The Business Ethics Blog

When is a voluntary transaction between consenting adults not permitted? Well, there are a few cases, but one interesting one is where one of the consenting adults is an unpaid intern at a for-profit company.

Now, the usual presumption is that people only consent to something if they see it as being in their interests, broadly construed, to do so. So why does the law frown on these voluntary unpaid internships?

For a bit of context, see this story (from last week) by Steven Greenhouse, from the New York Times:

Growth of Unpaid Internships May Be Illegal, Officials Say

With job openings scarce for young people, the number of unpaid internships has climbed in recent years, leading federal and state regulators to worry that more employers are illegally using such internships for free labor.

Convinced that many unpaid internships violate minimum wage laws, officials in Oregon, California and other states have begun investigations and fined employers….

So the central ethical issue is this: how can the law prevent me from accepting an unpaid internship if I see it as being in my interest to do so?

Well, there are two potential reasons. One is that the law is effectively preventing companies from taking advantage of people with few other options. If you really need to get your foot in the door of your chosen industry, you might be willing to undergo significant hardship — including unpaid labour — in order to do that. And a company preying on that desperation might be seen as exploitative. But then, “exploitation” is a lot easier to say than it is to explain. Someone who is being paid in opportunities and connections, rather than in cash, is still being paid.

The other potential reason is that we have minimum wage laws — which generally preclude a wage of “zero” — not to protect the person whose wage is at issue, but in order to protect others from having the price of labour driven downward. That is, the law forbidding me from working for $2/hr (in Canada or the U.S., for example) isn’t merely to protect me. That law is really there to protect you — it’s to make sure that I don’t accept (for whatever reasons) such a brutally low wage, and thereby bring about the expectation that you, too, should work for that little.

Still, it’s interesting to note that non-profit organizations are (mostly) exempt from such laws. You’re allowed to donate your time to them. But what’s the difference, really? As Henry Hansmann points out in The Ownership of Enterprise, the essential difference between for-profit firms and charities lies in the separation of buyer and beneficiary that typifies charitable organizations. When a customer gives money to a store, he or she receives some benefit in return; but when he or she gives money to a charity, it is so that someone else can receive some benefit. It’s not clear how that difference justifies a categorical difference in labour standards.

Who’s task is it to oversee ethics in a corporation? It’s tempting to say “everyone,” and at some level that of course is correct. Everyone is ultimately responsible for their own behaviour. People in management positions have some responsibility for those working under them. And anyone with the relevant knowledge and power has some responsibility for the behaviour of their organization as a whole.

But in 2010, many companies have also created special positions with the word “Ethics” (or some near synonym) in the title. So, which department should be home to that person? It’s not a trivial question. The Department that person is assigned to will to some extent determine the resources he or she has access to, and signals the company’s attitude towards the position. What’s the best choice? Here’s a terrific little article by Gina Passarella giving some insight into just that question:

Compliance Officers Play to Bigger Room

In a world of regulations, recession and corporate scandal, the creation of compliance and ethics roles has been on the rise. But what is dropping is the number of those newly created positions that are in any way tied to the legal department.

Because it was written for a legal publication, the article is mostly about how the issue looks from the point of view of lawyers, their job opportunities, etc. But it’s well worth reading for anyone with an interest in understanding how ethics, CSR, compliance, etc., are interrelated and institutionalized within corporations.

Life is priceless, right? Well, no, actually. No matter how often it is said, no one actually believes that life is literally priceless. If we accept the assumption, common within the social sciences, that what we really believe is reflected in what we do (rather than in what in we say) then our actions demonstrate that we actually believe that the value of human life is quite finite. We can, and do, put a price on human life. Examples are not hard to find. Lives cannot — in any civilized place — literally be bought and sold, but there are other ways in which the concept of pricing gets attached to human lives. The notion of life insurance is based on the question of how much one person’s life (namely, that of the insured) is worth to another (namely the beneficiary), and courts routinely place a value on lost human lives in cases of wrongful death. And governments and individual consumers implicitly put a price on life by means of all sorts of spending prioritization decisions.

