CSR NEWS

csr today - News Alert
_____________________________________________________________

CSR NEWS The Corporate Social Responsibility Network

www.csr-news.net

 

 

 




What should you do if you lose faith in what you’re selling?

What happens — what should happen — when you lose faith in your product, when you come to see that the product you’ve been selling all this time isn’t really what it’s been cracked up to be? Is it wrong to keep selling it? How bad does the product have to be for it to be wrong to keep selling it? How strong should the evidence be?

The question came to mind when I read recent reports accusing Dyson Airblades hand dryers of spreading germs at an apparently horrifying rate. Now to be clear, there are reasons not to overreact to the hyperbolic headlines. The stories you’ve read about Airblades are based on one study, conducted under lab conditions that might not reflect reality. But what if — what if — the reports turn out to be fair and accurate? What if the highly artificial scenarios used for the lab tests turn out to be validated by field trials? What if Dyson Airblades really are spreading filth? Should Dyson simply say “Oh well, so much for that!” and stop selling them?

The question of losing faith in your product also comes to mind with regard to various ‘complementary’ and ‘alternative’ healthcare products. Most people who sell such products, and most health practitioners (homeopaths, naturopaths, therapeutic touch practitioners, and so on) surely do what they do out of a genuine belief that they’re helping their patients. They believe they see positive effects. But the evidence generally doesn’t support that belief. Now, most practitioners and sellers simply never come to accept that fact, and so they go on selling and prescribing products that are physically incapable of doing what they claim they do. And though I’m a strong critic of such practices, I do have a degree of sympathy for the person who has spent, say, 20 years believing that homeopathy really works, and “seeing” it help thousands of people (a fact that can readily be explained by the operation of a whole range of well-documented cognitive biases). When such a person starts to realize the 20-year error they’ve made, they must find themselves in a rather awkward situation.

Some might ask whether the seller’s faith in the product really matters all that much. Isn’t the customer always right? Isn’t the customer’s opinion the one that matters? Yes, mostly. And so there are times when it’s absolutely OK to keep selling your product even after you’ve personally lost faith in it. Imagine you’re in sales for Coke, and you find yourself developing a taste for Pepsi. The fact that you prefer Pepsi doesn’t make it wrong to sell Coke. Your customers are buying based on their tastes, and de gustibus non est disputandum.

But that’s about questions of taste. What about questions of objective reality? Some products after all just don’t work. Selling only products that work is required by the basic ethical and legal requirement of “merchantability.” If you sell me a chair, it needs in fact to be capable of functioning as a chair. If you sell me a gizmo to attach to my car’s engine that you swear will provide better performance, then it had better actually provide better performance: me having the “feeling” that the car is now performing better isn’t enough.

And so some cases are pretty clear. Once you understand — really understand — the weight of evidence against most complementary and alternative medicines, it immediately becomes ethically imperative to stop selling them. And if Dyson finds its product really is spreading germs at an unconscionable rate, then it will be duty-bound to stop selling the product, though surely the restaurants and public buildings that are the company’s main customers will make that choice for them.

In the end, what’s required are vigilance and good faith. Anyone who sells a product is obliged to go to reasonable lengths to ensure their product works, and to grapple with credible evidence to the contrary. A sincere belief in your product is nice — it helps you get up in the morning and look yourself in the mirror — but it’s not enough.


    
 


Could the FBI really force Apple engineers to break encryption?

Would FBI Compelling Apple Mean Using Forced Labour?

News surfaced recently that, in the event that the FBI is successful in getting a court to compel Apple to unlock an iPhone, the company’s engineers might simply not do the work.

