The Business Ethics Blog

Here’s a story from the Environmental news Network: Coca-Cola Undertaking Africa Water Project, CEO Says

Coca-Cola Co. said Wednesday it would help to bring clean drinking water to parts of Africa in a plan to work with local communities on environmental issues like water management. “We’re focusing on water because we’re a hydration company,” Neville Isdell, chief executive of the world’s largest beverage company, said at a Business for Social Responsibility conference here.
“We’re focusing on water because it’s the main ingredient in every product we make…the success of our business depends on the availability of local water resources.”

OK, so the first comment to make is that, on the surface at least, this is a relatively progressive approach to Corporate Social Responsibility (CSR). It involves a company working in a field it actually knows about — in Coke’s case, treatment & transport of drinkable liquids — on projects that hold the possibility of not merely providing band-aid solutions, but instead contributing to the long-term development needs of communities.

Secondly, it’s worth noting that Coke is quite open about the fact that this is CSR of the “win-win” kind: it’s not philanthropy (i.e., it’s not Coke giving something away out of the goodness of its heart). Establishing a stable water supply is both good for local communities and helps Coke meet the needs of its bottling plants.

Now the cynical counter-spin: in helping bring water to more African communities, Coca-Cola is also helping bring its product, Coke, to more African communities. That is, Coca-Cola is expanding its market. As the ENN story notes,

International markets are becoming more important to Coca-Cola…as consumers in developed markets choose drinks like bottled water and tea over soft drinks.

OK, well I already noted that this isn’t philanthropy, it’s CSR of the win-win variety, which necessarily involves an upside for the corporation involved. So, what’s the problem? Well, the worry, anyway, is that Coca-Cola isn’t just expanding its market, it’s expanding the market for what is generally a pretty unhealthy product. Enjoyed in moderation, Coke is surely far from lethal. But better access to high-sugar, low-nutrient beverages is pretty much the last thing Africa’s poor need. I don’t want to ‘look a gift-horse in the mouth,’ — after all, lots of parts of Africa clearly are in desperate need of better supplies of water — but this particular example strikes me as being only slightly different than a tobacco company subsidizing the construction of roads to isolated towns so that they can more easily distribute their deadly product.

But if I lived in one of those African villages (or if I were a local politician), I guess I’d see this as good news. I’d accept the gift of clean water, even if it meant that kids would also now have easier access to some pretty unhealthy food choices. Not a pretty choice to have to make. But the fact that it’s offering something that desperate people would gladly accept is perhaps not the highest praise we can imagine for a company.

(Thanks once again to Melissa for alerting me to this story.)

Some ethical issues in business aren’t about specific instances of right- or wrong-doing, involving specific customers (or other stakeholders) on specific days. Some of the most interesting and complicated issues are about the large-scale social effects of various business practices, and whether companies have an obligation to moderate their behaviour in recognition of such effects.

One common issue of this type is the effect of commercial advertising. Advertising is becoming more pervasive, often more intrusive and (according to some) more manipulative.

In that vein, here’s an interesting story from the New York Times: Brands Produce Their Own Shows

Marketers have found a new way to try to keep viewers from tuning out: offer them TV shows, movies and online programming created by the marketers themselves, often with help from their advertising agencies.
These new offerings, the marketers hope, will be entertaining enough to endear viewers to the brands behind them.
Burger King, for example, is making a feature-length film that may star — no surprise here — the “King” character of its ad campaign. Office Max recently created a show on the ABC Family channel. Anheuser-Busch plans to start a seven-channel TV network online, called BudTV.

Interestingly, the NYT story avoided citing the obvious (perhaps too obvious? or too silly?) worries. The story managed to avoid quoting the usual media critics about how moves like this spell the end of civilization, etc. No mention of the idea that it’s bad to blur the distinction between entertainment & advertising (as if that distinction weren’t pretty much gone already.) Are we, collectively, just sort of over it? Is this a non-issue these days?

(Hopefully Andrew over at Rebel Sell will have something to say on this.)

