The Business Ethics Blog

(I’m blogging from the Society for Business Ethics conference.)

I started my morning listening to Richard DeGeorge (University of Kansas) talking about “Privacy in Public Space and Non-Governmental Surveillance.” DeGeorge outlined the various kinds of corporate surveillance (general v. individual, security v. marketing), and suggested that strongest arguments against non-governmental surveillance are going to be rooted in arguments about the harms that result from such surveillance than in arguments about privacy.

Next, Ian Maitland (University of Minnesota ) gave a talk called “Virtue or Control in the Governance of the Firm?” — essentially, it was a talk about what the evidence from experimental psychology says about the balance between virtue (character) and control (tight rules) that will work best in corporate governance.
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In the next session, I heard Exequiel Hernandez (University of Minnesota) give a talk called “Stakeholder Theory and Corporate Morality: Is a Shareholder Focus Associated With Corporate Unethical Actions?” Hernandez argued that firms that are shareholder-focused may tend inadvertently to foster cultures that make corporate fraud more likely (and, as Robert Kolb pointed out during Q&A) more likely to end up harming shareholders.

Next, Daryl Koehn presented a paper (co-authored with Joe Ueng) called “Back-dated Stock Options and Restatements of Suspect Earnings:  Is There a Correlation?” She presented data showing interesting correlations between various kinds of financial deceit at corporations.

Next I saw Denis Arnold (University of Tennessee, Knoxville) present on “The Ethics of Direct to Consumer Pharmaceutical Advertising.” (Great topic, btw: see this blog entry.) Denis did a careful examination of the pharma industry’s claim that direct to consumer (DTC) advertising is intended to “educate” consumers, and argued that the communication techniques typically used make DTC more like manipulation than education. He also usefully proposed that any new regulation ought to differentiate between “reminder ads” and “product claim ads,” on one hand, and “help-seeking” ads (the kind that say “Have these symptoms? See your doctor”) on the other.
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The final session of the morning was a panel on “Social Science Approaches to Business Ethics Research.”

Kirsten Martin (Catholic U. of America) gave a presentation called “Business Ethics and a Rich Research Agenda,” which focused on the uses of qualitative research in Business Ethics. She gave a nice explanation of the differences and complementarity between qualitative & quantitative research.

Second, Jared Harris presented “Endogeneity in Business Ethics Research: a Rely to James.” The problem of endogeneity is essentially a problem of how to make sure, in cases where you observe an correlation between A and B (e.g., between shoddy bookkeeping and poor performance), that there isn’t some 3rd factor “C” involved in either mediating A and B or in causing both A and B. Harris suggested a number of statistical & methodological ways of controlling for endogeneity. (Best — most fun — answer during Q&A: “I’m not sure there’s an answer to your question that I can give in plain English, but there is an answer.”)

Next, Daylian Cain (Harvard), gave a presentation on experimental economics called “What Good Can Come Out of the Lab?” Daylian gave some very nice evidence from experimental econ that our brains — our powers of reasoning — don’t actually work the way we experience them working. And this applies to moral reasoning too: there’s good reason to think that the moral reasons we believe motivate us in particular cases are not actually what motivates us. (In other words, in at least some cases you are mistaken about what ethical reasons are making you do the things you do.)

(I’m blogging brief notes from the Society for Business Ethics conference.)

My afternoon started with attending a session on Ken Goodpaster’s book, Conscience and Corporate Culture.

Goodpaster took the podium first and sketched the outline of the book. He said that central to his book is the notion of “teleopathy,” which he defines as a mindset that involves “the unbalanced pursuit of purpose.”

Next, Jeffery Smith gave some comments on Goodpaster’s book, and focused on the sense in which the notion of conscience involves finding an equilibrium between appeal to general principles, and a focus on the particularities of specific situations. Smith also drew a number of comparisons between Goodpaster’s book and Patricia Werhane’s work on moral imagination.

Then Wim Dubbink made a presentation (on Goodpaster) called “Is Teleopathy a Pathology?” He situated Goodpaster’s work within a history of critiques of the market. He also suggested that Goodpaster needs to tell us more about the sources of teleopathy, and the extent to which teleopathy is a necessary, or only contingent, feature of free-market capitalism.

