Archive for the ‘government’ Category
When should a corporation play the role of legal and moral enforcer? And when does a corporation start to take on the obligations — and limits — of a government?
Consider Microsoft’s Windows 8 operating system. When it was released last year, the new OS has met with mixed reviews. But at least one review, by PC World, noticed something interesting about SkyDrive, the new cloud storage service integrated into Windows 8:
“Microsoft restricts the types of files you may upload: Illegally copied commercial content is prohibited, and so are files that contain nudity or excessive violence.”
Just what does that mean? Let’s focus here just on the nudity part.
During an online Q&A session this summer, two Microsoft engineers clarified. Apparently SkyDrive’s rules mean that you are free to store your nudie pics, as long as they don’t include any child pornography. But if you use SkyDrive’s file-sharing feature, the limits are more strict: no nudity at all. So, those topless beach photos from your Mexican vacation are OK to store, but not to share. Is Microsoft checking to make sure stored erotica doesn’t include children? That’s not clear.
This raises interesting problems related to the amount of control that corporations have over everyday activities like storing computer files, especially when — as is the case with many tech companies — their services become part of the infrastructure of our lives, woven into everything we do.
Such power isn’t going to go away. But it does raise questions about the ethical standards that apply to corporate behaviour. If corporations have the kinds of power that were once reserved for states, do they then have the same kinds of obligations? Do the same standards for surveillance and search-and-seizure apply to Microsoft and its users as apply to a government and its citizens?
Of course, if Microsoft users don’t like it, they are in principle free to opt out. There are alternatives to SkyDrive — including Dropbox, Apple’s iCloud, and many others. But Microsoft’s market penetration in terms of operating systems means that for many users (especially ones who aren’t technically sophisticated) SkyDrive is the default. And default options matter; there’s a vast psychological literature on how often people simply go with the default, even when an alternative is available that would advance their interests better.
With great market power comes great responsibility.
Canada’s government is under fire with regards to gender equity, and business leaders should take notice.
Attention has recently been drawn to a petition calling for women on bank notes. Currently, Canada’s bank notes feature only dead (white) male politicians. Queen Elizabeth is the only woman featured, and she’s not Canadian. The result is that Canadian women, no matter how accomplished or historically significant, are excluded from being celebrated in this high-profile way. The petition notes that Canada’s $50 bill once featured “The Famous 5” (women instrumental in the fight to acknowledge women’s legal personhood) and Thérèse Casgrain, a Canadian senator who had once been a leader in the women’s suffrage movement in Quebec. But in 2012, those images were replaced with an image of an icebreaker.
Zero representation of Canadian women seems a clear matter of inequity. Of course, it can be pointed out by way of rebuttal that the bills mostly honour dead Prime Ministers, all of whom (the dead ones, that is) happen to be men. But that just means that it’s a case of systemic discrimination, sort of like back when certain police forces required officers to be over 5’10” or something. They didn’t say that women couldn’t be officers; it just happened (*ahem*) to be the case that very few women qualified.
The other thing that might be pointed out is that it’s not as if anyone is asking for anything onerous or expensive, here, in asking for women to be represented. It’s an easy move with plenty of symbolic significance. It’s the respectful thing to do. Other Commonwealth countries have done it. Why couldn’t Canada?
Of course, it’s easy to pick on individual issues like this, and to see them as representing a general attitude of disrespect. And that’s not always fair. So it makes sense to look more generally at what the Government of Canada has done to show its commitment to gender equality.
Let’s start at the top. How has the Government of Canada done at showing commitment to gender equity by, say, appointing women to Cabinet? Well, there are 12 women in Prime Minister Stephen Harper’s cabinet, out of a total of 39 cabinet ministers. That means Cabinet is 31% women. That’s very roughly proportionate to the number of women in Parliament, since there are currently 76 women sitting in the House of Commons (out of 308 seats, for 25%), and 38 more in the Senate (out of 105, for 36%). But of course it’s nowhere near proportionate to the number of women in the Canadian population, or for that matter on the list of eligible voters. That represents a middling grade at best. This is, after all, 2013.
The Harper government has also been criticized for the under-representation of women on the Supreme Court of Canada. I don’t have a real opinion on this, and I realize that in selecting SCC judges the matter of qualification for the job has to be paramount, far more important in fact than in selection of cabinet ministers. But still, well-informed individuals, including SCC justices, say there’s room for improvement.