Check this Reuters story: Man ordered to wear “sex offender” T-shirt [Link repaired Nov ’08]

A Delaware judge on Friday ordered a man who twice exposed himself to a 10-year-old girl at his workplace to wear a T-shirt with the words: “I am a registered sex offender” in bold letters, a prosecutor said.
Russell Teeter, 69, who pleaded guilty to two counts of indecent exposure, also was sentenced to 60 days in jail by Superior Court Judge Jan Jurden in Wilmington.
Deputy Attorney General Donald Roberts said he requested the unusual T-shirt punishment because he was concerned about Teeter exposing himself to children at the gardening business he runs with his wife.

Possible problem: wearing a t-shrit that says “I’m a sex offender” is only meaningful if there aren’t non-sex-offenders wearing similar t-shirts. Trouble is, T-shirts are now selling with all kinds of previously socially-unacceptable labels on them. Go to any North American shopping mall, and you’ll see teen girls wearing “Porn Star” t-shirts, and boys wearing shirts proudly proclaiming “Pimp.” So, I guessed — rightly, as it turns out — that someone out there would be selling sex-offender t-shirts.
See for yourself:
Lots of websites sell them, as I’m sure do lots of other retailers.
I guess the judge in this case never imagined that there’d be people out there wearing such t-shirts without being forced to. And I guess you can’t really say that t-shirt makers should have foreseen this judge’s rather innovative sentence. Still, you have to wonder about the net effect of products that seem designed to numb the general public to a range of important normative categories.

I just received a press release regarding an award given to General Motors by the U.S. State Department.

The press release starts out:

At a ceremony in Washington, DC, General Motors Corporation today received the Award for Corporate Excellence (ACE) from U.S. Secretary of State Condoleezza Rice. GM was recognized for its extensive corporate social responsibility programs in Colombia, which contribute to the quality of life of people in need, in particular those who have been affected by violent conflict in Colombia.

The press release continues:

GM Colombia has been contributing to the peace building process for six years through its support of a non profit organization dedicated to human development and job training for young people, especially those who have been demobilized from the paramilitary forces or displaced due to Colombian conflict.
GM Colombia employees are also involved in the community through the General Motors Volunteer Plus International Program, which encourages employees to donate time helping non profit organizations.

(There’s more information here.)
So, congratulations to GM for doing some genuinely good stuff.
But on the other hand, just in case y’all are starting to think I’m all about highlighting the good news, I should point out that GM is still building & selling the Hummer — and bragging that the new H3 gets a whole 20 miles per gallon!
And if you want more dirt on GM, you could check out the entry about them at Responsible Shopper’s website (featured in yesterday’s blog entry).

Of course, now I’ve fallen prey to an error that I’ve warned people against in a conference presentation I’ve made a couple of times on corporate moral motivation: I’ve warned that we should be cautious in questioning a company’s dedication to good corporate behaviour, because regardless of what criticisms we might have of the company in general, there’s a good chance that some very well-intentioned folks are behind the company’s ethics/CSR initiatives. Those people don’t deserve our cynicism. So: a hearty & sincere “well done” to the folks who earned GM its new CSR award, and a hearty & sincere “aw, c’mon!” to the folks in their Hummer division.

p.s., I considered giving this blog entry the title, “And the Golden Hummer Goes To…”, but figured that’d be too confusing…

Update: GM’s own blog now has an item about their new award: A Special Honor.

Here’s an interesting website:

Responsible Shopper

Responsible Shopper reports on global research and campaign information regarding the impact of major corporations on human rights, social justice, environmental sustainability and more.
The purpose of Responsible Shopper is to alert consumers and investors to problems with companies that they may shop with or invest in, and encourage individuals to use their economic clout to demand greater corporate responsibility.

This website clearly contains a wealth of information. But note also that it’s far from unbiased: it’s an activist website with a clear agenda. Not that there’s anything wrong with that.

Check out this bit from the entry on Wal-Mart:

Unfortunately, Wal-Mart confines its leadership to the realm of sales and in other areas promotes the attitude that virtually everything can be reduced to that which is disposable, whether that means products, workers, or even communities themselves.

Ouch. Not mentioned, here, are the ways Wal-Mart’s low prices benefit working class families, etc…or the range of things Wal-Mart has done over the last year to attempt to clean up its act. Organic food for all? Ring any bells?

