The Business Ethics Blog

This is a messy posting about a messy topic. It’s about an unflattering review of an unflattering book about a whistleblower.

Here’s the brief version of the long, messy story, for those unfamiliar with it:
Dr. Nancy Olivieri is a specialist in the treatment of thalassemia, an inherited blood disease. She works at the Hospital for Sick Children in Toronto. In 1996 she came to believe that the experimental drug she was studying, called deferiprone, was having serious side effects on the children she was treating. She decided to inform patients and their families. Apotex, the copmany that makes deferiprone, didn’t like that. They stopped the trials, withdrew funding for the research, and reminded Dr. Olivieri that she had signed a confidentiality agreement. Then, basically, everybody sued everybody. The Hospital and the University of Toronto (with which the hospital is affiliated) didn’t back Olivieri, and some think that had something to do with a large donation the university was expecting from Apotex. Olivieri was hailed as a hero, a whistleblower, protecting her patients by standing up to powerful corporate interests. A report was commissioned by the hospital; it was critical of Olivieri, but this report was itself later demonstrated to be based on misinformation. An indepedent inquiry sponsored by the Canadian Association of University Teachers exhonerated Olivieri, but was highly critical of Apotex, the University, and the Hospital.

OK, fast-forward a few years.

Miriam Shuchman (a psychiatrist and medical journalist) publishes a book called The Drug Trial: Nancy Olivieri and the Science Scandal that Rocked the Hospital for Sick Children. The book is highly critical of Olivieri.

Fast forward another year or two. Philosopher Arthur Schafer publishes a review of Schuchman’s book in the scholarly journal, Bioethics, called “Science Scandal or Ethics Scandal: Olivieri Redux” (subscription required) The review is devastating. According to Schafer, the book manifests a clear bias against Olivieri: it focuses on the woman’s alleged character flaws, and papers over those of her critics. It also unfairly (and unrealistically) blames Olivieri for the deaths of patients who didn’t get access to deferiprone. Further, Schuchman relies extensively on quotations from anonymous sources — nothing wrong with the odd anonymous source, of course, but it’s a dodgy way to build a case. And some of the sources she does cite explicitly are people who have already been thoroughly discredited. Finally, Schafer notes a number of serious factual inaccuracies in Schuchman’s book, including at least one instance in which a quotation is wrongly attributed to Schafer himself.

I haven’t read the book myself (nor do I plan to), but if even half of Schafer’s criticisms are valid (and he’s a thorough scholar, so I suspect it’s all valid), there’s a serious problem with the book having been published at all (by Random House Canada…).

But what concerns me most about the book, and about the decade-long controversy, is the focus on one person, on Olivieri. For Shuchman to focus on a single individual might have been good from the point of view of selling books, but from the point of view of understanding the ethics of the case, it was a mistake. It might even be a mistake to lionize Olivieri as a hero. This shouldn’t be a story about heroism. Personally, I have great respect for Olivieri (though I know her only by reputation), but the point is that this case isn’t about her. It’s about sick children, the institutions that are supposed to be dedicated to helping them, and the standards and procedures that smart, well-intentioned, compassionate people put in place for reviewing novel medical treatments.
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Update: Arthur Schafer says that people who want to see his article may feel free to contact him by email. Schafer asked me to add that — as he notes in his review — Shuchman also accuses Olivieri of being wrong about the science in this case, but that Shuchman does a poor job of defending that claim.

The web makes it easier to do lots of things, including bad social science. This time, it’s bad social science in aid of evaluating corporate social impact.

dotherightthing.com

dotherightthing is a place online where you can get unfiltered information about the impacts of companies on people and the world and make it worth their while to “do the right thing.”

Basically, it’s a place where people cite news stories (or gossip) about various companies, indicate just how well or badly they think the story (or gossip) reflects upon the company, and then a net score is eventually produced to tell you how socially responsible the companies are. Or, as the site’s owners put it, the site lets you “Track the ‘social performance’ of companies in real time”. (That, of course, is false. The site does no such thing. What it does is lets you track reports of social performance in real time. Big difference.)

