Crane and Matten blog

Solving the executive pay problem

2012-01-24T15:35:00.000-05:00

The idea that executive pay can be "too high" is a touchy issue. While many regular Joes are seeing their jobs disappear, or have been forced to endure cut backs to salary and benefits, CEO pay continues to escalate. Bonuses in the financial sector - never popular among the general public - are largely back to their stratospheric pre-crisis levels, much to the chagrin of the tax payers who funded the bailouts that kept them in business. And there is the growing chasm between those at the top and the bottom of the pay ladder that helped galvanize the Occupy movement. According to one recent study, the gap between CEO and average U.S. worker pay was 325-to-1 in 2010. In 1965, it was 24:1.

The business community, of course, continues to argue that it should have the right to determine its own remuneration levels. The global market for executives, they say, forces them to offer high salaries to attract the top talent. But stagnant performance is prompting many to question the logic of that argument. Why should companies be rewarding top executives for failure when everyone else is tightening belts?

Unsurprisingly, regulators have started talking tough. But progress has been limited. Three years ago President Obama announced that he would cap the salaries of executives of companies in receipt of TARP balilouts, yet by 2010 could do nothing to stop those companies awarding huge bonuses, judged to be "ill advised" by his newly appointed pay czar. A more systematic approach was promised with the Dodd Frank financial regulation, but efforts to rein in pay have had limited success. After much sword rattling from senior British politicians, the announcement by the UK government on January 23rd of a new approach to regulating executive pay claims to be the start of a more concerted response to the problem. The trouble is, it is not a very convincing solution. And perhaps even worse, it is not at all clear what the problem really is that they are trying to solve.

The "problem" with executive pay is that it is in fact a whole set of related problems. And each of these require different types of solutions. Income disparity between high and low earners is one thing, whereas CEOs being rewarded for poor performance is quite another. Setting the pay of bailed out businesses is yet another. And so on.

Regulators have to work out which of these problems they are trying to solve and what the best combination of regulation, encouragement, incentives, and sanctions should be to achieve desired results. Take the problem of pay disparity and those troubling pay ratios. Blunt regulation probably isn't going to be very helpful here. For a start no one really knows what the "right" ratio should be. A maximum permitted ratio of say 100:1 may be feasible in some industries, less so in others. And as many have pointed out, the unintended effects might be that companies start outsourcing any of the low wage jobs they still have to generate a lower ratio.

Incentives, such as tax breaks for companies reaching certain thresholds, may offer more potential, although it would be technically complicated to administer effectively. A pay-ratio credits type market could also be devised whereby those companies failing to meet their targeted ratio could buy credits from those that over-achieve theirs. Much like in carbon markets, these types of systems help to even out differences across industries.

The "transparency" option trumpeted by the current UK government speaks to a more typical way of government providing the framework for corporate social responsibility initiatives. In creating a mechanism for pay ratios to be compared across companies (such as through mandatory reporting of pay, and support for some type of league tables comparing performance) governments can spur companies to improve their ranking. This avoids any necessity of setting limits or levels of acceptable performance and instead relies on competitive forces to drive improvements. As with all these incentives type approaches, it remains up to companies themselves to determine how to improve their performance, whether through increasing the remuneration of lower paid workers or decreasing that of higher paid executives. It stops regulators getting directly involved in setting pay limits and enables businesses the freedom to determine what works best for them from a competitive point of view.

Of course, there are also other less direct ways to encourage better pay equity. George Monbiot the UK journalist and environmental campaigner has recently put forward a spirited defense of a "maximum wage". Others argue for incentives or regulations to encourage increased employee share ownership among the lower paid. Such initiatives avoid the risk of companies simply "gaming" the pay ratio statistics, but also run into other problems, such as resistance from the business community and difficulties in implementation. Still, there is plenty of scope for interesting and imaginative ideas to help solve this and the other executive pay problems, and the UK in particular seems to be at a crucial tipping point in terms of public support for change.

Where the current UK government's proposals largely fall flat is in their over-emphasis on enhancing shareholder control of executive pay. For a start this does nothing directly about pay equity (which is what the public wants) but rather focuses more on the problem of whether senior executives are being rewarded for poor performance. Whilst giving shareholders more input into executive pay is not a bad thing, first you need to have shareholders that are active participants in the companies they invest in. In our dispersed ownership model of financial capitalism where shares are often held for matters of minutes, hours, and days rather than months and years, we often simply don't have sufficient shareholder engagement for such initiatives to make all that much difference. Similar rules imposed by the Dodd Frank Act in the US have done little to curb executive pay.

Clearly the time is right for action on the manifold problems of executive pay. But for those seeking to tackle them, whether in industry, government, academia, or civil society, it is imperative that there is clarity on which problems are going to be addressed. And dealing with such complex issues is going to require more creativity in terms of solutions, and more joined-up-thinking in terms of the causes of those problems, than we've generally seen so far.

Photo by GDS Infographics. Reproduced under Creative Commons Licence

Business Ethics enters Politics

2012-01-17T23:02:00.002-05:00

Finally. The American establishment is talking about the issues the Occupy Wall Street movement attempted to raise since October last year: the ethics of Wall Street investors, private equity firms, the inequality of income distribution, the unfair taxation system. All these issues are now at the core of the Republican primary. Four of the five remaining contestant use those things in an attempt to stop current front runner Mitt Romney. And apparently he looks guilty on all accounts.

Mind you – let’s not get into the ethics of why these issues are brought up. The Republican base, many of them evangelical Christians, just hates Mormons such as Romney. So any argument will do to stop an heretic on his way to the White House. And while Newt Gingrich, Rick Perry and Rick Santorum are pretty much guilty of most of the things they accuse their opponent of - Mitt Romney as the Ex-CEO of Bain Capital, a private equity firm and the richest of the contestants, is just such a clear cut, stereotypical representative of the ‘One Percent’.

There are a number of reasons why this is worth pondering. The first and obvious one is that none of the Republican candidates was a strong supporter of these classic ‘Occupy’ issues. They all more or less dismissed the movement. In the primary election, in which the Republican base selects the next presidential candidate though it appears that obviously the issues have traction even with conservative voters. Whether this is an indirect result of the ‘Occupy’ movement is hard to tell. But it certainly shows that the role of Wall Street, income inequality and a tax code that favors wealthy people resonates with a far wider constituency of Americans. These issues currently, in the Republican primary, appear to be somewhat engineered and disingenuous; but they will become a core issue of the election later this year, when Romney as the most likely winner of the Republican ticket will run against Obama in the fall.

This turn in the debate is also remarkable as for the first time in a presidential race, a serious candidate with a background in business is assessed on his credentials in business ethics. Not that he is the first business person to do so: Romney stands in a long line of the likes of Mike Bloomberg in New York, Silvio Berlusconi in Italy or Sebastián Piñera in Chile - all examples of this kind of career. But it is interesting, that for the first time the ethics of a businessman-turned-politician's wealth creation is the subject of a debate on whether s/he is fit for public office. Obviously, ethical issues in business resonate with the general public more than ever before. This includes the level at which they have paid taxes, which in Romney's case with just 15% over the last years will make it very hard for him to endear him to the '99 per cent'...

This said then, the crucial ‘ethical’ issue seems to be the question whether Romney’s activities at a private equity firm resulted in job losses for the average American. This is however just a small fraction of what really is the ethical issue with private equity firms. In some ways, the rise of the private equity industry in the US (and beyond) was a result of the Sarbanes-Oxley Act, which attempted at addressing limited transparency and accountability which led to the Enron- and other scandals 11 years ago. With Romney in the race, for the first time there seems to be a real public awareness and scrutiny of what has happened in corporate America in the last decade.

While this makes one feel somewhat hopeful with regard to the potential of politics and the public sphere to not just accept the current state of ‘financial crisis’ and all that has gone along with it, it is also important to not forget about the context in which this happens. In some ways, if we judge Romney by his track record as Governor of Massachusetts – from the perspective of a liberal democracy he looks actually not too bad: as much as he denies it now, he pioneered what Obama now wants to implement as a general approach to health care in the United States. At the same time, characters like Rick Santorum are nothing short of suggesting some sort of ‘Judeo-Christian Sharia’ law, dismissing the rights of gays or women’s rights of abortion, just to name a few. The first country in the world that constitutionally separated state and religion now decides on candidates according to their faith. But that’s a whole new topic.

Picture by LWVC, reproduced under the Creative Commons License

Ecolabels – it’s time for a change

2011-12-14T15:29:00.000-05:00

Today, we have a guest post from Heather Mak from SustainAbility who is a co-author of the recently released report Signed, Sealed ... Delivered? which calls for a fundamentally new approach to eco-labeling. We asked Heather to tell us more....
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Over 30 years ago, the Blue Angel label came out in Germany. It was significant – a label for consumers to recognize what was the more environmentally sound choice, backed by a standard and certification. Years later, many others followed – including many well-known ones such as Fairtrade, Marine Stewardship Council, Energy Star, Organic – and as of several days ago on the Ecolabel Index, the tally was at 424 labels. But what we needed in the past is not what we need any more. It's time for a change.

In a recent research piece from SustainAbility called Signed, Sealed…Delivered? that I co-authored with my colleague Patrin Watanatada – we looked at the value and challenges that businesses find in using certification and labelling as tools to improve economic, environmental and social outcomes across global value chains.

What we have found is this - certification, labelling and the standards-setting organizations behind them have been pioneers in building a more sustainable economy. For businesses, they provide a credible, consensus-set reference point for collective action, access to expertise and networks, and can spur demand for certified or labelled goods. This is particularly the case in the B2B space, where labels and sustainable attributes are built into institutional purchasing agreements, such as within large companies or municipalities.

However, there are also a number of challenges. The traits that are the strengths of consensus-based standards – governance and inclusiveness — also pose challenges. For one, some businesses are seeking to advance sustainability as quickly as possible – but sometimes the agreement required in a consensus based model can slow things down. In addition, what is best for all stakeholders is not always perfect for sustainability – for example with many of the forestry standards it is a compromise between best available science and what the industry can handle. Also – the issues that are covered by specific standards may not be entirely appropriate for the business, so there are many cases where companies such as Innocent Drinks have developed their own standards for sustainable sourcing. As labels become more known in specific product categories, they also become a mere condition of entry, which has been the case with Energy Star in electronics. This does not suit most marketing departments who seek to differentiate, first and foremost.

Another challenge to labelling is that it has limits – in particular, limits to scale. Labels are mostly recognized and understood by a niche group of consumers – a typical consumer will not buy an ecolabelled product unless it has a clear “what’s in it for me?” for them. For example, organic products have done well because many believe it to offer them a significant health benefit. This is also why we see an increasing number of B2B standards and certifications that have no consumer facing element, including the Better Cotton Initiative and UTZ Certified for coffee and cocoa, which allows companies to focus solely on making the commodity more sustainable.

What then needs to happen? We think that the model of standards + certifications + on-pack ecolabels needs to evolve, where they are separated and each are used and recognized as part of a larger sustainability toolkit. Standards would provide an increasing, pre-competitive baseline, and brands could compete around this, such as what apparel manufacturers are planning with the Sustainable Apparel Coalition’s index. In concert, partnerships and collaboration with civil society would help to transform supply chains and consumer norms and behaviour, for example with Procter & Gamble’s Turn to 30 cold water washing campaign. Certification could take the form of civil society and government evolving to be more effective and efficient in developing ways to hold business accountable. And lastly, brands – which intentionally started off as trustmarks themselves – would be the main focal point with labels becoming a complementary “back of pack” instrument, such as the case with Method using Cradle to Cradle certification as a design tool to reinforce the brand’s design focus, and using the label for the 1% of its customers who are interested in it.

It’s a tall order to be sure, and a lot needs to happen before this vision can be realized. But in a quickly changing space as sustainability – it’s time that ecolabels had their change too.

Photo by fmg2001. Reproduced under Creative Commons Licence

Cleaning up the "ethical oil" mess

2011-12-07T12:50:00.001-05:00

With Stephen Harper's government getting plenty of heat at the Durban climate conference over its decision to relegate Kyoto to the history books, there is a lot of discussion back home about the merits or otherwise of presenting the Canadian oil sands as "ethical oil". It's something we discussed in the blog earlier in the year, but the XL pipeline decision process has kept the issue very much on the front burner. Factor in a controversial TV spot by Ethicaloil.org comparing so-called "ethical" Canadian oil to "conflict" oil sourced from Saudi Arabia that funds oppression of women, and its no surprise to wind up in a heated debate

Yesterday, CBC, Canada's national broadcaster, featured a segment on ethical oil in its popular morning radio show The Current, and we were happy to be invited to participate, along with Kathryn Marshall, the spokesperson for Ethicaloil.org and Jody Williams, a Nobel Peace Prize winner, who has publicly come out against the tar sands. You can hear the lively discussion, led by the impressive host Anna Maria Tremonti on the CBC website.

A colleague of ours in the law school here at York University, Stepan Wood, has blogged about the show and takes the time to expand upon some critical points that there was hardly even enough time to raise in the conversation itself. As he says:

"For one thing,[ethical oil's] narrow focus on human rights and the rule of law distracts attention from the massive environmental damage and energy consumption involved in extraction and processing of tar sands oil. For another, the claim that tar sands operations fully respect human rights is debatable, with numerous First Nations claiming that these operations impair their rights to clean water and a healthful environment.It is also hard to miss the xenophobic undertones of the Ethical Oil message–it is no coincidence that most of the countries targeted by the campaign are ethnically, culturally or religiously distinct from the white Canadian majority"

The bottom line, in which we and Stepan agree, is that Canada is very much not a leader when it comes to handling its responsibilities around oil extraction:

"To be a real leader Canada would have to show that it is genuinely committed to progress toward a post-carbon economy and improvement of the human rights records of Canadian companies overseas. This would include holding Canadian oil companies to the same high standards wherever they do business in the world. It is disingenuous to say that oil companies in Canada are ethical leaders if those very same companies are busily pumping oil and propping up those same repressive foreign regimes that the Ethical Oil campaign vilifies."

We don't expect that to happen any time soon, and in fact Canada has been content to be relegated very much to the margins of the Durban conference. When even China is criticizing you for setting a bad example, any claims that the country is a leader in providing "ethical oil" are only likely to fall on deaf ears.

Graphic by jfeathersmith. Reproduced under Creative Commons Licence

The tents are gone. But what about the ideas?

2011-12-05T01:45:00.005-05:00

The tents are gone in New York’s Zuccotti Park and many other cities - including Toronto's St James Park. Daily we can follow how other Occupy sites in the US are closed down by more or less forceful police actions. By and large, one has to say that the movement as such is fading out, at least in its initial shape.

A good time then to assess two important questions. What, if anything, has the movement achieved? And, equally important: Where is it going from here?

As to the first question, even skeptics like Jeffrey Simpson from the Globe and Mail admit that the movement has put the finger on an important issue, namely the one of income inequality in most developed democracies. He has quite impressive numbers to make his case - that while Canada, thanks to a tighter regulated banking sector, has not felt the brunt of the current crisis quite as badly, the issue of inequality is no less a matter close to home. As Politico’s Ben Smith has shown, the mentioning of ‘income inequality’ in print and web media has quintupled over the course of the Occupy protests (from 91/week to over 500).

So there can be little doubt that the movement has raised long acknowledged issues and has given them a legitimate place in the public. That is a success - no doubt. Other than that though, I am quite pessimistic about the impact of the protests. Despite sympathizing with many of the concerns and this new way of political protest I am rather disillusioned because – by and large – most media outlets, print and TV alike, have not really taken the issue seriously. This certainly applies to the Canadian papers, and apart from TVO, I have a hard time to see some more engaging coverage on TV. Similar observations hold true to the US media – which nearly unanimously ignored Occupy Wall Street for the first couple of days. Even with lone voices such as Keith Olbermann’s on Current TV it is hard to mobilize a broader public when your message is somewhat obscured, watered down or ridiculed.

This leads to my second question of where the movement is going. A good measure of the validity of an argument is still the determination of its opposition. Pepper spraying peaceful students (UC Davis) and 84 years old ladies (Seattle), or fracturing the sculls of Iraq veterans (Oakland) are just the tip of that iceberg which is the violent response from public authorities in the United States.

The destruction of public spaces or safety concerns were popular arguments in Canada. My home is right next to St. James Park where Occupy Toronto took place. The park, a hangout for homeless people and drug consumers on normal days, has never been safer than during Occupy. And it were police vehicles that ploughed the turf into a brown mess two weeks ago.

Be that as it may, the reaction to the movement was decisive and uncompromising. Perhaps no one other than Frank Luntz, long time strategist for the Republican Party has put the underlying sentiments in better terms:

I'm so scared of this anti-Wall Street effort. I'm frightened to death... They're having an impact on what the American people think of capitalism.

He said these words instructing Republican campaigners on how to clean up their language to immunize it against Occupy’s agenda. In my book, that endorsement just takes the cake.

The tension in a society that embraces both capitalism, free markets and private property on the one hand and democracy on the other has always been there. In the early decades of the 20^th century we saw it spiraling out of control, leading to fascism or communism in Europe. In the US it led to the great depression, upon which Franklin Roosevelt took leadership in assigning a new role to government in bridging this inherent contradiction.

Capitalism is hampered by two things. First, its inequality of wealth distribution and second, its cyclical ups and downs. Both of which have always put those in a precarious spot who just had their labor to bring to the party of capitalism. The reason capitalism and democracy have now been able to coexist for some 60 years in many developed countries has to do with the fact that mechanisms of economic empowerment and redistribution had been implemented to mitigate against those two problems.

Keynes’ solution was that government addresses the problem, by guaranteeing basic welfare state provision and actively spending in times of economic downturn. The ‘neoliberal’ solution, linked to Reagan and Thatcher’s approach in the 1980s has been to turn labor into ‘mini-capitalists’: boosting home ownership and moving from tax-based to investment-based entitlement plans (e.g. retirement, life insurance) has given millions an active stake in the capitalist systems.

The financial crisis has pointed out the limits of both approaches. The reality of the Occupy movement is that it has been strongly driven by those ‘middle class’ Americans who fell into poverty in the last years. The movement only started now just because the effects of a rigged system are only now painfully palpable for a critical mass of people, as described in the current issue of the New Yorker.

The issue of inequality therefore is here to stay, never mind the preliminary seizure of Occupy protests this past autumn. Looking at the Republican presidential contest in the US offers a somber glimpse at the alternatives. Candidates with no interest in governing and no interest in the institutions that have provided some peace and prosperity for quite some time, dominate the debate. Even George W. Bush’s former speechwriter agonizes about that. If democracies cannot secure a stake for those who just bring their labor to the market of the capitalist system, it has to come up with some other ‘mortar’ for keeping the social fabric together: religion, xenophobia or crude nationalism are just some of the offers we currently see.

This is not just a North American problem. The rise of the far Right in Europe – from The Netherlands to Hungary – or the militant protests in Greece point into the same direction. A system of majority based rule only works if the majority has some ‘stake’, some form of participation and real grounds of aspiration with regard to the 'system'. This is exactly what is eroding under our eyes. Occupy deserves credit for making these shifts manifest.

One of the sources of antagonism towards the movement was its strong anti-corporate bias. In some ways this preoccupation points towards one avenue of solutions. Heavily indebted governments or individuals disenfranchised by the financial system are not generating the solutions any more which we dearly relied on so far. If we ask for securing the buy-in of the working middle class in the capitalist system, a more active role falls to the corporate sector. In some ways one might argue that this demand has been well heard – the vociferous efforts to shut the movement down certainly allow this interpretation. The social responsibilities of business – beyond avoiding all these obvious scandals surfaced in the financial crisis – certainly extend now beyond pure philanthropy. Paying decent middle class wages, providing employment and affordable access to basic products and services is an imperative - provided we want to see an ongoing coexistence of basic forms of both democracy and free markets. It is in the ‘enlightened self interest’ of business to live up to these demands.

So yes, the tents are gone. But the core issue is here to stay. As is the struggle to address these them.

How many CSR experts are just cheats and plagiarists?

2011-11-24T16:15:00.001-05:00

CSR experts, people that write about, research, and practice CSR day-in, day-out are a pretty responsible bunch, right? After all, who would listen to anyone talking about responsible business who they didn't think was, well ... responsible?

Uh, wrong. Unfortunately, if our recent experience is anything to go by, there are some decidedly irresponsible CSR experts out there. Actually, worse than that; not just irresponsible, but flat-out cheats and plagiarists. And we're not just talking about the usual CSR snake-oil salesmen who are simply out to make a quick buck from some dishonest greenwashing. No, we're talking the supposed purveyors of something resembling objective truth - academics and journalists.

How do we know? Simple. In the last couple of months we've run into several glaring examples of so-called experts simply stealing our work and passing it off as their own. Consider this one that has only just come to light. Jaquelina Jimena, a journalist and CSR adviser, wrote a nice article in the Canadian Mining Journal back in 2009 titled "Is Corporate Engagement Possible Through CSR Blogs?" Well, we would say it's nice, because it is almost word-for-word copied from one of our own blog entries "Corporate Engagement through CSR Blogs", published the year before. She changes our use of "we" to "I" of course, but that is about it. The rest is almost entirely plagiarized from our post. Well, except the last paragraph, which we she didn't copy from us. But that's not her work either. It's directly stolen from a post from our fellow blogger Fabian Pattberg.

Jimena has published other pieces in the Canadian Mining Journal about CSR, all of which, as far we can tell, contain substantial portions of text just cut and pasted from other people's articles and websites. Our friends at Ethical Corporation are a particularly popular source, it seems. Of course, she claims on her LinkedIn page, to be a "professional journalist" as well as a CSR adviser and lecturer, with experience among others advising at the Global Reporting Initiative and Anglo-American.

Now, we're not saying that Jimena isn't an expert in CSR,or in her specialist field of stakeholder engagement and communication. But as a potential editor, employer, client, or reader of hers, would you really put your trust in someone who, from time to time, made a living by stealing other people's work?

It's not just journalists though. While plagiarism in academia is usually discussed in relation to students (and we have to say, this continues to be a big problem in the sector), there are no shortage of cheats standing at the front of the classroom too. Again, our own experience is instructive here.

A few months back, it came to our attention that an article published in the journal Management Decision under the title "Sustainability managers or rogue mid-managers? A typology of corporate sustainability managers" and suppposedly written by professors Tang, Robinson and Harvey, was in fact almost entirely plagiarized from a working paper written by Andy and one of our long time friends and collaborators, Wayne Visser. After someone had kindly pointed this out to us, we informed the journal who did some checking and then retracted the offending piece, acknowledging that "a large proportion" of the article had been copied from ours.

We also did a little further digging and discovered that one of the ostensible authors, Kevin Tang, had even plagiarized almost his entire PhD thesis. It took about 5 minutes to find this out given that he'd copied almost word for word Jennifer Lynes' dissertation about environmental commitment in the airline industry which was easily available on-line. So we informed Lynes (who was suitably shocked) and Bond University in Australia, who had awarded Tang's PhD. They've now taken the online version of Tang's PhD down and informed us that a thorough investigation into the allegations is underway. So you can't check now this one yourself, but believe us, it is a cut-and-dried case of plagiarism, even down to the personal acknowledgments page!

We'd love to believe that these are just isolated incidents, but realistically we think it is just the tip of the iceberg. Both of these cases came to light by accident just in the last few weeks and we only noticed them because they were rip-offs of our own work. Who else is blissfully unaware of getting their CSR research stolen by a so-called expert? And how many other CSR experts are out there passing off someone else's work as their own that we haven't discovered yet?

Academia certainly has been getting into all sorts of cheating scandals recently. Earlier in the year we witnessed the forced resignation of the German Secretary of Defence after revelations of his plagiarized PhD thesis. A few weeks ago, an investigation confirmed that the noted psychologist Diederik Stapel, the former Dean of the Department of Social and Behavioral Sciences at Tilburg University in the Netherlands, had falsified data and made up entire experiments over the course of the past decade. Unethical journalism has also been in the news of late, especially around the News International phone hacking scandal. Both professions are clearly in need of clean-up.

