No, Blacklisting Corrupt Construction Firms is Not Unfair
Under Quebec’s new Integrity in Public Contracts Act (Bill 1), companies that want to bid on government contracts must pass a fairly stringent legal and ethical sniff test. In the wake of the ongoing Charbonneau Commission (the Commission of Inquiry on the Awarding and Management of Public Contracts in the Construction Industry, in Quebec) the government of Quebec has begun using Bill 1 to blacklist construction companies.
First on the chopping block was engineering firm Dessau. The company was blacklisted recently and so it won’t be able to bid on public-sector contracts in Quebec for the next five years.
Some say this is unfair. Dessau employs thousands of people, some of whom will surely be put out of work if their employer is unable to bid on big public contracts. And since the vast majority of those employees presumably have nothing to do with the company’s shady dealings, they are in effect being punished for someone else’s crimes.
There is undoubtedly some injustice, here. It is, on the face of it, a bad thing to suffer for someone else’s wrongdoing. But the question, really, is whether the loss that will be suffered by some Dessau employees is an intolerable injustice. And whether an injustice is intolerable or not very much depends on the qualities of the overall system under examination.
One of the key features of the legal status of modern corporations is that the liability of employees is limited. If the company you work for goes bankrupt, all you lose is your job. For most people, that’s not trivial, but it’s a far cry from having someone from the court show up to repossess your car or foreclose on your mortgage to help pay your employer’s debts. One of the things that makes large corporations — and hence, our entire economic system — viable is that in seeking employment with a corporation you are not thereby putting everything you own at risk. This makes the the legal situation of an employee quite different from that, say, of a partner in a firm. Partners are in principle personally liable for the financial effects of each other’s wrongdoing or mismanagement.
Second, it is worth considering that if injustice is being done to the employees of companies like Dessau, such injustice must be placed into perspective by comparing it to the prior injustice done by such companies to employees of other companies. When companies succeed through bribery and illegal political donations, they do so at the expense of honest companies and their employees. In order to understand the Quebec government’s penalties, you need to look not just to the interests of identifiable individuals like Dessau’s employees, but to the interests of the hard-to-identify individuals who are harmed by the corruption that penalties like this are intended to remedy.
Third, it is worth noting that the Quebec government’s decision here is not beyond appeal. There is a process for reinstatement, which includes things like a requirement stop (and presumably to show evidence of stopping) fraudulent practices, to dump executives implicated in wrongdoing, and to “implement sound management practices, good governance and an ethical framework.” So if jobs are in jeopardy, they are not in jeopardy forever. It depends on whether managers at Dessau can clean house, and do it quickly.
Ultimately, if the employees of companies like Dessau are being wronged, the blame lies at the feet of executives who mismanaged the company. And make no mistake: engaging in corruption is a form of mismanagement. It counts as mismanagement not just because it can result in legal penalties or because it can result in significant financial losses. Engaging in corruption counts as mismanagement because it amounts to an admission that managers were unable — insufficiently smart or talented — to win while sticking to the rules of the game.
Why Do Family Firms Thrive?
Family firms (or family-controlled corporations) are a bit of an outlier in the modern business world. Modern corporations are typically characterized by a “separation of ownership and control” — that is, companies are generally run by professional managers, who manage on behalf of a very large number of mostly-anonymous shareholders. Most people who own shares own them only indirectly through pension funds mutual funds, and so they have little direct input into the way the company is managed. This pattern is directly responsible for the modern focus on governance standards: when managers are given the task of managing on behalf of anonymous, disempowered shareholders, they have an ethical obligation to take seriously the obligations such an arrangement implies. The CEO has to remember that it’s not her company: she’s a guardian, managing on behalf of others. Modern governance standards take some of the relevant ethical obligations and enshrine them in laws, regulations, and ‘best practices.’
“Family” firms (or family-controlled corporations) are somewhat different. The sort of family firms I’m talking about here are not ‘mom-and-pop’ organizations, but rather large, publicly-traded companies in which a family owns a controlling interest (i.e., 30% or more of stock). So while such firms are typical, publicly-traded companies in some regards, they are unusual in important ways. The family in question may have not just a strong position in terms of the stock it holds; they may also bear the name that’s emblazoned on the company letterhead. And the company’s origins and evolution may be intimately bound up with the family’s own history. This adds up to considerable influence. Is that influence a good or a bad thing? In principle, at least, there’s a worry that the family’s influence might not always work in the interests of other shareholders. And this worry is exacerbated by the fact that family-controlled companies often don’t stick to widely-acknowledged best practices in terms of corporate governance.
