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Top 10 Business Ethics Stories of 2015

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In addition to blogging here, I also co-edit a news & commentary website called BusinessEthicsHighlights.com. Below is a list my co-editor, Alexei Marcoux, and I have put together of the Top 10 business ethics stories of 2015. Enjoy! (If you prefer the PDF version, click here: BEH Year in Review, 2015.)


Year in Review: The Top 10 Business Ethics Stories of 2015

By the editors of Business Ethics Highlights (BusinessEthicsHighlights.com)

It has been a busy year in business ethics and corporate social responsibility. From the cheating carmaker to the price-gouging pharma-bro, to the coffee company that wanted us to have a casual chat about race with the barista, the year has been a cornucopia of case studies in the ethics of commerce. Just about any media outlet’s “year in review” could serve as fodder for a year-long course in business ethics. But we’ve gone ahead and drawn you a roadmap.


Below, the editors of Business Ethics Highlights present their entirely unscientific Top 10 Business Ethics Stories of 2015. This is our list of the top 10 items we reported on during 2015.* To create this list, we looked both for individual stories that had made a big splash, and for companies or individuals who had made the news multiple times for different reasons.

In no particular order, here they are.

Volkswagen was perhaps the biggest business ethics story of the year. The attention it got springs from two main sources: first, VW is a big, big, well-regarded company, not some fly-by-night operation. Second, the company didn’t just engage in some sort of minor rule-bending, fiddling along the margins: it outright lied to regulators and to customers regarding a key aspect of its cars’ performance. No wonder people were so interested in the lies the company told, in how it tried to scapegoat its engineers, and in the possibility that there just might not be very much that’s special about Volkswagen, in terms of the company’s likelihood to engage in wrongdoing.

In September, the CEO of Turing Pharmaceuticals, Martin Shkreli, quickly went from utter obscurity to being the world’s most hated chief executive by buying a company that makes a life-saving pharmaceutical and promptly raising the price from $13.50 to $750 per tablet. Most recent update: Shkreli has been arrested, for fraudulent activity unrelated to his price-gouging. Few tears are being shed, even among those who would defend his price-gouging as an unremarkable side-effect of an otherwise-beneficial free market.

Another issue that has seen a lot of attention this year is the sale of homeopathy, and other ‘alternative’ medicines. Toward the end of 2015, we featured a piece by BEH co-editor Chris MacDonald, which generated a huge amount of discussion on social media and which, within 24 hours of publication, became Canadian Business magazine’s most commented-upon story of the entire year. Check out “Homeopathy: the Ponzi Scheme of Healthcare.” The key idea: relevant experts know that Ponzi schemes can’t make you rich, so they’re illegal. So, by analogy, why hasn’t homeopathy been outlawed yet?

BEH’s own most popular item of the year was a story about BBQ restaurants being “banned” in Austin, Texas. The bylaw the city passed was not a ban, per se, though it was sometimes referred to that way. But it was a proposed limitation on restaurants’ right to emit smoke, which raised interesting philosophical questions about just what counts as pollution, and what counts as nuisance. Frankly, we’re not quite sure why this ‘tempest in a teapot’ topped our stats; are visitors finding our site by mistake while googling BBQ recipes?

Various elements of the so-called ‘sharing economy’ were big in the news this year, and continued to generate controversy. Fans and foes have been vocal. For example, back in September the New York Post published an op-ed on why Airbnb helps make New York more affordable, contradicting those who claim that the accommodations service is driving up the price of lodgings. And ride-sharing service Uber continued to please users while angering traditional taxi companies and frustrating municipal lawmakers.

Another of the big stories of the year involved an organization that most wouldn’t think of as a business in the traditional sense, namely FIFA (the Fédération Internationale de Football Association)—the governing body for soccer worldwide. In May, several of the organization’s leaders were arrested for corruption—but not its bombastic president, Sepp Blatter. The following month, Blatter resigned, and was more recently banned, for 8 years, from participation in any soccer-related activities, by FIFA’s ethics committee.

Fast-food company Chipotle created a tempest in a taco by announcing that it would stop using genetically modified ingredients. Critics called the move anti-scientific, citing the lack of evidence to support anti-GMO sentiment. More recently, suspicions arose that Chipotle’s anti-GMO stance was a smokescreen to distract from the company’s dodgy sanitation practices. Why keep the kitchen clean when you can impress people with your holier-than-thou sourcing practices?

Not surprisingly, wage inequality continued to be an important theme. August saw the release of a list of “CEOs who make at least 800 times more than their employees.” One of the richest men in the world, Warren Buffett, chimed in and agreed that inequality is a problem, but added that one standard prescription – raising minimum wage  – is not a solution.

