What Exactly is Business Ethics?

A cashier finds out that I teach business ethics and immediately straightens up out of her slouch and carefully counts out my change. A sales representative discovers I’m a business ethicist and responds, “Oh ___! how am I doing?” Others laugh at the apparent oxymoron of corporate morality.

Is business ethics about etiquette or keeping a strict moral code? As a business ethicist, am I simply a good behavior appraiser? The answer is yes . . . but not just that. While the field of business ethics includes the creation and enforcement of regulations, morality judgments tend to be considered at minimum legal and ethical levels.

The mere identification of immoral behavior is often unproductive and ineffective. A Ph.D. in business ethics is not required to decide that Bernie Madoff’s multi-billion dollar Ponzi scheme is wrong. Professional business ethicists are not needed to confirm that the reward from Munich Re, the world’s biggest insurer, of prostitutes to top sales representatives is unethical. What’s interesting and useful is exploring the respective issues affecting companies on a daily basis−such as moral hazard (risking someone else’s property without taking on the associated responsibility) and how incentives affect corporate morale and production−in order to offer concrete reflection and practical solutions.

Our field excels in looking at acceptable business practices and economic systems requiring further analysis, including marketplace dilemmas which don’t have obvious answers. What are the benefits and drawbacks of capitalism and conservationism? Are sweatshop labor and outsourcing obvious evils? Should transcendent principles or “When in Rome . . .” govern international trade?

Many people believe that business ethics is a contradiction in terms at worst and an unenforceable set of real-world rules to live by at best. While improved individual behavior is a worthy goal of business ethics, a broad business ethical vision incorporates critical marketplace reflection at the systemic, corporate, and personal levels with realistic moral and economic change.

A Social ‘Theft’work?

The Winklevoss twins represent two enemies that Facebook founder Mark Zuckerberg made in the process of designing The Social Network (2010). Did Zuckerberg steal the inspiration for Facebook from the brothers’ idea for their website? The answer may hinge on the divisive issue of intellectual property.

The debate centers around the intrinsic right to own non-tangible, creative ideas. According to traditional patent, trademark, and copyright laws, intellectual property represents real ownership of intangible assets. Dissidents like Richard Stallman−a software freedom activist−argue that intellectual property creates a ‘bias’ toward property rights by confusing non-physical monopolies with ownership of physical things.

Regarding the creation of Facebook, courtroom and journalistic evidence shows no formal contract between Zuckerberg and the Winklevosses . . . only interesting and entertaining “dorm-room chit-chat.” A mere week after beginning what Zuckerberg referred to as ‘the dating site,’ he started working on a separate ‘Facebook’ project. Zuckerberg appears to have considered the two as competing for the same users’ attention, but also seems to have regarded them as different in key ways. While Zuckerberg does appear to have intentionally strung along the twins with the goal of making his own project the more successful launch, the Winklevosses $65 million lawsuit settlement seems more than fair−especially considering that the entire dispute took place over two months in 2004 and that in the years since, Zuckerberg has built Facebook into a massive global enterprise.

The Winklevoss twins are demanding that the case be reopened not for money but for honor. If there is no such thing as intellectual property rights, then there was nothing to steal and additional demands represent mere ego and greed. If intellectual property represents real ownership of intangible assets, then the battle between information highway robbery and issues of gentlemanly agreement should return to the top of Facebook’s News Feed.

Update: the Winklevoss suit against Facebook was thrown out by a federal judge in Boston as reported on July 22, 2011.

The ‘Customer’-Physician Relationship

Medicine is subtly shifting from an emphasis on what is ideally best for the patient to an environment where hospitals are marketed from survey results and physicians are instructed on how to encourage customers to check the ‘Excellent’ box when rating their care. The danger in primarily viewing a patient as a consumer is that well known adages like ‘the customer knows best’ can gravitate toward motivations based primarily on the profit motive rather than the apparent benefits of collaboration, patient voice, and better service.