Or look at this, from the site’s blurb on Unilever:

Unilever is an international consumer products giant selling tea, ice cream, fabric softener, and much more. In attaining its current status, Unilever has engaged in a range of abuses nearly as broad as its production line. Child labor, unsustainable terms of trade, and corporate influence are among the most troubling offenses carried out by the company.

People who know a bit about Unilever know that ethical assessment of the company is a little more complex than that. For example, Hindustan Lever Ltd., a subsidiary of Unilever, has made a significant contribution in India by addressing two major health concerns that affect a large majority of the country’s poor. 1) it developed and marketed iodized salt to rural villages to help prevent iodine deficiency disorder (which afflicts about 70 million people in India) and 2) it helped reduce incidents of diarrhea by using its distribution channels to promote the idea of handwashing and the use of soap, too.

I guess it’s hard to blame activists for focusing on the negative. After all, it’s not like very many corporations do a terribly good job of presenting a balanced point of view in their Annual Reports. Just remember that with campaigners, as with corporations, caveat emptor.

Thanks to Melissa (who just wrote an excellent M.A. thesis on CSR & International Development) for alerting me to this website and for insight about Unilever.

Some people are under the unfortunate misconception that Business Ethics is all about public relations, and that efforts by companies to act more responsibly are simply ‘window dressing.’ Of course, that view is bouyed now and then by companies who engage in greenwashing and phony philanthropy. It probably doesn’t help when a P.R. firm doles out advice on how to use corporate responsibility as a way to attract the attention of an influential subset consumers.

In this regard, see this press release from Ipsos Public Affairs:

Just over a quarter (26%) of Americans fall into a group Ipsos calls “Ethical Advocates.” These are people who regularly advise friends, family, colleagues and others to patronize – or more often, not to patronize – a particular company.

Sounds like an important kind of consumer to get on your side, right? Luckily, Ipsos can help! The press release provides a “Corporate Responsibility Roadmap,” consisting of “eight model behaviors that can help companies stand out and appeal to Ethical Advocates.”

What kind of advice do they give? Here’s a sampling:

Companies should sell “quality products and services at a reasonable price.” Alright, that seems reasonable.

Companies should provide “universal access to its products and services”, which means avoiding discrimination based on “wealth, age or geography”. That sounds nice, but it’s not possible. All companies discriminate based on wealth (that’s what “pricing” is), and I doubt there’s a company on the planet that provides service without regard to where you’re located. Well, Amazon doesn’t care (as long as you’re somewhere Purolator ships to, that is), but then they hardly need the advice.

Companies should support “the local economy by sourcing US products and labor”. Of course, this panders to one particular view of consumer ethics, one that says that giving business to local companies (that may or may not need it) is superior to giving business to companies (and employees) in developing nations that need the work desperately. That is at very least open to question (or in need of elaboration).

Companies should make sure its “activities are not detrimental to the environment.” Again, not possible. There are no companies that have zero impact on the environment. The only reasonable goal is to have a less detrimental effect (or, if you’re only thinking P.R., do your best to appear green. But then see my mention of greenwashing, above.)

The funny thing, of course, is that Ipsos’ “Corporate Responsibility Roadmap” consists (mostly) of perfectly good advice. Treat employees well. Be respectful in your marketing and advertising. Avoid unjustified discrimination. And so on.

But this press release also illustrates why the whole “ethics is good business” line is a double-edged sword. It would be great if more businesses understood/realized/believed that acting responsibly is a good way to earn a living. But the last thing we need is to generate cynicism — either on the part of business managers, or on the part of critics of the corporate world — about why it is that corporations might make very visible attempts to do better.

This is Part 3 of Chris MacDonald’s interview with Walt Pavlo, on the 24-year jail term recently handed to former Enron CEO, Jeff Skilling. Pavlo spent two years in jail for fraud and money laundering at MCI. The goal of this interview was to get Pavlo’s special perspective on what it is that causes white-collar crime, and what it’s like to go to jail for it.

Part 1 of this interview was posted last week. Part 2 went on-line yesterday.

