The Business Ethics Blog

Two current stories in the news about corporations, as entities, being held responsible for the behaviour of their employees.

First, from the NY Times, is this one about the US Supreme Court’s consideration of Exxon’s culpability for the 1989 Exxon Valdez oil spill
Justices Take Up Battle Over Exxon Valdez Damages

Next, this story from the National Post is about a Canadian company convicted of criminal negligence in the death of one of its workers:
Sentencing for workplace death a first

At stake in both cases is (among other issues) the extent to which a corporation can be held responsible for the actions of its employees. The NYT story puts that front and centre. The NP story kind of misses that angle (perhaps because it focused on the question of criminal sanctions as opposed to sanctions handed out by a regulatory tribunal). In the Exxon case, the issue of specifically corporate responsibility is front and centre. At issue was whether,

Exxon was a “grave wrongdoer” itself, not just vicariously through the negligence of the ship’s captain, Joseph J. Hazelwood, who company officials left in charge of the ship despite having been informed that he was an alcoholic who had resumed drinking.

The NYT quotes Chief Justice John G. Roberts Jr. on this issue:

“I don’t see what more a corporation can do” to protect itself from employees who violate explicit company policy, like a no-drinking rule….

What both stories need to make clearer is that what is at stake here is criminal liability for the corporation itself, as an entity, above and beyond whatever criminal (or civil) liability might be borne by particular individuals within the corporation. It’s a big and important topic.

To many, the question of corporate responsibility is a no-brainer: corporations sometimes do bad things, and hence they should be punishable under the law. But at least two major complications arise. One has to do with the very idea of a corporation — a legal abstraction, a composite entity — bearing criminal responsibility. Under the Anglo-American legal system, criminal responsibility requires what lawyers call “mens rea”, a guilty mind. Corporations don’t literally have minds, so they can’t literally have guilty minds. Courts have, for many years, however, gotten past this by considering high executives of a corporation to be its “mind,” and their intent can (in the right circumstances) be taken to represent the intentions of the corporation. In the Canadian case cited above, one issue that is likely to have arisen is whether the managers of the company, aware as some of them apparently were of the overriding of a safety device, had the guilty frame of mind required to hold the company, as a whole, criminally responsible. The other big issue is this: if we assume that corporations can be criminally responsible for their actions (or actions taken in their name), under what circumstances can they also be criminally responsible for the reckless actions of their employees, where those employees are violating corporate policy?

Most people, I think, will agree that there are times when it makes sense to hold corporations criminally responsible. And lots of people will certainly find it desirable to do so. After all, when bad things happen, someone (something?) needs to be punished. We have the same intuition about punishing people who commit crimes while they are sufficiently intoxicated to make it apparently impossible for them to form criminal intentions. But the idea that someone/thing “ought” to be be punished still leaves open the question of what theoretical framework we wrap around that idea for particular kinds of cases, and such a framework is absolutely required if justice is to be meted out in an evenhanded manner.

Sorry for the boring title. “Clone Appetit” and “Bring in the Clones!” were already taken.

So, the big story: the Food & Drug Administration in the U.S. has approved the sale of meat and milk from cloned animals.

See the NY Times story here: F.D.A. Says Food From Cloned Animals Is Safe

After years of debate, the Food and Drug Administration on Tuesday declared that food from cloned animals and their progeny is safe to eat, clearing the way for milk and meat derived from genetic copies of prized dairy cows, steers and hogs to be sold at the grocery store.

The decision was hailed by cloning companies and some farmers, who have been pushing for government approval in hopes of turning cloning into a routine agricultural tool. Because clones are costly, it is their offspring that are most likely to be used for producing milk, hamburgers or pork chops, while the clones themselves are reserved for breeding.

Not only will producers be permitted to sell food derived from clones; when they do so, they will not be required to label it as such.

Those of you who have read my stuff on Genetically Modified foods may not find much new in my comments here. I think GM foods are pretty benign, and cloned foods even more so. Once you know that I’ve defended the right of companies to sell, without labelling, GM foods, you can guess what I think their obligations are (or are not) regarding cloned foods.

