The Business Ethics Blog

Is this the Golden Age of ethical business?

Yes, I’m serious. Bear with me.

Consider first the values manifested in the modern workplace. Workplaces today, while still far from perfect, are less sexist, less racist, and generally more civilized and humane than at any time in history. Yes, many workplaces are still less-than-great. Some are downright bad. But ask yourself this: when, generally, were they better?

Consider also that in 2010, businesses are more transparent and accountable — due in no small part, of course, to the effects of smart regulation and the advocacy work of NGOs and corporate watchdogs — than ever before. The public is paying attention, and between news agencies and the internet they have access to a lot of information about corporate behaviour. Corporations know that, and are by and large responding. We live in an era in which “Corporate Ethics Officer” is an actual job title, and in which entire businesses are built on the idea that consumers care about how ethical the companies they buy from are.

Now, you may ask, what about all those scandals? Well, I noted above that the media and internet are important sources of information. But while the media in particular are a vital source of information about corporate behaviour, it’s important not to mistake trends in reporting as trends in the world. If you judge only by what you see and read in the news, you’d think that violent crime is up (but it’s not) and that flying is dangerous (but it’s not). The fact that more corporate scandals are reported isn’t really evidence that more corporate scandals are happening. And even if it were the case that more wrongdoing is going on at high levels in the world of business, that doesn’t mean that business in general is any less ethical than it was 20 or 50 years ago. Scandals too easily obscure the fact that throughout North America, there are millions of people, working at tens of thousands of companies, making good, honest, ethical decisions day in and day out.

Of course, we can’t literally declare this the “Golden Age.” Normally the “Golden Age” of anything is only declared after the fact. Time, as they say, will tell. And if things go well, businesses may be even more ethical in 10 or 20 years than they are now. We all certainly hope so. But still I’m willing to advance the thesis for discussion that business today, in 2010, is more ethical than it’s ever been in human history.

Now, the rosy picture I’ve painted above is no reason for complacency. There are challenges ahead. Lots still needs to change. It’s important to keep business ethics on the agenda, both in the corporate world and in the public sphere. But that needn’t obscure the good that’s been done. In fact, it’s crucial that we keep in mind that past efforts to improve the ethics of business have met with at least some success. Past success, after all, is likely a crucial part of maintaining hope for an even brighter future.

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(This blog entry is inspired by comments I’ve prepared for this event, put on by The Economist, and which I’m speaking at today: Corporate Citizenship 2010: Doing Well by Doing Good.)

Homeopathy has been getting a bit of a rough ride in the UK lately, as the 10:23 campaign has been doing its best to shame UK pharmacy chains for selling unproven remedies.

Then just this week, a committee of the House of Commons concluded that the government should no longer pay for homeopathic treatments. Here’s a bit more detail, from The Guardian: MPs criticised homeopathy this week. What’s their evidence?

This week, the House of Commons Science and Technology Committee published a report criticising government policy on homeopathy, saying that homeopathic remedies should no longer be funded by the NHS or licensed by the drug safety watchdog.
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The committee discussed evidence from all kinds of sources, including the Department of Health, the British Homeopathic Association, the British Medical Association, Boots, doctors and scientists, NHS trusts, the UK’s drug safety watchdog, NICE, campaigning groups, and the Advertising Standards Authority.
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The committee’s report is highly critical of homeopathy. It recommends that placebos should not be routinely prescribed by the NHS, that the NHS shouldn’t fund homeopathic hospitals, and that doctors shouldn’t refer patients to homeopaths. According to the Society of Homeopaths, current NHS funding for homeopathy runs to £4 million each year….

Homeopaths and their customers, not surprisingly, have been up in arms, shocked that very idea that the government might end funding for the form of treatment the believe in so fervently. The fact that the Committee pointed to an absence of Randomized Controlled Trials (RCTs) showing that homeopathy works is taken by defenders of homeopathy as evidence of a too-narrow view of what counts as evidence.

But let’s set homeopathy aside. (Please, seriously!)