The philosopher Immanuel Kant reminds us to ask whether we are treating persons (customers) as a means to some end (profits) or as ends themselves (patients). When push comes to shove at medicine’s financial margins, decisions tend to lean toward monetary gain. Efficiency and profits are needed components of every venture (even Kant says not to use people as a means only but as a means as well as an end). Yet this move from taking care of patients to customers—while promoting friendlier hospital environments—may be damaging to the health care system in the long run.

The Hippocratic Oath has been condemned for promoting a ‘guild-like’ environment and its ancient author set aside in the hope of adopting the examples of other tightly managed industries (ironically, some business academics call for managers to take on the guild-like professionalism of the medical field). While some combination of treating patients as a means and as an end is probably acceptable, it seems that the customer/consumer metaphor is being adopted wholesale.

To Hippocrates, a physician’s first consideration was to use his/her art for the patient’s well-being—a re-emphasis that can benefit all stakeholders. Otherwise, this move to make the medical environment more patient-friendly has the potential to make it ultimately more vulnerable.

Written in conversation with Cory Wilson, M.D.

2010 in review

WordPress.com mulled over the Monday Morning Business Ethicist Blog in 2010 and summarized its overall health as “doing awesome!”

Healthy blog!

Statistics

A Boeing 747-400 passenger jet can hold 416 passengers. Readers viewed this blog 3,000 times from its launch date in May 2010. That’s about 7 full 747s.

From May, there were 12 new posts. The busiest day of the year was June 3rd with 72 views. The most popular post that day was Should Shopping Carts Stay or Should They Go?.

Referrals, Searches, and AttractionsFeatured image

The top referring sites in 2010 were facebook.com and moodle.csun.edu.

Visitors came searching for Miranda Priestly, stakeholder theory, Karate Kid, corporate espionage, and Avatar.

These are the posts that got the most views in 2010.

1.Should Shopping Carts Stay or Should They Go? May 2010

2.“Show Me the Marijuana!” November 2010

3. Human Sex Trafficking is Wrong July 2010

Thanks for reading the Blog!

“Show Me the Marijuana!”

Californians recently decided against legalizing marijuana for recreational use. Indeed, proposition 19 was on its financial deathbed until billionaire investor/philanthropist George Solos revived the proponents’ efforts with his $1,000,000 gift shortly before the election. In the meantime, opportunists snatched up domain names and bought up cannabis-related stocks. Since last spring, local unions had been organizing marijuana “bud tenders,” greenhouse workers, packagers and laboratory technicians just in case.

It was interesting to note how various constituencies lined up on California’s largest cash crop. The teacher’s union supported the recreational use of marijuana anticipating the ensuing taxes pouring into public schools. Beer distillers and small pot growers were worrisome over the ‘Wal-Marting of weed,’ and sought to wipe out the prospective competition. Law enforcement was mixed: some officers backed the initiative as they desired to diminish the cartel influence and decrease the prison population to focus on more violent offenders. Some were primarily opposed to the recreational use of marijuana on moral grounds. Still other departments were against the proposition because of the prospective loss of a profitable source of income (sales from the seized pot derived from their raids represent a substantial source of the budget particularly in difficult economic times).

The limits of government constraint on individual autonomy (cf. John Stuart Mill) may actually comprise the core issue in Proposition 19. However, there was relatively little evidence of this concern in current political discourse while following the greenbacks. Yet the business ethics question does not rest in simply dividing self-interest from ethics (pace Adam Smith) but in considering the economic benefits as part of a nuanced, principled plan to control a trade in need of regulation. One thing is for certain in that like war and politics−especially in this economic climate−weed makes for strange bedfellows.

The Karate Brand trumps Kung Fu Reality

After seeing The Karate Kid (2010), a martial arts remake of the 1984 original, my daughter asked me why the movie wasn’t called the Kung Fu Kid. She was not alone in her query. The blockbuster is actually entitled The Kung Fu Kid in China, and known as Best Kid in South Korea and Japan.