In addition to raising interesting practical questions (still hypothetical at this point) for the FBI, this turn raises interesting ethical questions about forced labour. It’s easy enough in the abstract to accept the idea of a court forcing a corporation — a lifeless thing —to do something. But it’s somewhat more difficult to stomach the idea of a court order compelling a number of human individuals to do work over a period of weeks. We’re all familiar of course with the idea of courts forcing people to do things — to disclose a piece of information, for example. But forcing labour, in the absence of a criminal conviction of the individuals involved, is dramatically different. It may even be a violation of the 13th Amendment to the U.S. constitution, which forbids “slavery [and] involuntary servitude, except as a punishment for a crime whereof the party shall have been duly convicted.”

This is also a reminder of the complex relationship between corporations per se and the people that, roughly speaking, make them up.

Back in 2011, a lot of people criticized then-presidential candidate Mitt Romney for saying during a campaign stop that “corporations are people.“ In context, it was pretty clear that Romney wasn’t referring to the controversial notion of corporate personhood, but rather to the simple fact that corporations are (in a practical sense) composed of people. When corporations profit, inevitably some people profit. And, more importantly for the present case, when corporations do labour, some people do labour.

The current Apple v FBI situation is a good example of Romney’s point. You can’t compel Apple to unlock an iPhone without compelling its human engineers to do certain work.

Of course, requiring people to do work they don’t particularly want to do is generally regarded as permissible within the context of a labour contract. When you sign up for a particular job, no one promises you that you’ll love every minute of it. So in complying with the (possible, potential) court order, Apple’s engineers would merely be doing their jobs. But on the other hand, there’s apparently now evidence that such a request would be considered sufficiently odious to make those engineers give up their jobs entirely. In that event, getting the work done would mean either literally compelling the individual engineers to do the work, or finding engineers with very specific skills to take their place.

And news emerged just today that the FBI may have found a way to get into gunman Syed Rizwan Farook’s iPhone without the help of Apple and its engineers. Whether the non-Apple route will work remains unknown. But the case still raises interesting questions about the rights and duties of corporations, and the way (or the extent to which) those rights and duties are ultimately held by humans. We offer legal protection to corporate property, not out of respect for corporations but out of respect for their human owners. And we should think twice before legally compelling corporate action, when that action would in practice imply forced labour for the corporation’s human employees.


    
 


Could the FBI really force Apple engineers to break encryption?

Would FBI Compelling Apple Mean Using Forced Labour?

News surfaced recently that, in the event that the FBI is successful in getting a court to compel Apple to unlock an iPhone, the company’s engineers might simply not do the work.

In addition to raising interesting practical questions (still hypothetical at this point) for the FBI, this turn raises interesting ethical questions about forced labour. It’s easy enough in the abstract to accept the idea of a court forcing a corporation — a lifeless thing —to do something. But it’s somewhat more difficult to stomach the idea of a court order compelling a number of human individuals to do work over a period of weeks. We’re all familiar of course with the idea of courts forcing people to do things — to disclose a piece of information, for example. But forcing labour, in the absence of a criminal conviction of the individuals involved, is dramatically different. It may even be a violation of the 13th Amendment to the U.S. constitution, which forbids “slavery [and] involuntary servitude, except as a punishment for a crime whereof the party shall have been duly convicted.”

This is also a reminder of the complex relationship between corporations per se and the people that, roughly speaking, make them up.

Back in 2011, a lot of people criticized then-presidential candidate Mitt Romney for saying during a campaign stop that “corporations are people.“ In context, it was pretty clear that Romney wasn’t referring to the controversial notion of corporate personhood, but rather to the simple fact that corporations are (in a practical sense) composed of people. When corporations profit, inevitably some people profit. And, more importantly for the present case, when corporations do labour, some people do labour.

The current Apple v FBI situation is a good example of Romney’s point. You can’t compel Apple to unlock an iPhone without compelling its human engineers to do certain work.

Of course, requiring people to do work they don’t particularly want to do is generally regarded as permissible within the context of a labour contract. When you sign up for a particular job, no one promises you that you’ll love every minute of it. So in complying with the (possible, potential) court order, Apple’s engineers would merely be doing their jobs. But on the other hand, there’s apparently now evidence that such a request would be considered sufficiently odious to make those engineers give up their jobs entirely. In that event, getting the work done would mean either literally compelling the individual engineers to do the work, or finding engineers with very specific skills to take their place.