To shed some light on this topic, my friends* at the Clarkson Centre for Business Ethics and Board Effectiveness have just released a new study Family Firm Performance Study. Their central finding?
“Canadian family-controlled issuers have outperformed their peers between 1998 and 2012. Moreover, family firms often appear best able to create value for their shareholders when they choose not to adhere to typical best practices in share structure and independence.”
It’s an intriguing finding. The study as a whole is worth reading. I want to comment on just a couple of issues, here.
First, a study like this casts doubt on the one-size-fits all approach to corporate governance. Best practices (such as standards for the number of independent directors on your board) and legal standards (such as the requirement to have an audit committee) typically prescribe how a corporation’s board should be composed and conduct itself, irrespective of the corporation’s history, industry, and so on. And, importantly, such standards don’t draw a distinction between family and non-family companies. And while such standards generally evolve (or are imposed) in response to emerging challenges and scandals, they are liable to be based on the average or typical company. But, of course, the average or typical company is a fiction. Every company is unique, and so one-size-fits-all may mean one-size-fits-none. At very least, it is worth acknowledging that a compromise is being made: uniformity in exchange for mediocrity. Best practices may not be best.
When I asked Matt Fullbrook, Manager of the Clarkson Centre, about this, he was cautious. There will be no immediate change in the way the Clarkson Centre itself ranks companies. He agreed, however, that it’s an open question: “we are actively asking ourselves about whether or not good governance might mean something different to family firms, and that’s the next place we hope to take our research.”
Second, a result like this immediately raises questions and generates hypotheses about why family-controlled firms work so well, despite their frequent violation of governance norms. One theory (alluded to in the Clarkson report) has to do with managing for the long run: a company rooted in a family’s history and tradition and reputation may well be less susceptible to the short-termism that is so notoriously a factor at most corporations today. Alternatively, does success come about precisely because family-controlled companies aren’t subject to the kinds of agency problems that other firms are subject to. Maybe having family members deeply involved keeps the company’s management honest. Or is it a matter of the way family firms cleave to a set of ethical values, in an attempt to safeguard the family name? It’s a question that bears more study.
Finally, it’s worth asking what ethical lessons can be learned by other sorts of companies — that is, by ones that are not family-controlled. If family-controlled companies do so well, should the be imitated? Lots of companies already use the rhetoric of family, encouraging employees to think of themselves as kin, as descendants of a proud lineage, and bound together by corporate “DNA.” To some, that’s a way of improving morale, and perhaps thereby improving performance. But if family control is itself a strength, that suggests another reason to think this way.
In sum, research like this is essential. Family-controlled corporations are already the subject of some ambivalence. On one hand, they evoke the traditional affection most of us feel for a family-run business. On the other hand, many of us mistrust dynasties in general, and the mismanagement and indeed malfeasance that nepotism can bring. But our attitudes toward them are more properly guided by research on whether (and how) they get the job done, than it is by emotion.
*Disclosure: I was a Visiting Scholar at the Clarkson Centre during the 2011-2012 academic year.
The Ethics of a Politician’s Speaking Fee
Justin Trudeau, leader of the Liberal Party of Canada, was recently asked by a charitable organization to give back a hefty speaking fee — $20,000 — after the event he spoke at took a loss. Not surprisingly, the dispute quickly became (and perhaps even started as) a political dustup.
Should Trudeau return the money, as he now says he will do? Should he have accepted it in the first place?
My first thought, upon hearing this story, was that it’s a great example of the close linkage between good ethics and good business practice. There would be no ethical question here if everyone involved had used good business judgment in advance. What kind of decision-making leads a charity into a situation in which it ends up feeling the need to reneg on a $20,000 contract? Did Trudeau do his due diligence in accepting such a large fee from a small organization that wouldn’t be able to absorb the expense if the event went poorly? Good business sense isn’t the same as good ethics, but sound business decisions are a pretty good start at avoiding ethical conflicts and dilemmas.
