The Business Ethics Blog

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.

Forbes.com has this slide-show featuring The Most Corrupt Countries. The source for the info is apparently Transparency International (though Forbes.com gives way too little info about the source of the data, how it was gathered, etc. Still interesting reading.)
[Tech note: the slide show proceeds automatically, and too quickly. There are controls just above the pictures that supposedly let you control the speed.]

Topping the list: Chad

What may turn out to be the single most piggish use of philanthropic funds has placed Chad at the top of the list of the world’s most corrupt nations. Proceeds from a project, funded in part by the World Bank, to build an oil pipeline through Chad and Cameroon were to have helped feed the desperately poor people of these nations. Instead, some $30 million was diverted to buy arms to keep in power the government of President Idriss Deby.

I posted a few days ago about a murder at a Montreal gas station. At that time, I noted that there was nothing about this, no response of any kind, on Shell Canada’s website. I also noted that I had emailed Shell about this, and would update you here if I heard back.

Today I received an e-mailed response. Apparently Shell had issued a statement (on January 25, 2006), but hadn’t posted it on their website. Here’s the text of the statement:

The following is a statement distributed throughout Montreal on January 25, 2006 from Shell Canada’s President and CEO.

The Shell family was shocked and saddened today by the news of the tragic death of an attendant at one of our gas stations in Montréal early this morning.

On behalf of the company, I extend my sincerest condolences to the family and co-workers. Care and support services are being provided to family, the retailers and their staff who have been affected by the incident.

Montreal authorities have released few details so far, but I assure you, Shell is cooperating fully with the ongoing police investigation.

We take the safety and security of our people very seriously and we have a variety of measures in place to protect them. We will conduct a thorough examination of this incident to see if there are lessons to be learned to help us to continue to improve.

Clive Mather
President and CEO
Shell Canada Limited

[Apologies for this re-posting. This was posted a few days ago, and then deleted due to technical difficulties.]

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Here’s an interesting editorial from the Philadelphia Inquirer, “How do we repair America’s integrity?” It’s by Jim Lichtman and Richard O. Hanson. [Note: this article seems to have gone off-line. Don’t bother clicking now.]

The article is interesting for 2 reasons.

First, it includes a good, clear recounting of the Enron saga. If you don’t actually know what went on at Enron, read Lichtman and Hanson. It’s as good as any brief account I’ve seen.

The editorial concludes its recounting of the Enron mess with this:

The victim is the trust of the American people. Every time we hear of another personal, corporate, or political ethics scandal, our trust and confidence in individuals and institutions declines. But the deeper question in all of this is: How do we get back America’s integrity?

The second thing that makes this article interesting is that (I think) it’s answer to that question is a very common one, but it’s also quite wrong.

The authors mention the Sarbanes-Oxley Act (“which calls for more independent oversight and internal controls on how companies do business”), but argue that legislation just won’t suffice.

Until there is a clear and consistent change of attitude among top management concerning the method and practice of business; until corporate boards begin to live up more fully to their responsibilities instead of passing the buck; until there is a consistent demonstration of honesty, integrity, accountability and respect from the top down, ethics always will be relegated to empty platitudes on mission statements and speeches given at shareholder meetings.

The problem with this kind of prescription is that it’s silent on just how we’re supposed to achieve the requisite “change in attitude.” Are corporate execs who previously saw their mission as world domination just supposed to wake up one day and suddenly get it? Is that actually our best plan? This is akin to the idea that we could fix the environment if, you know, we all just, like, thought harder about how much we’re screwing up the earth. Of course, changes in attitude are a key part of large-scale change. This is particularly true in cases (which are common) in which we need to rely on lots of people to behave properly with limited supervision.
But the hard part is figuring out how to achieve constructive changes in people’s attitudes. Legislation is one way. Your attitude toward any activity is bound to change if you’re told that the government will take you out behind the woodshed (figuratively, hopefully) for engaging in it. Peer pressure can also change attitudes. But peer pressure results from an influential group of your peers having, and pressing you to have, a certain attitude…clearly a chain that has to start somewhere. Attitudes can also change due to negative press coverage of corporate decisions, or due to religious conversion, mid-life crisis, getting married, or divorced, or having kids, or reading a great book, or…lots of things.
So, yes, corporate attitudes need to change. But achieving the right kinds of changes, on a massive scale, in the short term, is such a serious challenge that we need to stop calling for change, and start proposing ways to do it.