But predictably, not everyone is thrilled with the FDA’s new decision. “If you have moral objections to a particular food, or ethical objections to them, FDA’s saying, ‘Tough, you’ve got to eat it,'” said Carol Tucker-Foreman of the Consumer Federation of America (As quoted by Wired News.)

Well, not really. The FDA is simply saying they won’t force food producers to give you information that isn’t related to the healthiness of their products.

I don’t know what particular moral objections Ms. Tucker-Foreman has in mind, but it’s hard to imagine (and yes I’ve tried) any objections that are sufficiently weighty to imply serious and costly obligations for food companies. But really, the FDA’s concern is safety. And if the FDA (and European regulators) have said cloned food is safe, that’s a pretty good start. On the other hand, there’s safe and there’s safe. Safe is relative, right? So, just how safe is food derived from clones? Well, according to Stephen Sundlof, director of the F.D.A. Center for Food Safety and Applied Nutrition, (as quoted by the NYT), “It is beyond our imagination to even have a theory for why the food is unsafe.” In other words, cloned food isn’t just safe ‘as far as we know.’ It’s safe as far as the relevant experts can even imagine.

Now saying that regulators and others are convinced that the food is safe is not the same as saying consumers will be convinced. And surely that matters, somehow. On this point, see renowned Bioethicist Art Caplan’s commentary over at MSNBC: Don’t ask, don’t tell is bad policy for cloned food.

Cloning has gotten a bad rap in American society. It is the best means for scaring the daylights out of the American public short of making a movie or TV show about terrorism. We all know what clones do — at least on the big screen. They are monsters, fiends, reincarnated zombies, drones. Eat them? Hell you would not even want one standing in a field near you. No wonder why your poor deli manager is tied up in knots trying to figure out what to say when the day comes when customers ask if any of the products for sale are made from clones.
All of this fear-mongering about clones has made Americans forget that cloning is nothing more than artificially creating twins. It has made us forget that every drop of wine we drink comes from cloned grapes. It has made us ignore the fact that if you want to worry about what you are eating, you’d be better off wondering if the FDA has enough inspectors at meat plants looking for salmonella and E. coli.

Caplan is a smart guy, who is right more often than he’s wrong. Oddly, this particular commentary offers the industry pragmatic advice, rather than ethical argumentation. Caplan argues that the industry would be unwise not to label its cloned foods; he stops short of saying it would be unethical not to label it, though I suppose you could read that into what he says.

Transparency is not always the value that is used to sell food, but in this case safety is not enough. The consumer will have the last word.

Caplan may, of course, be right in claiming that it’s foolish for food producers not to label. But (as I’ve said before) we should never confuse advice about what would be smart for someone to do with advice about what they’re ethically justified in doing. Maybe I should call it “MacDonald’s Iron Rule of Business Ethics:” Never offer management advice to companies that don’t seem to need it, when you’re really in the business of giving ethical advice.

Is it ethically OK to sell cloned food without labelling it? I don’t see why not. Is it wise to do so? I guess we’ll see!

OK, this is not exactly news, but someone emailed me about it to ask what I thought. So, here we go. How much obligation does an employee have not to attach her employer’s name to a project or product her employer would object to? That’s the question raised by the DVD pictured at left, and available from Amazon.com: Playboy – Women of Wal-Mart [Caution: that link is not necessarily safe for work. Well, the first page is tame. But after that, there’s mild nudity. Depends where you work, I guess.]

What does the company think about this particular bit of publicity? Well, before the DVD, there was apparently an on-line pictorial at Playboy.com. About that (according to CNN back in 2003):
Wal-Mart said the pictorial “is in poor taste.” “Based on our values, we will be disappointed if any of our people do participate in it,” said spokesman Tom Williams. “However, individuals are free to do what they want.”

And no (as the CNN story points out), Wal-Mart has never sold Playboy in its magazine racks. They apparently don’t even carry less-explicit male-oriented magazines such as FHM or Maxim.