The question most people have focused on is whether Trudeau should have accepted such a speaking fee from a charity in the first place. Setting aside, for now, the fact that Trudeau is an elected official, we cannot reasonably assert that prominent persons generally should not take speaking fees from charities. Charities are businesses, and in the normal course of things they hire people, purchase goods and services, and pay bills. They don’t normally expect things for free, and charitable status doesn’t imply that an organization is off-limits as a business partner in the traditional sense.
And besides, to say that you can’t charge a charity a fee would be to limit the speakers to which charities have access, and thereby harm the interests of organizations that regularly make use of prominent speakers as a way of raising money. Anyone who does much public speaking (and I do a good deal of it myself) is liable to use a sliding scale. Well-heeled organizations may get charged more, and charitable organizations may get charged less or even nothing. But every speaker’s time is limited, and so not every charity can get things for free, and certainly not every time.
What about returning the money, as Mr Trudeau has now offered to do? This question reminds us of the important distinction between doing your duty, on one hand, and going above and beyond your duty, on the other. Often, we discuss ethics more starkly in terms of “doing the right thing.” But that implicitly binary way of talking blurs the gradations of “goodness,” if you will. It’s entirely coherent for us to think that returning the money would be a good thing to do, even if we don’t think he’s obligated to do so.
Finally, this kind of case highlights the fact that ethics is best thought of from the point of view of systems and institutions. While individuals may be the ones who struggle with particular ethical dilemmas, it is not necessarily at that level that structured thought about ethics can be the most helpful. Ethical problems are most tractable when they are of the form, “What kinds of rules should we follow?” “What would be an effective way of allaying this kind of worry in the future?” And so while we can squabble about just what Justin Trudeau should or should not do, our effort is much better spent thinking about the question one level up, as some commentators have already begun doing. Should sitting Members of Parliament like Mr Trudeau accept paid speaking engagements? If so, under what conditions and with what safeguards? Do paid speaking engagements risk jeopardizing the integrity of political decision-making? Worse, do they erode our confidence in particular decision-makers, or in political decision-making altogether?
Those sorts of questions are much more interesting and useful than questions about whether a particular politician should accept paid speaking engagements, and certainly more important than the borderline silly question of whether money that was accepted in good faith ought to be paid back.
Price Fixing: Not Just Business
Canada’s Competition Bureau has charged several candy companies with price-fixing. Nestle Canada, Mars Canada, and wholesale distributors network ITWAL stand accused of conspiring to manipulate the price of chocolate here in Canada. According to a press release from the Bureau, charges have also been laid against several individuals, including Robert Leonidas, former President of Nestlé Canada; Sandra Martinez, former President of Confectionery for Nestlé Canada; and David Glenn Stevens, President and CEO of ITWAL.
It’s interesting to note that price-fixing is one of the few pricing-related topics that comes up with any frequency in business ethics — one of the few that makes even a token appearance in any business ethics textbook. For the most part, pricing simply isn’t discussed as an ethical issue, probably because most companies are seen as having so little choice to exercise in the matter.
But price-fixing — attempts by erstwhile competitors to arrange not to compete on price — is a serious ethical as well as legal issue. It is also the subject of considerable cynicism. Many people seem to take for granted the idea that certain kinds of companies — gas companies come to mind, for instance — collude in an attempt to squeeze more money from consumers.
Another kind of cynic will see price fixing as not just common, but justified. After all, it’s just business, right? A manager’s job is to make a profit. And so if price-fixing is a route to profit, wouldn’t that just be part of a manager’s job?
But there is of course a good reason why price-fixing cannot be thought of as just part of doing business. And you don’t need to have a particularly warm-and-fuzzy view of business in order to see it.
But first it’s important to see that the reason why price-fixing is wrong is not just the bare fact that it hurts consumers. In market economies, there is no general prohibition against doing things that hurt other market participants. Markets are supposed to be win-win, but only in the big picture. There’s nothing unethical, for example, about developing a new and better product, one so good that it drives competitors out of business and hence leaves some people unemployed. Likewise, there’s nothing wrong with raising your prices in response to rising costs of production, even if that leaves some people unable to afford your product.
So the reason why price-fixing is illegal, and also unethical, is not that it hurts consumers. The key reason is that it violates one of the basic requirements for markets to work efficiently. In order for markets to function with anything approaching efficiency — never mind fairness — several conditions must obtain: for starters, there must be sufficient information in the hands of both buyer and seller, and the costs of transactions must be borne by the participants, rather than spilling over onto bystanders. But most important for the present case, markets can only be efficient if buyers have real options — that is, if no seller has the power to bully the market. Behaviour aimed at letting one seller, or a group of sellers, bully the market is contrary to the requirements of efficient markets.
