Will the UK Outlaw Ethical Investing?
OK, so the answer to the question in the title is almost certainly “no,” but outlawing ethical investing is precisely what is being implied, no doubt inadvertently, by a new plan being attributed to the UK’s Labour Party.
Over the weekend, several UK news sources reported on a press release indicating that the Labour Party’s leader, Ed Miliband, was about to announce his intention (if elected) to impose tough new rules on the financial industry. The idea was to be put forward during a speech at the party’s annual conference this past weekend. According to the Daily Mail,
Mr Miliband is proposing a sweeping new legal duty on any financial service which manages savings, including pension funds and banks, to maximise the saver’s returns. Failure to do so would mean them breaking the law.
(While I haven’t seen the actual press release upon which this analysis is based, a very similar report appeared in The Guardian.)
On the face of it, this is just another promise by a politician to fight for the little guy by imposing constraints on big business.
But hold on a minute. As Tim Worstall at Forbes.com astutely points out, requiring a bank to maximise a saver’s financial returns implies a legal duty not to pay attention to any factor other than money. No more attention to sustainability. No more doing good deeds. No more avoiding investing in tobacco or arms dealers. It’s gotta be all about the money.
But focusing on something other than money is precisely what financial institutions promise to do when then offer various ‘ethical’ or values-based investment instruments. The promise made by such funds is that they’ll aim at a “solid” return on investment, while at the same time paying due attention to social and/or environmental concerns. Miliband’s proposal would make such funds illegal. Indeed, if taken seriously, Miliband’s proposal goes much farther than that: it would criminalize all attempts at corporate social responsibility by financial services companies.
Indeed, legally requiring banks to maximize return to savers is exactly parallel to the (fictional) requirement for corporations to maximize return to shareholders. (Why “fictional?” Because the directors of a corporation are only legally obligated to serve loyally, not to maximize profits per se.)
Now as Worstall points out, such announcements regarding what a politician is going to say sometimes don’t come true. And heaven knows that even if Mr. Miliband does or did make the promise out loud, there’s no guarantee that he will make good on it, even if he has the opportunity. Hopefully he or his advisors have seen the folly in such a law, and will find some subtler way to achieve their policy objectives.
Chinatown: The Other Walmart?
Controversy has arisen recently over plans to build a new Walmart in Los Angeles’s Chinatown neighbourhood. Some residents support the plan, welcoming the idea of a convenient source of low-price groceries, clothes, and electronics. Others worry about the effect on small businesses, as well as the potential impact the retail giant would have on Chinatown’s unique culture and flare.
The controversy strikes me as amusing, given certain similarities between Walmart and the stores that already typify Chinatowns in many North American cities. Maybe if Walmart displaces smaller stores it wouldn’t really be as much of a change as critics say it would.
Think of it this way. If I told you I recently bought a very cheap umbrella, made in China, from a store that was chock-full of low-price goods imported from China, and that the clerk who sold it to me was non-unionized, and that I had serious doubts about whether the “organic” apples for sale in the store really lived up to the label, where would you guess I had been shopping?
No, I wasn’t at Walmart. I was at some little nameless place in Toronto’s Chinatown, just a few blocks from where I live. But the similarity between this little hole in the wall and a massive Walmart is in many ways striking. In fact, it often occurs to me as I walk through Chinatown that the entire neighbourhood sort of “adds up” to a Walmart, in certain ways: for starters, there’s the cheap, imported merchandise at low, low prices, and not a unionized worker in sight.
Now, the comparison between Walmart and Chinatown may strike some as insulting. So I hasten to assure you that none of this is intended to criticize Chinatowns in particular. Were it not for the recent controversy in LA, we could just as easily be talking about bodegas, 7-Elevens, and the millions of little mom-and-pop shops that inhabit the nooks and crannies of our larger cities. And I realize that Chinatown consists of more than just small shops selling food and manufactured goods, but those kinds of shops are the ones most clearly in jeopardy when a Walmart comes to town.
