The Business Ethics Blog

Last night I finally watched The Constant Gardner, the movie (based on John LeCarre’s novel) about murder and intrigue in the pharmaceutical industry.

After watching the movie, I thought maybe I’d blog about the (dis)similarities between truth & fiction, and how it is that an industry dedicated to saving & improving lives has become a plausible cinematic boogie-man (sort of a latter-day replacement for the once omnipresent Russian or East German bad-guys).

Then I found out today (thanks to The AJOB Blog) about the pharma story that won the 2005 George Polk Award for Health Reporting. Unlike in LeCarre’s yarn, no one gets hacked to pieces with a machete in this story; but it’s not a happy story, regardless. So, for today’s blog entry, why rely on fiction to inspire righteous indignation, when the truth will do?

Art Caplan at the Bioethics blog calls it a story about bioethics. I’d call it a story about corporate ethics. Either way, it’s shocking.

“Drug Industry Human Testing Masks Death, Injury, Compliant FDA,” was reported by Dave Evans, Liz Willen and Mike Smith. Their article documents injuries and deaths of participants in clinical trials conducted on behalf of various pharmaceutical companies throughout the U.S.

Here are the first few paragraphs:

Oscar Cabanerio has been waiting in an experimental drug testing center in Miami since 7:30 a.m. The 41- year-old undocumented immigrant says he’s desperate for cash to send his wife and four children in Venezuela.

More than 70 people have crowded into reception rooms furnished with rows of attached blue plastic seats. Cabanerio is one of many regulars who gather at SFBC International Inc.’s test center, which, with 675 beds, is the largest for-profit drug trial site in North America.

Across the U.S., 3.7 million people have enrolled in drug tests sponsored by the world’s largest pharmaceutical companies. The companies have outsourced 75 percent of experimental drug trials to centers like SFBC, a leader in a $14 billion industry.

At the same time, the U.S. Food and Drug Administration has farmed out much of the responsibility for overseeing safety in these tests to private companies known as institutional review boards. These boards are also financed by pharmaceutical companies.

So, the drug industry is paying the people who do the tests — and most of the people who regulate those tests. And that combination can be dangerous, and sometimes deadly.

Someone needs to invent a good Seinfeldian term (along the lines of “unvitation” and “re-gifting”) for “charitable” acts or donations that aren’t what they seem. (Recall my January posting about Reebok.)

Check out this story from yesterday’s NT Times: Billionaire Gives a Big Gift but Still Gets to Invest It

Boone Pickens, the often controversial and always colorful Texas oilman turned investor, took advantage of a temporary tax break to make a gift that propelled him into the ranks of the nation’s top philanthropists last year.

But what Mr. Pickens gave away with one hand he continues to control with the other.

At the end of the year, he gave $165 million to a tiny charity set up to benefit the golf program at Oklahoma State University, reaping Mr. Pickens a tax deduction. Records show that the money spent less than an hour on Dec. 30 in the account of the university’s charity, O.S.U. Cowboy Golf Inc., before it was invested in a hedge fund controlled by Mr. Pickens, BP Capital Management.

“It’s all his money, and he’s on the investment committee” of Cowboy Golf, said Mike Holder, the university’s athletic director and former golf coach, who is on the board. “If a person’s making a gift of that size, he can stipulate what he wants it invested in.”

Asked whether investing in BP Capital had been a condition of Mr. Pickens’s gift, Mr. Holder said no. “That was my decision,” he said.

Is such behaviour unethical? Well, wait: this is a good example of where we should resist asking & answering in those terms. According to the article, Pickens’ ploy is legal (which is not everything, but it’s something). According to an expert cited on conflict of interest, there is “probably” a conflict of interest here. Did Pickens actually donate money to a charity? Yes, and that’s arguably still a good thing (it will likely benefit others, perhaps more than it will benefit Pickens). So, think our ethical analysis needs to be more fine-grained than “is this ethical: yes or no?”