And when markets don’t operate efficiently, they lose much of their fundamental ethical justification. So when companies engage in price-fixing, then, they’re not just acting unethically. They’re acting as bad capitalists.
Obligations Regarding Our Overseas Factories
Filed under: accountability, capitalism, consumers, corporate citizenship, international, trade |
Comments (20) This past Tuesday I had the honour of being invited to testify before the Standing Committee on Foreign Affairs of Canada’s House of Commons. The hearing was part of a “study on corporate practices by companies supplying and manufacturing products in developing countries for Canadian consumers.” The discussion wasn’t specifically about the factory that collapsed in Bangladesh last month, but that sad event was certainly on everyone’s mind.
Other witnesses included representatives from the Retail Council of Canada (RCC), from Loblaw, from the Shareholder Association for Research and Education (SHARE), and from Gildan Activewear Inc.
Not surprisingly, a range of views were presented to the Committee. Strong government intervention? Solo efforts by individual companies? Collective action through groups like the RCC? Opinions differed on just how to proceed.
Equally unsurprising was that the witnesses were unified in their expression of deep sympathy for the people of Bangladesh. Everyone, as far as I could tell, was also in favour of improving working conditions in places like Bangladesh. Shareholders, for example, according to SHARE’s Peter Chapman, are and ought to be concerned about the “ESG” (ethics, social, & governance) obligations of the companies they invest in. Robert Chant — a senior VP at Loblaw, a company that commissioned clothing from one of the companies that worked out of the factory that collapsed in Bangladesh — said that while his company has always been concerned to monitor working conditions, they simply hadn’t thought to have their subcontractors’ buildings inspected. It wasn’t on their radar. And so the collapse in Bangladesh, said Chant, who showed genuine emotion during his testimony, “Shook us to the core,” and spurred his company to commit to doing better.
In my own testimony, I made 3 key points and 3 recommendations:
First, I noted that Canadian companies do indeed have ethical obligations that go beyond the legal minimum required by the governments of the countries in which they operate. Adherence to the law is seldom enough to guarantee that a company or individual has satisfied all relevant ethical obligations. This is of special significance in developing countries with underdeveloped legal and regulatory systems.
Second, I noted that we cannot expect companies operating in places like Bangladesh or China to adhere to Canadian labour standards. And perhaps no one expects that. Canadians generally enjoy high pay and high labour standards because we can afford to. Other countries, unfortunately, are not there yet.
Third, I asked what is the best way for Canadians to contribute to the well-being of those who work in factories in places like Bangladesh. I suggested three answers to this question. First, Canadians can continue buying things made in places like Bangladesh, because that is what gives a high proportion of Bangladeshis jobs. The second way to help is through charitable donations, both to humanitarian groups as well as to groups that are focused on issues like good governance and fighting corruption.
The third thing Canadians can do is to continue paying attention to this issue, and to continue encouraging Canadian institutions — businesses, governments, and NGOs — to keep working towards making things better. All have a role to play in encouraging and offering guidance on the pursuit of incremental improvements in working conditions in developing nations.
The Ethics of Buying a Mayor’s Crack Cocaine Video
You might as well stop feeling queazy about efforts at crowdfunding the purchase of the video that allegedly shows Toronto mayor Rob Ford smoking crack cocaine. After all, you’re going to watch the video, aren’t you?
The crowdfunding efforts (and there are at least 2 of them) have been the cause of no end of amusement, and almost as much controversy as the reported existence of the crack-smoking video itself. After all, while the video purports to show an important public official engaging in criminal activity, buying the video from the drug dealers who currently possess it would mean, well, doing business with drug dealers.
We can start to get a grip on this as an ethical issue by looking at it from the perspectives of both ends and means. The end or goal being sought by those trying to buy the tape is, arguably, an important one. If Ford has a crack habit, this is important, since it speaks to whether he is fit to be mayor. Suspicions have already arisen, shall we say, about Ford’s suitability for office: among other worries, the mayor’s ethical failings, not to mention his erratic behaviour, are well documented.
