The Business Ethics Blog

It’s important to separate prudential advice from ethical advice. I was reminded of this simple fact by one of the interested parties in this debate over whether hair salons in Canada should have to pay fees for playing music (i.e., for “public” performance of that music).
Here’s the story: Hairdressers must pay to play music, SOCAN says

Canadian hair salons are being asked to pay for the right to play music in their businesses, said SOCAN, the umbrella group for Canadian music composers.
The performing rights organization for music in Canada has sent out notices to hair salons across the country, urging them to pay a licensing fee or face legal action.
The law has always required that barbers and hairdressers pay to play music CDs, MP3s or other formats in public, said Serge Boutros, a SOCAN customer operations manager.

I saw a brief debate on TV last night, between a SOCAN rep and a hairdresser. The worst argument the hairdresser came up with was basically, ‘look, don’t you music people realize that hairdressers are trend-setters…we’re advertising your music in our salons, so you shouldn’t be charging us for it!’ I’ve heard a version of this same argument from students as to why it’s ethically OK to download pirated music: they tell me the record companies should get hip & realize that giving music away free is good for business. This bad argument raises two good rules of thumb:
1) Never assume that a multi-billion dollar industry is “simply being stupid” (and hence needs your advice on how to run their business); and
2) Never confuse advice about what would be smart for someone to do with advice about what they’re ethically justified in doing. Free-music advocates might well be right that the music industry is being dumb. But that’s the industry’s problem, and it doesn’t change (one way or the other) the answer to whether they’re entitled to enforce their intellectual property rights.

Today’s NYT has a neat little story about the personal libraries of CEO’s:
C.E.O. Libraries Reveal Keys to Success

Michael Moritz, the venture capitalist who built a personal $1.5 billion fortune discovering the likes of Google, YouTube, Yahoo and PayPal, and taking them public, may seem preternaturally in tune with new media. But it is the imprint of old media — books by the thousands sprawling through his Bay Area house — that occupies his mind.
…
Forget finding the business best-seller list in these libraries. “I try to vary my reading diet and ensure that I read more fiction than nonfiction,” Mr. Moritz said. “I rarely read business books, except for Andy Grove’s ‘Swimming Across,’ which has nothing to do with business but describes the emotional foundation of a remarkable man. I re-read from time to time T. E. Lawrence’s ‘Seven Pillars of Wisdom,’ an exquisite lyric of derring-do, the navigation of strange places and the imaginative ruses of a peculiar character. It has to be the best book ever written about leading people from atop a camel.”

Interestingly, there’s no mention, in the entire article, of books on ethics (with the notable exception of one exec who owns the collected works of Aristotle). This got me thinking: I wonder what books on ethics real, live business leaders do read?

So, it’s audience participation time:
I’d like you to send me anything you know on this topic. If you’re a biz exec, you can send me the title of your own favourite ethics book. Alternatively, have you seen a CEO quoted in the press, citing admiration for a particular ethics book? Two rules, please: don’t send quotations from book dust-jackets as evidence. Every book has those, so I don’t find them terribly meaningful. And authors, don’t tell me that so-and-so said he/she loved your book. I’d like something a little more credible than that. So, send me your input by email.
I’ll blog the results of what you send me at some point in the future.
—–
Update: extra points for timeliness if you can find evidence of a CEO who counts one of the Harry Potter books as a book on ethics.

From today’s Vancouver Sun: Drill-sample scandal pummels Vancouver gold exploration firm

An assay-reporting scandal has ravaged the share price of Vancouver-based Southwestern Resources Corp.
On Thursday, the company said a review of drill results on its Boka gold project in China “indicates that the integrity of certain drill core samples was compromised.”
As a result, it has fired its project manager, John Zhang, and withdrawn “all its previously announced results for the Boka project.”

Not much to say about this one, except maybe that it might be an interesting illustration of how a company can do wrong — in this case, mislead investors — through the wrongdoing of one or more employees, without it necessarily being “the company’s” fault. (The story also does a good job of laying out the time-line of the story, which begins in 2002. So it would be pretty good for classroom use.)

Slate’s Daniel Gross has a snippy commentary about a short article that appeared in a recent NY Times. (See the 4th item down.) Gross summarizes the facts:

[The Times article] …describes a philanthropic trend at big New York law firms. Under the Chow for Charity program, now in its fifth year, summer associates at the giant law firm Simpson Thacher can elect not to enjoy a $60 per person lunch with a firm lawyer. Instead, if they choose to eat with the lawyer at a more down-scale joint and spend $15 or less each, the firm will donate the difference ($45 per person) to a nonprofit legal group like Legal Aid.

At one firm mentioned in the article, this programme generated nearly $50,000 in charitable donations. Gross has a few complaints about the Chow for Charity program. Chief among them apparently is the fact that the donations dont actually cost these law firms anything: money that would have been spent on an associate’s lunch is simply reallocated to philanthropy. Associates make the sacrifice, but that just means that they settle for a still-pretty-good $15 lunch. The net cost to the firms is zero.