Nor is my intention to trivialize what is great about Chinatowns, many of which are surely among the most culturally rich and varied neighbourhoods in North America. Toronto’s Chinatown, the one with which I am most familiar, is an amazing place with an energy and exuberance not found anywhere else in the city.
But still, it is instructive to note that many of the practices for which Walmart has been criticized also seem, to a casual observer at least, typical of the tiny stores that inhabit the streets and alleys of Chinatown.
Now, to be sure, there are also plenty of differences. Where Chinatown is vibrant, Walmart is sterile. Where Chinatown is zany and chaotic, Walmart is a study in top-down control. Where Chinatown is entrepreneurial, Walmart is imperialistic. But it is important to see that not all of the differences play out in Chinatown’s favour.
Indeed, the careful top-down control for which Walmart is famous brings significant benefits, from a business ethics point of view. For one major difference between Walmart and Chinatown has to do precisely with centralized accountability. If you worry about Walmart’s supply chain, for example, and about the manufacturing processes and labour practices that result in those low, low prices, you know who to talk to. If on the other hand you worry about the manufacturing processes and labour practices that result in the wares for sale in Chinatown, then, well, feel free to wonder but there is little concrete you can do about it. The wondrous diversity that typifies Chinatown also implies a problem when it comes to assessing business practices and changing them when change is required.
Another crucial difference has to do with publicity. It matters a lot that Walmart, in part because of its size, is so highly visible. Little that Walmart does goes unnoticed; bad practices and mis-steps draw fire quickly. Compare this to how little we know about the business practices of thousands of tiny, virtually anonymous retailers. It’s not much of a stretch to say that Walmart really is the devil we know.
So, what are we to think about a situation in which Walmart is about to move into a vibrant neighbourhood and, inevitably, jeopardize the future of dozens or perhaps hundreds of small businesses? Clearly, there would be some downsides. But just as clearly, there would be some upsides. But what is perhaps least obvious is that some things just wouldn’t change at all.
Occupy, One Year Later
Today is the nominal anniversary of the start of the Occupy Wall Street movement. On September 17 of last year protestors took control of Zuccotti Park, a private park not far from Wall Street in New York. The undercurrents and indeed the planning can be traced farther back, but September 17 was the day the world took notice. The protestors stayed at the park, their numbers ebbing and flowing, until finally forced out on November 15, 2011. The movement did of course spread well beyond Zuccotti Park; indeed the protest was mirrored in towns and cities across the US, and indeed across the world. But Zuccotti, a stone’s throw from Wall Street, remains the spiritual home base for the Occupy movement.
The aims of the movement were diffuse, though not as vague as critics sometimes claimed they were. The protestors were concerned most specifically with income inequality, with the sense that those who hold the reins of the various great steam horses of capitalism were hoarding for themselves a wildly disproportionate share of the world’s wealth. This led naturally to a concern with capitalism itself, with the tendency of major corporations to behave badly, and with the government’s tendency (according to protestors) to let corporations get away with it. As a result, the movement’s name came to be used as a virtual synonym for concern with corporate ethics.
It’s hard not to sympathize with the goals of the movement, or at least with the passion of those most centrally involved. We can question the precision of their targeting, and the efficacy of the sit-in as method of producing social change, but only the shallow and the oblivious could fail to see that there was something to the protestors’ complaints. The financial collapse of 2008-2009 did enormous damage to millions of lives, and left a great many people with a deep sadness, a feeling of alienation, a deep and persistent sense of injustice and that the system is somehow rigged.
But motives aside, a year later, the question on every commentator’s mind is “What did they accomplish? Certainly Occupy succeeded in putting income inequality on the map, so to speak. As others have pointed out, Occupy is the central reason that presidential candidates this time around must comment on inequality. Not that that hasn’t been a topic of discussion in previous elections, but this time it’s utterly unavoidable. Consciousness of the topic has been raised, though it remains to be seen whether that consciousness will matter at the polling booth.
