The Business Ethics Blog

I’m thinking a lot about social responsibility reports these days.

The vocabulary varies, but the reports I’m talking about are generally annual publications that document a corporation’s social performance. (These get called Corporate Social Responsibility Reports, Sustainability Reports, Triple Bottom Line reports, and so on.) This is part of a larger movement that sometimes goes by the acronym SEAAR: Social and Environmental Accounting, Auditing, and Reporting. The general idea is that a company’s performance can be measured (loosely speaking) not just in financial terms, but in ethical (social and environmental) terms, too.

Such reporting is, of course, not uncontroversial. Some regard it as a crucial part of increasing corporate transparency. Others see such reports as window-dressing. (The reports are, after all, generally written by the corporation itself, rather than by an external assessor.) Also, there is legitimate difference of opinion as to what sorts of measures are the best indicators of good social performance.

Here’s a website that archives social responsibility reports for a lot of companies:
Sustainability-Reports.com
(Note: the site gives reports for the years 2000-2005, but some years there are more than others. For example, there are only 6 listed for 2005, but nearly 40 for 2004.)
And here’s a page I’ve begun, listing CSR reports for companies in the industry that most interests me,Biotechnology.

BusinessWeek Online reports today that Body Shop agrees to L’Oreal takeover deal.

Here is an opportunity for a natural experiment in corporate values.

The Body Shop was built on a very clear — and very well-publicized — set of values (including a commitment to the environment, to fair trade, and to avoiding testing products on animals). L’Oreal‘s public image, at least, includes no such commitment. (I’ve read conflicting reports about L’Oreal and animal testing. This story claims that the company eliminated animal testing — at least testing of products (as opposed to ingredients) as far back as 1989. The company does still face criticism for continuing animal testing. There are signs, however, that L’Oreal has been interested in reducing, if not eliminating, testing on animals.)

The experiment is this: let’s all watch BOTH the Body Shop and L’Oreal over the next, say, 3 years, to see whether the merger results in significant changes in either a) their stated values, or b) the values implied by their behaviour.

I came across this story in the on-line version of a rural Oklahoma newspaper: Cowboy culture still a model of ‘the right thing to do’

The story is about a panel discussion on business ethics, held at Price College of Busines, but a lot of the focus of the story is on the idea of “cowboy ethics,” and old-time cowboys as moral exemplars. (One of the panelists was James Owen, author of Cowboy Ethics: What Wall Street Can Learn from the Code of the West. I have not read the book.)

My immediate reaction to the “cowboy ethics” idea was pretty negative, but now I think my initial reaction was wrong. Here’s why.

Part 1: What’s wrong with the idea of cowboy ethics
Two things struck me as wrong about the idea of cowboy ethics as a moral exemplar.
First, any attempt to harken back to a “golden era” of ethics is probably mistaken. There have always been bad people, and good folks have always struggled, and sometimes stumbled, with hard choices. So, surely, for every cowboy who was honest, upright, and morally courageous, there must have been others who were dishonest, mean, and devious. Ever seen a western that didn’t have a bad-guy? And don’t forget, if you’re picturing the cowboys of the mid-to-late 1800’s (which is when most cowboy movies seem to be set), the cowboys you’re picturing were probably sexist, racist, xenophobic and (Brokeback Mountain notwithstanding) homophobic. So, they weren’t necessarily the pinnacle of ethics.

Second, I worry about the idea of singling out members of one group, one occupation, as if they have (or had) some kind of formula, some sort of special access to moral truth. Sure, there are lots of good values held by cowboys. But the same is true for nurses, truckers, bankers, school-teachers, and so on. Why should we take our cues from cowboys, rather than from these others?

Part 2: What’s right about the idea of cowboy ethics
My initial skepticism about cowboy ethics was the result of thinking about real (old-time) cowboys, and what they were probably like. But of course that’s a mistake: the exemplars being pointed to are not real cowboys, but the heroic cowboys of the classic westerns. Heroes like those portrayed by John Wayne, Gene Autry, Roy Rogers, and Clint Eastwood. At least, I reckon that’s the image most people picture when they hear the word “cowboy.” And those cowboys probably are pretty good moral exemplars. Sure there were the black-hats, but no one’s claiming all cowboys had good ethics. Though sometimes pretty flawed, the iconic cowboy — brave, hard-working, honest, compassionate, chivalrous — does stand out as a pretty inspiring figure.