Let’s ask the question more generally: what evidence should be required in order for a government insurance scheme (or any other insurance scheme I guess) to pay for a particular treatment modality? Should RCTs be required? Or is some lesser form of evidence sufficient? How much evidence is enough? How little evidence is too little?

Or, since this is The Business Ethics Blog, let’s ask it this way: which products is it ethical for a pharmacy to sell? Should pharmacies only sell remedies supported by RCTs? Or is consumer demand the only standard that matters?

Presumably defenders of homeopathy don’t think that the government should fund literally every therapy that someone claims is useful. There have to be some standards. Likewise, surely defenders of homeopathy don’t think that pharmacies should sell literally every product claimed (by someone) to have some therapeutic value. If I were to think up a “cure for cancer” while in a drunken stupor, surely my new “discovery” shouldn’t be sold in pharmacies just because I think it’s a cool idea. So, what generalizable principle do fans of homeopathy recommend for sorting this out?

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A note about posting comments:
Sorry, but I will not approve comments that don’t at least try to answer the question above. If you love homeopathy or hate it, that’s fine, but save it for another blog entry. Sorry, skeptics, that means there’s likely little for you to contribute here. My question is aimed at the believers. Likewise, comments about how “homeopathy worked for me!” are off-topic, here.

Who on earth would want to hear a politician indicted on a whole range of corruption charges talk about ethics?

Well, I would.

But I wasn’t among the lucky students at Northwestern University who heard Rod Blagojevich speak on ethics recently. Here’s the story, by Natasha Korecki, for the Chicago Sun-Times: Laughs, boos for Blago at NU

To some, the irony was as thick as the shock of hair on his head: indicted ex-Gov. Rod Blagojevich addressed Northwestern University students Tuesday night about ethics and morals in government.

One student said the event was akin to inviting Tiger Woods to speak about fidelity….

Why would anyone want to hear this guy speak on ethics? Well, let’s set aside the fact that he’s innocent-until-proven-guilty, and so he’s not yet certifiably unethical. I think that, even if he’s guilty of everything he’s charged with, there are still reasons to want to hear a guy like Blago talk about ethics:

One: “What’s this Ethics Stuff?” First, I’d be truly curious to hear just how someone like Blagojevich defines the word “ethics,” or more generally what he takes the scope of that topic to be. If the speaker thinks that ethics covers not cheating on schoolwork, but doesn’t think it covers not selling public offices, that’s an interesting substantive confusion.

Two: “Excuses, excuses.” I’m intrigued to hear anyone accused of serious wrongdoing explain themselves. It’s interesting (and likely useful) to hear the excuses & rationalizations. The explanations offered might be intended as explanations of why they didn’t actually do the things they’re accused of, in spite of the evidence. Or what’s offered might be rationalizations: “I did it, but it’s not as bad as it looks” or “I did it, but I did it for good reasons.” Either way, psychologically interesting.

Three: “Been There, Done That.” I’m also interested to hear apologetic wrongdoers. The ones who have come to terms with their wrongdoing can provide insight into the causes of wrongdoing more generally, and the processes by which otherwise “normal” folks can come to participate in schemes that they, by their own lights, would otherwise have seen as unethical. It’s also useful to see what someone convicted of serious wrongdoing looks like, if you’ve never met one. I once met Walt Pavlo, who did federal time for embezzling a few million dollars from MCI. When I heard Pavlo speak, I recall that the most alarming thing about the experience was just how normal the guy is, and what a nice guy he seemed to be. It was truly unnerving. I’m not sure what I was expecting a white-collar criminal to be like, but Pavlo wasn’t it! (See my blog entry about Pavlo here: White Collar Crime Up Close & Personal. See also my interview with Walt Pavlo about the sentencing of Enron’s Jeff Skilling, back in 2006).

Of course, when you’re listening to someone who is accused of, or who has admitted to, significant wrongdoing, there’s no guarantee you’re hearing the truth. Some of them may be inveterate liars; others may be lying to polish their own image. So, naturally, you should take what they say with a grain of salt. But to think that there’s nothing to learn from them is a mistake.

Jeff Skilling may not be guilty.

Seriously.