Goodpaster then offered a response to Smith’s & Dubbink’s commentaries. He said too much to summarize, but one nice point he made had to do with the sense in which moral “imagination” allows moral agents to get closer to the reality of other agents, rather than (as some might suppose) the ability to engage in flights of (moral) fancy.
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The afternoon ended with a moving tribute to Robert Soloman, a phenomenally productive and well-respected philosopher of business, who passed away in January. The session was chaired by SBE President Ed Hartman, and featured remembrances of Robert by his friends and fellow scholars Robert Audi, Joanned Ciulla, Daryl Koehn, and Richard Nielsen, along with lots of moving and funny anecdotes from members of the audience. I regret that I never got to meet a man who was so much admired, respected, and loved.

I’m blogging from the Society for Business Ethics conference. (I won’t be sending out email notices about this or subsequent blog entries over the next couple of days.)

Here are a few notes & bullet points (nothing very structured) about things I’ve seen so far:

I caught the tail end of “The Ethics of Pressure Groups and Stakeholder Reciprocity: The Missing Link in Stakeholder Theory,” by Yves Fassin, of Ghent University.
– interesting paper; reminding us that ethics is for NGO’s & others, too; useful broadening of the scope of business ethics.
– My friend Daryl Koehn (University of St. Thomas ) asked a very good question about what mechanisms are available for implementing the kind of accountability Fassin was arguing for.

Then I saw “Building a Case Against Corporate Social Irresponsibility,” Timothy S. Clark, George Washington University
– useful reframing, at least as a provocative change in vocabulary
– not clear whether “social irresponsible” is intended to mean something different from “unethical.” It probably should mean something different, if the “social” part is to meaningful at all (because not everything unethical has a “social” impact).

Next I heard Norman Bowie on “Organizational Integrity.”
Best line (I’m paraphrasing, here): “I’ve lost faith in codes of ethics, because codes of ethics lack ‘asset specificity.’ The key to organizational integrity is a sound ethical climate. An ethical climate has high asset specificity and is not easily copied.”

Then Ed Freeman (the ‘father’ — grandfather? — of stakeholder theory) gave a presentation called “Building an Ethical America” — part of an ambitious book project of his. He called for an end to “saints-and-sinners” thinking, and proposed a re-moralization of our institutions. What he meant by that was not a ‘return to old-fashioned values,’ but a rethinking of various social institutions and their purposes.

Also of note: During Q&A, Freeman said that the most important question of political philosophy is “How do we sustain value-creation & trade over time?” The question of justifying the state (the question normally taken as being primary) Freeman said should come second.

Yesterday I blogged about paying to offset the CO2 emissions from the flight I was on.

Loyal reader Sandra, from Montreal, emailed with a simple question: who paid the $4.80? Was it out of my pocket, or (because I’m a university professor with federal research grants) was it paid for by taxpayers? (Sandra admitted that it’s a piddling amount to worry about, but she’s rightly interested in the principle.)

Great question! The simple answer: I paid it myself. I don’t have any idea whether carbon offsetting is an “allowable” expense, or how I would even go about trying to claim it on my travel claim. But should it be an allowable expense? Should the taxpayers who pay the other expenses related to my research also pay for carbon offsetting? Well, currently, neither the federal government nor the relevant granting agencies nor my university’s Financial Services department has signalled that this would be allowed. Of course, I suppose I could give it a try: I could submit the receipt (under the heading of “miscellaneous expenses, I guess), and who knows, I might just get reimbursed. Should I? That would amount to me deciding — on behalf of the taxpayers of Canada — that carbon offsetting is not just a good cause, but a better cause than anything else that money could have been spent on. It would make me feel better, maybe, about all the travelling (and hence polluting) that I do. But do I have the authority to make that decision?

This immediately got me thinking: what if I were the CEO of a company, and the issue wasn’t taxpayer money, but shareholder money? And what if the bill for my offsetting (let’s say it’s not just for travel, but for whatever industrial processes my company carries out) was not $4.80, but some more significant amount, perhaps in the thousands or millions of dollars. Wouldn’t the question would remain fundamentally the same?

I’m blogging from “the road” again, this time en route to the Society for Business Ethics meeting in Philadelphia. The airline I’m flying, Air Canada, kindly offered me the opportunity to pay a little extra to offset the carbon dioxide emissions that resulted from my flight.

Air Canada and Zerofootprint have joined efforts to give you the opportunity to minimize the impact of your travel. Every flight you take releases carbon dioxide (CO2) into the atmosphere and contributes to climate change. When you offset your flight and contribute to certified environmentally friendly projects, you remove from the atmosphere an amount that corresponds to your share of CO2 generated by your flight.

