The Business Ethics Blog

Finally, a legitimate excuse to mention Barack Obama on the Business Ethics Blog.

Obama has taken a bit of flack recently for some of the things said by his former pastor, Jeremiah Wright. When Wright’s racially-charged comments came to light, debate ensued over whether they reflected badly on Obama. Could Obama be guilty just by association? (See, e.g.: Obama’s ties to minister may be ‘a big problem,’ some say)

The same issue pops up in the corporate world, in terms of charitable donations and sponsorships.

One good example is the relationship (the strength of which is very much in question) between the outdoor clothing & gear company, Patagonia and the controversial direct-action environmental group, the Sea Shepherd Conservation Society.

Sea Shepherd is controversial because its tactics go far beyond the consciousness-raising goals shared by most environmental groups, and beyond even the protests, blockades and sit-ins favoured by more action-oriented environmental groups. Sea Shepherd’s tactics are much more aggressive, including from time to time the scuttling and sinking of fishing and whaling boats. And although (as this Wikipedia page points out) “there have been few reports of injuries and no reports of deaths during Sea Shepherd actions,” the brand of environmentalism Sea Shepherd espouses isn’t exactly the warm-fuzzy version of environmental-friendliness that most corporations, today, want to be associated with.

Sea Shepherd does list Patagonia among its sponsors, though the sponsorship page is low on details (saying only that “Most of the cold weather gear worn by Sea Shepherd crew comes from Patagonia.”)

For its part, (based on just this one report on a German rock-climbing site, not exactly a mainstream information channel) Patagonia denies direct, recent links to Sea Shepherd. But given the prominence of its logo on the Sea Shepherd Sponsors page, it’s a bit hard to understand why more direct clarification from Patagonia is so hard to find. (If anyone can help me with that, let me know.)

Of course, whether this is a question of guilt by association, or rather credit by association, sort of depends on your view of Sea Shepherd. But vigilanteism, particularly the potentially-deadly kind, and particularly in pursuit of goals not unanimously agreed upon, is hard to defend. Is it fair to attribute guilt-by-association to corporate sponsors of groups like Sea Shepherd? Is it fair to expect of a company like Patagonia (as critics seem to expect of Obama) not just a refusal to support controversial one-time friends, but a clear and unequivocal repudiation?
—–
Note: Thanks to a careful reader, I’ve now corrected an error. The posting originally referred to “a Dutch rock-climbing site.” I have corrected this to read “a German rock-climbing site.”

This story has pricing, justice, and sizeism (discrimination based on size) all rolled into one.

From the BBC: M&S defends ‘tax on bigger bras’

Marks & Spencer has defended a policy of charging extra on some of its bras that are bigger than a size DD.
The High Street retailer said that the added cost – typically £2 – was “standard industry practice”.
M&S added it found most customers “were happy to pay a small premium for the specialist work” needed to make larger sizes of their bras.
But the policy has drawn protests with 900 people joining a Busts 4 Justice protest group on the Facebook website.

[And yes, that is the controversial bra, pictured above.]

The standard market-based response is, of course: “if you don’t like a company’s pricing, shop elsewhere.” That’s the beauty of the market: a whole range of suppliers can provide a range of products designed, manufactured, and even priced in a range of ways, and customers can choose what suits them. You can buy the blue or red or lilac bra if you want; you can buy the sweatshop-free bra if you want; and you can buy the one-price-for-all bra. Or not.
On the other hand, there’s nothing at all unreasonable (even from a fully market-based approach) about customers trying to get a company to change its practices.
Whether the company’s practices are worthy of criticism from a social point of view is a harder question. As CREUM PhD student Dominic Martin pointed out to me, there’s a conflict here between two popular norms regarding retail pricing. One norm says price should depend on inputs (labour, materials, overhead, etc.). The other norm says everyone should pay the same price for a given good (i.e. flat pricing). What one of the advocates quoted in the story wants is consistency: most clothes are subject to flat pricing: XXL costs the same as XS, usually. So why not these bras? But then again, maybe retail pricing consistency is itself a good best priced by the market.
For what it’s worth, ethics-in-pricing is one of the big gaps in the current business ethics literature. Indeed, the topic practically doesn’t exist (except for the occasional mention of profiteering or price-fixing).