Gender equity was also a big topic in 2015. Women fighting for equality got a boost from high-profile women, including Jennifer Lawrence (lamenting gender-based pay disparities in Hollywood) and tennis superstar Venus Williams (trying to correct the gender-based pay differential in pro sports).

In March, Starbucks announced an ambitious – some would say quixotic – plan to get Americans talking about race. The idea was to encourage customers to chat with baristas about what is without a doubt one of the most pressing social issues of the day, namely race. Skeptics scoffed, mocked, and rolled their eyes. The foam had barely settled on the latte before Starbucks declared that the #RaceTogether campaign was over.

There you have it, our year in review. Each of the stories above involved winners and losers. But then interesting times are always a mixed blessing.

* In fact, BEH only began publishing in March of this year, so our review of the year naturally only goes back to then.

© 2015 Journal Review Foundation

Business Ethics Highlights is produced by the editors of the Business Ethics Journal Review (bejr.org), and published by the nonprofit Journal Review Foundation (tjrf.org).


    
 


Loblaws selling homeopathy is junk science and bad corporate ethics
Homeopathy has the potential to stimulate the body’s own healing powers. Ask us to help you select a remedy.

Photo: Chris MacDonald

Imagine you walked into your local bank, and saw a sign that read:

“Lottery tickets have the potential to ensure a comfortable retirement. Ask us to help you select the lottery that’s right for you!”

You would, I am sure, be shocked. Anyone with the slightest bit of financial common sense knows that lotteries are a losing proposition. For every one person who (temporarily, at least) gets rich, there must necessarily be thousands or millions more who lose money. Lottery tickets are a bad bet, and to advise someone to buy lottery tickets as an investment strategy would be fraudulently bad investment advice.

But worse still would be a sign that read:

Ponzi schemes have the potential to ensure a comfortable retirement. Ask us to help you select the Ponzi scheme that’s right for you!”

This, of course, would be even worse advice. After all, lotteries sometimes (if rarely) pay off. Ponzi schemes never do. They always collapse, eventually. They make investors feel good, in the short run, but they are utterly incapable of securing anyone’s long-term future. So advising people to buy into a Ponzi scheme would be the height of professional irresponsibility for a financial institution. Only a company seeking to profit from gullibility—to prey upon the public’s lack of financial sophistication—would even think of such slimy advice.
So what about healthcare? Shouldn’t the same standards apply? Wouldn’t it be shocking if a company promoted a healthcare product that had not just a slim chance of working, but literally no chance at all?

Here’s a sign that greeted me in the back corner of my local Loblaws supermarket:

“Homeopathy has the potential to stimulate the body’s own healing powers. Ask us to help you select a remedy.”

The problem here is of course that homeopathy doesn’t work. It cannot work, as a matter of simple biology, and it’s been thoroughly tested and proven not to work. Scientific consensus is clear and unambiguous on this. For some symptoms, homeopathy can provide a short-lived placebo effect. But that’s very limited, and it’s not the claim being made when homeopathy is sold. A company the size of Loblaw Cos. Ltd. has no excuse for not knowing this.

Of course, some people claim that homeopathy works for them. This can readily be explained by reference to any of a number of perceptual failings and cognitive biases. The short version is that personal perceptions and recollections are not reliable: medicine needs to be rigorously tested using blinded trials. After all, many of us know someone—a former neighbour or second cousin once removed—who scored big on the lottery. That doesn’t mean lotteries are a reliable investment strategy.

Presumably Loblaws thinks they can get away with this because of the weasel words they use: words like “potential” presumably mean they’re dodging making any specific claim about cause and effect. That may keep them on the right side of the law. But it still makes the company’s behaviour deeply unethical. If by “potential” they merely mean “it’s not logically impossible,” then the claim about homeopathy may be true. But if they mean that stimulating the body’s own healing powers realistically could happen, then it’s false.

If Loblaws isn’t selling something that works, are they at least selling hope? Perhaps. And hope is a wonderful thing. But many desperate people also buy lottery tickets as a matter of hope, in a desperate attempt to get themselves out of poverty. In both cases, what is being sold is at best false hope, and there’s no honour in selling that.

Homeopathy is the healthcare equivalent of a Ponzi scheme. Loblaws—and any other retail outlet that sells it—should be ashamed.

 


    
 


How design can help companies make better ethical choices

What does it take to design an ethical plan of action? What would you do if you were head of compliance at <a href=”http://businessethicshighlights.com/2015/10/10/vw-blames-engineers/”>Volkswagen</a&gt;, or <a href=”http://www.theglobeandmail.com/report-on-business/snc-lavalin-calls-on-feds-to-adopt-corruption-settlement-deals/article27188907/”>SNC Lavalin</a>?