Add to this the fact that there have been claims that women’s rights have in fact suffered significant setbacks under Harper’s government.
When you put it that way, the lack of Canadian women on Canadian banknotes looks a little more significant, more like part of a pattern than an aberration.
What’s the take-away for business leaders? If you don’t want to have every decision and policy questioned from an equity point of view, make sure your track record on the issue is one that reassures, rather than provoking cynicism or outright antagonism.
Starbucks CEO Howard Schultz has stirred up controversy by posting an open letter asking Americans not to bring firearms into the coffee chain’s stores, even where it is legal to do so.
“Few topics in America generate a more polarized and emotional debate than guns,” Schultz wrote. “In recent months, Starbucks stores and our partners (employees) who work in our stores have been thrust unwillingly into the middle of this debate. That’s why I am writing today with a respectful request that customers no longer bring firearms into our stores or outdoor seating areas.”
I think Schultz is to be commended. Not for the position he has taken, but for the way he went about taking it. His open letter lays out the problem frankly and even-handedly. Some people are in favour of openly carrying firearms. Others are made incredibly uncomfortable by the idea of armed civilians behind them in line while they order a grande, half-sweet, non-fat, no-whip mocha. And Schultz doesn’t want his employees caught in the middle, so he’s making a polite request.
But, not surprisingly, the request has generated a firestorm of opposition. Not all of that opposition was well reasoned.
Twitterers who screamed that their rights were being tread upon, for example, were doubly incorrect. First, it is important to note that Starbucks isn’t imposing a ban on firearms in their stores. They’re asking politely, and have given no indication that they’re going to do anything more than that. Asking politely doesn’t infringe anyone’s rights.
Secondly, Starbucks isn’t the government, so appealing to the Second Amendment right to bear arms is (no pun intended) off-target. The US Constitution and the amendments to it protect citizens from intrusions by government, not from (supposed) intrusions by other citizens or private institutions like Starbucks.
But this raises larger, more interesting questions. It’s easy for me to say that, hey, Starbucks is a private company and it can make whatever requests it wants. It could even outright ban firearms from its stores, if it wanted to. They certainly wouldn’t be the first to do so. The stores are private property, and Americans do have constitutionally-protected property rights. Schultz doesn’t have to allow visitors to his home to carry guns, and he doesn’t have to allow visitors to his stores to carry them either.
But there’s an important sense in which a big company like Starbucks isn’t “just a company,” and a sense in which its stores are not fully private property. Starbucks has over 13,000 stores in the US alone (and over 60,000 worldwide), making their stores the go-to spot for coffee, a soft chair, and free wifi for plenty of Americans. And Schultz’s own vision for Starbucks was to make it a ‘third place’ between work and home, a kind of quasi-public meeting place. And so there’s a sense in which Starbucks, like Google and Facebook, is effectively a part of our public infrastructure.
That’s not to say that Starbucks has the legal obligations of a government. That would be a dangerous position to take. But it suggests that the range of ethical obligations we attribute to big companies with an important role in public life are a fit subject for debate. Schultz deserves praise, I think, for taking a good first step by presenting his reasoning openly, and making it fodder for public discussion.
Toronto mayor Rob Ford will apparently be keeping his job. An appeals court has overturned a previous court decision that had said that Ford had violated the province’s conflict of interest law.
The decision came down today from the Divisional Court which heard Ford’s appeal of his November conviction. The panel of three judges has now concluded that the original trial judge had made an error in finding Ford guilty under the Municipal Conflict of Interest Act.
Many Torontonians were bewildered by the original verdict, and by the fact that it could result (as required by the Act) in Ford’s removal from office and a multi-million dollar by-election. Ford’s offence, after all, was hardly armed robbery. He was merely accused of participating in a city council vote on a relatively small financial matter. The question under consideration at that vote was whether he, Ford, should return a few thousand dollars’ worth of donations that the city’s integrity commissioner says were improperly gathered. So it’s not as if Ford had stolen the money, or embezzled it. And garnering the donations was not itself a legal offence. The problem lay solely in his having voted on this matter, a matter in which he had a personal stake. Many people wondered how it could be that Toronto could lose its duly elected mayor over such a small procedural matter.