And, when the goal is to motivate people, and show them an alternative vision of what it means to be a good person, the cowboy’s ability to inspire has got to count for something.

My friend (and fellow blogger) Andrew Potter has had lousy customer service from Dell (or I’m guessing it was actually Dell Canada, if that matters). See the posting on his blog: why i hate dell and so should you.

Is bad customer service an ethics issue? Of course it is. There are at least 3 ways that customer service can be unethical:

1) Front-line CS folks can be unethical; they can do unethical things like lie or “misplace” your order. (My guess is that front-line staff are MUCH more likely to be undertrained, or stuck with implementing bad policies, than they are to be unethical themselves.)
2) Head office can under-staff their CS phone lines, or under-train the folks who staff those lines, which basically guarantees that customers won’t be treated appropriately.
3) Head office can have unethical policies (e.g., policies that make it difficult or impossible for customers to get repairs done under warranty; policies that limit the amount of time a rep can spend dealing with a single customer; failure to have a policy stipulating that customers who have — for whatever reason — been treated badly ought to receive special treatment until the problem is rectified, etc.)

How much should a given pharmaceutical cost? Should that be determined by supply and demand? By the value of the productive factors (raw materials, labour, overhead, etc.) that went into developing and manufacturing it? Or should cost be based on ability to pay, or some other criterion?

(About a year ago, the VP of a mid-sized pharmaceutical company told me that he thought pricing would be “the” ethical issue for pharmaceutical companies for the coming years. I think he was probably right.)

The issue arises in this story in today’s New York Times, A Cancer Drug’s Big Price Rise Disturbs Doctors and Patients, by Alex Berenson

In practice, the question of how prices should be set (and at what level they should be set) gets reduced to the simpler question of whether they should be lower than they are. Many drugs — including many life-saving ones, and ones that greatly improve quality of life — are so expensive that many people who need them either can’t afford them at all, or are driven into financial ruin in the process of paying for them. So, should drug companies lower their prices?

The issue of pricing can be crudely divided into two separate questions, I think.
1) How should pharmaceutical corporations price their products domestically?
2) How should those same corporations price their products for sale overseas (especially in developing nations, where the vast majority of people can’t afford to pay North American or European prices)?

I argued (in a paper I presented at the Annual Meeting of the American Society for Bioethics and Humanities this past October) that those questions ought to be treated separately, and in that order. In the case of the domestic market, consumers who buy a company’s products are also:
a) taxpayers, whose taxes help fund much of the basic science that results in pharmaceutical discoveries, and who might thus make some claim to mere customers,
b) “neighbours”, members of the corporation’s moral community.
Those two factors are both morally relevant (though whether they’re morally convincing is a larger question.) So, if we can’t construct a case for an ethical obligation to reduce prices in the domestic market, then it seems much less likely that we’ll be able to construct a case for reductions in prices overseas. Africans (for example) are generally not (from the point of view of North American or European drug companies) either a) taxpayers or b) neighbours. What about the moral requirements to help those desperately in need? Many people in Sub-Saharan Africa, of course, are in dire need of pharmaceuticals they can’t afford. But (like it or not) North American and European societies accept only fairly weak norms of charity. So, need alone won’t make the case.

In my humble opinion, the amount of advocacy on this issue has NOT been matched by a like amount of good scholarship.

People worry about how the lure of profits will affect the judgement of biotech companies in the highly competitive, aggressively capitalist North American business context.

Less thought has been given to ethical standards at biotech companies in the developing world. Regulatory infrastructure is notoriously weak in most developing nations; accordingly, constraint on business practices is by default left up to managers at individual companies. A lot of people think that India and China, in particular, loom on the horizon as burgeoning biotech powerhouses. Thus there’s been a lot of talk about the funding going into research in those two countries, their relatively educated workforces, their vigorous (or, in the case of China, blossoming) marketplaces, etc.
My question: 10 years from now, when China & India are biotech powerhouses, will their respective biotech sectors have the requisite depth of understanding of the corporate ethical issues involved in conducting the business of bioscience in a safe and ethical manner? Someone ought to write a Ph.D. dissertation on this.