How about these questions:
“Does Pickens deserve our admiration for this donation?” No.
“Is this an example of (legal) tax-evasion, and perhaps a shirking of civic duties?” Probably.
“Should Pickens be listed among those few high-level philanthropists who really want to give something back to their communities?” Nope.
“Is this a good example of real philanthropy?” No.
“How much moral credit should Pickens get?” Not much.

(Thanks to Wayne Norman for pointing me to this story.)

(This posting overlaps substantially with something I wrote for the Newsletter of the Canadian Society for the Study of Practical Ethics.)

Blogging has taken the world by storm, but has frankly barely generated a breeze in academic ethics. The biggest, best, and most popular ethics blog right now has got to be the blog written by the editors of the American Journal of Bioethics (blog.bioethics.net). Glenn McGee and his colleagues crank out an impressive volume of high-quality commentary on a range of bioethical issues. It is a must-read for anyone with even a passing interest in bioethics.

My own efforts have been focused on “The Business Ethics Blog”. My inspiration for starting a blog came from my dismay at not finding any business ethics blogs to speak of out there. Given the popularity of the medium, I was sure that when I finally got around to looking, I’d find dozens of blogs about business ethics and corporate social responsibility. My initial search turned up almost none, so I took up the challenge myself. I’ve since found a few decent ones – both academic and non-academic – that I now read almost daily.

But in general, there just aren’t a lot of ethics blogs, and even fewer good ones. I think this is a serious lacuna. Critics, of course, have already been trumpeting the “death of the blog.” Blogs, they say, are mostly vapid, self-indulgent exercises in unwanted opinion-sharing. And that’s mostly true. But that doesn’t mean that all blogs are useless. Blogs of the “guess-what-my-cat-did-today” variety are incredibly common, and even the best of them lose their charm after a couple of days. But clearly not all blogs are of that variety.

I think thoughtful ethics blogs by people with a background in ethics have the potential to be incredibly useful. First, of course, a good blog is a great way for readers “in the business” to keep up with current events and current controversies. Reading the AJOB blog is my primary means of keeping in touch with events in the world of bioethics, now that I’ve shifted most of my research to the world of business ethics.

Secondly, blogs can be useful teaching tools. One friend tells me he’s using my business ethics blog as a source of up-to-the-minute case-studies for discussion in one of his classes. Of course, a blog will never provide the kind of in-depth analysis and historical perspective that a good case book does; but then again, case books tend to be full of examples – the Ford Pinto, the Exxon Valdez – that happened before the current crop of undergrads was even born.

Finally, I think high-quality ethics blogs make a serious contribution to public discourse. A good ethics blog doesn’t just alert people to stories; a good ethics blog should provide at least a little educated insight. So, when a story pops up about the “dangers” of videogames? Here are the basics – a few sentences – of the ethics of product safety. A story about accusations of conflict of interest? Here’s at least a definition of the concept. I find I use my blog the way I use media interviews: not as a chance to give in-depth analysis, but as an opportunity to give just enough insight to raise the average educated person’s understanding of a given story one notch, to show that there can be more than knee-jerk moralizing when it comes to ethically contentious issues.

Pre-eminent legal scholars Gary Becker and Richard Posner jointly write a very smart blog called “The Becker Posner Blog.”

This week, they’re blogging under the title “Google in China,” though they’re actually talking about the whole set of companies recently under fire for their activities in (or regarding) China.

Becker & Posner’s comments are worth reading in their entirety; I won’t try to respond point by point to what they say.