The question arose recently, as I spent a weekend as a speaker and judge at the terrific <a href=”http://ethicsinaction.ca/”>Ethics in Action case competition</a>, held at Dalhousie University’s Rowe School of Business.

For those not familiar with the concept, a ‘case competition’ is an event in which teams of business students (typically 4 per team) are presented with business scenarios and tasked with giving a presentation, recommending to a panel of judges (playing the role of the ‘board of directors’) how the company should deal with the crisis. Students are judged on the quality of their analysis, the strength of their recommendation, and the poise with which they present it.

At the Dal competition, one of the cases teams had to address involved a company trying to recover from a string of bribery crises. The dilemma effectively was this: what should the company do, going forward, to recover from its problems and to attempt to prevent future trouble?

As we judges recognized, there’s no right answer here &mdash; or at least, no <i>clear</i> one. Lots of moves could be and were suggested: enhanced compliance training, careful screening of business partners, establishing a whistleblower hotline, and so on. But none of those moves, either individually or collectively, could come close to guaranteeing that scandal would not strike again at some point in the future. But each of them made a good deal of sense, and all were ingredients of a plausible path forward. Probably.

This implies a useful perspective on ethical problem-solving generally, namely this: every decision made in response to an ethical crisis is a kind of hypothesis. It is a guess &mdash; hopefully an educated guess &mdash; about what is going to work

This follows more generally from what we might call a <a href=”http://businessethicsblog.com/2010/11/14/mba-ethics-education-designing-the-designers/”>”design&#8221; perspective</a> on ethical decision-making. Because design (whether of machines or institutions) just <i>is</i> a process of hypothesis formulation and testing. In terrific 1985 book, <a href=”http://www.amazon.com/exec/obidos/ASIN/0679734163/ethics”>To Engineer is Human – The Role of Failure in Successful Design</a>, Henry Petroski argues that every structure that engineers build is an hypothesis — an educated guest to the effect that ‘yes, indeed, this bridge IS strong enough to bear the weight of all that traffic on a daily basis.’

What does this perspective imply about good ethical decision-making?

The most insightful work I know of on this topic is to be found in a brilliant 1996 paper by Caroline Whitbeck, called <a href=”http://www.jstor.org/stable/3527925″>Ethics as Design: Doing Justice to Moral Problems</a>. In her paper, Whitbeck discusses ethical decision-making as a design problem. The parallel between problem solving in engineering and problem solving in ethics, Whitbeck argues, suggests the following advice:

<strong>1) Some design problems have have no real “solutions”</strong>, where “solution” means “perfect answer. Sometimes we have to cope with a problem, rather than fixing it. Other problems are amenable to several possible design solutions, any of which might be “pretty good.”

<strong>2) Some practical problems are liable to suggest answers</strong> &mdash; design solutions &mdash; <strong>that are clearly wrong</strong>. Even if there’s no clear <i>right</i> solution, there may be plenty of clearly <i>wrong</i> solutions, and weeding those out is pretty useful.

<strong>3) Competing “pretty good” solutions may have different advantages &amp; disadvantages</strong>. Just as two engineering solutions might have competing strengths (one offers better safety, where the other offers better durability, perhaps), different ethical solutions can have different virtues (as when one produces better outcomes, but the other does more to protect the rights of the vulnerable). Such competing virtues can be incommensurable, and it’s important to admit as much.

<strong>4) Finally, solutions to ethical problems</strong>, like solutions to engineering problems, typically <strong>need to achieve a particular performance or goal </strong>(there’s a job to get done), conform to specifications &amp; constraints (you don’t have all the time and money in the world), and be reasonably secure against accidents and changes.

Overall, this design perspective has two major benefits. First, it reminds us that we are human, that our problem-solving is always a matter of looking for <i>better</i> solutions, not perfect ones. But it also reminds us that progress is possible, and that hard work to arrive at better solutions can pay off. There’s always a way to build a better mousetrap.


    
 


Do we really want Amazon policing authors?

Should a bookseller help a convicted murderer and rapist earn a living? In brief: yes. It’s not an appealing conclusion, so sold your nose, and listen to the reasons.

Amazon apparently disagrees with me, or is at least willing to bow to public pressure on the matter. The company has apparently <a href=”http://www.cbc.ca/news/canada/toronto/paul-bernardo-book-disappears-1.3319838″>removing an ebook</a> apparently written by convicted Canadian killer and rapist <a href=”https://en.wikipedia.org/wiki/Paul_Bernardo”>Paul Bernardo</a> from its website.

