The Business Ethics Blog

Cruiselines have been taking heat for continuing to bring tourists to Haiti. Critics have thought it unseemly for wealthy vacationers to be enjoying sun and sand on an island currently in a state of deep crisis.

See this article by Robert Booth, writing for The Guardian: Cruise ships still find a Haitian berth

Sixty miles from Haiti’s devastated earthquake zone, luxury liners dock at private beaches where passengers enjoy jetski rides, parasailing and rum cocktails delivered to their hammocks.

The 4,370-berth Independence of the Seas, owned by Royal Caribbean International, disembarked at the heavily guarded resort of Labadee on the north coast on Friday; a second cruise ship, the 3,100-passenger Navigator of the Seas is due to dock.

The Florida cruise company leases a picturesque wooded peninsula and its five pristine beaches from the government for passengers to “cut loose” with watersports, barbecues, and shopping for trinkets at a craft market before returning on board before dusk. Safety is guaranteed by armed guards at the gate.

The decision to go ahead with the visit has divided passengers. The ships carry some food aid, and the cruise line has pledged to donate all proceeds from the visit to help stricken Haitians. But many passengers will stay aboard when they dock; one said he was “sickened”….

Is there anything wrong with cruise lines continuing to do business with Haiti? I have to admit that, at a visceral level, I have some of the same reaction critics have had. There’s something a bit ‘off’ about having fun in the sun while others are suffering so near-by. It’s a bit like having a picnic adjacent to a funeral. It seems tacky. But is there anything wrong with it?

First, it’s important to note that Royal Caribbean is donating $1 million to the relief effort. When its ship docked in Haiti for passengers to enjoy the beach, it also dropped off “Forty pallets of rice, beans, powdered milk, water, and canned foods … and a further 80 are due and 16 on two subsequent ships.” So, the cruise company is doing a lot of good, both by contributing to the Haitian economy (by bringing tourists who spend money, for example) and by making philanthropic contributions. Now, that in itself doesn’t automatically make it OK to continue bringing tourists to Haiti during the crisis. Maybe the contrast between wealthy vacationers and desperate Haitians is just too repugnant to be overcome by mere money. Maybe it’s too much like waving a hundred-dollar bill in a poor man’s face and then giving him a dollar. Maybe.

But is it really plausible to say it’s wrong to have fun (or make money by taking people to have fun) “too close” to poverty and desperation? It’s hard to imagine making that a general rule. Should poor countries be scratched off our list of places to spend our vacation dollars? That’s hard to imagine, and it’s hard to imagine a principle that would let you distinguish between Haiti this week and, say, Brazil or Mexico or Trinidad & Tobago. And it’s worth keeping in mind that Haiti itself is a terribly poor and deeply troubled place at the best of times. It’s the poorest country in the Western hemisphere. It’s per-person GDP is about 1/36th that of the U.S. It’s #14 on the Fund for Peace’s 2009 Failed States Index. So, if it’s unethical for cruise ships to patronize Haiti’s ports this week, what about next week? Next month? Next year? When will Haiti be sufficiently stable that wealthy vacationers can feel OK about visiting (and about thereby contributing to the Haitian economy)?

I think it’s important for the world to know that Haiti is, in at least some small way, still open for business. And I think it’s worth a bit of awkwardness to send that signal.

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Once again: here are a couple of great links for helping the situation in Haiti right now (without having to book a cruise)…
World Food Programme and
Médecins Sans Frontières (Doctors Without Borders)
(If you choose to give to another organization, make sure you find a reputable one. But please do give.)

Are credit card companies morally obligated to waive their fees when people use their credit cards to donate to disaster relief, or is doing so itself a charitable act, something above and beyond the call of duty?

I think it’s great that the major credit card companies have all decided to waive their fees — but I think it’s important to acknowledge that as an act of charity. It’s an act of corporate philanthropy, not something they’re obligated to do. (The move to waive their fees came, unfortunately, after the firms were criticized for making money off the current crisis.)

