Archive for the ‘consumers’ Category
Credit Card Laws & Ethics
Filed under: banking, complexity, consumers, ethics, honesty, regulations, transparency |
Comments (4) Credit cards: we love them, and we hate them. We love the convenience, but we hate the high interest rates. But really, based on our patterns of usage, it seems like the love/hate relationship is tilted in favour of love; it looks like our fondness for those super-convenient pieces of plastic is getting the better of us. The result: many North Americans are utterly buried under credit card debt. The natural temptation is to blame the banks, and certainly many financial institutions have preyed upon both our fondness of convenient purchasing, and our lack of attention to fine print, to turn credit cards into a cash cow.
But see this story, by Jennifer Liberto, for CNN Money: Credit card laws working, says bank critic
A year after new credit card laws curbed interest rate hikes and forced new disclosures, consumers are paying fewer late fees and have a better understanding of what their cards cost, according to a federal study released Tuesday.
White House official Elizabeth Warren, best known for her outspoken criticism of the banking industry, is expected to praise that same group during a Tuesday conference on the one-year anniversary of the credit card laws….
Now unless I’m mistaken, what banks are being force to disclose is stuff that would previously likely have been buried in the notorious ‘fine print’ of credit card agreements. And fine print is a hard problem, ethically. We all know that consumers should read the fine print; there can be important information there. But we also all know that almost nobody does read the fine print. Fairness requires at least some attention to what we can reasonably expect consumers to do. But on the other hand, is it really a bank’s fault if they disclose something important and you simply don’t bother to read it? While you could argue the fairness point back and forth, it’s also worth pointing out that there’s an economic efficiency argument here, too. Information asymmetries are the enemy of economic efficiency. (An “information situation” is any situations in which one party to a transaction understands that transaction much better than the other.) So we have here the foundation for an argument that says that, even if it is fair to expect consumers to read all the fine print, the fact that they do not do so is resulting in socially sub-optimal patterns of purchasing. This means a social reason, not just a paternalistic reason, to want to help consumers by forcing banks to change how it is that they disclose information.
The other interesting aspect of this story has to do with the persuasive force of law. According to Warren, “much of the industry has gone further than the law requires in curbing repricing and overlimit fees.” In other words, this may be a case in which the law not only prescribed a certain set of behaviours, but also set the tone for the industry. I think this aspect of law is too often overlooked. This suggests that even when we are skeptical about a new law because, for instance, we are skeptical about the potential for strict enforcement, we ought to consider the possibility that an industry will take the passage of a law as sending a signal about the overall tenor of society’s perspective on their business. We also ought to consider also the possibility that the law will give those subject to it an excuse to do what they thought they ought to be doing in the first place.
Certifying Virtue
Filed under: accountability, brands, certification, consumers, labelling, standards, virtue |
Comments (2) 
Two weeks ago I was at Duke University’s Kenan Institute for Ethics, in part to participate in a panel discussion called “Certifying Virtue.” The panel was basically about the challenges faced by various attempts to certify particular consumer goods as having been ethically produced.
My excellent co-panelists were Greg Dees (director of Duke’s Center for the Advancement of Social Entrepreneurship) and Tim Büthe (Assistant Professor in Duke’s Political Science department). The panel was organized and moderated by Kenan’s Lou Brown.
My own comments focused on:
- The large number of value-dimensions along which different consumers might want assurances about the things they buy.
- The epistemic problems involved in figuring out how to measure the things you might want to certify (e.g., measuring “environmental impact”).
- The moral problem that arises when 2 or more desirable characteristics conflict (e.g., “wild” vs “organic” salmon — you might want both, but no one fish can be both wild and organic.)
- The role of brands and certification schemes as “value-alignment” mechanisms, helping consumers find producers with whom they want to do business.
