Archive for the ‘profits’ Category
Progressive Garment Factory, or Charity?
Filed under: aid, charity, employees, international, labelling, profits |
Comments (23) What’s the difference between a progressive factory and a charity?
Here’s the story, by Steven Greenhouse, for the NYT: A Factory Defies Stereotypes, but Can It Thrive?
…Ms. Castillo had long dreamed of a bigger, sturdier house, but three months ago something happened that finally made it possible: she landed a job at one of the world’s most unusual garment factories. Industry experts say it is a pioneer in the developing world because it pays a “living wage” — in this case, three times the average pay of the country’s apparel workers — and allows workers to join a union without a fight.
“We never had the opportunity to make wages like this before,” says Ms. Castillo, a soft-spoken woman who earns $500 a month. “I feel blessed…”
There’s lots that’s interesting, here, but what most struck me was the similarity between the factory described (which produces apparel under the label “Alta Gracia”) and the controversial (Product) RED campaign. As you may already know, (Product) RED is a project that attempts to leverage consumerism into charity, by donating a small portion of profits from certain consumer goods — RED-branded iPods, for example — to the Global Fund (to fight AIDS, tuberculosis, and malaria in needy countries). I wrote about RED here and here.
See the similarity? Red asked consumers to pay a premium so that money could be donated to the Global Fund. Alta Gracia asks consumers to pay a premium so that the money can be donated to the company’s workers. In both cases, there’s an attempt to advance a worthy cause (disease prevention on one hand, poverty alleviation on the other) by appealing to affluent consumers via value-laden branding.
Two questions occur to me.
1) Will Alta Gracia be subject to the same kinds of criticisms that (Product) Red has been subjet to? If not, why not?
2) It seems to me that the choice of workers as beneficiaries of the Alta Gracia scheme is but one option. Who are other potential beneficiaries of schemes like this? If RED helps out by donating profits directly to third parties (i.e., via the Global Fund) and if Alta Gracia helps out by donating higher wages to its workers, are there other parallel mechanisms that would work? Here’s an example. What if the company that owns Alta Gracia (Knights Apparel) were publicly-traded (instead of privately-held). And what if it gave shares to poor families, so that they could receive dividends when the company makes a profit? Would that be ethically the same thing? Would people who generally think profit-seeking is evil suddenly think profits are a good thing?
What Does BP Owe its Shareholders? Nothing.
People have generally been dismayed at the behaviour of BP execs in the wake of the disastrous oil spill. CEO Tony Hayward has been roundly criticized, both for his overall handling of the situation, and for asking dumb questions like “What the hell did we do to deserve this?” The unmistakable impression is that BP’s ‘heart’ really isn’t in it when it comes to fixing this mess, and that they’re more interested in preserving what’s left of their reputation and in protecting profits.
How, ethically, ought BP’s execs to be behaving? Where do their obligations lie? Should they be focused 100% on cleanup? Should they be trying to preserve and build shareholder value? Should they be balancing those 2 objectives?
Generally, the task of corporate managers is to build wealth for shareholders. Don’t forget, executives are hired to run a business they don’t own, so it’s not up to them to decide how to run it. The standard view is that their job is to serve the shareholders. As long as they do so in constructive ways — through innovation, efficiency, etc. — and as long as innocent bystandards aren’t hurt, such profit-seeking is in fact socially beneficial. So one way to think about business ethics is that managers are free to compete aggressively, focused primarily on shareholder value, as long as they’re not misleading customers, abusing monopolistic power, or foisting costs on bystanders (i.e., imposing what economists call “negative externalities”). Those behaviours represent the boundaries of the ‘game,’ as it were. Within those boundaries: play ball!
This view implies that as long as a company keeps its nose clean, they don’t need to feel bad about pursuing profits, even when doing so means, for example, putting a competitor out of business, resulting in a loss of jobs, etc.
OK, so now consider BP. A year ago, BP’s managers might have been able to say something like this: Our job is to build shareholder value. We do that by producing a product society needs and is willing to pay for. As long as we don’t pollute too much (after all, all industry creates at least some pollution) it’s ethically OK for us to focus on our the interests of our shareholders.
Now, fast-forward to right now, to June of 2010. BP’s managers can’t exactly help themselves to the above argument, can they? The condition that normally justifies the zealous pursuit of profits doesn’t obtain, here, because BP’s managers haven’t been anywhere near sufficiently careful about avoiding imposing costs on others. Indeed, they’ve imposed massive costs (massive negative externalities) on the people of the Gulf Coast states, and (less directly) on the rest of us too.
So, when BP’s managers look around them, at the wide range of individuals and groups with a stake in their current decision-making, how much weight are they justified in giving to the interests of their shareholders, i.e., to the people who benefited from their profit-seeking behaviour in the first place?
I’d say “roughly zero.”
(The philosophical version of the argument for the basis, and limits, of profit-seeking behaviour can be found in Joseph Heath’s “An Adversarial Ethic for Business: or, When Sun-Tzu met the Stakeholder,” Journal of Business Ethics, 69, 2006. A downloadable version is on Joe’s page here.)