A mini uproar from minority communities and film source devotees has emerged as allegations of cultural ignorance, potential racism, and deindividuation have resulted from the film keeping its original title. Critics cite this lack of distinction between accurate depictions of Japanese (Karate) and Chinese (Kung Fu) culture as a misrepresentation of truth and reality.

Producer Jerry Weintraub defends retaining the name (see 3:03 in his interview) as a brand issue. To Weintraub’s defense, a good explanation of how the protagonist (Smith) believes his Karate will help him defeat the Chinese bullies would represent a defensible starting point. However, the ‘film devotee rant’ and Weintraub interview explicitly and implicitly declare that movie studios inherently have a right to make money by whatever means necessary.

The marketing industry often walks a thin line between exaggeration and falsehood. Products and services are considered ‘must haves,’ and peripheral desires become necessities for human flourishing. Some defend advertising’s role in promoting economic growth and portray it as a cultural mirror of existing consumer values/visions of the good life. Others see the industry as representative of everything wrong with the free market. The critical question for the brand is when and where to draw the line between full disclosure and a desirable profit share, artistic license, and perpetuating a lingering stereotype.

Punishments that Fit the Crime?

Two principals of a defunct investment management firm pleaded guilty to a fraudulent tax scheme that generated $9.6 billion in fake losses. In order to offset capital gains taxes to wealthy clients, the partners essentially defrauded the government of $240 million.

What is interesting from a business ethics standpoint is not their relatively small $7 million fine, reduced prison time, or egregious crime, but the type of consequence handed to them “in the meantime.”

Both men must address students at their former universities—the University of Washington School of Business for Greenstein and the New York University School of Law for Wilk—about business and legal ethics.

It appears the court believes that society or business ethics education has something to gain from their story. Certainly, our culture can benefit from the reflections and actions of reformed convicts: former MCI WorldCom Executive Walter Pavlo and Special Counsel to President Nixon Charles Colson come to mind. I’m sure that many—from a sensationalist standpoint—want to hear from these experts in tax evasion. However, would these ad hoc lectures truly serve as appropriate and fitting “punishments?” What kind of message do they send to future lawyers and prospective entrepreneurs?

Certainly an argument could be made that the business partners made off well financially in the meantime before their indictments . . . and with possible offshore accounts, who knows? What kind of attitudes would seep out underneath their expected warnings and statements of contrition: true remorse, subtle arrogance, or ultimate displeasure at getting caught?

The notion of a forced confession from tarnished alumni just does not seem enlightening. Think of arguments and fights between spouses or kids. Sincere and reflective apologies often require a time out or in this case imprisonment. Another possible purpose, albeit faint, is the malicious intent to humiliate the defendants publicly in front of their alma maters−certainly a strange form of cruel and unusual punishment.

Delivering a mandatory public confession seems premature, but the press could be missing some important facts from this story. A year has passed between indictment and conviction; the defendants and the judge need the benefit of the doubt. If the principals are truly remorseful, desire to tell their story, and their business and law schools are agreeable then by all means . . . but if the lecture is an artifice of the court, and the defendants’ intentions are anything but true, then we should heed Pavlo’s recent blog: “Not Every Felon is Worth Hearing From”−at least not yet.

Thanks to Alexander Sum for pointing me toward this interesting piece.

Inception and the Unpopularity of Big Business

In Inception (2010) the audience ends up rooting for Cobb, the industrial spy, versus empathizing with Fischer, the undeserved mark of an “anti-heist.” It is one part contemporary worship of the movie star (DiCaprio) and another part distrust of big business. In today’s economic climate, the thief/deceiver garners more sympathy than a corporate CEO. Add in a tortured protagonist who wants to leave his job, clear his name, and return to his family, and you have a recipe for what philosopher David Hume described as an unfair battle between emotions and logic. The end justifies the means, the movie audience embraces a prospective con−and in a short skirmish, the passions win every time.