Just a couple of points & highlights:

What’s motivating these companies? According to Posner, “their claim to be altruistically motivated is ludicrous”. Posner’s cynicism here is unwarranted. Motives (individual or corporate) are notoriously difficult to read. Economists (and contractarian philosophers) sometimes “assume” self-interested (or profit-maximizing) motives, but that shouldn’t be taken as an actual hypothesis about what motivates specific individual companies or people: it’s rather an assumption that helps make sense of large-scale patterns of market behaviour or social interaction. Who knows what’s actually motivating Google or Microsoft? The available evidence includes their public pronouncements on the issue (which we might reasonably be skeptical about, I guess), and their history of behaviour. With regard to the latter, I’m slightly less cynical about Google than I am about Microsft. But really, the most sensible thing to say about these corporations’ claim to be altruistically motivated is not that it’s “ludicrous,” but that it’s irrelevant: we can’t really know what motivates a complex organization, so let’s focus on the likely effects of their behaviour (which is what Posner & Becker do, for the most part).

One of Posner’s points that I agree with is that we ought not bundle all of these companies’ activities together in our moral assessment: “There is a difference between censorship and surveillance”, says Posner. (“Censorship” here is a reference to Google’s agreeing to censor certain search results, and “surveillance” refers to Cisco’s selling to the Chinese government equipment that would help monitor dissidents.) I think companies can ethically enter the Chinese market, in at least some areas. But the nature of the product or service has to matter: compare the cases of a company that sells cheese to a repressive regime, and a company that sells them tear-gas.

For his part, Becker focuses on the case of Google, and the net benefit of Google providing even somewhat censored services in China:

…under present conditions [Google is] still providing millions of people in China, we hope that will climb to hundreds of millions, access to an unbelievable array of information. The subjects covered are far too numerous to enumerate, but let me just mention information about DNA and its discovery, medical treatments for breast and prostate cancers, the determination of prices under different market conditions, riots in the U.S. and elsewhere, the Becker-Posner blog, and many more.

Chinese Google users also have access to information that is highly informative about democratic institutions and processes. This includes discussions of elections in Japan, Great Britain, the U.S., the turnover of parties in power in democracies, histories of countries that were transformed slowly, like Great Britain, or rapidly, like Japan, from powerful monarchies to lively democracies. They also have some access to information on the overthrow of communism in East Germany, Poland, and the USSR, although that information is not as openly available as I would like.

In this way Google is still exposing millions of Chinese to information and knowledge that was unavailable to any one in the West even a decade ago. Isn’t this a priceless contribution to the welfare of the Chinese people, despite the restrictions placed on their access to certain subjects from using Google?

So, what Becker is pointing out that the Google’s provision of even censored search results to the Chinese market isn’t making anyone worse off. Further, it’s not denying Chinese citizens any rights that they previously enjoyed. That’s a fairly important point, ethically speaking.

Study finds dearth of women on boards, by Jane M. Von Bergen writing for the Philadelphia Inquirer

The key to getting more women on corporate boards is getting more women on board-nominating committees, according to a study released Thursday on diversity in corporate governance.

Success depends on “who makes the lists,” said Vicki Kramer, a Philadelphia management consultant who is chairwoman of a national network of female executives.

Although more boards are adding female directors, boards are still dominated by men, according to the report by the InterOrganization Network, a group of seven organizations of female executives.

“The snail’s pace at which women are making their way into corporate boardrooms is simply not acceptable,” Kramer said in a statement announcing the report.

It’s pretty widely acknowledged that women are under-represented on corporate boards-of-directors. The cause of that is subject to less agreement (is it all sheer sexism, or do women’s different priorities and life-plans play a role?), and the cure for underrepresenation is less agreed-upon still.

But the study described here illustrates nicely the difference between procedural and substantive justice. Substantive justice has to do with the fairness of actual outcomes: “in the end, how many women end up on corporate boards?” Or, alternatively, “how likely is a suitably-qualified woman to make it onto a corporate board?” Procedural justice has to do with the fairness of the procedure that generated that result: “was the process itself a fair one (regardless of whether it in fact produced an ideally fair outcome)?” The study cited here also points to a connection between procedural & substantive justice. Empirical evidence about outcomes (the low rate at which women are appointed to boards) is being attributed to a fact about the procedure (i.e., too few women are involved in the process of appointing board members). This is a neat bit of empirical input for our thinking about justice: it’s not enough to guess, or to postulate what constitutes a fair procedure. Sometimes we can actually look for evidence of bias in procedures, in order to help us engineer better ones.