OK, so what about ethics? There are of course questions to ask, here, about corporate ethics. There are the obvious exploitation-of-women questions to ask about Playboy (note: all the women being featured do, by definition, have jobs — namely at Wal-Mart — so they’re not without options, but then again Wal-Mart employees are not exactly highly paid). We could also ask about the ethics of one corporation (Playboy, in this case) profiting from the name of (and possibly from besmirching the carefully-guarded brand of) another corporation (Wal-Mart, in this case). There are also some hypothetical questions: what IF Wal-Mart were to adopt a more heavy-handed approach, and insist (possibly with threats of termination) that their employees not participate in the Playboy project? Would an employer be ethically justified in restricting employees that way, either as a condition of employment or after the fact?

But we can also think of this in terms of employee ethics: do these women owe Wal-Mart (or does any employee owe any employer) a duty not to participate in projects that cast the employer in a light that is, to them, unflattering? There is a rather legalistic sense in which, certainly, these women “have a right.” Maybe it’s part of free speech. Any employee could in principle (if he or she dared) start a website editorializing about his or her employer, and might even have the right to do so. Of course, having the right doesn’t make it the right thing to do. Other factors (such as a duty of loyalty) might well come into play. Due recognition of the relevant rights is just one component of a good ethical decision. One can choose wrongly in deciding to exercise one’s legitimate rights.

It’s worth noting that the issue of whether these women are acting wrongly in posing for Playboy’s “Women of Wal-Mart” video is not settled simply by deciding whether soft-core pornography of this kind is itself ethically OK. The point is that the video is not uncontroversial, and is inconsistent with Wal-Mart’s image and market positioning. You don’t have to be a prude to at least contemplate that Wal-Mart might have a legitimate beef here.

Some, of course, will scoff at the idea that this (or maybe any) product could besmirch the reputation of a company like Wal-Mart. Wal-Mart is, after all, one of the most vilified companies in the world. In response, I’ll point out that many of the criticisms of Wal-Mart are in fact not very well thought-out. But it’s also worth remembering that there’s a legitimate disagreement over where the moral high-ground is here: for some, Wal-Mart’s supply-chain policies (etc., etc.) make the company ethically suspect. For others, its focus on “family values” makes the company worthy of applause. (Others of us have a more subtle, less black-and-white view of Wal-Mart, but that’s another story.)

(Oh, and FYI, Wal-Mart isn’t the only company to face this issue. Playboy has also produced such videos as “The Women of Starbucks” and “The Women of Enron,” not to mention “America’s Sexiest Bartenders.”)

Look isn’t a film about business…seeing the business ethics issues here requires extrapolation, but it’s not much of a stretch.

If Look had been made 20 years ago, it would have fallen into the category of “Futuristic Dystopian” films: it portrays a society in which seemingly one’s every move — walking down the sidewalk, changing in a clothing store change-room, sitting on the couch in a middle-class condo — is seen, recorded, monitored. But in point of fact the film is set in the present day. As the movie reminds us, “the average American is captured on surveillance camera more than 200 times a day.” Dystopian realism?

Look, written and directed by Adam Rifkin, is filmed more-or-less entirely from the point of view of various surveillance and security cameras. (Cinetmatically, it’s sort of Sliver meets Crash…everyone is seen on closed-circuit video, and eventually half a dozen disparate story threads weave themselves together). The dramatic tension of the movie comes from the fact that, during the course of the film, we witness murder, child abduction, theft, statutory rape, and a number of less serious offenses, all through the lens of what are ostensibly surveillance cameras.

So here’s the business ethics angle. About half the video footage that makes up the story of Look is shot by cameras at public institutions (schools, police stations, public transit); but the other half is shot by cameras located at and owned by private businesses (shopping malls, department stores, Quickee marts, etc.). The implication (though not one explored in the film) is that a vast quantity of video information is in the hands of private companies. This of course raises a whole host of business ethics issues. It raises questions about the appropriate limits on surveillance (covert and otherwise) in commercial settings, as well as questions about what may ethically be done with the fruits of such surveillance.
I’ll simply enumerate some of the headings under which we might organize such questions. Each of these topics is, of course, the subject of a considerable literature:

1) Surveillance of employees.