Facebook and Dangerous Ideas
Of all the ideas that a CEO can have, is the most dangerous one the idea that his main objective should be to generate profits for shareholders?
How about a belief in the idea that your privacy — the privacy of millions of customers, whose information he holds in the palm of his hand — just doesn’t matter? That’s roughly what Facebook CEO Mark Zuckerberg seems to believe.
Venture Beat’s Kim-Mai Cutler looked around and found a bunch of evidence about just what Zuckerberg believes, including this gem:
“You have one identity,” he emphasized three times in a single interview with David Kirkpatrick in his book, “The Facebook Effect.” “The days of you having a different image for your work friends or co-workers and for the other people you know are probably coming to an end pretty quickly.” He adds: “Having two identities for yourself is an example of a lack of integrity.”
What Zuckerberg is really talking about when he talks about people having “two identities” is privacy. He means revealing more or different information to some people than you do to others. And far from betraying a deep character flaw (“lack of integrity”), giving differential access to information about ourselves is widely regarded as an important part of how we develop and maintain intimate relationships. Your friends (including Facebook “friends”) are more or less just people who have access to information about you that most people don’t have. What it means to be intimate with someone (sexually or otherwise) is to give them access that you don’t give to everyone. It’s what makes them special. For someone like Zuckerberg not to understand this is truly scary, given how much information he controls.
And as usual, my point here is more about the general question than about the particular instance. The point of this blog entry isn’t to add one more voice to the chorus of criticisms levelled against Facebook recently. I’m just using Facebook as an example, to illustrate the point. Many people believe that the belief in the importance of profits is the big, dangerous idea we need to worry about. But it’s not. There is nothing wrong with zealously pursuing profits, so long as you don’t do so through anti-social means.
So here’s a CEO with a truly scary belief, but it’s not the belief in the importance of profits.
No, the real danger doesn’t lie in a commitment to making profits; the danger lies in what you’re willing to do to make those profits.
Profits & Disaster Relief
I’m currently spending a few days this week at the wonderful Kenan Institute for Ethics, at Duke.
Last night I was part of a Kenan panel discussion with Jacob Remes (a Kenan Graduate Colloquium Fellow and a Ph.D. candidate in the department of history here at Duke). Jacob sketched some of the history of disaster relief, and argued that the kinds of aid most likely to prove effective have typically been ones rooted in solidarity, rather than in charity. He said that the informal help of family and neighbours has most often proven more useful than official aid. (Here’s an editorial Jacob wrote on the topic: Aid that will work in Haiti.)
I’m no expert on disaster relief, but regular readers will know that I’ve touched upon it once or twice on this blog. In particular, I blogged about the role of both cruise lines and credit card companies in the wake of the earthquake in Haiti.
To try to link my own thinking on disaster relief to Jacob’s historical account, I looked at what features of solidarity (or, roughly, friendship) make it so important in disaster relief. My quick causal hypothesis is that the crucial features of friendship, here, are knowledge and motivation. And if those really are the two key factors, then it’s worth looking at what other mechanisms have those features. Human solidarity is a beautiful thing, but it’s not always there. So it’s worth considering other mechanisms.
So, I argued that, at least to a certain extent, market-based solutions have those same two features. First, consider motivation. Aid based in friendship is likely to be enduring aid because our friends (even loosely speaking) are motivated to help us. But famously, another pretty reliable motivator is profit. I hope that companies see opportunities for profit in Haiti, for example. Most of us who help will help by making a quick, one-time donation. Companies who see business opportunities in Haiti are more likely to make longer-term investments.
Next, consider knowledge. One of the most important features of markets is that market prices convey information about needs. So, knowing that the price for x has risen in a particular region tells entrepreneurs that there’s a need for more x. And that equals an opportunity to profit by meeting that need. The other way in which business can do well in terms of knowledge is this: those of us who are distant from the scene can contribute by helping local businesses — businesses that are likely acutely aware of local needs. Microcredit organizations like Kiva and Zafèn are in effect ways to combine local knowledge with foreign capital to help build local economies.
Now, I hasten to add that I’m not suggesting that all (or even the most important) answers to the big questions of disaster relief are going to come from the world of business. But when it comes to disaster relief, we need ‘all hands on deck.’ So it’s worth thinking carefully about just what the profit motive can, and can’t, do in terms of disaster relief. The profit motive may not be the noblest of human motives, but it is surely one of the more reliable ones.
Should Consumers Trust Big Pharma?
Filed under: accountability, conflict of interest, consumers, honesty, pharma, product safety, profits, risk, science |
Comments (9) 
Lots of people don’t trust Big Pharma. And to a significant extent, that’s for good reasons. (I’ve blogged about some of those reasons here, here, here, here, here, here, here and here, just to cite a few examples. See also some of the entries on the other blog I co-author, the Research Ethics Blog.)