At the moment, none of these more high profile scandals have been concerned with CSR experts. Not yet, anyway. But if our experience is anything to go by, it's probably just a matter of time.

Photo by loop_oh (Robert Ganzer). Reproduced under Creative Commons licence

Happy 2 months birthday, OWS!

2011-11-18T03:42:00.001-05:00

Its two months today that Occupy Wall Street had occupied Zuccotti Park in New York. And after strong reluctance from the big media (it took most of big US networks more than a week to cover the story) the movement has successfully occupied the news channels for the last weeks.

New York’s mayor duly used the two month anniversary of the movement to finally evict them from their initial site. Ironically though, that decision seems to just have added that other bit of publicity the movement could handily use. By the time of writing, between 15,000 and 35,000 people, depending whose estimate you want to believe, are currently marching in the streets of New York. Mike Bloomberg still does not disappoint as the most effective PR agent of the Occupy movement.

I had a strange déjà vu today when stumbling over one bit of news. Obviously, the evicted protesters in New York are flocking to church buildings to get food and shelter, and to be secure from police harassment. The last time when churches were the only safe haven for civil unrest was when people in East Germany took to the streets in the summer of 1989. Those famous ‘Monday demonstrations’ and their organization started in churches (note: this was before facebook and twitter). By November 9^th that year, the wall had finally fallen. And with it the regime that held the country in its grip for some 40 years.

Certainly in Toronto, where the Occupy movement has camped in St. James Park, co-owned by the Anglican Church, a similar pattern is visible. Even though support currently seem to falter, initially the church was one of the crucial supporters of the protest, supplying them with vital access to amenities.

This historical parallel is more than just a co-incidence. Like the demonstrations in 1989, the Occupy movement is only loosely organized, has some rather sweeping demands and has little sense of translating their agenda into the institutional setting of how our society is governed. All they have is a legitimate issue. They are concerned with the fact that governments no longer represent the people, the ‘99%’, and that wealth is blatantly unfairly distributed. It all sounds so familiar to me, up the chants to remain non violent by OWS protesters, very much like the famous ‘Keine Gewalt’ (‘no violence’) choruses which became the signature slogan of East German protestors 22 years ago.

Like communism, the current form of capitalism has created a governance system, where some very few are perceived to control societies and where large parts of the population feel disenfranchised and curtailed in many ways.

The crucial difference to today’s US seems to be that in most US cities the reaction of the police is rather uncompromising and violent. Events in Oakland or the pepper spraying of an 84 year old lady in Seattle are just a tip of the iceberg. In some ways the starkest prove that these protestors have a point is the remarkable police presence. When I visited Zuccotti Park in late October my guess would be that the ratio of police to protesters was at least 2:1.

If it is true that OWS is ‘not productive’ (Michael Bloomberg), why do we need so many police there? The fear of the establishment is palpable. New York just serves as the test tube for this: the Mayor Bloomberg, himself firmly in the ‘1%’, symbolizes the seizure of corporate interests of the political process. To become the ‘democratically’ elected mayor he spent $250m out of his private wealth.

Drawing the parallel to the fall of communism 22 years ago, one big difference seems to be that there is no ‘Gorbachev’ figure. There is no strong, prominent, visible leader on the other side, who understands the legitimacy of the issues and, as Michael Gorbachev at the time, refuses to use the power at his disposal to crush this movement.

This said though, some of the ‘1%’ understand the movement and take it seriously. As business school professors, we occasionally have to go to events where we rub shoulders with these guys. Just yesterday, I was totally flabbergasted listening to one of Canada’s real estate tycoons arguing that this movement is serious and here to stay and that it is something business leaders better take seriously.

It is difficult to predict where this movement is going. At the moment, the fact that it has stayed non-violent has certainly helped to make people sympathize with it that do not ordinarily go out on the streets demonstrating. The other element is the core issue of the movement. It seems that the blatant inequality of wealth and the co-optation of governments by business interests are the common denominator of the protests.

In some ways we have nothing to add to our earlier comments. There are strong parallels between the green movement starting off in the 1970s with pretty similar features. David McTaggart and the other founders of Greenpeace where hardly taken seriously by the establishment back then. But we all know which impact that movement had on politics, business and civil society.

So again, Happy Birthday Occupy Wall Street! And many happy returns!

Photo by David Shankbone, reproduced under the Creative Commons Licence.

Why is communication such a big deal for CSR?

2011-11-04T12:30:00.001-04:00

Corporate social responsibility often provokes a lot of debate. But one thing that most people seem to be agreed on is the necessity of good communications. Of course, what makes for "good" communications is not so clear cut. Should companies engage in dialogue and debate with their stakeholders? How do you communicate "authentically" with consumers around social issues? And what do employees expects or want in terms of internal communication around CSR? These are some of the questions occupying minds rights now, so it has been interesting to spend the last couple of weeks exploring some of the challenges around the intersection of CSR and communication, both from a research and practice perspective. Not that this has necessarily brought me any closer to the right answers, but I think it has helped a lot in clarifying what the right questions might be.

Last week I keynoted the 1st International CSR Communication conference in Amsterdam, NL, a primarily research conference that also featured a lot of practitioner participants. This was preceded by a doctoral workshop on CSR and communication research where budding PhD students sought to test out their ideas, theories, and methods with experienced researchers like myself and Mette Morsing from Copenhagen Business School. Then, this week I keynoted another pretty unique conference - a mixed practitioner/research conference in Copenhagen on CSR and social media titled "Social media for social purposes".

Suddenly it seems that the communications challenges in CSR are getting a lot of attention. Certainly they are beginning to attract a lot of research activity, whether from management researchers, communications scientists, or media analysts. There is some really interesting stuff happening out there, much of it making use of the new online data that is all around us. I've been impressed by some of the datasets that are being put together using Tweets, blogs, YouTube videos, media articles, and a variety of online texts and reports. The possibilities of analyzing "big data" around online CSR communication are growing all the time. But also, it is clear that we need more than just huge amounts of data - we also need to be asking the right questions.

Consider this. McDonald's, which has been a pioneer in blogging about its CSR practices through its Values in Practice blog, has recorded the following stats from January - November 2011:

Number of posts: 16.
Average number of comments per post: 0.5
Average number of tweets per post: 1.2
Average number of Facebook likes per post: 3.1
Average number of shares per post: 3.8

Now consider this. McDonald's has more than 11m people who have "liked" the company's main Facebook page. That's a lot of people who don't seem to be much interested in what is happening over at their CSR blog. Clearly something is up. CSR experts are saying that companies need to engage in dialogue with their stakeholders. So are McDonald's stakeholders actually not interested in dialogue? Is the way the company is communicating not relevant for them? Is the company blocking interacting on some way or is one way communication actually effective here?

As I say, we don't really have the answers to these sorts of questions yet, but the field is moving fast and through network, discourse, and sentiment analysis, for example, researchers are getting a better understanding of how and why people respond to CSR communications in particular ways.... and what this all means for the society we live in today. There is a long way to go, but it looks like its going to be an exciting and informative journey.

AC

Photo by joshfassbind. Reproduced under Creative Commons licence

Hannah Arendt And The Banality of (Corporate) Evil

2011-10-25T02:06:00.005-04:00

In this world of ongoing financial turmoil and unrest against the current form of capitalism it is interesting to see how the search for intellectual resources to fuel our thinking about a changed world is taking us to new shores.

This week, as part of the Holocaust Education Week, an exhibition about the philosopher Hannah Arendt started in Toronto. In many ways, this could not have been a timelier moment to have her heritage reinvigorated. Arendt is a staple in many discussions over 20^th century history and philosophy. Of Jewish origin, born in Germany in 1906, she emigrated to the US during the Nazi regime and became a vocal analyst on how oppression, totalitarianism and violence affects the individual and what the conditions and options of resistance are.

Now much of this seems to be a far cry from the life of many of us in the 21^st century. But it gets much more colorful if we add Arendt’s voice audible in later phases of her work: most notably, her book on the trial of Adolf Eichmann in the 1960s. It is here where the famous phrase of the ‘banality of evil’ was coined. It adumbrates the fact that Eichmann – in today’s lingo the ‘logistics-zsar’ of the holocaust – talked about his ‘job’ in his trial in Israel just like any Fed-Ex or UPS manager would describe her/his work today. It was just about ‘getting the job done’. That he was managing a ‘supply chain’ that started in ordinary people’s home and ended in a gas chamber was just a minute detail for Eichmann – otherwise a (more or less) faithful husband and a loving father of four. It was just a slight ethical glitch that his nine-to-five-job happened to be in the business of delivering some six million people to the gas chambers as smooth, efficient and cost-effective as possible. And boy, he was good at that!

Here is where Hannah Arendt’s unique vantage point kicks in: she was not so much interested in the individual’s guilt, evilness or criminal inclinations. In fact she thought that those aspects were rather marginal. The evil of Eichmann’s actions was in fact ‘banal’ as it occurred to amount just to some ‘executive decisions’ of an individual who never questioned the ethical nature of the wider organization he was operating in.

It is indeed a rather contemporary perspective. We are in the middle of a ‘financial crisis’ which has dominated our lives and attention now for more than three years. The ‘Occupy Wall Street’ protests have taken over globally and – despite a cacophonic range of claims – have highlighted the fact that our current economic and political system produces outcomes that are patently unethical by most available standards of judgment. And apart from Bernie Madoff or Raj Rajaratnam we had a hard time to attribute this mess to any particular individual.

Hannah Arendt’s legacy speaks to the fact that ethical agency of individuals is intricately interwoven and embedded in the social systems in which they are enacted. Fine. Maybe not that much of a spectacular finding, some of us might think. But it nevertheless raises the question of how ethical the systems are in which we live and work. What I like about Arendt is that she was not just stopping to blame the specific historical contingencies of the holocaust. It was never about just taking fascism, the Nazis or, for that matter, Germany as a culprit to task. Her central analytic take-away was that societies are able to ‘rationalize’ all sorts of atrocities. Consequently, in the 1970s, when the creeping ecological destruction of our planet reared its first signs of appearance, she talked about the capitalist system as a form of ‘economic totalitarianism’ which rationalizes the destruction of the planet. She plainly coined it as ‘eco-cide’ (as a pun on ‘genocide’).

In the current situation, Arendt’s vantage point highlights many of the questions, the ‘Occupy...’ movement elucidates. These are ongoing questions which will, it has to be said, occupy us a little longer than this blog can last. However, Arendt also raises the important question (initially with regard to her study of Adolf Eichmann):

‘The moment you come to the individual person, the question to be raised is no longer, how did this system function, but why did the defendant become a functionary of this organization?’

This is in some ways the more compelling question. How do we individually act in a system that, by many people’s conviction, has created blatant inequality, ecological destruction, and a public largely disenfranchised from democratic decision making? Arendt in this sense is a master optician alerting us to the ‘grey zones’ of human ethical existence. But also lets us never get off the hook in terms of questioning our role in the wider societal or organizational contexts we are embedded in.

Monday night in Toronto the opening of the ‘Hannah Arendt Denkraum’ (= thinking space) took place. In some ways it was an event riddled by irony. Located in the German Consulate it appeared, in language and in ritual, like yet another atonement for the empirical backdrop of Arendt’s work. This contextualization in some ways could not be further from Arendt’s initial ideas. Equally ironic, the speaker rather skillfully highlighted the general implications of Arendt’s work, and its damning view of contemporary capitalism etc. – while the entire event was sponsored by the German multinational Miele whose executives were rather uncomfortably clinging on to their wine glasses hoping the speech would be over rather sooner than later. What all those millionaire-sponsors of the Holocaust Education Week, listening to a fairly astute reading of Arendt’s anti-capitalist messages were thinking – I could hardly guess. I am very sure though what Arendt - hardly ever photographed without a cigarette in her mouth - would have thought of the oppressive North American 'ethics' on smoking indoors if she would have ever dared to light a fag on this event in her honour in the German Consulate...

The picture on top is from the 'Hannah Arendt Denkraum' exhibition by ovit, the picture below was taken from G4Gti - all reproduced under the Creative Commons Licence.

Why Occupy Wall Street should occupy corporate leaders' minds

2011-10-14T17:39:00.000-04:00

This weekend, the Occupy Wall Street protest will go global. Protests, marches and occupations are planned across the world, with almost a thousand events across every continent scheduled to go ahead on October 15th. Here in Toronto, the financial district around Bay Street is preparing for an occupation that has so far garnered more than 9000 followers on Facebook. In London, social media sites have registered more than 15000 followers for the planned occupation of the London Stock Exchange. Similar smaller scale events are in the offing from everywhere from Alaska to Auckland. Whatever the success of these protests, it is remarkable the speed at which a local event in New York which was hardly reported on two weeks ago, has now been turned into a global movement.

Although the range of issues and demands of the Occupy Wall Street campaign and its various international incarnations are many and diverse, they share a strong single point of focus. The financial sector is very much the villain here. This is in some contrast to the movement that the current events most parallel, the anti-globalization protests that took to the streets in late 1990s and early 2000s, exemplified best by the Battle in Seattle in 1999. At that time, although many of the issues were the same as those receiving attention now, the main point of focus was international finance and trade organizations such as the WTO and the IMF, and meetings of political leaders such as the G8 were major targets. Now, by occupying the financial centers of major cities, the focus is much tighter. The financial sector is public enemy no.1.

In many respects, this is not too surprising. Economies across much of the developed world have been in a constant state of crisis for the past three years. Austerity measures are biting hard. Unemployment is up. And a significant proportion of society feels excluded, exploited, and ready for an alternative. The financial sector is an obvious target because it is here that the systemic risks have been created, and it is here that so much of taxpayers money has ended up, shoring up institutions that are too big to fail. When these same organizations continue to post substantial profits, pay out huge bonuses and generally carry on as before, it is fairly predictable that they will become the focus of so much public ire.

Much of the initial response to Occupy Wall Street has been dismissive. The financial sector, which must be getting quite used to being the bad guy these days, has hardly raised a murmur in response. As of yet, we haven't seen a single press release on the events from major financial services organizations such as Bank of America, Barclays, Citigroup, Goldman Sachs, HSBC, or anyone else. Don't business leaders have anything to say about what's going on? Don't they want to be part of the conversation? Or are they just so concerned that anything they say will just be ridiculed by the protesters, or simply set them up as even more of a fall guy, that they are fearful of trying to put their position across in public?

But big business, and big finance in particular, needs to take this seriously. Here's why.

First, because governments are looking to be responsive and populist, especially with elections around the corner in the US. That could mean tighter controls, less freedom and more regulation. As even Dominic Barton of McKinsey made clear in the Harvard Business Review earlier this year, "Business leaders face a choice: They can reform the system, or watch as the government exerts control ... there is growing concern that if the fundamental issues revealed in the crisis remain unaddressed and the system fails again, the social contract between the capitalist system and the citizenry may truly rupture, with unpredictable but severely damaging results." Better regulation might fix some of these problems, but knee-jerk regulation, borne of anti-corporate prejudice is not going to be the best fix for the capitalist system, and not necessarily the one that we need.

Second, because the protests create a great opportunity for collective action on the part of business. Problems of financial risk, executive pay and corporate lobbying aren't going to be fixed by individual company initiatives, or even by national government regulation. If one firm or one country reduces its attractiveness by, for example, controlling pay, then talent will likely migrate to more rewarding shores. If one company puts a limit on government influence, then the attention of policy makers will simply be taken up by its competitors. That's the savage logic of the global marketplace. The best recipe for meaningful change is collective action across an entire industry. Like a financial sector executive pay protocol. Or a banking industry code of practice on political influence. But to be effective these would need to include government and civil society participation and include effective monitoring and sanctions across borders. No one is pretending this wouldn't require a huge effort. But crises of trust, like the current protests, could be the context that is needed for collective action such as this to arise and prosper.

Third, because these protests clearly signal that for some proportion of the population, all the money, time and effort expended on CSR simply isn't working. And spending more isn't going to make a difference. These people are looking for a change in the system, in the rules that govern business and it's relationship with government.They're looking for more accountability, less political influence, and if their demands are for better corporate citizenship, they mean the kind of citizenship where you pay your fair share of taxes and don't just simply offshore when it suits you. This requires a very different approach to CSR than the one now predominant in the corporate sector. It means fixing attention on how to devise better rules, not how to behave better within the existing rules.

The challenge here, clearly, is a big one. Perhaps then it is no surprise that corporate leaders have been content so far to just cover their ears and hope it all blows over. But there are fundamental issues that need addressing at the heart of our model of global capitalism. Occupying Wall Street, Bay Street, or the City of London may not be any kind of solution, but that does not mean it should just be dismissed either. Business leaders would be foolish not to see this as an opportunity to create an improved system of capitalism that serves us all better.

Photo by david_shankbone. Reproduced under Creative Commons licence

What the hype around Steve Jobs really says about us

2011-10-07T16:05:00.000-04:00

Let me confess this right upfront: I have never been an avid user of Apple’s products. I briefly owned an iPod in the mid 2000s but when it fell into my toilet (true!) one day I didn't really miss it. So writing about Steve Jobs this week feels a little like an atheist writing an obituary for the pope.

This said though, the remarkable expressions of sympathy for Steve Jobs’ untimely death wasn’t lost on me. They are extraordinary in number (2.5m tweets in the first 13 hours), source (e.g. Obama) and nature. It all reminds me a little of what happened when Princess Diana or JFK died, I guess. The question here of course is: what is it that causes millions of people to respond so emotionally and affectionately to the death of this business tycoon?

It is obvious that most of the usual features of these icons of popular culture do not really apply to Jobs. He was hardly a charismatic business leader with big PR value such as Richard Branson (Virgin) or Jack Welch (GE). In fact, many of his co-workers actually describe him as rather awkward and geeky in personal interactions. It also can’t be his generosity to society which has given business leaders such as Bill Gates or Warren Buffet some more charisma these days: up to now Steve Jobs has only engaged rather reluctantly in charity and so far has refused to join Gates’ initiative to pledge large parts of his personal wealth (at least $6.5bn) to social causes.

Talking of responsible business practices, in fact there might be a group of people who are actually a tad gleeful about seeing Jobs go: Chinese factory workers in Suzhou poisoned two years ago by toxic chemicals at Apple’s touchscreen factory wrote to Jobs directly, asking for his help in getting medical care and compensation for their illnesses and lost work time. Jobs never even cared to reply.

Much of the hype focuses on his ‘vision’, his ‘innovation’, his ‘genius’ etc. But is that really true? One of the first ‘inventions’ credited to Steve Jobs – the computer mouse and the clickable workspace (later adopted by Microsoft Windows) were initially invented at the Xerox PARC laboratories in the late 1970s. Jobs saw these ideas there first, and then just went on to commercialize them. All in all, Apple in this sense lives with ‘creation myth’, as Malcolm Gladwell recently put it.

Was it his business acumen? Maybe, but even here, until he was fired from Apple in 1985 the Macintosh PC was a niche product. It was rather Bill Gates who played that phase of the game to perfection. And as Robert Reich points out in Supercapitalism (Chapter 2) Steve Jobs and the entire Silicon Valley phenomenon was by no means initiated by all that ‘American entrepreneurship’ or ‘True spirit of modern capitalism’ which is now touted on all the American TV networks reminiscing about Jobs’ life. The American IT boom was initiated mostly by whopping defence contracts from the Pentagon and NASA – i.e. good old ‘socialist’ government money – in a quest to keep up in the cold war arms race in the 1970s and 80s.

So – what is it really? At a time when IT has become a key instrument not just for work but for most areas of our life many of us ‘consumers’ are pretty gutted by the quality of products we are ‘forced’ to use. Who of us has not despaired over the dismal quality of his Office software or the unreliability of his Windows browser? Who among us has not gone ballistic at the slow speed of their hardware at times or been incensed that the next ‘generation’ of software now forces us to by yet another, faster computer? Or utterly despaired when ploughing through an incomprehensible user manual or trying to install the new TV or some software on the PC for the umpteenth time?

One thing Steve Jobs obviously had understood is this: that consumers are actually happy when they use products that are suited to them: easy to operate, fun to use, opening new experiences or simply making life easier. Apple’s recent products - and the real beacons of Jobs’ fame and commercial success - are different in this one aspect: they put the user and his preferences first. And even as a heathen in the church of Apple followers I am ready to admit that the iPhone or the iPad provide an ergonomics and a scope of service which is really phenomenal. Especially compared to what is otherwise on offer.

So, in somewhat cynical terms, what is the real regret about Jobs’ untimely death? We will miss a CEO who put consumer interests first. It is that simple. While this should be a normal thing in a free market economy the reaction to Jobs’ death in my reading just goes to show how modest we have become as consumers. This is particularly true in the world of IT, where we rely in many areas on just one monopolist (Microsoft). Who has treated us over the years not exactly well. To a degree that the one entrepreneur, who really gave us our money’s worth, who offered us products and services which really add value to our life - we no longer see this as the normal result of free consumer choice in a competitive market, but as a gift bequeathed to us by a god-like figure of divine foresight, clairvoyance and care. St. Steve, as it were.

(DM)

Artwork by Cea, reproduced under the Creative Commons Licence.

UBS and that missing $2.3bn: Rogue trader, rogue company or rogue industry?

2011-09-20T19:20:00.001-04:00

Revelations last week that UBS, the Swiss-based global financial services company, had shipped close to $2.3bn due to "unauthorized trading" in its London investment banking division focused intense media speculation on the derivatives trader at the heart of the scandal, Kweku Adoboli. Earning himself the now familiar epithet of the "rogue trader", Adoboli also claimed the dubious honor of a position at number 3 in the all time Rogue Trader Top 10, placing well behind Jérôme Kerviel at number 1 (with nearly $7bn in losses), but close to Yasuo Hamanaka at number 2 ($2.6 bn) and well in front of Nick Leeson at number 4 ($1.3bn). Like those before him, Adoboli's losses have had grave repercussions for his employer and for the bank's stakeholders. UBS's share price dropped by 10% after the losses were reported, and with almost the entire quarterly earnings of the firm wiped out, the bank is reportedly aiming to accelerate a major restructuring of its business, involving thousands of job losses. Meanwhile UBS was quick to reassure its well-heeled customers that none of their money was at risk, though a downswing in the bank's reputation and overall trust levels seems inevitable.

The narrative of the "rogue trader" is a seductive one in making sense of events like those at UBS. A lone trader going off the rails, committing fraud to make himself rich - what could be a simpler explanation? But as with Kerviel, Leeson and others before him, Adoboli does not appear to have been seeking to profit directly from the unauthorized trades (although clearly would benefit indirectly in terms of a higher bonus if the gamble paid off). In reality it was more a case of taking an illegal route to try and make the firm more money. Likewise, Adoboli hardly fits the stereotype of the evil genius that many will picture when thinking of a rogue trader. By all accounts the Ghanaian born, 31 year old seems to be pretty unremarkable. He likes art and photography. He's "very polite", "very loyal" to his employers a "really nice guy" according to the neighbors, even his former landlord speaks highly of him. He went to private school and graduated from a respectable university (Full disclosure: actually he studied at the University of Nottingham, and graduated whilst Crane and Matten were teaching there - but did not, we might add, attend our ethics class). Clearly, a major share of the blame for UBS's losses must rest of the person who cooked the books to keep his spiraling losses secret. But he's hardly much of a rogue, it has to be said.

So where does the rest of the blame lie? UBS itself certainly has to take a large proportion of the responsibility. After all, what kind of financial institution doesn't realize that one of its employees is taking such wildly speculative positions and then cooking the books to hide it? Adobodi appears to have been making some unauthorized trades since 2008. In the end it was the trader himself who blew the whistle on his activities, not those who were responsible for exercising financial control. Internal and external auditing, back office controls, risk management, compliance -aren't they supposed to stop this kind of thing happening? Moody's the rating agency is belatedly pointing at "ongoing weaknesses" in the bank's risk management."We have continued to express concerns with regards to the ability of management to develop a robust risk culture and effective control framework," the agency said in the aftermath of the last week's disclosures. But this is hardly news for a bank like UBS that lost $37bn in the subprime mortgage crisis and had to be bailed out by Swiss taxpayers.