But bewilderment about that initial verdict says more about public understanding of conflict of interest than it does about the substance of this case. Conflict of interest isn’t about numbers; it’s about loyalty. And when we think someone has violated a conflict of interest rule it’s not necessarily because we think he or she has made an improper decision, but rather that we think he or she has failed to keep personal business and official duties separate, and that as a result we cannot be sure about what factors may have influenced that decision. It is also, in the end, about public faith in the decision-making processes of our most important institutions.
Be that as it may, today’s decision means that Ford is not guilty of violating the Act, and hence gets to keep his job. My non-lawyer’s understanding of the verdict is this. The decision seems to turn on a technicality. Ford had been accused of wrongfully participating in a February 2012 debate and vote by Toronto city council over whether he, Ford, should return the improperly-gathered donations. A council vote 2 years earlier had required Ford to pay back that money. But, according to today’s ruling, Council didn’t have the authority to engage in that earlier vote. So it was legally null – effectively, it never happened at all, from a legal point of view. And if the earlier vote “didn’t happen,” then the February 2012 vote that essentially responded to that earlier vote was really moot. And if that vote was moot, it cannot have been improper for Ford to participate.
But the court’s decision today is far from a vindication. Ford keeps his job on a legal technicality, the sort of thing that a layperson could never foresee from a reading of the plain wording of the relatively brief and clear Municipal Conflict of Interest Act.
That’s fair enough, from a procedural point of view, but it doesn’t mean that the mayor didn’t do anything wrong. He still took part in a decision in which he had a personal stake. And as a man in a position of power and trust, he not only should not have done so, but he should have known better than to do so. Even if he knew in his heart that his vote in the matter was unbiased, he should have known that that’s beside the point. What matters is that trust in the system requires decision makers to remove themselves from decisions that pertain to their own affairs. Doing so is essential for maintaining public trust in the system.
We can only hope that Ford will proceed now with uncharacteristic humility, and with more eagerness to learn the rules that govern his position than he has thus far demonstrated.
Toronto Mayor Rob Ford has been found guilty of violating the Municipal Conflict of Interest Act, and will be removed from office. The much-anticipated court decision was handed down this morning.
Regrettably, this is unlikely the end of the story. Ford had announced, prior to the decision, his intention to run again should the judge remove him from office. The judge had the option to include, as part of Ford’s sentence, a prohibition on running again, but opted not to do so.
Ford has plenty of detractors. Some don’t like his politics. Some question his aptitude for the job of mayor of Canada’s largest city. Others worry about his being implicated not just in one but in a string of conflict of interest violations. But he also has plenty of defenders — after all, there are an awful lot of people out there who voted for him, and many of them are sticking to their guns on that choice. So the debate will rage. Plenty of ink is sure to be spilled in by both camps in the wake of this decision. I’ll limit myself here to just two quick points. One is about leadership, and the other is about governance.
First, leadership. Whatever your views of Ford, and whatever your views about the severity of his breach of the Conflict of Interest Act, you pretty much have to agree that Ford demonstrated a disappointing lack of leadership ethics, here. Yes (as his lawyer pointed out) people do make mistakes, and even a mayor can be forgiven for an incidental breach of a rule now and then. But what’s particularly worrisome here is that Ford, who by all rights ought to be the guy who leads Council in understanding its ethical obligations, seems to be utterly clueless about them. And he doesn’t seem terribly worried about that, either. According to a report of the court proceedings, Ford “testified he never read the Conflict of Interest Act or the councillor orientation handbook. Nor did he attend councillor training sessions that covered conflicts of interest.”
My second point has to do with governance. As Marcus Gee pointed out in the Globe and Mail recently, bumping Ford from office might be a case of ‘out of the frying pan, into the fire.’ Turmoil is likely to ensue. Council is now faced with the choice of having someone else — someone not elected to be mayor — serve out the rest of Ford’s term, or spending several million dollars of taxpayer money to hold another election. The result of turfing Ford seems especially troubling when we compare Ford’s ethical cluelessness with the out-and-out corruption that has brought down mayors in other major cities.