The panel was videorecorded, and the resulting 90-minute video is here, on YouTube: Certifying Virtue
Ethics of Inefficiency
Filed under: consumers, corporations, energy, productivity, quality, sustainability, technology |
Comments (13) 
The current way of thinking seems to imply that small-scale production is the way to go. Of course, for much of the 20th century, small-scale production was a sign of affluence: only the wealthy could afford to have a craftsman dedicate hours, perhaps days, to the task of custom-making an item just for them. Today, everyone from yuppies to hippies is clamoring for just that, in their rush to grab for things perceived as local and green and anti-commercial. We don’t want multinationals to get between us and the skilled hands that make our loafers, and we want no agrifood giants mediating our relationship with the farmer who lovingly raised the goats that gave the milk that made the cheese. We want our business small, and indie. We want our consumer goods “bespoke,” and “artisanal.”
And the reason for this seems to be some vague impression that those kinds of businesses, and those kinds of products, are somehow more ethical. And in some cases, along some ethical dimensions, that may be true. But if anyone thinks that products produced by a small, local artisan are likely to be environmentally superior, well excuse me for being just a tiny bit skeptical.
This vague association of the small with the ethical misses the fundamental truth that, when it comes to production methods, size brings efficiency. Mass production tends to be efficient in its use of energy, materials, and labour. There are of course tradeoffs and exceptions: it’s entirely possible for a factory mass-producing something to be highly efficient in the use of labour, but to be highly inefficient in the use of, say, water — especially if water is had at no cost. But generally, mass production is efficient; that’s its raison d’etre. Consider: a local tailor spending an entire day hand-stitching a jacket has to use, to begin with, an entire day’s worth of energy to light and heat his workshop. Alternatively, the same jacket could be made in a garment factory in a matter of minutes, using a few minutes’ worth, rather than an entire day’s worth, of energy.
Now that’s not a blanket endorsement of all mass production. It’s entirely possible for production processes to be set up so that they are highly efficient in their use of whatever resource is particularly costly, and highly inefficient in its use of whatever happens to be cheap, regardless of the ethics of doing so. Note also that mass-produced goods tend to cater to the lowest common denominator. It should also be noted that assembly lines may tend to result in repetitive strain injuries among workers — and, if you believe some critics, in feelings of alienation as the worker whose job is reduced to some trivial aspect of production is effectively cut off from any connection with the product as a whole.
But (generally) efficiency is good. Certainly no one is in favour of inefficiency, with the possible exception of those of us who revel in a well-earned “inefficient” weekend. At any rate, the very reason we engage in mass production is that it is efficient: it produces the most output per unit of input. And that’s a good thing. So while there may be reason to value the small, the local, the artisanal, we ought at least to be aware that such goods are liable, at least in general, to be the product of highly inefficient — and hence environmentally unfriendly — production methods.
Most Ethically-Significant Consumer Decision?
OK, this is one where I pose a question.
What is the most ethically-significant purchasing decision a consumer can make?
Most consumer choices make very little difference in the world, taken on a purchase-by-purchase decision. In the aggregate, of course, consumer decisions are enormously important. But I’m thinking today about individual decisions.
Take the decision to buy a low-energy lightbulbs for your house. The net impact on the environment will be roughly zero. Same goes for, e.g., not eating certain kinds of tuna that are on the verge of being listed as endangered. Whether you buy tuna or not really isn’t going to make any difference to the fate of the species.
On the other hand, if you decide not to buy meat this week, the net impact is that a bunch of critters get to live (and if you think animals matter, ethically, then that’s a good thing). Of course, even that is questionable, because in most cases it’s not as if those animals were going to be killed just for you. If you don’t eat them, they’re still going to be killed, and it’s only long-term trends in consumer demand that will make a difference.
Another kind of example might include the decision to purchase, for example, a piece of art from a homeless person. In that case, a single purchase (say, for $20) might make the difference between that person eating and not eating for a couple of days — something clearly ethically significant. But those kinds of opportunities are relatively rare.
So what are the best examples of purchase decisions that individual consumers can make that will have a real, concrete impact on the world?