In the context of our global economy, the film brings up a question of whether certain lines of work are inherently unethical. Are there honorable ways of conducting oneself as a member of the mafia, a prostitute, or a corporate spy? Is redemption possible within these professions or only upon its departure?

Some argue that levels of corporate espionage could be ethical according to extensions of game theory. Entire branches of the electronics and computer industry provide equipment for industrial spies. Despite legal prohibitions, businesses using secret agents and technology seem to bear no more shame than nation-states. The relative lack of prosecution under the Uniform Trade Secrets Act and Economic Espionage Act (1996) disguises the widespread prevalence of underground activity.

Others believe that companies walk a fine line between more socially acceptable forms of competitive intelligence and corporate espionage. From this vantage point, a vocational catharsis may result from realizing that the possibility of ethical espionage only exists in dreams.

For an expanded version of this post, see my chapter on “Honor and Redemption in Corporate Espionage” found in Wiley-Blackwell’s book Inception and Philosophy: Because It’s Never Just a Dream (November 15, 2011).

Human Sex Trafficking is Wrong

The proposition, “Torturing babies for fun is wrong” is often used in ethics courses to illustrate obvious examples of evil. Human sex trafficking should be added to this list as neither ethical expertise nor extended discussion is needed in passing judgment.

Human Sex Trafficking is the recruitment, transportation, or harboring of persons by threat, fraud, or abuse of power to achieve control over another for the purpose of sexual exploitation. Sex trafficking is no longer a crime just against the poor and marginalized. It has no respect for age, gender, race, class, or geographic boundary. In light of commercial exploitation, the victim’s consent is irrelevant.

Modern day trafficking−which includes forced labor, slavery, the removal of organs, and the sex trade−is big business. Cash for exploitation is the second largest illegitimate international activity with estimated total revenue between $5-$9 billion dollars (falling second only behind illegal drug distribution) and represents the fastest growing criminal industry in the world.

Business exploitation is often expressed through a sense of injustice in economic transactions, here exhibited by the systematic oppression found against helpless young women and innocent children and market-driven transactions of exploitation for cash. Profiteers from the sex trade and patronizers who fuel this exploitative industry represent the two halves of this problem. Supply side conditions will not significantly shift without a corresponding decrease in sexual demand.

Ultimately, while human sex trafficking masks itself as an economic transaction, it involves a deep violation and lack of respect for the dignity of the human spirit.

Film recommendation: Taken (2009)Trade (2007)

Postscript: Over $15,000 was raised July 24th, 2010 as ~ 150 North Orange / South L.A County residents participated on a 5K run/walk to build a sex trafficking refuge house in the Philippines. Support a safe haven.

The Defenders rode from Portland to Salem, OR on Saturday, October 2nd, 2010 to let legislators know that Oregonians care about protecting kids.

The Book is Eli

The Book of Eli (2010) details one man’s post-apocalyptic trek to protect a book few people want and most cannot even read. The remarkable twist lies not only in what Eli could not do but also in what he eventually accomplished while meditating on the text. It is why Eli could truthfully tell Lombardi toward the end of the film that he had the book in his possession, having hid its words in his heart.

The often lonely trek through a moral wasteland is a fitting descriptive metaphor for many individuals in the marketplace. For some, the continual need for guidance and direction to navigate ethical quandaries is necessary amid personal failure and triumph. Others use this image as a backdrop for the unique rules of corporate competition (cf. the game of poker). Whether Eli’s quest ought to exist as a universal business paradigm is a question needing constant contextual consideration.

Eli describes what commerce was like . . . before the contemporary economic system of wasteland backpack bartering replaced it:

(We) had more than (we) needed. We had no idea what was precious and what wasn’t. We threw away things people kill each other for now.

While material excess is often associated with free market economies, the Hughes brothers are not targeting capitalism. Abuse, waste, and overage are no strangers to devotees of socialism and command oriented systems. Rather, the directors’ fingers point at our collective reckless relationship toward conserving our resources.