(Note: the following has been edited for clarity and length, but I’ve also tried to retain the informal character of the conversation.)

Business Ethics Blog: Interview with Walt Pavlo, Part 3

Business Ethics Blog: The judge in this case recommended that Skilling serve his sentence at the federal penitentiary at Butner, North Carolina, which is a medium-security facility. Does that sound like the kind of ‘country club’ that many people have worried Skilling will be sent to? Because the presumption, of course, right, is that for white-collar criminals, that prison really isn’t so bad for them: big-screen TV’s and golf-courses, and so on.

Walt Pavlo: There are none of those. Even in minimum security there’s no big-screen television. There’s strict control of your movements, in there. The reason he’s got that is because he got such a long sentence, he’s got to be under higher security. He has 24 years. If you’re in a minimum-security camp, there’s the chance that you could just walk off. It’s for his own benefit, his own mental health. We can’t put you in a situation where you could try to escape, because it is such a long period of time.

But you know eventually he’ll get switched to a camp, because he’s a minimum-security person. When he’s got 8 or 10 years of his sentence left, he will be in a minimum security prison, it’ll just take him a while to get there. But it’s a tougher existence where he’s going to be.

BEB: So people who are angry at Skilling shouldn’t worry that his life is going to be too soft or too easy?

WP: No, no, it’s going to be one heck of a punishment. It is a very long time he’s going to locked up with, at that level, very few white-collar inmates. I mean very few. Most of the ones he’s going to be involved with are going to be life-in-prison sorts of people, or people who have sentences very similar to his for other crimes, like for moving large amounts of drugs or, in some cases, murder.
There’ll be very few white-collar inmates. That’s a punishment too, because there’ll be very few people he can really even associate with, and just talk to. He doesn’t know anything about that life. I think that’ll subject him possibly to being singled out and beaten up, and things like that. And to me, as non-violent offender, that’s going to be a very scary environment for him to be in.

BEB: A lot of people aren’t going to have much sympathy. But a friend of mine who’s a prosecutor put it nicely when he said that prison is a form of punishment; it’s not a place we send you to be punished, through violence or whatever.

WP: Exactly. And what does that say about his ability to rehabilitate? You know, that kind of fear and resentment when he’s in there, there’s going to be no rehabilitation done. Over time he will just break. It’s certainly not a life where he’s going to be able to really rehabilitate. I mean if he is, it’s going to be an incredible story, if he can try to find a way to get back or redeem himself in some way. I don’t know how you even do that, with a sentence like that, any place like he’s going.

BEB: Any other thoughts, things you’d like folks to know about Skilling’s case? You’ve got a special perspective on this. Anything you wish people understood?

WP: Even though I’ve gone to prison, and I’ve talked a little about the excessiveness of Skilling’s punishment, I am certainly not one to say that prison should be abolished for white-collar criminals. I believe that there is a place for that.

I just think that they should be treated differently. Not that that means a lighter punishment. They need to be incarcerated in a very strict environment. But I think the monetary side should be looked at, one hundred percent. If the $45 million that Skilling has been asked to pay, if that represents every single thing that he had, that to me is a huge punishment. One, he’s going to be out of money. Two, let’s just say if he went to prison for, I’ll give a number that people might accept, like 10 years. When he comes out, I don’t know where he would ever work again. I really don’t know. I mean, he would have very difficult time ever finding any occupation again. And that means that the only thing that Enron shareholders have to look at is this $45 million that they got and they’re not going to get another penny out of the guy. And he’s just going to go away forever, and I think that’s sad. He didn’t go the extra mile. We’ve defined exactly all that Enron’s going to get back, and it’s fixed dollar amount. He may have some money left over. And he walks away with a lot of knowledge that I think is valuable for us all to look at as far as why these things happen.

[End of interview]

[A unified version of this interview can be found on a single page, here.]

This is Part 2 of Chris MacDonald’s interview with Walt Pavlo, on the 24-year jail term recently handed to Jeff Skilling. Pavlo spent two years in jail for fraud and money laundering at MCI. Pavlo isn’t an expert on sentencing, or on Enron. But he has a special perspective on what leads people to commit white-collar crimes, and what it’s like to go to jail for it.