Peter Singer (the Princeton University philosopher who is the leading modern advocate of utilitarianism) recently posted the following short article on Microsoft’s compliance with China’s censorship of citizens’ blogs: Fear and Freedom on the Internet.

Earlier this month it was reported that, at the request of China’s rulers, Microsoft shut down the Web site of a Chinese blogger that was maintained on a Microsoft service called MSN Spaces. The blogger, Zhao Jing, had been reporting on a strike by journalists at The Beijing News that followed the dismissal of the newspaper’s independent-minded editor.

Microsoft’s action raises a key question: can the Internet really be a force for freedom that repressive governments cannot control as easily as newspapers, radio, and television?

In particular, Singer is critical of 2 of Microsoft’s claims:
1) Microsoft has claimed that censoring in China is necessary in order to comply with local laws; but Singer points out that the computers on which the relevant blogs were stored were in the U.S., and thus not subject ot Chinese law;
2) Microsoft’s Bill Gates argues that the right to freedom of expression is not absolute, & that Microsoft is (likewise) willing to limit, say, or child pornography. Singer argues that child pornography itself does not “express ideas,” so it cannot be subject to the kind of “freedom of expression” that we all value so much. In China, however, what’s being suppressed is the ability to express a range of views and opinions. So, the child porn example is a red herring.

Singer’s conclusion:

In any case, China’s crackdown on straightforward reporting and discussion of events taking place in that country is not the suppression of a discredited political ideology, but of open and informed political debate. If Bill Gates really believes that the Internet should be a liberating force, he should ensure that Microsoft does not do the dirty work of China’s government.

I think Singer’s argument seems roughly right, as far as it goes. But it only goes so far, and I think that’s less far than Singer imagines. Singer’s argument supports the conclusion that there is something bad about Microsoft’s actions. Namely, it is a bad thing for a company to help a government suppress free expression on important issues. But Microsoft might even admit as much, without admitting that they’ve done anything wrong. (That seems to be Google’s rationale for its agreement to censor search results on its Chinese site.) The question is whether companies like Microsoft and Yahoo and Google are doing more good than harm, overall, by entering the Chinese market (and doing the things that are necessary to stay in that market). Now, in focusing on the balance of harms & benefits, I am not implying that only outcomes matter; I only mean that this is a complicated moral question, the resolution of which requires that we balance rights and freedoms, harms and benefits, short- and long-term effects, etc.

(One last note: Microsoft, Google, and Yahoo have all stated or implied that the practices for which they’ve been criticized have been necessary in order for them to enter & remain in the Chinese market. Such claims always warrant very careful examination. Sometimes convenience masquerades as necessity.)

It’s late on a Friday afternoon, so why not? Check out this odd little piece, Sex workers call for boycott of ‘Grand Theft Auto’ from News.com.

Here’s a bit of it:

The Grand Theft Auto franchise is getting attacked from all angles.

Joining the ranks of politicians, policemen and attorneys in their crusade to see the game lifted from shelves are the nation’s sex workers.

On its Web site, the Sex Workers Outreach Project USA, or SWOP, is asking parents to assist them in calling for a boycott of Take-Two Interactive’s controversial game.

Citing a 2001 document from the National Institute on Media and the Family’s David Walsh, SWOP is calling “on all parents and all gamers to boycott Grand Theft Auto.”

OK, we all get why this made the news. “Ha ha.” Sex workers objecting to someone else’s line of business. But the real point is a more serious (and controversial) one: here is yet another group, one intimately familiar with real street violence, arguing that this game is dangerous. I’ve blogged about video games before (here and here) and I take it that there’s no evidence that games like GTA actually have real-world bad effects; but when everyone — from cops to prostitutes — who actually knows about street violence is worried about this game, it certainly does give me pause. At the very least, it makes me think it’s unseemly to make a game out of what is for some a tragic existence.