Here are a couple of quick points to consider, if you’re tempted to think that these companies are ethically obligated to waive their fees, rather than profiting from this terrible situation.

1. Shouldn’t companies that find excellent ways to help in disasters be rewarded, at least by being allowed to charge their normal fees for their services? The credit card companies are of enormous importance to the people of Haiti at this point: the very existence of these companies means that millions of people like you and me can help financially with a few clicks of a mouse. Indeed, the services these companies provide (even were they to charge their standard fees) are probably more important to Haitians at this point than any single charitable organizations is. And as far as profiting from a bad situation goes, well, that’s not exactly uncommon. Lots of companies profit from human misery, and I’m glad they do. They profit because (with some notable exceptions) they’re providing a genuine service. Drug companies make lots of money because people get sick. Insurance companies make money because people fear fire and theft and disability. And so on. Credit card companies are far from unique in this regard. They provide a huge service in times of hardship, and deserve to profit from doing so. So, forgoing such profits is an act of charity, not an obligation.

2. What makes this event unique? Don’t get me wrong: it’s a horrific crisis, and anyone who can help should do so. But if credit card companies are obligated to waive fees for charitable donations to Haiti right now…what about donations to Haiti last year, or next year? It is, after all, the poorest country in the Western hemisphere, in constant need of help. Should facilitating donations (without charging fees) always be considered the minimally decent thing for credit card companies to do, instead of generous and morally praiseworthy? Should all charitable donations (to all charities? in support of all causes?) be underwritten that way? Some people do apparently think that companies should never profit from charitable donations. But again, that seems to undercut the huge amount of good that credit card companies do by facilitating charitable donations. (I for one know that I donate more often, to more charities, than I otherwise would, just because Visa lets me do it so easily online.)

So: a big “yay!” for Visa, Mastercard, American Express, and Discover for waiving their fees and thereby helping the people of Haiti. But that’s “Yay, good corporate philanthropy,” not “Yay, they’re foregoing evil profits.”

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While I’ve got your attention: here are a couple of great links for helping the situation in Haiti right now…
World Food Programme and
Médecins Sans Frontières (Doctors Without Borders)
(But of course the most important thing really is not that you choose one of those, but that you find a reputable organization and give.)

A friend of mine took this picture recently at a Starbucks in Busan, South Korea.

My first reaction when I saw it was, “What the….?!” Why does a banana need a plastic package? Isn’t the banana already our most perfectly-packaged fruit? After all, a banana peel is relatively tough (certainly tougher than thin plastic wrap) and easy to open. It’s water-proof, and easily keeps dirt of the delicate fruit inside. What’s with the wrapper? Wouldn’t a Starbucks-logo sticker and a best-before date sticker be enough?

On the other hand, Starbucks isn’t stupid. Packaging costs money, and if there weren’t a good reason (at least from their point of view) to stuff a banana into a plastic wrapper, they wouldn’t do it. And they’re a relatively environmentally-conscious company: they are at least alive to environmental issues, and they know that big companies like themselves are liable to be prime targets when they make poorly-thought-through decisions.

Does anyone know the actual reason for this packaging? Is the reason, whatever it is, a good justification, in an environmentally-conscious age?

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(Thanks, Zack!)

Should companies ever tolerate unethical behaviour in the workplace? Never? What about really small stuff? What about really important employees? How strictly should they monitor employees? Won’t intense scrutiny hurt morale?

Here’s an excellent piece on just those questions, by Vadim Liberman, in the Conference Board Review: Workers Behaving Badly

This article is written for workplace miscreants who steal from, lie to, bribe on behalf of, and deceive their bosses and businesses. Not you, of course. Not only is the angel on your left shoulder restraining Satan on the other side—page thirty-four in the company manual forbids such hijinks.