But really, the movement’s impact has been more cultural than economic. It spawned a number of memes — occupy-this-or-that, and the 99%-vs-1% thing. As a meme, “occupy” has been a victim of its own success. Had it been slightly less catchy, it might actually have been a useful rallying cry. But no sooner had the slogan been uttered in earnest than a thousand copycats, earnest or mocking or simply silly, sprouted on Facebook and Twitter. Occupy the dean’s office! Occupy the Death Star! Occupy my couch! Imitation may be the sincerest form of flattery, but it’s also a good way to devalue a currency.
Alas, concrete examples of change that could plausibly be traced to the Occupy movement are hard to come by. No new grassroots movement doing anything beyond sit-ins and marches. No significant new activist organization with the organizational capacity to take effective action toward promote real change according to a clear agenda. Nor has Occupy made any noticeable moves in the realm of electoral politics; and however cynical you want to be about that system, it is still a crucial part of getting things done. The point is not to occupy Wall Street, but to change it.
In retrospect, perhaps all we can say at this point is that while the Occupy movement struck a nerve, and perhaps fostered conversation, what it has failed to do is inspire change. Whether real change is in the offing, and whether important change will ever be attributable to the sparks that originated in Zuccotti park remains to be seen.
Twitter, Occupy, and the Rule of Law
As the 1-year anniversary of Occupy Wall Street approaches, it looks as if Twitter is finally on the verge of handing some key protestor tweets over to a New York judge. The tweets have to do with the timing and planning of a march across a New York bridge, a march that ended in mass arrests.
And, even setting aside the legal consequences of failing to do so, it’s the right thing to do. Companies have a general obligation — a part of good corporate citizenship in the most literal sense — to obey the law. There are of course exceptions, for instance in situations approximating some form of civil disobedience. Civil disobedience is best thought of as a situation in which an individual, or perhaps a company, openly defies what it takes to be a bad law or an unjust legal ruling. In classic cases, the party engaging in the disobedience does so in an attempt to effect legal change, and shows its commitment by being willing to suffer the consequences of standing on principle.
Now, tech companies like Twitter do have a principled stance to take, here. They are rightly concerned about protecting users’ data. But tweets are decidedly and emphatically public, so the present case is quite unlike the case of a company being asked to turn over customers’ emails or other private communications.
Twitter is in a sense duty-bound, of course, to put up some resistance. Being overly cooperative with law enforcement tends to look bad on a tech company, even if it’s only because people fail to distinguish between private and non-private information, or fail to distinguish between New York and Beijing. But a year’s worth of resisting is likely sufficient for Twitter to show that it takes privacy seriously. It’s time for Twitter to do its duty as a good corporate citizen in a society governed by the rule of law.
Samsung, Chinese Workers, and Labour Rights
Filed under: children, compliance, employees, human rights, international, rights, supply chain, wages, workplace safety |
Comments (1) Samsung and Apple recently shared the spotlight as the parties to a billion dollar intellectual property lawsuit. Now, Samsung has replaced Apple as the tech company in a different spotlight — the spotlight, that is, consisting of accusations of mistreating Chinese workers. A report by the New York-based NGO China Labor Watch says that Chinese factories making devices and components for Samsung are guilty of a range of abuses. Employees working more than 100 hours of overtime in a month. Children under 16 working in factories. Failure to provide safety clothing where appropriate. And on and on.
A few key points are worth noting.
First, a note about overtime. It’s worth pointing out that China Labor Watch criticizes overtime — voluntary overtime — as if overtime were a bad thing. But at the Foxconn factories supplying Apple, at least, the biggest complaint of workers was that they wanted more overtime. If anything similar is the case at the Samsung factories, this implies that stricter limits on overtime would indeed be a bad thing, at least from the workers’ point of view.