So, what’s a human life worth, then? Well, that depends quite a lot on context. So, let’s be more specific: how much is a corporation — say, a mining company — obligated to spend on rescuing an employee in peril? This isn’t a random question, but a sadly poignant one, given the tragic recent events at a coal mine in Virginia, where 25 miners have already died and 4 more remain missing.

Here’s the latest on this story, from the NY Times: No Signs of Life From 4 Missing in Mine.

Rescue workers continued the precarious task early Wednesday of removing explosive methane gas from the coal mine where at least 25 miners died two days before, but they had not received any signs of life from the four people still missing….

So, how much is the company that owns this mine (The Massey Energy Company) obligated to spend on the rescue? I suspect that, for practical purposes, the answer to “how much must the company spend?” is “whatever it takes.” The only thing that stops that amount from climbing without end is the sad fact that, eventually, hope will run out.

Now, it may be relevant that the mining company is not exactly blameless in all this:

The mine owner’s dismal safety record, along with several recent evacuations of the mine, left federal officials and miners suggesting that Monday’s explosion might have been preventable….

So, their safety record is pretty bad. And we generally thing that when you make a mess, you have some significant obligation to clean it up. So Massey arguably has more of an obligation to spend (and spend and spend) on rescue than they would if this were a freak accident that they could not have prevented.

Now, it’s worth pointing out that there is (for better or for worse) a strong social norm, here. We are often, collectively, willing to spend vast sums of money on rescue. I wouldn’t be the first to point out that we’ll spend far more (socially) to treat a sick child than we would have spent to keep that child healthy in the first place. Our spending patterns here are not, at least in any straightforward sense, rational, though it might be that these patterns have some use in signalling, socially, in a very public way, the extent to which we value human lives, or our attachment to compassion more generally. From that point of view, spending what would otherwise be insane amounts of money to rescue a single human (or, in some well-publicized cases, a horse or dog) makes a certain amount of sense.

The problem, of course, lies in the economic notion of “opportunity costs” — roughly speaking, the idea that every dollar spent on one thing (like rescue) is a dollar not spent on something else (like making mines safer in the future). So, in principle, a million dollars spent on rescuing a small number of miners could instead be spent on safety improvements that could save many more lives than that, in the future. But then, it’s not an obvious either/or decision: it’s not like the vast sum of money spent on rescue is going to be subtracted from some actual or hypothetical mine-safety budget for next year. But still…there has to be some limit on what a company should spend on rescue. The question is, what is that limit? Or, more generally, how should a company calculate that limit?

p.s. note that my intention here is not at all to suggest that, at some point, we ought to let the company off the hook. My point is just that, no matter what you value, there’s always going to be some alternative use to which money spent on rescue could, otherwise, be put. So it’s worth at least considering whether or when money ought to be conserved to be spent on other things. It’s a hard question, but it cannot be avoided.

So, has big business embraced social networking? Well, the evidence is a bit uneven. There are lots of corporate blogs, including quite a few dedicated to ethics & social responsibility (see, e.g., McDonalds’ CSR blog and CSR@Intel blog). There are also plenty of companies now using Twitter (for example, @Jim_Starbucks and @methodtweet.) But effective use of social media is not exactly universal within the corporate world.

Here’s another data point: In a couple of weeks I’ll be attending & blogging this U.S. Conference Board conference in New York, as a guest of the organizers:

Business Ethics and Compliance Conference: Priorities in Today’s Regulatory and Enforcement Environment.

The conference website describes the goals of the conference this way:

What are we likely to see in the coming year? The risk environment is changing in many areas: antitrust, anti–corruption and FCPA, privacy, export control, fraud, money laundering, government contracting, environmental crimes, human rights violations, insider trading and more. What new risk areas are emerging as a result of new technologies as well as new financial pressures and uncertainties? What changes should you make to your ethics and compliance program, and what needs to be a priority for your company’s leaders?

Sounds interesting over all, but one of the sessions I’ll be most anxious to attend is one called “The Impact of Social Networks and New Communications Technologies.” After all, the use of these new technologies opens up all kinds of new avenues for corporate transparency, along with plenty of new questions about appropriate limits on transparency. Technologies like Twitter have opened up new mechanisms for broadcasting corporate messages and commitments, but have also provided new and potent means by which corporations’ critics (internal and external) can spread their own messages.

