Archive for the ‘accountability’ Category
Steve Jobs’ Health & a CEO’s Privacy
Filed under: accountability, employees, health, management, privacy, risk, transparency |
Comments (5) How much privacy does a CEO deserve? Is his or her health a private matter, or a matter that should be open to the scrutiny of the public (and, in particular, of the investing public)?
See, for example, this piece by Miguel Helft, at the NYT: Jobs Takes Sick Leave at Apple Again, Stirring Questions
Steven P. Jobs, the visionary co-founder and chief executive of Apple, is taking a medical leave of absence, a year and a half after his return following a liver transplant. The leave raises questions about both his long-term prognosis and the leadership of the world’s most valuable technology company….
So, should Jobs tell all, letting shareholders and potential shareholders (and other stakeholders?) just what’s up with his health, so that everyone can adjust their decision-making accordingly? Some say a CEO has as might right to privacy as anyone else. Others say a CEO’s obligation to be transparency overrides that.
As Slate’s Annie Lowrey tells us:
While publicly traded corporations need to disclose events and changes that might “materially” affect the company, the Securities and Exchange Commission does not specifically require disclosures about CEO health. That vagueness in the law means that Apple has remained within the letter of the law with its disclosures….
I don’t have a strong view on this, but here are some thoughts:
1) Information is good; it’s what lets markets operate more rather than less efficiently. But a big part of what matters most is equal access to information, and so far there’s no worry about that here, as far as I can see. (It may be that some are worried that top insiders will trade Apple’s stock based on their insider knowledge. Doing so would probably be illegal, and hence very dangerous.)
2) Health is a spectrum. There are people in the pink of health, and people on death’s doorstep, and everything in between. All CEOs are somewhere on that spectrum, and there’s simply no clear line beyond which a CEO’s health becomes a worry. So if Steve Jobs needs to disclose his diagnosis, the same likely goes for all CEOs (and other senior executives?) Note also that medical prognosis is as much art as science. So even if, say, Jobs were to reveal that his doctors were giving him a year to live — well, frankly, that could mean he’d be dead in a month or in 5 years. We have good evidence that doctors just aren’t good at making those estimates.
3) The basic, crucial info — that Jobs has ongoing health problems, likely quite serious ones — is already out there. As a former SEC chair Arthur Levitt says,
Jobs going on medical leave sends a message to the market,” Levitt continues. “An intelligent investor should know the risks of Jobs having a relapse. For the board to opine on what the extent of the illness is right now I don’t think is really necessary.”
In the end, I guess I’m most worried about the slippery slope, here. There are lots of things investors could want to know, and lots of things they could argue they need to know. But that doesn’t mean we want to push on down that road.
Sustainability is Unsustainable
Filed under: accountability, complexity, CSR, definitions, energy, environment, greenwashing, labelling, natural, sustainability, values |
Comments (21) I was tempted to call this blog entry “Sustainability is Stupid,” but I changed my mind because that’s needlessly inflammatory. And really, the problem isn’t that the concept itself is stupid, though certainly I’ve seen some stupid uses of the term. But the real problem is that it’s too broad for some purposes, too narrow for others, and just can’t bear the weight that many people want to put on it. The current focus on sustainability as summing up everything we want to know about doing the right thing in business is, for lack of a better word, unsustainable.
Anyway, I am tired of sustainability. And not just because, as Ad Age recently declared, it’s one of the most jargon-y words of the year. Which it is. But the problems go beyond that.
Here are just a few of the problems with sustainability:
1) Contrary to what you may have been led to believe, not everything unsustainable is bad. Oil is unsustainable, technically speaking. It will eventually get scarce, and eventually run out, for all intents and purposes. But it’s also a pretty nifty product. It works. It’s cheap. And it’s not going away soon. So producing it isn’t evil, and using it isn’t evil, even if (yes, yes) it would be better if we used less. Don’t get me wrong: I’m no fan of oil. It would be great if cars could run on something more plentiful and less polluting, like sunshine or water or wind. But in the meantime, oil is an absolutely essential commodity. Unsustainable, but quite useful.