Of course, wanting more overtime doesn’t prove that things are great at the factories; it just proves that workers want more money than they make during a regular workday. After all, if you pay people poorly enough, everyone will literally beg you for more overtime.
But then, it’s also worth remembering that “overtime” is a social construct. The amount of hours someone should work in a week is a matter of convention, and in North America and Europe we established the conventional 35 or 40 hour work week once we could afford to do so. Not everyone is yet so lucky.
Second, it is a mistake to lump all the accusations in together, as if they were all of a kind. They aren’t. Some of the complaints have to do with things that are susceptible to tradeoffs. Long hours, for example, may be acceptable if workers believe the loss of leisure time is justified by the extra income. It’s arguably a matter of rational calculations for each worker.
Other complaints, in comparison, have to do with rights, and rights are traditionally regarded as not being readily subjected to such calculations. We don’t allow voters in a democracy to literally sell their votes, for example. We put such a high value on the right to democratic participation that we forbid voters from making tradeoffs of this kind, from weighing how much they value their ability to vote against how much they value some quantity of money. Now, back to Samsung. One of the issues raised by China Labor Watch is that workers in the factories lacked a mechanism by which to lodge complaints. The existence of such a mechanism in the workplace might arguably be said to be a right. Such being the case, Samsung cannot simply argue that its workers are making a rational tradeoff here. Rights, as the saying goes, are trumps.
Finally, a note about accountability. As law professor Stan Abrams points out, one of the key factors differentiating the Apple and Samsung cases is that Samsung owns or controls many of the factories in question. Apple, on the other hand, was (and is) criticized for conditions at factories owned by its subcontractor. But since it didn’t run those factories it could plausibly deny knowledge and perhaps responsibility. Samsung, on the other hand, has no such refuge. When you own or control a factory, you can’t plausible, ethically, deny that you know how workers are being treated.
That’s not to say that the Apple and Samsung cases are categorically different. In both cases, the companies in question need to take a hard look at how their products are being made. But consumers and investors need to take a hard look, too. And that means not just casting a spotlight, but doing the hard mental work of thinking through some complicated questions of right and wrong.
Can Business Schools Teach Ethics?
It’s that time of year again. Fresh young faces are flooding onto campus, and lineups are long at the university bookstores. Once again, there is a rush of new faces past the door of my office at the Ted Rogers School of Management. And once again, editorials are being written about whether business schools can do anything effective in the realm of ethics. Far better than most, in this regard, is a recent piece by Professors Ray Fisman and Adam Galinsky, of the Columbia Business School and Kellogg School of Management, respectively. Is it possible, they ask, for business schools to train students to be ethical?
Fisman and Galinsky’s piece has a lot going for it. The view they put forward is realistic, but not cynical. Nor does it make the all-too-common mistake of assuming that the goal of an ethics course is to “make students ethical.” And it rightly, to my mind, focuses on the psychology of wrongdoing — on looking for ways to counter the psychological forces that result in decent folks doing bad things.
Beyond recommending their article, I’ll only add the following comments:
Echoing a suggestion I made nearly two years ago, Fisman and Galinsky suggest that business students need to be taught to become “Moral Architects” (their term, not mine). That is, business students need to be taught skills relevant to shaping the environment in which they, and others, work in order to push behaviour in the right direction.
This is exactly right, but if anything Fisman and Galinsky underplay the question of design. A great many business school graduates will go on not just to work in business, but to be managers, and managers are tasked with designing and managing work environments. So even if ethics classes aren’t capable of changing students’ behaviour, it is important to ask whether they can give students the skills to help shape other people’s behaviour in the future.
My final point is about the focus on business students. Why focus on them? Fisman, Galinsky and I all teach at business schools, so for us the answer is obvious. But from a broader point of view, it may be a mistake. If we are concerned with ethical conduct in business, we need to look at all of the training grounds for business, and that goes far beyond the business school.
