generated for one company will be amenable to comparison with the social & environmental “bottom lines” of other companies. This, too, is false. Without accounting’s “common unit of measure” assumption, comparisons across companies are impossible.
I’ve had the opportunity to talk to a couple of 3BL consultants (consultants who help companies implement a 3BL system/strategy/whatever). Both caved in almost immediately when pressed on the meaningfulness of the term. One admitted that it was “just a metaphor,” and that of course her practice didn’t actually calculate social & environmental “bottom lines.” The other consultant I talked to reassured me that costing out (i.e., putting dollar figures on) social & environmental impacts was relatively straightforward — in other words, he admitted that his group doesn’t actually believe in three bottom, lines, but rather in 2 additional sets of factors (social & environmental impact) that can be bundled into the one, traditional, financial bottom line.
In sum: tracking and reporting on social & environmental performance is a good trend. Thinking that managing such matters can be reduced to a form of accountancy both understates the complexity of social and environmental performace, and overstates the reach of the field of accounting.
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