2) Surveillance of customers.

3) Role of private surveillance in public security.

Links:
IMDB’s page for Look
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Note: I was offered and accepted a free copy of Look on DVD to discuss on this blog.

Two months ago I blogged about how the One Laptop Per Child project (formerly known as the “$100 Laptop Project”) was Harnessing Consumerism to Get Laptops to Needy Kids. I said I thought the idea made sense. Two days ago I put my money where my mouth was, and donated $400. As a result, sometime soon I’ll take delivery of one of those strange little devices, and a second will be sent to a child in a developing nation.

I’m not looking for praise by announcing this donation. Some will think I don’t deserve any, anyway. After all, like people who buy goodies through the (Red) campaign, it’s not like my purchase/donation was selfless. On the other hand, look at it this way: I had the itch for a new gadget. And apparently I had $400 burning a hole in my pocket. The other toy I considered buying was a new iPod. Buying an iPod, or buying/donating a funky little green laptop would have cost about the same amount, and satisfied the same itch. For what it’s worth, the choice I made has resulted in some kid I’ll never meet having a nifty educational tool she wouldn’t otherwise have had.

One of the things that makes discrimination really insidious is that it can be subtle, going unnoticed even by people who do it and people who are subjected to it. This poses problems for well-intentioned businesses that want to make sure their customers are treated fairly. So what’s a business to do in light of evidence that women are getting slower service?

Here’s the story as reported by Tim Hartford at Slate: Waiting for Good Joe: Do coffee shops discriminate against women?

That’s the conclusion of American economist Caitlin Knowles Myers. She, with her students as research assistants, staked out eight coffee shops … in the Boston area and watched how long it took men and women to be served. Her conclusion: Men get their coffee 20 seconds earlier than do women. (There is also evidence that blacks wait longer than whites, the young wait longer than the old, and the ugly wait longer than the beautiful. But these effects are statistically not as persuasive.)

So, what could a coffee shop owner do in response to this sort of evidence? Some will be tempted to scoff at the idea that anything should be done. After all, it’s only 20 seconds we’re talking about here. No one’s being refused service. But 20 seconds multiplied by a gazillion coffees served across (even just) North America in a day adds up to a lot of time. Also, the difference in speed of service might be the tip of the iceberg: in what other less-readily-quantified ways are women being given worse service in these establishments? And in the end, even if it’s just a few seconds, non-discrimination isn’t just about effects: it’s the principle of the thing. This study represents some evidence — not conclusive, but suggestive evidence — that women are being treated less well at coffee shops. That’s a bad thing.

So, what to do? Sensitivity training for barristos? Probably not. Allow women to jump the queue? Excessive! In fact, it’s hard to imagine what kind of intervention one would use to counteract a small effect like the one indicated by this study. Almost any change in procedure is likely to backfire, or to generate resentment, or to result in the pendulum swinging too far in the other direction. I fear that this is a situation where even though we know something bad is going on, it is literally impossible to remedy in the short run.

Here’s the direct link to the research paper: Ladies First? A Field Study of Discrimination in Coffee Shops
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Thanks to Feministing for the pointer.

Long before Tony Soprano became everybody’s favourite mobster, it was pretty well known that the Mafia — despite it’s reputation for being far from law-abiding — has certain, um, rules…very strict rules, in fact, failure to follow which could result in very serious repercussions. Still, it’s interesting to know that those rules were codified. Here’s the story, from the BBC:

Mafia’s ‘Ten Commandments’ found

Italian police have found what they say is a “Ten Commandments”-style code of behaviour for Mafia members, at the hideout of a captured Mafia boss.
Prohibitions include frequenting bars and looking at friends’ wives, while members are urged to treat their own wives with respect.
The list was found during the arrest of Salvatore Lo Piccolo, the reputed new boss of the Sicilian Mafia.
It is thought to have been drawn up as a “guide to being a good mobster”.