Not to say that he didn’t do anything bad. Skilling is no angel.

But to be truly, criminally guilty, you need to a) be convicted at a fair trial, and b) be convicted of a law that is sufficiently precise to meet the standards of fairness.

It’s looking like it’s at least possible that in Skilling’s case, those two criteria weren’t met.

Here’s the story, by Adam Liptak, writing for the New York Times: Justices Hear Appeal of Ex-Chief of Enron

Both the law under which Jeffrey K. Skilling was convicted and the way his jury was selected were the subject of skeptical questioning at the Supreme Court on Monday. The law was too vague, several justices suggested, and the jury selection too cursory….

The bit about the law being vague warrants some explanation.

The basic idea is that in order for a law to be considered just, it has to have certain qualities. For example, there can be no secret laws. Laws also normally have to be general in their formulation (so, you can have a law that says “It’s illegal to do X” but not a law that says “It’s illegal for Dave to do X.”) And laws also have to be sufficiently clear and specific that citizens can know, in advance of acting, whether they’re about to break a law or not. This is so that the law can actually guide citizens’ behaviour. So, for example, you can’t have a law that says “It’s against the law to do things that displease the King.”

The worry, in Skilling’s case, is that the federal law under which he was convicted (title 18 of the United States Code, section 1346) is too vague. Title 18 is where anti-fraud laws are found, and section 1346 specifies that the term “fraud” also “includes a scheme or artifice to deprive another of the intangible right of honest services.” Now, if you’re wondering what the heck that means — well, that’s precisely the problem. Basically the idea is supposed to be that it’s illegal to defraud your employer. But as was pointed out in Skillings’ appeal, section 1346 may be so broad that it effectively criminalizes all kinds of workplace dishonesty — including many things that no one would think of as illegal. And it’s impossible to follow a law the scope of which you cannot predict.

So, while no one is saying Skilling is innocent, he may not be guilty of the crime of which he was convicted.

This past Friday I delivered The 2010 Edwards Family Lecture in Business Ethics at the University of Saskatchewan, on the topic “Greenwashing and Corporate Moral Motivation.”

The talk was basically whether corporate motives matter in making an accusation of greenwashing. Though the term is sometimes used more loosely, I think greenwashing is best understood as an attempt (usually in advertising) for a company to highlight a relatively minor environmental accomplishment as a way of distracting viewers from a poor environmental track record. Greenwashing is a problem, because it can to a certain extent mislead or manipulate viewers. But certainly there’s nothing unique about greenwashing in that regard; other forms of “puffery” in advertising is more-or-less taken for granted. I think that a big part of what actually explains people’s strong negative reaction to greenwashing is lies in the hypocritical element of greenwashing: how could a company like that dare to brag about this puny environmental accomplishment?

There’s a problem, though, if a charge of greenwashing imputes a particular motive to the company involved (typically, I think, the accusation is that the motive for greenwashing is an interest in distracting from something or covering something up.) This is a potential problem because accurate attributions of corporate motives is difficult. Some people are entirely skeptical about the very existence of corporate motives: some people think corporations are merely legal fictions, and legal fictions don’t have minds, let alone motives. I’m not quite so skeptical about the existence of motives: I think it’s at least possible that corporations, as complex entities in their own right, can have motives (and intentions and interests and desires). But there remain two problems. Even if corporate motives can exist, it’s still possible that in particular situations there actually was no corporate motive per se: it might just be that a corporate decision was arrived at, but that it was supported by dozens of important internal stakeholders for dozens of different reasons. The other problem is a problem of knowledge: even if a corporate motive exists, it may be terribly difficult for outsiders (and sometimes even insiders) to figure out what it is.

Where does that leave us? My skepticism about divining corporate motives is not intended as a way to let greenwashers off the hook. The fact that corporate motives can be hard to discern doesn’t at all mean that we shouldn’t be on guard against companies trying to pull the wool over our eyes. But it might well mean that it’s smarter just to focus on present behaviour, good or bad, and do our best to call attention to environmental claims that are either false, or far less impressive than the companies making them want them to seem.