But ask yourself: Have you ever slipped a pencil from your desk into your purse? Ever surfed the Internet in the office to check the score of this afternoon’s game? Dropped a holiday package in the mailroom outbox? If you answered no to all the above, congratulations! You’d be the ideal ethically pure executive—that is, if your no weren’t an outright lie.

Oh, come on, you might be thinking—it’s just a pencil….

The article cites a number of relevant considerations (including a few in quotations from me). The one I think particularly worth highlighting is the distinction between ethical infractions that only affect the company (e.g., petty pilfering from the supply cabinet) and those that affect outsiders (e.g., exaggerating expenses that are then billed to clients). It seems to me that companies (and hence managers) are within their rights to be more or less as strict or as lax as they want, when only the interests of the company are affected. That’s not to say they couldn’t make more- or less-wise ethical decisions in that regard; it’s just to say that, well, it’s their business, and that gives them the right to some latitude. But when employees do unethical (or illegal) things that affect those outside the company, if the company allows the behaviour (explicitly or implicitly condoning it) then it essentially becomes an action of or by the company. And in that case, the company itself is acting unethically.

(By the way, this is one of the finest piece of ethics journalism I’ve seen in a long time, and not just because it quotes me. It’s thoughtful and well-researched. The whole thing is well worth reading.)

Most of you will have heard of Dr. Jeffrey Wigand, or will at least have heard of the movie, The Insider, that chronicled Wigand’s harrowing experiences as a tobacco-industry whistleblower.

Most of you will not know, that Wigand is still involved in the fight against Big Tobacco. More specifically, he’s the head of a nonprofit foundation called Smoke-Free Kids.

You also may want to know that Wigand will be appearing this Tuesday (January 12th) on the internet radio show Ethics Talk. The title for that show will be: From Knowledge to Action: An Interview With Jeffrey Wigand.

It’s good to know that one of the few true celebrities of business ethics is still involved in trying to make the world a better place.
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(You can follow Wigand on Twitter, here: @jeffrey_Wigand.)
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Here’s a very useful piece by economics prof Thomas F. Cooley, writing in Forbes: The Real Bank Pay Scandal.

Cooley notes (and sympathizes with) the pattern of outrage over executive compensation. But he also reminds us that, when designed properly (which it isn’t always) compensation packages are designed to give executives incentive to build long-term shareholder value. That’s why, for example, the modern trend is towards paying CEO’s predominantly in stock options: it aligns the interests of CEOs with the interests of shareholders.

Of course, CEOs are humans, and humans are complicated. Motivating them is not straightforward. So different companies use different combinations of salary, stocks, stock options, and other perks. Well-organized Boards of Directors have “compensation committees” set up to figure out how best to incentivize senior execs, and there are consulting firms available to offer advice.

Well, how well do firms generally do? Cooley’s research (with his colleague, Gian Luca Clementi) suggests that, over all, CEO compensation is in fact pretty strongly correlated with gains for shareholders.

The first figure shown below is a plot of net shareholder gain in billions of 2005 dollars (the horizontal axis) against total compensation in millions of 2005 dollars (the vertical axis) for CEOs of all publicly traded companies…
What one would hope to see in such a plot is that the observations would lie in the lower left and upper right quadrants, which by and large they do. …There are some [exceptions] and one can identify them by name, date and company. The important point is that there are very few.

So, with a few exceptions, it looks like firms are doing pretty well at aligning executive compensation with the interests of shareholders. But in an age characterized by massive government bailouts, that’s not the whole story. Cooley’s concluding paragraph:

At the heart of the anger about bankers pay is the very legitimate concern that the bankers and their shareholders and debt holders benefit from a subsidy paid for by taxpayers–the subsidy that is implied by the notion that they are too big to fail. That subsidy empowers them to take bigger risks and earn bigger returns for themselves and their shareholders with all of the down side risk born by Main Street. That is the real outrage.

Hey, folks.

