The Business Ethics Blog

I’m a Visiting Professor this term at the wonderful Keck Graduate Institute of Applied Life Sciences (KGI). Yesterday afternoon I gave a talk there, called “Direct-to-Consumer Genetic Testing: Consumer Empowerment or High-Tech Fortune-Telling?”

I didn’t talk about genetic testing in general, but rather specifically about at-home genetic tests (a.k.a. “personal genomics” services) sold by companies like 23andMe, Navigenics, and deCode.

The scientific consensus (among academic and clinical geneticists, anyway) seems to be that such tests aren’t worth much. You see, these services involve doing genetic tests based on a statistical method known as “genome wide association studies” (GWAS). Basically, rather than identifying a gene responsible for a particular illness, such studies look for statistical correlations between certain genetic “markers”‘ and illnesses. Sometimes those correlations are “suggestive” but statistically weak: it’s very often not clear that testing “positive” for a genetic marker associated, statistically, with some disease, actually tells an individual much about personal risk, or what to do about it.

So, is it ethical (or under what conditions is it ethical) to sell a product the utility of which is very much in doubt?

In my talk yesterday, I examined a range of possible comparison classes & categories of products currently on the market to which we might compare personal genomics services. Are they like pharmaceuticals: potent, potentially dangerous, and in need of serious regulation? Are they more like medical scans (x-rays, MRIs) and tests like home-pregnancy tests? Are they more like self-help books, which are never guaranteed to help, but which are (probably) harmless and might just help some people? Or are they like the “services” provided by fortune-tellers: utterly uninformative, but hey maybe fun? I don’t think the answer is easy.

I suggested in the talk that one of the keys to this, from a business ethics point of view, is framing it in terms of the information available to the buyer and the seller. Though they’re optimistic about what customers will gain from their products, these companies are mostly pretty modest about that, and acknowledge that they just don’t know how useful their products will be to individuals. Maybe individuals who get tested will be more health-aware as a result. Maybe they’ll reevaluate lifestyle choices in positive ways. The companies are — and ought to admit to being — a bit uncertain about this. But if they’re uncertain, and if they’re open about that, then there’s no clear sense in which consumers particularly need to be protected. Information asymmetry is dangerous: when the seller knows a lot more about the product than the buyer does, the buyer can find themselves duped. And certainly there will typically be huge information asymmetries with regard to the science behind personal genomics. But it seems to me that there isn’t much asymmetry regarding knowledge about how useful the product is. And it seems to me that it’s not unethical to market a product in the fact of shared (honest) uncertainty.

(Here are 2 previous blog entries on the topic: Genomics & Personalized Medicine and Genetic Testing: Ethical to Market a Not-Very-Useful Product?.)

This is a good (and awful) story. Here are some good bits. Commentary will follow.

From the NY Times: Food Problems Elude Private Inspectors.

When food industry giants like Kellogg want to ensure that American consumers are being protected from contaminated products, they rely on private inspectors like Eugene A. Hatfield. So last spring Mr. Hatfield headed to the Peanut Corporation of America plant in southwest Georgia to make sure its chopped nuts, paste and peanut butter were safe to use in things as diverse as granola bars and ice cream.

The peanut company, though, knew in advance that Mr. Hatfield was coming….

And while Mr. Hatfield was inspecting the plant to reassure Kellogg and other food companies of its suitability as a supplier, the Peanut Corporation was paying for his efforts….

Federal investigators later discovered that the dilapidated plant was ravaged by salmonella…nine are believed to have died and an estimated 22,500 were sickened.

Funniest quote from an un-funny story:

“The contributions of third-party audits to food safety is the same as the contribution of mail-order diploma mills to education,” said Mansour Samadpour, a Seattle consultant who has worked with companies nationwide to improve food safety.

See also:

Robert A. LaBudde, a food safety expert who has consulted with food companies for 30 years, said, “The only thing that matters is productivity.” He added that “you only get in trouble if someone in the media traces it back to you, and that’s rare, like a meteor strike.”