(Thanks to both the Edwards Family and the Department of Philosophy at USask for the invitation & the hospitality.)

It’s a perennial favourite with adults and kids alike. And it’s potentially deadly. Should manufacturers act?

The villain: the good ol’ hotdog.

Here’s the story, by Dakshana Bascaramurty writing for the Globe and Mail’s health & fitness blog: Wanted: a redesigned hot dog

The hot dog may be a saviour for time-pressed parents and a favourite among picky eaters, but a respected health body says it can also be a serious danger to children.

The American Academy of Pediatrics identified the hot dog as the greatest food-related choking hazard to children in a policy statement released yesterday.

“If you were to design the perfect plug for a child’s airway, you couldn’t do much better than a hot dog,” Gary Smith, lead author of the statement and professor of pediatrics at the Ohio State University College of Medicine, said in a release. “It will wedge itself in tightly and completely block the airway, causing the child to die within minutes because of lack of oxygen….”

So, should hotdog manufacturers act, to reduce the risk to kids?

I’m sure for many people, the immediate response will be a skeptical one. There are lots of ways to die, and indeed lots of things that kids can choke on. You can’t prevent all accidents, and you can’t make products 100% safe. Leave the hotdog-makers alone!

I’ve got a lot of sympathy for such views. But there are at least a few factors that make me think it’s at least plausible that hotdog manufacturers have an obligation, here.

1) Hotdogs aren’t just a choking hazard. They’re choking hazard #1. Sure, every product brings dangers. You can choke on literally anything you can fit into your mouth, whether solid or mush or liquid. But when one product dominates the top of the choking-hazard list, it’s hard not to think that manufacturers of that product should pay attention.

2) The risk is there regardless of how vigilant a parent is. There’s no parental negligence required for a 10-year-old to choke on a piece of hotdog. So you can’t plausibly just say “It’s up to parents. Parents should be more careful.”

3) This is an area where no company could reasonably rely on government regulation, because specifying a regulation for non-choke foods is essentially impossible. First, it’s hard to imagine what the regulation would look like…a ban on food products of a particular diameter? That seems unlikely. Second, the worry here is about kids, but most food isn’t sold as “food for kids” — it’s just sold as “food.” And it seems a bit intrusive for government to ban a certain kind of food altogether, including for consumption by fully aware and rational adults.

Yeah, yeah, I know. It’s just a hotdog. What could be more common and more innocent than the beloved hotdog? But we shouldn’t let the cultural centrality of a food (or other product) seduce us into exceptionalism. So, if you think the manufacturers of the highest-choking-risk food have no responsibility to improve their product, do you also think that goes for other products that are most-dangerous in their respective categories?

From the Times Online: Gap factory danger to African children

A factory that makes jeans for Gap and Levi Strauss is illegally dumping chemical waste in a river and two unsecured tips where it poses a hazard to children.

The scandal was uncovered by a Sunday Times investigation into pollution caused by a plant in Lesotho, southern Africa, which supplies denim to the two companies. Dark blue effluent from the factory of Nien Hsing, a Taiwanese firm, was pouring into a river from which people draw water for cooking and bathing….

We should being by saying, yes, this is a bad thing. Polluting water that people need to survive is generally wrong. In some cases, it seems justifiable for developing nations to choose lower environmental standards in exchange for economic development, but I doubt that argument applies very well to this particular case.

But it’s worth noting that the headline for this story is misleading. The factory in question isn’t a “Gap factory”. It’s the factory of a company that supplies denim to the Gap. That might not seem like a huge distinction in an era in which large companies are regularly held responsible (and increasingly accept responsibility) for the actions of their suppliers. But it does matter. The headline is importantly misleading, for two reasons.

First, there’s a moral difference between me doing X, and someone who sells me things doing X. To begin, I can normally only bear any responsibility if I know (or should know) what the person selling things to me has done. It’s good that, in 2010, it’s harder for big companies to turn a blind eye to wrongs done solely in order to meet their demands. But that’s different from saying that we ought to lob an accusation — an accusation of hurting children, in this case — as soon as there’s any slippage in a company’s supply chain.