2) There are ways for things to be bad other than being unsustainable. Cigarettes are a stupid, bad product. They’re addictive. They kill people. But are they sustainable? You bet. The tobacco industry has been going strong for a few hundred years now. If that’s not sustainability, I don’t know what is. To say that the tobacco industry isn’t sustainable is like saying the dinosaur way of life wasn’t sustainable because dinosaurs only ruled the earth for, like, a mere 150 million years. So, it’s a highly sustainable industry, but a bad one.
3) There’s no such thing as “sustainable” fish or “sustainable” forests or “sustainable” widgets, if by “sustainable” you mean as opposed to the other, “totally unsustainable” kind of fish or forests or widgets. It’s not a binary concept, but it gets sold as one. A fishery (or a forest or whatever) is either more or less sustainable. So to label something “sustainable” is almost always greenwash. Feels nice, but meaningless.
4) We’re still wayyyy unclear on what the word “sustainable” means. And I’m not talking about fine academic distinctions, here. I’m talking big picture. As in, what is the topic of discussion? For some people, for example, “sustainability” is clearly an environmental concept. As in, can we sustain producing X at the current rate without running out of X or out of the raw materials we need to make X? Or can we continue producing Y like this, given the obvious and unacceptable environmental damage it does? For others, though — well, for others, “sustainability” is about something much broader: something economic, environmental, and social. This fundamental distinction reduces dramatically the chances of having a meaningful conversation about this topic.
5) Many broad uses of the term “sustainable” are based on highly questionable empirical hypotheses. For example, some people seem to think that “sustainable” isn’t just an environmental notion because, after all, how can your business be sustainable if you don’t treat your workers well? And how can you sustain your place in the market if you don’t produce a high-quality product? Etc., etc. But of course, there are lots of examples of companies treating employees and customers and communities badly, and doing so quite successfully, over time-scales that make any claim that such practices are “unsustainable” manifestly silly. (See #2 above re the tobacco industry for an example.)
6) We have very, very little idea what is actually sustainable, environmentally or otherwise. Sure, there are clear cases. But for plenty of cases, the correct response to a claim of sustainability is simply “How do you know?” We know a fair bit, I think, about what kinds of practices tend to be more, rather than less, environmentally sustainable. But given the complexities of ecosystems, and the complexities of production processes and business supply chains, tracing all the implications of a particular product or process in order to declare it “sustainable” is very, very challenging. I conjecture that there are far, far more claims of “sustainability” than there are instances where the speaker knows what he or she is talking about.
7) Sometimes, it’s right to do the unsustainable thing. For example, would you kill the last breeding pair of an endangered species (say, bluefin tuna, before long) to feed a starving village, if that was your only way of doing so? I would. Sure, there’s room for disagreement, but I think I could provide a pretty good argument that in such a case, the exigencies of the immediate situation would be more weighty, morally, than the long-term consequences. Now, hopefully such terrible choices are few. But the point is simply to illustrate that sustainability is not some sort of over-arching value, some kind of trump card that always wins the hand.
8 ) The biggest, baddest problem with sustainability is that, like “CSR” and “accountability” and other hip bits of jargon, it’s a little wee box that people are trying to stuff full of every feel-good idea they ever hoped to apply to the world of business. So let’s get this straight: there are lots and lots of ways in which business can act rightly, or wrongly. And not all of them can be expressed in terms of the single notion of “sustainability.”
Now, look. Of course I don’t have anything against sustainability per se. I like the idea of running fisheries in a way that is more, rather than less, sustainable. I like the idea of sustainable agriculture (i.e., agriculture that does less, rather than more, long-term damage to the environment and uses up fewer, rather than more, natural resources). But let’s not pretend that sustainability is the only thing that matters, or that it’s the only word we need in our vocabulary when we want to talk about doing the right thing in business.
Glock Pistols, Ethics and CSR
Filed under: accountability, corporate citizenship, CSR, ethics, product safety, profits, regulations |
Comments (3) 
It’s been a week now since the Tuscon, Arizona killings in which Jared Lee Loughner apparently emptied the high-capacity magazine of his 9 mm pistol.
Plenty has already been written about the awful killing. Inevitably, some of it has focused on the weapon he carried, namely the Glock. According to Wikipedia’s Glock page,
The Glock is a series of semi-automatic pistols designed and produced by Glock Ges.m.b.H., located in Deutsch-Wagram, Austria.
