The Business Ethics Blog

Yesterday I blogged about a new cherry-flavoured malaria drug, made by Novartis and marketed in Senegal, that kids (especially) would be less likely to spit out. (I suggested that, in some cases, yummy flavours might result in kids seeking out meds & overdosing, but that for a life-saving drug administered in less-than-ideal circumstances, the move made sense.)

OK, same story, but whole new angle:

According to this brief report, the new cherry-flavoured pill by Novartis threatens to put a Senegalese factory, which manufactures the yucky-tasting old-fashioned anti-malarial pills, out of business:

Launch of child malaria drug threatens local industry

…a child-friendly anti-malarial medicine, has been received with mixed feelings.

The medicine, launched in different African countries, is a product of Medicines for Malaria Venture (MMV), a Swiss non-profit company and Novartis, a multinational pharmaceutical.
…
“The only fear is that we have a factory manufacturing Anti-malarial drugs (Luzira-based Quality Chemicals),” Otaala [a government official] said.

OK, normally people think it a bad thing when big, foreign companies put small local companies out of business.

But in this case, the foreign product could save lives.

But wait a minute…the foreign product might save lives. But in a very poor country (and Senegal is one of the poorest in the world) local industry is really important. Local industry is what allows locals to afford anything, including medicines for their kids.

But…

Well, let’s just say that this story has the makings of a terrific case-study.

It typically sounds like a dangerous move when pharmaceutical companies decide to make medicine in yummy flavours for kids. After all, yummy flavours could entice kids and result in overdoses. Here we see an exception, a case where the candy-coating really does make sense. See the Associate Press story here:

Cherry-flavoured malaria drug launched for kids

Swiss pharmaceutical company Novartis is launching a new cherry-flavoured malaria drug that it says children will be less likely to spit out.

The child-friendly version of its malaria pill dissolves in water, as well as breast milk, and tastes like fruit juice.
…
Hans Rietveld, director of marketing for Basel, Switzerland-based Novartis’ malaria initiative, said that until now, mothers were forced to crush the anti-malarial pill and mix it with sugar in order to trick children into swallowing it.

Even under a cloak of sugar, the pill still tastes bitter, causing many children, especially infants, to spit it out.

Sometimes it’s useful to see something done for very good (e.g., life-saving) reason, to serve as a source of comparison when companies do something superficially similar but less-well justified.

Just how much responsibility does a company bear for the uses to which its products are put?

For a relatively strict take on that question, see this piece by politics prof Stephen Zunes, writing for the advocacy-oriented online mag, Alter.net: Obama’s Caterpillar Visit a Thumb in the Eye for Human Rights Activists.

Over the objections of church groups, peace organizations and human rights activists, President Barack Obama decided to return to Illinois to visit the headquarters of the Caterpillar company, which for years has violated international law, U.S. law and its own code of conduct by selling its D9 and D10 bulldozers to Israel.

In his speech on Thursday, Obama praised Caterpillar, saying, “Your machines plow the farms that feed our families; build the towers that shape our skylines; lay the roads that connect our communities; power the trucks that deliver our goods.” He failed to mention that Caterpillar machines have been used to level Palestinian homes, uproot olive orchards, build the illegal separation wall and, in some cases, kill innocent civilians, including a 23-year old American peace activist.

OK, let’s veer immediately away from the Israeli/Palestinian conflict, and look at the more general question: is a company responsible for all the uses to which its product is put? After all, lots of products can be used to hurt people, regardless of what they’re designed and marketed to do.

Two noteworthy principles are worth considering here.

The first is about moral responsibility in general. What sorts of things are we responsible for? We’re typically not responsible for things someone else does, and we’re not (generally) responsible for things we do involuntarily (like sneezing) or for outcomes that we could not have foreseen. This is sometimes summed up by the idea that we’re responsible for “the foreseeable outcomes of our intentional actions.” So, applying that principle here: does that mean a company is (other things being equal) responsible for the foreseeable uses of its products. Not quite, because the principle says you’re responsible for the foreseeable outcomes of your actions, not (necessarily) what other people do with the things you sell them. Which brings us to our next principle.

The second relevant principle is what philosopher Alan Gewirth called 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. The easy case is this: if Honda sells me a car, and if I use that car to go on a homicidal rampage, Honda can rightly say “look, we just sold him the car…he decided to do something stupid and immoral with it!” The principle is less convincing at the other end of the spectrum: imagine me handing a knife to a man with a crazed look in his eye. If I said “look, I didn’t stab anyone. I just handed a knife to a dude who made bad choices,” no one would buy it.