And news emerged just today that the FBI may have found a way to get into gunman Syed Rizwan Farook’s iPhone without the help of Apple and its engineers. Whether the non-Apple route will work remains unknown. But the case still raises interesting questions about the rights and duties of corporations, and the way (or the extent to which) those rights and duties are ultimately held by humans. We offer legal protection to corporate property, not out of respect for corporations but out of respect for their human owners. And we should think twice before legally compelling corporate action, when that action would in practice imply forced labour for the corporation’s human employees.


    
 


What Are Corporate Boards Ethically Obligated to Know?

game_of_telephoneJust what are corporate boards obligated to know? More precisely, what lengths are they obligated to go to in order to get to know the things they ought to know?

The topic came to mind when I read today’s story about how the salary of the CEO of Canada’s biggest banks, RBC, had gone up 44 per cent to $10.9 million during his first year on the job. One has to ask: just what information does RBC’s board have at hand that would justify that level of compensation, and that very substantial change in level of compensation?

The question is not a trivial one. In fact, it’s the topic of a program of research we are currently conducting at the Ted Rogers School of Management’s Ted Rogers Leadership Centre. The question, more generally, is about what boards are obligated to know. Of all the things a board could know, which things must it know, in order to do its job properly?

The question turns out to be harder than it sounds. Boards typically need of quite a lot of information, and face plenty of obstacles to getting it.

What do boards need to know? Boards of directors are ethically and legally responsible for the oversight of firms. While it is not the job of directors to manage the firm, it is the job of directors to govern it. Both individually and collectively, directors have fiduciary responsibilities to govern the firm by selecting, paying, guiding, and assisting top management. Performing those tasks well requires considerable information. In general, directors need to have sufficient information about the firm they are directing, as well as about the industry within which it operates. They need to understand the relevant bits of corporate law, and to have basic financial literacy. With regard to specific decisions, directors may need very special information. With regard to a major strategic decision such as merger or acquisition, for example, directors may need to have detailed information about not one but two organizations, as well as detailed valuations and reliable market forecasts. With regard to setting executive compensation, boards may need not just detailed information about performance, but also information about industry benchmarks as well as information about what a given CEO’s other employment options are.

Why is it so hard for boards to get the right information? The fundamental problem is that most directors are, at least vis-a-vis the specific organization, amateurs. They are (mostly, preferably) outsiders — they are outsiders on purpose — and so by definition they spend much less time in direct contact with the organization than, say, the CEO or other employees. So they are automatically subject to relative information poverty.

The result is that they have to rely on others. Who do they rely on? First and foremost, they rely on insiders, especially the insider with whom they have the most interaction, namely the CEO. But of course, there’s always the worry that the CEO will, shall we say, “filter” information. After all, if no one particularly wants to give the boss bad news, who on earth wants to give the board bad news? Boards also may get information from other firms. The board’s audit committee, for example, ought to be able to get information directly from the firm’s accounting department, but such direct access is not universally available.

Boards also sometimes look to outsiders, a category that includes consultants (such as compensation consultants, strategy consultants, and governance consultants) and professionals (such as external accountants and outside legal counsel). Compensation consultants are a key example here: many large firms make use of those. But anecdotal evidence, at least, suggests that directors often doubt the reliability and value of comp consultants, even after having paid good money for their advice.

That’s why our research is focused on the wide range of structural and procedural principles that we argue boards ought to attend to. The right structures and procedures need to be in place to make sure (or to make it more likely) that boards will be diligent and effective in their pursuit and use of information.

So, for example, how do you ensure that boards will seek and appreciate a wide range of information? Start by having a nominating committee that is dedicated to seeking out real diversity. How do you make sure that boards have the right expertise to make good use of the financial information available to them? Implement a ‘board skills matrix’ to identify gaps in their collective knowledge. How do you make sure that boards make proper use of consultants? Make sure the board has the appropriate budget, but also implement policies to reduce redundant use or other kinds of over-use of consultants of dubious value.

