The Business Ethics Blog

Over the last couple of months I’ve blogged a couple of times about ethics in the use of corporate jets. (See here and here.)

Last Friday, I participated in a ‘webinar’ sponsored by the National Business Aviation Association, called The Business Case for Business Aviation. My co-panelists were people who know a lot more about the aviation side than I do, including people who run Aviation departments for major corporations. They had interesting stuff to say about utilization policies, and the role aviation plays in the day-to-day affairs of a big company.

I kept my own comments pretty brief. I made two key points:

1) Appropriate use of aircraft is a matter of governance and accountability. At well-governed organizations, decisions promote the stated goals of the organization, whether those be be profits, expansion of market share, reduction in carbon footprint, etc. That means that at well-governed organizations, corporate jets will only be used in ways that advance legitimate corporate objectives. And that’s true for private firms, publicly-traded firms, nonprofit organizations, etc., and it’s true whether or not a company is getting some form of aid from the government.

2) The ethics case is part of the business case for business aviation. Business today depends on the goodwill of many stakeholders. In order to argue that corporate aviation makes good business sense, a company also has to justify their choices to key stakeholders, whether those be shareholders or taxpayers or someone else. Stakeholders who aren’t convinced can make life difficult. So, even a tool (e.g., an aircraft) that a company finds operationally useful can become impractical if the ethics case can’t be made to key stakeholders

It seems that human ingenuity really is limitless…at least when it comes to new and devious ways to adulterate food in profit-maximizing ways.

And yes — *sigh* — the evidence, yet again, is a case from China.

From China Journal:
Water-Injected Meat: The Next Chinese Food Scandal?

Along with the recurring scandals, China’s food industry is plagued by a number of troubling “open secrets.” Everybody knows about them, it seems, and it’s no big deal until someone gets hurt and then it becomes a very big deal.

The latest open secret may be the practice of injecting meat with water to raise the weight (and hence value) of the product. This week, Feng Ping, a CPPCC delegate and expert at the China Meat Products Integrated Research Center, publicly challenged the lack of government oversight that has allowed the practice to go on for over 20 years, according to the Chinese-language Southern Weekend. (An English summary of the report, from Shanghai Daily, is available here).

According to the report, the practice, in its more gruesome-sounding forms, involves either forcing water into the stomachs of pigs and cattle shortly before slaughter, or injecting water into the hearts of recently slaughtered animals, so that the water will quickly flow into the animals’ flesh through the blood vessels. Another method involves simply soaking chunks of meat in water to absorb the liquid.

Eek. Lovely.

OK, now while my first paragraph above pandered shamelessly to your cynicism about profit seeking, I’m next going to try to convince you that the problem, here, isn’t profit-seeking.

The problem in cases such at this can no more be laid at the feet of profit-seeking than can the problem of thugs cornering people in alleyways and stealing their wallets. This isn’t just a case of profit-seeking. It’s a case of profit-seeking-by-socially-non-preferred methods. There are good ways to seek profits (ways that go by names like “innovation” and “improved efficiency”) and there are bad ways to seek profits (ways with names such as “lying” and “stealing”). In fact, here’s a rule of thumb: next time someone screams “profit motive,” remind them how little that explains. Ask them, “OK, sure. Someone wanted to make a profit. But what was the particular means of profit-making here, why was it objectionable, and how did they end up getting away with it?

(For more on the distinction between socially preferred and socially non-preferred ways of seeking profit, see the terrific paper “Business Ethics Without Stakeholders,” by my pal Joe Heath. You can find it on Joe’s page.)

A few weeks back, I blogged about layoffs at profitable companies. “Profitable” is one thing; how about “record-breaking” profits? Check this out: the French oil giant, Total, has announced that it’s laying off 550 people. This, despite making a “record profit of EUR 13.9 billion in 2008.”

From Expatica: France slams ‘scandalous’ Total job cuts

France on Tuesday attacked the “scandalous” behaviour of its biggest company, oil giant Total, after it said it would slash jobs despite reaping the highest annual profit in French corporate history.