Myret Zaki, the author of a best-selling book on the bank has presented the situation as "a never-ending story repeating itself"."I'm not surprised at all about this," she told the UK newspaper the Telegraph "[UBS CEO] Oswald Grubel kept advocating an increase in risk-taking. When you have a CEO talking like that, you are not in a climate where you feel restricted, as a trader. He was on the side of continuing to make money on the markets, even though wealth management was employing 30pc fewer staff for double the profitability." Others, such as Richard Abbey, the senior managing director of financial investigations at Kroll, point to UBS's recent downsizing as a factor: "It's no coincidence that after downsizing and lay-offs these type of losses are more common. There may not be enough people to physically control checks and balances. It may be institutions are too reliant on computer controls and they are the easiest to bypass." In many respects then this was a time bomb waiting to go off - with Adobodi as much the symptom as the cause. This could be "rogue bank" just as much as "rogue trader".

Taking a broader perspective on the scandal, maybe we don't need to stop the blame game at Adobodi and UBS. As with the recent financial crisis, perhaps this is also a deeper rooted problem of the financial services industry as a whole. According to the Telegraph, "unauthorized" trading could be considerably more widespread than the occasional huge rogue trader incident suggests: "experts and insiders warn the amount of risky unauthorised trading is difficult to quantify and often not brought to the public eye unless losses are huge enough to be announced". The paper goes on to quote a "senior trader" at a London bank: "People are fired every year for having stuff on their book that they shouldn't. All the banks tend to know what has happened and why someone has left, but it doesn't get publicised. It's usually only a couple of million bucks." So while Adobodi may be number 3 in the rogue trader top 10, we never even get to hear about all those entries lower down the charts. Jérôme Kerviel, who's still there at the top of the list has suggested that companies like Société Générale, his then employer, may even tacitly endorse such trades as long as they are making the bank money. It's only when they start registering huge losses that the controls really kick in. As even the Wall Street Journal recently quipped: "what do you call a 'rogue' trader who makes $2 billion? A Managing Director!" These may of course be little more than jokes, rumors and groundless accusations. But clearly the financial services industry has a major task ahead of it to clean up its reputation and regain the trust of its stakeholders. The events at UBS are going to make that task even harder now. We don't just have a rogue trader on our hands. We have a rogue industry.

Photo by Ahmad Nawawi. Reproduced under Creative Commons Licence

Has 9/11 changed business ethics?

2011-09-11T14:14:00.002-04:00

I can’t believe I just wrote this headline. Looking at today’s punch lines in North American papers or on TV, you can get the impression that 9/11 was the all defining event of the new millennium. And that pretty much nothing in the world has remained the same ever since.

There is a lot of hyperbole out there these days. As shocking as 9/11 appeared at the time the last decade has seen – in terms of loss of life or any other criteria we want to apply – much worse tragedies, injustices and atrocities. This includes a number of ways in which America and its allies have responded to 9/11 (8,500 American soldiers and contractors killed, 103.000 Iraqi civilians killed, according to today’s New York Times).

World politics aside – and there are more gifted minds and eloquent writers out there to address those issues – it’s still worth just engaging in this little thought experiment. So let’s play around with this thought for a second: if 9/11 is the day ‘that changed everything’ – what has its effect been on the niche of the world we are commenting on in this blog? Here are some thoughts off the cuff.

Blurring lines between the public and the private. 9/11 has given many governments new legitimacy in redefing the public and the private in their relation to their citizens. Email, phone conversations, financial records, tax statements are just prominent examples where governments have attempted to intrude the privacy of citizens – all of course in the name of fighting ‘the war on terror’. Conspicuously, many of this information is administered by private companies. Unsurprisingly, we then see that electronic privacy, identity protection and a host of other privacy issues have turned in ethical dilemmas for private business. Arguably, many of the ethical issues here would be on the agenda without 9/11 though, as the main driver of ethical contestation is the mere fact that advances in information technology have made those new ways of information gathering possible in the first place.

New business opportunities. Looking at how America and its allies have approached the wars in Iraq and Afghanistan it is evident that we have seen a surge in business opportunities for private military contractors, mercenary companies and security providers. As the Wall Street Journal investigation ‘Top Secret America’ has highlighted this also pertains to intelligence gathering, counterterrorism or homeland security. This all has propelled private business in a sphere traditionally occupied by governments and other – at least on paper – publicly and democratically accountable societal actors. Again, we can legitimately ask in how far this is really triggered by 9/11. As Naomi Klein has pointed out (‘The Shock Doctrine, Chapter 14), it was exactly on September 10, 2001, when Donald Rumsfeld held a Town Hall Meeting in the Pentagon announcing far flung privatization of military operations leading CNN to the headline on the very eve of 9/11: ‘Defence Secretary Declares War on the Pentagon’s Bureaucracy’! In this sense then 9/11 might have accelerated these developments and provided some much needed legitimacy – but the underlying ideas and intentions were hardly new.

Soaring government deficits. The current debate on government deficits in the US, UK and elsewhere is often directly linked to the so-called financial crisis of 2008/9. This however overlooks the fact that due to the ‘response’ to 9/11 certainly the US and the UK, had already heavily overstretched their budgets. The New York Times today cites a figure of $1.6trillion in costs for just the wars post-9/11. In some ways one could even argue that due to the constant distraction of two wars the looming financial disaster could grow largely unnoticed by governmental scrutiny. And the need to finance those wars made it all too tempting to keep interest rates low - with the widely known effects on cheap credit in America. As a result we now see more or less in all Western democracies an increase slashing of classic welfare state provision. As many commentators have pointed out retreating governmental provision of health, education or other public services has been a key driver in a shifting expectation towards business in engaging in these arenas – the UK probably being the best laboratory to substantiate that thesis.

New issues in diversity and discrimination. Certainly in the US, 9/11 has heightened scepticism towards all things Muslim. This is certainly reflected in tightened immigration laws and the general perception of the public. Conspicuously, there is relatively little case evidence that this has also played out in business. While gender or sexual orientation have been well documented there is only scant evidence of actual discrimination on the basis of being of Muslim faith. This may, however, be more credited to the fairly palpable ‘Teflon’ of political correctness with which those topics have been touched since then in business.

A multipolar world and the rise of China and India. One of the most interesting developments in the US has been its heightened restrictions on immigration of highly educated young people including those graduating from American universities. This has had a number of implications for business both in the US and the rest of the world. Most obvious are changes in those industries where America is still quite advanced, most notably IT, electronics and software. All these industries have in the past and still at present do rely heavily on an influx of foreign-born professionals. While it has become more difficult to hire this talent at home, places such as India have immensely benefited from this. Much of the software development and business process outsourcing of leading US companies is now done in Bangalore, Hyderabad or Mumbai. In this sense, with the US becoming less open to a free movement of people we see that this has benefited other parts of the global economy. This has also been visible in University education. Countries such as the UK, Canada or Australia have seen a surge in international students who found their ambition to study in the US rendered impossible after 9/11.

For business ethics this move towards a world where the US in many fields has lost a pole position is quite interesting. With growing business interests in emerging economies we see, at the same time, an interest in business responsibilities and ethics growing in these parts of the globe. We can certainly argue that the last decade has seen much stronger influence and relevance of other areas of the globe. Business ethics, 30 years ago, was by and large an American subject. This is no longer the case today.

Arguably, much of the changes we discuss here have a fairly tenuous link to 9/11 as such. The events had their most severe impacts on ethics in government, warfare, international relations and how governments have (dis-)respected basic human rights since then. Some of it, as we think, has had a trickle-down effect on business. But maybe the gist of it is still best summarized by commodity trader Carlton Brown in the movie The Corporation: ‘In devastation, there is opportunity!’

Photo by JessyeAnne, reproduced under the Creative Commons licence.

Lessons in politics from Starbucks: sign of the times or storm in a coffee cup?

2011-09-06T23:24:00.003-04:00

Drip, latte, cappuccino, espresso, frappuccino; short, tall, grande, venti, trenta. Starbucks, the international coffee chain is great at giving choice in getting our daily dose of java. But what about campaign contributions or no contributions? Doesn't exactly roll off the tongue in the same way, but that is the stark choice that Starbucks CEO Howard Schultz is now offering US politicians in the face of the country's ongoing debt crisis. For the past few weeks Schultz has been seeking to build a coalition of US business leaders ready to join him in withholding campaign contributions from Washington until the main political parties start working together and agree a debt deal to turn around the beleaguered economy.

In the last few days Schultz has stepped up the campaign with full-page ads in the US press, including the New York Times, taking the form of an open letter on Starbucks headed paper to his "fellow citizens" to join him in "restoring hope in the American Dream" by sending "the message to today's elected officials in a civil, respectful voice they hear and understand, that the time to put citizenship ahead of partisanship is now".

It's quite a remarkable campaign. Schultz has the support of more than a hundred business leaders joining his pledge. Among those listed as "key supporters" on the campaign website are the CEOs of AOL, BBDO, NYSE, NASDAQ, Wholefoods Market and Zipcar. It is not such a significant coalition yet to cause the main political parties any real loss of sleep - compared with major contributors, most of these individuals and companies are not heavily involved in funding political parties. But for a business leader like Schultz to come out and so explicitly take a stand that effectively seeks to hold his domestic politicians to ransom until they do his bidding represents a fairly unique twist on the growing involvement of business in politics and the claim by corporations to be "good citizens".

In one sense, Schultz should be applauded for seeking to use his own and his company's economic muscle to try and achieve what he sees as a greater public good. Management guru, Rosabeth Moss Kanter, for instance has come out in favor of his "courage and leadership" in attempting to restore confidence. Even the more cynical corporate critics will find it difficult to see a clear-cut corporate self-interest at stake here. Sure it could help reinforce the famous Starbucks brand but at the same time its also going to annoy a lot of people too, especially those in Washington who are being labelled by Schultz and his CEO friends as having a "pervasive failure of leadership".

On the other hand, though, we might also question what's really going on here when we have a company CEO leveraging his company brand in such a way to make a political rather than an economic point, and at the same time claiming to be a "fellow citizen" with the rest of us (who can hardly afford to take out full page ads in the New York Times to present our own views on the current political logjam). This is not just Schultz the individual citizen speaking here but Schultz the corporate CEO and representative of Starbucks. But then, if (and it is a big "if") we accept corporations as political actors, then at least this example represents a fairly good case of building coalitions, providing an arena for free and fair deliberation, and moving beyond mere corporate self-interest.

To our mind the whole situation presents a really interesting insight into the emerging political role of the corporation and the difficult decisions that have to be made when business leaders start increasing their involvement in public debates. According to a McKinsey survey, "almost half of US executives believe they and their peers should play a leadership role in publicly shaping debate and in efforts to address sociopolitical issues such as education, health care, and foreign policy ... yet only one-seventh of survey respondents consider themselves to be playing that role now". Schultz's efforts to restore economic confidence by taking a step into politics gives us a taste of what might happen when these executives really start doing so. We still have a choice about whether and how those steps should be taken.

Photo by Nick Humphries. Reproduced under Creative Commons Licence.

OSC: Barking up the wrong tree?

2011-08-29T17:48:00.001-04:00

This weekend, an interesting business ethics story hit the papers in Canada. It is about the fairly unprecedented measure of the Ontario Securities and Exchange Commission (OSC), on Friday last week, to not only suspend the trade of Sino-Forest (TSX listing: TRE) but to also to demand five of their top executives to step down. Sino-Forest is a Hong-Kong based lumber company mostly operating in China which appeared to have overstated their reserves as well as their revenues. The OSC was alerted to this by a whistleblower in a Canadian investment bank (with the conspicuous name of Muddy Waters...). While the OSC later had to rescind their demand for personnel changes at Sino Forest – it turned out to have no jurisdiction over such far reaching changes in the corporate governance - the case raises some interesting questions about the role and intricacies of business ethics.

For one, it was a pretty unequivocal and drastic measure for a regulator. While the failure of the SEC in the US in the regulation of sub-prime mortgages or the Madoff case has been widely lamented, the OSC seems to be much more hands-on with these things. In some ways, many have argued that this relatively higher level of regulation has in fact strengthened over all the Canadian financial market place.

At the same time the case also raises questions about the role of a regulator. The job of the OSC is basically to ensure a functioning and fair market for capital and credit. The main challenge here is to make sure that the prices signal a credible account of the ‘goods’, and that the information about those goods is available to all players. Issuing commands about the intricacies of corporate governance, including who should do which job, certainly is not the job of the regulator.

In this sense, one could argue that the OSC – while trying to play the tough Sherrif in town – has maybe still some more work to do. Sino-Forest was correctly audited by Ernst & Young and got decent ratings by Standard & Poors and Moody’s (until Friday that is, when both agencies rated Sino-Forest down). It is amazing to see how little attention in the press is paid to these circumstances. How is it possible, that the very intermediaries in charge of making sure the information about a company out there is correct have failed so blatantly and frequently in recent times – with hardly any serious attention to this drawn by regulators? We would certainly recommend the OSC to look a bit closer to these actors.

The incident is also interesting in other respects. One might ask why such an allegedly strong ethical stand of the OSC comes at this point in time? One cannot help but to think about the ongoing plans of a merger between the Toronto Stock Exchange (TSX) and the London one (LSE) – something which is viewed by many Canadian business people as another sell-out of Canada’s business jewels. Arguably, this incident makes a point: the TSX, listing place of around 80% of all mining/resources stocks globally, lists mostly smaller und fairly unknown companies who – unlike big brands or companies with consumer interface – are mostly working under the radar of public scrutiny. Without strong scrutiny from NGOs, consumers or the media, a regulator in such a market has arguably more on its hands. Whether this could easily take place from London after such a merger remains open for discussion

It will also be interesting to watch if such a new approach of the OSC will debunk another Canadian myth: that as a small country in a global economy, regulators have to be soft in order to not shy business away to the US or even further. Currently, Sino-Forest is still traded over the counter in New York. Investors at the TSX though run no risk to buy this ‘junk bond’ any more. In some ways the case seems to provide another confirmation of the thesis that a stricter regulated financial sector has protected Canada and Canadians from many of the hardships the subprime mortgage crisis in the US in 2008 has landed their neighbours with.

Admittedly, this all sounds a bit like we are trying to sneak in another endorsement of the ‘ethics pays’-hypothesis. Well, in this case it might indeed, mostly for shareholders though. But that is a whole other ethical issue in itself.

Picture by jurvetson, reproduced under the Creative Commons Licence.

Crisis? What Crisis?

2011-08-15T17:14:00.002-04:00

In the latest edition of ‘Business Ethics’ we referred to the events of 2008 (Lehman, AIG, RBS etc.) as the ‘financial crisis of the late 2000s’. Well, at the time we did not expect this to be useful for the reasons it now makes total (non-)sense: we are quite likely to having witnessed the beginning of the next instalment these days.

Following the budget compromise in the US and the downgrading of US government bonds by Standard & Poors (S&P), we have seen markets plummeting and shareholder’s wealth wiped out in the billions. Again. Rather than being a distinct event from 3 years ago, the ‘financial crisis’ – as it is still commonly referred to – seems more of an ongoing concern than a one-off. This also seems to be the message from Europe: Greece is hardly on the safe side, and new bad news is coming out of Italy, Spain, and even France, of all places!

So let’s put it frankly: there is no such thing as ‘the financial crisis’ or ‘a new financial crisis’. What we see these days is just the new normality in global economics and politics.

What does that mean? We think the last two weeks have given us a little taster of the some major features dominating economic, social and political life for the foreseeable future. First, it was blatantly obvious how the recent turmoil, once again, got induced by the plotting of rating agencies. The initial spark for the fall of stock prices was the downgrading of US bonds by S&P. Now, this is in itself hilarious. As Paul Krugman pointed out, this was not only the company that in 2008 ‘gave Lehman Brothers, whose collapse triggered a global panic, an A rating right up to the month of its demise’. As he also reports, the initial downgrading report contained an error of $ 2trillion – and when it was discovered they downgraded those US bonds anyway.

While we do not want to speculate about the motivations of S&P this clearly points to the fact how global political developments are now directly shaped by private, unaccountable corporations. When we started to write about the role of ‘corporations as governments’ in the early 2000s many of our colleagues deemed this ‘an idea whose time has not yet come’. We have much less of a hard time to make this point these days – and we say this not without some regret. It is not only a statement regarding corporations in general. Readers of our text will have noticed that we included a section on the ethics of rating agencies in chapter six of the 3^rd edition in 2010. These players have escaped the scrutiny by both the public and academics alike for all too long.

Parallel to this, the last two weeks surfaced a culmination of public unrest and violence. We got a little appetizer over the summer from Greece, Italy or Spain already. But what happened on the streets of London, Manchester or Birmingham these last two weeks, takes it to a new level. The anger and veracity of violence against persons and property is quite shocking. One of the most thought provoking analyses by many commentators was summarized in an article in Der Spiegel this week. He argues that societies which just had witnessed theft, misappropriation of funds or invasion of privacy by bankers and other corporate players on a massive scale, with next to no consequences for these people, loses its sense for fairness of institutions and trust in the rule of law.

This is exacerbated by the fact that in all countries affected by the financial crisis the bill, by and large, is footed by cuts in welfare, health and education for middle and lower income segments of society. The latest US budget takes this to an even comical level: tax breaks for private jet owners, but cuts for the sick, old, young, and poor. The fact that the UK is leading in the riot department just reflects that Cameron’s Tories, despite all the smooth talk about the ‘big society’, has not changed a bit from the ‘nasty party’ that they were dubbed under Margret Thatcher in the 1980s.

This wider effect of ‘white collar’ crime has also been re-iterated by the whistleblower Harry Markopolos, who warned the SEC about Bernie Madoff’s Ponzi scheme years before it blew up. In an interview on which the new documentary ‘Chasing Bernie Madoff’ is based he talks about the blatant asymmetry we see between prosecuting million dollar corporate misappropriations and, say petty theft or small time bank robbery. This interview is worth watching also as Markopolos – more a nerdy accountant than an anti-corporate activist – elaborates on the corporate capture of the political system which has for decades refused to adequately police Wall Street. While his is a largely American argument the recent scandal around Rupert Murdoch’s phone hacking scandal has shown that this phenomenon is by no means confined to this side of the Atlantic.

There are little signs of change – which in theory should come from governments and regulators. The haphazard and amateurish handling of the Greek finances by EU leaders, or the dealings and compromises in US politics to fix the budget though provide little hope from this direction. It leaves us all to wonder how the world will develop. What is clear though is that the current situation is not just an ephemeral ditch – a ‘crisis’ - in which the economy is stuck for a short period of time. We should get used to the thought that it is in fact becoming the normal state of affairs.

Artwork by studebaker2008 (top) and takomabibelot (bottom right), reproduced under the Creative Commons licence.

Ethical sunscreen: getting it covered?

2011-07-30T11:02:00.001-04:00

The end of July. School is out, the beach is beckoning, and North America is just emerging from a massive heatwave. OK, so its grey and chilly in much of Northern Europe right now, but for many of us, summer is truly here. And like all self-respecting sunworshippers, we're all too aware that this means it is time for sunscreen. The question is, though, what is the responsible choice among the myriad brands in the market? And what counts for responsible when it comes to sunscreen anyway?

Over at the Ethical Consumer website, help is at hand. The UK-based magazine publishers and all-round ethical shopping wonks produce ethical buying guides for just about everything. Their buyers guide for sunscreen is available free and includes probably more information than anyone could possible want about how the various brands stack up against a wide array of social and environmental issues. Top of the list of things to avoid are potentially harmful chemical ingredients, including various parabens and cinnamates. Not to mention one of the more controversial ingredients around, nanoparticles. These are widely used in sunscreens, but have raised concerns around safety and environmental issues. Of course, the most responsible sunscreen is one that actually works. Natural, non-chemical ingredients are all well and good, but not if they don't guarantee you the protection you need ... or has been the case in the past, do not actually provide the SPF protection they claim on the package. With the EU tightening up regulation a few years ago, some of the "natural" producers have struggled to comply and stay in the market.

That said, unsurprisingly for an organization that has always held multinationals in low regard, the top-ranked brands according to Ethical Consumer are still largely small-scale natural product specialists, such as Yaoh organic hemp sunblock, and Green People sun lotion. Among the more well-known international brands, Clarins, Malibu, and Nivea are among the best scorers, though it has to be said that they all come in at less that 10 out of 20 on Ethical Consumer's scoring system. But this is mainly because the sunscreens are not just being ranked on their ingredients and other product-specific qualities. Ethical Consumer has always taken a more holistic view of a product's ethics, taking into account the producing company's policies and practices on a wide range of issues including employee rights, sustainability reporting, political involvement, and much more besides. In fact "product sustainability" is only one of five categories that a product is ranked on, the others being "environment", "animals", "people" and "politics". In essence, they evaluate the brand, not just the product.

Such a wide ranging assessment may not be for everyone. Some people just want to rate the product, not the whole corporate culture. In the past, you'd just have to stick with the final assessment given by the company doing the rating, but organizations like Ethical Consumer are now providing more sophisticated tools. We love the way they provide a customizable scorecard online so that you can quickly and easily prioritize the ethical issues that matter to you and de-prioritize those that don't just by using the sliding scales. And when you do, the differences between the sunscreen brands turn out to be more driven by company factors rather than simply product-specific factors. That's not to say these company factors aren't important. But clearly, not everyone is going to care as much about all the same issues. So customization is a technique that really works in ethical product ratings.

Where the sunscreen ratings don't quite convince though is on the real basics. People buy sunscreen to get protected from harmful UV rays. An ethical sunscreen has to be one that provides superior protection. But none of the more than 20 categories ranked by Ethical Consumer appear to include an assessment of actual performance. Maybe they just assume that if the products meet the legal standard then they are all of acceptable standard. But as far as we're concerned, ethical performance is not just about the ethical add-ons. It's also about doing the job the product is designed to do - and doing it well. Marketers refer to this as the "core" and the "augmented" product. If ethical evaluations pay no heed to the core product benefits, then they miss out on half the picture. Its like lying in the sun and using sunscreen on everything except your most sensitive areas. Sure, you're taking precautions - but you're still gonna get burnt exactly where its going to hurt the most. Ethical rankings need to get the essentials covered.

Photo by Pedro Moura Pinheiro. Reproduced under Creative Commons licence

Murky Murdoch

2011-07-19T12:39:00.003-04:00

To write about Rupert Murdoch, the Australian born media mogul and Chairman & CEO of Newscorp, in a business ethics blog seems somewhat tedious. Already in the first edition of our business ethics textbook nearly a decade ago we had a vignette on him and his conspicuous influence on governments and public opinion.

There is however now a good reason to take the subject up again. Murdoch and his British subsidiary News International have taken the old story to a new level (The Guardian maybe has the most comprehensive coverage on this).

Murdoch’s British tabloid ‘News of the World’ (NoW) has been in the headlines for a while for hacking into voicemail accounts of a number of celebrities. Actually the story is now lingering on since at least 2007. It only broke last week as to what the real extent of this scandal has grown into over the years: voicemail accounts, cell phones, bank accounts and legal files of some 4,000 individuals, 5,000 landline numbers and 4,000 mobile numbers may potentially have been hacked into not only by NoW, but also by other Murdoch papers such as The Sun or The Times. One of the things that gave the investigation extra spice was that among the targeted were many senior British politicians and – oh what sacrilege! – the Royal Family.

What really tipped over the debate is that NoW allegedly hacked into voicemail/cell phone accounts of abducted children, British Iraq war veterans or 7/7 victims. In the case of Milly Downing, a girl who was reported missing and ultimately turned out to be murdered, NoW not only hacked into her voicemail. They also deleted messages, which gave her parents the impression that she possibly might be alive – while the NoW ‘investigators’ already knew that this would be a false hope. At this stage allegations that NewsCorp has hacked into the phones of 9-11 victims are discussed in the media – which moves this scandal to a new level beyond just the UK.

First, it’s interesting how the ‘old’ story of media power over government plays out in this particular case. From Tony Blair on the one hand to David Cameron on the other – the intricate connections and the dependency of political leaders from Murdoch’s news empire has come to the fore once again. In Cameron’s case, the fact that he employed the already tainted NoW executive Andy Coulson as his communications officer has plunged his government into a crisis over those allegations. Ex UK Prime Minister Gordon Brown seemed to have stayed a bit cleaner here – one wonders if that is one of the reasons why the NoW published the health record of his then infant son.