Carbon offsetting is not without its critics. Making it voluntary like this pretty much ensures that only a trivial percentage of CO2 emissions will actually be offset in some way. And if the offsetting ends up being trivial, then it might well amount to a way for suckers like me (apparently) to make themselves feel better, without actually having any real impact.

Anyway, here’s what the calculation looks like, showing how much CO2 my being on that flight resulted in, and how much I had to pay to atone for it.

Here’s my proof of purchase:

Cynics: don’t worry, I only paid to offset the first leg of my trip. I guess I’m just not that irrational.

The 7-year trial over the largest mining scandal in history ended yesterday, with Bre-X’s Chief Geologist, John Felderhof, being found not guilty.

Here’s the story, from the Globe & Mail:
Bre-X: ‘The end of the trail’

TORONTO — Investors burned by the world’s biggest mining fraud were dealt a blow yesterday when John Felderhof, former vice-chairman of Bre-X Minerals Ltd., was found not guilty of illegally selling $84-million worth of shares in the company.

Mr. Felderhof, 67, was the only former Bre-X official to stand trial over the firm’s collapse. He was charged with four counts each of illegal insider trading and issuing false press releases but was not accused of involvement in the fraud that saw $6.1-billion of shareholder wealth eradicated in 1997 when tests found virtually no gold at Bre-X’s much-touted Busang site in Indonesia.

Is this really the end of the trail? Maybe, maybe not. There’s still a class-action suit in the offing. And at least some commentators say the not-guilty verdict is a sign that Canada’s securities legislation is in need of revision. See, for example:

Canadian laws too weak
and
Bre-X case an ’embarrassment’ for Canadian law: expert

More links, different angles:

From Forbes.com: Former Bre-X Executive Acquitted
From ResourceInvestor.com: The Bre-X Scandal Ends: Chief Geologist Found Not Guilty
From Bloomberg.com: Former Bre-X Geologist Acquitted at Insider Trial
From CTV: Former Bre-X geologist acquitted of insider trading
And finally, from the CBC’s digital archives: Stranger than Fiction: The Bre-X Gold Scandal

Economist Tyler Cowen, of Georgetown University, co-writes an excellent blog called Marginal Revolution.

Last week, Tyler offered to post a personalized podcast for anyone who bought an advance copy of his new book, Discover Your Inner Economist: Use Incentives to Fall in Love, Survive Your Next Meeting, and Motivate Your Dentist.

It’s not every day a star economist offers to answer any question you pose, so I ordered the book (which I had wanted to read anyway) and emailed Tyler my question. Now, I’m often more intrigued by what smart people think about what counts as an “interesting question,” than by their answers to those questions. So my question for Tyler was this:

What do YOU think is the most interesting challenge or problem associated with ethics in commerce, and why?

Here’s Tyler Cowen’s response. [4 minute audio clip]

Roughly: Tyler’s answer is about the doctrine of fiduciary obligation and its application to CEO’s. He notes that a fiduciary obligation to maximize profits (subject to legal constraints) is on one hand pragmatically necessary, but on the other hand philosophically hard to defend. He also makes an interesting comparison to the case of national leaders, and their fiduciary duties to their citizens.

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Update
I now have a transcription of Tyler’s podcast. It should be a fairly accurate transcription, but no guarantees. Apologies to Tyler for any errors:

Hi, this is Tyler Cowen. Thanks so much for pre-ordering my book “Discover Your Inner Economist” and thanks for reading the blog. First let’s have a statement of your question.

Q. I’m often more intrigued by what smart people think about what counts as an interesting question than by their answers to those questions. I’m a philosopher who specializes in business ethics. So, my question: What do you think is the most interesting challenge or problem associated with ethics in commerce and why?

A. Thanks. That’s a very good question. I suppose the one I tend to worry about the most relates to issues of fiduciary responsibility. It seems to me quite obvious that at the practical level we need something like a doctrine of fiduciary responsibility. That is, if someone is appointed as CEO of a corporation it’s entirely reasonable on one hand to expect that person to maximize the corporation’s profits, at least subject to a legal constraint, and that if this sort of contract were not allowed the whole corporate structure would seem entirely unworkable, we would all be quite poor, people would die early, civilization would more or less collapse, and so on. But on the other hand, when one looks at the doctrine of fiduciary responsibility more philosophically, I think it’s really quite difficult to defend.