OK, here’s the problem. A big, big part of what allows the productivity levels enjoyed in modern societies is division of labour. That means, among other things, that most of us don’t product our own food. Plus, we demand an enormous variety of foods. Those two facts together imply an enormously complex food production and distribution system. A system that complex is going to have gaps, and opportunities for negligent, or lazy, or undertrained workers and managers to screw things up. Add to that the fact that we (naturally) want this bounty delivered to us as cheaply as possible (a desire satisfied by a vigorously competitive food retail market). That means an incentive for just about everyone to cut corners. Frankly, I’m surprised how few people die.

OK, three points to make.

1) Some heads need to roll. Don’t want to judge from one or two newspaper stories, but sounds like something pretty close to criminal negligence in some of these cases. I’d like to hear of more people going to jail for it. That might wake a few people up.

2) I need… you need, we consumers need … good stats about which foods are deadliest. Are there patterns? Are some foods just bad wagers? It’s a bad idea to judge based on one or two high-profile cases. Frankly, I’m tempted to avoid anything that a) comes from a factory, and that b) isn’t cooked. But I want more info.

3) As a society, maybe we need to think of food like we think of cars: something we love that just happens to kill some people. Now, our love of cheap, varied food and our acceptance of a certain degree of risk doesn’t mean food producers shouldn’t do better — much, much better even — at producing food safely, any more than our tolerance of thousands of highway deaths relieves auto manufacturers of the obligation to make cars safer.

Lead is a useful metal. It’s also toxic. Lead poisoning is one of the oldest known industrial hazards — the ancient Romans, for example, were aware that lead, though handy, was hazardous to your health. In recent decades, lead poisoning is mostly associated with old paint, and in particular with children being exposed to it. But the phrase “lead poisoning” is also used as a cute term for being shot — most bullets, after all, are made of lead. Grim humour to be sure. But as it turns out, the lead in bullets really is a source of poisoning…but the problem here isn’t with the bullets that hit their mark; it’s with the ones that miss. Every shot that a hunter fires, for example, if it misses its mark, ends up as a pollutant, either lying in a lake or accidentally ingested by some animal.

The solution? See this story, from the Globe & Mail’s Report on Business: Banking on bullets for the granola set.

Stephen Leahy doesn’t want to take guns away – he just want to make their bullets greener.

The chairman and chief executive officer of North American Tungsten Corp. Ltd. hopes demand for the metal his company produces will increase as tungsten’s use as an environmentally friendly alternative to lead gains in popularity.

Tungsten can now be used as a non-toxic substitute for lead in fishing lures, wheel weights and protective X-ray vests.

But Mr. Leahy is most excited about the potential to use tungsten in bullets and buckshot.

A few months ago I asked:

if you think product X is unethical (or maybe just morally “problematic”), can you engage in a constructive discussion about how to make that product more acceptable (while still selling it) or how to sell it more ethically?

Seems to me here’s a good example where the answer is clearly “yes.” I think the world would be a much better place with way fewer guns in it. Fewer guns and fewer bullets. Well, guns & bullets aren’t going away. But if you’re going to make ’em, might as well make ’em green.

The market for organic foods (etc.) continues to fascinate me. For some people, “organic food” basically means “ethical food,” or at least symbolizes the idea that the way food is produced — in particular, whether chemical herbicides and pesticides are used in its production — matters. To other people, organic food is a joke: there’s no evidence that it’s safer, but plenty of evidence that it helps certain yuppies distinguish themselves from the masses.

My main concern is that people know what the “organic” label (or the “GM free” label or the “Fair Trade” label or the “Free Range” label) does and doesn’t mean. So I was interested to see this article, from the NYT: It’s Organic, but Does That Mean It’s Safer?

MOST of the chicken, fruit and vegetables in Ellen Devlin-Sample’s kitchen are organic. She thinks those foods taste better than their conventional counterparts. And she hopes they are healthier for her children.

Lately, though, she is not so sure.

The national outbreak of salmonella in products with peanuts has been particularly unsettling for shoppers like her who think organic food is safer.