I often ask my own students, do you know what the difference is between a Business major and an Arts major? The answer is that a Business major already knows she’s going to work in the world of business. The Arts major is almost certainly going to end up doing something in the world of business; she just hasn’t realized it yet.
But of course, it’s highly unlikely that anyone is going to make a business ethics course mandatory for arts majors, based on the simple fact that many arts majors will end up in business. So the burden, for all intents and purposes, is likely to stay with those of us who teach at business schools. As I watch the fresh young faces flow past my office door, I can only hope that we are up to the task.
Conflict of Interest and the Rule of Law
The hapless mayor of Canada’s largest city is again facing accusations of conflict of interest. Or, more accurately, he is facing accusations that he violated the relevant legislation regarding how conflicts of interest ought to be handled by municipal councils. The claim is that Toronto Mayor, Rob Ford, violated the Municipal Conflict of Interest Act when he voted, along with the rest of Council, on whether or not Council should let him off the hook with regard to a prior charge related to improper use of his position to garner donations for his own private charity.
Alas, this is far from being Ford’s first run-in with conflict of interest rules. See my blog postings on previous events here and here. But the present accusations are more serious, in particular because the penalty prescribed under the legislation is for the mayor’s seat to be “declared vacant.” In other words, if Ford is found guilty, he loses his job. Further, he can (at the judge’s discretion) be barred, for up to seven years, from becoming a member of council again.
Two elements of this case are particularly worth highlighting.
The first has to do with an apparent difference between the possible penalties in this case and the penalties that would apply in a parallel case in the private sector. Imagine the CEO of a major corporation being found guilty of violating her company’s Conflict of Interest Policy. How many would be summarily fired for it? It’s certainly not a legal requirement, to the best of my knowledge. As for corporate policy, some corporate conflict of interest policies don’t specify penalties at all — in some cases because they are part of larger corporate codes of ethics that try to focus on the positive. Should corporate policies specify penalties as harsh as removal from office? That’s a question for another day.
The second instructive aspect lies in the Mayor’s thinking on how the situation should be handled, and who should decide his fate. Ford is reported to have said that voters, not the court, should decide his fate. To his credit, Ford’s assertion here has the whiff of moral principle about it. He’s pointing to a principle of democratic accountability. If voters believe he has acted wrongly, they can and should make that clear at the next election, two years hence.
What Ford is missing, of course, is something called the Rule of Law. “Let the people decide” is, on its own, a recipe for disaster. For one thing, many people (including apparently some in positions of responsibility) just don’t understand what conflict of interest is or why it is important. While an electorate certainly ought to take such things into consideration when they enter the voting booth, that doesn’t mean they ought always to have the final say. Another way of looking at it is that the voters already have decided — they elected the provincial government that put into place the Municipal Conflict of Interest Act twenty or so years ago, the law that in turn will determine Ford’s fate. And, should they choose, the voters can ask their representatives to change that law.
Incidentally, the ‘rule of law,’ broadly understood, is what makes so called “say-on-pay” rules, rules allowing shareholders to vote on executive salaries, something less than a slam-dunk from a corporate governance point of view. Whether ‘voters’ should have direct control over something as technical (and sometimes emotional) as executive compensation is far from clear, which is why most say-on-pay requirements today call only for advisory votes.
The general principle, here, is that ‘the people’ ought to have a say, but that their say needn’t always be direct. It is for good reasons that we set up systems of laws, or in the corporate case systems of policies, and empower and entrust qualified administrators to apply those laws and policies. Of course, just which matters ought to be left to judgment to case-by-case basis, and which ought to be categorically determined as a matter of policy, is a hard problem for those who design institutions of all kinds.
Vancity vs Enbridge
Filed under: energy, environment, investing, public relations |
Leave a Comment It was recently reported that Vancity Investment Management is divesting its shares in beleaguered Canadian oil company, Enbridge.