No wonder then that a hard handed crackdown from the British government was somewhat difficult to assemble. It did not help that Scotland Yard, too, had obviously very cosy ties to Murdoch’s empire and for some time had the chief ‘hacker’of NewsCorp on their own payroll. The resignation of two senior officials this weekend just demonstrates how serious this has become. Yesterday’s reports on the death of Sean Hore, a whistleblower in the case asserting that Coulson knew about the hacking for years, just adds another layer of both tragedy and intrigue to what now looks the saga out of which crime fiction is made.

As an ironic aside, the entire scandal occurred in the first place because journalists were in fact doing actual journalistic work, which is: investigation. We have commented on the threat free media on the internet poses to this often costly side of news production by private news organisations. At the same time it appears that commercial pressure led to some rather ‘cost effective’ approaches into illegality to give way to sound journalistic work.

The ironic twist – and maybe the new angle - in all this seems to be that Rupert Murdoch and his family are now putting up at least the appearance of taking the scandal seriously just because they are a private company. Lets call it for a second the ‘commercial forces cleaning up the ethical misconducts of commercial media’-hypothesis. After all, more than anybody else the shareholders of News International now might ask serious questions about how events like this could happen which ultimately have – according to some accounts – reduced the value of the company by some 20%? And many alleged that Murdoch only threw himself into cleaning up the scandal to secure his bid for taking over the British TV station BSkyB.

It was interesting to watch Murdoch Senior and Junior appearing before the Parliamentary Committee in London today. The more both father and son tried to assert that they had no prior knowledge of the business practices, payments to lawyers, bribes to the police etc. – which makes sense in terms of litigation and other legal responsibilities – every shareholder must ask him-/herself about the corporate governance of Newscorp. If it is true that Chairman (Murdoch Sr.) and COO (Murdoch Jr.) had no knowledge of major operations what does this say about their fiduciary responsibilities to shareholders? Those investors who still trust the organisation will probably only do so because they know that informally the reality is maybe somewhat different.

Our somewhat reckless thesis here gets more fodder if we consider that the debate in the United States (which allegedly accounts for a third of Murdoch’s business) now focuses on whether News International (which owns Fox News or the The New York Post, among others) might be taken to court there because of the Foreign and Corrupt Practices Act. After all, one of the allegations in the UK consists of bribing Policemen to release private information to the NoW. No wonder, Murdoch Sr. now puts a serious face on cleaning up his organisation.

In a similar vein, it also cannot be overlooked how all the main global news organisations have zoomed in on this case. This is understandable for The Guardian or the BBC as domestic competitors, but also the New York Times, the Globe and Mail in Canada or pundits like Keith Olbermann now for weeks have the phone hacking scandal on top of their front pages or opening editorials. In a world of tough commercial competition in the news market it is only too understandable that the mishaps of Murdoch’s empire as a key competitor are a field day for those media players.

Will anything change? James Murdoch today announced in the hearing that his organisation is working on a new code of ethics. That much for solutions! – the sarcasm of this is certainly not lost on only the business ethics professor watching this. For us, the larger problem of Murdoch’s role in global politics is not that his organisations obviously resorted to shady practices in getting stories. It is still the fact that he personally wields enormous power over shaping public opinion. Blair, Cameron, or currently the ‘Tea Party’ movement in the US would be nowhere without his conglomerate backing them and providing a platform.

In this sense watching the Parliamentary Inquiry today was sad: as far as we can judge, the committee was staffed mostly by no-name backbenchers. No MP or politician of any stature (that is: with any strong future ambitions) would obviously dare to get into the way of Murdoch Sr. – who even in this ‘most humble hour’ of his career (as he put it today) could only barely disguise his contempt for them. Maybe those MPs should check on their cell phones or their kids’ health records or their tax returns – Rupert still has an army of ‘journalists’ out there who might return the favour one day in the future...

Picture by Surian Soosay. Reproduced under Creative Commons Licence.

Corporate responsibility infographics - the good, the bad and the ugly

2011-07-05T01:21:00.001-04:00

Data visualization, or the creation of "infographics", has been gradually seeping into the corporate responsibility world. And its no surprise. When their designers get it right, infographics can tell you an important story in a wonderfully accessible way using cool, hard facts. But when they get it wrong, it's just, well..... a mess. Too much data and it is confusing; too little and it risks being banal. And using the wrong data can simply discredit the whole enterprise from the beginning.

So what does a good corporate responsibility infographic actually look like then? We've been taking a good look at the craze for infographics, and picked out some of the best and the worst that relate to corporate responsibility issues. There are more and more appearing every day, so we're not claiming to provide anything like an exhaustive review, but here are a few examples that we think give a good flavor of the potential and pitfalls of turning business ethics into pictures. And if you don't agree with us, then please tell us why in the comments field ..... or better still, create an infographic to explain it all!

The Good

There has been a few corporate taxation infographics doing the rounds in the last couple of months. What we like about this one from onlinemba.com though is the funky design (you've gotta love that faux factory styling), the solid citations, and the clear storyline. Yes, it takes a fairly hardline anti-business stance, but it doesn't pretend the answers are obvious or simple.

Via: OnlineMBA.com

Another powerful infographic is this one detailing the role that pharmaceutical companies play in influencing doctors to prescribe their medicines. We like it because although it is a little on the long side (click on the image for the full image) it tackles an important question; it is controversial without being sensationalist (again, the referencing is pretty tight), the design is smart, and it rounds out the story with advice on what you can do to make a difference. Let's call it activism meets journalism.

Of course, infographics can be a lot more than just simply static visuals. And they don't have to be critical of business! Videos, animations, music and all kinds of possibilities are out there to tell corporate responsibility stories in interesting ways. We like this one from Fortune and CNN because it offers some nice simple interactivity about something all of us care about - what makes some places better to work in than others. Based on Fortune's annual 'Best companies to work for' survey, it not only shows which companies score well, but also lets you search the kinds of words that employees use to describe their companies - the top ones being "people", "time", "family" and benefit". But some of the cross-company comparisons are really interesting. Whilst top spot holder SAS includes words like "care", "life" and "health", Goldman Sacks at 23 emphasizes words like "best", "firm", "people" and "individual". Just goes to show that what makes a firm good to work for is very much in the eye of the beholder.

The Bad

Corporate tax dodging again. But this time the infographic is less successful. Sure it has an easy to understand message, but it doesn't have the richness of data to be authoritative. For a start it doesn't cite its sources, which immediately threatens some of its credibility. Second, it doesn't look to explain any of the facts it presents, but instead relies on some slightly shonky political posturing. Good infographics should make you feel like you've read an informed newspaper article. This comes across more like a bumper sticker.

Source: US Uncut - No Cuts Until Corporate Tax Cheats Pay Up!

The Ugly

Sometimes, not even well researched corporate responsibility infographics hit the mark. Getting the balance right between telling a clear story and getting the facts on the table can be tricky. We wanted to love this incredibly informative infographic about the BP oil spill from 2010 by Carol Zuber-Mallison but frankly it just doesn't cut it like it should. It's simply too crammed with data. Sure, it tries to describe a complex situation of corporate responsibility, but if infographics are going to be successful they've got to render that complexity easily understandable in a single narrative. This tries to cover too much. Plus, given all the data, the referencing could be better. How else is anyone supposed to check the facts? So although this is an impressive effort in many respects - especially the crazily ambitious attempt to update it in real time - it's ultimately an infographic fail. Too much info, not enough graphic.

CSR – It is still Greek to European Banks!

2011-06-22T01:41:00.000-04:00

Yesterday, Greek Prime Minister George Papandreou narrowly won the support of the Greek parliament for his ongoing efforts to steer the country away from bankruptcy. Whether this has given him a second political life though is an open question. Greece’s financial troubles are far from over.

As a member the EU and the Eurozone the survival of Greece within these European institutions seems still anything but certain. Last week, the debate among European heads of state and Finance Ministers on further support for Greece was tough and controversial. Finally an agreement of another multi billion Euro cash injection from mostly France and Germany paved the way for keeping Greece floating for another month or so.

A thorny nettle of disagreement between the countries was the question, in how far private sector banks should be part of the solution. Germany, whose banks exposure of some €20bn is much lower than France’s was insisting on more involvement, while France opposed this approach in fear of a downgrading of their private banks by rating agencies. The compromise turned out to appeal to banks to ‘voluntarily’ become involved – but precious little is found in the news about whether banks have actually taken up this ‘invitation’.

If we watch the footage of protests and civil unrest in Greece it is conceivable that further ‘austerity’ measures (i.e. cutting public services) – let alone an outright bankruptcy – of the Greek government will pose a serious threat to the country’s democratic institutions. Much (admittedly not all) of Greece’s current troubles are following the global financial crisis. Greece is perhaps the most visible example of what many citizens in North America and Europe think: that Governments pile up huge debts to fix the irresponsible behaviour of wealthy bankers and investors while asking the common taxpayer and middle/working class people to put up with reduced public services or – as for instance in the case of UK university students – higher prices for those services.

It reflects a recent debate in the CSR literature which was initiated by Colin Crouch, a prominent sociologist and, more recently, CSR expert at Warwick University. He argues that capitalism has been able to coexist with democracy in most Western countries only because there were mechanisms to deal with two problems inherent in capitalist market economies: first, the cyclical ups and downs of the economy, which exposes particularly middle and lower income groups to economic hardship. Second, the harmonious coexistence of both systems is only possible if the inherent inequality of income distribution in capitalist systems can be addressed in a way that some income at the top end is redistributed to those at the bottom.

For decades after World War II the mechanism to address this problem was referred to as Keynesianism. Government spending during recession as well as progressive taxation and a welfare state helped addressing these two problems. This system was somewhat obliterated in the 1980s with policies most visibly linked to Reagan and Thatcher, often referred to as ‘neo-liberalism’. Crouch though argues that those changes in fact created a policy regime of ‘privatized Keynesianism’. By encouraging and extending home ownership, pension plans based on investments in capital markets and other models of making the saving middle class to small scale investors, the two inherent contradictions between capitalism and democracy were basically to turn lower income citizens in ‘mini capitalists’.

With the so-called ‘financial crisis’ in the late 2000s though this system has proven to be no longer effective. Many lower and middle income citizens in Western countries have lost their homes and pensions – or at least have suffered a severe reduction of their value. Currently, he suggests, we see this mechanism of ‘privatized Keynesianism’ weakened, if not absent, with no real alternatives in sight.

In this situation we face two stark options. The first possibility is that similar to the 1920s and early 1930s, this absence of a mediating policy regime may give rise to political extremism, anti-democratic movements or outright the re-invigoration of fascism or left wing authoritarianism. In this light, the developments in Greece, but also the ongoing rise of the political extreme right in many European countries and the United States actually get quite a daunting character. We are not quite there yet, but the signs of far reaching unrest and despair about the effects of a global, largely unregulated capitalist system are clearly there and by all accounts, are likely to rise.

The other option though, in Crouch’s argument, is that one group among the winners of global capitalism and arguably the most powerful players step into the role of addressing the two inherent tensions between capitalism and democracy. This is exactly the point where corporate social responsibility would kick in. And in fact, as we have argued elsewhere, much of what companies are doing under the label of CSR is in fact very similar to classic welfare state activities. CSR in this perspective would see private corporations as pivotal actors in addressing those two inherent tensions between capitalism and democracy.

The reaction of European banks to support the effort of saving Greece from bankruptcy so far however shows little sign of awareness of this broader context for corporate responsibility. The Greek bailout situation is probably a blatant example of a country at the brink of severe political unrest where direct involvement of the private sector might indeed prevent a country sliding into anarchy or political extremism. So far though there are no signs that any of the European banks have seriously thought about their broader role in society. Maybe it is because the business case for this kind of CSR is so hard to make...

Picture by PIAZZA del POPOLO. Reproduced under Creative Commons Licence.

Another free download on corporate social responsibility

2011-06-16T05:04:00.000-04:00

Last year we released a free download of our introduction to corporate social responsibility, originally published in our textbook "Corporate social responsibility: readings and cases in a global context". It proved to be pretty popular, with hundreds of downloads in the months since it was released. Today, we are making available another free CSR download, this time from our three volume edited collection on CSR, originally published by Sage in 2007. You can download the chapter by going HERE and selecting the "One Click Download" tab.

The new download is more of an academic-oriented treatment than our last one. It sets out to describe the academic literature on CSR rather than how CSR is thought about by practitioners. So for anyone doing research in the field, or just looking for a general introduction to the academic field of CSR, it will provide a handy starting point. We intended it to be accessible rather than too complex or jargony, so it should make sense to non-academics too.

The book itself is mainly intended for university libraries to purchase. At over 1000 pages and with a price tag of £450, that will probably come as no surprise! But we wanted to give the specially written introduction a wider readership and the publishers Sage have kindly agreed to now make it available free to anyone that wants to read it - and with all the final formatting and page setting in place too.

You may be interested in knowing which articles we ended up collating to capture the field of scholarship of CSR at the time. Things have moved on in the literature since 2007 but we think this still gives a pretty thorough overview of the field. The full table contents are below. If anyone wants full references for any of these pieces, just drop us a line. And keep watching for news of our next addition to the Sage Library in Business and Management - a mammoth 4 volume set on New Directions in Business Ethics, due out next year.

FULL CONTENTS: CORPORATE SOCIAL RESPONSIBILITY. 3 VOLS, EDITED BY ANDREW CRANE AND DIRK MATTEN

Volume I: Theories and Concepts of Corporate Social Responsibility

1. Editors’ introduction

2. Introduction to Corporate Social Responsibility
2.1 What's a business for?, Charles Handy
2.2 The case for corporate social responsibility, Henry Mintzberg

3. Corporate Social Responsibility in Theory
3.1 The pyramid of corporate social responsibility: toward the moral management of organizational stakeholders, Archie B. Carroll
3.2 Corporate Social Responsibility Theories: Mapping the Territory, Elisabet Garriga & Domènec Melé

4. Critiques of Corporate Social Responsibility
4.1 The social responsibility of business is to increase its profits, Milton Friedman
4.2 The nature of business, Elaine Sternberg

5. Stakeholder Theory
5.1 The stakeholder theory of the corporation: concepts, evidence, and implications, Thomas Donaldson & Lee E. Preston
5.2 What stakeholder theory is not, Robert Phillips, R. Edward Freeman & Andrew C. Wicks

6. Corporate Citizenship
6.1 Corporate citizenship - towards an extended theoretical conceptualisation, Dirk Matten & Andrew Crane
6.2 Business citizenship: from domestic to global level of analysis, Jeanne M. Logsdon & Donna J. Wood

7. Corporate Sustainability and Business Ethics
7.1 Focusing on value: reconciling corporate social responsibility, sustainability and a stakeholder approach in a network world, David Wheeler, Barry Colbert & R. Edward Freeman
7.2 The corporate social policy process: beyond business ethics, corporate social responsibility, and corporate social responsiveness, Edwin M. Epstein

8. Corporate Social Performance
8.1 Corporate social performance revisited, Donna J. Wood
8.2 Corporate social and financial performance: A meta-analysis, Marc Orlitzky, Frank L. Schmidt & Sara L. Rynes

9. History of Corporate Social Responsibility
9.1 Corporate responsibility, Tom Cannon
9.2 Corporate social responsibility - evolution of a definitional construct, Archie B. Carroll

Volume II: Managing and Implementing Corporate Social Responsibility

1. Corporate Social Responsibility, Leadership And Strategy
1.1 Components of CEO Transformational Leadership and Corporate Social Responsibility, David A. Waldman, Donald S. Siegel & Mansour Javidan
1.2 How corporate social responsibility pays off, Lee Burke & Jeanne M. Logsdon

2. Organizing Corporate Social Responsibility: Organizational Structure, Culture And Learning
2.1 The Institutional Determinants of Social Responsibility, Marc T. Jones
2.2 The Path to Corporate Responsibility, Simon Zadek

3. Corporate Social Responsibility and Human Resource Management
3.1 The development of human rights responsibilities for multinational enterprises, Peter Muchlinski
3.2 Corporate social performance as a competitive advantage in attracting a quality workforce, Daniel W. Greening & Daniel B. Turban

4. Corporate Social Responsibility and Marketing
4.1 The Role of Marketing Actions with a Social Dimension: Appeals to the Institutional Environment, Jay M. Handelman & Stephen J. Arnold
4.2 Doing Better at Doing Good: when, why and how consumers respond to corporate social initiatives, C.B. Bhattacharya & Sankar Sen

5. Corporate Social Responsibility And Accounting
5.1 Thirty years of social accounting, reporting and auditing: what (if anything) have we learnt?, Rob Gray
5.2 Getting to the Bottom of "Triple Bottom Line", Wayne Norman & Chris MacDonald

6. Corporate Social Responsibility In Purchasing And Supply Chain Management
6.1 Supply chain specific? Understanding the patchy success of ethical sourcing initiatives, Sarah Roberts
6.2 Socially responsible organizational buying, Minette E. Drumwright

7. Corporate Social Responsibility And Public Affairs Management
7.1 Differences between public relations and corporate social responsibility: An analysis, Cynthia E. Clark
7.2 How Multinational Corporations Deal with their Socio-political Stakeholders: An Empirical Study in Asia, Europe, and the US, Dirk Holtbrügge & Nicola Berg

8. Stakeholder Management And Partnerships
8.1 Stakeholder management: framework and philosophy, R. Edward Freeman
8.2 Common interest, common good: Creating value through business and social sector partnerships, Shirley Sagawa & Eli Segal

9. Codes Of Conduct
9.1 Standards for corporate conduct in the international arena: challenges and opportunities for multinational corporations, S. Prakash Sethi
9.2 International codes of conduct and corporate social responsibility: Can transnational corporations regulate themselves?, Ans Kolk, Rob van Tulder & Carlijn Welters

Volume III: Corporate Social Responsibility in Global Context

1. Global Governance And The Firm
1.1 Global rules and private actors - towards a new role of the TNC in global governance, Andreas Georg Scherer, Guido Palazzo & Dorothée Baumann
1.2 Governing globalization? The state, law and structural change in corporate governance, John W. Cioffi

2. Institutions Of Global Corporate Social Responsibility
2.1 Reconstituting the public domain - issues, actors, and practices, John Gerard Ruggie
2.2 Strategic Responses to Global Climate Change: Conflicting Pressures on Multinationals in the Oil Industry, David L. Levy & Ans Kolk

3. Global Civil Society And The Corporation
3.1 The idea of global civil society, Mary Kaldor
3.2 Nongovernmental organizations as institutional actors in international business: theory and implications, Jonathan P. Doh & Hildy Teegen

4. Corporate Social Responsibility in Europe and North America
4.1 Corporate Social Responsibility in Europe and the U.S.: Insights from Businesses Self-presentations, Isabelle Maignan & David A. Ralston
4.2 A conceptual framework for understanding CSR in Europe, Dirk Matten & Jeremy Moon

5. Corporate Social Responsibility in Asia
5.1 Corporate Social Responsibility in Asia: A Seven Country Study of CSR Website Reporting, Wendy Chapple & Jeremy Moon
5.2 Transcending Transformation: Enlightening Endeavours at Tata Steel, S. Elankumaran, Rekha Seal & Anwar Hashmi

6. Corporate Social Responsibility in Africa
6.1 Revisiting Carroll's CSR pyramid: An African perspective, Wayne Visser
6.2 Do firms with unique competencies for rescuing victims of human catastrophes have special obligations? Corporate responsibility and the AIDS catastrophe in Sub-Saharan Africa, Thomas W. Dunfee

7. Corporate Social Responsibility in Latin America
7.1 The Corporate Social Responsibility System in Latin America and the Caribbean, Paul Alexander Haslam
7.2 Social and Environmental Responsibility in Small and Medium Enterprises in Latin America, Antonio Vives

8. Corporate Social Responsibility and International Development
8.1 Serving the world's poor, profitably, C.K. Prahalad & Allen Hammond
8.2 The false developmental promise of Corporate Social Responsibility: evidence from multinational oil companies, Jedrzej George Frynas

9. Fair Trade and Corporate Social Responsibility
9.1 The Fair Trade movement: parameters, issues, and future research, Geoff Moore
9.2 Fair Trade Futures, Alex Nicholls & Charlotte Opal

Photo by johntrainor. Reproduced under Creative Commons Licence

Cucumber ethics

2011-06-09T06:05:00.001-04:00

Last week’s E-coli outbreak in Germany was another interesting case study in the ethics of risk management. A ferocious looking bacteria, thought to be carried by the very food we eat whenever we feel like a healthy option (i.e. salad vegetables) has led to a scare that has plummeted many of Europe’s farmers into severe financial troubles. On the face of it the numbers don’t quite hit home why exactly consumers and regulators across Europe (and especially in Germany) have reacted so strongly: while, sadly, 26 people have died so far from the E-coli outbreak, this number looks negligible in comparison to Germany’s 3,651 fatalities in road accidents annually (in 2010). Banning Spanish cucumbers – sure thing! But touching the fundamental right of Germans to speed without limit on the Autobahn? No way, no one even thinks about that.

Fair enough maybe - food is one of those things that does raise the risk perception more than almost any other. But one of the more curious things about the outbreak was the initial culprit: cucumbers (especially as attention eventually turned to those evil little bean sprouts). But of course it wasn't just any old cucumbers - still less German cucumbers - but Spanish cucumbers that were blamed. In a continuously integrating EU economy, suddenly a poor little vegetable becomes the carrier of nationalistic identities and accusations.

There is something about cucumbers, one has to admit. In the German context, the vegetable has once before been at the centre of a rather black humoured joke just in the wake of the unification in 1989. The German satirical magazine ‘Titanic’ opened with a picture of ‘Zonen-Gabi’ (‘Gabi from the East’) holding up ‘her first banana’: a cucumber, peeled in the style of a banana. This of course was to make fun of the chronic absence of exotic fruits in the East during the time of the wall. The cucumber became an epitome of the split national identity that divided the unifying halves of the country at the time.

Poor cucumbers have also been at the centre of many jokes about the regulatory frenzy of EU bureaucrats in Europe. Allegedly there exist norms that lay out not merely how long, hard and green a cucumber must be but which even stipulate the degree of a cucumber's curvature: at maximum, its arc can be no more than 10 millimetres per 10 centimetre length. Imposed on poor Polish or Czech farmers prior to their countries’ accession to the EU, these regulations made the vegetable a symbol of the hegemonic power of Brussels and the nearly totalitarian zeal of regulating even the smallest little detail. All symbolized by, yes, cucumbers!

How political the innocent vegetable can become was demonstrated nowhere more strongly than in Iraq. According the UK newspaper the Telegraph, a few years ago Al-Qaeda leaders in Anbar province allegedly banned women from buying cucumbers because they considered them to be ‘male’ vegetables, and therefore in violation of religious law. Tomatoes, however, were perfectly fine for women to buy because they were considered female.

Well, if we were to do more research on the cultural history of cucumbers, who knows where we might end up - but Crane and Matten have no intention of jeopardizing the ‘General Audiences’ rating of their blog! Still, who would have thought that the lowly green vegetable could be such a repository of ethical values and a tool for inter-cultural conflict. So next time you're in the supermarket remember to take a second look at those cucumbers. There's so much more to them than meets the eye.

Top photo by Surian Soosay. Reproduced under creative commons licence

Sex, privacy and media ethics

2011-05-30T06:32:00.001-04:00

Sex sells. And sex really sells in the media business. With their profitability in free-fall, newspaper businesses especially are always on the look out for a salacious front page story to help them grab some precious market share. Unfaithful soccer stars "playing away from home", celebrity match-ups and break-ups, trysts with prostitutes, or accusations of sexual assault are all highly newsworthy, especially at the tabloid end of the market. But recent events in the UK and elsewhere have led many to question whether the sex lives of celebrities can be afforded some degree of privacy protection from an intrusive media, or whether in the interests of press freedom, and the growing uncontrollability on online social media "reporting", they are simply fair game.