But what was the alternative? A judge has no choice but to call ’em like he sees ’em. Ford violated important rules, and those rules say he should be removed from office. Note that the judge in this case would have had the same range of sentencing options if the dollar amount at the heart of this case had been $3.15 rather than $3,150. A more sane system would perhaps allow for a broader range of penalties. Examples could be found in other systems and at other levels of government. A fine? Censure? Limitation of future mayoral discretion? Mandatory ethics training? I don’t know the answer. But a governance system that allows a political leader to blunder this way and then throws a city into turmoil is not a good system. Principles matter, but so does the way we implement them.
OK, so the answer to the question in the title is almost certainly “no,” but outlawing ethical investing is precisely what is being implied, no doubt inadvertently, by a new plan being attributed to the UK’s Labour Party.
Over the weekend, several UK news sources reported on a press release indicating that the Labour Party’s leader, Ed Miliband, was about to announce his intention (if elected) to impose tough new rules on the financial industry. The idea was to be put forward during a speech at the party’s annual conference this past weekend. According to the Daily Mail,
Mr Miliband is proposing a sweeping new legal duty on any financial service which manages savings, including pension funds and banks, to maximise the saver’s returns. Failure to do so would mean them breaking the law.
(While I haven’t seen the actual press release upon which this analysis is based, a very similar report appeared in The Guardian.)
On the face of it, this is just another promise by a politician to fight for the little guy by imposing constraints on big business.
But hold on a minute. As Tim Worstall at Forbes.com astutely points out, requiring a bank to maximise a saver’s financial returns implies a legal duty not to pay attention to any factor other than money. No more attention to sustainability. No more doing good deeds. No more avoiding investing in tobacco or arms dealers. It’s gotta be all about the money.
But focusing on something other than money is precisely what financial institutions promise to do when then offer various ‘ethical’ or values-based investment instruments. The promise made by such funds is that they’ll aim at a “solid” return on investment, while at the same time paying due attention to social and/or environmental concerns. Miliband’s proposal would make such funds illegal. Indeed, if taken seriously, Miliband’s proposal goes much farther than that: it would criminalize all attempts at corporate social responsibility by financial services companies.
Indeed, legally requiring banks to maximize return to savers is exactly parallel to the (fictional) requirement for corporations to maximize return to shareholders. (Why “fictional?” Because the directors of a corporation are only legally obligated to serve loyally, not to maximize profits per se.)
Now as Worstall points out, such announcements regarding what a politician is going to say sometimes don’t come true. And heaven knows that even if Mr. Miliband does or did make the promise out loud, there’s no guarantee that he will make good on it, even if he has the opportunity. Hopefully he or his advisors have seen the folly in such a law, and will find some subtler way to achieve their policy objectives.
A parliamentary committee in the UK has decided, in the wake of the phone-hacking scandal, that media baron Rupert Murdoch is “not a fit person to exercise the stewardship of a major international company.”
This is not exactly good news for Murdoch, but nor is it catastrophic. The parliamentary committee that chastised him has no real power, and certainly not the power to act on its assertion that Murdoch is unfit to run a company.
The power to make that determination, and hence in principle to hobble the UK branch of Murdoch’s media empire, is “Ofcom”, the UK’s Office of Communications, a regulatory agency set up by, but arm’s-length from, the UK government. According to the Washington Post, “The independent agency has the power to take a TV license away from anyone deemed ‘unfit’ to hold one.”
But assertions by a parliamentary committee that a corporate leader is unfit should give us all pause — not to contemplate the fate of the accused, but to contemplate the larger question of governments telling us who is fit to be in business. Trust me, I have no particular sympathy for Rupert Murdoch, but I also think it’s a very good thing that the committee wagging its collective finger at him has no teeth.
One of the virtues of free markets is that governments don’t generally play a role in deciding who gets to be an entrepreneur or who gets to run a corporation. A corporation is a piece of private property, albeit a rather complex and unusual kind of private property. In small organizations, you get to be chief by starting the business yourself; in larger ones, you get hired by the shareholders or (as in the case of cooperatives) by the employees or customers who own the thing.
Contrast this to a communist or feudal system under which an aspiring entrepreneur has to grovel at the feet of some bureaucrat or feudal lord just to be granted the privilege of starting a business and supplying his or her fellow citizens with the products they want and need. Under such a system, you only get to be head of a large, productive organization if government officials give you the nod. Now of course, some people won’t see that as such a bad thing. If you see a corporation as primarily a public institution — one whose goals ought to be public ones — then perhaps you also think its leaders ought to be chosen by (or at least subject to veto by) representatives of the public.