And clearly, social media is a topic that’s on the minds of the conference organizers, maybe more than other topics on the agenda. How can I tell? Because the Conference Board is bringing me in not to attend as a professor of Business Ethics — despite the fact that that’s what I do for a living — but as a business ethics blogger. I’ll be blogging (and probably Tweeting) the event: so readers of this blog — including business executives, students, critics, etc. — are going to know, through this medium, what sorts of things are being said at a conference that most won’t get to attend. Anyway, it looks like it will be a great event. Tune in to this channel on April 21 and 22 to hear all about it.

OK, this is entirely hypothetical, though I imagine there are real choices to be made that fit this same pattern.

If you had to choose between safety and reduced environmental impact, which would you choose? What if the safety involved is the safety of your children?

This question, though entirely hypothetical, came to mind as I read the following story about a new “green” method for making rubber for tires, to replace the old petroleum-intensive method:

Goodyear, Genencor Partner on True Green Tire Project

Researchers at Goodyear Tire & Rubber Co. and Genencor are working to create “renewable feedstocks” that would replace petroleum in tires, effectively resulting in a completely “green” tire. And that could happen within five years, they said.

The new tires will be an advance toward greener, more sustainable transportation in a quite literal sense, according to Dr. Joseph McAuliffe, who reported on the technology. The process can use sugars derived from sugar cane, corn, corn cobs, switchgrass or other biomass to produce the ingredient, a biochemical called isoprene, derived from renewable raw materials….

Now, to be perfectly clear, I’m not at all suggesting that there’s anything second-rate about this new “green” rubber. I’m sure they’re working hard to make this new product just as tough and durable and suitable-for-making-tires as regular petroleum-based rubber. But it is of course an obvious question. Rubber quality matters a lot for tires, and so any new form of rubber is going to have to prove that it can perform in prolonged use under harsh conditions.

So, let’s take this new technology and ask a hypothetical question. If “green” tires were to hit the market, and if they a) really were substantially more environmentally friendly but b) were only “nearly” as safe (say, 98% as safe) as old-fashioned rubber tires, would you buy them? Should you?

Marketing is about selling things. Other things being equal, the more you sell, the more effective your marketing has been. Can marketing ever be too effective? Yes, when it’s done it’s done expertly and aimed at kids. Marketing to kids in an ethical way is tricky. It’s hard to imagine saying flat-out that companies should never market to kids. Lots of kids have at least some buying power (transferred to them by adults) and many kids have influence on family expenditures. And it’s not like kids have absolutely no ability to filter information and make good decisions. The fact that they’re kids doesn’t mean they’re stupid. But still, most people agree that if you’re going to market to kids, you’ve got to pull your punches a bit.

On that note, see this story, from The Age: It’s time to go, Ronald

A coalition of health professionals, parents and corporate accountability advocates is calling for Ronald McDonald to retire as a spokesman for the world’s largest restaurant chain, saying he has too much influence on kids.

Corporate Accountability International, which has waged campaigns against bottled water companies and tobacco companies in the US, said it plans to present the results of a survey on Wednesday showing that most Americans agree….

So, is is it OK to use a clown to market what is generally pretty unhealthy food to kids? Kids do love clowns: they’re happy, friendly, welcoming, accepting. Now, it’s worth noting that cigarette maker R. J. Reynolds retired its own kid-friendly marketing device, Joe Camel, nearly 13 years ago, in the face of criticism that using a cartoon character to sell a deadly product was, well, a bit over the top. Hmm, see the parallel? Now, McDonalds isn’t R. J. Reynolds. However unhealthy most of McDonalds’ food is, it’s still not cigarettes. But, as food choices go, eating at McDonalds is pretty bad. At least it’s bad as a habit. Sane, sensible adults can exercise restraint, and do their best not to let it become a habit. And maybe that’s fine: eating at McD’s once in a while isn’t going to hurt you. But kids don’t necessarily have the same capacity (or responsibility) for restraint. And for junk food, as for cigarettes, it’s pretty reasonable to think that they core marketing strategy is to get ’em while they’re young.

