The Business Ethics Blog

Salon had an interesting item recently: Big Pharma’s protectionist trade agreements, by Andrew Leonard (If you’re not a Salon subscriber, you have to view an ad in order to get to read this article for free.)

The article is basically about efforts by the pharmaceutical industry to manipulate international trade regulations as a means of protecting intellectual property (i.e., keeping the price of their products high).

The standard industry argument is that Big Pharma needs the reward of big profits to subsidize the huge expense of research and development. There is some merit to this argument. Without the incentive of any profit at all, the Pfizers and Lillys and Mercks simply wouldn’t exist. But the question is not whether it is immoral for pharmaceutical companies to make a buck; the question should always be how does one best balance the public interest with the private? How much I.P. protection is too much?

There’s no easy answer to that question, and reasonable people can disagree on such questions as how long the term of a patent should extend. But reasonable people can also expect that profit-seeking enterprises do not control the governmental policymaking process — that’s a complete perversion of the purpose of government, and that is exactly what is currently standard practice in the United States. It’s bad enough that in the Medicare Drug Prescription Benefit Act, Medicare was explicitly forbidden from using its purchasing power leverage to negotiate price discounts. It’s positively ludicrous that Big Pharma should then proceed to attempt to prevent any government, anywhere, from using its power to operate in the public health interest.

I’m no fan of Big Pharma. They’ve earned their bad rep. But the problem of corporate lobbying is perhaps more subtle than Leonard is allowing, here. Of course we don’t want corporations controlling the policymaking process. But that’s quite different from saying we don’t want them participating in that process. (Admittedly, the latter might sometimes be an attractive idea, too. But it would require serious constraints on free speech, and would hinder policymakers’ access to the crucial information often held by corporations).

Secondly, it’s not so obviously “ludicrous” that a company should attempt to prevent a government from operating in the public interest. Neither you nor I nor any corporation is obligated always to put the public good above our own. If the public good demanded that my home be expropriated to make way for a freeway, I would work hard to oppose that. Rights (human rights, property rights, etc.) put legitimate constraints on the pursuit of the collective good. Of course, the exact nature and meaning of any given right is, in the end, up for debate and negotiation. Perhaps, for example, our understanding of intellectual property rights ought to be a consequentialist one, rather than one rooted in the natural right to the fruit of one’s labour. But in the absence of a definitive answer to that debate, it’s far from ludicrous for a company (pharma or other) to work — within the law & within the rules governing corporate political involvement — to defend its intellectual property.

Here’s an interesting, well, sort-of-story. Actually, kind of an interesting non-story: Poll: Most students think biz ethics optional (Francine Knowles, Chicago Sun-Times)

Most Chicago area high school students queried in a business survey revealed they have a dim view of the need for high ethical standards.

The survey, conducted by the Illinois Institute for Entrepreneurship Education and the Chicago area chapter of the National Association of Women Business Owners, found a wide gulf between the ethical perspectives of high school students and those of business owners.

More than 96 percent of business owners surveyed said they believed that having others view them as a person of integrity is very important, while only 37 percent of high school students surveyed shared that view.

When asked whether it was better to bend the rules and win or play by the rules and lose, 79.2 percent of business owners said the latter was better, compared with 41.7 percent of students.

The survey posed several ethical questions to more than 70 high school students and 80 women business owners in the Chicago metropolitan area.

First, question, class: who can tell me what the Margin of Error is on a study of 70 students? (If you don’t know what margin of error is, look it up before you try to read any more news stories that cite surveys. It’s important.) OK, a hint: the margin of error (roughly the amount by which a study with a sample of this size — 70 — might be wrong, just by chance) is huge. So, the title of this story is pretty misleading. It should read, “Tiny Poll: Majority of Notoriously-Rebellious Highschool Students in One City Gave Anti-Social Answers to Ambiguous Questions.” OK, that’s not very catchy though, is it?

Second, who is supposed to be surprised that a significant proportion of adolescents (maybe) have immature, antisocial attitudes?

OK, so, snippy comments about this survey aside, there is a serious issue here, related to the role-models young folks see in media & pop-culture portrayals of the world of business, and the long-term effect that has on their thinking and their values. That’s a serious topic. If anyone knows of good empirical research on that topic, e-mail me, and I’ll blog about it.

(Thanks to Laura Hartman for the heads-up.)

Here’s an interesting story from The Guardian: Somerfield gives up on ethics

Britain’s fifth-biggest supermarket chain, Somerfield, has pulled out of the Ethical Trading Initiative, an alliance including unions and retailers that aims to ensure suppliers in developing countries meet basic labour standards.