“That a group like Total, which made billions in profits, isn’t able to set an example in terms of employment at a time like this sticks in my throat,” said Employment Minister Laurent Wauquiez.

“They’d be well advised to change their behaviour quickly,” warned Wauquiez, who said the move by Total was “scandalous” but did not elaborate on how the government might make the company change its mind.

This great quotation deserves attention:

“Total says it makes 90 percent of its profits abroad, but it should not forget where it comes from and what it owes to France,” said one protestor.

Two quick thoughts:
1) It’s not at all clear whether Total owes France an obligation never to reduce its workforce, or even not to reduce it during bad economic times. I think obligations should be established before the fact, rather than shouted about during the crisis.
2) The process of criticism during events like this might well be regarded as part of the process of establishing just what a corporation’s (informal, socially-enforced) obligations are.

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Thanks to BusinessAPE.

Law prof Lawrence Lessig is one smart dude. I’ve been a fan since his brilliant 1999 book, Code and Other Laws of Cyberspace. These days his work (as a scholar and as an activist) is focused mostly on political corruption.

In this blog entry, Lessig makes a great point about just why Conflict of Interest is a problem: And again: the point: DEFINE: “Good Soul Corruption”

I’m not even accusing anyone of anything unethical. My charge is that by (a) introducing legislation that has no good public policy justification behind it and which (b) does not benefit your own constituents while (c) being disproportionately supported in financial contributions by the single industry that would benefit from the legislation, you invite the charge (as 88% of citizens in my district believe) that “money buys results in Congress.” WHETHER OR NOT “money bought” this result, you have committed this wrong. The wrong is the relationship, and the suggestion the relationship begs. It is not — and again, NOT — that the person accused is “being paid off” by anyone.

In other words, while finding yourself in a conflict of interest (COI) is not unethical, doing something avoidable that put yourself into a COI, and thereby threatens public trust in an important institution, is.

Take 4 minutes to watch the short presentation video embedded in Lessig’s blog entry. It’s a wonderfully effective presentation, and works well to drive home Lessig’s point about COI.

Every business major should be required to memorize this.

From the Associated Press: Text of Bernard Madoff’s court statement. Here’s the first paragraph:

Your Honor, for many years up until my arrest on December 11, 2008, I operated a Ponzi scheme through the investment advisory side of my business, Bernard L. Madoff Securities LLC, which was located here in Manhattan, New York at 885 Third Avenue. I am actually grateful for this first opportunity to publicly speak about my crimes, for which I am so deeply sorry and ashamed. As I engaged in my fraud, I knew what I was doing was wrong, indeed criminal. When I began the Ponzi scheme I believed it would end shortly and I would be able to extricate myself and my clients from the scheme. However, this proved difficult, and ultimately impossible, and as the years went by I realized that my arrest and this day would inevitably come. I am painfully aware that I have deeply hurt many, many people, including the members of my family, my closest friends, business associates and the thousands of clients who gave me their money. I cannot adequately express how sorry I am for what I have done. I am here today to accept responsibility for my crimes by pleading guilty and, with this plea allocution, explain the means by which I carried out and concealed my fraud…

(I first blogged about Madoff back in December: Madoff: Biggest Financial Scam in History)

Some people hate advertising. Others love it. But one thing that tends to make even zealous defenders of advertising cranky is advertising to kids.

But it’s good to see contrarian views. So, here’s Giles Gibbons (a consultant at Good Business), writing in Ethical Corporation magazine: BrandWatch focus: marketing to children – Why brands should sell to kids

Marketing to children is an issue that’s not going anywhere. Whenever we conduct research with consumers into whether they think companies should be able to target promotional messages directly at children the overwhelming reaction is that this is something that no responsible company would do.

And commentators are no different. They also tend to react in a knee-jerk way….

Gibbons basically argues that the concerns tend to be overstated, and responsible advertisers already know how to avoid key problems. He may have a point there. Of course, part of the reason advertisers know what behaviours to avoid is that consumer activists have hammered them for their excesses.