Under what circumstances should a company be legally forced to carry a particular product?

A recent story says that Wal-Mart stores in Massachusetts are going to be forced to carry the “morning after” contraceptive pill. Apparently state law in the state requires all pharmacies to dispense all “commonly prescribed medications.”

Here are some links to the story:
Wal-Mart Told To Stock Morning-After Pill (@ Forbes.com)
Mass. makes Wal-Mart sell morning-after pills (@ Chicago Sun-Times)
State: Wal-Mart must carry emergency contraception (@ CNN)

So, why should a given store be required to carry a particular product?

One reason might have to do with a particular store having a local monopoly or near-monopoly. If Wal-Mart’s pharmacy is the only pharmacy in (or near) your town, then a decision by Wal-Mart not to carry a particular drug means a serious limitation on consumers’ ability to acquire that drug.
But what about stores in big cities, where there are likely dozens of other pharmacies? Why be concerned then?

The answer, I think, has to do with the logic of collective action: Wal-Mart’s decision not to carry the pill might not be disastrous, but a proliferation of such decisions might be (at least from the point of view of the women who want/need access to it).
In a big city, no individual store’s decision not to carry a particular product is going to have any effect on the product’s availability (just as no individual’s decision not to pay her taxes is going to affect overall government revenues enough to endanger the provision of services, and no individual’s pollution is going to ruin the environment). An individual action in such cases is nearly without effect. But if one store, either because of management’s ethical or religious convictions or because of management’s fears about carrying a controversial product, refuses to carry that product, what’s to stop other stores from following their lead? And if all (or even just “many”) stores make the same decision, the net result (just like the result of rampant tax evastion, or wide-spread pollution) would be a serious problem.

Corporate philanthropy often generates cynicism: we often wonder whether a given corporation is donating to a good cause just to be seen giving to a good cause, in order to improve public perceptions of its overall character.

But seldom is a public showing of atonement so blunt as the one described in this story from BusinessWeek Online: “Samsung Group to offer $800M to charity”

FEB. 7 10:08 A.M. ET South Korean conglomerate Samsung Group said Tuesday it would donate more than $800 million in corporate and private assets to charity as part of an apology for several recent scandals.
…
“Samsung Group deeply repents for causing concern to the people,” the conglomerate said in a statement posted on its Web site. “In order to comply with the views of society and the people, (the group) decided to offer 800 billion won [about $830 million U.S. dollars] worth of assets to society.”

The announcement was, of course, greeted with a degree of skepticism:

Following Samsung’s announcement, the People’s Solidarity for Participatory Democracy, a civic group, accused Samsung of failing to present “basic solutions” to improve how the conglomerate is run, Yonhap news agency reported.

“The announcement was just symbolic and there are no efforts to resolve the Samsung matters,” the group said in a statement on its Web site, according to Yonhap.

Just how skeptical should we be? Here are a few considerations:

1) It’s not clear (yet?) just how the “punishment” is related to the “crime.” It’s not clear how the donation is supposed to right the wrongs done by Samsung. Consider an imaginary alternative: imagine a company involved in an environmental catastrophe going beyond the need to clean up their mess, and making a large donation to Greenpeace. Similarly, a corporation with a poor reputation in terms of gender or racial discrimination might (in addition to revising internal practices) make a donation to a scholarship fund or other program aimed at helping the groups it had formerly discriminated against. These would be examples of a very clear & specific kind of atonement. Just how are the charities Samsung intends to donate money to related to the specific wrongs that Samsung is accused of?

2) The public admission of guilt we see in this case is an admirable rarity. Of course, the offence being admitted to is quite vague, but it’s pretty rare to see a major corporation admitting to a failure “to comply with the views of society and the people.” That’s got to be worth something.