(For a much more detailed, and smarter, account of this issue as it applies to environmental problems, see the chapter of The Rebel Sell called “Spaceship Earth.”)

Canadian readers of this blog are likely already familiar with this sad story.

Brigitte Serre, 17, was killed while working the night shift at a Shell gas station in the north end of Montreal last Wednesday. Several suspects are already in custody.

As Andrew over at Rebel Sell has pointed out, it remains unanswered just what a teenage girl was doing working alone at a gas station on a school night.

This story from the Toronto Sun raises the issue of employee safety, but suggests that a number of safeguards were in place. Why they didn’t work is left unclear.

Louis-Philippe Gariepy, a spokesman for Shell Canada which owns and operates the station, said the teen had been working the dayshift for several months but it was her first time on at night.

Gariepy said there was a surveillance system at the station and there should have been $50 or less in the till.

Safety measures vary from station to station, he said, but the north end location was supposed to be locked during the night shift.

“No one goes in except the cashier and all transactions are processed through a transaction window much like a drive-through,” he said in an interview.

“No one is supposed to enter the site,” he said.

In addition:

Gariepy said shifts are determined by employee availability, operational needs and willingness to work, he said, and the company does not discriminate due to gender or age.

“Minimum legal age in Quebec is 16-years-old,” he said.

Gariepy said employees received extensive safety training and that safety of employees is their top priority.

“As a parent myself, I have to tell you I am very concerned but we have to look at the overall picture,” Gariepy said. “Shell as a company has provided as best we can a safe work environment in normal circumstances.”

So far, nothing is mentioned about all this on Shell Canada’s website. (I’ve e-mailed Shell about this…I’ll update this posting if I hear back from them.)

So, how much responsibility do employers have for the safety of their employees, ethically speaking?

The easy answer, of course, is that employers should do everything they can to keep employees safe. But that answer quickly runs aground: no workplace is ever 100% safe, and so the amount of time, energy, and money that could in principle be spent on workplace safety is literally unlimited. So, instead, maybe we should say that employers should take “reasonable” steps to ensure workers’ safety. The word “reasonable” is the hard part. Who’s to say what is a “reasonable” degree of safety, or a “reasonable” amount of effort to put into ensuring safety?

Here, in no particular order, are some points to consider.

1) Risk is not an objectively determinable property of a situation. Whether a situation is “risky” or not depends upon, among other things, what kinds of dangers you fear, and what kinds of dangers you’re used to. I read somewhere that most coal-miners don’t consider their job risky, though most of us would think of it as very risky.

2) Legal standards matter, but they don’t settle the issue. The simple fact that it’s legal to have a 17-year-old girl work alone at night doesn’t make it right (or wise).

3) From a business manager’s point of view, industry standards do matter. Does your company lead the field in safety? Just barely meet industry standards? Do you lag behind? (So, in the present case, I’d really like to know how Shell’s safety measures compare to those of other gas stations.) Of course, it’s also possible for an entire industry’s way of doing things to be wrong, or to be out of step with the reasonable expectations of the community.

4) Some job-related risks are considered acceptable because they’re “part of the job” (e.g., the risks faced by police & firefighters), and they’re accepted by the people who do those jobs. People may accept job-related risks because a) the pay is worth it, b) they value some aspect of the work itself (e.g., the opportunity to serve their community or to do interesting & challenging work), or c) because they’ve got few other realistic options. For whatever reason, they consent to the risks.

5) The fact that some people consent to job-related risks does not make those risks ok, especially if a) those risks could have been avoided easily, b) the worker has few other real options, or c) the worker is too young to exercise reliably good judgment about the kinds of risks being taken.

Some other relevant links:
Here’s a story on employee safety, inspired by this case, from the CBC’s Manitoba bureau.
According to the Montreal Gazette, Quebec has no plans to change the laws

Coming Clean on the Clothes We Wear: Transparency Report Card was published last month. It’s a fairly detailed report on the supply-chain practices of some of Canada’s most prominent retailers and clothing brands. Interestingly, rather than reporting on actual labour conditions in overseas factories, etc., this report is based on publically available information. That is (and as the title of the document implies) this isn’t a report about how well these companies are doing in terms of fair sourcing, etc., it’s a report on how transparent — how up-front — they are about just what their practices are.