Groupon Super Bowl Ad: Unethical
Filed under: advertising, brands, character, consumers, ethics, food, international, marketing, virtue |
Comments (9) 
A collective gasp could be heard at one particular moment last night during the Super Bowl. No, I’m not talking about the gasp following Nick Collins’ 37 yard touchdown run in the first quarter. I’m talking about the gasp that issued at the punchline of the now-infamous Groupon.com commercial featuring Timothy Hutton.
You can see the 30-second spot here, on YouTube: Groupon – Tibet
And here’s the entire transcript:
“Mountainous Tibet — one of the most beautiful places in the world. This is Timothy Hutton. The people of Tibet are in trouble, their very culture is in jeopardy. But they still whip up an amazing fish curry. And since 200 of us bought at Groupon.com we’re getting $30 worth of Tibetan food for just $15 at Himalayan Restaurant in Chicago.”
Immediately following the commercial’s appearance, Twitter lit up with comments about how “offensive” and “tasteless” the Groupon.com commercial was. Media outlets today have been abuzz with criticism and commentary. The headlines tell the tale. According to NBC Chicago: “Groupon Super Bowl Ad Not a Good Deal”. CNN Money.com‘s headline was “Groupon spends big on controversial (tasteless?) Super Bowl spots”. Time asks: “And the Most Offensive Super Bowl Ad Goes To: Groupon?”
But the ad was more than just tasteless. It was unethical. To recruit — and then trivialize — the plight of the people of Tibet to sell Groupon’s services shows a jaw-dropping level of disrespect. And while we often think of disrespect as a matter of bad manners, showing suitable respect for other humans’ basic needs and interets is a core moral principle.
It’s also worth pointing out that the commercial played, perhaps unintentionally, on the unfortunate fact that, for many westerners, complex Asian societies are often most closely associated with exotic dinner fare. Yes, yes, Tibet is exotic and troubled. But hey, they make a yummy curry!
Who knows just what the fallout will be? There have been predictions that Groupon will lose business over this — it’s been suggested that the company may have found the limit of the notion that “there’s no such thing as bad PR.” And, predictably, there have already been calls for a boycott of Groupon.com. Timothy Hutton (once an Academy Award winner) will likely have to go into the spokesperson’s equivalent of rehab, perhaps by working with a pro-Tibet charity of some sort.
Of course, some will cling to the notion that Groupon.com intended all this — that they knew the ad would be controversial, and were aiming directly at the enormous amount of free media coverage they’re now getting. Maybe that’s true. But it was a helluva gamble to take. And, if it was a gamble, it was a gamble that treated the people of Tibet as just another Asian trinket to be tossed in among the poker chips.
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Addition:
It’s been pointed out to me (by @Changents on Twitter) that Groupon is apparently donating money to the causes featured in its commercials. See: http://savethemoney.groupon.com/. I’m not at all sure that that’s sufficient to overcome the worries discussed above, especially given that the disrespectful commercials is all that most people will see or know about. What do you think?
“Attacking a brand is like attacking a person”
Filed under: brands, consumers, corporations, definitions, food, honesty, labelling, personhood |
Comments (1) Last week on my Food Ethics Blog, I posed the following question: Fast Food Beef: What Matters? At the heart of that blog posting is a lawsuit that has been filed against Taco Bell, alleging that…
…Taco Bell’s “meat mixture”, which it dubs “seasoned beef” contained less than 35 % beef. If these figures are correct, the product would fail to meet minimum requirements, set by the U.S. Department of Agriculture, to be labeled as “beef”. The other 65% of the “meat” is made up of water, soy lecithin, maltodextrin, silicon dioxide, anti-dusting agent and modified corn starch
Today comes news that Taco Bell is fighting back. See this story from ABC News: Taco Bell Fights ‘Where’s the Beef’ Lawsuit
According to the ABC story, Taco Bell President Greg Creed says the allegations are simply false.