Amazon came <a href=”http://www.ctvnews.ca/canada/it-s-wrong-amazon-under-fire-for-e-book-attributed-to-paul-bernardo-1.2657084″>under fire</a> last week for selling the ebook. The book, importantly, is not about Bernardo’s own criminal exploits &mdash; he’s not profiting off his own crimes. Rather, the book is supposedly a political thriller of some sort. But many people were far from thrilled to see the widely-despised convict publishing at all.

Why should Amazon distribute Bernardo’s book? Some commentators have mentioned the need to protect free speech: Bernardo is a convict, but even convicts retain fundamental rights. But free speech is a red herring in this context. Amazon would be <i>within its rights</i> not to publish Bernardo’s book. No one has a right to be published. That’s not what the right to “free speech” implies. The right to free speech simply means that when you attempt to speak (or write) no one may rightly take action to forcibly stop you from speaking or writing.

So Amazon is within their rights to stop selling the book, but they are still wrong to do so.

Consider the precedent Amazon is setting here. For the sake of consistency, we need to realize that Amazon is now effectively claiming the right &mdash; and perhaps the obligation &mdash; to vet every author prior to agreeing to sell his or her book. And in doing so, what principles should they apply? Should all murderers be excluded, or only murderer-rapists like Bernardo? Or all criminals? How about war criminals. That’s a category that (ethically if not legally) includes a number of past heads of state. Should Amazon sell CDs by rappers with criminal convictions? And so on.

For what it’s worth, Amazon currently sells books by a number of <em>other</em> serial killers and mass murderers, including the likes of John Wayne Gacy, David “Son of Sam” Berkowitz, and the most infamous mass murderer of all time, Adolf Hitler.

The argument for a nonjudgmental approach by Amazon is strengthened by the fact that it’s <em>Amazon</em>, in particular, that we’re talking about. Amazon’s dominant position in both book publishing and book selling means that it would be incredibly dangerous for the company to start picking and choosing, on moral grounds, which authors it chooses to work with. We, the public, should not want Amazon to help itself to that kind of moral authority.

Amazon should reverse its decision, and go back to selling Bernardo’s book. And we should respect that decision. Not because we think Paul Bernardo is especially worthy (or even, frankly, minimally worthy). The question isn’t who <em>he</em> is, but who <em>we</em> are.


    
 


Trust is the most valuable asset any company has

Valeant Pharmaceuticals has suffered a crisis of trust over the last few weeks. More specifically, the trust that investors had in the company was substantially diminished in the wake of revelations that Valeant had an unclear but apparently too-cozy relationship with specialty pharmacy called Philidor. The loss in trust in this case was quite concrete, measured by a substantial drop in the company’s share price.

The source of this loss of trust was, as is generally the case, a question about the company’s ethics.

Doing business in the long run absolutely requires ethics. At the ery least, doing business requires a degree of mutual respect, embodied in our commitment to getting things from others by offering them what we think they want in return. It also requires a commitment to basic honesty, and a commitment to honour our contracts. These ethical basics are essential because they are the foundation of trust. And if you don’t trust someone—at some level—you’re just not going to do business with them.

If trust enables business, then trust has a real value, in real dollars and cents. So what, then, is the dollar value of trust? I estimate the dollar value of trust, within the global economy, at roughly $102 trillion—in other words, the entire nominal Gross World Product for 2014. Without trust, all commerce on the planet would literally grind to a halt.

The fact that trust is crucial in markets is evidenced by the fact that businesses have come up with such a dizzying array of mechanisms designed to generate trust—everything from brands (which carry reputations) through to warranties, return policies, endorsements and third-party guarantors.

But what exactly is trust? What does it mean to trust someone? Functionally, it’s an expectation that someone will behave in certain ways. Trust is also an attitude—part calculation, part emotion—that involves an expectation of goodwill, or at least good behaviour. It is an expectation that the other party to a transaction will not do us harm. As my friend and fellow philosopher Daryl Koehn once put it, trust is a mean between paranoia and foolish faith.

But what happens when trust is broken? How can a company like Valeant (or Volkswagen, for that matter) regain the trust of consumers and the investing public? There are many ways to rebuild trust, and none of them is quick.

A company that has lost the trust of the investing public is likely going to need to show a consistent pattern of trustworthy behaviour over a substantial period of time. And the focus, here, is on the showing. CEO Michael Pearson has said how important ethics is to the company. And—present appearances aside—that may well be true. But in the light of the current wave of mistrust, the company is going to need to do more. It is going to need to engage in substantial disclosures, far beyond detailing the nature of its relationship with Philidor. In the face of a failure of disclosure, the company may well find that that it needs to engage in more disclosure than any company—even one with nothing to hide—would be fully comfortable with.


    
 


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