The move has drawn comments that Somerfield, under its new owners, flamboyant financier Robert Tchenguiz, and venture capital firm Apax Partners, are more concerned about profits than about the fair treatment of workers in poor countries.
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Somerfield maintained its leaving the ETI would not cause a lowering of ethical standards. The company said: ‘Somerfield was a founder member of the ETI. We remain committed to the principles of an ethical trading policy and have incorporated accepted codes of practice across our business.

The title of the Guardian article is pretty misleading. At the very least, it makes what seems to be a large, unsubstanitated assumption, namely that Somerfield’s withdrawal from the ETI signals a change in the company’s commitment to monitoring & improving labour conditions along its supply chain. But if Somerfield is indeed still committed to that, it’s likely going to need to do something concrete to signal that commitment.

Relevant Links:
Somerfield‘s website
Ethical Trading Initiative‘s own website (Here’s ETI’s official statement on Somerfield’s withdrawal.)
Ethical Trading Initiative (per Wikipedia)
International Labour Organization
Implementing Codes Of Conduct: How Businesses Manage Social Performance In Global Supply Chains (book)

A few weeks back I blogged about Wal-Mart’s stated intention to become the world’s #1 purveyor of organic foods. (See: Wal-Mart Goes Organic!?)

Today’s New York Times has an update: Wal-Mart Eyes Organic Foods

Starting this summer, there will be a lot more organic food on supermarket shelves, and it should cost a lot less.

Most of the nation’s major food producers are hard at work developing organic versions of their best-selling products, like Kellogg’s Rice Krispies and Kraft’s macaroni and cheese.

Why the sudden activity? In large part because Wal-Mart wants to sell more organic food — and because of its size and power, Wal-Mart usually gets what it wants.

As the nation’s largest grocery retailer, Wal-Mart has decided that offering more organic food will help modernize its image and broaden its appeal to urban and other upscale consumers. It has asked its large suppliers to help.

Wal-Mart’s interest is expected to change organic food production in substantial ways.

Some organic food advocates applaud the development, saying Wal-Mart’s efforts will help expand the amount of land that is farmed organically and the quantities of organic food available to the public.

But others say the initiative will ultimately hurt organic farmers, will lower standards for the production of organic food and will undercut the environmental benefits of organic farming. And some nutritionists question the health benefits of the new organic products. “It’s better for the planet, but not from a nutritional standpoint,” said Marion Nestle, a professor of nutrition, food studies and public health at New York University. “It’s a ploy to be able to charge more for junk food.”

Just a couple of quick points:
1) This whole story flags a big “buyer beware.” The term “organic” is not synonymous with “healthy” (which is why, in many juristictions, producers and sellers of organic foods are forbidden from making claims that organic foods are any healthier than non-organic foods.) And, just to push the point, if you eat a diet consisting largely of foods high in sugar — even if it’s organic sugar — you’re going to suffer for it. (And apparently Wal-Mart is going to help illustrate this point, by offering at least some high-sugar, highly-processed foods that also happen to be “organic.”)
2) Note that one of the key objections (from advocates of organic foods) to Wal-Mart’s involvement is that it will “ultimately drive down prices and squeeze organic farmers.” Yes, that’s exactly what Wal-Mart does. But remember: there’s nothing sacred about current prices. In fact, by driving down prices, Wal-Mart may of course reduce the income of organic farmers, but at the same time they’ll make organic foods available at lower costs to consumers. And that’s good, right?

Last month, I blogged about the potential Merger of Corporate Values implied by L’Oreal’s takeover of the Body Shop.

Today’s Independent reports on the on-going controversy over that particular corporate acquisition: Roddick targets Nestlé after corporate ‘sell-out’

Dame Anita Roddick has admitted that she harbours concerns over the ethical record of Nestlé, a major shareholder in the French cosmetic giant L’Oréal, which bought the Body Shop for £652m.

She also suggested campaigners, determined to stage a consumer boycott, should target the Swiss multinational’s leading brands such as Perrier, Kit-Kat and Nescafé, rather than the company she founded.

The entrepreneur has been repeatedly forced to defend herself over the controversial sale in March, announced amid a blaze of allegations that she had morally and financially sold out.

Wow, even a whiff of betrayal — even deviation, or difference of opinion as to methods — is apparently enough to bring out the knives! This sort of in-fighting between the faithful is unseemly, at best. Obviously, not everyone is going to agree with Roddick’s contention that corporate behaviour is best changed from the inside, but it’s hard to fathom why those who disagree about her method can’t at least see that she’s “on the right side.”