Well, sorting that out shouldn’t be too hard, for some unbiased food scientists.
More interesting is Creed’s moralized counter-attack:
“Attacking a brand is like attacking a person. It’s just unacceptable when there aren’t any facts to support it….”
Attacking a brand is like attacking a person? How so? Creed doesn’t expand on the question, but he make just mean that attacking a brand is “like” attacking a person in that both are wrong when they involve falsehoods — perhaps simply because lying is generally wrong.
But setting aside that line of argument, is it possible that a stronger thesis is justified, namely that a brand is something that deserves protection the way that a person deserves protection? Now, I’ve argued before that corporations need to be considered persons. And I’ve also blogged about whether corporations should have the right to sue for libel to protect their interests. But a brand isn’t the same as a corporation, so the arguments I’ve given about those don’t quite hold, here.
The most obvious way to think of the ethical justification (or requirement?) for defending a brand against attack is to think of the brand as a piece of property. If you damage the brand, you damage the interests of those who own it. Sometimes that will be justified (perhaps because the good done by damaging the brand outweighs the interests and/or rights of the brand’s owners), and sometimes it won’t. But I wonder if a still-stronger thesis is possible: is there any reasonable sense in which the brand could be thought of as an entity in its own right, with interests separable from those of its owners? Consider the world’s most valuable brand, Coca Cola. If all of the owners of stock in Coca Cola repudiated their ownership rights, and if all the employees of the company all quit en masse (eliminating another key stakeholder), what would we say about the Coca Cola brand? It would no longer, per hypothesis, have any “owners.” Would it cease to have any ethical significance at all? Would there be nothing either right or wrong that you could do “to” it? What about other brands, like the Red Cross or Greenpeace?
I don’t have good answers, but I think it’s an intriguing question, given the significance of brands in the early 21st century.
Trustworthy Business Behavior
Filed under: consumers, corporations, ethics, honesty, rankings, trust |
Comments (8) I was recently honoured to be named among the “Top 100 Thought Leaders in Trustworthy Business Behavior” for 2010, by the folks at Trust Across America.
The list is an interesting mix. It includes fellow business ethics profs like Laura Hartman and Mary Gentile, along with business leaders like Jeffrey Hollender (formerly of Seventh Generation), Whole Foods CEO John Mackey and consultants like Charles H Green and Christine Arena, as well as journalist-bloggers like Aman Singh.
The focus on “trust” in this listing is interesting. There’s probably not much to differentiate this list from a listing of thought-leaders in, say, business ethics or CSR. That’s not to say that a different title wouldn’t have changed the list at all; but basically all such lists, whether they’re of companies or of individuals, are about the doing the right thing in business or about promoting and fostering such behaviour.
But I do like the focus on trust. I think the role of trust in commerce simply cannot be overstated. Business — and that includes consumers interacting with any business — simply cannot happen without trust. Consider, for example, how crucial trust is…
- …whenever you buy any consumer product, and thereby trust not just the person who sold it to you, but dozens or perhaps even hundreds of people who helped make that product.
- …whenever one business buys something from another business, just by picking up the phone and saying, “Hey, please send us a box of X, and we’ll pay you at the end of the month.”
- …whenever anyone is employed by anyone else. (In that case, the employer trusts the employee not to shirk as soon as the employer’s back is turned, and the employee trusts the employer to pay the agreed-upon amount at the end of the day or week or whatever.)
- …whenever you give some of your money to a bank, ask them to hold onto it for you, and then (as most of us do) take their word for it when they tell you how much interest you’ve earned (or, more likely, how much interest you owe them on the money you’ve borrowed).
- …whenever you climb into a taxi, or sit down at a restaurant to eat. (The driver or waiter is trusting that you will actually pay your bill at the end, rather than make a dash for it.)
- …whenever you pick up the phone to order pizza. (The fact that it actually shows up means that they trust you to pay for it when it gets there.)