Part 1 of this interview was posted last week. Part 3 will go on-line tomorrow.

(Note: the following has been edited for clarity and length, but I’ve also tried to retain the informal character of the conversation.)

Business Ethics Blog: Interview with Walt Pavlo, Part 2

Busienss Ethics Blog: Another reason we put people in jail is to ‘incapacitate them,’ to separate them from the public so that they can’t do harm. Was a 24-year-sentence necessary for that, in Skilling’s case?

Walt Pavlo: I don’t think so. I think that you learn your lesson in prison in a few years. I mean, particularly for someone who’s intelligent. I’ll give Skilling credit, he’s obviously a well educated guy, he’s not mentally ill, like a number of people who are in prison, and he certainly has the ability to reflect on the impact this has on his life and it doesn’t take 24 years to do that.

A long sentence for him, that I believe would have allowed him to reflect, could have been 5 to 10 years. You know, prison is more of a self-paced program. There’s nothing in there except the onus on the individual to look at their actions.

I can’t imagine that Skilling is going to spend 24 years in prison thinking about how wrong he’s done things and come out a different person. I think that he will, in the short term. But then over a long period of time he’s just going to lose contact with society and just become institutionalized in many ways.

BEB: So you don’t think this is a place where there’s much hope for rehabilitation?

WP: No, I don’t even see what the impact would be, even if it was positive, what it would accomplish at the other end. He’s going to be a broken man when he gets out. He’ll be in his 70’s if he exits alive, and he certainly can’t work again. I don’t know what that accomplishes. One strike and you’re out, in his case. It’s a big strike, but that’s it. First offense, only offense, last offense.

BEB: When I heard you speak this summer in Tulsa, you said that in your own case, your jail sentence was not the main penalty. The main penalty was the effect your criminal record has on the rest of your life. Skilling will likely be in jail for most of the rest of his life. How does your comment apply to him?

WP: Well he is not going ever be able every to demonstrate publicly or in society what he did wrong. And I think because of the length of his sentence, probably he’s not going to be in the frame of mind to tell anybody he’s sorry. It’s like, ‘hey, you guys have sent me here for the rest of my life…’ and I think the length of his sentence, in a way, is going to prevent him from coming forward and saying ‘you know I really did screw up, I really did do something wrong and here’s what I learned from that.’

I think all that stuff is just going to waste away with him in prison and I think that’s unfortunate, and I think there are a lot of valuable lessons – they might be in greed – but they’re just going to go away with him and we’re just going to see a man who’s bitter and goes away and takes every secret with him, about what went wrong that we could all learn from. And that’s sad.

BEB: After you got out of prison, you decided to try to do some good by speaking to business students, telling your story, and letting it serve as a warning. Do you think Jeff Skilling can do anything positive with the rest of his life, given where he’s going to be?

WP: It would be miraculous. It’s difficult for me to do it, and I say that because so few white collar criminals who’ve been convicted do that. There’s no incentive for him to do that. For him to try to make a positive impact, there’s nothing he’s going to get out of it. He’s not going to come home any earlier.

Over time, I see him becoming more bitter, or just succumbing to it, and never being able to share with us what that is, good or bad. It’s just going to go away with him.

The only version of events we’ve seen is the Prosecution’s side and a defense that quite honestly just didn’t make sense to people. We’d rather say, ‘Can you be honest with us for a moment and tell us what went wrong? A lot of people lost a lot of money. We don’t want this to happen again. You need to be punished. But can you tell us what happened, what your thoughts were, so we can learn from it?’ And I think all of that’s going to be lost.

BEB: What do you make of Skillings’ apparent lack of remorse? You know, he’s said, ‘I’m sorry that people got hurt,’ but he hasn’t expressed any remorse for his role, he hasn’t sort of said ‘yeah, you know I screwed up.’

WP: Those are questions, Chris, that get back to this very long sentence: the guy was fighting for his life. I think if you put any person in that situation, where he just felt like he had to defend his character, or whatever, or really defend himself so that he wouldn’t be put away for the rest of his life. He had to adopt that strategy, because the alternative was such a long time in prison.