In the end, that’s what governance is about. It’s about not just doing the right things, but putting the right processes in place to make it more likely you’ll do the right things on an ongoing basis. So the shareholders (and other stakeholders) of RBC need to ask not just is David McKay worth $10.9 million, and not just did the board gather the right information in making that decision, but did the board put in place the policies and procedures to make sure that it has the right information, and uses it correctly, on an ongoing basis? That, after all, is what a board is really for.


    
 


Fast Food Chains, Cage-Free Eggs, and Animal Rights

It’s not all that surprising that restaurants that focus on fast, cheap food look to suppliers who focus on fast, cheap production methods. Fast food chains and factory farms, in other words, seem like a match made in heaven. But from the point of view of animals, it’s a match made in hell. The fast food industry’s capacity to efficiently turn ingredients into meals implies a huge demand for the products of the cruelty-prone meat and dairy industries. You don’t have to be a zealous animal rights activist to cringe every time you see images of battery hens, and imagine what a life — even with the very basic mental life of a chicken — would be like in a tiny, crowded cage.

But there are signs that things are changing in this regard. See, for example, the recent announcement by Burger King, along with iconic Canadian coffee chain Tim Horton’s, (both of which are owned by the same parent company) promising to use only cage-free eggs by 2025.

Just how big a deal is such an announcement?

It’s easy to be cynical about a target that’s nearly a decade out. Given that the average tenure of a CEO is far less than that, it risks looking like a leadership team making a promise that someone else is going to have to keep. The key question, of course: Is there a plan in place? Is substantive action underway already? If so, then this is long-term planning, rather than punting.

There are also big questions about supply chains. A big restaurant chain can simply decide to change what it sells if it can’t find a source. So the announcement of the restaurant chains’ intentions implies a need for big changes within the egg industry. And, perhaps not surprisingly (given the purchasing power of the two chains) there are signs that the industry is listening: witness the recent announcement that Canadian egg farmers aim to abandon battery cages by 2036.

Finally, it also should be noted that this move sets a powerful precedent for other restaurants. A pair of restaurant chains, even popular ones, can’t change the practices of the egg industry on their own, and hence can’t make a meaningful dent in the total quantity of cruelty in the industry. But the move by these two (although not the first) could have knock-on effects in several ways.

First, it helps establish a supply chain (see above). Second, it signals to consumers that cruelty-free eggs can be had, even at a fast-food joint, and so it’s OK to expect that from a fast-food joint. Finally, it gives implicit permission to managers at other fast-food chains to live according to their own values. No one prefers eggs from unhappy chickens, but many managers may feel that competitive pressures won’t allow the alternative. Burger King and Tim Horton’s have essentially signalled that they see a path to that alternative, and are willing to follow their conscience to it.

Could this all be a marketing ploy? Of course it could. But in the end, that may not matter. As long as BK and Tim’s see good reason to move to cage-free eggs, they will do it, and there’s good reason to believe that other restaurant chains will follow.


    
 


More Recent Articles

 

 

 

Imprint and Contact:

CSR NEWS GmbH | August-Hermann-Francke-Str. 2 | D-42499 Hueckeswagen
http://www.csr-news.net

Geschaeftsfuehrender Redakteur: Achim Halfmann (V.i.S.d.P.)
Wissenschaftlicher Direktor: Prof. Dr. Thomas Beschorner

Handelsregister: Amtsgericht Koeln - HRB 60902

Email: redaktion@csr-news.net
Tel.: +49 2192 8546458
Fax: +49 2192 8546459

 


 

 


Click here to safely unsubscribe from "CSR NEWS | csr-news.net » and +english."
Click here to view mailing archives, here to change your preferences, or here to subscribePrivacy