Cool story in today’s NY Times, about re-purposing common corporate advertising strategies in pursuit of public health goals:
Warning: Habits May Be Good for You

A FEW years ago, a self-described “militant liberal” named Val Curtis decided that it was time to save millions of children from death and disease. So Dr. Curtis, an anthropologist then living in the African nation of Burkina Faso, contacted some of the largest multinational corporations and asked them, in effect, to teach her how to manipulate consumer habits worldwide.

Dr. Curtis, now the director of the Hygiene Center at the London School of Hygiene & Tropical Medicine, had spent years trying to persuade people in the developing world to wash their hands habitually with soap. Diseases and disorders caused by dirty hands — like diarrhea — kill a child somewhere in the world about every 15 seconds, and about half those deaths could be prevented with the regular use of soap, studies indicate.

But getting people into a soap habit, it turns out, is surprisingly hard.

To overcome this hurdle, Dr. Curtis called on three top consumer goods companies to find out how to sell hand-washing the same way they sell Speed Stick deodorant and Pringles potato chips.

Two interesting points, here, in my opinion.
One is about the influence of advertising. This story adds fuel to the fire of the debate over whether advertising tries to, or succeeds at, manipulating us. The debate is often framed in terms of whether advertising can produce in us new desires. At the very least, this story makes clear that companies work hard to produce in us new habits. Whether that’s better or worse, or whether it amounts to the same thing, is open to discussion.
The other is a lesson about the ingenuity of corporations: don’t fear it, learn from it.

“For a long time, the public health community was distrustful of industry, because many felt these companies were trying to sell products that made people’s lives less healthy, by encouraging them to smoke, or to eat unhealthy foods, or by selling expensive products people didn’t really need,” Dr. Curtis said. “But those tactics also allow us to save lives. If we want to really help the world, we need every tool we can get.”

From the NY Times, yesterday:
A Modest Survey of the iPhone Obsessed
The story is mostly about who, what kind of person, is crazy enough to stand in line for a sufficiently fancy cellphone.
But there’s a business ethics element, here, namely in the issue of people standing in line overnight just in order to be able to sell their place in line. In fact, since selling a position in line is a business interaction between (potential) customers, this is an issue of both business ethics and consumer ethics.

Queues (lineups) are a method for controlling (and distributing) access to a scarce good (whether it be a theatre ticket, a heart transplant, or a gorgeous 3G iPhone). They embody a particular theory (or micro-theory) of distributive justice, namely “first come, first served.” Social conventions regarding behaviour in queues (“No butting in!”) can be quite strict (though they vary enormously internationally). Many people regard the selling of a place in line as a violation of that principle, changing “first come, first served” into “highest bidder, first served.”

It’s an interesting example of a norm the only defence of which may be that it is, in fact, a norm (or perhaps part of a network of norms). After all, if I’m 2nd in line, whether the guy in front of me is there because he got there earlier, or because he bought the spot from a guy who got there earlier, really doesn’t affect me at all. So it’s hard to see any harm being done. The objection seems to be in some sense about merit: the guy who bought the better spot in line doesn’t deserve to be there. And perhaps, in the end, that means that selling a spot in line jeopardizes the incredibly-useful norms surrounding queuing itself. So, hard question: if the business you’re in (here, selling spots in line) has a social impact that hard to measure or even specify, how do we respond to it, ethically?

—
See also:
Markets in everything, dining edition (a MarginalRevolution blog posting about a company that sells reservations at good restaurants, another form of selling positions in line)
F. Neil Brady, “Lining Up for Star-Wars Tickets: Some Ruminations On Ethics and Economics Based on An Internet Study of Behavior in Queues,” Journal of Business Ethics, 38: 157–165, 2002. [subscription req'd, to see more than the abstract]
Queuing and Waiting: Studies in the Social Organization of Access and Delay (book by Barry Schwartz, via Amazon.com)
Wikipedia on Queuing Theory
—
Thanks to Wayne (who loves the NYT almost as much as he loves his iPhone.)
—
And no, this blog posting was not sponsored by Apple. I wish!

May was a busy month for me, so I missed this story until now.
Back in May, a furor arose when an employee at Tim Hortons — Canada’s iconic donut chain — was fired for giving away a “Timbit” (that’s the trademark name for the treat made from frying the ball of dough punched out of the centre of a donut. ) (In fact, the firing was done by managers at a franchise store, not by Tim Hortons Inc.) Here’s the story:

Tim Hortons fires single mom over free Timbit

Giving a free Timbit to a baby has cost a single mother of four her job.
Nicole Lilliman, 27, was fired yesterday from her Tim Hortons job for giving one of the 16-cent blobs of fried dough to a tot.