That’s a fine line. Where do you provide an incentive for someone to be honest, and still punish them, and allow them to really tell a story and be remorseful and let us critique it: you know, is he really sorry? Did he really tell us anything? And I think, again, his story is going to go with him to go to prison. And that’s going to have to be his story, which is that he didn’t do anything wrong, which is absolutely ridiculous. It’s ridiculous.

So we have a Prosecution that says ‘everything he did was wrong.’ You have a defense that says ‘I did absolutely nothing wrong.’ And then, we’re left in the middle. I’m just speculating…but that’s where we’re left. I think that’s unfortunate: I’d rather hear it from him. There’s got to be some deterrent where he’s punished, he’s allowed to come clean, and lay it all out there about things that he did right and things that he did wrong. I think we could learn from it, but as it is I don’t think we can learn from it.

[to be continued…]

I first met — and blogged about — Walt Pavlo back in August. Pavlo spent two years in jail for fraud and money laundering at MCI. Pavlo now works as a professional speaker, letting his own story serve as a cautionary tale.

I interviewed Pavlo by phone yesterday, about the 24-year jail term handed to former Enron CEO, Jeff Skilling, two days ago. It’s a longish interview, so I’m going to post it here in 3 installments over the next three days.

Business Ethics Blog: Interview with Walt Pavlo

(Note: the following has been edited for clarity and length, but I’ve also tried to retain the informal character of the conversation.)

Business Ethics Blog: Jeff Skilling was just sentenced to 24 years plus 4 months, the longest sentence handed out so far in the whole Enron case. Given what you know about the case, does that make sense?

Walt Pavlo: You know, I think it’s a long sentence. The other thing that came with that sentence was forfeiture of about $45 million. What I didn’t see was how much remained. It sounds like a lot of money, and I think I would’ve rather known what was left. Is it a million, is it fifty thousand, is it fifty million? I really don’t know the answer to that. I think that’s where the punishment should be.

For a non-violent crime, that many years just doesn’t make sense to me. You’ve got murderers and sex offenders who do far, far less. He’s a lesser danger to society. Do I think he should go to prison? Positively. But 24 years seems excessive. But I would’ve liked to know more on the monetary side: was that significant? How much is left? That’s what shareholders would be interested in.

BEB: In my Blog on Tuesday I noted that the standard reasons for putting people in jail are denunciation, deterrence, incapacitation, and rehabilitation. So let’s take those in order. First, what’s your view on Skilling’s 24-year-sentence as a way of publicly denouncing what he did, or maybe his way of doing business?

WP: I’d be the last one to say it’s not effective. It should open a lot of eyes out there. At the same time, as I said earlier, it seems excessive. They could’ve gone with much fewer years, and it probably still would’ve been somewhat of a deterrent.

But I believe that white collar crimes happen not looking at the punishment but looking at the likelihood of getting caught. And I would think someone like Skilling just didn’t see himself ever getting caught. He doesn’t even see it today.

I don’t know how much of a deterrent it is. Is it some? Maybe. But it’s certainly not one where everyone says “well, I’m going to do everything by the book now!” I don’t see that. You know, crimes will happen in the white-collar world, without people thinking about a prison sentence when they’re in the middle of the act.

BEB: Well we’ll get back to the idea of deterrence in a second. But sticking with this idea of denouncing the crime. In your own experience, in your own case, was there any psychological or emotional impact from being told, by an authority, by a court, that “what you did was wrong, and this is just how wrong we think it was?” Because that’s supposed to be part of this idea of denunciation.

WP: I knew I did something wrong. That wasn’t the issue. But the amount of time, even in my own case, when they read down through the Federal Sentencing Guidelines and said, “this charge carries 30 years, and this charge carries 30 years,” for each count. I just remember being in shock at the amount of time, even though I knew I’d done something wrong. I mean, I was still astonished at the amount of time that I was looking at. I’m certain that Skilling, one thing he’d look at, and I know his lawyer did, is to say ‘hey, why don’t you kind of put it in line with other guys who cooperate?’ and give him 10 years, because that would be almost double what Fastow got.