…
Despite initial resistance from the market to accept a “plastic gun” due to concerns about their durability and reliability, Glock pistols have become the company’s most profitable line of products, commanding 65% of the market share of handguns for United States law enforcement agencies[5] as well as supplying numerous national armed forces and security agencies worldwide….
If you want to learn more about the company that made the pistol Loughner used, see this article, by Paul M. Barrett for Bloomberg Businessweek, Glock: America’s Gun
…Headquartered in Deutsch-Wagram, Austria, the company says it now commands 65 percent of the American law enforcement market, including the FBI and Drug Enforcement Administration. It also controls a healthy share of the overall $1 billion U.S. handgun market, according to analysis of production and excise tax data. (Precise figures aren’t available because Glock and several large rivals, including Beretta and Sig Sauer, are privately held.) ….
Barrett’s article provides a fascinating account of the invention of the Glock pistol and how it came to its current dominant market position through a combination of excellent engineering, good marketing and cagey lobbying.
The sale of semi-automatic pistols with high-capacity magazines is a good example of an issue where the term “corporate social responsibility” provides a useful analytic lens. I’ve argued here before that the term “CSR” is over-used — we shouldn’t try to stuff every single ethical issue into the relatively narrow notion of corporate social responsibility. But like the BP oil spill, the current case raises issues that are genuinely social in nature. As difficult as it may be, set aside for a moment the tragic events of January 8th, and look at the marketing of the Glock pistol (and its accessories) from a social point of view.
Do Americans as individuals have the right to buy certain kinds of weapons? As a matter of constitutional law, yes. And there’s arguably no direct line to be drawn between the sale of an individual gun and a particular wrongful death (because there’s always the complicating factor of the decision made by the individual who bought the gun and then pulled the trigger). So let us take as given (even if just for the sake of argument) that there’s nothing intrinsically wrong with making and selling guns to the public. Let us assume that individual customers have a legitimate interest in owning semi-automatic pistols, and there’s nothing unethical about a company seeking to make money from satisfying the demand for this entirely-legal product.
That still leaves as an open question, I think, the question of social impact. The best rationale for public acceptance of the kind of zealous, profit-seeking behaviour seen in the world of business lies in the social benefits that arise from a vigorous competitive marketplace. This implies that the moral limits on business are also to be found in a business’s net social impact.
There is a raging debate, in the US, over the net social impact of the sale of handguns. And where a product is contentious, you can argue that “the tie goes to the runner,” and that the “runner” in this case is freedom. When in doubt, opt for freedom of sale and choice. So let’s say (again, if only for sake of argument) that there’s nothing wrong with selling handguns to the public. So Glock (the company) is justified in existing and in carrying out its business. That still leaves open the question of the particular ways in which handguns and their accessories are marketed. The social benefits of selling handguns may be fundamentally contentious; in other words, reasonable people can agree to disagree. But I doubt that the same can really be said for marketing moves designed, for example, to foster the sale of high-capacity magazines (ones that hold 33 bullets instead of the usual 17).
I’m not presuming to answer that question here; I’m merely pointing out the significance, and appropriateness, of a specifically social lens.
——
(See also Andrew Potter’s characteristically sane piece on the politics of gun control: ‘You can’t outsmart crazy’—or can you?)
The Purpose of a Manager
What is the “purpose” of a manager? In particular, what is the purpose (or goal or objective) of a corporate manager (i.e., any manager, at any level, within a corporation)?
The preamble of the MBA Oath echoes one common sentiment when it says, “my purpose as a manager is to serve the greater good by bringing people and resources together to create value that no single individual can create alone.” [emphasis added]
Is that really the case? Is there a good argument for that point of view?
Let’s consider 3 possible answers to the question of what a manager’s purpose is (in the ethically-relevant sense of that word).
- The purpose of a manager is to do whatever s/he was hired to do, which is probably (for standard business corporations) to do his/her best to help the corporation make a profit (and to implement whatever charitable / CSR-type plans the company’s bosses see as appropriate);
- The purpose of a manager is to serve the greater good; and
- The purpose of a manager is to pursue his/her own interests.
Which of these is right? Do we need to choose? Can they all be right at once? If and when they conflict, which should take priority?
Let’s try a thought experiment, a bit of fiction to stimulate our intuitions.