Mostly the article is about contamination, and the fact that organic foods, just like “normal” foods, can be subject to contamination by bacteria, rat feces, etc. Maybe that’s not surprising, unless you happen to assume that “organic” really means “grown by hand and lovingly packaged by a sweet old couple who consider themselves stewards of the Earth.” Which, um, it doesn’t. But still, a reminder that crummy business practices abound, even among the organic crowd, is a useful thing.

Another interesting facet of the NYT story is its mention of the fact that there are lots of kinds of food ethics, lots of different things people different people care about with regard to their food:

Some shoppers want food that was grown locally, harvested from animals that were treated humanely or produced by workers who were paid a fair wage. The organic label doesn’t mean any of that.

“They’re questioning the social values around organics,” Ms. Demeritt said.

Local, humane, fair-trade, organic…and safe, too, right?

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p.s., I’ve blogged about organic foods and such a few times previously. See also:

• Ethics of Organic Farming
• Organic Certification & the Role of the Firm
• WalMart & Organic Foods
• Organic Everything: Mattress Edition

Ethics-based investing is a big deal these days. Individuals and institutions know that the money they invest isn’t an abstraction, but actually amounts in some way to participating in the production of goods and services, and so plenty of them care what sorts of companies and what sorts of industries they invest in. If you wouldn’t work for Haliburton, why would you invest in them? If you wouldn’t take tobacco-company money, why would you give the tobacco industry your money?

The latest news on this front: U.S.-based aviation & defense industry giant Textron is under fire from a large Norwegian fund for making cluster bombs.

Here’s the story, from Defense News: Defense Stocks and Ethics: Norwegian Pension Fund Objects to Cluster Bombs

Textron has become the latest defense firm to be blacklisted by Norway’s $380 billion Government Pension Fund-Global (GPFG), the largest of Norway’s sovereign wealth funds.

The decision to divest $36 million in Textron shares, announced by the GPFG’s administrative board Jan. 31, was based on a report and an exclusion recommendation from the fund’s Ethics Council, said Kristin Halvorsen, Norway’s finance minister.

“Textron produces cluster weapons, which are banned pursuant to the Convention on Cluster Munitions,” Halvorsen said. “We cannot participate in the funding of this type of production.”

The convention was signed Dec. 3 by more than 100 countries, but not the United States, China or Russia.

(FYI, here’s the Wikipedia page about the Convention on Cluster Munitions.)

Now, $36 mil is a lot of dough. But to put this into perspective, that amount constitutes about 1/3 of 1% of Textron’s $12 billion market capitalization. So it’s not like Textron is likely to care much. But then, the GPFG’s goal can’t plausibly be to punish Textron, anyway, or to change the way the company does business. The fund’s goal is surely symbolic, and perhaps an attempt to keep its hands clean. How to keep one’s hands clean in a complicated world is clearly a big topic. For now, I’ll just point back to my posting from last week, about bulldozers, and ask: which company is “dirtier”? A hypothetical company that makes 99 civilian products and one nasty weapon, or a hypothetical company that makes only civilian products, 1% of which end up being used for military tasks?

Yesterday I blogged about companies (and witch doctors!) selling things without sufficient reason to believe they actually work. Among other things, I said “There are good reasons why drug companies are forced to do randomized, double-blind, clinical trials.”

Some of you may have inferred from that blog entry that I love Big Pharma and Big Medicine (because, after all, they use science) and hate purveyors of “natural” medicines with their reliance on “traditional” and “folk” knowledge.

Not true.

Here’s a story from yesterday’s NYT, slamming crappy practices in high-tech medicine: Regardless of Quality, Medical Scans Cost the Same

When Gail Kislevitz had an M.R.I. scan of her knee, it came back blurry, “uninterpretable,” her orthopedist told her.

Her insurer refused to pay for another scan, but the doctor said he was sure she had torn cartilage that stabilizes the knee and suggested an operation to fix it. After the surgery, Ms. Kislevitz, 57, of Ridgewood, N.J., received a surprise: the cartilage had not been torn after all.

She had a long rehabilitation. And her insurer paid for the operation. But her knee is no better.

