The Business Ethics Blog

Here’s an interesting little piece by Alex Singleton, blogging for the Telegraph: Is it ethical to buy cheap clothes?

Is our shopping encouraging child labour? That is a question many consumers are concerned about following a Panorama documentary earlier this week, and rightly so.
Counter-intuitively, though, buying clothes made cheaply overseas actually cuts child labour, rather than increasing it.

The argument is that buying cheap clothes manufactured in developing countries gives (mostly) adults factory jobs that get them away from the subsistence-level agriculture that is the biggest user of child-labour. Get Mom & Dad away from the farm, and Jr will be freed from the fields, too.

But there is of course more than one ethical issue in buying cheap clothes. Cheap clothes typically wear out quicker, and so must be replaced more often, which (unless I’m missing something) makes them less environmentally friendly. So, buy MORE cheap clothes if you want to save kids from child labour; buy LESS cheap clothes if you want to help the environment. Many people would like to believe that the socially responsible thing to do is also always the environmentally responsible thing to do. Of course, that’s wishful thinking. In reality, sometimes acting ethically is win-win. Sometimes it ain’t.

Is there any difference between ethically evaluating a corporation’s goals, on one hand, and a non-profit organization’s goals on the other hand? That is, should our standard of evaluation of similar goals be different, for different kinds of organizations?

Today’s posting is loosely linked to the following recent press release:

Harvard University and Not-for-Profit, Diagnostics-For-All, Partner to Introduce Innovative, Low-Cost Diagnostic Technology in the Developing World

Harvard University and Diagnostics-For-All, Inc., (DFA) have entered into an agreement aimed at developing a new generation of portable, low-cost, user-friendly diagnostic solutions and make this technology accessible to patients and healthcare providers in the developing world.
DFA is a not-for-profit diagnostic device company launched to develop a low-cost, paper-based “lab-on-a-chip,” a simple and flexible diagnostic device that can be used in resource-poor areas of the globe to support public health. The DFA took top honors at Harvard Business School’s 12th Annual Business Plan contest in April and at the 2008 MIT $100K Entrepreneurship Competition in May.

It’s a nice story about a genuinely nifty-sounding technology, one that seems likely to do a lot of good. But it made me think about the goals of non-profit organizations more generally, and how we evaluate them. Here are some initial thoughts:

A firm’s pursuit of particular goals is in effect licensed by three factors. First is the consistency of those goals with society’s standards (so, e.g., your firm can’t have as its goal the promotion of child pornography, because that’s outside the limits set by society). Second is the firm’s being situated within a free-market economy, one within which the choice of what products and services to produce is left up to corporate managers, guided by consumer demand. Third is the obligation -– again part of the capitalist system -– to attempt to make a profit for shareholders. I think those are roughly the grounds upon which to assess whether a firm’s goals are reasonable.

An non-profit organization doesn’t play the same social role that a business firm does, and so its goals are not subject to precisely the same standards of evaluation. Thus, for example, the fact that the factors listed above warrant a particular firm’s goal of promoting, say, the clinical use of genetic testing (and hence sales of its own genetic test products) does not immediately imply that an non-profit organization would be warranted in promoting genetic testing: increased genetic testing (say, for population screening) might not be warranted by evidence, and an non-profit with a health-promotion mandate ought only promote health technologies that are established to be genuinely effective and efficient.

[Note: I realize the Harvard story above is not about genetic testing per se, but my own example mentions GT because it is more controversial.]

I’m just back from St. John’s, Newfoundland, where I attended the Annual Meeting of the Canadian Bioethics Society. (Good conference, great party.)

I gave a presentation with the cranky title, “What Bioethics Gets Wrong About the World of Commerce.” In fairness to my bioethics pals, I did clarify that I thought the myths I discussed are pretty common far beyond the world of academic Bioethics. But misunderstandings regarding the world of commerce are particularly worrisome in Bioethics, given the huge role that commercial entities play in health care and health research (even in countries like Canada with robust publicly-funded healthcare systems). And constructive criticism and advice are impossible without understanding.

So, briefly, here are the 4 myths I tried to bust during my presentation, along with an abbreviated version of my comments on them.