Trust in big pharma is an important issue. Pharmaceuticals are responsible for saving and improving a huge number of lives. Vaccines alone have prevented literally millions of deaths. Survival rates for many cancers are better than they used to be. And AIDS, once a death sentence, is now regarded as a chronic disease. So there’s real benefit from pharma, but also an undeniable track record of scandals and general unethical behaviour. What should we think?
The first thing worth noting is that the question in the title above is vastly oversimplified. The question isn’t “should consumers trust big pharma?”, it’s more like “To what extent, and under what circumstances, on what issues, should consumers trust big pharma?”
Setting aside the industry’s spotty track record, the main reason people tend not to think Big Pharma trustworthy is, of course, the fact that Big Pharma consists of profit-oriented organizations. And the general assumption is that money corrupts. Of course, money isn’t the only thing that corrupts judgment (so does love, reputation, ideology, etc etc), and big pharma is far from the only industry where big money is at stake. But still, there’s a real worry here (one I’ve blogged about before).
Now, what about the reasons in favour of trusting Big Pharma? What factors would tend to make Big Pharma trustworthy, to at least some extent?
Now I cannot emphasize this strongly enough: what follows is not intended to imply a general conclusion about the trustworthiness of Big Pharma. It’s just a list of important factors to keep in mind when assessing the trustworthiness of a particular claim, by a particular company, on a particular issue.
1) Ethics. Don’t just think about the organizations; think about the people who work at them. They’re mostly people like you & me. Most of them got into the business to try to help people (and, yeah, to make a living). And most of them were raised by their parents to be decent, honest folks. Most people tell the truth about most things most of the time.
2) Regulation. The pharmaceutical industry is heavily regulated, subject to lots of laws regarding the efficacy and safety of their products, as well as regarding advertising. Criminal and civil sanctions are possible when pharma companies misbehave. Now, that’s not to say that the current level of regulation is sufficient, or that enforcement is adequate. But companies (and individuals) have been subject to serious sanctions. Companies generally want to stay out of court, and so they’ve got a reason — not always a sufficient reason, but a reason — to behave in a trustworthy manner.
3) Peer Review. In few other industries is fundamental information about what makes your product work (or not work) open to public scrutiny. In order for a new drug to receive approval to be marketed, it has to show itself to be safe and effective in clinical trials, and the results and methods of those trials have to be published in peer-reviewed medical journals. Drug companies are not allowed to make claims based on secret data. “Peer reviewed” means that the articles reporting on the trials have to be vetted by a panel of qualified experts if they are ever going to see the light of day. It’s an imperfect system (all systems relying on human judgment are) but bad science tends to get weeded out pretty quickly. Then, once a study is published, it’s there for assessment, and potentially criticism and rebuttal, by hundreds or thousands of other experts.
4) Scientific Overlap. You sometimes hear it implied that physician-researchers (the ones who do most clinical research, as well as doing all that peer reviewing mentioned above) have all been corrupted by corporate money. And it’s true that there really is cause for worry here. Too many docs get too much money (and other perks) from pharma, and are insufficiently transparent about that. So: it’s good to worry…up to a point. Here’s the problem with the pharma-controls-everything theory. Physician-researchers publish in scientific journals that are read not just by other physicians (some of whom don’t have industry funding), but also by biologists, chemists, epidemiologists, statisticians, and so on, most of whom have no corporate funding whatsoever. Further, modern science more generally is an enormously complex process for finding mistakes and exaggerations in each other’s research. And it helps that there’s significant overlap between the sciences, so no one group of scientists is ever truly isolated and free from scrutiny. Oversimplifying, you could say that biologists are double-checking the work done by the physicians, chemists are checking up on the biologists, and physicists are checking up on the chemists. (That’s why any physician who tries to use “quantum theory” in writing about disease had better be careful: there are armies of physicists waiting to explain just how irrelevant quantum mechanics is to human physiology.)
5) Competition. People often talk about Big Pharma as if it’s a monolith, one big organization, rather than a bunch of companies with divergent interests competing savagely with each other. That competition gives them every reason to attack each other’s weaknesses, and to point them out to the public. Add to that the fact that there are hundreds of smaller firms nipping at the heels of the big players. It’s far from a cozy conspiracy. This vicious competition of course means that there’s sometimes an incentive to cut corners in unscrupulous ways; but it also means that when you cut a corner, there’s always someone out there ready to point it out.
Now, again, this list is not supposed to lead to any particular conclusion about just how trustworthy Big Pharma is. It’s just a list of social and institutional mechanisms we need to take into consideration, in addition to the obvious bad track record and obvious financial incentives. Each of those mechanisms will apply to a greater or lesser degree with regard to specific situations. For particular issues, we need to think carefully both about what’s at stake, and about whether the above factors are likely to be sufficient to reassure us.
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Late-breaking Note:
I’ve been getting (and rejecting) comments full of unsubstantiated, and in some cases very dangerous, claims on some topics related to the above. When it comes to matters of health, if you’re not going to cite reliable sources, I cannot take responsibility for allowing your comments on here. There’s too much at stake, in terms of public health.
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