Here are some starting points, mostly focusing on the case of India:

Shaping the Indian biotech sector

Biotechnology is called the “technology of hope” owing to its revolutionary promises in agriculture, healthcare, industrial processing and environmental sustainability. The technology offers so much hope that trade groups and governments are trying to make environments conducive to the emergence of this technology.

Fuelled by aspirations of self-reliance and pressured to cope with poverty and underdevelopment, Indian Government is focusing on education and infrastructure to establish strong biotechnology capabilities. An Ernst & Young report identified 96 exclusive enterprises as biotechnology companies, making Indian biotech sector third largest in the Asian region after Australia and China. Though India is yet to introduce a novel biotechnology product, it has a strong science and the potential to generate a revenue of $5 billion and a million jobs by 2010.

Some relevant items from the web:

• Agricultural Biotechnology in India: Ethics, Business and Politics
• “Ethics will be the gateway for clinical research in India”
• India well positioned to achieve biotech potential by 2010
• Venturing into the unknown
• Agilent bullish on pharma, BT in India

Some relevant books:

• Biotechnology in India
• Science, Agriculture and the Politics of Policy: The Case of Biotechnology in India
• The Ethics of International Business, by Tom Donaldson
• Agricultural Biotechnology in International Development
• International Biotechnology, Bulk Chemical, and Pharmaceutical GMPs

Working on the assumption that it’s never too late to ‘get out in front’, Wal-Mart is now advertising for a new director of global ethics. Here’s the full story: Wal-Mart: Desperately seeking ethics (by Matthew Boyle, for Fortune.com

That Wal-Mart (Research) needs to beef up its ethics organization is not too surprising. The Bentonville, Ark. behemoth has been bloodied on several fronts lately — an $11 billion class-action discrimination lawsuit, employee pay and health benefits, and former vice chairman Tom Coughlin’s alleged expense account padding have all provided ample fodder for the retailer’s growing chorus of critics.

The ethics director, once hired, will oversee a team of about ten staffers inside Wal-Mart’s Global Ethics Office, which the retailer created in 2004 to “advance the company’s ethical, values-based culture,” according to the job posting. The job spec also details a veritable laundry list of responsibilities, from developing a global ethics strategy to “policy refinement” to overseeing an ethics hotline, where employees can report violations of corporate policies.

So, Wal-Mart is catching up with the half of the Fortune 500 companies that already have ethics officers. (I read elsewhere that such a position has actually existed at Wal-Mart for years, but it was handled part-time by an executive with other duties.) Of course, having a ‘director of global ethics’ is one thing, but having the right person in the job and then making effective use of the position are different things entirely. On these issues, Boyle’s story has a couple of great quotes from experts:

Having a say in Wal-Mart’s corporate policies suggests that the position will be more than window dressing. “The key is not just to have the role, but what you do with it once you have it,” says Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware.

[T]he job will include “frequent and informal” interactions with senior corporate officers, “up to and including” CEO Lee Scott, according to the job spec. “You have to have the commitment of the CEO,” says [Andrew] Wicks [of the Olsson Center for Applied Ethics ]. “If not, this is just like the ethics code at Enron.”

(That last bit, of course, is a reference to Enron’s Code of Ethics…a document that, at 64 pages long, might seem impressive, but is actually a pretty bad document, and notoriously ineffectual.)

Here’s an update on a posting from a couple of weeks ago, calledWal-Mart & the Morning After Pill.

Yesterday, Reuters had this story: Wal-Mart pharmacies to carry morning-after pill.

Wal-Mart Stores Inc. said on Friday that all of its pharmacies would carry morning-after contraceptive pills, bowing to pressure from states seeking to force the world’s biggest retailer to do so.
In a statement posted on its Web site, Wal-Mart said all of its pharmacies would begin carrying “Plan B” contraceptives as of March 20, but added that workers who did not feel comfortable dispensing a prescription could refer customers to another pharmacist or pharmacy.

A Wal-Mart spokeswoman said the company would not comment beyond the contents of the statement.

“We expect more states to require us to sell emergency contraceptives in the months ahead,” Ron Chomiuk, vice president of pharmacy for Wal-Mart, said.

“Because of this, and the fact that this is an FDA-approved product, we feel it is difficult to justify being the country’s only major pharmacy chain not selling it,” he said.