Myth #1. “Profit is the sole driver of corporate behaviour.” Corporate motivations are of course much more varied and complex than this. Even short-term motives (such as diversifying, or expanding market share, or improving community relations) that are linked to building long-term shareholder value are different in important ways from straightforward profit-seeking. And don’t forget that what drove key decision-makers at Enron (and the companies at the heart of so many other scandals) was not pursuit of corporate profits, but pursuit of personal gain.
Myth #2. “For business, ethics is always just window-dressing.” Clearly not all companies that claim to care about ethics care very deeply. But as a generalization, the claim that corporate ethics is always window-dressing is an unsubstantiated empirical hypothesis, one at odds both with informed opinion and common sense. There are companies that care deeply about ethics, roughly because there are people who care deeply about ethics. And it’s worth adding that even companies whose commitment to ethics is instrumental (i.e., they pay attention to ethics because they think it’s good for the bottom line) can still manifest a deep instrumental commitment to ethics, one woven into the organization’s policies and procedures.
Myth #3. “The profit motive is antithetical to the public good.” The pursuit of profit, properly constrained, is of course typically generally conducive to the public good. Or perhaps more precisely, a system where the provision of goods & services is motivated by the pursuit of profit is conducive to the public good: profit is a useful lure, attracting talent and investment toward useful projects. Those who believe that the profit motive is “the problem” have yet to offer a plausible alternative.
Myth #4. “Corporations are unitary decision-makers.” If corporations were unitary decision-makers — thinking with one mind, speaking with one voice — they’d be both easier to steer and easier to criticize. But they’re not. Corporations are complex & difficult to manage. They have many internal stakeholders, many interests, many values. They famously are subject to a whole host of “agency problems.” Can shareholders effectively control the Board? Can the Board effectively control Management? Can Management effectively control employees? Although corporations are, from a legal point of view, individual “persons,” it’s crucial to remember that that convenient legal fiction also masks a very complicated social reality.

Of course, it’s quite likely that not very many people really believe all (or maybe even any) of those myths. But popular films like The Corporation have done their best to propagate them, so it’s worth pausing once in a while to consider just how silly they really are.

(The Business Ethics Blog is back, after a short hiatus. FYI, this blogger is spending the summer as a Visiting Researcher at the Centre de recherche en éthique at the University of Montreal. Terrific city, terrific ethics centre. OK, onward…)

Don’t you just hate it when conspiracy theorists turn out to be right, or even roughly right?

With gas prices soaring, there’s been plenty of yammering about price-fixing. Surely if prices are so high, it must be because gas companies are colluding to jack up prices. The mere forces of supply and demand couldn’t possibly cause prices to rise, minus some greed-driven chicanery on the part of Big Oil. Right? Right?

Sigh.

Well, turns out (some of) the suspicions were (at least partly) right. A bunch of gas stations here in Quebec have just been charged with price-fixing. And a bunch of individuals and businesses have already pleaded guilty.

Here’s the story from the Globe & Mail: Price-fixing scandal fuels uproar

Christian Goulet has helped fuel a firestorm in Quebec over prices at the pumps.
Mr. Goulet’s statements in a local paper that he received threats from rivals because he was selling fuel at his gas station at lower prices than theirs formed the basis for a sweeping competition-watchdog probe into price-fixing in four Quebec markets.
The article, published four years ago in a Victoriaville biweekly, culminated in the federal Competition Bureau’s laying of criminal charges against 13 individuals and 11 companies in four markets: Victoriaville, Thetford Mines, Magog and Sherbrooke.

Here’s another version en francais, from Radio-Canada: Le Bureau de la concurrence sévit (the headline translates roughly as “Competition Bureau Cracks Down”)

And here’s an editorial on the topic, from the National Post: The honest price of gas

The Competition Bureau’s discovery of a price-fixing conspiracy at gas stations in four southeastern Quebec cities has led to an apparent wave of “Gotcha!” sentiment among Canadian drivers harried by high prices at the pump. There has always been a strain of opinion that sees something deeply suspicious in the similarity in prices that usually prevails over a geographical area, on any given day, in the consumer market for gas. With prices now hovering around $1.30 a litre in major metro areas, the perennial grumbling is turning into rage. Are the dirty tricks in Sherbrooke and Victoriaville just the tip of the iceberg? Are the rest of us being victimized by the oil companies too?

A couple of things worth noting, here. First, yes, the conspiracy theorists were at least partly right. There’s been evidence of at least local price fixing. No evidence (that I know of) for the holy-grail of gas-price conspiracies, namely the claim that the head offices of the big oil companies are engaging in price fixing.

Second, the story is an interesting study in corporate responsibility for the acts of its agents. Major gas companies keep track of the prices charged by their stations. As noted in the National Post editorial, “A few stations apparently remained outside the cartel, and according to Ultramar, one of the companies that pleaded guilty, its operation required a sales representative to lie to his superiors about local price fluctuations.” It’s another example of how hard it is for large organizations to monitor the activities of their branches & employees, even when (let us assume) they are motivated to do so.