The flaws, here, are mostly too obvious to state. When an accusation counts as data, where the contributors of data are self-selected, and when anonymity is encouraged, you’re pretty much toast as far as methodology goes.

Here’s a nice commentary about this site, courtesy of blogger Marginal Revolution: Measuring the social impact of corporate behavior
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Thanks Andrew!

(Sorry for the long break, blog fans. Just been busy…)

So apparently a handful of Senators are sponsoring this new bill to help deter US companies from using foreign sweatshops.

Here’s the story, as reported in the Contra Costa Times: Senate sweatshop bill gains bipartisan support

A bipartisan group of senators introduced legislation Tuesday aimed at preventing American companies from profiting from the use of foreign sweatshops and other unfair labor practices abroad.

Sen. Lindsey Graham, a South Carolina Republican, joined four Democrats and independent Sen. Bernard Sanders of Vermont in sponsoring a bill that would allow U.S. firms to sue competitors that they believe are selling imported products made in overseas sweatshops.

A couple of points to consider, here (particularly for those of you who haven’t thought/read a lot about sweatshops…):

1) There’s no question the worst sweatshops out there are truly awful. Conditions are often inhuman. Some people figure “sweatshop” just means “less nice than North American Factories.” Not true. Of course, there’s bound to be a whole range of conditions, depending on the brutality of a factory’s owners/operators, degree of effective local regulation, and the level of desperation among the workers. (I sometimes hear people say, “Yeah, they get paid less, but 20 cents an hour is a pretty good wage over there!” True, local cost of living matters. But you can’t just assume…you’ve got to get the facts.)

2) Yes, for many countries, sweatshops to supply North American retailers are an important source of investment and employment. So it’s foolish just to say “shut ’em all down!” In this regard, I’ll be curious to see what test they’ll use to determine if a particular factory is a “Sweatshop.” Most of us have the luxury of judging such things from our armchairs, because we don’t have to justify (and enforce) our views. And reputable retailers can focus on making things better rather than focusing on which factories are “really” sweatshops vs which ones are just a little sub-standard. But if this bill goes through, someone will have to define, clearly, what counts as a sweatshop. Lawyers: on your marks, get set…

3) I read in another version of this story that the proposed fine is $10,000 per offcne. Is that some sort of joke? Unless that’s the fine per day or something, it’s not going to impress any of the big retailers (Wal-Mart, Target, etc.)

4) Sometimes it’s not just about immediate consequences. Sometimes symbolic gestures matter. So it may be that this bill has some moral value — as a public condemnation of certain labour practices — even if the mechanism is complicated and the fine too small.

This is Day 4 of Sin Week, the Business Ethics Blog’s examination of various “sin industries.” Today’s focus is the arms industry. (To reiterate a warning from Day 1: take the term “sin” with a grain of salt. I’ve got nothing against national defence, but because of its less-noble uses, the arms industry is typically included on the list of so-called “sin industries.”)

As it happens, one of the top headlines in Canadian news today is about a Canadian defence contractor, Bell Helicopter (a subsidiary of Bell Helicopter Textron Inc., of Texas). Here’s the CBC’s version of the story: Montreal workers forced off contract over U.S. security concern, and here’s Harper calls U.S. security demands ‘big worries’.

The basics of the story are this: U.S. regulations forbid citizens from certain countries (including Syria, Cuba, Haiti, and others) from being involved in the construction of strategic military weapons. Bell Helicopters in Montreal is making choppers for the US Army, and some of its employees — all Canadian citizens — are also citizens of countries on the US government’s black-list. So, Bell has to either get rid of the employees or lose the contract. That would be a tough problem for any company, but it gets worse: Section 15 of Canada’s Charter of Rights & Freedoms forbids discrimination based on “national or ethnic origin.” Now technically (per s. 32), the Charter only applies to actions taken by government, not by private companies, but such fundamental constitutional documents can reasonably be taken as providing ethical guidance for Canadians more generally and for Canadian companies in particular. So, if Bell Helicopter discriminates against (whether by firing or arguably even by reassigning) some of its employees on the basis of national origin, it does so in contravention of core Canadian moral values.