Second, if consumers see this headline and think they can save children in Africa by avoiding Gap jeans, they’re wrong. For starters, the story (for those who get that far) actually supplies 2 companies: The Gap and Levi Strauss. But beyond that, if you actually were going to make a decision about what jeans to wear based on the environmental and labour conditions under which they were made, you need to know about the product as a whole, and the company’s production processes over all. Indeed, what you really need is comparative information, not just information about one company.

I can understand why activists like to single out big companies for special attention. Yelling “Gap hurts children!” gets more attention than “wholesaler you’ve never heard of hurts children.” But those of us focused on understanding problems (including newspapers like The Times) should hold themselves to a different standard.

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(Thanks to LK for this story.)

Tiger Woods just held a press conference, making a 14-minute apology for his transgressions.

The apology itself was point-by-point perfect, so perfect that it’s hard not to imagine that it was the product of professional PR advice (not that there’s anything wrong with that — if I had his profile and were in his situation, I’d seek expert advice at this juncture, too.)

He offered two very different explanations for his wrongdoing, explanations that are not necessarily mutually exclusive, but just very different.

Woods’ first explanation was that he had succumbed to temptation. The particular explanation he offered was that he had allowed himself to believe that the rules didn’t apply to him, and that he had allowed himself to think that he had earned the right to enjoy the temptations around him. (As I’ve discussed here before, there’s reason to think that excuse-making, and in particular the process of making exceptions for oneself, is a key component in various kinds of wrongdoing.)

The second, very different, explanation, was a medical one. Though he was vague about this, Woods said he had spent most of the last 2 months in treatment, receiving counselling and therapy. (Roughly, it seems the implication is that he suffers from addiction — namely, that he’s a sex addict.)

I don’t know (and the talking heads on TV don’t know either, regardless of what they say) which of those explanations is correct, or whether there’s some truth in both of them.) But it’s crucial to see how different those 2 explanations are. The first is basically cognitive: the implication is that Wood had formulated a certain kind of argument in his head, namely an argument that said that he was subject to an exception to the rules he said he himself believed in. The second explanation is, roughly, biomedical — roughly that there is something, presumably something subconscious, in Tiger’s head that makes him behave wrongly.

Now, Tiger Woods’ wrongdoing was primarily not a question of business ethics. His wrongs were largely personal wrongs. But the question of what makes people do bad things is an important one in business ethics (and in other fields). So it’s worth considering: is the cognitive (excuse-giving) part of his explanation plausible? Is it sufficient? And to the extent that it resonates with what we know about other cases of wrongdoing, does it point to a strategy for reducing the frequency of wrongdoing in particular contexts?

Padding expense claims or otherwise abusing expense accounts may well be the most common form of petty wrongdoing in the workplace, perhaps second only to stealing office supplies. Such behaviour is likely to be common because it is so often necessary for employees to pay for certain kinds of expenses up front (travel, for instance) and get compensated for it later. Typically, such expanse claims are subject to some form of oversight by the Accounting Department. But it’s probably worthwhile, from the point of view of administrative efficiency, to structure an expense-claims system such that they basically trust employees to report their expenses honestly. And with that trust comes the opportunity for malfeasance — an opportunity some people find too good to pass up.

So, what ethical standards apply to filling out and filing an expense claim?

First, it should go without saying that expense reports should be honest and accurate. There’s no justification for ‘padding’ an expense claim. Some may say that the organization they work for is cheap, and that by padding expense claims they’re simply taking what they’re really owed. That, of course, is simply a self-serving rationalization — akin to the shoplifter claiming that she’s not doing anything wrong because she’s merely exacting restitution for having been cheated by the store in the past.

So, basic honesty is a given. But what sorts of things is it OK honestly to claim? Well, most obviously, you can claim things that your organization’s expense claims policy permits you to claim.

Now, some expense claim policies are vague, stating only that “reasonable” expenses will be covered. That leaves lots of room to manoeuvre. Some people will use such vagueness to their own benefit, trying to argue that if there’s no specific rule against claiming a certain kind of expense, then it must be OK to do so. Of course, that doesn’t follow.