I’ve been nominated for an interesting new award, the “Shorty” award, “Honoring the best producers of short real-time content.” I’m nominated in the CSR category (apparently despite my frequent criticism of the term “CSR”. Oh well.

Voting is Twitter-based. So if you have a twitter account, and feel inclined to vote, go here:

http://shortyawards.com/ethicsblogger

And check out the other nominees, all of whom do interesting and useful stuff.

http://shortyawards.com/category/csr

A little over a year ago, I blogged about the current state of evidence regarding the effectiveness of one particular herbal remedy: Ginkgo Biloba a Dud for Alzheimer’s: Ethical to Keep Selling It? I noted that there was little good reason to think it an effective remedy, and suggested that, as a result, it was ethically problematic for companies to keep selling it.

Just yesterday, Scott Gavura at the Science-Based Pharmacy blog, posted an important update on the evidence regarding Ginkgo Biloba: Forget to take your Ginkgo biloba? Turns out, it doesn’t matter. Gavura’s posting is based on a new study reported in a recent issue of the Journal of the American Medical Association. Gavura (a licensed pharmacist) notes that he was once guardedly optimistic about Ginkgo Biloba, But given the most recent science, he says that hope is gone:

The largest and best-designed study to examine Ginkgo biloba has found it ineffective in reducing the incidence of dementia, Alzheimer’s disease, or in reducing the rate of cognitive decline in older adults. This is a persuasive study. In a population that is very close to the “real world” that might consider taking the product, no effect of ginkgo has been shown.

Importantly, Gavura ends with this ethical prescription:

It’s time for pharmacists to start recommending against self-treatment with Ginkgo biloba for the treatment or prevention of dementia or cognitive decline. [His emphasis.]

I agree. And it’s worth noting that the ethical constraints on pharmacists are stricter than the ethical constraints generally imposed on companies. Pharmacists are granted a collective monopoly on a particular field of practice, and we trust them to advise us on complicated matters that are deeply important to us. So, when supplement companies insist on their freedom to sell Ginkgo Biloba, on the very thin grounds that, hey, after all, people want it, it falls to pharmacists to do what they can to keep the public from wasting money on product that, while once promising, we now know to be useless.

Ethics, at its most basic level, consists in acting in principled ways to resist the urge to indulge in short-term gratification of our desires. It’s about resisting temptation, and thereby adopting ways of acting that, in the long run, are mutually beneficial. In the world of commerce, temptation isn’t merely passive: in many cases, temptations are thrust upon us. And when we make purchasing decisions with money that is not our own, the problems multiply.

See this short bit from the CBC’s Money blog: Air Canada marketing unethical: U of O prof

A University of Ottawa business professor says an Air Canada marketing tactic is crossing an ethical line.

Mike Miles, director of the MBA program at the University of Ottawa, said Air Canada offers frequent flyers, like him, coupons to upgrade their flights to business class. However, travellers have to purchase their tickets at a higher fare to qualify for the upgrade.

Miles said because much of his travel is for his work as a business professor, those extra costs would be passed on to the university, and it’s unethical for the airline to put him in that dilemma….

Basically, Miles is saying to Air Canada, ‘you shouldn’t tempt me like that to misuse my institution’s money!’ And I think there are certainly cases where we do think it’s unethical for one party to tempt another that way. I’ll quote a blog entry of mine from 2008:

…this falls very generally into the very broad category of doing things that encourages, promotes, makes more likely, that someone else will do something bad. Think of suborning perjury. The lawyer who puts a witness on the stand, knowing that witness is planning to lie, is doing something very bad, even if she herself isn’t the one doing the lying. Now, I’m not saying there’s a direct parallel here….

Now for what it’s worth, notice that in this case, Air Canada isn’t targeting business travellers exclusively: anyone who wants to use an upgrade coupon faces the same dilemma, namely whether to spend more to get (a lot) more. The difference is that for people like Miles (and me), whose travel is mostly paid for either by our institutions or by research grants, Air Canada’s policy amounts to a temptation to spend more of someone else’s money. And that difference constitutes a problem (an agency problem) for any institution that empowers employees to spend money on its behalf.