Imagine I own and operate a small but productive apple orchard, employing say a dozen people to help me harvest and ship the apples. But imagine that, at some point, I get offered an attractive job in the city, one that is inconsistent with continuing also to run an orchard. Imagine that, rather than sell the orchard, I decide to hire a manager to take care of it in my absence. So I leave the company in her hands, and move to the city. Once month or so, we talk by phone, so that she can tell me how things are going and so that she can ask what my wishes are about high-level strategy, etc. And at the end of the year, she sends me whatever money is made from the sale of apples, minus operating costs (including the cost of materials and equipment, her own salary and the wages of the other employees, etc.).
Now, ask yourself: what is this manager’s purpose? What objectives should she work towards?
Well, surely she has as one of her goals making a living. That, after all, would likely be why she took the job in the first place. So she has her own “purposes.” But those surely can’t be ethically overriding. For example, what should she do with the money derived from the crop of apples after she has taken her own salary and paid other expenses? Can she use that money for her own purposes? Surely not. (Preventing that sort of self-serving move is a big part of the point of the system of corporate governance that bigger, more complicated organizations need to put in place.) The most obvious answer (though not the only alternative) is that she should send that money to me. They are, after all, my apples, grown on my trees on my land, and I’m the one who hired her to manage the operation for me.
What about the notion of serving the greater good? In our story, I’ve now got a good job in the city. Surely there are others in the community in which the orchard is situated that could use the leftover money more than I could. In that sense, it would serve “the greater good” for the manager to give that money to them. Or she might instead be tempted to give a really big raise to my apple-pickers. (Let’s assume they already make a decent “living wage,” but a big raise would allow them something closer to the affluent middle-class lifestyle that I myself already enjoy.) But surely — given that they’re my apples to start with — my manager ought at least to ask me, first, before giving my money away? Doing anything other than sending the money to me would amount to embezzlement, or at very least misuse of funds. But how do we square that with the appealing notion that being a manager involves contributing to the greater good?
We can get closer to the answer by noting that there’s a complication in the statement about a “manager’s purpose” in the bit of the MBA Oath quoted above, a complication that I’ve ignored so far. The Oath says that “my purpose as a manager is to serve the greater good by bringing people and resources together to create value that no single individual can create alone.” In other words, the Oath also suggests the mechanism by which managers are to serve the greater good.
Working that provision into our story: the manager I employ can be seen as serving “the greater good” by doing a good job of managing my orchard. If she does that well, she’ll produce a valued food product, contributing to the well-being of everyone who likes apples. If she manages to keep the business going in a sustained manner, she’ll also help keep a dozen people gainfully employed. And also by doing so, she will hopefully generate a profit for me (out of which I may well contribute to various charities, or simply buy things, thereby contributing to keeping other people employed). If she can’t do that, I’m likely to replace her with someone who can, or shut down the orchard entirely. And who benefits from that?
WikiLeaks and NGO Legitimacy
Filed under: accountability, activism, NGO, stakeholders, values |
Comments (12) The ethical standards that apply to an organization depend in part on what kind of organization it is. Some standards are either universal or nearly so: lying, cheating, stealing are generally bad whoever you are. But lots of other rules, principles, and values will vary, at least in terms of the weight attached to them. It matters for lots of purposes whether you are a corporation, a government agency, a non-governmental organization (NGO), a social club, a church, or a newspaper.
What kind of organization is WikiLeaks? It is sometimes referred to as a news agency, though that designation is disputed. Let’s look at WikiLeaks as a straightforward cause-oriented NGO, for the sake of argument.
One key question we ought to ask with regard to any NGO has to do with its legitimacy. In other words, for any NGO, we need to ask, “does this group have the right to speak and act on behalf of the cause it claims to speak and act for?” In other words, anyone may claim (for example) to “represent the forces of Good” or to “stand for justice” or to “speak for the whales.” And anyone is free to say what they want in defence of goodness or justice or whales. But saying you speak for goodness or justice or whales doesn’t mean that you actually do, and it doesn’t mean that anyone should listen to you or consult you on important decisions. Being a legitimate spokesperson takes something else. But what?