Gibbons ends with a less-convincing point:

Not only do many products and brands have a positive impact on children, they are also often best placed to get through to them. The very influence brands have over children and their appeal can be turned to deeply positive ends.

The example he chooses is an unfortunate one:

McDonald’s happy meals have been subject to barrages of criticism in the past on the grounds that they encourage children to eat unhealthy food. Rather than remove them altogether, the company has moved to ensure they include healthier options – water and carrot sticks as opposed to soft drinks and fries. No doubt many still feel that the very existence of McDonald’s is an outrage but this would be to ignore the possibility that they might be an excellent way to introduce some healthier options to the very children that are hardest to reach.

I don’t see how marketing an unhealthy meal to kids, and then caving in to critics by marketing a less-unhealthy (but still not great) meal to kids teaches them anything positive about nutrition. That might just be one weak example. Gibbons ends with a more general point:

The potential to effect positive change holds true across all child-friendly brands. Messages on bullying, or the environment, or online safety that come from a cool brand – like Hello Kitty – can have far more impact than the strictures of parents and schools.

That’s a more promising, but still unsubstantiated, claim. Besides, it might well be that cool brands can have a positive impact. But what we should be concerned with is the net effect, not just finding an upside to an otherwise worrisome trend.

Information asymmetry — big differences in knowledge about a product — is a big problem in the marketplace. Consumer empowerment basically boils down to finding various remedies to such asymmetries. Jim Sabin over at the Health Care Organizational Ethics Blog had this nice blog entry 2 days ago, on an attempt to empower patients by letting them post comments, online, about their experiences with particular physicians: Up with Zagat! Down with Patient Waivers!

I recently discussed the collaboration between Wellpoint and Zagat for rating physicians and concluded that the benefits of web-based rating systems outweigh the risks. Since writing that post I have come upon (a) a very informative report about physician-rating websites by Ruth Given and (b) a seven year old physician protection enterprise called “Medical Justice.”

Anonymous online rating systems can make your mouth go dry, if you’re the one being rated — regardless of whether you’re a business whose product is being rated, a professor whose teaching is being rated, or a physician whose bedside manner is being rated. For docs, that’s where Medical Justice steps in. According to that organization’s website, the solution is what they call (and what they charge to facilitate) a “mutual privacy contract” between physicians and patients. According to the organization’s website…

Mutual privacy agreements are designed to address the emergence of now over 40 generally anonymous physician rating sites. “Mutual privacy” means that patients are granted additional privacy protections by the doctor above and beyond those mandated by law.

In return, patients agree not to post to anonymous doctor-rating websites. Good idea? Sabin (himself a physician and educator) says “no.”

…the idea of asking new patients to sign a contract eschewing physician-rating sites and sweetening the deal with “additional privacy protections” is unseemly. Meaningful privacy protections are fundamental moral obligations – they’re not chits to use as enticements for patients to sign a contract. If a physician greeted me by asking me to sign such a contract I’d be out of the office in an instant and badmouthing the physician shortly thereafter.

Sabin is right. Contractual solutions might be apt for many kinds of straightforward commercial transactions. But the relationship between physician and patient is a special one, one that necessitates a level of trust that seems incompatible with crude contractual solutions.

Lobbyists are not the most beloved creatures on earth. The very word “lobbyist” is practically an accusation these days. And that’s too bad, because there’s nothing bad, in principle, about what they do for a living. Fundamentally a lobbyist is a spokesperson. They speak to lawmakers and regulators, on behalf of a company or interest group, and thereby attempt to influence laws and policies. The worry, of course, is that they’re too good at their jobs, and that that gives the people they work for too much influence.

Here’s the story, from the Associated Press: THE INFLUENCE GAME: Lobbyists defend earmarks

What’s it like to be at Washington’s political ground zero? Ask Dave Wenhold, who trudges to work with two bull’s-eyes pinned to his back.
He’s a lobbyist and he earns part of his living fighting for special-interest earmarks, those prized pots of money that lobbyists vie for and critics decry.