I don’t have much to say, except that evaluation of the Chow for Charity program depends pretty heavily on the baseline you choose. Compared to what a mega-multi-million-dollar law-firm could do in terms of philanthropy, Chow for Charity is, um, pretty small potatoes. Compared to, well, not doing anything philanthropic, Chow for Charity is, well, better than nothing. That of course the strong consequentialist streak in me speaking. If you happen to think that donating a mere $50,000 is so little that it’s in some way insulting or unseemly, then no, maybe $50,000 isn’t better than nothing.

——————
[Thanks Jim!]

Last week I blogged about business ethics jargon. I was reminded of this when I saw Canada’s Prime Minister, Stephen Harper, on the news this morning. Harper is on a tour of South America. Yesterday he was in Chile, where he vaguely defended Canadian gold mining company Barrick against charges that one of its Chilean mines was causing undue environmental damage and threatening the livelihoods of an indigenous population.

Harper defended the Canadian company on TV, saying “Barrick follows Canadian standards of corporate social responsibility.” But wait: did Harper mean “corporate social responsibility,” or did he mean “Corporate Social Responsibility?” The term “corporate social responsibility” (uncapitalized) might reasonably be taken to refer to a corporation’s social responsibilities, whatever those happen to be, and if that’s what Harper meant, then the claim that Barrick followed Canadian standards of corporate responsibility might be a very thin claime to have made. After all, as a right-leaning politician, Harper might hold the view that corporations have relatively few social responsibilities beyond producing goods & services, paying their taxes, and so on. But if Harper meant “Corporate Social Responsibility,” (“CSR”) then he’s making a much stronger claim, namely that Barrick lives up to the high standards proposed by CSR advocates. And maybe that’s a claim that Barrick does indeed live up to. I have no idea. But it’s a good illustration of the problem implied by using a nice, general term like “corporate social responsibility” to designate a particular view about what a corporation’s responsibilities are. Now that the term CSR is practically trademarked, it simply can’t be used in the kind of generic way in which Harper — pretty reasonably — was probably trying to use it.

——-
Here’s Barrick’s environment page.

Details of the environmental criticisms aimed at Barrick can be found in the sidebar of this story from the Toronto Star.

The requirement that corporations “follow the law” is supposed to be one of the easy ones, or at least it’s supposed to be a requirement that’s easy to agree upon. Regardless of whether you’re a free-market economist or an anti-globalization protestor, there seems to be pretty broad agreement that doing what is legally required is sort of the bedrock of being even a minimally decent corporate citizen.

Of course, things are not really that simple. Companies are subject to an immense number of laws and regulations issued by various levels of government. In some industries (e.g., biotech or nanotech) legal requirements can sometimes be unclear and are often in flux. Add into the mix well-known ‘agency problems’ (roughly: problems in getting people in a chain of authority to do what they’re supposed to do) and it suddenly becomes very likely that any large company simply is going to end up violating the law at some point. In at least some industries, scrupulous adherence to the law, in every aspect of a company’s operations, is a significant achievement (and might even be impossible). For practical purposes, then, our interest turns away from whether a given company ever violates laws or regultions, to the question of whether, when violations occur, the company cooperates with government authorities, modifies its behaviour, cleans up its mess, and works expeditiously at implementing changes.

The occasion for posting on this topic is the following NYT story about the safety of magnetic toys:

Toy Magnets Attract Sales, and Suits

MEGA Brands, which buys its magnets in China, looks to be just such a company, according to records that the United States Consumer Products Safety Commission provided to Congressional investigators examining problems with magnet toys. Even as the company’s products were the subject of two voluntary recalls prompted by the commission — one in March 2006 and another on April 17 this year — MEGA Brands delayed answering the government’s requests for information, was uncooperative with the commission and violated the terms of one of the recalls, the records show.

Problematic or improperly labeled toys also remained on sale at major retailers well after they were supposed to have been off the shelves.

Harold Chizick, director of promotional marketing and public relations at MEGA Brands, says the company has done right by consumers and regulators. “Obviously, the company wanted to make sure this was handled swiftly and properly. We did everything we were instructed to do.”

So, although the details are muddy, let’s assume that MEGA did in fact meet its regulatory obligations, eventually, and that they merely took their time in doing so. Is this flagrant violation of law? No. Is this casual disrespect for lawful regulatory authority? Looks like it. My own informal observation via news reports suggests that behaviour like this is not uncommon. So what level of praise ought we offer companies that don’t act that way?

In other words, my question is this: could a company rightly brag about its exceptional performance if it were simply to adhere more scrupulously to all legal requirements than any other company in its industry? Discuss among yourselves.

You may have noticed that this blog is called “The Business Ethics Blog.” So, clearly my interest is in Business Ethics. But a lot of the people reading this blog are probably more used to talking about “Corporate Social Responsibility” or “Sustainability.” And some of you may really be interested in “Corporate Citizenship” or “Values-Based Management” or (oh no!) the so-called “Triple Bottom Line.”