I recently argued in another venue that it can be hard for companies to show restraint. Aiming to sell “a little less” to kids or to market to them “a little less aggressively” is probably a hard promise to keep. But McDonalds has a chance to take a concrete, discrete step here, one that doesn’t involve any mushy grey zones. All they have to do is cut a mascot that’s clearly aimed at promoting their mostly-unhealthy product to kids. Yes, Ronald, it really is time to go.

—–
Here are a few related blog entries:

• Ethics of Advertising Bad Food to Kids
• Kudos to Kellog (Fewer Ads Aimed at Kids)
• Marketing to Kids

—–
HT to Andrew Potter.

Just what is the relationship between shareholders and the companies in which they hold shares? People who own shares through pension plans, mutual funds, and so on, don’t even know the names of the companies they’ve invested in. And yet, in some sense, the managers of a company are supposed to work “for” shareholders. What does that mean?

As illustration, see, for example, this story recent story about Toyota and the currently-not-so-cozy relationship it has with its shareholders: Toyota Shareholders Sue Over Fallen Stock Price

Toyota shareholders incensed over a sudden drop in the Japanese automaker’s stock price are heading to court with lawsuits claiming company executives deliberately misled investors and the public about the depth of accelerator problems in millions of its vehicles….

Some people will find this odd. How can shareholders sue the company? Don’t they own the company? Well, it would be odd, if in fact that were true.

A good critique of the notion that shareholders own the company can be found in John Boatright’s Fiduciary Duties and the Shareholder-Management Relation: or, What’s so Special About Shareholders?, in which he argues that, if there is any sense in which shareholders can be thought of as owners, it is in a very special sense that differs markedly from other examples of ownership of property. Boatright writes:

Ownership of a corporation is different, of course, from the ownership of personal assets. Most notably, shareholders do not have a right to possess and use corporate assets as they would their own; instead, they create a fictitious person to conduct business, with the shareholders as the beneficiaries….

And it’s often noted that, as a shareholder, you don’t automatically have the right even to set foot on corporate property. That’s a pretty strange form of ownership.

(The notion that shareholders do not own corporations is also a favourite theme of law professor Steven Bainbridge. See his blog entry, Who Owns the Corporation? Nobody.)

Others hold that, yes, shareholders do own the company — it’s just that it’s an unusual form of ownership, set up to meet particular needs. The question, then, isn’t simply whether shareholders ought to be regarded as owners. It’s rather to what extent shareholders ought to be regarded as owners, for what purposes, and what the legal and ethical implications of this odd form of ownership are. In the case of Toyota, a judge is going to have to decide, in effet, whether the company’s shareholders are owners whose employees (managers) failed in their duty of loyal service, or whether, instead, the shareholders are merely another stakeholder group that was let down.

—
Thanks to Wayne Norman for showing me this story, and for pointing out this implication.

OK, this one is personal.

I wanted to buy a new iPod. I decided to order via Apple’s website in part because when you order online, Apple will engrave the iPod for you, at no extra cost.

I wanted to get one of my favourite philosophical quotations engraved. The quotation (from David Hume’s 1739 masterpiece, A Treatise of Human Nature) says: “Reason is, and ought only to be the slave of the passions.”

But no. The Apple website refused my request. “Inappropriate message text.”

Huh? “Inappropriate”? A call to Customer Support confirmed my suspicion: the word “slave” is not allowed. You can’t have just anything engraved on your iPod. Certain words are forbidden. Uh, OK. I get that. Apple is providing a service, and they don’t want to engrave ridiculously offensive slogans on their merchandise. And there’s no free speech issue, here. You’re free to get someone else to engrave whatever you want on your iPod once you’ve got it. Apple just doesn’t want to do it for you.

But why is the word “slave,” in particular, forbidden? I don’t know, and the nice Customer Service rep didn’t know either. One possibility is the term’s association with the ugly, mostly-historical practice of human slavery. The other possibility is the term’s sexualization in the world of BDSM. Not exactly a dirty word, but (or so I supposed at first) Apple is just being super-cautious, and forbidding any word with vaguely sexual connotations.