Enbridge has made the news repeatedly over the last few years because of leaks in its pipelines. Not unrelatedly, the company has faced opposition from native and environmental groups with regard to its planned pipeline across northern Alberta and British Columbia. The combination of errors in its past and risks in its future is apparently just too much for Vancity, and perhaps for other socially- and environmentally-conscious investors.
This new announcement is, on the surface at least, a good example of the connection between ethics and business. It is often pointed out that, in order to stay in business, a company needs to maintain its ‘social license to operate.’ But more specifically it needs to retain the goodwill of key stakeholders, and investors are very high on that list.
But of course, investors can turn on a company for all kinds of reasons; the perception that the company isn’t doing well socially or environmentally (or more generally, ethically) is just one. Companies can take a hit to their shares for any number of reasons. Even if we limit ourselves to broadly “social” reasons, there are good and bad reasons, reasons about which there is broad social consensus (e.g., child labour) and ones that are socially divisive (e.g., contributions to pro-choice or anti-abortion groups). And so on.
This points to an interesting question about the obligation that managers and boards have to manage risk. It is increasingly clear that the obligation to manage risk includes not just financial risk, but just about any risk to which the company might be subject. That includes environmental risks and reputational risks. Understandably, the two are intertwined. According to the story cited above, one “ethical investment” company (Northwest & Ethical Investments LP) has expressed concern about Enbridge not (just?) because of the risks its pipeline poses, but because of the risk posed by opposition.
Should Enbridge (and its shareholders) be concerned about the Vancity divestment? That’s unclear. The divestment itself doesn’t sound catastrophic, but things could change if other investors follow suit. How likely that might be is also unclear. The interesting question is which kind of worry is more likely contagious: worries over environmental risks (and financial risks that go with those) or worries over risks of opposition.
In the end, it may not matter much. As I’ve argued before, oil companies need to do a better job of managing environmental risks. If they can succeed at that, they may well see the risks of social opposition melt away at the same time.
Profiting from Prison Labour
Is it right for a company to use convicts for cheap labour? Is it unfair to pay prisoners less than the minimum wage? Is it wrong to use such labour in a way that displaces “ordinary” employees?
The Guardian recently ran a story about prisoners doing work for a private telemarketing company in a way that may (or may not, depending who you ask) be taking jobs away from law-abiding folks. The prisoners in question are being paid the equivalent of about four and a half dollars an hour — just a fraction of the legal minimum wage.
Prison labour is a great topic, ethically, in part because it tends to make people of just about all political stripes uncomfortable, albeit for different reasons. Some worry about the prisoners, who may have little option but to accept whatever crummy labour comes their way. Others may have the opposite worry: why coddle criminals by giving them the benefit of a job or job training? They’re in prison to be punished, not to learn skills. Still others worry not about the prisoners at all, but about the non-prison workers who are displaced by prisoners who inevitably “underbid” them for jobs. You could add to that list the businesses who don’t use prison labour, and who are therefor at a competitive disadvantage. How can you compete when your competitor’s labour costs are half what yours are?
We’ll leave for others the basic question of whether, or under what conditions, penal labour is itself justified, and instead focus on the business ethics issues. And as far as I can see, from that point of view there just isn’t a problem.
The “law-abiding” workers put out of a job have every right to complain, but that’s not to say that they have a justified complaint; they haven’t been wronged in any way. Other things being equal, no one has a right to any particular job. The worker who finds herself out of a job because she’s been underbid by cheap prison labour is no more treated unjustly than the worker underbid by cheap labour overseas. (For that matter, the prisoner arguably needs the job more than the average UK worker does, as does the worker overseas.) If I needed a plumber and found one who charged $100/hr and another who charged $50 an hour, the more expensive one would have no cause for complaint if I opted for the cheaper. It is reasonable, and not unfair, for me to try to keep my costs down.