This is a new twist on a standard business ethics issue, namely the question of how international businesses should behave in the face of differing ethical standards in different countries. (Standard examples are things like: should a Canadian company operating a factory in Mexico apply Mexican environmental standards or higher, Canadian standards? Should an American firm operating in Saudi Arabia work according to Saudi standards of gender (in)equality, or American standards?) In the present case, we see a conflict of values between two similar countries: both the US and Canada are Western nations with advanced economies, stable, demoncratic, governments and well-functioning legal systems with strong (but not unwavering) traditions of protecting individual rights.

What’s Bell to do? For some people, rights are sacrosanct. For others, rights merely produce a presumption against certain behaviour, a presumption which is defeasible under extenuating circumstances. Let’s assume the latter, more permissive, view, for the sake of argument. Clearly, even on this view, violation of rights can’t be taken lightly. But perhaps minor infringement (such as reassigning these workers to different projects) might be justifiable, if the end being sought by the US government (presumably national security) is sufficiently compelling. The trouble here is, it’s hard to see how this particular rights violation — discrimination based on national origin — accomplishes anything. It’s just not reasonable to think that retaining citizenship in one’s country of origin implies sympathy for that country’s current government, let alone a willingness to commit criminal acts on behalf of that government. So, as important as national security is, and even if it’s plausible that some forms of discrimination might be reasonable in defence of national security, it just doesn’t seemt o make sense here. Sometimes the ends do justify the means, but there at least has to be good reason to think that the means will be effective.

Today is Day 3 of our examination of “sin industries.” (I know…yesterday should have been day 3. Feel free to assume that I was unable to blog yesterday because I was recovering from the previous night’s debauchery. I’m not saying that’s what happened, but feel free to assume.)

Today’s posting is about pornography (a.k.a. smut, “adult” entertainment, etc.). As it happens, this story is about the end of the porn industry that almost no one is willing to defend, namely child porn. This story is from a Swiss website:
Credit card checks for child porn welcomed

Earlier this week German police used customer details provided by credit card companies to track down suspected subscribers to an illegal child porn website.
…
…as part of the German raid the prosecutors had demanded all transactions for a specific account as well as a specific sum of money which were connected to products involving child pornography.
…
“The companies sifted through all their customers according to these two parameters and were able to say which of their customers had paid this amount of money to that account…”

This story could be seen as involving a couple of ethical issues, for the credit card companies involved. On one hand (and this is the issue flagged by the author of the story), the companies allowed authorities to sift through information on millions of customers — most of whom had done nothing wrong. So, their privacy was invaded. That’s not to say that the invasion was not warranted, but privacy (especially vis-a-vis the state) is pretty important to most of us, so there has to be some compelling countervailing value to justify such an invasion. Fighting child pornography is a pretty significant countervailing value, so for many people this one will be a no-brainer.

The other ethical issue, of course, is the credit card industry’s implicit support of the porn industry in general, and the child porn sub-industry in particular. I suspect that credit card companies (like banks generally) try their best NOT to know what business their corporate clients are in, and to be agnostic about what sorts of business is legitimate. Their child-porn customers are likely the “sacrificial lamb,” here (though the “lamb” metaphor probably wrongly implies innocence, here). Rolling over so readily when authorities come knocking for THOSE records may well be what helps credit card companies justify their general attitude that they’re merely helping companies do business, rather than being in the porn business themselves.

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A related news item, just FYI:
Unique Video Glasses Offer Privacy To Porn Lovers

A Taiwanese company has unveiled its collection of sleek video glasses that turn film viewing into a private affair, at the world’s biggest porn show on Wednesday.
The video glasses are a boon for porn lovers as they offer high level of privacy with complete viewing session in an inbuilt screen with audio through an ear piece.

OK, sure, so people won’t be able to see what you’re watching. But don’t you think maybe if you’re watching porn on your video-glasses at the laundromat or while waiting in line at the grocery store, those around you will notice the, um, heavy breathing, etc.?

I couldn’t choose between gambling and porn (ahem!), so I flipped a coin: it came up “heads”, so today we’re talking about gambling.