The focus of the story is on the use of outdated machines, and on the conflict of interest inherent in physicians ordering expensive (i.e., profitable) tests conducted on machines they themselves own. The neglected angle is the poor state of knowledge about the kinds of ailments such scans are often used for. Note that Ms. Kislevitz’s doctor was “sure” she had torn cartilege, which she didn’t. Sometimes fancy scans just add an illusion of certainty in situations like that.

Now, as to the distinction between high-tech medicine and “traditional” medicine: at least people (and companies) in high-tech medicine don’t (i.e., can’t) deny that having evidence would be good.

This is a horrific story. And maybe I’m about to make a horrific comparison. Feel free to let me know.

Here’s the horrific story, about thugs dismembering Albino children in Tanzania, because of the black-market value Albino body parts have for their supposed medicinal value and luck-bringing properties: Halting the slaughter of Albino innocents.

Under cover of darkness, a group of men charge into young Viviana’s room in the middle of the night, pin her pale form immobile, and hack off one of her little legs as her sister screams in horror.

Viviana, shockingly, is among the lucky ones. The commotion draws the attention of neighbours, and the attackers slip off into the night without finishing the job. She is left an amputee, but alive.

The single albino leg will fetch upwards of $1,000 in a gruesome market controlled by powerful Tanzanian witch doctors, who grind the bones into potions and repurpose them as good luck charms for struggling miners and fishermen.

What to say? Horrific. Unspeakable. I mean, the murder & dismemberment is awful. But it makes you want to pull your hair out when you realize that the reason for these deaths is so ridiculous: the attribution of “magic” powers to Albinos. I mean, those potions and charms won’t work, right? Right? Hmm, but the witch doctors say they work. And they’ve got plenty of satisfied customers, apparently. I mean, what could be better than first-hand experience to prove that a product works?

OK, you see the issue. Now, hop across the ocean with me, from Tanzania to Texas…

From the Wall Street Journal Law Blog: Man Oh Mannatech! Company, Founder, Settle False Marketing Claims

The multi-level marketing world – the same industry that gave forth Amway and other home selling networks – got a black eye this week.

Mannatech Inc., a maker of dietary supplements, agreed to pay $6 million to settle a lawsuit brought by the Texas attorney general. The state alleged that the Coppell, Texas company made false claims about its health benefits and marketed products as cures and treatments for diseases.

What evidence did Mannatech have for its claims? Why, first-hand experience, of course.

…the company’s annual employee-sponsored event, called MannaFest. Part bonding session, part Christian revival, Mannafest in 2007 in Dallas included numerous sales associates and consumers who stepped on the stage and testified how they had taken Mannatech products and recovered or had found relief from their paralysis, their tumors, and their lesions.

I don’t want to belabour the comparison. Mannatech didn’t murder anyone. They’re not witch doctors. But they still were making claims they couldn’t support, and taking people’s money. What such companies and their customers need to learn about is the limits of personal testimonials. There are good reasons why drug companies are forced to do randomized, double-blind, clinical trials. To understand better, you just need to take a peek at the enormous literature on cognitive bias, which details the enormous number of ways in which first-person testimony can go awry. People have a tendency to see correlations, and even causes, where none exist. They tend to mis-estimate relevant probabilities. They tend to mis-remember key events. Reputable companies test their products in ways that minimize those effects. When you’re selling things — especially when you’re taking money from people desperate for help — you owe them a higher standard of evidence.

What does the public think made the dinosaurs to go extinct? Does the public believe that the Second World War could have been avoided? Does the public believe that the charge on an electron is positive, or negative? Does the public believe in ghosts?

Do the answers to those questions about the public tell you anything about how the world really is?

But check out this story, from Reuters:
Wall Street rates poorly for ethics, honesty: poll

Americans hold a dim view of business executives, giving them poor grades for honesty and ethics and blaming them for business failures, according to a survey released on Thursday.

Nearly 60 percent gave the worst grades to Wall Street executives for honesty and ethical practices, according to research conducted by the Marist College Institute for Public Opinion in Poughkeepsie, New York.