It’s worth pointing out the parallels between the Mafia code and the ethical strictures placed on members of legitimate business enterprises, including:

“#2. Never look at the wives of friends.” (this is roughly parallel to various rules most businesses have regarding sexual improprieties)
“#3. Never be seen with cops.” (i.e., avoid even the appearance of conflict of interest)
“#4. Don’t go to pubs and clubs.” (presumeably this is to make disclosure of ‘company secrets’ less likely)
“#5. Always being available for Cosa Nostra is a duty – even if your wife’s about to give birth.” (every organization promotes loyalty to itself)
“#6. Appointments must absolutely be respected.” (presumeably this is an attempt to minimize the effects of agency problems)
“#8. When asked for any information, the answer must be the truth.” (no explanation required)
“#9. Money cannot be appropriated if it belongs to others or to other families.” (i.e., a basic rule prohibiting fraud)

This highlights the fact that we can meaningfully divide the field of business ethics into two different types of questions: questions about ends, and questions about means. On the one hand, you have questions about what count as legitimate ends for profit-seeking enterprises. Is extortion, pimping, or making cigarettes a legitimate way to make a living? Are those legitimate goals for your company? But on the other hand, we have questions that we can sensibly ask even about organizations whose goals we despise: given that you’re going to make your living selling cocaine or sex or cigarettes or SUV’s, what sorts of rules ought your organization, and its employees, follow along the way? This helps explain why companies can do very well on certain kinds of ethics/CSR rankings, despite being in problematic industries.

I’m blogging “on the road” again. I’m at a conference in Riga, Latvia, called “Ethics in Democracy,” sponsored by the Canadian Embassy here and organized by some of my friends at the University of Montreal. The theme of the conference is broad — covering topics from “Pluralism and Citizenship” to “Corruption and Dysfunctional Democracy” to “Corporate Social Responsibility.” I’m presenting tomorrow on the relationship between regulation and business ethics.

As the conference begins, I’m struck by just how important it is. My feeling, anyway, is that this is maybe the most important conference I’ve ever been to, mostly because these issues are far from theoretical issues in Latvia, today. Latvia was formerly part of the Soviet Union, and many former soviet states are still struggling with establishing democratic institutions, and establishing the kinds of background conditions — including the rule of law and traditions of basic trust — that allow their populations to prosper. And just two days ago, there were protests here in the streets of Riga over a brewing scandal within the Latvian government. Oh, and just to make things interesting, we have a significant number of members of the Latvian parliament attending the conference.

I’ve been to lots of ethics conferences before, ones where the academics involved could afford to be aloof and theoretical, and where the business people involved could afford to be “philosophical” about the “need for ethics.” But today, it matters. People’s lives may actualy be affected in very concrete ways by the ideas presented here today.

I just watched “Sicko”, the latest installment in Michael Moore’s “poke-tragic-fun-at-the-Establishment” series. For those of you who haven’t already seen it (or read about it ad nauseum), Sicko is a two-hour critique of the American healthcare “system” (though whether it deserves to be called a “system” is subject to debate, I guess.)

The film makes a lot of points, some more fair than others. Key take-home messages include:

• People in the US who lack private health insurance get pretty lousy healthcare.
• People in the US who have private health insurance sometimes also get pretty lousy healthcare.
• Insurance companies in the US are trying to make lots of money, and not so much trying to help sick people.
• All the politicians work for the insurance companies (or the drug companies, or both).
• People in countries such as Canada, the UK, France, and Cuba (yes Cuba) get access to very good healthcare, without having to pay out-of-pocket.
• In the US, even rescue workers who worked the wreckage of the Twin Towers after 9/11 can’t get decent treatment for the illnesses resulting from that work. Unless they go to Cuba, where they can apparently get treated very well, for free.