As is the case with many of the so-called “sin industries,” gambling seems like one of those things that’s entirely harmless, when enjoyed in moderation. (We did a lot of gambling — playing cars for dimes — at my parent’s house over the holidays.) But gambling, as an activity and as an industry, still has a pretty nasty rep. There seem to be two reasons. One is gambling’s association with other vices, and indeed with organized crime. That association isn’t a necessary one, of course: there’s nothing about gambling itself that says that the Mob (or other dodgy organizations) have to be involved. But historically, some pretty organizations dubious organizations have been involved in running gambling operations. Secondly, gambling has a nasty tendency to ruin the lives of a certain percentage of participants. See, for example, this story about gambling addictions:

Gambling treatment program won’t cure addiction
and…
Pull ‘misleading’ scratch tickets, gambling watchdog group urges

(For a depressing look at what happens to those who win at gambling, check this story: 8 lottery winners who lost their millions)

This week is “Sin Week” on the Business Ethics Blog. (Why this week? Because my birthday is this week, that’s why.) So, each day this week I’ll post something about a different “sin” industry (pornography, gambling, tobacco, alcohol, prostitution, etc.). In fact, such is the popularity, and range, of sinful-but-profitable activities that I suspect Sin “Week” may turn out to be rather more than a week long. We’ll see.

Now before anyone accuses me of being puritanical based on vocabulary alone, let me assure you that I do not hold all of the industries or products that will be discussed this week actually to be sinful. I myself probably drink more martinis than is healthy for me, and there’s nothing I like better that a fine cigar. And I’m pretty sure that something that could reasonably be called porn (though not all forms of porn) is going to be permissible in a free and just society. I guess if pushed, I’d say there’s not a single industry or product among those I’ll discuss this week that I can write off entirely, from an ethics point of view. None the less, each of them has been subject to serious criticism, and much of that criticism is fully justifiable. Nonetheless, please be sure to take my use of the word “sin” with a big grain of salt.

Today I’ll begin the week with a discussion of so-called “sin stocks.” If you haven’t heard of them, sin stocks are essentially just shares in companies associated with the above-named industries. Investing in sin stocks (on purpose, as a focused activity, rather than just incidentally) is sort of the flip side of the “Socially Responsible Investing” (SRI) coin. SRI funds are investment funds that eschew investment in socially questionable (a.k.a. “sinful”) industries — either on ethical grounds or for fear that such industries are in some way unsustainable.

The core idea behind investing in sin stocks is that, well, sin sells. Sin is popular, and often so attractive that people will spend a lot of money on it, even when there’s little money to go around. Thus, sin is profitable: predictably, and sometimes obscenely, profitable. So if you’re interested in Return on Investment, one reasonably effective strategy may be to put your money in sin. For an informed take on just how profitably, see this article from Canadian Business: Why sin is good: tobacco, alcohol and gaming stocks can add sizzle to your portfolio

So, sin stocks can be profitable. Or not, according to Michael Brush, author of this article at MSN Money: Should you abstain from sin stocks? According to Brush…

…the reality is that investing in sin is no sure bet. In fact, the Vice Fund (VICEX), the Dallas fund that invests unabashedly in gambling, alcohol, tobacco and defense stocks, has dropped more than 10% since its launch last summer. And some areas, such as gaming and tobacco, face higher risk as states view them as easy targets for tax revenue to plug budget shortfalls.

Then there’s the question of definition. Defining “sin” (or, if you want to avoid the theological implications of that word, defining what’s unethical) is a tricky matter, and subject to more than a little disagreement. What’s sinful to one person might be virtuous to another, depending on some crucial value-assumptions. According to MSN’s Michael Brush…

Like the Noah fund, the Ave Maria Catholic Values funds … screens out any companies linked to pornography, birth control and the “anti-family” practice of offering benefits to unmarried domestic partners, says Robert Schwartz of Schwartz Investment Trust, the Detroit firm that manages the $61-million-asset Catholic Values fund. But the fund, whose largest holding is H&R Block … can hold shares in alcohol, gaming and defense stocks, just like the Vice fund.