In the end, I suspect it’s typically reasonable for companies to point to the principle of intervening action. Companies typically can’t foresee (let alone control) the uses to which there products are put, and hence can rightly claim to have marketed their products in good faith. There will of course be cases where that principle doesn’t make sense. But I doubt that highly controversial political confrontations are going to provide the clear counter-examples.

Talk about controversial products!

Check this story, from the Toronto Star: Hells Angels seek to protect skull logo.

After years of the Hells Angels being the target of police raids and surveillance across North America, the outlaw motorcycle gang has decided to make a stand in an Ontario court – over its logo.

Next month, the Hells Angels Motorcycle Club takes to the courts in a bid to force police to return its vests, jewellery, calendars, scarves, T-shirts, belt buckles, rings, pins, posters, a cuckoo clock, bumper stickers and anything else they have seized bearing the bikers’ trademarked logo of a winged skull….

The question I asked back in November and again last week, was:

“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?”

This story about the Hell’s Angels implies the following question:

“Can we engage in a constructive discussion about protecting the intellectual property rights (or other rights) of a ‘business’ that happens also to be a criminal organization?”

Another way of asking the same thing: Do we care about basic rights enough that we’re willing to defend those rights, even when we don’t like the organization claiming them?

Outsourcing is an interesting topic, both economically and ethically. The outsourcing of entire pharmaceutical research projects — clinical trials — is particularly interesting, not to mention controversial.

(For those of you who don’t already know, “outsourcing” generally means when a company sends work to be done beyond its own walls. That might happen either because the company lacks the expertise to have the work done in-house, or simply because it’s cheaper to have someone else do it. And note that those 2 factors are not unrelated. “Outsourcing” can also mean sending work to be done overseas. In this particular case it refers to when companies that need research done — usually pharmaceutical companies — arrange to have that research done in another country, typically a less-developed one.)

Outsourcing of all kinds is subject to criticism. When companies with unionized workforces outsource work to cheaper, non-unionized companies, unions get upset. When North American companies outsource work (e.g., sewing clothes) to other countries, there’s always criticism — some of it rooted in concern for overseas working conditions, and some of it clearly rooted in bigoted protectionism if not downright xenophobia.

The source of much of the hullabaloo over outsourcing, of course, is that outsourcing involves a shifting of costs and benefits. When GM outsources assembly of engines (let’s say), that typically transfers work — income — from unionized employees to non-unionized employees. It also likely transfers money from employees to consumers, in the form of lower prices. Same goes for outsourcing overseas: it tends to transfer jobs from North Americans to people in less-developed nations, and typically results in a net transfer of wealth to customers and/or shareholders.

Whether the transfers of risks & benefits involved in particular cases of outsourcing are a good thing or not is hard to say. Some North Americans will argue that too many benefits are being transferred to foreign countries; others will argue that too many risks (e.g., environmental risks) are being pawned off on people who are already living, in some cases, difficult lives.

Take all of that complexity, and mix it with a) the passions aroused by anything having to do with medical research, and b) fairly-well-founded skepticism about the behaviour and motives of major pharmaceutical companies, and you’ve got a recipe for serious controversy.

Case in point: researchers at Duke University recently published a critique of the outsourcing of drug trials, in the New England Journal of Medicine. Here’s the full text of the paper: Ethical and Scientific Implications of the Globalization of Clinical Research (PDF). The paper raises a number of concerns, ranging from questions about the qualifications of clinician-researchers in developing nations to oversee complex trials, to concerns about potential injustices in access to the products that (hopefully) result from clinical trials.

Here’s the story as reported in the NY Times: Outsourcing of Drug Trials Is Faulted. The NY Times story raises good questions about the data used by the Duke researchers, but it remains true that there are good questions to be asked about the standards that get applied to clinical trials run in less-than-modern settings. I think the issue that is least-well-analyzed in this study is the issue of justice in access; I suspect that insight could be gained by comparing the outsourcing of clinical trials to other forms of outsourcing. How is outsourcing clinical trials different from outsourcing, say, customer support or manufacturing or assembly of electronics? Is the inability of the average Bangladeshi to afford major pharmaceutical products importantly different from the average Chinese factory worker’s inability to afford the Nokia cellphone she assembles? If so, how and why?
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Addendum: for a Research Ethics perspective on this story, see today’s posting over at the Research Ethics Blog, here.