One framework that I’ve found useful is the one provided by Iain Atack in his paper “Four Criteria of Development NGO Legitimacy.”1. Atack’s framework is intended to apply to development NGOs, but I think that the basic idea can be applied more broadly.
Atack suggests that an NGO may gain legitimacy from one or more of 4 sources:
- Representativeness (Does the organization, for example, have a large membership base for which it genuinely speaks?)
- Effectiveness (Does the organization have a proven track record of getting the job done?)
- Empowerment (Does the organization work not just to achieve its goals, but to make sure that those it helps are, in the long run, left better-able to achieve those goals themselves?)
- Values (Does the organization embody and promote the values that are essential to the sort of organization it is, whatever those may be?)
Each of these is a way in which an NGO might acquire legitimacy. Some NGOs might score well on several of those. Some on just one. Some on none — and those that score well on none of those criteria are, according to Atack’s framework, lacking in legitimacy. Stated negatively, we could put the point this way: if an organization doesn’t have a membership base, isn’t effective, doesn’t work to empower those it seeks to help, and doesn’t embody the relevant values, then just what makes it think it has the right to speak or act for anyone other than itself?
Of course, these are not all-or-nothing questions. An organization can be representative, effective, etc., to a greater or lesser degree, and hence be either more or less legitimate.
This framework isn’t the be-all and end-all of assessing NGO legitimacy, but it’s a starting point. So, consider an NGO like WikiLeaks. Where does its legitimacy come from? In other words, what is the source of whatever moral authority is has? Is it from one of the sources Atack suggests, or is it something else?
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1Ian Atack, “Four Criteria of Development NGO Legitimacy,” World Development, 27:5 (1999) 855-864.
Wikileaks & Mastercard: Should Companies Do Government’s Bidding?
Filed under: accountability, corporate citizenship, corporations, CSR, environment, government, law, politics, values |
Comments (4) 
The controversy over Wikileaks has raised the question of whether companies should do government’s bidding. One popular suspicion is that Mastercard, Visa, and PayPal stopped acting as conduits for donations to Wikileaks not on principled grounds, but rather due to government pressure. If that’s true, is it ethically acceptable for business to act that way, as a tool of government? I’m not talking about government contractors, including military contractors like Blackwater, though I suppose the comparison is not entirely ridiculous. I’m thinking broadly of companies (ones not in the employ of government) helping to enact public policy or to implement the will of government more generally.
From a moral point of view, the question has to hinge in part on the moral quality of the particular thing business is being asked to do, and that may in turn hinge in part on the moral character of the particular government involved. Think, for example, of the controversy over Google participating in censorship in China. Many people thought it was wrong for Google to implement government policy in that case because they believe the Chinese government’s censoring of its citizens’ internet access to be morally problematic.
It’s worth pointing out that there are times and places where participating in implementing government objectives has been seen as unobjectionable, even patriotic. During both World Wars, companies were expected to participate in the ‘war effort’ by ramping up production, by shifting production to products needed for the war, and by conserving key raw materials. And that sort of active, corporate civic responsibility isn’t limited to times of war. Note that the US Department of Homeland Security expanded its “If You See Something, Say Something” to…
…hundreds of Walmart stores across the country – launching a new partnership between DHS and Walmart to help the American public play an active role in ensuring the safety and security of our nation.
I think it’s also instructive here to consider the relationship between “the state” (roughly, the government) and society. Many people are happy to think of corporations as instruments of society — that’s what motivates much of the CSR movement. We think it right for businesses to be environmentally responsible because we, as a society, value the environment. We want to conserve our resources, and we expect business to do its part. But the democratic state, like it or not, is a legitimate instrument of society. Now, government (including democratic government) is notoriously imperfect. As Churchill said, democracy is the worst system in the world, except for all the rest. But it’s hard to see how you can approve of (or insist upon) corporate implementation of social objectives and at the same time object entirely to corporate implementation of government objectives when those objectives are the reasonable objectives of a relatively-legitimate government.
In the end, it seems to me that if the behaviour in question is not intrinsically unethical (as Microsoft and Yahoo helping China’s government spy on dissidents arguably was) and if the behaviour doesn’t violate the firm’s fiduciary obligations to its shareholders, then it is at least permissible (though not necessarily obligatory) for a business to help implement public policy.
Should Companies Judge the Ethics of Those With Whom they Do Business?