Is it unethical (or even just ethically dodgy) to invest in sin? If so, a lot of us should be worried. As noted in this WSJ story (In Mutual Funds We Trust ) it’s pretty hard to avoid sin stocks, given the difficulties in figuring out which companies are in what businesses, either directly or indirectly:

But who has a moral compass calibrated finely enough to navigate the complexities of modern corporate conglomerates? Invest in General Motors and you find yourself with a stake in GM’s Hughes subsidiary, which runs the DirecTV satellite service. Which means you are, however tangentially, a shareholder in the vast American porn industry, beaming the Playboy Channel coast to coast.

So, welcome to Sin Week. Pour yourself a drink, sit back, relax, and enjoy….

Relevant Links:
Investing in Sin Stocks (from the Motley Fool)

Andrew Leonard at Salon had an interesting (and, to me, odd) piece a few days ago: The Wal-Mart effect on workers [subscription required]. In it, Leonard quotes Charles Fishman, author of The Wal-Mart Effect. (I haven’t read Fishman’s book yet, but I know he’s written some interesting stuff in the past, including this article from 3 years ago: The Wal-Mart You Don’t Know)

Anyway, here’s what Fishman says (quoted by Leonard) about Wal-Mart’s new plan to use real-time computerized scheduling of workers’ shifts to optimize the number of workers in a store at any time:

I think the plan described…is wrong-headed, disrespectful, and won’t solve the problems Wal-Mart is trying to solve — while creating new ones.
Scheduling people is not, in fact, like scheduling electricity purchases or scheduling the arrival of trucks at a loading dock. You can’t “optimize” them if their work lives spin their personal lives into chaos and uncertainty.

What strikes me as odd about Fishman’s comments is that he’s essentially giving management advice — advice on efficiency — to one of the most efficient corporations in the world. I mean, hey, go for it: we’re all free to offer as much advice as we want (not that Wal-Mart’s necessarily going to listen). But Fishman’s comments here are an example of an argumentation pattern I’ve seen before: start off making an ethical argument, and then ground that argument in some arm-chair prudential advice.

Other examples I’ve heard in the last few months:

• “There’s nothing wrong with pirating music, because after all, big music companies should realize that this is a form of advertising! They should realize that on-line filesharing is just going to help them sell more records!”
• “Food companies shouldn’t be allowed to clone or genetically modify foods. After all, what’s the point? Traditional agriculture works just fine! They’re wasting their money!”

Now in each case, the conclusion reached just might be right. My point is that the arguments are faulty. In each case, critics seem to arrive at a moral conclusion on narrowly prudential grounds. As I tell my own students: we should always be very cautious in assuming that a management strategy that we don’t understand is actually stupid, especially when it’s being carried out by an organization that is famous for making smart decisions.

[Thanks to Caitlin Roran for the pointer.]

Joel Makower at GreenBiz.com has written up what he believes to be the Top Green Business Stories of 2006 . The list — full of hyperlinks to news items — makes great reading.

Here’s Joel’s list (minus his commentary):

• 1. Wal-Mart Goes from Zero to Hero
• 2. Alt-Fuel Vehicles Get in Gear
• 3. Carbon Neutral Brings Hope and Hype
• 4. Financial Sector Takes on Climate
• 5. Investors Flex Their Muscle on Climate
• 6. Renewables Become the New Recycled
• 7. Water Rises as a Business Issue — and Opportunity
• 8. Computer Industry Plugs in to Green
• 9. Green Chemicals Become Supercritical
• 10. Green Becomes an Engine of Growth

I have just two quick points to add.
First, several of the stories are about major institutional players (insurance companies, investment banks, etc.) who’ve decided to go green. This is significant in its own right, but is probably also noteworthy as an indicator of how serious certain environmental problems have become: insurance companies and investment banks don’t operate on the basis of guess-work. If they’re on the move, there’ve gotta be good reasons.