Nor can a competing company rightly complain. A company reaps no unfair advantage by using prison labour. Sure, it reaps an advantage, but not through anything underhanded. As long as prison labour isn’t acquired by fraud or by, say, bribing or pressuring officials in the justice system into making decisions that violate their sworn duties, then prison labour is just another form of cheap labour. From an economic point of view, they’re to be congratulated for innovation. As long as other companies have the option of obtaining (or competing for) access to the same cheap labour pool, there’s no injustice here.
There’s an important lesson here about what counts as an “ethical issue.” The use of prison labour is, to be sure, an ethical issue. There are important rights at stake, and the decision to use such labour has important consequences. Such being the case, the decision and the details are not to be taken lightly. But that’s not to say that the practice itself is unethical. It is not, in and of itself, unjustified. But it is still good and socially healthy that the practice gives so many of us cause to pause and reflect.
Needed: A High-Efficiency Oil Company
Filed under: complexity, efficiency, energy, environment, pollution, risk, workplace safety |
Comments (3) A Nimitz-class aircraft carrier is a hellishly complex piece of machinery. Picture a boat the length of three football fields, carrying several dozen heavily-armed aircraft into a war zone. It’s a boat with a crew of 3,200 plus an additional 2,400 involved in flying, maintaining, and launching aircraft. Oh, and it’s powered by a pair of Westinghouse A4W nuclear reactors.
As it happens, the US Navy has 10 such carriers. And on these unimaginably complex machines, errors of any significance are practically unknown. Time after time, F/A-18 Super Hornets laden with missiles are literally catapulted from the flight deck, sent out on missions, and then land again on the carrier’s super-short runway. And failure is practically unknown. This requires amazing skill on the part of pilots, but it also requires an incredible team effort, and a system built to include multiple redundant safeguards. The safety record of nuclear aircraft carriers is so good that they are now a standard example of highly-efficient, low-failure, complex systems, the kind that other complex systems should aspire to become. They are systems in which failure is simply not an option, and smart design makes sure it just doesn’t happen.
Next, let’s look at another complex system, namely an oil company and its network of pipelines. Let’s look in particular at one Canadian company, namely Enbridge. Enbridge’s pipeline system, as far as I can tell, is significantly more prone to failure than an aircraft carrier. Just under a year ago, I wrote about a leak in an Enbridge pipeline running past the tiny northern Canadian town of Wrigley. That was a small leak, but one that raised serious concerns for the local native community that eked out its living from the now-polluted land. That leak involved maybe a thousand barrels of oil. But just a year earlier, an Enbridge pipeline running through southwest Michigan spilled 20,000 barrels into a creek leading to the Kalamazoo River. And now, this past Friday, another significant leak was reported. This time, the company’s “Line 14” spilled about a thousand barrels of crude into a field in Wisconsin. And this is just to name a few of the company’s pipelines over the last decade.
Of course, there’s no special reason to pick on Enbridge. Other companies in the oil exploration and refining industry have spotty records, too. BP is perhaps the most dramatic example that comes to mind. It was the company behind the explosion on the Deepwater Horizon, and the subsequent spill that devastated a big chunk of the Gulf coast.
There’s little doubt that, for the foreseeable future, oil companies like Enbridge and BP are a practical necessity. Like it or not, our economy depends on them. They are as necessary to our economy as an aircraft carrier is to the US’s naval supremacy. But the fact that those companies are so essential is precisely the thing that dictates that they must do better. They must seek the kind of never-fail efficiency exemplified by carriers like the USS Harry S. Truman and the USS Abraham Lincoln.
There are of course important differences between an aircraft carrier and a system of pipelines. For one thing, an aircraft carrier exists in a single place, under the watchful eye of a single Commanding Officer; a pipeline can stretch for thousands of unobserved miles, necessarily subject to only infrequent inspection. For another thing, various corporate motives summed up very imprecisely by the term “the profit motive” mean that there will always be temptations for oil companies to cut corners. But the example is there, and the body of knowledge is there. Oil companies can, and must, do better.
The Business Ethics Blog 