But then again, Air Canada surely knows that the vast majority of its frequent fliers are travelling on someone else’s dime, so a policy like this is bound, intentionally or not, to create huge numbers of agency problems. The question then becomes, at what point do the rewards for acting against your employer’s interests (e.g., by spending more than necessary) become sufficiently attractive that we start to think of the party offering those rewards as doing something unethical?
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Addendum / Clarification: I don’t think Air Canada’s practices here are unethical. But I do wonder at what point simple temptation becomes unfair inducement in cases like these.
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Thanks to Samantha for the story!

The profit motive is often seen as a source of great evil — maybe as the source of evil. Many people believe that when organizations (and the people working within them) seek profits, all other values fall by the wayside.

But it doesn’t take much thought to realize that the pursuit of profit (or even of money more generally) is not the only thing that makes people act badly. And consequently, questionable behaviour is not going to be found exclusively at organizations whose main objective is to make a profit.

For an example, see this nice piece by Natasha Singer, writing for the NY Times: Cancer Center Ads Use Emotion More Than Fact

A print advertisement for prostate cancer surgery at Mount Sinai Medical Center in Manhattan is typical of the way many elite research and teaching hospitals sell hope to the public.

“Our newest prostate specialist… has pioneered a minimally invasive approach that allows him to retain the highest cancer cure rates with the lowest risk of side effects,” says the ad….

The ad’s claims are based on the successful results of Dr. Samadi’s operations and testimonials from his patients, said Jane Zimmerman, Mount Sinai’s chief marketing officer.

In medical science, such anecdotal data would not be considered statistically valid. But ads for nonprofit medical centers are not held to scientific standards of evidence….

This is basically a question of advertising ethics. Mount Sinai and other nonprofit hospitals are making dubious, perhaps misleading, claims in their ads. They’re making claims that, if made by a for-profit drug company, would be subject to serious legal restrictions.

The main lesson, here, is that profit is not the source of all questionable behaviour. In order to do bad things, you don’t need to be pursuing money. In order to find yourself playing fast-and-loose with the truth, for example, there just has be something (some value, or objective, or mission) that you think is more important than the truth. In some cases that might be profit. In others it might be power, or fame. In other cases it might be healing the sick.

Some people might object that minor ethical infractions like the ones in the NYT story are easy to forgive, given the good work such hospitals do. After all, we’re only talking about ads that might tend to mislead some potential patients. And these are non-profit organizations after all. They’re in the business of doing good. Doesn’t that mission mean we should cut them some slack? Well, no. In many ways, being a nonprofit organization is a pretty small difference. Technically, a nonprofit organization is just one that doesn’t distribute wealth to shareholders. And that certainly doesn’t mean money isn’t a driving concern. And nothing in nonprofit status certifies that an organization actually does good. So the main difference between, say, a nonprofit hospital and a for-profit hospital is that a nonprofit hospital needs “merely” to break even, whereas a for-profit hospital needs (on average) to break even plus a bit. Meeting those objectives is liable, I think, to strike managers in either kind of organization, as really important — probably sufficiently important, from time to time, to warrant behaviour that the rest of us would take as unethical.

Postscript: It’s worth considering that the organizations discussed in the NYT story are among the best hospitals on the planet. Anyone “misled” by their ads is nonetheless, if they end up being a patient, going to end up getting world-class care. So maybe not much harm is going to be done. It’s hard to imagine getting too cranky about being “tricked” into getting treated at Mount Sinai. But consider: these hospitals are likely ‘industry leaders’ in more ways than one. They set the tone for advertising by other hospitals, probably including ones providing a much, much lower standard of care. Now how do you feel about misleading advertising?