Second, what’s motivating all this? A newfound-but-heartfelt love of green, open spaces on the part of corporate execs? Well, probably not. But does it matter? Guessing (or worrying about) the motives of corporations is a lot like guessing/worrying about the motives of politicians. On just that topic: I heard an environmentalist being inverviewed on CBC radio this morning, about his attempts to lobby the Canadian Prime Minister’s office on environmental issues. The reporter asked what he thought motivated the Prime Minister’s new interest in the environment, to which the environmentalist responded (and I’m quoting from memory here), “A political party’s job is to get elected. If I worried about what motivated politicians, I basically would never speak to them. My job is to make sure that the state of the environment improves.”

Here’s a story for those of you who dislike Wal-Mart, and who have thought to yourselves, “if only they could use their power for good, instead of for evil!” From yesterday’s NY Times: Wal-Mart Puts Some Muscle Behind Power-Sipping Bulbs

…the long-lasting, swirl-shaped light bulbs known as compact fluorescent lamps are to the nation’s energy problem what vegetables are to its obesity epidemic: a near perfect answer, if only Americans could be persuaded to swallow them.
But now Wal-Mart Stores, the giant discount retailer, is determined to push them into at least 100 million homes. And its ambitions extend even further, spurred by a sweeping commitment from its chief executive, H. Lee Scott Jr., to reduce energy use across the country, a move that could also improve Wal-Mart’s appeal to the more affluent consumers the chain must win over to keep growing in the United States.

For those of you to whom Wal-Mart is a symbol of unmitigated corporate evil, this story must be mightily confusing. Wal-Mart doing something good?

Two themes are worth considering, here.

The first theme is Wal-Mart’s attempt to reposition itself as a leader in ethics, social & environmental responsibility, etc. Apparently they’re tired of being the bad boy of retailing:

More than a year ago, Mr. Scott, the company’s chief executive, began reaching out to some of environmental groups, telling them that Wal-Mart, long regarded as an environmental offender, wanted to become a leader on issues like fuel efficiency and greenhouse gas emissions.

Clearly, Wal-Mart has the organizational wherewithal, and the cash, to implement big changes. And there’s nothing in Wal-Mart’s business model that says it can’t be an environmental leader. Of course, selling a hundred million energy-efficient bulbs doesn’t turn Wal-Mart into an enviro-saint; there are doubtless other issues it needs to work on. But it apparently has the will, and is clearing beginning to find the ways. (See also my prediction about Wal-Mart from back in March.)

The second theme is Wal-Mart’s enormous power. We might usefully distinguish 3 kinds of power Wal-Mart has. The first lies in its own size, organizational capacity, & cash-flow. When Wal-Mart wants something, it’s got the resources to make it happen. Even if Wal-March changes no one’s light-bulb purchases but its own (for over a thousand stores in the U.S. alone), that’s still going to have a huge impact. The second lies in its access to the eyes & minds of gazillions of consumers: advertising energy-efficient bulbs on the end of an aisle at Wal-Mart is probably more effective marketing than a 30-second commercial during the Superbowl. This means that Wal-Mart has the power to influence people’s thinking. (Which do you think is more effective: an aisle-end display at Wal-Mart, or endless Saturday-morning public service announcements about hte importance of turning off light-switches?) The third is its power as a business partner. When Wal-Mart sets its mind to something, other key players are pretty much bound to come along for the ride:

In a December 2005 meeting with executives from General Electric, Wal-Mart’s largest bulb supplier, “the message from G.E. was, ‘Don’t go too fast. We have all these plants that produce traditional bulbs,’ ” said one person involved with the issue, who spoke on condition of anonymity because of an agreement not to speak publicly about the negotiations.
The response from the Wal-Mart buyer was blunt, this person said. “We are going there,” the buyer said. “You decide if you are coming with us.”
In the end, as Wal-Mart suppliers generally do, the bulb makers decided to come with the company.

Yikes. Not a lot of companies can get away with being snippy to G.E. (the world’s second-largest company). When you see that kind of weight being thrown around, it’s pretty hard not to agree that it’s being done in service of something like energy efficiency. Sure, Wal-Mart probably wouldn’t be doing this if they thought they’d lose money at it, but why should they? And besides, there are lots of products to make money on. Energy-efficient lightbulbs? We could do a lot worse.