So the ends here might be worthy. What about the means? Well, the proposed means by which to reveal the truth about Rob Ford involves associating with (or at least doing business with) drug dealers. This, in itself, is probably regrettable. Of course, buying a video from drug dealers is not quite like buying crack from them, but still. When you do business with certain types, the taint can’t help but rub off. But then, it’s a one-off deal, not the forming of a long-term business relationship.
So perhaps we can say that the deal, if it happens, would be merely unseemly, rather than fully unethical. And that’s an important distinction. Too often the question gets posed as “Is this ethical?” when what would be more useful is to ask “Just how bad is this?” We shouldn’t think of these things in binary terms. It’s OK to be vaguely uncomfortable with a course of action, as long as we ask ourselves why. That’s not being wishy-washy. That’s being reasonable.
In the end, avoiding the all-or-nothing judgment is pretty important in a case like this, because it’s very unlikely that many of us (in Toronto, at least) will keep our hands clean. The option most of us will choose is to let Gawker or someone else get their hands dirty — let them do the crowd-sourcing, buy the tape, and so on — and then cackle with glee at the results in the privacy of our own homes.
Rejecting the Bangladesh Safety Accord
Filed under: brands, corporate citizenship, employees, excuses, human rights, international, retail, safety, supply chain, unions |
Comments (18) 
Image by rijans (Creative Commons)
It’s easy to villainize a company like Walmart for being unwilling to sign an agreement seeking to improve safety for workers in Bangladesh. What’s harder is to assess the company’s actual motives, and its obligations.
Headlines recently blared that Walmart has refused to sign the new “Accord on Fire and Building Safety in Bangladesh”, despite the fact that 24 other companies (including Europe’s two largest clothing retailers, as well as American brand Tommy Hilfiger and Canada’s Loblaw) had signed.
Other news sources avoided the Walmart-centric hysteria and pointed out that lots of retail chains have in fact opted not to sign. For its part, Walmart says says it plans to undertake its own plan to verify and improve conditions at its suppliers’ factories in Bangladesh. Supporters of the accord, however, are skeptical about the effectiveness of company’s proposed independent effort.
From the point of view of ethical responsibilities, could a well-intentioned company conscientiously decline to sign the pact?
It’s worth looking at a few reasons why a company might choose not to sign a pact designed to improve, and even save, lives. Walmart presumably believes that its own effort will be sufficient, and perhaps even superior. The company’s famous efficiency and notorious influence over suppliers lend some credibility to such a notion. Other companies have worried that signing the pact would bring new legal liabilities, which of course is precisely the point of a legally-binding document. (Gap, for instance, has said that it will sign only if language regarding arbitration is removed, a stance that effectively amounts to refusal.)
There may also be worries about governance: the accord provides for the appointment of a steering committee “with equal representation chosen by the trade union signatories and company signatories” — equal, but to be chaired by a seventh member selected by the International Labour Organization (ILO). Perhaps some worry that the ILO-appointed chair won’t really be neutral, giving unions an effective majority.
Other companies — including ones like Walmart, which is famous for its efficiency — may worry about the extra administrative burden implied by weaving this accord’s regulatory apparatus into its own systems of supply-chain oversight.
Another worry might be the fact that the accord applies only to Bangladesh, and makes that country the subject of a separate set of procedures. The accord also commits signatories to expenditures specifically on safety in Bangladesh, when from a particular company’s point of view Bangladesh might not be a priority. In the wake of the April factory collapse, it’s worth pointing out that there are other places in the world with unsafe factories and crummy working conditions. It’s not unreasonable for at least some companies to focus their efforts on places where conditions are equally bad, and that host even more of their suppliers.
None of this goes any distance toward excusing inaction. None of it condones apathy. The point is simply that while failure to sign a particular accord makes great headlines, we need to look carefully at reasons, as well as at a company’s full range of obligations, if we are to make sense of such a decision.
Hiring the Donor’s Daughter
Filed under: employees, HR, leadership, nepotism, NGO, philanthropy, Uncategorized |
Comments (13) Nonprofit and charitable organizations face many of the same ethical challenges that other organizations face, but they may also bump into a few special problems from time to time.
As an example, consider the following HR dilemma, which was posed to me recently.