But consider: the committee mentioned above was composed of members of two different political parties. The report the committee issued was approved by a 6 to 4 vote, a vote that divided the committee along party lines. So before you give a hearty cheer for this instance of government censure, remember that under a different system such censure might have teeth, and such a committee could easily be dominated by a party other than the one you prefer.
Corporate personhood is one of the most badly misunderstood concepts in discussions of corporate behaviour and responsibility. It is also one of the most essential tools for promoting human wellbeing and protecting individual human liberties.
People get angry — understandably and often justifiably angry — when they see instances in which corporations have too much power. But the response, the way such anger is directed, is not always constructive. Indeed, sometimes it’s downright counterproductive.
Witness, for example, the recent move in the US to propose a “People’s Rights Amendment.” (It’s a project of citizens group “Free Speech for People”, and the bill was introduced in congress by Congressman Jim McGovern of Massachusetts.) This is a hail-Mary attempt to amend the US Constitution, largely in response to the US Supreme Courth’s controversial Citizens United decision. That decision, rooted in constitutional arguments about free speech, removed certain limits on corporate political donations. Like many people, I worry about the effects of that decision; but I worry even more about the potentially disastrous effects of the proposed remedies.
Now, a lot of people believe that the US Supreme Court, in the Citizens United decision, invented the notion of Corporate Personhood. That belief is both false and wildly US-centric. But aside from getting history wrong, this belief has resulted in a backlash that has included some wrong-headed proposals for shifting the balance of power back to The People. And the People’s Rights Amendment is one of those.
Here are the 3 sections of the proposed “People’s Rights Amendment”:
Section 1. We the people who ordain and establish this Constitution intend the rights protected by this Constitution to be the rights of natural persons.
Section 2. People, person, or persons as used in this Constitution does not include corporations, limited liability companies or other corporate entities established by the laws of any state, the United States, or any foreign state, and such corporate entities are subject to such regulation as the people, through their elected state and federal representatives, deem reasonable and are otherwise consistent with the powers of Congress and the States under this Constitution.
Section 3. Nothing contained herein shall be construed to limit the people’s rights of freedom of speech, freedom of the press, free exercise of religion, and such other rights of the people, which rights are inalienable.
There are two problems here, and they are rooted in Sections 2 and 3 respectively.
Note that Section 2 says that incorporated entities don’t get constitutional rights at all. So that means, for example, no 4th Amendment limits on search and seizure of corporate property. So, under this proposed Amendment, no one’s investments — not your stock portfolio, not your RRSP, not your pension plan — is immune from arbitrary seizure by the state. It also means that a corporation would have no right to due process when charged with a crime. The implications for shareholders and employees, here, are potentially disastrous. Under the People’s Rights Amendment, any corporation you’ve invested in, or where you work, could effectively be seized and shut down without cause, without trial, without explanation. This surely limits corporate power, but at enormous cost — namely an enormous increase in the power of the state. Not the people; the state.
I should also add that this Amendment seems also to apply also to unions, nonprofits, and churches. None of them would, under the People’s Rights Amendment, retain these rights against the state, and all would be enormously vulnerable.
But all of that only matters if Section 3 doesn’t exist, because Section 3, if taken seriously, guts the whole thing. Section 3 reasserts that people, human beings, do have rights, and that nothing in Section 2 can be construed as limiting those rights. So as the owner of a corporation, or as a shareholder in one, Section 3 assures you that your property — including presumably the property of the corporation you own, or the property of the corporation from which you derive dividends — cannot be subject to unreasonable search and seizure, and cannot be confiscated without due process. Whew!
The point here is that people, real flesh-and-blood people, rely on business corporations and other ‘corporate entities’ in a huge number of ways. They are how we make our living. They are the instruments of our collective success. Where the power of those instruments needs to be limited, as it surely sometimes does, it cannot be done by pulling the rug out from under individual, human liberties. And so if corporate power is to be reined in, it will have to be done through a mechanism considerably less clumsy than the People’s Rights Amendment.