It’s an entertaining movie overall, of course. But the parts of the movie that are relevant to this blog involve the behaviour of insurance companies. The critique offered there — insurance companies are just out to make money, not to help people — was pretty seriously lacking in subtlety. As I watched, I kept seeing the behaviour of those companies as the sad but inevitable consequence of leaving health insurance to the market. It’s not generally wrong to do your best to make a profit, and to limit the benefits you offer consumers. All companies do that; it’s just that stories about insurance companies denying coverage to women with breast cancer are a lot sadder than stories about Wal-Mart failing to accept merchandise returned without a receipt. But one aspect of the behaviour of insurance companies that is seriously unethical involves their use of information asymmetries. Insurance companies seemingly rely upon the fact that insurance is a complicated product, and that they know much more about the value of the good they’re selling than consumers do. So they can get away with selling me an insurance policy that doesn’t meet my needs, because in some ways they know my needs better than I do. This is what Joe Heath calls a [socially] “non-preferred competitive strategy.” That is, when companies make profits by capitalizing on consumer ignorance, they’re failing to engage in the kind of socially-beneficial competitive behaviour that makes the free market worthwhile.

That alone makes Sicko worth a look by anyone interested in business ethics.

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Joe Heath’s argument about non-preferred competitive strategies can be found in his paper, “Business Ethics Without Stakeholders,” Business Ethics Quarterly, 2006 (Vol. 16, No.3).
Note: I was offered and accepted a free advance copy of the DVD of Sicko by the film’s distributer, to review on this blog.

By now you’ve likely heard about this story that broke over the weekend: it’s been revealed that one of the factories making garments for clothing retailer The Gap has been using unpaid child labour.

Here’s CNN’s version: Gap: Report of kids’ sweatshop ‘deeply disturbing’

The president of Gap North America says a subcontractor accused of using child labor to sew Gap clothes in India has been fired and the Gap will not sell clothes made in the New Delhi sweatshop.

“It’s deeply, deeply disturbing to all of us,” Gap President Marka Hansen said after watching video of the children at work. “I feel violated and I feel very upset and angry with our vendor and the subcontractor who made this very, very, very unwise decision.”

Hansen blamed the alleged abuse on an unauthorized subcontractor for one of its Indian vendors and said the subcontractor’s relationship with the Gap had been “terminated.”

A couple of comments:

1) Is this story an indictment of outsourcing, or of globalization more generally? Clearly not. As I suggested in my blog entry about toy recalls, the amazing thing isn’t how often things go wrong in a globally ramified supply chain, but how often things go right. Note also that it is only because Gap is a big company with well-organized supply chains that any coherent response is even possible. If those products of sweatshop labour were merely being retailed through a few hundred small independent retailers across North America and Europe, there would be little anyone could do. The Gap serves as a clearing-house not just for products, but for blame, and the company (unlike a disorganized cluster of mini-retailers) has the resources to remedy the problem.

2) The Gap says they’re not even going to sell the products that have already come out of the factory involved. I guess the theory is that those clothes are now somehow ‘tainted,’ like blood diamonds or something. This seems a bit crazy. It’s a symbolic gesture at best, and it seems wasteful. Worse, it smacks of a kind of puritanical, holier-than-thou attitude. As in, “sure, other companies would apologize, yank the relevant contracts, and tighten up monitoring of sub-contractors, but we’ll go a step further and treat the products as if they’re bearers of contagion.” Why not give the clothes to charity or something? (For all I know that might be their plan.) Or would that be bad, too: making poor people wear morally-tainted clothes? (Think about that for a minute!)

3) Interestingly, the Indian government worries that attempts to (over?)-regulate the apparel industry (making it harder for Western companies to outsource work to places like India) is a veiled form of trade protectionism. See the comments from the Indian commerce minister in the Times of India. Though it doesn’t come anywhere close to justifying child labour (let alone child slave labour) it’s worth remembering that the Gap is an effective means for funnelling money from affluent North Americans and Europeans to the working poor of India, among other places. That might not change the diagnosis, but it might well change the prescription.