A couple of days ago I wrote about efforts by a cigarette company to show off its corporate social responsibility activities. That posting generated some healthy skepticism, in the comments section of the blog. Now, a company from another skepticism-inducing industry is showing its stuff. As reported by the New Scientist: Big Pharma shows its caring side.

BIG Pharma has a heart after all. GlaxoSmithKline will slash the cost of its medicines and patents to the world’s poor, raising hopes that its rivals will follow suit.

In a speech at Harvard Medical School on 13 February, the chairman of GSK, Andrew Witty, declared that his company would “earn its right to exist” by meeting the expectations of society, not just shareholders. He said that GSK would cut the prices of all its medicines in 50 poor countries – to no more than 25 per cent of the price in wealthy nations. The company will also provide free access to its patents relating to neglected diseases – those into which there is a lack of current research.

A summary of Witty’s speech is here: Big Pharma as a Catalyst for Change (PDF).

I think there’s every reason to suspect that much of what Witty is proposing makes a good deal of business sense for GSK, in terms of building new markets. And I don’t think there’s anything wrong with that. Sounds like a win-win idea. But whether win-win models of CSR count for much is a matter of some debate within certain circles.

Here’s an interesting short piece from Forbes blogger Matthew Herper: Could GM’s Union Negotiations Hurt Health Care? Herper quotes analyst Les Funtleyder at the trading firm Miller, Tabak + Co.

“Because of the size of retirees and existing workforce as reduction in benefits could have significant knock-on effects for companies in health care,” Funtleyder wrote in a morning note to investors. “We will be watching to see how severe the cuts to the plan are (which we view as inevitable) to gauge the magnitude of the decline to the sector.”

Interesting thought. It’s also an interesting question to bounce off a couple of the leading analytic frameworks in business ethics.

Take Stakeholder Theory, for example. That theory (or maybe just ‘framework’) says, roughly, that in making decisions, companies should consider the interests of all “stakeholders” — that is, the interests of everyone who has a stake in the fortunes of the company. It’s an idea that lots of people like. The hard part is figuring out who gets to count as stakeholders (there are real dangers in defining that term too broadly or too narrowly) and how to balance the competing interests of those stakeholders. So, to adherents of stakeholder theory: are companies (and employees thereof) in the healthcare sector stakeholders in GM’s negotiations with the union, and if so, how much weight should their interests get?

Alternatively, if you’re an adherent of Corporate Social Responsibility, ask yourself this: do executives at GM have have a social responsibility to consider the effect of their decisions on other sectors of society (e.g., the healthcare industry)? Or are the current negotiations a private matter between GM, its employees, and its shareholders? Either way, why?

Back in November I blogged about ethically producing and marketing controversial products. I proposed this thought experiment:

“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?”

Today I got to see first hand what it looks like when a company tries to have such a discussion. I was invited to be part of a round-table discussion designed to provide Imperial Tobacco of Canada with constructive feedback on its ‘sustainability’ framework. (Imperial is now a member of Canadian Business for Social Responsibility. CBSR hosted the event.)

Here’s a link to Imperial’s Corporate Social Responsibility page. Their most recent report on their activities in this area is called Taking Responsibility…An Update On Our Commitments. That document is prefaced by a letter from CEO Benjamin J. Kemball, who (oddly, I think) signals that the company’s next report will be not a “social responsibility” report, but a “sustainability” report. And much of today’s discussion was framed in terms of “sustainability.” (I think the shift is odd, and I told them so at today’s meeting, because the sorts of things they’re doing, the sorts of activities they report on in this document, have little to do with what most people mean when they talk about “sustainability.” Corporate citizenship, maybe, or corporate responsibility, but not sustainability. For a forestry company, finding a way to operate sustainably is a worthy ethical goal. For most companies, it sounds like aiming low.)

According to the document cited above, Imperial’s key commitments (to sustainability or corporate responsibility or whatever) fall into 3 categories:

• Fighting the illegal tobacco trade;
• Developing harm reduced tobacco products;
• Preventing underage smoking.

(Those 3 are the focus of the document, though we talked this morning about other relevant stuff they’ve got going on, including some supply-chain management stuff, ethics requirements for suppliers, etc.)

Anyway, the document is interesting reading. And this morning’s conversation was a fruitful one. It was interesting to see what an apparently-earnest company can do to differentiate itself ethically — short of stopping selling its dangerous product.