A final thing worth noting — one thing I wouldn’t have (but probably should have) anticipated about this story — is that the price-fixing was achieved at least in part through intimidation. Stop picturing a back-room deal, featuring greedy, cigar-smoking executives cackling as they decide how to divide the spoils of their evil deeds. The truth is more interesting. Conspiring to jack up prices required not just simple agreement, but an agreement apparently enforced by good old-fashioned thuggery. The hero in this story — the gas station owner who went public — simply wanted to conduct business in the good old-fashioned capitalist way, doing his best to make his product available to the public at a price better than the competition.

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(Merci à Dominic pour l’idée!)

I’m told by reliable sources that having kids changes you, and among other things it shifts your views on lots of things.

Add to that the fact that many important decision-makers are parents, and you’ve got the makings of an interesting and important question: is the behaviour of key institutional decision-makers affected by their kids?

Apparently it can be. See this blog posting about political decision-making:
Fathers, Daughters, and Roll Call Voting in the U.S. Senate

The short version: apparently having a daughter is correlated with members of congress voting progressively on issues of special importance to women.

Now, although the data presented there is specifically about congressional voting, it seems highly unlikely that the effect found is limited to that domain. This raises interesting questions about decision-making by corporate executives. Does having a daughter affect a senior executive’s decisions about corporate issues such as on-site day care, maternity leave, etc.? What I love about this question is that it helps further discredit the idea that all corporate decision-makers ever care about is profits. The standard cynical hypothesis is that if a company does something progressive, like making an effort to have women on the Board, it must be motivated by a desire to look progressive and thereby indirectly to increase profits. Alternative hypothesis: maybe the decision-makers in charge have daughters?

Sex sells. Duh. And uses of sex(uality) to sell things range from the cutesy to the crude, from the obvious to the outrageous. Most reasonable people, I think, take a certain amount of it for granted, though we may wince or just roll our eyes at the more blatant and/or childish efforts (I’m looking at you, Axe Body Spray!) But at very least, using overt representations of sexuality to sell your product opens up a lot of questions, ethically speaking. For some, the use of sex seems like a distraction, an irrelevancy. “Why are there scantily-clad women in this ad? It’s an ad for office supplies!” The sexual element of such ads tell us nothing, and so such ads might be criticized for failing at achieving the purported goal of advertising, namely to inform consumers. For others, the use of sex can be more sinister, a cynical attempt to manipulate us by means that stereotype, reduce, and trivialize.

So, here’s something to chew on: what are we to think when a company (or other organization) uses sex to sell something that is generally presented as an ethical product or lifestyle choice? In particular, what to think about using sex to sell vegetarian products and an animal-friendly lifestyle? Here are two recent stories on this question:

• From Maclean’s: Go Veg! Get Girls!
• And from the NYT: The Carrot Some Vegans Deplore

Both stories focus on the same 2 cases. The first is a vegan strip-club in Portland. According to Maclean’s it is…

…a devil-themed venue called Casa Diablo Gentlemen’s Club — the world’s first vegan strip club — where, as [the owner] told local media, “We put the meat on the pole, not on the plate.”

What, you wonder, is a “vegan” strip club? Well, all the food (in a traditionally meat-oriented style of establishment) is vegan (i.e., zero animal products), and all the strippers are vegans. In addition, all the strippers wear cruelty-free outfits. (Well, at least the outfits aren’t cruel to animals. I can only speculate whether the outfits are cruel to the strippers.)

The other case featured in both stories is the use of naked female bodies by PETA (People for the Ethical Treatment of Animals) to raise awareness of its cause. In recent years, PETA has used the nude or semi-nude bodies of both unknown women and famous women (e.g., Pamela Anderson, Cindy Crawford, Alicia Silverstone) in its ads and publicity stunts. In defending such tactics, PETA sometimes appeals to the free choice made by the women in their ads, but for the most part they stick to a consequentialist focus on the anticipated good outcomes. The NYT quotes thusly:

“Sexuality is what society will turn its head for more than anything else,” said Ingrid Newkirk, the president of PETA, who added that the recent advertisements were just one of the group’s strategies. “We try to reach everybody in different ways.” She noted that the group has also shown naked men in ads.

Of course, sex itself isn’t a bad thing, so featuring sex(uality) in advertising can’t be intrinsically a bad thing. The problem is that, historically, using “sex” to sell has typically meant using women’s bodies, and usually specific cultural stereotypes of ideal women’s bodies, to sell things. And some people, at least, see a special irony in using women’s bodies to sell vegetarianism: the tactic, critics say, fights oppression of animals by colluding with the oppression of women. I wonder: would PETA be just as ready to use, say, race the same way they use sex? Food for thought.