I work for a nonprofit organization in health research, and I’ve recently been told that I will be hiring and supervising a new individual whose parents are donating her salary for one year (it’s to be a one-year, limited-term position) in addition to making a sizeable donation. The hope is that, in time, the donors will make a significantly larger gift of a million dollars or more. The arrangement presents numerous challenges to me as a manager, since everyone in the upper levels of the organization agrees that the true nature of the arrangement can’t be revealed, but many employees will realize that the situation is unusual and will have serious questions about it.
I’ve presented my concerns to those involved, but the decision-makers are rationalizing their actions (they tell me it’s “for the good of the organization”), and asking me to embrace this “opportunity.”
Clearly, the mid-level manager here is in a tough position, caught between a rock and a hard place. The manager is being told, by those higher up, that this is the way things are. But the manager also has a team to manage, and the unorthodox hiring of this new “employee” may cause trouble.
Here are what I think are the relevant considerations:
1) I don’t think the basic arrangement itself is obviously unethical. The “employee,” here, is essentially a volunteer, being bankrolled by her father. A bit lame, for her, but if she provides the organization with some value, that in itself could be a good thing, in addition to the donation that her father is making and may later make.
2) Point #1 above assumes that this person will actually do some work, rather than just be padding her CV by means of this one-year position with a reputable nonprofit organization. If she’s just going to take up space, then her presence is inevitably going to be resented and hence disruptive.
3) Then there’s the question of whether this “hire” is affecting anyone else’s job. From what I understand, no one is being fired to make room for this new person. But even if no one’s job is immediately in jeopardy, it may have implications for who gets hired over the next year, who gets overtime, whose job is expanded in interesting ways, and so on. So other employees do have reason to be concerned.
4) The fact that senior management sees a need to hide what’s really going on, here, seems to be where the ethical problem lies. That part seems highly problematic. If this is a good “hire”, why not be transparent about it?
5) At a certain level, this is as much a “wise management” question as it is an ethics question. If (as seems to be the case) the current plan is bad for morale, then wise senior managers should realize that, and think this through more carefully.
All in all, I would suggest that the situation, as it is being handled by senior managers, represens a significant lapse in leadership. Their motives in accepting the deal — hiring this woman in return for a big donation — are reasonable enough. The mere fact that her hire wouldn’t go through the usual processes isn’t itself damning, provided that the net value to the organization is positive, and as long as no one’s rights are violated. Perhaps the ends here do justify the means — after all, we’re talking about the potential for a very large donation. But the fact that senior managers feel the need to keep the deal secret is a major red flag. Wise organizational leaders should work hard to make sure that, when compromises are being made, they are at very least compromises that they are able to defend, and about which they are willing to be transparent.
Why HR Management is Always Ethically Relevant
Ethics should be thought of as the heart of your organization’s HR function. Likewise, HR is likely to be the heart of attempts to manage ethics within your organization. Let me explain why.
It’s hard to imagine a function more essential to most businesses than HR.
HR may not get the glory that Finance does, but it’s just as important. Hiring, training, evaluating, and retaining the right people are all undeniably core management challenges. Every manager knows this. The relevant difference between Finance and HR is that Finance gains prestige by bringing to bear the tools of quantitative analysis; HR issues, on the other hand, are typically harder to quantify, harder to mathematize, leading many to think of them as “mushy.” But “mushy” typically just means “I find this stuff difficult.” Managers who find HR difficult would rather hide in the numbers. Ironically, HR gets called “soft” precisely because it is so hard.
At many large companies, the HR Department is in charge of ethics — or at least that part of ethics that isn’t bundled with Compliance. The HR Department is often tasked with making sure every employee gets a copy of the company Code of Ethics, for example. HR is also typically in charge of ethics training, as well as updating the company’s Conflict of Interest policy and other ethically-salient policies.
But the fact that many companies embed their Ethics function within their HR function may actually obscure the extent to which every aspect of HR is ethically significant. The full extent to which HR is an ethical matter may not be obvious.
Ethics is fundamentally concerned with the choices we make — either as individuals or as companies — when those choices have an impact on people’s well-being or their rights. And so ethics is and must be part of all of the policies and activities for which HR is responsible, not just the ones that have the word “ethics” explicitly attached to them.