It’s anyone’s guess, of course, just what is really motivating Wal-Mart here. When a corproration attributes a change in behaviour to pressure from government, it could mean:
a) we’re bowing to pressure from government;
b) we’re using “pressure from government” as an excuse to do something we wanted to do anyway;
c) we’ve some other motive which no one outside the corporate boardroom will ever figure out.

It’s also interesting to consider the implications of Wal-Mart’s claim that “workers who did not feel comfortable dispensing a prescription could refer customers to another pharmacist or pharmacy”. This sort of proviso holds the possibility of making the promise to carry the pill a bit hollow; there’s not much benefit to customers in need if you stock the product but employees are unwilling to dispense it. Policies like that are usually called “conscience clauses,” and are designed to protect employees from having to participate in an activity that violates their personal ethical or religious convictions. That sounds like an admirable policy. Of course, problems arise when those personal convictions interfere with doing one’s job, and in particular when it poses a serious obstacle to customers (or patients) getting the products and services they need.

From the current issue of Wired: A Nation of Guinea Pigs, by Jennifer Kahn.

This is a story about drug companies conducting clinical trials in South Asia, using tens of thousands of poor Indians as “guinea pigs.” It’s sort of The Constant Gardner, minus the violent killings.

The key ethical aspects of the story:

• Drug companies pay hospitals and doctors to enroll patients in drug trials. The potential for conflict of interest is clear: hospitals and doctors, far from wealthy themselves, may succumb to financial temptations to enroll patients inappropriately. Of course (and with a few important differences) the same worry applies here in North America.
• Most of the people being enrolled in trials are poor, illiterate, and culturally deferential to doctors. Their ability to give free and informed consent is questionable.
• Most of the drugs being tested are drugs that are irrelevant to the health needs of a nation like India; they’re mostly medicines (like blood-pressure drugs) aimed at the North American & European markets.

One final element of this story needs explanation. The author points out a couple of times that sometimes people get enrolled in drug trials ‘even though the trials won’t help them.’ That sounds shocking, unless you know that clinical trials are never intended to help the test subjects who are enrolled in them. The idea that clinical trials are supposed to benefit those enrolled is what my colleagues in Bioethics call “Therapeutic Misconception.” The real goal of clinical trials is actually to answer a scientific question: “is this new drug effective?” or — preferably — “is this new drug better than the old way of treating this disease?”
So, while there are LOTS of ethical concerns when it comes to conducting drug trials in developing countries, the possibility that such trials “might not help” the test subjects is not one of them.
——
Update: This blog entry was excerpted in the “Rants & Raves” section of the May 2006 issue of Wired.

Here’s a BusinessWeek Online story I apparently missed last week, “Calling the Ethics Cops”, by Joseph Weber.

Corporate America is a surprisingly corrupt place. The high-profile scandals may have been just the tip of the iceberg. Graft, self-dealing, dishonesty, sexual harassment, and other unethical activity is strikingly common, according to recent surveys by search firm Hudson Highland Group and the Ethics Resource Center. The outfits found that between 31% and 52% of U.S. workers have witnessed co-workers operating unethically.

But that could change. One byproduct of the scandals is growth in the ranks of ethics officers. A professional group for in-house corporate cops, the Ethics & Compliance Officer Assn., began with just 16 founding members in 1992, grew to 600 three years ago and has since doubled to 1,250. For the unethical these days, says Keith T. Darcy, executive director of the Waltham (Mass.)-based ECOA, “there are no secrets and no places to hide.”

This article is worth reading, though it’s depressingly focused on behaviour that is outright criminal, rather than ethically complex or interesting. The Ethics & Compliance Officer Association actually just recently added the word “Compliance” to its title. Until recently, they were known simply as the Ethics Officer Association. Adding “Compliance” is a bit of honesty-in-advertising, I think, since it seems that compliance (making sure a company complies with legal & regulatory requirements) is most of their focus. Still, notice that the article uses the word “ethics” a whole lot, even when it’s talking about preventing behaviour that would normally just be considered outright “illegal.” Since when is stealing stuff a matter of ethics? Of course, stealing stuff is (usually) unethical. But using the word “ethics” for such cases is likely to a) make people forget that the behaviour in question is criminal, and/or b) make people conflate ethics & the law to such an extent that they risk wrongly concluding that if something is legal, it must also be ethical.