Unnecessary footnote: FYI, the connection between sex & vegetarianism might not be spurious; it might make more sense to use sex to sell vegetarianism than to sell office supplies. Pro-vegetarian literature has long touted the, er, sexual benefits of a vegetarian diet. (Fewer clogged arteries, better blood flow…you figure it out.) This particular vegetarian blogger is not about to do anything to deflate those claims.

This one’s nearly a “perfect storm” of business ethics.

Marketing a product that plays on female body-image issues? “Ethically questionable!”
Marketing a product that promotes a sexist stereotype? “Ethically problematic!”
Marketing any product to children? “Ethically challenging!”

Add ’em all up: T-R-O-U-B-L-E.

Case in point: An on-line game called “Miss Bimbo,” aimed at pre-teen girls. See the story, here, from The Age: Outrage over girls’ bimbo game

Parents’ groups in Britain have condemned an internet game in which girls as young as nine are encouraged to “buy” virtual dolls breast operations and facelifts.

The aim of the Miss Bimbo game, which was launched in Britain last month, is to become the “hottest, coolest, most famous bimbo in the whole world”, and contestants who compete are told to “stop at nothing”, even “meds or plastic surgery”, to ensure their dolls win.

Children are given a naked virtual character to look after. They compete against other players to earn “bimbo” dollars so they can dress her in sexy outfits and take her clubbing.

Now, true, the designers of this game didn’t invent body image problems, and I doubt there’s any uncontrovertible evidence that a game like this is going to cause girls to end up with body image issues. But still: who wants to be responsible for promoting the idea that you “win” by using surgery & pills to turn yourself into the very best bimbo? OK, sure, certain reality TV execs do, but they hardly count as moral exemplars.

And every serious company that markets to kids knows it has to tread very carefully in deciding what to sell and how sell it. (Rough hypothesis: no big company would be dumb enough to market a product like this. Discuss.) (Footnote: a key mechanism at play here is that e-commerce has lowered ‘barriers to entry’ so much that anyone with some computer savvy can turn a bad idea into a product. Compare: if you wanted to produce this game as a board-game, it’d be expensive to do, and so you’d have to get investors, etc. Then there would at least be someone asking obvious questions, like, “Are you sure this is a good idea?”)

This is one of those cases where, even if you couldn’t work out an air-tight argument to the effect that promoting such a game is utterly unethical, you’d still want to tell this guy: “Dude, get a life! There are better ways too make a living.”

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As usual, the Feministing blog has a funny, on-target assessment:

[The game’s creator] claims that the game is just aiming to be realistic: “The breast operations are just one part of the game and we are not encouraging young girls to have them, just reflecting real life.” You know, the kind of real life where nine year-olds get boob jobs. Charming.

Regular readers will know that one of my pet peeves is the silly idea of “Triple Bottom Line management,” “Triple Bottom Line Investment,” etc. I’ve railed against the Triple Bottom Line (3BL) silliness both in scholarly publications, and in blog entries here and here and here.

Clearly, one of the big sources of inspiration for the 3BL idea is the worry embodied in the old saw that you ‘can’t manage what you can’t measure.’ The inference is that if you could only measure ethical performance (or something), and reduce it to a bottom line (or something), then you could really get a handle on it and manage it properly. Of course, ever good manager knows there are lots of things she has to manage that typically aren’t, and maybe can’t be, measured.

Thus my heart rejoiced when i read this bit from a recent Maclean’s magazine article (Time to Stop the Clock? ) about the move by many law firms to stop billing by the hour. The article cites Jay Shepherd, head of a Boston area law firm, explains how he gets by without being able to attach numbers to his people’s productivity:

Shepherd—who predicts the billable hour will last another decade—doesn’t even track his staff’s hours for internal purposes. This has prompted many competitors to ask how he knows if associates are doing their work? “I manage them,” he says. “That’s my job.”

Precisely.

What New York Governor Eliot Spitzer did was illegal. Was it unethical? Certainly it is true that our areas of ethical concern extend well beyond the limits of the law, but it’s also true that not everything illegal is unethical. Many acts of civil disobedience, for example, are both illegal and morally praiseworthy. But generally, citizens (including corporate citizens) have an obligation to uphold the law, even when those laws are relatively bad laws or even stupid laws. Of course, the worse or the sillier we believe a law to be, the more likely we are to forgive those who, in contravention of their duties as a citizen, break that law. But the law Spitzer broke was not an obviously bad one, and he certainly didn’t break it as an act of civil disobedience. So, in addition to a personal infidelity, it seems fair to say that Spitzer has committed the moral wrong of violating his country’s laws.