So, why not just keep them away from lawmakers entirely? Well, first, because to petition your government is a fundamental democratic right. And if it’s my right to have my say, it’s also got to be my right to send someone to speak for me — after all, we’re not all eloquent, and we can’t all travel to where the lawmakers are. Note also that decision-makers actually need input, lest they make poorly-informed decisions. And it’s not just drug companies and such that employ lobbyists: so do charities and universities and municipal governments, for example.

So, what can we do?
1) Governments can put safeguards in place. Countries like Canada and the U.S. (and many others) have rules governing the behaviour of lobbyists. They usually have to register, for example: no secret lobbyists are allowed. Also, they’re allowed to talk to lawmakers, but not to give them money. Further, there are rules to limit the “revolving door” phenomenon, which sees lobbying firms and government agencies swapping personnel and practically guaranteeing conflict of interest. And so on. Of course, figuring out just the right set of safeguards — to maximize benefit and minimize risk — is hard.
2) The lobbyists can exercise ethical restraint. Individual restraint in a competitive domain is hard. Acting together is a little easier, though by no means trivial. The American League of Lobbyists, for example, has its Code of Ethics. Yes, plenty of room for skepticism there.

I think this might be one of the hardest problems in and around business ethics. Everyone agrees that businesses ought to obey “the rules of the game.” But how should they, and their representatives, behave when they get the opportunity to influence the rules themselves?

When hard times come along, should ethics be the first thing you cut, or the last thing?

Over at the Research Ethics Blog, my friend Nancy Walton has posted an interesting (and frightening) story about cuts in the world of bioethics: Ethics on the chopping block.

Here are the basics:

The University of Tenneessee is considering closing down The Department of Human Values and Ethics in the College of Medicine along with a number of other science and medicine programs.
….
Across the globe in New Zealand, the government will sign off on disbanding the country’s Bioethics Council on Monday. The Bioethics Council was created in 2002 in response to public concern that the government was making decisions — in an ad hoc and unadvised manner — on complex and controversial biotech and genetic issues ….

Nancy’s analysis of why these are stupid moves is thought-provoking, and goes beyond the obvious. She points out that, in the world of bioethics, at least (and I would argue elsewhere too), ethics departments serve outreach, advocacy, and educational roles that go beyond their literal job descriptions.

My own question is whether we should expect the same bad moves in the corporate world, during this global economic downturn. We already know there have been layoffs. But has anyone heard of any CSR or Ethics & Compliance departments being cut at major corporations? If anyone knows of any current examples, post a comment below or email me.

How much water does it take to make a latte? That’s the question asked (and answered) in this cool little flash video from the World Wildlife Fund: How Much Water?.

The answer: 200 litres (about 53 U.S. gallons). That number is shocking, and it’s intended to be. What the video points out is that each ingredient of the latte — from the milk, to the coffee beans, to the paper that makes up the cup — requires water to grow or manufacture it. But the video is a wonderful little piece of awareness-raising, and a good opportunity to highlight an economic concept that is crucial to understanding questions about sustainability:

Cost-free (or underpriced) resources get overused. It’s significant that the video chose to highlight water inputs, rather than, say, petroleum inputs. All the ingredients of your latte also require petroleum inputs (for energy to run the factories, for transportation, etc.) But petroleum products always cost money, and in fact are relatively expensive, so manufacturers have a built-in reason to use less, wherever they can. But at least some water-inputs are essentially free (e.g., water drawn from a private well) or are subject to flat-rate municipal pricing (such that using more doesn’t cost more). Manufacturers have no intrinsic reason to conserve a resource like that. So, you either need to a) find a way to charge, or to charge more, e.g., by taxing the product, or b) rely on changing attitudes and raising ecological awareness.

Note that the video isn’t particularly an indictment of lattes or latte drinkers. All foods and manufactured products and indeed all services require resource inputs. So don’t leap to feeling guilty about your 200-litre-latte. Whatever you might have had in lieu of that latte would have taken up some water resources, too. I suppose that means that we need not just “awareness,” but awareness of differences among products, and awareness of differences that can actually lead to changes in our behaviour.