What is it that would give one person the right, obligation, whatever we’re going to call it, to do something other than that which is best for the world as a whole? So if you take Parties A, B, and C. Lets say Party A is the CEO, Party B the contracting shareholders, and Party C is someone else; the consumer, citizen, person in another country affected by the corporate actions. Party C may well feel that Party C ought to have some voice in what Party A does because party C is affected by Party A. And if you tell Party C, well, the actions of Party A are entirely just because Party A wrote a contract with Party B to do it, there is really no reason why this should carry much weight for Party C. Party C says, look I’ve never been part of this contract, what Party A really has is an obligation to somehow do what is best or take my welfare into account. And philosophically that argument, to me, seems to be strong. So we have this clash of perspectives that at the rule-based level we need something like fiduciary responsibility, but in particular cases when looked at critically I think the doctrine collapses almost immediately. And finding some kind of reasonable rapprochement between these perspectives – I know there’s a lot written on this issue but I’ve never seen much that I find very convincing.

And you find a lot of issues come up at the level of the nation state also. So libertarians for instance will say, well we should be cosmopolitans. But then if you ask them, take a national government: should it maximize just the welfare of its citizens or the welfare of the world as a whole, there’s a bit of stumbling. It seems hard to imagine how we could arrange things that national governments look after the whole world, but on the other hand we don’t think a national government can just do whatever it wants to the citizens of other countries. And if you ask Milton Friedman, who’s been a free-trade cosmopolitan when he was alive, ‘well Milton you say a CEO can maximize profit, does that mean a politician is justified in maximizing votes or that a national government can use protections to enrich itself at the expense of other countries?’ Milton would probably stumble a bit and be critical but exactly what’s the difference between these two cases? Again I come back to wanting to see a lot more good work on that issue.

Anyway, thanks a lot for the question. I will think about it some more in my spare time, as they say on Monty Python. And I hope you enjoy the book. Bye!

Today, a local story, from the province where I live:

From the Halifax Chronicle Herald: Smoke sellers fume over display rules (by Sherri Borden Colley)

On the eve of new rules that ban the display of tobacco products behind counters, some 200 Nova Scotia convenience store owners will meet … today to fight the way the province is implementing the legislation.

One of the key complaints is cost. According to the story, retailers are claiming that renovations to bring their stores into compliance will cost “anywhere from $4,000 to $10,000 per store.” The retailers’ association is even (implausibly) asking the province to compensate them financially for (some of?) those costs.

So, yeah, on one hand, that’s a lot to cough up to revise the method by which a legal product is sold. On the other hand, you can’t expect much sympathy when you’re selling a lethal, addictive product.

Here’s a great example of how sometimes industries actually want regulation. In this case, it’s the biotech industry, which has realized that public trust depends on establishing safeguards, and that investors aren’t as willing to gamble on technologies that don’t have clear regulatory path to the marketplace.

Here’s the story, from today’s NY Times: Without U.S. Rules, Biotech Food Lacks Investors

Here’s a snippet of the story:

Some scientists and biotechnology executives say that by having the Food and Drug Administration spell out the rules of the game, big investors would finally be willing to put up money to create a market in so-called transgenic livestock.
“Right now, it’s very hard to get any corporate investment,” said James D. Murray, a professor at the University of California, Davis, who developed the goats with the infection-fighting milk. “What studies do you need to do? What are they looking for?” he said, referring to government regulators. “That stuff’s not there.”
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[So]…the biotechnology industry is actually pushing for the tougher standards.
“Our overarching goal is to have public confidence in our products,” said Barbara Glenn, the managing director for animal issues at the Biotechnology Industry Organization, a trade group. “We won’t have that unless we have a very strong review process.”

Here’s a quick one:
Study Renews Conflict-Of-Interest Debate (by Lindsey Tanner writing for the Associated Press)

A new study showing that padded hip protectors didn’t prevent fractures in the elderly has renewed questions about hidden drug industry ties to medical research.
Three of the authors of the study on bone breaks didn’t tell editors of an influential medical journal, which is publishing their research Wednesday, that they had consulted for or received research money from the makers of bone-strengthening drugs. That potential conflict was discovered by The Associated Press.

OK, here’s the business ethics angle. There’s no claim, in this story, that the makers of bone-strengthening drugs had any direct involvement. The worry rather is that the three researchers failed to disclose a financial relationship that might reasonably be expected to influence their professional judgment. The question: do the companies involved (i.e., in the background) bear any responsibility? Could they be considered vicariously liable (I mean ethically, not legally)? Would tacit condoning of failure-to-disclose be anything like condoning perjury?
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p.s., anyone interested in the pharmaceutical industry absolutely MUST check out this blog: Pharmalot