Seriously, folks: who cares? Does it actually matter what the average person thinks about corporate ethics in general or about Wall Street ethics in particular? What are they going to do, not buy things anymore? Not invest their money on Wall Street anymore? Do you think Wall Street cares what the average person thinks? It’s just not useful information. You could take everything the average person knows about the functioning of Wall Street, plus everything they know about the sources of the recent troubles there, and fit it into a box of matches without first taking all of the matches out.

In particular, it’s worth pointing out that the fact that the public thinks poorly of Wall Street ethics proves something about the public, but it proves nothing about Wall Street. I’m not saying the public is wrong. I’m just saying public opinion isn’t informative, here.

Employees can be understandably hurt & confused when profitable companies lay off workers. Imagine how they feel when, after having been sent packing with a meagre severance package, they’re notified that the company overpaid them, and wants some of that severance back.

Here’s a story about just that, from the Globe and Mail: Microsoft asks laid-off workers for cash back

A few weeks after launching the first wide-scale layoffs in its history, Microsoft Corp. admits it screwed up a key part of the plan.

The company is asking some laid-off employees for a portion of their severance back, saying an administrative glitch caused the software maker to pay them too much.

According to this version of the story, the overpayments “ranged from hundreds of dollars to $5,000 per employee.”

This is a case where knee-jerk reactions are easy, in one of two directions. Some will say, basically, “Finders keepers, losers weepers! Tough luck, Microsoft!” Others will say “It’s Microsoft’s money. Crappy mistake, but it’s gotta be paid back.” I don’t find either of those responses fully satisfying.

Two quick points:
1) This might be a case that illustrates well the difference between having a right, on one hand, and it being right to exercise it, on the other. Microsoft has a right to ask for the money back; but that doesn’t necessarily mean it should do so.
2) This might be a case where thinking in terms of corporate character & virtue is useful. That means, don’t focus on the actual action in question, or at least don’t start there. Ask instead, “What kind of corporation does Microsoft want to be? How does it want to present itself to the world?” Then, and only then, should we ask, “And how should that kind of company behave in this kind of case?”

(To personalize this, think of an analogous case: a homeless guy asks you for a dollar. Chatting away on your cellphone, you absentmindedly reach into your pocket hand him what you think is a dollar bill. You walk a little farther, and then realize it wasn’t a dollar. It was a twenty. Oops. Honest mistake. Do you now go back & ask the destitute man for the money back? You have a right to. But maybe you shouldn’t.)

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Thanks to both Garrett & Will for suggesting this story.

Two days ago I asked, Is Every Product a Potential Weapon? (I started with a story about Caterpillar bulldozers being used by the Israeli army, and suggested some principles for deciding whether, in particular cases, companies are responsible for the eventual uses to which their products are put.)

Today’s New York Times has a story that serves as a good follow-up: U.S. Is a Vast Arms Bazaar for Mexican Cartels

The Mexican agents who moved in on a safe house full of drug dealers last May were not prepared for the fire power that greeted them.
When the shooting was over, eight agents were dead. Among the guns the police recovered was an assault rifle traced back across the border to a dingy gun store [in Phoenix] called X-Caliber Guns.

Recall the two principles I suggested on Tuesday:

• 1. The general principle of moral responsibility that says we’re responsible for “the foreseeable outcomes of our intentional actions.”
• 2. The “principle of intervening action.” That principle says roughly that if someone else gets to make a choice along the causal chain between my action A and some outcome Z, my own causal responsiblity for Z is diminished, along with my moral responsibility for Z.

Clearly the deaths in Mexico were, under the circumstances, foreseeable outcomes of selling military-grade firearms to people known to be supplying them to Mexican cartels. What about the “principle of intervening action?” After all, the gun dealers didn’t kill anyone. Someone else did. Someone else’s intentions interrupt the causal chain between the sale and the deaths. True, but when the “intervening action” (i.e., the choice to use the guns to kill people) is fully predictable, we reach the limits of the exculpatory force of that principle.