Filed under: accountability, corporate citizenship, decision-making, government, NGO, protest, stakeholders |
Comments (10) 
The Wikleaks backlash continues. I suggested here two days ago that Mastercard was probably justified in ceasing to act as a conduit for donations to Wikileaks. I said that, at very least, it’s not surprising that a company whose business depends on its reputation as a trustworthy keeper of secrets would find it hard to endorse the behaviour of an organization that exists entirely for the purpose of exposing secrets.
But quite a few people have suggested that Mastercard (and Visa and PayPal and perhaps others) have been inconsistent, and perhaps even hypocritical, in deciding to cut off Wikileaks. As an editorialist for the Guardian pointed out…
while MasterCard and Visa have cut WikiLeaks off you can still use those cards to donate to overtly racist organisations such as the Knights Party, which is supported by the Ku Klux Klan.
For that matter, you can use Mastercard or Visa to donate to any number of controversial charities and political causes, from PETA to the NRA to Planned Parenthood — all of which are organizations about which at least some people have serious moral reservations. Similarly, you can use either card to buy cigarettes, to buy guns, to buy drug paraphernalia, to reserve the services of a call girl, or to pay for hardcore pornography online. So, really, just how careful are Visa and Mastercard with regard to the companies they deal with?
And if Visa & Mastercard are on thin ice with regard to judging Wikileaks morally, that reduces the force of their ostensible reason for cutting off the organization, and lends credibility to the claim that all they’re doing is caving to government pressure.
Trying to divine the actual motives of the credit card companies here is probably nearly impossible. But this also raises the very general question of whether companies should pass moral judgment on their customers and business associates. Is it OK for a company to refuse to do business with someone — whether that someone is an individual or another company — because they have ethical objections to their behaviour?
(I touched on this topic a couple of years ago, in discussing the right of a bakery not to decorate a cake with the name “Adolf Hitler” on it. And more recently I blogged about corporate participation in the death penalty.)
Now in some cases, of course, moralistic discrimination is simply impossible, because the grounds upon which a company might choose to discriminate are invisible to them. In many markets, companies simply don’t know enough about their customers to pass judgment. The store I buy my groceries from has no idea how I live my life, what my values are, etc. Maybe if they knew more about me they would refuse to sell to me. But they don’t, so they can’t, and they aren’t likely to start going to the trouble of finding out more.
And in many (most?) cases, discrimination on moral grounds is off the agenda simply because it reduces profits. Maybe you have moral qualms with the behaviour or character of 25% of the population (or maybe even with the 50% who don’t vote the way you do), but are you really going to refuse to do business with them, and accept the resulting huge reduction in income?
And clearly, generally, this paucity of moralistic discrimination is a good thing. A lack of discrimination likely leads to greater economic efficiency (good for the community as a whole). And the fact that businesses are generally (though unfortunately not always) unable to discriminate based on, e.g., what they see as moral objections to someone’s sexual orientation, is a good thing for gays, lesbians, the transgendered, etc.
On the other hand, there are some clear cases in which it is widely accepted that companies will and should discriminate based on the character and behaviour of their customers. Think of banks, which are obligated (often legally required) to “discriminate” against criminal organizations by, for example, reporting large financial transactions to the government.
Note also that many people believe that companies should judge other companies they do business with, for example with regard to their environmental record and labour standards. In fact, lots of companies have faced serious criticism for failing to do so. Companies today are supposed to care about the ethical standards of their suppliers.
So, is it OK (or even good) for companies like Visa and Mastercard and PayPal to judge the morality of Wikileaks? Your initial answer to that is likely to depend on your opinion of Wikileaks more generally. I’d be curious to know if there’s anyone out there who says either:
- “Wikileaks is evil, but Mastercard, Visa, and PayPal should stay neutral and continue funneling funds to them,” or
- “Wikileaks is great, but Mastercard, Visa, and PayPal are fully justified in cutting them off.”
Business Ethics and the “New York Times” Rule
Filed under: accountability, decision-making, ethics, stakeholders, transparency |
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On Monday, the front page of the New York Times featured at story about financial firms adjusting the timing of bonuses in response to anticipated changes in tax laws. I mention this story not because of the particular ethical issues involved, but because it was featured on the front page of The Times. How would you like your decision-making subject to that kind of scrutiny?