Of course, when the story hit the news, all hell broke loose.
And almost immediately, Tim Horton’s head office intervened:
Tim Hortons rehires fired woman

A Tim Hortons employee fired Wednesday for giving a free Timbit to the child of a regular customer has been rehired.
Nicole Lilliman, 27, a single mother of four in London, Ont., was reinstated Thursday after intervention by the chain’s head office.
In a terse press release, the company blamed an overzealous manager for the firing, which threatened to become a public relations nightmare as the story gained traction in the media Thursday.

“Unfortunately the action of the manager of this location was not appropriate nor grounds for dismissal. With an apology from management, Ms. Lilliman has been rehired by the franchisee,” it states.

Two issues here, which must be kept separate.
One issue is fair treatment of employees: clearly it’s rather unfair, bordering on insane, to fire someone over 16 cents (especially when the 16 cents weren’t stolen, but given away in a well-intentioned effort to do something nice for a loyal customer.) An extreme punishment for a minor violation of the rules is a genuine business ethics issue.
Another issue is about good business sense. Many of the reader comments following the news stories focused on how silly it was for Tim Hortons to punish an employee for doing something that’s good for business. And, that’s probably right. (Some other coffee stores have a policy that basically says “if a customer is unhappy, give them something for free.” It’s good business.) But as always, it’s important to keep the “good business” argument and the “good ethics” argument separate. Even if giving away freebies (in certain circumstances) is good business, that doesn’t mean a company is unethical for punishing an employee for doing so in violation of policy.
The final thing worth pointing out here is that the story is a good illustration of some basic agency problems. Store managers punished Ms. Lilliman for using her judgment in violation of company policy; and Head Office overruled the store managers for making (what seemed to Head Office to be) a silly managerial decision not in the the best interests of the company. At both levels, managers found out that delegating authority is a perilous business necessity.

I recently spotted this ad in a men’s room at a pub here in Montreal (quite near the Université de Montréal, in fact). Not the first time I’ve seen an ad seeking participants for a clinical trial, but it’s the first time I’ve seen one a) advertised in a men’s washroom, and b) with the glossy, happy-people look of a beer ad.
It’s from a local company called Algorithme Pharma.

Here’s the translation:

Clinical trial: 18+

Receive $700 to $4000*
*compensation depends upon the type and duration of the study.

Do it for a good cause!
Participate in research on known medicines.

We are currently looking for men and women, light smokers and non-smokers, to participate in a clinical trial.

Many trials are available (during the week or weekend, short or long duration).

Call now!

I don’t have any particular assessment to offer. Surely some people will find this style of ad disturbing. But of course clinical trials like this are a necessity. The money being waved around, well that’s a notoriously double-edged sword: pay too little, and you’re being abusive. Pay too much, and you’re offering unfair inducement.
Some people may also be disturbed by the beer-ad style of the poster: pretty people, smiling brightly. “Participate in a study? Hell yeah!” What does that have to do with science? But ads feature pretty, smiling people because pretty, smiling people are eye-catching. And if the product is a legitimate one (as this one is), and if there’s nothing misleading, then why not?
Mostly, I just found the ad interesting, so I thought I’d share it.

The Economist recently had an interesting piece on Bill Gates, who is stepping down from his active role at Microsoft, in order to pursue his philanthropic interests: The meaning of Bill Gates

Of particular interest is the final paragraph, which includes an interesting point about philanthropy. The author(s) argue that, whatever good Gates does with the massive fortune he amassed through his business activities, that good is morally independent of the good he has already done as a business-person:

Whatever the corporate-social-responsibility gurus say, business is a force for good in itself: its most useful contribution to society is making profits and products. Philanthropy no more canonises the good businessman than it exculpates the bad. In spite of his flaws, Mr Gates is one of the good kind.

You don’t have to be much of a Gates fan to agree. Indeed, no matter what philanthropic endeavours Gates chooses to focus on over the coming years, it’s hard to imagine him ever having as much impact as a philanthropist as he did as head of Microsoft. Of course, Gates is not a man to be underestimated; let’s hope he’s as clever at meeting the challenges of philanthropy as he’s been at putting computers into offices and households.