Why don’t organizations just make the rules clearer? Well, fair question. And maybe they should. Some policies probably are too vague. But a certain amount of slack and vagueness is inevitable. No policy, no system of rules can ever be so complete as to describe in full detail exactly what is and is not permitted. For one thing, policy-makers sometimes just can’t foresee every eventuality that could arise. Further, ask yourself this: would your world (your organization) really be better if policies were as detailed as possible, and left no room for individuals to use their judgment?

So, when rules are vague, what should you do? How should you decide whether a particular expense is or is not fair to claim?

The most obvious rule of thumb, here, is that in order to be ‘expensable,’ an expenditure should be one that you had to undertake only because of your job. Here’s an obvious example. The airfare to meet a client in another city is very likely alright to claim: you wouldn’t have had to expend that money in the first place if not for your job. But your pyjamas probably are not a reasonable expense to claim, since you were going to wear those wherever you slept that night.

One last piece of common-sense advice: if all else fails, consider the ‘publicity test.’ When contemplating submitting your receipt for that espresso maker for your ‘home office,’ ask yourself whether that is an expense you would be happy to see honestly reported in your local paper, or that you would be happy to explain to the person or persons to whom you are ultimately accountable: shareholders, in the case of corporate employees, or taxpayers in the case of public employees. Now of course, explaining yourself can be a pain, especially when it’s hard for outsiders to understand the requirements of your job. (For example, I blogged last year about the use of corporate jets and pointed out that most people don’t know that some big companies require their CEOs to use a corporate jet, for security reasons.) When people don’t understand your job, things that you know are essential expenditures can look frivolous. But still, being accountable — being willing to answer for your actions — is central to the kind of agency role undertaken by employees in organizations of all kinds. Your organization entrusts you with an expense account; the quid pro quo is a willingness, on your part, to be accountable for how you use it.

Many people interested in business ethics are fascinated by the idea that ethics is good business, or that you can “do well by doing good.” Others think that idea is obvious hogwash.

So, are ethical behaviours profitable? Well, are swans white? The answer is yes, mostly, except when they’re not.

The obsession some people have with the obviously-partly-true and obviously-partly-false claim that “ethics brings profits” is regrettable. It seems to me a truism of commerce that, in the long run, you’ll tend to do well if you deal honestly with customers, treat your employees well, deal honourably with suppliers, etc. But everyone in their right mind knows that that basic truism doesn’t mean you can’t ever make a little more (sometimes a lot more) by doing something bad. And so, “ethics is good business” is a lame sales pitch, at least when the person trying to sell it implies that it applies to every single decision, at all levels, and that it implies the very highest level of virtue.

Now, of course, there’s of room for some interesting empirical work, here. Somewhere between “ethics never brings profits” and “ethics always brings profits” lies the truth, and it would useful to know just where the truth lies, and what the relevant variables are. Even though doing the right thing is (by definition) the right thing to do, even when it’s not profitable, it would be nice to know under what circumstances those two things are liable to go hand-in-hand.

The key philosophical error people make here is in thinking that the “ethics is profitable” idea applies on a decision-by-decision basis. It doesn’t, and it can’t, any more than it’s true that “honesty always pays” in our personal lives. Now, it’s clearly true that having a set of ethical rules that we (mostly) all (mostly) abide by is “profitable”, socially. (See, e.g., Nobel-prize-winning economist Ronald Coase on how moral rules make commerce more efficient.) And it’s clearly true that generally acting ethically is a pretty decent route to success for any given individual or firm. (Though it’s important to note, here, that I think the list of ethical “oughts” for business is much smaller than some people, particularly people in the world of CSR, seem to think.) But is ethics profitable all the time? Obviously not.

So, if people try to sell you or teach you the dumb version of the profit-ethics connection, they’re selling & teaching an obvious falsehood. But that doesn’t mean there’s no connection at all, and it certainly doesn’t mean that being profitable should be seen as somehow being definitionally opposed to acting ethically.

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This blog entry began life as a comment on this useful blog entry by Charles Green: Financially Justifying Ethics: A Faustian Bargain?