From some perspectives, ethics is simple: “do the right thing.” For others (especially for philosophers like myself) it is incredibly complex, involving an ongoing centuries-old debate between arcane theories like deontology, utilitarianism, social contract theory, virtue theory, and others. In-between, we see lots of bits of ethical wisdom bundled into rules of thumb for ethical decision-making. Some of them are useful, some are misleading.
The one I’d like to discuss briefly today is the so-called “Front Page of the Newspaper” test, or sometimes “The New York Times Rule.” In one of its standard versions, it gets stated this way: “never do anything you wouldn’t want to see reported on the front page of the New York Times.” Some versions have additional qualifiers. Some, for example, say that you shouldn’t do anything you wouldn’t want to see fairly reported on the front page. That qualifier rules out slanted or malicious reporting — there are presumably plenty of fully-justifiable behaviours that we wouldn’t want to see reported in a malicious way, on the front page of the NYT or anywhere else.
The first thing to say about the Newspaper Test is that it probably is a useful heuristic. Asking the question it poses at very least serves as an opportunity to pause and ask yourself whether the action you’re about to take is one that could withstand publicity and scrutiny.
But there are two clear problems with the Newspaper Test.
One problem is that it can seem to serve as an argument against actions that are actually perfectly ethical. John Hooker, in his book Business Ethics as Rational Choice, gives this example: Imagine you’re CEO of a large corporation, and due to tough economic times you’re forced to lay off several thousand employees. Imagine that some of those employees slide into clinical depression. Others become alcoholics and end up beating their children. Lives are ruined. You probably wouldn’t want all of that reported on the front page of the NY Times, but that doesn’t mean your choice was unethical. In fact, Hooker points out, it might have been the least-bad option available. The point here is that sometimes even ethically good decisions are ones that we wouldn’t want publicized, either because their negative consequences are more visible than their positive ones, or because the reasons behind those decisions are reasons that, despite being good reasons, would be difficult or even impossible to explain.
The other problem is that it can seem to condone behaviour that is actually unethical. Most obviously, it can let you go ahead with an unethical plan if you happen either to be either generally insensitive to bad publicity or blind to subtle ethical dimensions of the question at hand. The former possibility is pretty self-explanatory: some people (and some companies) just don’t seem to care what the public thinks of them, or believe themselves to be above all need for accountability. As an example of the latter possibility (ethical blindness), picture a company sending its CEO to Washington on a private jet, with the aim of asking for money, and being utterly oblivious to the idea that the public might find this unseemly. If you don’t recognize, or care, that someone might object to your decision, then conducting the Newspaper Test isn’t going to stop you from doing something you shouldn’t.
The thing to remember about the Newspaper Test is that, like so many other catchy rules of thumb, it is at best a heuristic, and not an algorithm. It doesn’t automatically crank out an answer that is both determinate and correct. What it really is is an ‘intuition pump.’ It is a way to force yourself to ask, as part of a well-rounded ethical decision-making process, whether your decision is one that, in principle, you could defend in public. The hidden strength of the Newspaper Test lies in the notion of accountability, i.e., of having to give reasons for your actions in order to make them understandable to society at large.
Deadly Crashes, “Agency Theory” & the Challenges of Management
Filed under: accountability, complexity, corporations, decision-making, employees, ethics, excuses, governance, management, product safety, quality, risk, technology |
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Sometimes for a corporation to “do the right thing” requires excellent execution of millions of tasks by thousands of employees. It thus requires not just good intentions, but good management skills, too.
For an example, consider the story of the crash of a Concorde supersonic jet a decade ago. The conditions leading up to the crash were complex, but one factor (according to the court) was negligence on the part of an aircraft mechanic. Whether (or to what extent) that mechanic’s employer is responsible for that negligence, and hence at least partly responsible for the crash, is a difficult matter.
Here’s the story Saskya Vandoorne, for CNN: Continental Airlines and mechanic guilty in deadly Concorde crash
The fiery crash that brought down a Concorde supersonic jet in 2000, killing 113 people, was caused partially by the criminal negligence of Continental Airlines and a mechanic who works for the company, a French court ruled Monday.