I still think you can only get so far in terms of genuine “goodness” (whether framed in terms of corporate citizenship, sustainability, etc.) when the product you sell is one that you acknowledge to be dangerous. But I think the answer to my hypothetical question — about whether a constructive conversation can be had about ethics in the making and marketing of a controversial product — is clearly “yes.”

The Guardian had an interesting editorial on corporate social responsibility and tax avoidance, Saturday:

Tax Gap: Corporate social responsibility.

Here are a few key paragraphs:

Public companies do frequently claim to practise “corporate social responsibility” (CSR), and most leading businesses boast of charitable and green activities in their annual reports.

Barclays Bank calls itself a “responsible global citizen”, with concerns ranging from carbon emissions to credit card fees. It even has a reputation committee, chaired by deputy chairman Nigel Rudd. But nowhere does its policy mention Barclays’ tax avoidance schemes.

The advertising group WPP, before moving to the Irish Republic last November to cut its taxes, boasted six different kinds of “corporate responsibility”, including minimising its environmental impact and only engaging in “ethical marketing”. Tax did not figure in the list.

It’s a hard question, or at least harder than it looks.

Clearly, if the question were “does business have a social responsibility to pay the taxes it is legally obligated to pay?” then the obvious answer is “yes.”
And if the question were “does business have a social responsibility not to use valid deductions put in place by government for various public-policy reasons?” the answer is probably “no.”

The harder question is in between those two: “does business have an obligation not to find innovative ways to reduce or avoid paying taxes, ways that follow the letter but not the spirit of the law?”

To understand the complexity of tax avoidance, and just how far some companies have gone beyond merely using valid exemptions, it’s worth taking a look at the Guardian’s series: Tax Gap.

(This is also a good example of the damage done to the vocabulary of business ethics by the capturing of the phrase “corporate social responsibility” by those who choose to capitalize the 3 words that make it up. Those 3 words ought to signify a topic for discussion: what are a corporation’s social responsibilities? Instead, they almost always imply a statement: these are a corporation’s social responsibilities. Why does this story use that phrase? Why not just ask if tax avoidance is unethical?)

Some people use the term “corporate social responsibility” when they want to talk about “business ethics.”

That’s a mistake.

CSR is a particular thesis, or perhaps more properly a movement, within the larger topic of business ethics. Business ethics asks, quite generally, how businesses ought to behave. CSR is — roughly — the thesis that business ought to take into consideration the interests of society at large in their decision making.

Another way of putting the CSR idea is that, from a CSR point of view, it makes perfect sense to admit that a business:

• makes a useful product or provides a useful service;
• provides employment;
• provides an investment opportunity for investors;
• follows scrupulously all laws and regulations to which it is subject; and
• pays its taxes….

…and then to ask of that business, “Yes, but what do you contribute to society? How does society as a whole figure in your daily decision-making?”

Three quick criticisms of CSR:

1) Misunderstands capitalism: The central tenet of CSR — namely that the best way for business to contribute socially is through good works — is faulty, and implies a misunderstanding of the basic wealth-and-welfare generating function of markets. Businesses contribute by producing things we want; they facilitate voluntary exchanges of goods and services that, when conducted honestly, leave all concerned better off. (Ask yourself: when did Bill Gates start contributing to society? Was it in 1994, when he founded the Bill & Melinda Gates Foundation? Or was it in, say, 1975, when Gates founded the firm — Microsoft — that would help put the power of computers in of millions of offices and homes? I’m no fan of Microsoft or its products, but to think that Gates’ contribution began with the founding of his admittedly wonderful foundation is just silly.)

2) Smokescreen: when companies are cooking the books, or flouting environmental laws, who cares what CSR activities they’re engaging in? OK, I’m exaggerating. Of course good works are good works. But it’s not at all clear that they make up for other transgressions. We should stay focused. When business leaders start bragging about their CSR activities, we should smile politely, and then enquire how their companies are doing in terms of honest advertising, corporate governance and regulatory compliance.

3) Waste of Public / Activist / Media Attention. In the face of corporate scandals and economic instability, what we ought to be asking of business executives is that they focus on doing their job honestly and diligently. In any given week, millions of dollars are being spent on academic and industry conferences, round-tables, and dinners to talk about the importance of CSR. In any given week, newspaper stories are being drafted about which companies are doing well, or badly, in their CSR efforts. And in any given week, activists are staging protests, writing letters, and educating the public about the failures of companies to be “socially responsible.” What would happen, I wonder, if all of that money and effort were redirected to the simple idea of getting more people, in more businesses, to behave more consistently according to basic rules of honesty and integrity?