The Transparency Report Card assesses and compares 25 apparel retailers and brands selling apparel products in the Canadian market in terms of their efforts to address worker rights issues in their global supply chains and on how and what they report on those efforts.

Companies are rated according to their programmes to achieve compliance with recognised international labour standards in the factories where their products are made; and the steps they are taking to communicate thoroughly, effectively and transparently these efforts to the public.

The following conclusions are included in the report:

– none of the companies surveyed is currently providing sufficient, credible and verifiable information to consumers or shareholders to allow informed ethical choices
– of those companies that have made codes of conduct available to the public, few have codes that are consistent with International Labour Organization (ILO) standards
– only a small minority of companies report assigning specific responsibility for ethical issues in their supply chains to board members or committees. There is also very little reporting on labour rights issues as a risk factor for investors by any of the companies surveyed for this study.

Here’s a snapshot of key findings (click on the image to see a larger version)…

Conclusions of note:

High marks: Nike, Mountain Equipment Co-Op, Liz Claiborne,Levi Strauss & Co., and The Gap

Mediocre marks: Wal-Mart, The Bay (HBC), Roots

Low marks: Sears, Le Chateau, Giant Tiger, Harry Rosen, Reitmans

Perhaps not surprisingly, several of the companies that got high marks are companies that have, in the past, faced serious pressure (including boycotts, etc.) to improve performance in this area.

OK, it’s hard not to post something about the trial of Enron’s Kenneth Lay and Jeffrey Skilling.

Technically, of course, this (the trial) is not an ethics story. It’s a legal story. The jurors in this case won’t be asked to decide whether Skilling & Lay did something bad. They’ll be asked to decide the legal question of whether the facts presented to them support the prosecution’s charges “beyond a reasonable doubt.”

It’s easy to confuse legal issues with ethical issues, in part because there’s so much overlap. Most things that are illegal are also unethical; and many (but not all) seriously unethical things are also illegal. Further, judges (especially at the Supreme Court level) very often appeal to ethical principles to explain their rulings. I think it’s best to think of ethics & the law as two overlapping circles. Some things are unethical, but not illegal (e.g., lying to a friend about something important). Some things ar illegal, but arguably not unethical (e.g., many forms of civil disobedience). And some things are both unethical and illegal (murder, theft, assault, etc.).
It’s pretty clear (and you don’t need an ethics professor to tell you this) that what Lay & Skilling did was unethical. Whether it was illegal depends on a) the facts of the case, and b) the specific wording of relevant bits of legislation, and legal precedents set in previous court cases. That, as they say, is for the jury to decide.

Here are a few links about the Enron trial:

• Jury Selected for Enron Trial (AP story @ Yahoo news)
• How The Media Missed Enron , by Paul Maidment @ Forbes.com
• Lay-Skilling trial really comes down to lying
• Enron trial set for opening arguments (from Reuters)
• My review of Enron: The Smartest Guys in the Room

Don’t you love it when big companies squabble among themselves over not whether, but how, to help folks in developing nations?

A couple days ago I blogged about the $100 Laptop idea, which has the backing of MIT’s Media Lab, as well as corporate partners like Advanced Micro Devices (AMD), Brightstar, Google, News Corporation, Nortel, and Red Hat.

Now, Microsoft says it has a better idea. Cellphones already pack a fair bit of computational power, and are getting more common even in poorer countries. So, why not use them as the heart of a simple desktop computer setup? Attach a cheap keyboard, and a TV as a monitor, and voila!
Here’s the story from the NY Times: Microsoft Would Put Poor Online by Cellphone

Craig J. Mundie, Microsoft’s vice president and chief technology officer, said in an interview here that the company was still developing the idea, but that both he and Mr. Gates believed that cellphones were a better way than laptops to bring computing to the masses in developing nations. “Everyone is going to have a cellphone,” Mr. Mundie said, noting that in places where TV’s are already common, turning a phone into a computer could simply require adding a cheap adaptor and keyboard. Microsoft has not said how much those products would cost.