OK, enough is enough.

For months we’ve been hearing about how demand for ethanol (for fuel) is driving up the price of grain crops. But now it appears that even beer — sweet, delicious beer — is at risk.

Check the BusinessWeek story: Trouble Brewing for Craft Beer Makers

The small brewer’s first concern is commodity prices. Gone are the plentiful hops and cheap malt that made it possible for any basement brewer to develop a distinctive recipe and launch a brand. Just look at the list of ingredients on the label: Barley supplies have been hit by droughts in Australia, too much rain in Germany, and the rush to plant corn for ethanol, pushing the price for the grain up 100% over the past 12 months. [emphasis added]

Didn’t advocates of alternative fuels think about the full social impact of their choices? In the immortal words of Homer J. Simpson: “Homer no function beer well without.” That goes for bloggers, too.

OK, so as “social consequences” go, a shortage of micro-brewed beer might not rank very highly. But this example would serve as a good starting point for discussing the sometimes-distant and hard-to-foresee consequences of seemingly simple economic decisions, and the extent to which business (and investors) can be considered responsible for those. Discuss. Over beer.

The world of institutions is normally thought of as being broken up into roughly 3 types: public sector institutions (government), private sector institutions (corporations and other firms) and the voluntary sector (charities & other non-governmental organizations). The categories are not exactly water-tight compartments. Many corporations have associated charitable foundations (e.g., the Eli Lilly and Company Foundation, Inc.) , and there are lots of government agencies that provide services in a way that closely approximates private commerce (e.g., Canada Post).

But in the developing world, the boundaries between categories can be even more porous. Case in point: those of you who haven’t already heard about it may be surprised to learn about a giant NGO called “BRAC” (the Bangladesh Rural Advancement Committee).

Here are 2 stories about BRAC, one quite recent from The Guardian:
Growing discontent

In the chaotic heart of downtown Dhaka, the 19-story Brac building – home to one of the world’s largest NGOs, the Bangladesh Rehabilitation Assistance Committee, an organisation so powerful that it is commonly termed Bangladesh’s second government – casts a shadow over one of the city’s largest slums. From the top floor, the slum looks like a ramshackle maze of corrugated iron and tarpaulin. But a short boat ride across the river reveals a neighbourhood of neat interlocking streets dotted with open shopfronts, selling everything from firewood to hot cakes, and with centres providing health and education programmes to its 300,000 inhabitants.
Most of the small enterprises here have been funded by Brac micro-finance loans. The slum’s school is run by Brac-trained teachers using Brac textbooks. More than 200 Brac-trained health volunteers dispense medical services. Down the road is the Brac University, and a Brac bank sign is just visible across the street.

With an expenditure of £160m, a staff of 108,000 and services that reach more than 110 million people across the country, Brac has grown from a small relief operation into an organisation globally unsurpassed in the scale of the programmes it provides to some of the world’s poorest people.

In its 35-year history, it has organised nearly 7 million landless poor into 239,000 village organisations and distributed more than £2bn in micro-finance loans.

…and another, slightly older, story from the NY Times:

Helping Hand for Bangladesh’s Poor

…BRAC today resembles a corporation as much as a development organization. It claims to be 80 percent self-supporting, with a budget this year of $174 million. It has 28,000 permanent employees — plus its 34,000 schoolteachers — and a 21-story headquarters in Dhaka, the capital. It may be the world’s largest national nongovernmental organization.

BRAC and other groups have become national institutions, but along the way they have also become lightning rods. Businesspeople have accused BRAC of elbowing in on their fields, especially banking. ….

What’s interesting to me, here, is the issue of how ethical standards shift as the activities of an NGO like BRAC bleed across borders into the realms of government and private commerce. On the one hand (as pointed out in the story in the Guardian) organizations playing government-like roles need to be accountable in ways that NGOs normally don’t need to be. Most NGOs need only be accountable to donors; an organization like BRAC arguably needs to be accountable to the entire population it serves. And, presumably, to the extent that it engages in commerce, BRAC becomes subject to the principles and norms that ought to govern commercial organizations, in addition to the principles and norms that govern NGOs.

Here’s the BRAC website.

(p.s. I have a research interest in the idea of NGOs taking on quasi-governmental duties, and in particular in how business firms should relate to NGOs in such situations. If you know things I should read, email me.)
——
Thanks to Melissa for sending me the Guardian story.