A major day in business ethics

June 29, 2009, might go into the annals as a big day in the history of business ethics. Right on top of many US news sites, we learn, first, that Bernie Madoff got his whopping 150 years sentence and, second, the US supreme court ruled in a landmark case in favor of 18 white firefighters who were suing their employer for what is often called ‘reverse discrimination’.

The Madoff case is in some ways your run-of-the-mill textbook case for unethical behavior in business – if it were not on such a biblical scale and in these dire times. And for a change not only hitting poor or middle class people but the wealthy. For us this example of fraud and theft points to the clear limits and boundaries of business ethics: the strong approach to deregulation and self-regulation of the financial industry in the US (and elsewhere) in the past has delegated a lot of ethical issues into the realm of the voluntary.
Funnily, they interviewed Harry Markopolos, a stockbroker, recently on 60 Minutes who as early as in the year 2000 had filed a complaint to the Securities and Exchange Commission (SEC), the self-regulatory body overseeing Wall Street. Four more he filed over the years, mostly because he was mad at Madoff as a competitor who offered these fairy tale returns. Remember, this was the time of Enron etc, where one would have expected the SEC to take complaints about unethical behavior seriously. Based on mathematical modeling Markopolos ("It took me five minutes to know that it was a fraud. It took me another almost four hours of mathematical modeling to prove that it was a fraud.") could prove back then what the SEC never took serious. Madoff was just too respected and too powerful on Wall Street for the SEC to even daring to question his practices. It shows that ethical behavior in business still is very dependent on strong institutions, independent regulators and, no less, skilled and professional oversight. The ‘Case Madoff’ in that sense is in fact a ‘Case SEC’.

The second incident is equally important and will have massive consequences. The case is about the fire department of New Haven (a small town north of New York City) which had made their firefighters pass a test as the basis of promotion. None of the black firefighters passed the test. Out of fear to appear racist, the City of New Haven then refrained from promoting all the (white) guys who did pass. These 18 white guys (one of them Hispanic) went to court and now finally won fighting their case through all the levels.
For a long time, the business ethics literature has actually addressed these issues of retributive justice in rather favorable terms. Because of past injustices against a particular group, that group should now receive preferred treatment. The black guys, so the argument goes, did not fail the test for reasons in their control, but because they belong to an ethnic group, which in the US still struggles in education, family stability and other factors which make people successful. The problem here is though that in doing so, you discriminate against other groups in a similar way. The fact that a court now rules against this in some ways is a sea change in the way we will deal with affirmative action in years to come. The ruling will have massive implication for business too, as it is based on laws that apply not only to the public sector. It will surely lead to many complex discussions and tricky decisions in business.

Ethics in the fashion industry

Most of the stuff that gets written about ethics in the fashion industry tends to focus either on fur, or on its effects on consumers, and especially the damage it can do to the self-esteem and body image of young girls. Those who work in the industry tend to get pretty ignored by the ethics community. Outside of the well-publicised supermodel tantrum, or the occasional rumour of drug taking, the working lives of models are essentially off-stage and out of sight. Most of us probably assume that the fantastic clothes, the famous faces, the glamorous locations, and the stratospheric salaries make modelling one of the best jobs in the world.

However, the release of the documentary Picture Me, which is just hitting the festival circuit now, looks set to lift the lid on the darker side of the modelling world. Made by Sarah Ziff, a model turned documentary maker, and co-director Ole Schell, the film chronicles the high pressure, exploitative, and sometimes abusive environment faced by professional models. It also, perhaps more controversially, provides us with a glimpse into the highly sexualized, predatory pressures that models experience, even as young teenagers. The film is already getting noticed, probably because its maker is already a familiar face in the fashion industry. The UK's Observer newspaper ran a feature on it a couple of weeks ago which ended up on the cover of their magazine. The doc also won best film and best fashion film at the Milan International Film festival recently.

Ziff is clearly a true industry insider, having been discovered on the street by a photographer when she was 14, and then going on to become the face of numerous global brands such as Calvin Klein, Tommy Hilfiger, Dolce & Gabbana and Gap. In her time, she has worked for all the top designers including Marc Jacobs, Stella McCartney, Louis Vuitton, Gucci, and Chanel. Along the way, she obviously made a huge amount of money. But these experiences also provided her with extraordinary access to life behind the scenes of the fashion industry.... and an opportunity to tell the story of what goes on backstage in all its warts and all glory. By putting cameras in the hands of the models themselves, she was also able to give voice to those who, as the film’s myspace page puts it, ‘are often seen, but rarely heard’. As such, the film presents a sincere and engaging look inside the working life of models, documenting both the rewards and sacrifices that young women have to make.

In addition to Ziff and her fellow models, the film also features appearances and in-depth interviews with noted photographers and designers. By stitching these various accounts together Ziff and Schell create a frank account of various ethical issues confronting the industry such as age, anorexia, working conditions … and of course the exorbitant salaries earned by top models. It also brings to light the surprising lack of regulation and protection governing the industry.

In fact, the film itself is part of a nascent attempt by some models to bring greater visibility and protection into modelling. As the Observer article mentions, a handful have started writing behind-the-scene blogs chronicling their daily lives in intimate detail. A successful 2007 campaign by two models, Victoria Keon-Cohen and Dunja Knezevic, also led to the opening up of the actor’s union Equity to catwalk and photographic models for the first time.

We're hoping the film makes it and gets a wider release - it certainly should do given some of the star power behind it, even if it was made on a shoestring budget. It's not so much that no one knew there was all kinds of dodgy stuff going on in the modelling industry. But by putting it up there on the screen in such an honest and intimate way, Ziff looks to be making a valuable contribution to the debate.

Ethics pledges: If it's good enough for Harvard....

A few weeks ago we wrote about the growing phenomenon of ethics pledges at business schools, and its likely impact on avoiding the kinds of ethical problems involved in the current financial crisis. Several people have now been pointing us to a recent article in the New York Times on an Ethics Oath instigated at Harvard Business School. As a voluntary, student-led initiative, this is pretty much in line with the vogue for pledges in the US that we discussed in the earlier posting. That it has happened at Harvard, however, appears to be news to the NYT, presumably because this is about as deep into the mainstream MBA establishment as you can get. The logic here being: if it's good enough for Harvard, it'll probably be good enough for any self-respecting business school.

Certainly the current financial problems have focused a few more minds on issues of ethics and responsibility. And as the NYT suggests, the new generation of MBA students tends to be interested in making a difference just as much as making a buck .... or at least some of them do. It is notable that despite the hoohaw about the Harvard Oath, less than a quarter of the graduating class actually signed it this year, so we are not exactly talking about a majority of students. Still, a sizeable minority represents something of a shift from a decade or so ago when these kinds of commitments would have been laughed out of the class at most big MBA schools. Ethics pledges like these may not be for everyone, ut they do signify how far things are changing ... and how far they still have to go before a serious commitment to management integrity goes mainstream.