In the last few weeks the Ryan Giggs super-injunction affair in the UK has brought these issues to a head. Why all the excitement? Well until a few days ago, Giggs, one of the UK's best known soccer players, was the mysterious unnamed figure who had successfully been granted a so-called super-injunction by the English courts. The injunction had been given to protect Giggs' privacy in the wake of an attempted kiss-and-tell story by Imogen Thomas, a former reality TV star, who claimed to have had an affair with the married, and previously squeaky-clean, soccer star. It not only prevented newspapers from reporting the story but also from even referring to the injunction or the claimant.

Super-injunctions like the one granted to Giggs have become the legal instruments of choice for individuals and companies in the UK looking to prevent their activities from being reported in the press. They are granted by the courts to protect privacy under the Human Rights Act. The newspaper industry is predictably waging a war of words against them because they shackle some of the traditional freedoms that they are used to and which they rely on to act as the fourth estate. Super injunctions also raise the hackles of the public because with a price tag that starts at something like US $100,000 they appear to allow special legal treatment for the rich and famous. Moreover, as the Giggs affair and the 2009 pollution case of the oil company Trafigura have shown, the rise of social media platforms such as Twitter through which stories can be circulated outside the remit of the formal TV and newspaper industries, the limits of existing legal protections for privacy are being severely tested. Giggs' name was connected to the injunction through Twitter long before the press could report on it, raising legal questions about the culpability of Twitter and it's tweeters for being in breech of the injunction.

There are all sorts of ethical questions arising out of this, but from our point of view, it largely boils down to the question of when our sex lives should be private and when could or should they also be public knowledge? Let's sort out some of the considerations here:

1. Consent
Obviously the starting point here is consensual sex between adults. Coerced sex or sex crimes fall into an entirely different realm of privacy. The media has a legitimate right to publish in these cases provided legal protections for victims and the accused (which differ between jurisdictions) are respected. But clearly Dominic Strauss Kahn's alleged assault on a hotel chambermaid should be held to a different standard of privacy than his consensual affairs. Affairs with subordinate employees, even when supposedly consensual, might fall somewhere in the middle given the power dynamics involved.

2. Public interest
Where there is a potential public interest at stake the media also has a stronger case for investigating and publishing, such as where politicians campaigning on "family values" are accused of marital infidelities, anti-gay advocates are caught with rent boys, or legal enforcers break the law by paying for sex. A weaker but sometimes defensible case can also be made for leaders in a position of authority and trust whose trustworthiness might be questioned when extra-marital affairs come to light. The sex lives of celebrities rarely have a public interest component .... however much the public may be interested in hearing about them!

3. Privacy vs free speech
In the absence of coercion or public interest, there is much less chance of the press claiming a prima facie right to publish. Privacy (and after all sex is pretty private) will usually trump rights to speech unless free speech can lead to other public benefits. It's a matter of avoiding harm being prioritized over some fairly minimal free speech benefits. The media may claim that the right to privacy is critically weakened in the case of marital infidelities and other ethical infractions. But even the unjust should be able to expect justice.

4. Harms and benefits
Without public interest, for the equation to fall on the side of publishing, there will often have to be some meaningful moral benefits for one or more of the parties to the "private" act. A spurned lover with an illegitimate love child for instance might be looking to tell their side of the story in the media and thereby gain some kind of apology or recompense from a celebrity. Here the ethical equation between speech and privacy should shift more convincingly towards publishing.

5. Reasonable expectation
Where the waters really get muddied is in the question of reasonable expectation. Privacy is typically attributed when there is a reasonable expectation that something will remain so. A telephone call or a conversation in a private residence should reasonably be expected to remain private, for example. That is why the UK newspaper, the News of the World, is in such hot water for it's illegal phone hacking of celebrities. These conversations took place in a reasonable expectation of privacy and should remain that way unless one of the participants chooses otherwise. But phone hacking is a case of the ethics of media tactics. A newspaper offered a story by a willing kiss-and-tell informant is very different. Here it is one of the participants looking to rewrite the "contract " of privacy established between themselves and their sexual partner. And in this case we have to ask ourselves whether soccer stars and other celebrities really have a reasonable expectation that their affairs with glamour models and reality TV stars will remain private. However much they wish it to be the case, there appears to be a lot of evidence to the contrary. Sure, this may be a case of a highly pragmatic interpretation of rights to privacy, but it's in the real world, a world of privacy for sale that we increasingly find ourselves in. Celebrities should be protected from direct intrusions into their privacy by the media. But maybe they should not be protected from their own decisions about who to be "private" with in the first place.

Photo by AtilaTheHun. Reproduced under creative commons licence

The Opium still works

2011-05-24T01:08:00.001-04:00

For those of our readers who don’t live in North America one of the news lines on major media outlets including CNN or The New York Times last weekend will sound rather quaint. Last Saturday (21 May), based on the predictions of the American Radio Broadcaster Harold Camping thousands of people on this side of the Atlantic were expecting the ‘rapture’, i.e. the disappearance of all ‘true’ Christians to heaven and the judgement day for all the rest of us.

The absurdity of what sounds like a weird hallucination of a 89-year old zealot however did not stop a remarkable number of followers to take his, allegedly, biblical calculations dead seriously. People dropped their university education and their jobs in the face of the world’s imminent end, or invested all their retirement savings into alerting the world to this event. As we know by now, it was of course all a big hoax.

Now we refer to this not so much as to dissect the insanity or validity of religious beliefs (though that’s a discussion worth having). The more amazing thing seems to be how powerful and pervasive religious beliefs still are. While Karl Marx’s famous quote of religion being ‘the opium of the people’ insinuated that a more liberated, developed and economically empowered humanity would no longer need this sedatitive we are still living on a planet where at least two thirds of the population confesses adherence to some form of religion. And the numbers are still rising.

It could be interesting to speculate about the reasons. Keith Bauer, a Maryland tractor-trailer driver who last week drove his family cross-country to witness the ‘rapture’ in Camping's California headquarters, told one newspaper: “I was hoping for it because I think heaven would be a lot better than this earth”. This all points to Marx: the ‘sigh of the oppressed’ is still loud and clear because by and large, the enormous social, economic and technological achievements of the last two centuries have still left the majority of people in the world where Marx saw them in the 19th century.

That would be one claim. We are aware that there are of course other contenders for explaining the unbroken popularity of religion. For us the prevailing relevance of religion has been interesting from a professional point of view. Initially, when we started writing the first edition of ‘Business Ethics’ in the early 2000s we were rather curt on the topic. This had to do, among other things, with the fact that the project of ‘ethics’ is in some ways the exact opposite of religion.

The central starting point of ethical reasoning is the assumption that human beings, by dint of experience and rational reflection, are indeed able to delineate morally right and wrong behaviour. Religion, most notably the monotheistic ones, however start from the assumption that human beings are not able to do this - in some religions even are considered intrinsically ‘fallen’ and corrupted. Man rather needs to be told about right and wrong by some ‘celestial dictator’ (as Christopher Hitchens would put it), who incentivizes his rules by the reward of heaven or hell - ultimately.

Consequently, we did not see too much space for religion in a book on ethics. However, it is remarkable how much research there has been on the effect of religious beliefs on business ethics in the last three decades. Just to talk a bit more from the Crane&Matten shopfloor, we are currently working on a four volume anthology on New Directions in Business Ethics – and lo and behold!: articles on religion and business ethics in the academic journals form a chunky part of it.

This reflects of course the fact that for many societies religion is still a major force in questions about the right or wrong of human behaviour. Over the years, we discovered this force of religion also among the readers of our textbook – hence we felt encouraged give it a bit more airtime in the latest edition. We are still, though, kind of puzzled about the conclusion from this research. After all, the imperatives of most of the world religions on business behaviour amount to some form of common sense, which does not necessarily need some superior authority to pull this out of the hat: fairness, honesty, respect of property, long term orientation, concern for the poor, and many other nice things. All these are strikingly similar to what secular ethicists would suggest.

Admittedly, some religions gave rise to specific tools (e.g. Islamic Finance) or elaborate conceptual frames (e.g. Catholic Social Thought) or pretty unique companies (e.g. Zoroastrianism and the TATA companies in India). More interesting is the research on whether religious business people act more ‘ethical’ (in the sense of morally more desirable) than others. Here, it strikes us that the beauty is often in the eye of the beholder (i.e. the person who conducts the research). But that’s probably a subject for yet another blog post.

Photo by Chris Yarzab, reproduced under the Creative Commons License.

Will privacy and security be critical differentiators in cloud computing?

2011-05-13T13:05:00.000-04:00

The debut this week of Google's new web-only Chromebook laptop, coming hot on the heels of Sony's massive data security breach just a few weeks ago suggests that data security is becoming increasingly critical for the success of technology companies. Google, no stranger to accusations over infringements of privacy, is upping the ante with the release of a computer that, rather than running software and storing files on its own hard drive, will instead rely predominantly on cloud computing. Yes, that means everything that you'd usually keep stored on your laptop will actually be held somewhere in a vast data center run by Google ... and of course, everything that you do can be tracked and recorded because you're signed-in and doing it online.

Although the Chromebook itself may not become quite the challenger to Microsoft and their Windows operating system that Google hopes it will be, the shift to cloud computing (which anyone using Picasa, Google Docs, Dropbox or numerous other applications is already very much part of) is sure to continue apace. But cloud computing raises a number of troubling ethical issues. On the one hand there are the environmental problems associated with running servers capable of storing such huge amounts of data. And then, of course, there are the privacy and data security issues that are faced by any company storing so much personal data online.

In recent weeks, consumers have been made all too aware of these privacy and security issues because of several high profile data disasters. Last month, for example, Amazon, which has been a leader in cloud computing, was forced to shut down its service for several days. A number of companies using its services were paralyzed and some even lost potentially valuable data. Then Sony's travails with hackers reached a new zenith when the company was forced to concede that more than 20,000 of users of its online gaming system had their financial details stolen. Osama bin Laden even got in on the action when a swath of spam Facebook messages purporting to be photos and videos recording the death of the former Al Qaeda leader turned out, according to the Financial Times, to be malicious malware designed to phish for passwords and financial data from infected computers. Ironically, even as we tried to publish this post, Blogger experienced a service disruption that meant that we were unable to publish for more than 24 hours. So much for the instantaneity of social media! All of this added up to bad news for technology companies looking to convince customers of the safety and security of their products and services.

This then raises the question of whether data security and privacy protection will increasingly become critical areas of competition between leading technology companies, especially those relying on cloud computing, rather than just being a kind of necessary evil for everyone concerned. Microsoft, whose operating systems and internet software had long been plagued with security problems, certainly seemed to be thinking this way when it launched its Windows 7 operating system. The company has long been compared unfavourably in terms of security to Apple's Mac OS - but appears to have regained some ground with its latest version. But as more and more personal data moves to the cloud, and companies like Facebook and Google become increasingly involved in recording, using and selling data related to our usage stats and preferences, this is likely to affect a wider range of companies ... and potentially in an even more significant way. Yesterday's revelations that Facebook employed a leading PR company to plant negative stories in the media about Google's privacy policies gives some indication of just how high the stakes are becoming. And nothing focuses corporate attention more than the threat of multiple lawsuits, which is the latest ignominy faced by Sony in the fall-out from its hacking attack.

Despite all this, there are still reasons to doubt whether security and privacy will ever become major differentiators in the battle for technology market share. Unlike speed, performance and design, security is a tricky intangible that is difficult to evaluate up front. And besides, despite their criticisms of technology companies, most end users in practice tend to display a fairly carefree disregard for security issues, and even for their own privacy protection. After all, how many people actually read all of those terms and conditions when they download another Facebook app or install a new piece of software? With commercial users the equation is different, of course, but for the average Joe, security is a concern but not one that yet impacts significantly on their technology choices.

In the end, a better way of looking at this might be for technology companies to start looking at privacy and security as pre-competitive issues. That is, rather than competing on the quality of their privacy protections, why not collaborate with one another to improve standards across the industry. After all, a major hack at Sony, an outage at Amazon, or a spate of malware at Facebook threaten the reputation for security across the board not just for the individual company that is targeted. Problems at one company can spell reputational damage for the industry as a whole. Sure, healthy competition can drive innovation in new security systems. But so too can healthy cooperation. And in the long run it might just be more effective, and provide a better service for skeptical consumers unsure of how far they want to put their trust in tech companies.

Picture by samplereality. Reproduced under Creative Commons licence.

Minefields and Mining

2011-05-09T08:12:00.003-04:00

What a couple days we had! First a Royal Wedding watched by half of the Globe. Then Obama’s capture of Osama. And finally, for us here in Canada, an election with a scary winner.

Welcome to the world of ambiguity. Wills & Kate look like a nice couple and less fake than most of what has been on display by the British Royals in the last decades. But all this pomp, glitter and archaic ceremony? It’s 2011,folks, wake up! But we still preferred the ecstatic crowds Friday a week ago in London to those in Washington last week Sunday night. A middle-ages inquisition ceremony could not have been jollier - or should we say - barbaric. Osama bin Laden? Certainly a person that has some things to answer for. But do we buy Obama’s ‘brought to justice’ rhetoric? After all, according to many Bin Laden and his movement was largely an American creation in the first place. And then the Canadian election: the Bonsai-George-Double-U Stephen Harper has now a solid majority. He will ‘Americanize’ the country further until it can just apply for becoming the 51st state of those ‘South of the Border’. The same election though gave us also the victory of the centre-left NDP winning the biggest number of seats in history. A bit of pyrrhic victory though.

All in all a minefield for the ethicist. Which provides some space to talk about – why not – mining. In fact that industry has taken our attention here in our School in Toronto over the last couple of months. As it turns out, Schulich will launch later this year a specialization in ‘Mining and Minerals’ on the MBA program. A core topic for this new program in fact will be the social responsibilities and ethics of mining.

Now, that’s a minefield in itself. Our school prides itself on being the leading school in the world in integrating environmental and social issues into business education. How does this go together with getting into bed with the mining industry? An industry which has a fairly dubious legacy with regard to ethics and social responsibility as the main focus of a school focusing exactly on these issues? There was some debate among faculty about this.

For us, this question gave rise to some thinking, too. As academics, we can stay, as one of our colleagues sometimes put it, ‘small and clean’ – or one can get out there, engage with issues, actors and industries which are of big importance and get the hands a little bit dirty. For the time being, the latter approach seems to be more intriguing and rewarding. In the sense that our research and teaching might in fact have an impact on the real world.

Of course a closer engagement with mining surfaces the rather complex nature of the industry. On a recent visit to some goldmines in Turkey we were able to witness these issues from closer up. We visited the area around Canakkale, 3 hours southwest of Istanbul, where currently some substantial explorations in gold mining are taking place. On the one hand, mining can in fact have substantial positive impacts on economic and social development of communities. This of course assumes that mining companies (in this case Australian and Canadian firms) share employment, infrastructure and profits with local communities. The effect can be rather substantial as often mines are located in otherwise not very developed regions. On the other hand, the disruption of the environment and the pollution around mining operations are huge.

The push for responsible mining, as we witnessed on site, is challenged by a number of characteristics of the industry. First, mining in the early, exploratory stages is still pretty much a gamble. Hundreds of millions investment is needed before even the first drop of oil or the first ounce of gold can be mined. This puts a rather tight budget and intense investor scrutiny on the companies and will make extensive voluntary expenses on environmental or other social responsibility issues rather difficult to justify. Second, unlike the big mining MNCs such as Rio Tinto, Glencore or AngloAmerican, the majority of companies are rather small, especially in the early stages of mining. They often simply lack the resources, often also the awareness of managers who mostly have science/engineering backgrounds with little understanding of wider social impacts of mining. Third, and finally, mining predominantly takes place in contexts of rather poor governance and regulation where the immediate pressure on companies to avoid harm to the environment and local communities is rather weak.

This is certainly an educational challenge. One executive we spoke to mentioned, just as an example of the dimensions of social responsibility, that the manager of a large mining project he was involved in in Papua New Guinea is now more or less in charge of half of the GDP of this country. This entails responsibilities beyond just the immediate profitable management of the extracting operations (which is a 24/7 job to begin with). Those managers inevitably assume – whether they know it or not – wider responsibilities for economic, social and environmental development and welfare of a country. We consider this a stark challenge – in education, research and engagement with the industry and their many critics in civil society. We might talk more about mining in this space!

Ethical slum tourism

2011-04-25T07:32:00.001-04:00

"Money good, working bad." Our guide, Ishaq has no shortage of aphorisms to capture the light and dark of life in Dharavi, one of Asia's largest slums. He points to the clouds of noxious fumes rising from the aluminium recycling unit where battered old containers are melted down and turned back into usable product. There are few if any environmental standards adhered to here, and health and safety is a concept seemingly irrelevant to the wage laborers whose safety boots are flip flops. But although the dangers are many, there is regular paid work. And for Mumbai's slum dwellers, that is what matters most. And besides, who else is going to do the dirty work of recycling the city's discarded junk and refuge, and returning it into productive use?

The life of a business ethics professor takes you to some pretty interesting places. It is not too often though that we find ourselves in the middle of a huge urban slum. Not that we've been short of opportunities having spent time in cities such as Rio, Cape Town, and Mumbai over the last few years. But there is always a profound sense of unease about stepping into the life of the city's poorest residents. Of course, in some cases it's just plain dangerous, such in the favelas of Rio. But even when it isn't, or when there's a local guide at hand to provide security, there are significant ethical doubts too. Knowing that you can just saunter back into the air conditioned hotel at the end of your trip to the slum means that you're little more than a slum tourist exploring the underbelly of society for your own voyeuristic pleasure. However much you may claim it to be educational to see how other sections of society live, slum tourism can't but help to raise moral uncertainty. This New York Times op ed from last year summarizes these concerns pretty succinctly. As a result, we've stayed away from the dubious attractions of slum tourism. Until now.

On the advice of a colleague, we decided to investigate a so-called 'ethical' slum tour provider. Whilst in Mumbai teaching at our school's MBA program in India we hooked up with Reality Tours and Travel, which offers tours of Dharavi, the city's largest and most well known slum. Dharavi is pretty much slap bang in the middle of modern metropolitan area of Mumbai, and just a short ride away from the 5-star luxury hotel where our school puts up its itinerant professors. The contrast, as with much of modern Mumbai, couldn't be more stark. Air-conditioned comfort is immediately replaced by a sweltering cacophony of noise and dirt. And discreet service is replaced by perilous, unrelenting industry.

It's clear that this is not just any old slum tour. There is a strict 'no cameras' policy, and the focus of the tour is not so much the corrugated iron shacks of the residential quarters of Dharavi, but the remarkable commercial activity that powers the slum's economy. It is said that some 5000 businesses operate in the tightly packed lanes of Dharavi, accounting for an incredible $600m of turnover annually - much of it in the illegal or informal economy. Recycling, leather and pottery make us the largest proportion of this, and so it is these that provide the focus of Reality's slum tour. Ishaq leads us first to a fragrant bakery and then onto a micro plastics recycling business where piles upon piles of multicoloured plastics are dried and then painstakingly sorted on the roof, before being melted down and then formed into pellets for resale in the cramped concrete rooms below. A sink and a few rolled mats is the only evidence that this is also where the workers live and sleep once the days' work is done. After that we move on to other recycling businesses, before passing the leather cutting, tanning and treating area and then onto the more peaceful environs of the potters colony which called Dharavi home since the 1930s. Along the way, we also take in a popadom bakery to see how the cross legged women shape and bake the traditional Indian appetisers, and briefly pass through (but do not stop at) some residential lanes.

According to Reality, the aim of the tour is "to show the positive side of the slums and break down negative stereotypes about its people and residents". Our trusty guide certainly doesn't fail to offer a positive spin on what might otherwise simply turn into a grim picture of India's unrelenting filth and poverty. He engages amiably with local residents, and he shows us a local health centre, an English language middle school, thriving businesses - this is no sob story meant to induce pity but an encouraging (if realistic) glimpse into Dharavi's struggle to sustain and prosper against the odds. As if to reinforce this, the tour finishes at the community centre run by Reality's sister organization (the NGO Reality Gives) which provides English, computing and skills training to disadvantaged young people.

It's a nice touch, but the real kicker is that this is not just some minor charitable add-on to 'put something back'. When Reality talks about changing the image of the slum, it goes beyond simply refocusing the optics. The company is putting its money where its mouth is. Since setting up in 2006, Reality has pledged that a full 80% of the profits from the slum tours would go to local charities. They even publish a summary of their accounts on the web to prove it. The establishment of their sister NGO Reality Gives in 2009 has provided a focus for these efforts, and along with the community centre, has now opened a kindergarden to provide quality education for preschoolers in the slum.

'Ethical' or 'responsible' tourism of all stripes, is a work in progress. Ethical slum tourism, in particular, poses all kinds of moral challenges. In our opinion, Reality is doing a fine job in walking that tightrope. Whilst it doesn't appear to have yet addressed the critical questions of scale - the more it succeeds, the more it risks overwhelming the slum with tourists - it does tackle both the content of its tours, and what it puts back into the community. Training and employing disadvantaged young people as guides, focusing on slum businesses rather than people's private lives, and banning cameras all help remove some of the moral tensions that can give slum tourism a bad name. And making investments that help educate slum residents and give them a chance to improve their lives helps balance the one-sided equation a little. Just ask the Dharavi resident who reveled in taking snaps of our small band of tourists whilst our own cameras stayed firmly in our backpacks.

Photo by Meanest Indian. Reproduced under Creative Commons License.

Labour rights - back to the future?

2011-04-14T10:32:00.001-04:00

While a lot of the topics we comments on in this blog are usually about either international events or the latest, contemporary developments, it is good to remember that some of the age old issues in business ethics are worth revisiting from time to time.

One of these is fair wages and the right to unionise. In North America these issues are currently high on the agenda as if we were still in the dark ages of capitalism in the 19^th century. This was nowhere more surprisingly evident than in last week’s instalment of ‘Real Time’ with Bill Maher. The show took off with an interview of Chesly ‘Sully’ Sullenberger. You remember, the pilot who landed his plane for lack of other options safely into the Hudson River in January 2009, after both engines had been struck by birds. Since then, Sullenberger, with his cool attitude and gigantic moustache not only reminded us what a real pilot should look like, but also became something of a hero.

What is interesting though is what he’s currently using his fame for. Before Congress, some time ago, he focused attention on some of the crucial ethical issues in his industry. The pay of most pilots and airline staff has dropped by around 40% and most employees – including Sullenberger – have lost their pensions when their airlines filed for Chapter 11 bankruptcy – as most large airlines in the US have done.

This silent infringement of workers’ rights has gone on for some time – but has received little attention. One of the big events – next to celebrity campaigning by ‘Sully’ – that did draw the attention to this was the crash of a Colgan Air jet in Buffalo only a month after the New York incident in February 2009. Meanwhile, a PBS documentary unearthed some interesting details, such as that most commuter airlines, like Colgan Air (a subsidiary of Continental Airlines), pay their pilots below a living wage – between US$16 to 20,000! The documentary suggests that one major contributor to the air crash was pilot fatigue and working conditions. The co-pilot, for instance, had to sleep in the airport the night before because she felt unable to afford a hotel in Newark before starting work in the morning.

The interesting ethical issues here clearly point to the need to revisit and re-apply some stakeholder thinking to the airline industry. While customers have seen falling prices in air tickets in the last decades this seems to have largely taken place at the expense of employees. It is somewhat tragic that it took a plane crash killing all 49 people on board to alert the public to these imbalances.

Now, the issue of a living wage is something we often discuss in the context of so-called ‘developing’ countries. But these questions obviously also need to be addressed in many industrialized countries. In some ways, the US ‘leads’ the way here, especially with respect to the big controversy in recent weeks over new legislation, discussed in the states of Wisconsin, Ohio, Florida and New Jersey, which substantially cuts back the rights of public sector workers to organize and bargain collectively with their employers.

Sifting through the US papers these days, it is a little bit like good old class warfare all over again. Union membership, long in decline, is surging: the American Federation of State, Country and Municipal Employees (AFS) has grown from 900,000 to 1.4 million members in the last couple of years.