A recent story quotes Fred Green, the CEO of the Canadian Pacific Railway, as saying that he won’t sacrifice safety in pursuit of profits. In his words, he won’t violate the terms of his company’s unwritten ‘social licence’ to operate.
The notion of a ‘social licence to operate’ reflects the notion that in order for a business to be successful, in the long run, the support and goodwill of society is essential. This includes everything from the willingness of a local community to walk into your store to buy things, to the willingness of neighbours to put up with the noise of your trucks driving past, to the willingness of duly elected representatives of the people to pass the kinds of legislation that makes modern commerce possible.
This raises the question: just how does a company earn, and maintain, its social licence to operate? How, in other words, can — or should — a business show its gratitude, or pay its debt to society?
There are a number of ways, and they are not mutually exclusive.
One option is through charitable donations. Corporate philanthropy is as old as the hills, but is generally pooh-poohed by proponents of modern CSR, who favour instead things like collaborative efforts to build local skills and capacity.
Another way is by paying special attention to social impacts, beyond what is required by law. For example: selling junk food is perfectly legal, and arguably fully ethical, at least on a case-by-case basis. But a food seller that looks to the aggregate social consequences of its junk-food sales, and tries to mitigate negative impacts, might be said to be doing so as part of its social licence to operate.
Another way is by paying its taxes. That might seem trivial, a mere matter of following the law. But given the complexity of the tax code, the number of loopholes, and the size of some companies’ accounting departments, a commitment to paying your fair share is probably non-trivial.
Another way a company can earn and keep its social license to operate is by a commitment to looking for ‘win-wins.’ In this category, we could place various efforts at seeking energy efficiency and waste reduction. Of the many ways a company can look to save money, some are socially valuable, and opting to pursue those over others might be seen as supportive of a company’s social licence.
And finally, there’s the old (and true) point made by Milton Friedman years ago, which is that companies contribute socially by making goods and services that people want. What does Merck ‘give back?’ It gives us pharmaceuticals that relieve pain and suffering. What does BP contribute? It finds and refines the oil without which our economy would literally grind to a halt. What does my local coffee shop do for the community? It provides a place to get in out of the rain, have a cup of coffee, and chat with a friend.
Now it’s quite likely that no one of these is sufficient. Each of them is a plus, and counts towards a company’s social licence, but likely some combination is necessary. From this range of options, each company chooses how it thinks it can best earn and keep its social licence to operate. Different mixes will make sense for different companies in different industries. There’s no one right combination that will let a company merit its social licence. Innovation and variety are a good thing, here. Let a hundred flowers blossom!
The Toronto Star recently reported that the city’s beleaguered Mayor, Rob Ford has stumbled yet again. The Mayor, it seems, opted not to use the city’s standard (cheap) method of having business cards printed. He opted, instead, to go his own route. That might not be surprising a surprising move, coming from a maverick mayor, except for two facts. One is that his way cost a fair bit more. The other is that his way meant giving the contract to his own family’s printing business.
Three additional points are worth making.
First, this is an actual, bona fide conflict of interest. The Star reports City Councillor Josh Matlow as being critical of Ford’s decision, and wondering if the decision carried the risk of “a perceived conflict of interest”. Perhaps Matlow was pulling his punches, attempting to be collegial. But the term “perceived conflict of interest” is properly reserved for situations in which the concerned observers might understandably but wrongly think that the decision-maker had an external interest that could have influenced his decision-making, perhaps because outsiders are misinformed about who was responsible for what decisions.
Second, as always, it’s important to differentiate conflict of interest from corruption. The term “corruption” implies a level of intentionality not required to establish conflict of interest. You can be in a conflict of interest through no fault of your own. Whether there was fault, in the present case, is for voters (and quite possibly the city’s city’s integrity commissioner) to decide.
Finally, it must be acknowledged that the dollar amounts here are pretty small. The total cost of the business cards Ford ordered is just a tad over $1500. Compared to the city’s budget, or even just the budget for the Mayor’s Office, that’s pocket change. But one thing that corruption and conflict of interest share in common is that size isn’t always the issue. What’s at issue in conflict of interest is the need to protect the integrity of the institution, and in particular the way key stakeholders perceive its decision-making processes. Whether in business or in public office, it is crucial not just that top executives make the right decisions, but that they be seen as making decisions on the right basis.