Basically, all of us, in our organizational lives and in our lives as consumers, end up trusting dozens and perhaps hundreds of people (and many many business organizations, too) during the course of our daily lives.
Of course, sometimes we use specific mechanisms to enforce trustworthiness — policies, laws, regulations, warrantees, contracts, etc. But all the formal enforcement mechanisms in the world couldn’t possibly keep a complex modern economy running, in the absence of a fundamental ethical commitment to trustworthy behaviour.
Most Hated American Companies Of 2010
Filed under: consumers, corporations, employees, rankings, virtue |
Leave a comment 
The corporate world is certainly subject to plenty of criticism, and even hatred. But which companies are hated most?
Here’s one look at that question, from 24/7 Wall St.: The Fifteen Most Hated American Companies Of 2010
Customers, employees, shareholders and taxpayers hate large corporations for many reasons. 24/7 Wall St. reviewed many of these to choose the 15 most hated companies in America.
We examined each company based on six criteria….
(Note that the title “Most Hated” actually understates the sophistication of the ranking method used here, which includes measures of employee satisfaction, media coverage, total return to shareholders, and more.)
Interestingly, several of the companies on this “most hated” list have appeared on the Business Ethics Blog before.
- Dell (#9 on the un-ordered list) appeared here several times in 2006 and 2007, in blog entries about the ethics of poor customer service.
- Nokia (#2 on the list) appeared here as the subject of a movie I reviewed, called A Decent Factory. The movie was about Nokia’s attempt to manage things like labour standards in its supply chain.
- Toyota (#3) appeared in a blog entry on whether a company’s shareholders really “own” the company, as well as in an older blog entry about “Patriotism vs. Globalization in the Auto Industry”.
- Citigroup (#6) appeared in a blog entry called “Ethics in Banking: Best Practices”, as well as in a more recent one called “The Pay Czar’s Ethical Dilemma”.
- McDonald’s (#12), not surprisingly, has made a couple of appearances. It appeared in a blog entry on “Trans-fats vs. Genetically Modified Foods”, as well as “Saving the Earth, One Big Mac at a Time”.
- Last, but not least, British Petroleum (BP) is #14 on the list (and labelled “the most obvious choice to be on a list of hated companies”) has of course appeared here several times this year, including in “BP and Corporate Social Responsibility”, and “Boycotting BP is Futile and Unethical”, and “Ethics, BP, & Decision-Making Under Pressure”.
As you read through the whole list, it’s worth noting more generally the role that unethical (or at least ethically controversial) behaviour plays in generating hatred.
Lead Content in Products for Children Adults
Filed under: children, consumers, labelling, marketing, product safety, regulations, risk |
Comments (1) 
Selling products for kids is a tricky business. We adults are, to a certain extent, willing to adopt a “buyer beware” attitude. But kids deserve protection — the duty to protect children is a universal ethical norm. Add to that the fact that they are simply more physically vulnerable, and it’s not hard to see why we expect (and impose) higher standards of behaviour on the part of companies that make products aimed at kids.
That implies all kinds of ways in which manufacturers need to exercise caution: in product design, in the sourcing of parts and ingredients, in the manufacturing process, and in marketing. One way to avoid the extra hassle: make a product for kids, ignore the relevant safety standards, but make sure that you claim, when asked, that it’s really not for kids at all.
Here’s the story, by Justin Pritchard for The Associated Press: Feds dismiss recall on lead glasses
A federal agency reversed itself Friday and said lead-laced Wizard of Oz and superhero drinking glasses are, in fact, for adults — not children’s products subject to a previously announced recall.
The stunning about-face came after the Consumer Product Safety Commission said last month the glasses were children’s products and thus subject to strict federal lead limits.
Lab testing by the Associated Press found lead in the colored decorations up to 1,000 times the federal maximum for children’s products. The CPSC has no limits on lead content on the outside of adult drinking glasses….
The story here is in part about the odd decision by the Consumer Product Safety Commission. But I want to focus on the decision the company here made.