Academically, it is interesting to see that these bread-and-butter labour issues initially did not have their natural home in the business ethics curriculum. Rather, these things are mainly studied among ‘Industrial Relations’- or ‘Labour Process’ scholars, with their separate conferences, journals and textbooks. With the return of these issues to the fore, it is clearly also time for the business ethics and CSR communities to start looking closer to home. Ahead of the curve here is the Aspen Institute which has launched an initiative on Low Wage Workers. This involves a teaching module for use in MBA courses and a white paper looking at low wage work in the US economy. Let's hope it's the spur for further action that we need.

Photo by Rochelle Hartman, reproduced under Creative Commons Licence.

Can India hit corruption for six?

2011-04-06T14:00:00.000-04:00

India, a country of cricket fanatics, has been in serious celebration mode since the national team's thrilling victory in the cricket world cup last weekend. News and media outlets here have covered little else for days. It's been front page news in the national press and all the rolling news programmes have been swamped with wall-to-wall coverage. Now though, as the euphoria starts to die down after Sunday's big victory, attention is beginning to turn to another major issue facing the country - corruption. The big question is though, will India be as victorious in fighting corruption as it has been at fighting its cricketing rivals. And the answer, we fear, is almost certainly no.

Corruption has been a serious problem in India for longer than anyone cares to remember. At 87th, it currently ranks about half way up the Corruption Perception Index from Transparency International. A score of 3.3 (out of a possible 10) suggests a major corruption problem. But recent events, such as the 2G bandwidth auction scandal, and investigations of widespread corruption at last year's Commonwealth Games in Delhi, have suggested a growing willingness by the media to investigate and report on corruption issues, and there is discontent with the practice amongst ordinary Indian people.

Much of the attention has understandably focused on public sector corruption, but few cases exclude companies as alleged bribe payers too. Late in 2010 Telecommunications Minister Andimuthu Raja was forced to resign over allegations that he lost the Indian Government some $38 billion in revenues by offering 2G telecom spectrum licences to favoured companies on beneficial terms. This week, struggling for media attention amongst the cricket hullabaloo, Raja, eight other individuals, and three companies were formally charged with criminal conspiracy, forgery, cheating and corruption in relation to the case. Meanwhile a parliamentary committee investigating the scandal this week quizzed Ratan Tata the head of the Tata Group about his role in the scandal, although unlike some of its rivals, there is no suggestion that Tata is likely to be subject to any charges.

The 2G scandal is gradually gathering momentum, and is putting significant pressure on the Indian government to do something serious about the escalating corruption problems. As yet, though, little tangible action is on the cards. One significant piece of legislation, the Jan Lokpal Bill, proposes to introduce an independent corruption ombudsman body at both national and state levels, but has been held up in protracted redrafting. The country was first promised such a law some 40 years ago. Now, with a view to preventing the government from procrastinating further and watering down the bill, social activist Anna Hazare from India Against Corruption, has pledged to go on an indefinite hunger strike to force the authorities to act. His demand is that they allow civil participation in the bill's review rather than let the government simply force through a toothless version that will do little to address the country's endemic corruption problems. Hazare's promise to fast until death is garnering huge attention and hundreds of people are now planning to join the fast.

Whether the Indian government will see this perfect storm around corruption reform as an opportunity to address a problem that drags down growth and hampers social equity remains to be seen. We certainly hope so. As Rahm Emanuel said at the time of the financial crisis in 2009, "you never want a serious crisis to go to waste."So far though, Prime Minister Singh's Government looks set to do exactly that - waste a perfectly good crisis. India, the country of world champions, deserves better.

Nuclear fallouts

2011-03-30T08:55:00.002-04:00

These last weekshave been, if anything, exciting times for anybody interested in the mechanics of international news cycles. While the earthquake, tsunami and nuclear meltdown in Japan were continuing to unfold, the new war in Libya seemed to dominate the headlines for a few days. Now, with more bad news from Japan the topic seems to be back on the agenda.

It is interesting to see how many of the debates of the 1980s on nuclear power are slowly coming back to the fore. Furthermore, the same irrationalities in dealing with risks are coming back on to the agenda. Since nuclear risks mainly exist in the individual’s perception, the debate over the last two weeks has been a splendid laboratory in understanding the social construction processes of reality.

One of the more surprising comments to read came from long-time environmental activist and commentator George Monbiot. In his regular column in The Guardian he shocked many with a relatively straightforward plea in favour of atomic energy. Mostly on the grounds of it being more climate friendly than coal. While his arguments are worth listening to it was surprising how he made his case: even taking the Chernobyl disaster into account, he argued that far fewer people died from nuclear power so far than will potentially do so in the future from global warming.

The interesting point here is not so much this weighing-against-each-other of life, disease and hazards but the fact that in the second decade of the new millennium, one crucial difference to the debate in the 1980s is visible: the spectre of global warming. The way we evaluate and compare these risks largely depends on our subjective evaluation. Monbiot in the British Isles probably has a very different recollection of the Chernobyl disaster than, say, people in Continental or Eastern Europe.

Arguably the country where the Japan disaster has caused the biggest ripples for business and politics is Germany. Not only did Physics-PhD and staunch nuclear supporter Angela Merkel announce immediately a 180-degree turnaround in the nation’s policy on nuclear energy. This was enough to anger large parts of the German business community. It did not help that her Economics minister Rainer Brüderle told industry leaders in a meeting that this was just ‘electoral tactics’ – a comment promptly leaked to the public and leading to his resignation from his role in the Liberal Party FDP.

The biggest winners of the debate in Germany currently are – to no surprise – the Greens. For the first time in history, they have scored enough votes to gain power in one of the most important states (Baden-Württemberg) in the southwest of Germany. The Green party now for the first time leads a state government and Germany has its first Green state premier. And this in one of the most conservative and industrious states of Germany, home to many crown jewels of German business, including Mercedes and Porsche. According to many commentators it was mostly the nuclear topic which swung voters to turn out for the Greens.

Funny enough, our own comments on this blog attracted some interesting attention from the media. We gave a couple of interviews recently – interestingly enough mostly for Chinese and Indian TV stations. Click on the clip (for Omni 2, a Canadian Chinese language program) – it is curious to see what journalists find worth quoting. It was probably the most trivial and banal thing we said in an interview which went on for more than 30 minutes. Which brings us back to news cycles. What a funny world we live in...

Photo by spacepleb. Reproduced under Creative Commons Licence

Corporate disaster relief in Japan: going beyond charity?

2011-03-21T14:25:00.000-04:00

With global attention focusing on the rapid escalation of conflict in Libya and desperate efforts to contain the nuclear threat in Japan, it is easy for the ongoing humanitarian crisis in the wake of the Japanese earthquake and tsunami to recede from view. But with reports of the death toll now edging past 18,000, and nearly 500,000 people still living in shelters, the country is still certainly in dire need of support and assistance - and will be for some time to come. A report from the World Bank has estimated that the damage inflicted by the disaster will cost somewhere between $123bn and $235bn, the equivalent of some 2.5% to 4% of the country's GDP. Recovery could take up to 5 years, the report suggests.

Business in Japan has been significantly damaged by the quake and its aftermath. The automotive and electronics supply chain, in particular, appear to have been severely disrupted, leading to delays and shutdowns in production. But as previous disasters have shown, business can also play a major role in rescue and relief operations, as well as in subsequent rebuilding efforts. Wal-Mart famously upstaged the US government in responding effectively to the floods in New Orleans after Hurricane Katrina in 2005. In contrast, after the devastating 2008 cyclone in Burma, international companies were slow to offer assistance. Last year's Haitian earthquake generated a lot of corporate donations, as well as a fair deal of controversy around the role of companies in economic redevelopment and rebuilding projects.

Corporate involvement in disaster relief in Japan has yet to hit the headlines in any major way, primarily, as far as we can tell, because companies have been rather conservative in their responses. That's not to say that companies haven't helped raise a lot of money for the cause, because they have. According to the US Chamber of Commerce's, Global Aid Tracker, which does a pretty impressive job of keeping tabs on such things, global corporate assistance for the Japan crisis has now exceeded $158 million. This includes 100m Yen (about US $1.2m) each from companies such as Bayer, BP, Hyundai, LG, Nikon, and others. Even higher sums - up to 5 times as much in fact - have been committed by the likes of Canon, Citigroup, Dow, GE, Mitsubishi, Nintendo, Sony, and Wal-Mart. As you can see, it's not just Japanese companies either, but global companies, especially those operating in Japan doing the giving. The Japanese Red Cross, however, appears to be the most favoured recipient.

Some companies have linked up their corporate donations with employee giving, often by matching employee donations, as a way of engaging workers in CSR initiatives. An interesting development here has been the tie-up between the CSR services company AngelPoints and Network for Good to provide a free on-line giving platform to the firm's clients. As the firm's press release puts it:

From now until the end of April, two million employees from companies such as Newell-Rubbermaid and Sterling Savings Bank will have access to a centralized online donation platform that will facilitate the immediate transfer of funds to organizations in Japan that need it most.

In fact, the on-line world has probably seen some of the more innovative responses to the disaster from the corporate community. Whilst some, such as iTunes and LivingSocial have simply enabled users to readily make donations through their sites, various Japanese gaming companies have developed cause-related game tie-ins to engage their users in contributing to relief efforts. The gaming demographic is notoriously difficult to enlist in social programmes, so it is certainly a positive sign that gaming companies are using their core products to reach out in this way. Zinga, the US company behind the hugely popular Facebook games, Farmville and Mafia Wars has followed up its Haiti giving initiative with a Farmville in-app donation vehicle which enables users to donate by buying virtual goods within the game - in this case, a daikon crop. Launched within 24 hrs of the disaster, online gamers reportedly went on to help Zinga contribute more than US $1m in just a few days. For a company with a tagline of 'connecting the world through games' (and already drawing fire for its addictive effect on young players), Zinga's ability to use social media to connect gamers around the world with major social problems is a surefire winner.

Elsewhere, there has been a disappointing lack of innovation among the corporate community in the Japan disaster relief. Providing money and in-kind goods is one thing, but what really can make humanitarian aid efforts stand out are when they leverage core corporate capabilities. Japanese manufacturing companies, with their decades of experience in just-in-time management and lean manufacturing practices, could be deploying their logistics and supply chain prowess to relief efforts. Law firms and financial services companies could be putting their skills towards helping displaced families, many of which lack earthquake insurance, sort out the legal and financial mess they have found themselves in rather than simply donating cash. The list goes on. Short-term charity is fine as far as it goes, but companies should know that a more strategic approach to corporate responsibility has the potential to add considerably more value both to the stricken Japanese people and to themselves.

Going nuclear?

2011-03-13T17:05:00.004-04:00

This weekend is another proof of the absurdities of short-lived international news cycles. While the revolution in Northern Africa/Libya is still ongoing but features rather low on news sites, and academic scandals are forgotten totally - the earthquake plus tsunami in Japan has swept most other stories from the screen.

Fair enough. What we have seen from Japan has been harrowing. Crane & Matten have taught and worked with many Japanese students over the years and our thoughts have been with them in recent days. We hope that they and their families are all fine and wish them our heartfelt best. Let us know how things are going!

One facet of the catastrophe though moves it clearly to a next level of watching some apocalyptic science fiction movie: We are talking about the ongoing news story about the explosion and potential meltdown of so far four nuclear reactors (by the time we write this). The nuclear beast is rearing its ugly head again.

We remember when the Chernobyl accident happened in 1986 many western commentators put much of the blame on the allegation that the Soviets had old technology, they did not run things properly and anyway, it just went to show that communists are not good at anything. Now – this is Japan, one of the high tech capitalist nations of the world. Sure, this was triggered by one of the top 5 earthquakes in history. But in Japan, earthquakes are not what extreme snowstorms are in Britain. The Kobe earthquake which claimed six and a half thousand lives happened just 16 years ago.

The event hits at a time when nuclear power was experiencing a second spring in many industrial countries. As a carbon-free source of energy it seems a good alternative to fossil fuels, which are considered key drivers of climate change. Many countries that have been shying away from nuclear after Chernobyl or the Harrisburg incident in the US are now reconsidering their options. Finland has just built some new reactors, Obama has issued fresh permits for uranium mining in Colorado, even Germany (which ruled it out 10 years ago) is prolonging the life-cycles of its existing plants – just to name a few examples.

While many experts in environmental politics considered the debate on nuclear power dead by the beginning of the last decade, it is amazing to see that it has come back. The disaster unfolding as we speak in Japan elucidates exactly why a rational discourse on nuclear power is so difficult.

The main threats of this technology are consequences which are mostly uncertain or even unknown. In other words, these ‘risks’ – apart from a few accidents we have seen – entail consequences which humans normally will find difficult to imagine, much less to calculate. The speculations on TV by ‘experts’ about what happens to Japan in case this really turns bad clearly demonstrates this. While the probability of nuclear incidents historically has been very low, the potential impact is without boundaries. Geographical boundaries, but also temporal ones: how long will people suffer from the fallouts we have already seen this weekend? Not to think about the worst case scenario...

Nuclear risks are unique. Their probability – from all we know – is rather low and since we have so few incidents, they are hardly calculable (unlike your car insurance, where we have ample data to establish probabilities). At the same time, the potential impact or damage of a nuclear accident tends toward infinity. Thus the normal way of assessing risks is rather difficult: a probability next to zero times a damage next to infinity – what exactly does this risk look like?

It is here where irrationality and ideology often fill a gap in the debate, as rational concepts fail to analyze the problem. This is exacerbated by the problem that nuclear risks are now ‘compared’ to the risks of global warming – which again is a risk that is difficult to calculate. Not much mathematical information exists on how likely the increase in temperature is. And even less information is available on how hard climate change will hit, where, when, who, and which parts of the world. So, finding trade-offs between nuclear risks and climate change risks is next to impossible – proving another characteristic of those modern risks: their ‘incommensurability’, meaning, it is impossible to ‘compare’ and weigh these risks against each other.

So what hope is there after this wake-up call about the fact that nuclear is not the silver bullet against climate change? We have to accept that climate change is real (even though we can say with little certainty how exactly it will hit us) and nuclear power is not a safe option either. We would argue that much more effort, resources and political will has to be directed toward alternative sources of energy: energy saving (by many accounts our largest resource), renewables, and lifestyle changes. If the disaster in Japan would trigger that debate there is at least a glimmer of hope coming out of this unfolding catastrophe.

Photo by IgnatiusJReillyEsq. Reproduced under Creative Commons Licence

Controversies in university funding: LSE and the Libyan connection

2011-03-07T22:57:00.002-05:00

The London School of Economics has been embroiled in a major controversy regarding its relationship with the under-siege Libyan regime, and most particularly Saif Al-Islam Gaddafi, the son of the Libyan leader. Last week saw the shock resignation of the LSE's Director, Sir Howard Davies, as a direct result of the crisis - a major scalp for those arguing that the university had put commercial interests before its academic integrity. But the case is far from clear cut.

So what has got the internationally acclaimed university into such hot water? The critical issue here is the receipt of money from sources attached to the Libyan regime, including a donation of £1.5m from a charitable foundation run by Gaddafi's son, and £2.2m paid to the university to train Libyan officials. To complicate matters, Davies also acted as an advisor to the Libyan sovereign wealth fund. Oh, and Saif Al-Islam Gaddafi is an alumnus of LSE, whose PhD, awarded in 2008, is now the subject of a heated plagiarism scandal. As with the recent case of Karl-Theodor zu Guttenberg, the German Defence Secretary that we covered two weeks ago, an on-line campaign to identify and make public alleged plagiarism offences in Gaddafi’s doctoral thesis has gathered considerable momentum, forcing the university to instigate an academic offences investigation. Who knew that PhD plagiarism would be such an on-trend internet phenomenon in the first months of 2011?

Davies' resignation from his role as Director of LSE could not have been envisaged only weeks ago. But with Gaddafi senior and his Libyan regime now widely condemned after the dictator’s brutal response to the public uprising in the country, (and Gaddafi junior very much defending his father’s position) those with links to Gaddafi have also increasingly come under fire. And it’s not only pop stars like Usher, Beyonce, and Nelly Furtado. When a university such as LSE is linked in such a direct way to human rights abuses, it is no surprise that its reputation will come under fire. As Davies remarked about his resignation:

"I advised the [LSE] council that it was reasonable to accept the money and that has turned out to be a mistake," he said. "There were risks involved in taking funding from sources associated with Libya and they should have been weighed more heavily in the balance."

Well yes, that’s probably so. University leaders do have a responsibility for upholding the reputations of their institutions. And despite the recent charm offensive from Libya, it certainly did continue to pose a significant reputational risk. But then with hindsight that is, of course, easy to say. The UK government was certainly strongly encouraging the LSE to engage more with the country and there’s definitely a strong case to be made that bringing the educational heft of the LSE to the Libyan regime might well have made a contribution to enhancing openness and democracy in ways that only a liberal education can. This side of the argument was persuasively presented by our former colleague, Darryn Mitussis, writing in the Letters pages of the The Guardian newspaper:

“Introducing the children of autocracy to the best traditions of critical, reflexive British education and inculcating anointed leaders with the rigours of public accountability and transparency is a wonderful and deeply subversive thing to do (irrespective of the fee accepted). If – and only if – accepting the money required a compromise in the academic integrity of the syllabus then resignation is appropriate. If academic standards were not compromised and it was still wrong to take Libyan money, then it is also wrong to take money from any number of government scholarship schemes funded by undemocratic states (including Saudi Arabia and China) that prepare their chosen future leaders for business, political and scientific leadership.”

There is clearly a broader issue here about the appropriate balance of public, private and international funding for education. But we agree that given the reality of so much external funding, the main issue with funding is whether it impedes academic freedom. When “strings” are attached to funding the ethical problem is one of misusing power to distort knowledge. With “no strings attached” arrangements, this moves to a more vague “complicity” with undesirable people or organizations or being associated with “dirty money”. Not that these are inconsequential considerations. But there is certainly a good case that can be made for using “bad” money for “good” ends – as critics of Microsoft’s monopolizing tactics might recognize in the Bill and Melinda Gates Foundation, for example. In the case of LSE, there is no evidence as yet of any such strings – but maybe Davies' prompt resignation could hint at further skeletons in the closet. Time will tell.

Ultimately though, universities should be (but are not) better prepared for the risks associated with their funding arrangements, especially in the UK where a great deal of controversy is attached to funding sources in higher education (a subject that barely raises a peep in North America). We should know, having both worked in a CSR centre initially funded with tobacco industry money (which understandably caused a storm) and now occupying chairs named in honor of a company featuring no less than two disgraced CEOs (HP), and a business man who among his many accomplishments was responsible for bringing the renowned animal lovers KFC to Canada (George Gardiner) – neither of which has raised a murmur.

When we joined the BAT-funded International Centre for Corporate Social Responsibility at Nottingham University in 2002 we quickly joined Jeremy Moon, the Director, in establishing a governance structure and a funding policy that ensured academic independence and scholarly freedom along with clear lines of decision making and reporting. LSE, by comparison is now nearly 10 years later only just talking about a developing guidelines for donations as part of an independent inquiry into the Libyan affair. Perhaps it would also be wise to belatedly start tackling the issue of plagiarism more concertedly. Davies was unlucky to take the fall for an unexpected series of events in the Middle East. But he only has himself to blame for not instituting the systems and structures necessary to deal with the problems effectively in the first place.

Photo by Leo Reynolds. Reproduced under Creative Commons Licence

Anti-corporate activism through social media: how Greenpeace is leading the way

2011-02-28T16:14:00.000-05:00

As events in the Middle East have shown, social media can play a critical role in connecting up protesters around a common cause. Whilst in this context the aims are political and the targets are state leaders, over in the world of business, companies are also finding themselves the unwitting subjects of campaigns fueled by social media. And leading the way in exploiting new technology to confront companies is Greenpeace. After having claimed the scalp of Nestle last year with its viral Kit-Kat ad that prompted the company to change its sourcing of palm oil, Greenpeace has also recently rolled out its "Polluter Harmony" campaign in Canada to confront government support of oil sands companies. Last week, it claimed another victory with the US retailer Costco announcing a major sustainable seafood initiative after a Greenpeace campaign featured the company in a series of videos going through an "Ocean destroyers anonymous' program. And now, it has set its sights on the social media giant itself, Facebook.

Greenpeace is no stranger to the use of new technology in anti-corporate activism. As Ethical Corporation reports, the organization was propelled onto the world stage by its use of live video footage from its campaign ship in the mid 1990s. The organization also led the way in using YouTube videos to target companies, such as its Kimberly Clark campaign back in 2004. Since then Greenpeace has continued to exploit developments in new media to get its message across and engage people in its campaigns against big companies. For example, a 2009 campaign against an extension to Heathrow airport involved setting up a 'Join the Plot' website that enabled some 90,000 people around the world to become "beneficial owners" of land earmarked for the new runway, thereby giving them the right to be represented at any future inquiries about the extension. Plans to extend the airport were subsequently shelved by the UK Government.

The Kit-Kat YouTube spoof, which was part of a concerted campaign to stop companies sourcing from the Indonesian palm oil supplier Sinar Mas, was so successful that it made it into our top 10 stories of last year. As Greenpeace put it, “With nearly 1.5 million views of our Kit Kat advert, over 200,000 e-mails sent, hundreds of phone calls and countless Facebook comments, you made it clear to Nestle that it had to address the problems with the palm oil and paper products it buys.” And, lo and behold, it did.

The latest campaigns have so far garnered attention, and no doubt ruffled a few feathers, but it remains to be seen what kind of success they've actually achieved. The Polluter Harmony campaign was started in the US in time for Valentine's Day 2010. This February, attention switched to Canada after the Environment Minister Peter Kent started extolling the virtues of the 'ethical' oil sands. It's a well executed campaign featuring toe curling spoof videos of big company bosses and politicians (or 'tar-crossed lovers' as the Canadian declaring their love for each other in the form of those nauseating love match clips used by online dating sites such as e-harmony. Similar in style are the Costco videos portraying the company as an initially in-denial 'ocean destroyer' who eventually completes the 6-step program on sustainable fishing and graduates from rehab. They've generated thousands rather than 10s or 100s of thousands of views, so in social media terms have not exactly taken off, but all the same have clearly been a nagging irritant for the company.

And then there's Facebook. Here the tool isn't just social media, so is the target. It's a smart piece of media planning for Greenpeace to be attacking Facebook through, well ... Facebook. The main focus is a Facebook page urging the company to 'Unfriend Coal' as a power source for its new data centre. Featuring a cute logo that uses the iconic Facebook thumbs up (and thumbs down), as well as a cheeky (or maybe just annoying) video that apes the "Story of Stuff" technique to remix the Social Network the campaign is gradually going viral. The page now has some 60,000 friends and the video has been played almost half a million times on YouTube.

But its not just the numbers we should be looking at here. The interesting things about the Greenpeace social media campaigns is the way they manage to harness the power of new technology to get people to do more than just click 'like' or watch a 2 minute video. Here's a few of the things we think they're doing right:

Using social media to get people on the ladder of participation. Joining a Facebook group doesn't represent much in terms of participation, but issues like coal, seafood, runways or toilet paper aren't all that interesting. So it's critical to make it easy for people to get involved, to get their foot on the first rung of the ladder of participation, before engaging them further. Greenpeace has been adroit at engaging .. and then educating ... through providing extensive resources, constant updating of new material, and encouraging people to go go higher up the ladder. Once people know more, there's a better chance they'll participate more and write an email, join a protest, or create their own activist videos or photos.

Mixing earnestness with wit and irony. Activist groups believe passionately in what they do. and the issues they deal with are often ugly and unpleasant. So it's no surprise that their way of communicating is a preachy form of earnestness. But that often doesn't work with social media where attention spans are small and content is typically "lite". Greenpeace has been effective in using wit and irony in its "lower rung" communications coupled with a more earnest voice once people's interest has been pricked. That combination is something other organizations, including companies, have struggled with.