Hiring, for instance, (or setting the rules for hiring) involves balancing a range of value-laden criteria, such as skill and experience and reliability, and avoiding ethically-inappropriate criteria such as race, gender, and sexual orientation. The same goes for performance evaluation. Likewise, how overtime is handled — who is eligible, under what conditions, with whose permission — is a fundamental question of justice. This is also true of policies related to discipline, which obviously require attention to fairness, another central sub-topic within ethics.
So even if it weren’t in charge of ethics training and ethics policies, the HR function would remain ethically crucial.
Finally, HR also gains ethical significance by embodying most of the few tools available for managers to shape that elusive thing known as corporate culture. Culture — that communal set of understandings, beliefs and traditions that give a shared sense of “how we do things around here” — is widely acknowledged to be a critical element of organizational success. Indeed, there’s a well-worn saying to the effect that culture trumps strategy every time. That is, regardless of what strategic initiatives senior managers put in place, or what policies they put down on paper, those initiatives and policies are liable to fail if the culture of the workplace isn’t suited to them. Enron famously had a rather lengthy code of ethics, but the culture fostered by the company’s compensation model and its performance review process went a long way toward fostering a culture in which unethical behaviour was readily tolerated. Culture, you might say, makes up an organization’s collective ethical character.
So we see, then, that HR is actually ethically significant in two ways. It is the locus of an enormous number of central, ethically-relevant policies, practices, and decisions. And it is the mechanism through which organizational culture is built, the culture that will hopefully support rather than frustrate ethical decision making.
A shorter version of this blog entry appeared at the Cornerstone Blog
Joe Fresh: is Compensation for Bangladesh an Admission of Guilt?
Filed under: accountability, brands, capitalism, corporate citizenship, disaster, employees, public relations |
Comments (1) Loblaw Companies Limited, the company that owns the Joe Fresh retail clothing line, has announced that it will pay compensation to the families of victims of last week’s factory collapse in Bangladesh. Details are sparse at this point, but it’s an interesting development.
The move will of course garner the company plenty of praise. Some of that praise will be offered only grudgingly, by those who will see it as the least that can be done by a money-hungry corporation in the habit of squeezing profits out of the labour of Bangladeshis with few other options. But still, there will be praise. For it is easy to see the good in a transfer of wealth from a multibillion dollar Western corporation to several hundred exceedingly poor families. Any plausible amount of compensation will be trivial to the company, but an enormous boon the those in Bangladesh who were affected.
But I for one still have questions, in particular questions about what is motivating the move. As I’ve said, the move will do a lot of good, but there are many different principles that might underlie any given action that does good. And we typically care not just about outcomes, but about principles too. Upon what principle is Loblaw compensating the victims in Bangladesh?
Cynics are already assuming that the move is pure PR, aimed at deflecting criticism (however unfair) and dissociating the Joe Fresh brand from the grimy reality of developing-country sweatshops. That’s one possibility.
It might also be that the company sees such payment as a form of charity. The building collapse last week resulted in horrible human suffering. Most big companies donate to charitable and humanitarian causes. And even if Loblaw doesn’t see itself as responsible for the collapse, it must see a connection, emotionally at least, and so the families of the dead are an especially apt target for the company’s charity.
But for me, the word “compensate” raises questions. That word can mean many things. But in contexts like this, it is perhaps most naturally read as referring to payments aimed at offsetting a loss, payments from someone who is either responsible for that loss or who at least for some reason owes such a payment. “Compensation” is not quite the same as “restitution,” of course. The latter word clearly implies culpability. But still, the word “compensation” seems to imply a level of regret, if not guilt. Is that what the company is implying? After all, Loblaw could have opted simply to say “We’re going to help those affected,” or even more neutrally, “We’re going to send money.” But “compensation” is the word the company itself is using. Is that really what they mean? And if so, why specifically do they think they owe compensation? What level of responsibility do they take — do they plan on taking — for the actions of subcontractors on the other side of the planet?
This is more than mere semantics; it’s about the principles underlying corporate behaviour. If, as seems inevitable, we are to regard corporations as entities capable of taking action, and of meriting praise or blame, then we need to be able to talk about what motivates them, and to ask them about the principles upon which they act. In a way, to seek a principled explanation in a situation like this is even more demanding than simply to ask that the company pay up. As I’ve already noted, the money in this case is a drop in the bucket. Giving voice to a set of values and principles upon which corporate behaviour is based is a lot harder than writing a cheque.
The Business Ethics Blog 