BEB: So, what about deterrence? A lot of editorials have been saying that the judge in this case has ‘sent a clear message’ by giving Skilling such a lengthy sentence. Do you think his sentence deter others in the world of business from fraud or from pushing the limits?

WP: This judge, Sim Lake, has a history of being fair. He looked at this case and said it justified 24 years. To me, because of who the judge was and what I had known about him and other sentences [he had handed down], I think that it really did speak to how seriously the courts now view this thing, particularly at that level.

BEB: Will it work? Will it deter people?

WP: I think somewhat, but again I’ll go back and say the sentence is very severe. And what Skilling was accused of and was found guilty of was very severe, and the losses were in the billions of dollars.

Other people rationalize, when they’re doing a crime, about what the impact would be. So to me I would think that rationalization plays a large part in that without looking at what the end penalty would be. And I even think that Skilling himself must be astonished at the amount of damage he’s accused of doing. He says ‘you know, maybe I did some things wrong, but I didn’t do all that wrong!’ Will it be a deterrent? I think somewhat, but I just don’t think it’s a cure-all, by any means.

BEB: So, people may not make the connection between what they’re doing and the serious wrongs they see being punished.

WP: Sure. You know, I think a lot of people will even rationalize in their minds, they’ll say you know what I may be doing some thing wrong but, my gosh, I’m not doing that much wrong, you know, into the billions of dollars. And I think that’s the wrong way to look at it, to be honest with you. That’s a rationalization that takes place when people say ‘you know it was bad but I wasn’t as bad as Skilling and Lay.’

This case was so well-publicized, and so large a dollar amount. I don’t know if it’ll be a deterrent because people just don’t see themselves as being that bad. And honestly, looking at what Skilling says, he doesn’t see himself as being that bad.

[to be continued…]

OK, so everyone knows by now that former Enron CEO, Jeff Skilling, was sentenced yesterday to just over 24 years in jail. As is often the way in high-profile court cases, debate began immediately over the suitability of the sentence. I saw one commentator on TV who basically said “come on, there are rapists and murderers who do less time than that!”

On the other hand, according to CNN

Some victims felt the sentence was too lenient. “If it had been me, I would have given him more time,” said Charles Prestwood, who lost $1.3 million when Enron collapsed. “I guess you can’t win them all.”

The judge in the case is reported to have said, in justifying the very long sentence handed out to Skilling, that…

“His crimes have imposed on hundreds if not thousands of people a life sentence of poverty

To make any sense of this issue of sentencing, Business Ethics needs to cede the floor to its philosophical cousin, Philosophy of Law. One of the most basic, and most important, issues in the Philosophy of Law (and in legal scholarship more generally) is the purpose of punishment. It’s important to know why you’re punishing someone, because the why is likely to affect the how. The reasons typically given for punishing criminals include:

• To denounce the crime;
• To deter the offender, and others, from further crime;
• To incapacitate offenders, by separating them from society;
• To rehabilitate;

(In fact these, and others, are among the principles of sentencing listed in the Criminal Code of Canada. But they’re certainly not unique to Canada.)

So, back to Skilling. In discussing the appropriateness of the 24-year sentence, we should be asking questions like these:

• Is a 24-year sentence necessary, and sufficient, to denounce the crime, to repudiate the kind of behaviour in which Skilling engaged?
• Is this sentence likely to deter other would-be corporate criminals? (My guess: no. When you’re the “smartest guy in the room,” you don’t expect to get caught.)
• Will this sentence separate Skilling from society, such that he won’t be able to repeat his crime? (Or, more precisely, is this sentece required if we are to prevent Skilling from offending again?)
• Is this sentence likely to rehabilitate Skilling, to show him the error of his ways, and to turn him into a productive member of society?

(If this stuff interests you, I recommend in strongest terms David Paciocco’s wonderful book, Getting Away With Murder: The Canadian Criminal Justice System. Though the book’s focus is on Canada, it really should be of interest to people living in any country that’s part of the Anglo-American legal tradition. Basically, it’s a book about legal technicalities, and why — though sometimes maddening — they’re often incredibly important. Anyway, I recommend it here because it has some really interesting stuff to say about sentencing, and because it’s actually a fun read.)