Now, I might have been a bit harsh when I implied above that the company making these glasses is being disingenuous when they say the glasses really aren’t for kids. Who knows what their intentions were? Our default assumption about people’s intentions should be a fair and charitable one, in the absence of evidence to the contrary. But that of course highlights the difficulty with a regulation based on divining a company’s intentions:
Under federal law, an item is a “children’s product” if it is “primarily intended” for those 12 and under.
Now on one hand, regulation based on intent makes a good deal of sense. If the relevant standards for kids’ products really is different, there really is no other way to draw a line between what counts as a product for kids and a product for adults. There’s nothing stopping parents from giving their kids access to products that are clearly “for” adults. So it seems fair for companies to be able to say, look, we intended that product for adults…it’s not our fault if some parents decided, instead, to give our product to their kids.
But I also think it’s worth pointing out that while regulations may focus on the manufacturer’s intentions, the relevant ethical standard should point to reasonable expectations. The makers of the glasses in question here may well have intended their product to be used primarily by adults, but the question they should have asked themselves is whether glasses with fantasy characters on them can in fact reasonably be expected to end up in the hands of kids. And if so, they should adhere to standards that are relevant to that expectation.
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Thanks to LH for alerting me to this story.
Walmart & Free Shipping: Who Will Suffer?
Filed under: competition, consumers, CSR, internet, marketing, pricing, profits, retail, SME, strategy |
Comments (7) 
Once again, Walmart is making headlines with a business practice that will be good for its customers, and bad for its competitors. Here’s the story, by Stephanie Clifford for the NYT: Wal-Mart Says ‘Try This On’: Free Shipping
For years, Wal-Mart has used its clout as the nation’s largest retailer to squeeze competitors with rock-bottom prices in its stores. Now it is trying to throw a holiday knockout punch online.
Starting Thursday, Wal-Mart Stores plans to offer free shipping on its Web site, with no minimum purchase, on almost 60,000 gift items, including many toys and electronics. The offer will run through Dec. 20, when Wal-Mart said it might consider other free-shipping deals….
Not surprisingly, Walmart’s competitors are alarmed. Smaller on-line businesses don’t get the kinds of sweet shipping rates that Walmart gets from UPS and FedEx, and they don’t have the regional distribution centres that allow Walmart to keep its shipping costs low. It’s pretty clear that this move by Walmart is going to put serious pressure — maybe even fatal pressure — on some of its competitors.
Just 2 quick points to make:
1) It’s worth noting (for the benefit of those who don’t know) that Walmart’s profit margins are already razor-thin. Yes, the make big profits overall, but that’s due to their mind-bogglingly huge volume of sales. On a per-sale basis, their profit is very small. So the money for shipping a given product (for free) isn’t coming out of the profits on sales of that product — the profits just aren’t there. Something has to give. One possibility is that it really is a short-term gimmick, perhaps intended precisely to drive competitors out of business. That would potentially count as an instance of predatory pricing, which would be at least arguably unethical and potentially illegal — in spite of the short-term benefits to consumers.
2) Normally when we think about Walmart’s effect on competitors, we think about its effect on its very small competitors, the ‘mom & pop’ operations. But I wonder whether that’s the case here. I’m no expert on the structure of the industry, but it seems that the companies most likely to be hurt are Walmart’s large and mid-sized competitors, i.e., companies that occupy roughly the same strategy space as Walmart. It seems to me (and it’s just a hypothesis) that most small retailers will have significantly different business strategies than Walmart, and hence won’t be competing directly with Walmart in ways that would let them fall victim to this latest maneuver. If I’m right, then if Walmart really can sustain this free shipping policy (and they haven’t claimed they’ll even try to) it would be very bad for its medium-sized and large competitors. If that’s the case, will people have the same kinds objections as they tend to have when Walmart’s consumer-friendly strategies are instead bad for small businesses?
The Business Ethics Blog 