Perhaps the answer is a sociological one having to do with the psychology of groups. More than 20 years ago, sociologists Mary Douglas and Aaron Wildavsky wrote about how groups of all kinds (but especially small, isolated groups like the Old Order Mennonites) maintain their cohesiveness by portraying the outside world as fraught with peril, and portraying those who deviate from shared values (or worse, choose to leave the group) as sinners. So, it may well be that some corporate watchdogs are going to see value in harsh criticism of non-conformists like Roddick, as a way of enforcing internal order and adhesion to the one true faith.

Book Links:
Business As Unusual: My Entrepreneurial Journey, Profits With Principles, by Anita Roddick
Anita!: The Woman Behind the Body Shop, by Jules Older & Lisa Kopper
Risk and Culture : An Essay on the Selection of Technological and Environmental Dangers, by Mary Douglas, Aaron Wildavsky

Andrew Potter of Rebel Sell fame has a very nice piece about the late John Kenneth Galbraith’s influential views on advertising, in this week’s MacLean’s Magazine, called Galbraith’s theory of advertising had us all fooled.

Here’s a snippet or two, but I highly recommend reading the whole article:

In what remains the most influential passage of his best-read book, The Affluent Society, Galbraith argued that in societies such as ours, wants or desires are created by the very process through which they are satisfied. Contrary to then-popular belief (the book was published in 1958), Galbraith wrote that corporations do not use advertising to inform us about products that might sate our independently determined desires. Rather, the function of advertising and marketing is “to bring into being wants that previously did not exist.” Galbraith calls this “the dependence effect,” and goes on to argue that this is an indictment of the entire system of capitalistic production, which is no more defensible than a town doctor routinely running over pedestrians in order to keep the hospital beds full.
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The problem with this argument, though, is that it is a logical runaway train. Forget about fancy coffee or teeth whitener, what about music, literature, religion? If we set aside our urgent needs (for food, shelter, sex), there is probably not a single civilized want that is not, in a basic sense, an acquired taste. There was, presumably, no pre-existing desire for poetry until the first poet started rhyming. For the dependence effect to have any bite as a critique, we have to carve out advertising as a special, pernicious case. Galbraith himself did not offer a satisfactory way of doing so, and a half century of neo-Galbraithian social criticism has been devoted to figuring out some way of screening off commerce from the rest of culture.

As usual, I think Andrew is absolutely right.
The only reservation I have has to do with the case of products — take SUV’s as an example — that we know to be socially pernicious, and the demand for which we know has been (I won’t say “created”)…um…fostered by a cluster of very aggressive ad campaigns. Andrew’s right: the current prevalence of SUV’s is absolutely the result of a whole lot of stupid, selfish, individual decision-making. But the fact remains that there are too many SUV’s on the road. And advertising continues to play a role in that. And advertising is easier to regulate (or criticize) than the behaviour of millions of consumers. So, even if advertising isn’t the proximate cause of the SUV problem, it might well be one of the most effective ways to tackle a nasty social dilemma.

Ethical Corporation magazine has an interesting article today about How business can lobby responsibly.

Some experts on ethical lobbying offered some tips at a London conference this week
Allegations of undue corporate influence of government officials are never far from the news these days.

Recently the UK’s Guardian newspaper detailed how mobile operators are aggressively lobbying Brussels over EU plans to limit expensive roaming charges.

Partly in response to greater awareness of business lobbying, one of the City’s biggest investors, F&C asset management, which manages over £110 billion for various clients, sponsored a report last year on responsible lobbying.

Speaking at the Business in the Community annual conference in London on Tuesday, Karina Litvack, head of governance for F&C, said that the US lobbying system is viewed by many as “institutionalised bribery”.

The issue of lobbying is an interesting & complicated one, and one worthy of more attention than it’s received in the business ethics literature.

On one hand, lobbying is just a particular kind of expression of an opinion, and thus ought to be protected by freedom of expression.

On the other hand, we all realize that the lobbying efforts of a company like Shell or Wal-Mart or GlaxoSmithKline (or of an entire industry association) is quite different from the letter written by the average citizen to his or her elected representative. Corporations often have the money required to hire very, very good lobbyists, who are well-compensated for being very, very convincing.

I think the interesting philosophical question here has to do with what limits (if any) should be placed on the ability of companies to influence public policy. Even quite radical defenders of the free-market (people who often deny that companies have any significant social responsibilities) typically agree that companies do have a responsibility to play according some fairly narrow interpretation of the written and unwritten rules of the game. OK, so, gotta follow the rules of the game. We all agree on that. The question at hand, though, has to do with the ability of companies to influence — indeed, sometimes to determine — what the rules of that very game will be.