Creative imitation. Like it or not, but in terms of getting a message across about big brands, parody works. Spoof ads, Facebook icons, dating websites - Greenpeace knows how to leverage the tools and brands of big business to communicate to the public. But it does so in a creative way that helps them stand out from a busy field. As academics, we'd be tempted to call this intertextuality - where the codes or meaning of one text are transferred or re-produced in another.

Fitting social media into a broader strategy.With all the hype around social media it's easy to forget that it's just one tool among many, and just one part of a broader strategy to achieve an organization's aims. Greenpeace appears to have been successful in deploying social media as part of a social change strategy that also involves direct dialogue with companies, developing new solutions, and tackling issues at a policy level.

And a couple of things they could still do better:

End of life 'take-back'. OK, it's not the same as letting your e-waste end up poisoning someone in Africa, but the artifacts of social media also tend to stay around a long time, especially online videos and webpages. Once a company like Nestle or Costco has changed its policy, Greenpeace might want to think about what it should do with all the critical content it has left out there that is no longer an accurate picture of reality. Taking videos down from your own website is one thing, but a successful "push strategy" can leave content lurking all over the web. We like the latest Greenpeace video 'Changes' celebrating Costco's success following the 5-step program - it's a real step in the right direction - but do they have a policy on what should be done about all the rest of the stuff they've produced and disseminated?

Further integration. So far, Greenpeace has been better at creating new content than linking it all up, especially between its different campaigns and across countries. It's a difficult challenge, especially in a network form of organization like Greenpeace International, and where you're trying to talk in (at least) two different voices. But greater integration can pay-off in terms of clarifying the message and capitalizing on successes. Given how far they have come already, it doesn't look to be beyond them. Though maybe that's just another of the secrets of success in social media - the courage to give up control.

‘Baron zu Googleberg’

2011-02-20T02:44:00.003-05:00

Our last blog looked at the role social media and other internet or mobile based communications technologies and their role in shaping a somewhat new, ideology-free form of revolution in Egypt. One of our readers hinted to Malcolm Gladwell’s comment on the web edition of the New Yorker which poured some water into the wine of excitement about the potential of new technology. And what we saw from Yemen, Bahrain and other Arab countries this week seems to add to the perspective: it is not just new media which makes revolutions inevitable. There are still a number of other factors which mediate the eruption and impact of widespread discontent in the Middle East.

On a different note though, last week has shown the power of the internet for holding politicians accountable in a somewhat new and quaint context. Since a couple of years, Germany has a new rising star in politics, the current Secretary of Defence Karl-Theodor zu Guttenberg (his real name runs over half a page of nobility titles and stuff – we spare you this). He is young (39), smart and eloquent, good looking, filthy (old money-) rich as a Baron with a long ancestry of Franconian nobility, boasts a beautiful wife and cute kids and so far has done quite a good job as a federal top politician in Berlin. He is well connected, also beyond Germany and one of the few German politicians who can actually talk coherently in English (then Industry Secretary). Many touted him for future Chancellor (German for Prime Minister).

Earlier last week though events took an ugly turn. Andreas Fischer-Lescano, a law professor from Bremen University, published a book review of Guttenberg’s recently published PhD thesis in some law review. Initially drawn to the work by scholarly interest – the book is a comparative study of constitutional law in the US and Europe – he had some strange déjà-vu’s while reading Guttenberg’s 435-page tome. He googled a few paragraphs which appeared familiar and as a result, he published in the appendix to his review dozens of passages, where Guttenberg had just copied and pasted newspaper articles, speech manuscripts and journal papers. Of course without any citation, any reference and without even mentioning most of them in his 50-page reference list. Immediately, an online community of bloggers and researchers zoomed in on the case. The immediately set up website ‘GuttenPlag Wiki’ so far has digged up around 120 alleged incidents of plagiarism in Guttenberg’s PhD.

Now one has to consider that in Germany carrying a ‘Dr.’ in front of your name - rather than indicating academic ambitions – is, however, by now almost a requisite to enter the higher echelons of politics and business. So getting the title by what now appears to be a thesis rampant with plagiarized parts is no small feat. No wonder this lead to widespread debate about whether such a cheating and disingenuous individual could still be in such senior political role. Especially as his brand was very much predicated on being ‘authentic’, ‘straightforward’ and ‘genuine’ – unlike all those clichés the public normally harbours about the political class. The glee about ‘zu Copyberg’, ‘Baron Cut-and-Paste’ or ‘zu Googleberg’ is limitless in European media.

Now the interesting thing about this is not necessarily the fact that we come across yet another sleazy politician. Fair enough, if the allegations are true, zu Guttenberg has cheated and there is no way he could keep his degree. More serious, it now came out that he also used the Parliamentary Research department and pasted their reports into his PhD - without any reference. In fact, suspicions that the whole tome was written by a Ghostwriter are now popping up all over the web. The Minister has announced on Friday: "I will temporarily, I repeat temporarily, give up my doctoral title." Crisis management German style.

The really interesting story in our view though is the pivotal role the internet has played in this case. The initial review in the law journal was only possible because some young guy in a provincial university was able to use Google and other software to detect plagiarism comprehensively. And the subsequent frenzy of research online which discovered even more incidents of plagiarism just put up the heat on Guttenberg. Politicians – like most of us these days – are so much more transparent and thus also accountable for their legacy and actions – just because technology empowers ‘normal’ citizens to access so much more information. One of the funnier incidents in cypberspace is the facebook page on this (‘If Guttenberg has a Doctor, I want one too!’) or the new keyboard designed for PhDs a la Guttenberg - with all keys removed except the 'c'ut and 'v'-paste ones...

The lessons from this are clear. Yes, it still matters how people think, what ethical convictions drive them and what values are held in high regard. For many other places in the world, this scandal just sounds a little quaint, German, parochial. In the Anglo-Saxon World, politicians are more prone to fall over irregularities in their love life. But the dynamics and the mechanics of political processes – be it the fairly prosaic plagiarism in the PhD thesis of a German politician or the far more substantial way of organising a revolution in Egypt – are fundamentally altered by the way we can access, process, analyse and distribute information these days. Kadhafi’s shoutdown of social media in Libya today just seems to underline this point.

Needless to say, that those cases also raises some challenging implications for private corporations, whose ethical behaviour now - just by dint of the technical means - faces a new wave of transparency. But that's a topic for a whole now blog, we guess.

Photo by isafmedia. Reproduced under Creative Commons Licence.

Egypt and the revolutionaries with MBA degrees

2011-02-14T16:03:00.002-05:00

Like many of you we have been glued at times to the TV screens these last days. Seeing the masses assembling on Tahrir Square in Cairo asking for a peaceful transition to democracy in one of the biggest Arab nations is something of a watershed. For too long we in the West were just used to taking for granted that, well, if it comes to politics, the Arab world is a wholly different story. And the botched attempts to parachute ‘democracy’ into Afghanistan and Iraq seemed to underline this notion.

But now, the chips on the table seem to be mixed for a whole new round. This being a business ethics blog, lets first work through some of those issues with regard to recent developments in Egypt. Let’s look at the upshot. The current revolution would not have been possible without new media –or social networking companies. Twitter, Google, Facebook were instrumental in coordinating, organizing and network the protest movement. All of which, of course, are private companies.

We think it’s a good time to give Google some credit – especially as we have taken them to task in some of or our earlier blogs every now and then. One of their executives actually became a leader in the movement, which so far has shown little signs of a coordinated effort. Google – symbolically represented by Wael Ghonim, their marketing executive for the Middle East, has become a pivotal player in the ‘revolution’ in Egypt. The support of social media has been vital – even after the Egyptian government closed down internet communication. It was then when Twitter opened the ‘SayNow’ feature, allowing sending messages via telephone. As Ghonim pointed out himself in an interview with ABC's 60 Minutes program, much of the pressure to free him from his 12 days in solitary confinement by the Egyptian police came from his employer Google itself. All in all then, we have seen private businesses ‘enabling’ civil and political rights, much along the lines of one our most cited papers.

In a similar vein, some companies have also collected some shame. Vodafone’s network was used by the existing Egyptian authorities to send compulsory messages to their users in support of the system. Vodafone’s explanations do not sound very convincing. When has a major multinational accepted an abuse of their assets lately? Looking at the way Vodafone has managed its business so far, not at least the vociferous determination it applied to their takeover of Mannesmann in Germany years ago, their complicity in this approach sounds less than convincing. Framing themselves as a helpless victim just doesn’t wash.

Leaning back and comparing the current uprising in Egypt (and other Arab countries) to, say the fall of Communism in Eastern Europe 20 years ago, there are some remarkable differences now. Apart from such accidental leaders like Wael Ghonim – who does not intend to play a bigger role in Egyptian politics and just wants to go back to work – it really was a ‘leaderless rebellion’. No particular persons, organisations, ideologies or religious groups can be identified to have fuelled the process. Ghonim told ABC’s 60 Minutes program that ‘we don’t understand politics’. He is not a trade unionist (like Poland’s Lech Walesa), nor a writer or artist (such as the Czech Vaclav Havel), but a marketing executive with an MBA from the American University in Cairo. The MBA as a degree which provides skills for being a revolutionary? – who would have thought!

The success of the movement seems to lie in a combination of people agreeing on a minimal demand (to get rid of Mubarak) and a new set of very efficient tools (social media) to coordinate this effort. Internet and mobile communication played a pivotal role, not at least also because it allowed considerable exchange of knowledge and experience among a global group of activists in Tunisia, Serbia and the US. Pragmatism and access to new forms of information sharing seem to be the two crucial ingredients of this latest revolution.

This said, some big questions however are yet to be answered. First, will this movement spread? Today’s news from Iran, Yemen, Bahrain seem to point in this direction, but it appears that those regimes tend to be more ready and unequivocal in their resort to using force against the protesters. The second question of course points to – however spectacular the fall of Mubarak by peaceful means may be – what will succeed these regimes? To build democracy will take time and allowing people elections is just a first step. Signs are that the new Egyptian politics stays on its pragmatic course: Where else have we ever seen the revolutionaries coming back to their square of victory and, after their job of toppling the regime was done, cleaning up with broom and shovel the garbage left behind by peaceful protest?

Photo by Ahmad Hammoud. Reproduced under Creative Commons Licence

Five things we've learned about social responsibility in the media this month

2011-01-30T14:08:00.001-05:00

If the WikiLeaks embassy cables saga that kicked off at the end of last year wasn't enough, the first month of 2011 has seen media organizations facing a whole slew of social responsibility issues. The Guardian newspaper has been breaking a major phone hacking scandal at News Corporation; a sexism case at Sky Sports in the UK has been championed by those bastions of political correctness, the UK tabloids; and the Qatar-based broadcaster Al Jazeera was identified this week by the New York Times as a major force behind the spread of riots in the Arab world. Not only this, but earlier in the month, Al Jazeera was involved in publishing the leaked 'Palestine papers' about the Middle East peace process, which immediately inflamed tensions in the region and, according to the Middle East peace envoy Tony Blair had destabilised the peace process.

Meanwhile, back at WikiLeaks, Rudolf Elmer was convicted of breaching Swiss banking secrecy laws when he handed over client information to Julian Assange, pledging to make public the confidential tax details of 2,000 individuals and companies,which he claimed revealed instances of money-laundering and large-scale illegal tax evasion. Oh, and some of the WikiLeaks supporters that attacked the websites of Mastercard, Visa and other companies last December after the firms withdrew their services from WikiLeaks were arrested. Phew! These are just some of the headline grabbers in what has been a month to remember for corporate responsibility watchers in the media sector.

Talking of which, we are also expecting to see any day now, the release of the Global Reporting Initiative's final draft Media Sector Supplement ready for a last round of public consultation. This supplement is intended to offer specialist guidance for media organizations 'measuring and reporting on the economic, environmental, social, and governance dimensions of their activities, products, and services'. Judging by the events of the last month, they'll have their work cut out.

So what then have we learnt about social responsibility in the media this past month? And how prepared will the GRI guidelines make media organizations who want to report on all this stuff?

1. The media sector might have to start thinking harder about product responsibility
There has been a gradual acceptance that media organizations have to take some regard for the impact of their content, as well as for the actual physical media they use. From protections for minors from adult content, to recycling of newspapers, there are a whole host of product responsibility issues for the media to consider. The GRI guidelines are generally suitable to cover these. But recent events suggest a shift in the conversation about the impacts of publishing controversial political content. When news organizations become complicit in political unrest and pose threats to peace, the standard response of "publish and be damned" comes under increasing scrutiny. By the same token, stories that help forge greater democracy in repressive states should be held up for praise. Organizations such as The Guardian and the New York Times have been leading the way in accounting for the positions they take on such issues with their commentary around the Embassy Cables and the Palestine Papers. The Guardian editor, Alan Rusbridger, also recently published an interesting commentary on this (and points 2 and 3 below) in an extract from his forthcoming book about WikiLeaks. But a serious question mark remains about whether and how media organizations should consider the social impact of their version of the news - or like tobacco companies before them, lay the responsibility squarely in the hands of the consumer.

2. News organizations are being held to higher standards for how they gather information than they hold their own sources to.
The phone hacking scandal at the UK Sunday tabloid the News of the World demonstrates the importance of news organizations subscribing to legal and ethical standards in how they generate ‘news’. Illegally accessing the private voicemails of royals, film stars and other celebrities is simply unacceptable by normal standards of journalistic ethics. The Guardian newspaper has rightly been pursuing this story over the last few years. The resignation of Andy Coulson, the Government’s Director of Communications (and former editor of the News of the World) and Ian Edmonson, the paper’s Assistant Editor, show just how significant a story this is turning out be. On the other hand, the Guardian (and other news organizations) have decided to run stories based on illegally hacked emails, and no doubt will also do so using stolen financial information and other data gleaned by dubious means by intermediaries. Although there is a difference in the public interest component of these stories, the main distinguishing factor is that in one case the news organization is doing the dirty work, and in the other a third party is and the news organization simply takes advantage of it.

This has been a common ethical position adopted by news organizations, but as organizations in other sectors have learnt to their cost, the claim that the actions of those further back in the supply chain is not their responsibility doesn’t always convince – nor does it pacify their critics. News organizations will probably need to take a closer look at their policies and practices regarding the news supply chain. And the GRI should ensure that reporting on these policies and practices is part of their guidelines.

3. The fight between transparency and privacy is only going to get nastier.
Privacy and transparency are two fundamental principles frequently at odds with one another. The events around WikiLeaks have shown that much of the momentum is towards the latter, but the arrests of Elmer and the Anonymous hackers who supported WikiLeaks, not to mention mounting pressure on Assange and the travails of the original source of the Embassy Cables leak, Bradley Manning, are a warning that the proponents of privacy (or secrecy as their rivals put it) are not going to let the balance change without a fight. Media organizations need to articulate clearly where they stand on these critical issues for their business.

4. Diversity issues affect media organizations in quite unique ways
The GRI guidance is quite clear on the need for media organizations (like all other organizations) to respond to and report on diversity issues. But the media actually has particularly acute responsibilities here because of its critical role in influencing public attitudes. So it's good to see the guidelines also cover diversity issues in media content. The Sky Sports case, which has seen one leading presenter fired and another resigning over sexist comments delivered off-air (but with the microphones still on), demonstrates just what a lightening rod the media sector can be for diversity issues. After all the presenters were off-air and would normally have expected their comments to go unreported and unheard by the public. Still, public they became and because this was a media organization and not say a bank or a real estate office, a couple of dodgy comments led to a firestorm of publicity. For Sky, sacking some star presenters isn't a bad way of advertising their commitment to diversity in such a context. But there's also a case for seeing the developments as an attempt by Sky to find a couple of scapegoats for what would appear to be something of a culture of institutionalized sexism at the organization - and not just a couple of off-message old dinosaurs.

5. Media organizations need other media organizations to make them act more responsibly.
Finally, for all the concerns about social responsibility in media organizations, the past month has also made it clearer than ever that the media plays a critical role in ensuring the accountability of powerful interests, whether those are governments, corporations .... or even media organizations. For this policing of the media by the media, we of course need plenty of plurality in the sector. Unfortunately, as far as powerful media players go, this is actually on something of a decline. And social media, for all its worth, simply doesn't have the research and reporting depth to do the core of that 'fourth estate' job as well. But that's a debate for another month.

Photo by Caro Spark. Reproduced under Creative Commons Licence

Can the Canadian oil sands really be an 'ethical' source of energy?

2011-01-11T10:25:00.000-05:00

The new year has got off to a bang in Canada with the new Environment Minister Peter Kent coming out of his corner fighting. According to Kent, the Albertan oil sands are not the environmental catastrophe we all thought they were. In fact, as he says, the oil sands are "an ethical source of energy". Yes, that's right. Alberta is the new home of ethical oil. Oh boy, that's going to need some explaining.

Now, before you slam your head into the computer screen in disbelief, let's take a closer look at this claim and put it in a little bit of context. Kent's basic point is that because the oil sands are in Canada, they are properly and democratically regulated, they do not fall foul of corruption and abuses common in oil rich countries - and the proceeds don't go into funding terrorism. Compare that to the other states in the top 10 countries by proven oil reserves and you can see that he might have a point. Saudi Arabia, Iran, Iraq, Kuwait, Venezuela, UAE, Russia, Libya, and Nigeria - hardly a list of ethical hotspots it has to be said. As Kent puts it, "[Oil sands oil] is a regulated product in an energy superpower democracy... The profits from this oil are not used in undemocratic or unethical ways. The proceeds are used to better society in the great Canadian democracy."

OK, so let's not get into a debate about just how "great" the Canadian democracy is. After all this is a country that, under the current Government, has regularly taken to shutting down Parliament when things get a bit dicey. But against the rest of the countries with big oil reserves, it still comes up looking pretty good by comparison. This is important for potential buyers of oil sands oil, especially the US which is concerned with global energy security, and is looking to wean itself off its dependence on oil imports from countries that it would rather not have to go to war with again. In fact, Kent's ethical makeover of the oil sands is all part of the major charm offensive that the Canadian government is pursuing to bolster its reputation in the US and elsewhere where climate concerns have started making Canadian oil distinctly unpopular in recent years.

In this context Kent is right to promote some of the virtues of the oil sands. All energy sources have their positives and negatives - yet the oil sands has become chiefly known only for its social and environmental downside. So a bit of rebalancing of the ethical equation is not inappropriate. But claiming any source of non-renewable energy is "ethical" and especially one that is fraught with such problems as oil sands oil, is not too helpful in advancing the debate in a meaningful way. Such claims may get media attention but they also infuriate critics and simply serve to entrench existing antagonisms. Climate activists are likely to target the oil sands even harder now that the Canadian government is drawing out the battle lines in this way. Greenpeace Canada for example had already started campaigning on a 'Separate oil from state' platform including an anonymous leak site for inside tip-offs about government efforts to promote the oil sands. This is all part of a concerted NGO response to what the Climate Action Network regards as, "federal officials ... systematically trying to kill clean energy and climate change policies in other countries in order to promote the interests of oil companies."

Far better it would have been then for Kent to acknowledge the shortcomings of the oil sands along with proclaiming their virtues. Any freshman ethics student knows that a utilitarian cost-benefit analysis of the ethics of different energy sources has to take into account more than just one factor. Country of origin is just one of a whole range of relevant issues. There is no way that the tar sands can be regarded as an ethical source of oil based on one factor alone. But country of origin "benefits" can be traded off with climate change "costs" if you subscribe to a utilitarian mode of thinking. However, a myopic, one-sided piece of government propaganda doesn't help anyone ... especially when it is proclaiming the virtues of "the great Canadian democracy".

Photo copyright Greenpeace.

New year, new design

2011-01-11T10:24:00.000-05:00

Since we've now moved into our 4th year of writing this blog, we thought it was time for a little freshen up. So along with a new year, we've got a new design. We hope you like the new-look Crane and Matten blog, but please send us any comments you have about it, especially if you have trouble reading the text, accessing the links, seeing the pictures, or any other troubles. In the meantime, we'll still be doing a few more nips and tucks, and perhaps a little botox here and there, to make sure everything looks good. It ain't easy getting old, you know.

Business ethics more culturally significant than CSR ... but not everywhere

2010-12-19T06:13:00.001-05:00

'Business ethics' and "corporate social responsibility" are two terms that are often used interchangeably, but at the same time represent somewhat different lenses on business practice. Ethics, of course, is always concerned with norms and values, and is basically about what is right and wrong. CSR on the other hand may be about these things, but doesn't have to be - lots of people take a purely economic or strategic approach to CSR without any real consideration of the normative dimensions. CSR is also, as might be expected, a lot more business-friendly than business ethics. In fact, people often tend to use CSR when they're talking about the good things companies are doing, and business ethics (or a lack of them) when talking about the bad things they do. There are other differences too, but we'll save the definitional niceties for another day.

The point is that the term you use is not always just arbitrary. And the two have a very different heritage even if they have broadly similar concerns. As a professor of business ethics (Crane) and a professor of corporate social responsibility (Matten), and co-authors of textbooks on both subjects, we often get asked which is the most important, which is the most popular subject at university, and why we do we need more than one term to describe the same thing? So we were pleased to discover the new gizmo from Google that lets you easily and quickly do a simple analysis of the cultural significance of different words and phrases. The Ngram viewer from Google Labs plots the incidence of specific terms over the last 200 years in more than 5 million digitally scanned fiction and non-fiction books. It may not let you do anything very sophisticated from a research point of view, but it is incredibly easy and fun to use.

So we plugged "business ethics", "corporate social responsibility" in, and for good measure added "corporate responsibility" and "sustainable business". The results, shown above, relate to books published in English from 1900 to 2008 (the last year provided by the data). As you can see, CSR only really emerged post 1960, whilst business ethics has enjoyed more than a century of cultural dominance, with particular peaks around the crash and depression of 1929-1930, and the financial scandals of 2000. And CR was actually a preferred term to CSR in books until around 2001.

By the looks of things, the dominance of business ethics could be coming to an end though. CSR and corporate responsibility have become increasingly more used - especially in the last decade which has seen an exponential growth in their incidence. Saying that, we'll see if the most recent financial scandals see another resurgence of business ethics post 2008 as the last data points on the graphs might seem to suggest.

An interesting feature of the tool is that you can distinguish between books published in English in the US and books published in English in the UK (as well as books published in non-English languages). And here, we were intrigued to see that in UK publications, CSR has already overtaken business ethics as you can see in the graph below.

In fact, in UK books, business ethics in general has not achieved anything like the cultural significance it appeared to in the first graph. Until the early1980s corporate responsibility was actually the dominant term.

Looking then to US books (see below), we can see that it is here that business ethics particularly stands out - albeit with a mid 1970s blip when corporate responsibility overtook it. Even as late as 2008, business ethics still dominates by quite a gap, although this is clearly narrowing over time.

The US emphasis on individual ethics versus the European focus on system-level responsibilities is something we've discussed at some length in our Business Ethics textbook. Plus the UK has been very much at the vanguard of the CSR movement. So these graphs don't come as a complete surprise. Still, it's interesting to see the data set out so starkly. That said, there are clearly some limitations to the Ngram methodology, as has been widely discussed. Still, there is clearly food for thought in here. And, of course, we're sure there are a whole lot of other corporate responsibility analyses that can be conducted with the tool. Do let us know of any interesting ones you come across.

‘Freedom of Speech is Priceless - For Everything Else, there is MasterCard.’

2010-12-10T00:59:00.001-05:00

This is a quote from the German blogosphere today, commenting on the decision of MasterCard, Amazon, PayPal and other companies to withdraw their services from the controversial Wikileaks site.

In the last two days the attention on Wikileaks has taken a really funny turn. While most of the brouhaha in the media over the last days has been about the stirs in the political world ensued by the disclosure of the diplomatic cables, the debate has taken a conspicuous turn in the last two days.

First, there is the decision of these companies to withdraw their services from Wikileaks. While this points, once more, at the blurring boundaries between business (making profits) and politics (acting as agents of their democratic electorates) it also highlights the increasing relevance of ethical reasoning for corporate decision making. How we would love to have been a fly on the wall in the boardroom of these companies when they were deliberating on how to deal with Wikileaks these days!