So, just what words are forbidden? I doubt that list is made public, but a little experimentation (and imagination) turned up some interesting patterns, as well as some hilarious inconsistencies.

The word “slave” is forbidden, but “master” is permitted.
The term “vaginal” isn’t allowed, but “anal” is.
“Masturbation” is out, but “rape” is OK.
You can’t have “boobs,” but you can have “nipples.”
“Slut” is not permitted, but “whore” is fine.

I now officially have no idea what kind of filter Apple is using.

Interestingly, only six out of seven of George Carlin’s “Seven Words You Can Never Say on Television” are forbidden. The one that refers to someone who performs fellatio — itself a forbidden word — is allowed.

What are a company’s responsibilities when a small amount of its product doesn’t do anything bad, but when higher levels of consumption have bad consequences either for the individual consumer, or for the community?

That’s the topic of a guest posting by me today over at CSRwire, called “Social Responsibility as Restraint”.

Here’s the opening paragraph…

Restraint is tough. Anyone who has ever dieted, even just to lose five pounds, knows that. Our bodies whisper, “more…more….” even as the conscious part of our brain tells us that more would be bad. The hard thing is, just one more bite of cake really isn’t going to hurt us. The calories in one bite of cake are trivial. But we know that in the long run, all those “one more bites” are going to add up….

Basically I advance the idea that for certain categories of products — namely, ones that are harmless on a case-by-case basis but dangerous in the aggregate — the social responsibilities of companies might imply looking not at ways to cut back on production or sales, but to look at specific, concrete categories of sales that they could eliminate (e.g., sale of sugary colas to kids).

Anyway, you can check it out over at CSRwire.

I’m just back from speaking at a terrific conference in New York on Corporate Citizenship, sponsored by The Economist. The panel I was on included senior executives from both Coca-Cola and Procter & Gamble. During Q&A, I kept hoping someone in the audience would ask a particular question that was on my own mind. Both of those companies face one particular challenge: they both produce at least one product that, socially, we’d like them to sell less of. The world would be a better place if less sugary cola was consumed, and the Pampers brand diapers made by P&G are currently being archived for eternity in our landfills. There’s a hard ethical problem there, especially for Coca-Cola: their product is arguably perfectly harmless when consumed in moderation, but many people don’t consume it in moderation. Coke knows that. They’re helping feed the obesity epidemic — but they’re also selling something that many people enjoy in very safe moderation. But if colas (and other sugary drinks) are feeding the obesity epidemic, their contribution to that epidemic varies only in degree from other kinds of foods and beverages that are subject to over-use. If it’s wrong to sell cola, then it’s arguably also wrong to sell ice cream, chocolate cake, and (gasp!) wine. All of those have plenty of calories, and all of them can make you fat.

As it happens, here’s a related story from just 2 days ago, by Bruce Horovitz, for USA Today: Pepsi is dropping out of schools worldwide by 2012

The iPod Generation will get a global lesson in healthier beverages from an unlikely source: Pepsi.
PepsiCo on Tuesday announced plans to voluntarily remove high-calorie sweetened drinks from schools for kids up to age 18 in more than 200 countries by 2012. Coke and Pepsi agreed to stop selling sugary drinks in U.S. schools in 2006….

Whether the product in question is food or something else, marketing to kids is arguably “low-hanging fruit,” ethically. It’s relatively clear that (most?) young people are less-able to make good dietary decisions than are (most?) adults. Add to that two special features of teens in particular. First, they famously think they’re indestructible, so they’re unlikely to be scared off by warnings that a product is unhealthy for them. And second, they’re in the process of forming patterns of food consumption that are likely to be with them for life. So it’s pretty easy to make an argument that it’s especially socially irresponsible to market sugary drinks to kids & teens.

Now, I’m sure some people wish Coke & Pepsi would both go farther, and restrict their marketing even more. But maybe by taking their beverages out of schools, these companies are aiming at a kind of compromise. Maybe this kind of decision on the part of Pepsi is analogous to the kind of behaviour we all ought to exercise in our own consumption of sweetened drinks: not utter abstinence, but a reasonable degree of moderation.