Panel Faults Pfizer in ’96 Clinical Trial In Nigeria: Unapproved Drug Tested on Children (by The Washington Post’s Joe Stephens)

A panel of Nigerian medical experts has concluded that Pfizer Inc. violated international law during a 1996 epidemic by testing an unapproved drug on children with brain infections at a field hospital.

That finding is detailed in a lengthy Nigerian government report that has remained unreleased for five years, despite inquiries from the children’s attorneys and from the media. The Washington Post recently obtained a copy of the confidential report, which is attracting congressional interest. It was provided by a source who asked to remain anonymous because of personal safety concerns.

The report concludes that Pfizer never obtained authorization from the Nigerian government to give the unproven drug to nearly 100 children and infants. Pfizer selected the patients at a field hospital in the city of Kano, where the children had been taken to be treated for an often deadly strain of meningitis. At the time, Doctors Without Borders was dispensing approved antibiotics at the hospital.

Pfizer’s experiment was “an illegal trial of an unregistered drug,” the Nigerian panel concluded, and a “clear case of exploitation of the ignorant.”

Pfizer says it did nothing wrong. Regarding an apparently falsified letter of approval from a hospital ethics committee, Pfizer states:

“Obviously this should not have occurred and the company very much regrets that it did,” …. “It is important to point out, though, that Pfizer thought proper procedure had been followed at the time of the clinical study.”

This raises important issues about the background conditions and infrastructure in developing nations, the backdrop against which corporate activities are carried out. There are lots of safeguards built into the background, institutions, social conventions, etc. in developed nations, that add several layers of relative safety to clinical trials conducted here. Developed nations, for example, tend to have stable institutions (local and central), educated populations, and a plethora of watchful consumer- and patient-rights groups. Not all places are so fortunate.

Nigeria, for example, scores prett badly on the Fund for Peace’sFailed States Index 2006. The Index ranks Nigeria as #22 (i.e., the 22nd WORST nation-state on earth). This might suggest that companies doing business (or conducting research) in places like Nigeria bear an additional burden, additional responsibilities, and should realize that they cannot simply assume that local safeguards are adequate.

Here’s an interesting website that allows you to post anonymously “the most unethical thing you’ve done in business”: Ethics Crisis Confessions.

It also allows others to rate just how unethical whatever you’ve confessed to is — on a scale from 1 (“Always Acceptable”) to 5 (“Never Acceptable”). The average of all past ratings is displayed for each confession.

As it stands, the site is pretty interesting (in a voyeuristic kind of way, I guess). It would be even more interesting if the site collected richer statistics from those who vote (Do you work for a big company yourself? Is your objection to this practice based on a) Respect for Property Rights, b) Respect for persons, c) social welfare, etc.)

The site also lets you leave comments after any of the confessions. The comments make for great reading. Though the site is pretty new, the comments already range from very sensible through to preachy outrage, etc. I’m sure they’ll only get more fun as time goes on.

Finally, I can’t help pointing out that a lot of what’s reported on the site is not just unethical, but illegal. Take, for example, this person, who admits that stealing expensive items from the office is “probably not ethical.” Um, yeah.

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(Thanks to Rebel Sell for the heads-up.

What a great story: it’s got titilation, philanthropy, and executive malfeasance. It’s downright Shakespearean.
From Reuters: “Charity exec who stole to pay dominatrix gets jail”. [Dead link deleted Nov. ’08]

An executive at a heart disease charitable foundation who embezzled close to a quarter of a million dollars over two years to pay a dominatrix to beat him was sentenced Tuesday to two to six years in prison.

Abraham Alexander, an accounts payable executive at the Manhattan Cardiovascular Research Foundation, admitted to stealing $237,162 and spending most of it on services provided by a Columbus, Ohio-based dominatrix called Lady Sage.

Manhattan prosecutors said Alexander, a Singapore-born citizen of India, had forged or altered checks payable to himself, to two credit card companies and to an online-based dominatrix company called Through the Looking Glass.

Not much to say about this one, except maybe that this story will get WAY more attention than it deserves (and yes, I’m guilty here) because Alexander spent the stolen money on a dominatrix, rather than on something passé like sports cars or cocaine. Oh, and this story also shows that the term “business ethics” needs to be interpreted broadly, as referring to ethical issues that arise in all sorts of organizations (not just for-profit corporations).

Links:
Lady Sage’s website (warning: mild sexual content)
Cardiovascular Research Foundation
Books on ethics for non-profit organizations
Books on sexual ethics