3) It seems noteworthy that the donation will be a combination of corporate and private money. In other words, this isn’t just a case of a corporate executive giving away someone else’s money (i.e., shareholder money) to make amends for his mistakes. In this case, Samsung’s chairman (and his family) are kicking in a considerable amount of their personal wealth.

4) It’s too easy to be cynical about this. Is Samsung trying to improve its image? Sure. But how is it doing that? Seemingly, by doing things that genuinely warrant our respect. There’s got to be a difference between trying to make people like you by doing things that look good, and trying to make people like you by actually going good. Whether Samsung’s specific choices in this case are sufficiently good to buy it real credibility is a bigger question.

Here’s a nice little commentary from Andrew Leonard, writing in Salon: Enron: Bad apple or poisoned orchard [requires subscription]

Leonard has 2 main points to make.
First, he points out that it’s too easy for everyone to agree that Enron (or rather, its team of senior executives) was bad. Bad, as in one bad apple, one isolated problem:

Naturally, media attention directed at Enron right now is focused on a very narrow question — are Lay and Skilling guilty of intent to commit fraud? Once we get a yes or a no on that, then the whole sorry mess is theoretically wrapped up neatly with a bow, and we can move on to the next corporate scandal. But the truth is that their guilt or innocence doesn’t amount to a hill of beans in the grand scheme of things. The real story of Enron is the story of a company that flourished in an age of deregulation, that had such mighty power that it could get laws changed to allow it to act with less and less restraint, and that with that freedom came complete and utter irresponsibility.

Leonard is of course right about this. Just as any one crooked individual won’t get far with attempts at wrong-doing within a corporation with a sound, ethical corporate culture, a crooked company won’t get very far within a business community and regulatory environment that is intolerant of its shenanigans. Of course, internal policy & practice at Enron made the company fertile ground for pernicious actions by individual employees, and as Leonard points out, the deregulated energy market in the US (along with a willing & cooperative financial community) made it easy for Enron to flourish.

Leonard’s other point (really, for him, just a building block for his main point), is about the fact that Enron really isn’t the worst-case scenario. Enron was in the energy industry, which was bad enough (just ask the people of California, including people with home medical equipment that relied upon the electricity that Enron so gleefully turned off and on in order to manipulate prices). But it could have been worse:

Imagine if, say, a Merck or a Monsanto were run as recklessly as an Enron. The potential public health or environmental disasters that could be spawned by cutting-edge pharmaceutical or biotech firms is a cyberpunk nightmare. Modern multinational corporations have far too much power to be allowed to A) police themselves, and B) influence the crafting of laws that affect their business. They need to be reined in, and they need to be isolated from the political process, not in charge of it. Of course, the complete opposite has been happening in the global economy. Corporate influence and power is at an all-time global high.

The idea that things could’ve been much worse if Enron had been a biotech firm is one I’ve been making in public presentations for 3 years now. Of course, that’s only partly true: biotech (at least the kind related to human health) is, in all fairness, more tightly regulated than the energy industry.
But I think the overall point stands, especially with regard to the role of corporations in the policy-making process. It’s pretty well known, for example, that Monsanto wrote the US regulations on genetically modified foods, and essentially handed them to policy makers in Washington.
That sounds pretty bad, but in some ways it’s more understandable than you might think. Policy-makers in some cases need to rely on those who know more than they do about complicated issues, and companies like Monsanto have a lot of information (not all of it unbiased) at their fingertips. And it’s hard to fault the company for wanting to influence policy. Everybody — private citizens, NGO’s, mom-and-pop companies, large corporations — want governments to make decisions that reflect their values and interests.
So the challenge is this: a) how do we get companies (perhaps entire industries) to show reasonable degrees of restraint in their efforts at lobbying government, and b) how do we make sure that the civil service is sufficiently capable that high-level policy makers don’t have to rely on the world’s biggest corporations to advise them on how to regulate them.