Now, so far none of this has much directly to do with business ethics. But Spitzer’s case is a great starting point for discussions in business ethics, because it involves several issues and principles that are directly relevant there:

Ethics in Leadership
The Spitzer scandal has raised questions about the significance of ethics and character in leadership. Spitzer himself put it this way, in his very brief press conference:

“From those to whom much is given, much is expected. I have been given much: the love of my family, the faith and trust of the people of New York and the chance to lead this state. I am deeply sorry that I did not live up to what was expected of me.”

Spitzer was not just someone to whom much had been given. He was a leader, and what he in particular had been “given” was the responsibility both to make decisions on behalf of, and to provide leadership to, the government and people of the State of New York. The most direct reason for his resignation is that his wrongdoing called into question his capacity to lead. In particular, many commentators have commented on Spitzer’s hypocrisy…he was a rabid prosecutor of other people’s wrongs (including prosecution of the use of prostitutes) while he himself was partaking of the services of prostitutes. It’s worth noting, however, that being a hypocrite is not the same as being wrong. His having made use of the services of prostitutes in no way invalidates his prosecution of others who made use of the services of prostitutes. But such hypocrisy probably does radically diminish the man’s ability to fulfill at least the symbolic elements of the leadership role.

“Personal” wrongs can jeopardize institutions
Spitzer’s illegal behaviour had nothing directly to do with his duties as Governor. He was not accused of taking a bribe, or of mishandling a conflict of interest, or anything of that sort. Yet his behaviour resulted in him having to resign his post — and might well have needed to do so even if the behaviour in question had been “merely” unethical, instead of illegal. Why should Spitzer have to resign over “personal” wrongdoing not directly connected with his job? There may be several reasons, but I think the most interesting one has to do with the worry that a man in Spitzer’s role is at serious risk of blackmail if he engages in behaviour over which one could be blackmailed. That is, in engaging a prostitute, Spitzer created the possibility that someone could find out and then blackmail him into making decisions, as Governor, that were not in the interests of the people of the State of New York. Spitzer’s private behaviour jeorpardized his public duties.

Illicit business
At least some of the discussion around the Spitzer case has at least mentioned the question of whether prostitution (and related activities such as solicitation and pimping) ought to be illegal in the first place. On one hand, there’s the libertarian argument that voluntary financial transactions between consenting adults ought to be left to the discretion of those directly involved. Others argue that prostitution (etc.) ought to be illegal either because it tends to involve the exploitation of women, or because it tends to be “associated with” other, more clearly dangerous, activities such as drug trafficking, or because it tends to be a public nuisance. (FYI, a focus on the latter is why in Canada and the UK, at least, prostitution itself is technically legal, but solicitation for the purposes of prostitution is not.) There’s good fodder here for classroom discussion about what kinds of businesses should be forbidden, and why.

Here’s an unexpected story of a business sector finding environmental salvation: many Christian churches are apparently “going green” this Palm Sunday (which I’m told is coming up soon). In particular, they’re using palm fronds that have been harvested in more environmentally responsible ways during their celebrations of the story of the rebirth of Jesus:

Churches go ‘green’ for Palm Sunday

This year, more than 2,130 congregations across the USA, including Catholics, Episcopalians, Lutherans, Methodists and Presbyterians, will use “eco-palms” that are harvested in a more environmentally friendly way….

One wonders whether this environmentally conscious move will one day be carried to its logical conclusion, namely the elimination of the use of palm fronds altogether. Surely their symbolic role could be carried out by some means other than having every member of a church’s congregation carry one? Why not an e-palm… a picture of a palm frond on my PDA or iPod? I mean, if you really want to minimize environmental impact, reducing ain’t as good as eliminating.

It’s also interesting to note what a huge premium churches are paying for eco-palms:

A typical order of 200 eco-palms costs $47.50…compared with $21 to $23 for traditional palms….

That’s a helluva premium to be paying… apparently part of that is accounted for by the slower, more careful (and hence more ecologically friendly) harvesting methods. But some of it goes to ensuring fair wages for workers, and apparently 25% goes back into the harvesting communities in the form of scholarships, etc. Seems to me that marketing eco-palm fronds to these churches is roughly like marketing fair-trade coffee to yuppies. Once they’ve signaled that they’re willing to pay more, why not double the price? But if I were the one doing the buying on behalf of one of these churches, I’d want to ask some tough questions about just where that huge markup is really going, and whether that’s the best way to spend that money.

(Note: for some neat background and argumentation about marketing fair trade coffee to yuppies, etc., see John Kay’s The Truth About Markets)