Continental Airlines was fined 202,000 euros ($268,400) and ordered to pay 1 million euros to Air France, which operated the doomed flight.
Mechanic John Taylor received a fine of 2,000 euros ($2,656) and a 15-month suspended prison sentence for involuntary manslaughter….
I don’t know the details of this story well enough to have any sense of whether the mechanic in this case really did act negligently. But what intrigues me, here, is the issue of corporate culpability. Note the difficulty faced by airline executives who (for the sake of argument) want desperately to achieve 100% efficiency and never, ever to risk anyone’s life. In order to achieve those goals, executives have to organize and motivate hundreds or perhaps thousands of employees. They need to design and administer a chain of command and a set of working conditions (including a system of pay) that is as likely as possible to result in all those employees diligently doing their very best, all of the time. That challenge is the subject of an entire body of political & economic theory known as “agency theory.”
Agency theory and the various mechanisms available to motivate employees in the right direction are things that every well-trained business student knows about, because those are central challenges of managing any corporation, or even any small team. What is recognized too seldom, I think, is just how central a role agency problems play in assessing and responding to ethical challenges in particular.
What do “Higher Standards” for Business Look Like?
Filed under: accountability, definitions, ethics, standards, values, white collar crime |
Leave a comment When we see what seems to be an increase in misbehaviour, we need to ask: is that because behaviour has gotten worse, or because expectations have gotten higher?
See this piece, by Theresa Tedesco, for Financial Post Magazine: Farther. Faster. Higher.
…Business leaders are on trial like never before. Public outrage over recent ethical crises and the dramatic failures of corporate governance, most notably the stunning collapse of Enron Corp. and the financial crisis of 2008, have fuelled assumptions that government and regulators are stepping in and that ethical standards of business must be on the rise as a result. Certainly, public awareness is heightened in the aftermath of spectacular corporate collapses. But are ethical standards actually getting higher as a result? Or are shareholders, employees and other stakeholders simply more aware of the moral considerations in the wake of these scandals and crises, considerations that are soon to be forgotten? Either way, the role of the modern CEO and other senior executives has become much more complex, driven almost reflexively by the velocity of change in social values, technology, regulation and, increasingly, public opinion….
(I’m also quoted, making a point I’ve made before, namely that business is more ethical today than it has ever been in the past.)
But there’s also an interesting philosophical question, here, about what counts as a “higher” standard.
In some cases, “higher standards” might actually mean that we attribute to business obligations in domains in which they previously were seen as having basically no obligations at all. Environmental concern might be one such domain. Once upon a time, pollution just wasn’t an issue. At even once pollution was “on the radar,” so to speak, specific types of pollution (e.g., CFC’s) still weren’t seen as important. In that sense, it’s clearly true that we see “higher standards” imposed, and observed, by business today.
A second kind of “higher standards” might involve stricter requirements for things like honesty and product safety and truth in advertising. Once upon a time, the rule really was “buyer beware.” That’s no longer the case. Social expectations, often backed by law, mean that businesses face (and generally adhere to) standards far higher than we’ve ever seen before in history.
A third kind of “higher standard” might have to do with social expectations with regard to the impact business has beyond its interactions with its own customers and employees. Now, it has long been the case that many businesses make social contributions through things like charitable donations. But today, it is utterly run-of-the-mill for companies to have CSR departments that consider not just things like charitable donations, but how to track and report on the business’s net social impact. This is yet another way in which businesses face, and face up to, higher expectations.
But there is also a fourth kind of higher standard, one which is less-obviously being met. And that is in the area of individual decision-making. When the average person (or the ethicist, for that matter) surveys the world of business, he or she still sees examples of bad behaviour — people lying, cheating, embezzling, and defrauding. Most of us get our data in that regard from the media, which is far from a fair accounting of the issue. But still, the cases are out there. And it’s in that sense that people are very fair to observe that, at very least, things don’t seem to be getting better, dammit. Then again, I know of no credible evidence that things are getting any worse in this regard.
I suspect different people mean different things when they talk about whether “ethical standards” are higher or lower in business today. I suspect that the first 3 kinds of “higher standards” above are the crucial ones, since I suspect that the 4th, which depends on the character of individual human beings, is less susceptible to long-term change on a population basis.
The Business Ethics Blog 