What these terms all have in common is that they’re all ways of talking about doing the right thing in business. But why are there so many different vocabularies for this? Does it matter which one we use? Are some better than others? Why?

Wayne Norman and I recently gave a presentation on this topic, at the International Center for Corporate Accountability’s 2nd International Conference, on Globalization and the Good Corporation (June 26 – 28, 2007). We’re working that presentation into publishable form right now.

In the meantime, here’s a bit of data regarding the diversity of vocabularies. Here’s a webpage I’ve set up showing the range of terms used just within one single industry — the pharmaceutical industry — to talk about what I would call simply “business ethics.”
Diversity of Normative Vocabularies: The Pharmaceutical Industry

From the NY Times: Kellogg to Phase Out Some Food Ads to Children

Froot Loops’ days on Saturday morning television may be numbered.
The Kellogg Company said yesterday that it would phase out advertising its products to children under age 12 unless the foods meet specific nutrition guidelines for calories, sugar, fat and sodium.
Kellogg also announced that it would stop using licensed characters or branded toys to promote foods unless the products meet the nutrition guidelines.

The change is apparently an attempt to fend off lawsuits:

The policy changes come 16 months after Kellogg and Viacom, the parent company of Nickelodeon, were threatened with a lawsuit over their advertising to children by two advocacy groups, the Center for Science in the Public Interest and the Campaign for a Commercial-Free Childhood, and two Massachusetts parents.

Even so, this move puts Kellog out in front of an industry that has generally done too little to self-regulate.

See also this blog entry from last year: Ethics of Advertising Bad Food to Kids.

I’ve never understood why any human being over 8 years old would want to wear these things, though I’ve been willing to concede that if (if!) they have some orthopedic value, then I’ll make an exception for, say, nurses and people with back problems.

Now it turns out that Crocs aren’t just ugly (really, really ugly) but also possibly dangerous:

From Maclean’s: The shocking truth about Crocs: Why some hospitals are moving toward a ban on the colourful foam clog

An increasing number of hospitals and health centres are moving toward banning Crocs and Crocs knock-offs from their facilities for fear the shoes have endangered both patients and staff. The main offenders appear to be the popular Beach and Cayman models, which have holes on top, side vents and a back strap rather than a closed heel. They allegedly have been responsible for infection control hazards because bodily fluids such as blood have spilled into the holes. Staff have reportedly twisted ankles because of the open back. And staff reaction times are said to be compromised because it’s suspected that clogs are more difficult to run in than traditional hospital footwear. The most heinous charge against Crocs and similar shoes is that they act as “isolators,” enabling enough static electricity to be generated to knock out medical equipment — including respirators in maternity wards.

The manufacturers, naturally, deny the static electricity problem. No word yet on whether they’ll plead guilty to the charge of ugly.

From the NY Times: After Sanctions, Doctors Get Drug Company Pay

Summary:
The NYT story is about physicians who, despite having been sanctioned either by professional regulatory groups or by courts, continue to be employed by drug companies.

A decade ago the Minnesota Board of Medical Practice accused Dr. Faruk Abuzzahab of a “reckless, if not willful, disregard” for the welfare of 46 patients, 5 of whom died in his care or shortly afterward. The board suspended his license for seven months and restricted it for two years after that.
But Dr. Abuzzahab, a Minneapolis psychiatrist, is still overseeing the testing of drugs on patients and is being paid by pharmaceutical companies for the work. At least a dozen have paid him for research or marketing since he was disciplined.

Rant:
There is a reason why Medicine is (supposedly) a “profession,” rather than simply an “industry.” And there’s a reason why the pharmaceutical industry is (supposedly) highly-regulated.

It’s because pharmaceuticals, and health care more generally, are the kinds of products it is very, very hard for consumers to evaluate. There’s an enormous information asymmetry between the people buying and the people selling these goods and services. Such goods and services fit very poorly the model of effficient free-market transactions between fully-informed buyers and sellers. Trust is therefore essential. Setting up systems such that trust is warranted is not easy.

With regard to physicians, our solution has been to allow them to form self-regulating, self-licensing associations, groups that devise, adopt, and inculcate shared ethical values and then enforce them. Thus, patients are supposed to be able to trust doctors because doctors are part of a profession with a set of shared values that includes “putting the patient first.”

For drug companies, the solution has been to regulate them. Give the government control over what drugs are safe enough, and effective enough, to put on the market. And then further, entrust physicians with the power to act as trusted gatekeepers for the most potent drugs (i.e., prescription drugs).

I have enormous, enormous personal respect for the many physicians (and other health professionals) who work tirelessly to benefit their patients. I also have enormous respect for the many people working inside pharmaceutical companies who truly want to be part of an industry whose goal is to produce medicines to improve people’s lives. But stories like this one point to a need both for tighter self-regulation by the medical profession, and for tougher (and better funded) regulation of the pharmaceutical industry.
—–
Thanks to Bryn at Genethics.ca