Now, the controversy here is rather simple – and has been discussed by us on the blog before: what should a corporation do in the face of censorship by a government? In the case of Google et al. in China the answer still seems reasonable easy: of course they should not allow it, in particular as they would bow to demands of a totalitarian, undemocratic regime. But what about the US government? And its perils in the face of a fairly low key website such as Wikileaks, disclosing some rather embarrassing realities about the war in Iraq, Afghanistan, and latest, their real thoughts about friends, foes and allies?

Alas, the reaction of these companies and their declared intents are anything but convincing. And do not reveal a very informed and mature expertise in addressing ethical issues. How can MasterCard still offer services to organisations close to the Ku Klux Klan, but turn down Wikileaks on the grounds of violation of the rule of law in democratic countries? It does not make sense. Similarly, Twitter’s half-baked explanation about why to go easy on Wikileaks Tweats was anything but convincing. It all points to a second insight the recent disclosures have made more than obvious.

A minute ago, The Guardian (on its website) revealed how Pfizer attempted at tweaking the political system in Nigeria to avoid legal action because of dubious practices in drug trials (‘The Constant Gardener’ is kind of greeting…). Similarly, the cables reveal how deeply MasterCard and other credit card companies were using American political/diplomatic clout to further their business goals in Russia, for instance. Most notably we learned about the fact that oil giant Shell ‘had seconded employees to every relevant department and so knew "everything that was being done in those ministries".’ Not only that this slightly clashes with Shell’s business principles – or maybe provides us with a proper interpretation of those: ‘Shell companies do not take part in party politics.’ Fair enough. But the Wikileak cables provide us with the proper interpretation of what Shell really means when it makes a sweeping statement like this:

‘However, when dealing with governments, Shell companies have the right and the responsibility to make our position known on any matters which affect us, our employees, our customers, our shareholders or local communities in a manner which is in accordance with our values and the Business Principles.’ (Principle 3)

The merit of Wikileaks is not that we suddenly discover what companies say publicly is not the same as they do in private. We are all guilty of this at times. As Lizzie Widdicombe puts it in the New Yorker this week, the problem is not a certain discrepancy in facts, but the ‘abrupt shift in tone’. Not that companies feel exposed by revelations of some sort of truth, but in fact by a disclosure of intent. All that smooth talk about CSR in Nigeria on Shell’s website – at the end of the day the intent of their most senior executive in the country reveals the true attitude: an instrumental approach to the countries Shell is operating in.

So there is much merit in following the websites of those news organisations, Wikileaks has entrusted with the documents. Democracy is only possible with some basic transparency of the institutions that govern us. Wikileaks, again, highlights the fact that those are not just governments. But more and more also corporations. In that sense, it is somewhat sad that the two previous waves of Wikileaks’ disclosures have only met rather limited uproar: the Iraq war (incl. the video on American soldiers killing civilians) and the Afghan War Logs. The real fury in Washington and elsewhere came with the latest disclosure of the diplomatic cables. Chances are, that the latter will give us a much more precise idea of how much the collusion between business and governments has really developed.

Photo taken from Jotman.com

Is too much transparency a bad thing?

2010-12-07T05:47:00.001-05:00

It’s been quite a week or so for transparency. The incendiary WikiLeaks release of almost a quarter of a million classified cables from the US diplomatic service has set news media across the world alight with daily revelations that have acutely embarrassed politicians everywhere. Last week also saw the FIFA bribery scandal reach new heights with the screening of the BBC Panorama program alleging corruption, followed by last Thursday’s selection of Russia and Qatar as the hosts of the 2018 and 2022 World Cups respectively. Yes, that’s Russia, the country labeled a “virtual mafia state” in one of the WikiLeaks cables. Both cases involve a whole host of ethical issues, but perhaps more than anything they pose critical questions about the appropriate limits of transparency. How much should we know about what goes on behind the scenes in organizations such as the US diplomatic service or a global sporting body such as FIFA? And can too much transparency really be a bad thing?

WikiLeaks is clearly the most significant case of the two, and it looks set to be something of a landmark on the ethics of transparency in the digital age. On the one side, high profile rightwingers in the US, including Presidential hopeful Mike Huckerbee, have responded by suggesting the source of the leaks should be tried for treason. “Anything less than execution is too kind a penalty,” he commented. WikiLeaks founder Julian Assange is under investigation in the US and Australia, wanted for questioning in Sweden (for an unrelated charge), and on Interpol’s red list – not to mention being cast by Sarah Palin as an “anti-American operative” who should be pursued with “the same urgency [as] al Qaeda and Taliban leaders”. Bradley Manning the army private who is supposedly the original source of the material is sitting in a military jail awaiting court marshal and a possible 52 years in jail. US internet companies Amazon, Paypal and EveryDNS, meanwhile, have responded to pressure by US authorities and ceased supporting WikiLeaks by allow it to use their servers, domains, and payment services respectively. As a result, the organization has been forced offline several times in the last week.

On the other side of the debate, five respected news organizations – the New York Times, The Guardian, Le Monde, El País, and Der Spiegel – received prior access to the cables and have shown little hesitation in splashing front page stories over the past 10 days. Various commentators, hackers, and net activists have heralded the leaks as a new phase in the radical transparency of digital information. Columbia, meanwhile, has offered Assange immunity, whilst Amazon has been touted as a boycott target for caving to “censorship” and political restrictions on “free speech”. Clearly, things are complicated, to say the least.

The publishing of the embassy cables by WikiLeaks is in many ways a more ethically ambiguous act than many of their previous leaks, most notably the well known Iraq and Afghanistan war logs which detailed the hidden impacts of US military action. Other WikiLeaks though have also won acclaim focusing on documents alleging political and corporate corruption, public interest media reports suppressed by injunction, and secret Congressional research reports. The embassy cables, just by their sheer volume, represent a less focused campaign.

Yes, there are clearly some important public interest revelations in the material that has come to light. These include: the exposure of a US spying campaign targeted at UN leaders; the naming by US diplomats of China’s propaganda chief Li Changchun as the orchestrator of the Google hacking late last year; and disclosures that the Brazilian government deliberately covered up the existence of terrorist suspects within its borders to protect the country’s image, to name just a few. Oh and of course claims that the media organization al-Jazeera is heavily influenced by state foreign policy in Quatar, where the 2022 World Cup is going to be held. But it has to be said that many of the big news stories are no more than allegations by diplomats in what they thought were confidential dispatches rather than necessarily well-founded or verified facts. There is also a whole lot more material that is just plain gossip and rumor-mongering rather than what you might genuinely call ‘intelligence’.

All this makes the WikiLeaks cables less clear cut in terms of making the hidden “truth” public. They provide us with a unique insight into how international diplomacy works, and what emerges is hardly pretty or a paragon of honesty and integrity. But it is hardly the case of a whistleblower bringing a miscarriage of justice to light or an exposé of corporate malfeasance or political corruption, except in the very broadest of terms. Sure the material in the leaks is incredibly interesting, but how we have to ask how much of it is genuinely in the public interest. If it doesn’t pass this test, then why should supposedly classified information become public?

On the other hand, the arguments emanating from the US that the release of the cables has injured the national interest and put lives at risk is also rather flimsy. Yes it has embarrassed the government, but then who hasn’t it embarrassed? Putin, Burlosconi, and others have been just as much the target as those in the US. And no one yet has managed to unearth anything that has genuinely put lives at risk even if it has probably hampered US diplomatic efforts in general. This of course begs the question of why so much information should be classified in the first place if it’s not actually protecting anything.

It is this – the transparency versus confidentiality issue – that is at stake here. Some would clearly like to see all but the most critical security information made public so that the state can be held to account. Others believe that a communication made under the presumption of confidentiality should remain that way unless there is a clear public interest reason for disclosing it. In the FIFA case, there seems little doubt that the BBC was right to go public with its allegations of corruption, even if some commentators were unhappy that it potentially hampered England’s bid to host the 2018 tournament. And even if FIFA President Sepp Blatter complained of “the evils of the media"

The WikiLeaks cables though are so indiscriminate as to fail the public interest test, at least when considered as a whole. However, with appropriate sorting and contextualizing (which the newspapers appear to be doing a pretty good job of), this changes the complexion somewhat. Newspapers like the New York Times and The Guardian have given a good account of their motives and methods. As the New York Times editor says:

"The more important reason to publish these articles is that the cables tell the unvarnished story of how the government makes its biggest decisions, the decisions that cost the country most heavily in lives and money. They shed light on the motivations — and, in some cases, duplicity — of allies on the receiving end of American courtship and foreign aid. They illuminate the diplomacy surrounding two current wars and several countries, like Pakistan and Yemen, where American military involvement is growing. As daunting as it is to publish such material over official objections, it would be presumptuous to conclude that Americans have no right to know what is being done in their name."

With appropriate journalistic selecting and framing, there is little doubt that there is an important if rather delicate media task at work here. This doesn’t condone the release of the cables en masse, though, which in our opinion is harder to defend from an ethical point of view, unless one’s view is that all government should be 100% transparent.

Regardless of the rights and wrongs of WikiLeaks in this particular case, though, the broader lesson seems to be fairly clear. In business ethics, one of the standard rules of thumb is the New York Times test – if you wouldn’t want your actions to be reported on the front page of the newspaper then maybe you shouldn’t be doing it. No doubt US diplomats didn’t expect this to so literally come true, but in a digital world, the prospects for doing so are increasing exponentially. And if you don’t want to be a news star, then you’ll need to work a lot harder than the US government in making sure what is said in confidence stays that way.

WikiLeaks graphic by Anna Lena Schiller reproduced under Creative Commons Licence
America Shhh image reproduced from Boycott Amazon for Dumping Wikileaks

What’s wrong with Canada?

2010-12-02T11:46:00.001-05:00

For a long time Canada – certainly in the rest of the world – had this image of a very progressive, liberal and forward looking country in terms of social and environmental responsibilities of business. This not only applies to business leaders which from an early time on championed these ideas. To mind comes Maurice Strong and his engagement for various UN led environmental initiatives in the 1970s. Or Chuck Hantho who, while CEO of what is now ICI Canada, initiated the ‘Responsible Care’ program in Canada which subsequently was adopted by the global association of the chemical industry and is now a standard for the industry in 53 countries globally. Not to forget David McTaggart, the Canadian businessman who became one of the founders and early leaders of Greenpeace. Also notable are wider initiatives such as the Montreal Protocol or, more generally, the courageous stance for human rights and integrity in the world, symbolized by ‘the last man standing in Ruanda’, Canadian General Romeo Dallaire on the UN mission when the Genocide began to unfold in the Central African country.

This all sounds like long ago now. The month of November was not a good month for Canadians with an interest in social responsibility of business. First, we saw Bill C-300 voted down by the Canadian parliament – a bill which attempted at raising the standards of environmental and social responsibilities of Canadian mining companies abroad. We might quibble about details of the bill. But it is pretty undisputable that the Canadian mining industry as a whole has a pretty dismal reputation around the world. What is conspicuous is that Canadian politicians do not even see some attempts at ‘symbolic politics’ – which the bill would have been by and large – as necessary. It makes you wonder.

Then, later in November, it was a – by all standards rather modest – attempt at addressing Canada’s more than wanting approach to climate change, which was voted down in the Senate (Canada’s second chamber of parliament). Bill C-311 was a modest attempt to close the gap between the Kyoto targets and the current performance of the country, ahead of a next round of negotiations in Cancun this month.

Of course it does not help to be governed by a party whose power base and current Prime Minster is from the province of Alberta which thrives on one of the most questionable mining operations in the world: the oil sands. But it cannot be all just old-style business interest driven political manoeuvring. This blog is triggered by reports about the work of Vancouver based consultant Patrick Moore for Asian Pulp and Paper (APP) basically legitimating the environmental record of a company that is allegedly responsible for the most rampant deforestation in Indonesia. The delicate detail – which seems to look symbolic for the country: Moore once was a director and spokesperson for Greenpeace.

All this is even more interesting as Canadians generally pride themselves on being so much more sophisticated, civilized and socially literate than their relatives ‘South of the border’. Looking, however, at the track record on the ground, the mood of the country has largely assimilated to that of their Southern neighbours. And were it not for the last bastion of Canadian’s pride in their social edge – the public health system - the Country’s practices make it look in many ways like the 51st state...

Photo by 416style reproduced under the Creative Commons Licence.

Price of tap water x 2000 + plastic bottles + manufactured demand = The Story of Bottled Water

2010-11-26T09:00:00.001-05:00

We've been meaning to write something on Annie Leonard's "Story of Stuff" online phenomenon for some time. But then we thought: why not give some real "digital natives" the opportunity to express what they think about it? So we set a challenge for a class of undergraduates at Copenhagen Business School who we knew were using our book and were about to watch some of the Story of Stuff content as part of their CSR course. Write us a review, we said, and we'll feature the best one on the Crane and Matten blog.

And so here it is - a terrific guest blog from the winner of our challenge, Camilla Marie Thiele, a bachelor’s student at CBS.

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“The Story of Bottled Water” presents a narrative of how the bottled water industry came into being by “manufacturing demand” for an unnecessary product through misleading advertisements, and how this product is effectively trashing the planet. This narrative, which is cleverly presented in animated video form with smartly drawn cartoon characters that attract the attention of adults and children alike, attempts to expose the bottled water industry and its deceptive selling practices in an effort to help us consumers see through the deception. That said, the video also points the finger at us – the consumers – who purchase these millions of litres of bottled water every year and toss them out with little regard to where those chunks of plastic pile up.

Annie Leonard, the writer and narrator, offers a compelling argument of how the bottled water industry has worked to deceive us, where that industry has strategically called into question the quality of regular old tap water and manipulated all of us into thinking that water from the tap is inferior to water from the bottle. This is part of the bottled water industry’s plot to manufacture demand with an ultimate goal of relegating tap water to just showers and washing dishes!

And, as Leonard argues, it is obvious why the bottled water industry must work to manufacture demand because it costs 2000 times more for bottled water than tap water - not to mention that tap water has been shown over and over again to be just as high quality (if not better) than bottled water. Leonard goes on to argue that this has led to the current situation where because of this manufactured demand, people around the world are spending their money on bottles of water whereas the real demand issue of access to clean tap water is grossly underfunded. And this happens while the bottled water industry is laughing all the way to the bank!

Leonard is right - that does not sound sustainable. It is time that we took back the tap.

The seven minute animated video that is “The Story of Bottled Water” is part of a wider collection of videos known as The Story of Stuff Project. Since the first The Story of Stuff video was put out in 2007, this project has become an online phenomenon clocking up over 10 million views. This figure now includes my fellow classmates and I since we viewed both the Story of Stuff and the Story of Bottled Water as part of our bachelors course in Corporate Social Responsibility at the Copenhagen Business School.

The Story of Bottled Water critically examines the environmental and social consequences of an unchallenged allegiance to consumerism by using the bottled water industry as a compelling example of the harms that can result. And it is effective because even though The Story of Bottled Water is part of an activist campaign taking on a suite of very serious issues, Leonard frames the points in a satirical and highly entertaining way. Despite - or maybe because of - the simple videos and their easy-to-understand-manner, it is a message that provides substantial food for thought for every kind of audience. And perhaps most importantly for my fellow business school students and me, The Story of Stuff provides the opportunity to really dive into the questions about the responsibilities of business, in particular the responsibility of companies that manufacture demand for products that are not even needed.

Making a product that is not needed, and then spending all of your time and energy to manufacture demand for it? Hmmmm, that sounds like a huge waste. Why don’t we call for companies to focus their time and innovative energy on meeting real demands? The world is full of a lot of really big challenges and thus there are a lot of very real demands out there that could use creative people and companies addressing them, and ultimately turn these problems into more sustainable solutions. This calls for a re-calculation of the first equation:

Real needs + innovative products + sustainable solutions = Responsible and sustainable profits.

And who knows – you might even smile on your way to the bank. So be smart and think outside of the bottle.

Camilla Marie Thiele is a bachelor’s student at the Copenhagen Business School studying Business Administration and Organizational Communication. She can be reached at cath08ae@student.cbs.dk.

The blog challenge was facilitated by Robert Strand, a PhD fellow at CBS and one of our occasional guest contributors. Thanks Robert!

Client 9: the Rise and Fall of Eliot Spitzer

2010-11-20T14:47:00.001-05:00

"All I ask for is an unfair advantage.” Reputedly a favourite line of Hank Greenberg, the former Chair and CEO of AIG, it makes for an apposite tagline for a leader forced to resign by his own board as a result of investigations into financial impropiety. The Greenberg investigations were instigated by then New York Attorney General, Eliot Spitzer, who made a habit of making enemies amongst the city's most powerful corporate leaders during his uncompromising campaign to prosecute corporate misconduct. And as writer and director Alex Gibney argues in Client 9: the Rise and Fall of Eliot Spitzer it was the foes he created in his day job as much as the night time friends he sought among the high class escort world that ultimately brought him down.

Gibney, the oscar winning documentary maker of Taxi to the Dark Side, Casino Jack, and Enron: the Smartest Guys in the Room, is no stranger to the twilight morality of big business, and the powerplays of American politics. In Client 9 he weaves the two together in a fascinating and surprisingly gripping account of Spitzer's downfall. It's played out like a battle of giants, Spitzer the so-called "Sheriff of Wall Street" fiercely defending the moral purpose of his achievements, and a cast of highly entertaining, and visibly bristling combatants like Greenberg who can hardly contain their pleasure at tough-guy Spitzer's remarkable demise ... and their own part in contributing to it.

There's no shortage of insight here about the ethics of business and politics, and especially in Spitzer's spectacular rise and fall, about the intersection of public virtue and private vice. He gives a frank and compelling interview to camera, insightful and erudite on his public achievements and then stilted and seemingly at a loss to explain his private problems. The question at the heart of this is how could someone so vigorous in policing the law so knowingly engage in illegality. Spitzer himself doesn't offer too many answers. But one of his aides makes the case in terms of a balance sheet - on the one side cracking down on the financial misdemeanours that led to a worldwide financial crisis that cost billions and billions of dollars - and on the other side having sex a few times with a prostitute. In those terms, Spitzer is on the side of moral good. The good he did far outweighed the bad - at least that is how Gibney couches it in a balanced but ultimately sympathetic portrayal of someone that tends to divide opinions. But Spitzer also admits to hubris, albeit in rather ironically self-important terms. “The only metaphor I can think of" he says at the outset of the movie, "is Icarus. Those whom the gods would destroy, they make all powerful.”

It's not just Spitzer's brittle character though that gives Gibney's movie it's edge. It also features some wonderfully revealing portraits of his enemies and other players in the story. These include: Kenneth Langone, a billionaire American businessman and an outspoken critic of Spitzer; Roger Stone, the infamous lobbyist with a Richard Nixon tatoo on his back; Joseph Bruno, Spitzer’s chief political rival when he became governor of New York; “Angelina” his preferred escort; and audience favourite Cecil Suwal, the disarmingly ditzy CEO of Emperors Club VIP, the escort agency at the heart of the scandal. It's a feast of moral messiness, perhaps best summed up by the giggling Suwal who admits to getting "confused" about the illegality of high end prostitition given the huge sums of money involved. Gibney doesn't give us any reason to believe that she was the only one.

Baby shopping: ethics, fiction and the marketization of human reproduction

2010-11-15T15:05:00.000-05:00

We are big fans of the power of film to illuminate business ethics issues, but we don't often discuss the role of fiction. But that doesn't mean we're not interested in it. And to prove the point, we thought we'd point out that a short story written by Andy has been short-listed for a writing prize, the AnyBook Award, organized by the American Book Centre in Amsterdam.

The theme of the competition is Redesign Your World, and Andy's entry "Baby Shopping" is all about the marketization of human reproduction. It doesn't offer any ethical answers or certainties, but uses fiction to explore what happens when the emancipatory forces of choice get the better of ethical considerations ... and the very human problems that ensue. It's all focused around personal relationships rather than abstract ethics, which is where fiction has some obvious obvious advantages over our more usual academic writing. It's not to be taken too seriously, but if you've ever cringed about stories of celebrity adoptions, or wondered whether you really could get just anything on the interenet, you might want to take a read. The competition limited entries to 1000 words so it won't take long!

For the next week, until 22nd Nov 2010, the top 10 shortlist are the subject of a public vote, so if you like Andy's entry, do give it your vote. The other shortlisted pieces (which include art and poetry as well as short stories) are certainly worth a read too, and in keeping with the Redesign Your World theme, some include strong sustainability themes. So stop reading this and step into the creative world with us for a minute.

Photo by ^^TILSIM^^. Reproduced under Creative Commons License

The art of finance

2010-11-01T14:54:00.000-04:00

Money. Cash, moolah, dough, readies, greenbacks, dosh. Whatever you call it, you can't get away from it. Most of us like to have it, of course, but we also know that it's a dangerous drug. "Money," as the saying goes, "is the root of all evil."

With the financial crisis and executive greed currently giving money a particularly bad name, we were interested to hear of a recent experiment in Amsterdam in the Netherlands which is seeking to provide a new and more positive way of thinking about the value of money. It's called the Bijlmer Euro, named after a much maligned quarter of the city called de Bijlmer which is home to many of Amsterdam's many immigrant communities and a good proportion of its less successful examles of high rise urban planning.

The Bijlmer Euro is a local currency, which for those of you that have not come across them before, are specially designed notes or other form of exchange certificate that are used within a specific locality to enhance local social and economic systems.

Local currencies like the Bijlmer Euro operate as exchange tools giving people the opportunity to buy and sell goods and services among a particular community without resorting to the usual pounds, euros or dollars. Why would communities want to do this? Well there are a whole lot of reasons, which vary depending on the local currency concerned. But some of the more common reasons are that they are help stimulate the local economy (because they can only be used locally), they can encourage people to ‘buy local’ and get to know local providers, or they can be part of an attempt to reduce reliance on existing financial systems and actors such as banks and credit card providers.

There are thousands of local currencies out there, including in our own home town of Toronto, where the Toronto Dollar operates around the St Laurence Market community. But what makes the Bijlmer Euro so interesting is that the whole project was designed by an artist, namely Christian Nold, who is mainly known for his 'emotional cartographies' project which saw him using lie detector technology and Google Earth to create user-generated emotion-based maps of neighbourhoods and towns. Interesting stuff. So while in Amsterdam recently, we spoke to Nold about the Bijlmer Euro and what he's hoping to achieve.

Probably the most interesting aspect of the whole project is that Nold has designed it so that you can actually see how the money is circulating in the local economy. The Bijlmer Euro notes are regular Euros with a special chip (recycled from used public transport tickets) overlaid on them which means that everytime a note is used, the transaction is tracked. In this way it is possible to trace the networks of exchange that are taking place among the participants. You can see a live visualization on the project website. This, Nold says, is especially important for an area like de Bijlmer which is most commonly presented as a 'problem area'. So his central objective was to help people see the Bijlmer also as a thriving economic network. "People described it to me as the Dutch Bronx" he says, "but with this you can replace that with a vision that gets you a little bit closer to the NASDAQ."

Of course, to get people involved in the whole project, it needed more tangible aspects that this. So users of the notes get discounts at local stores,and shop keepers get to make new connections with residents and hopefully stop leakage of economic value from the local economy. There are also some fun touches included such as the ability to put electronic messages on the notes for people to read, and a bright yellow, bicycle-powered 'mobile bank' (as shown above) where you can get the notes and input your messages. Even these though have a deeper purpose, as Nold explains:

"Money is an economic tool, but I think it is also very much a social tool. Banknotes are this weird thing that doesn’t really belong to us, but is really a social medium that moves between people. I think that having messages on them is a funny way of reclaiming the money in some way and making it personal."

Looking at it this way, you can see how there's more to money than meets the eye. Talking to Nold - whose personal explanation for the project takes in everything from the financial meltdown, baffled economists, the Falun Gong, transition towns, the end of capitalism, and the Iranian 'Green Revolution' - makes you look at the spare change in your pocket in ways that you really haven't considered before. However, whether the residents in de Bijlmer have seen this as anything more than a fun way to save a few cents remains to be seen. But Nold certainly thinks that a number of people have gotten sufficiently excited about the initiative that it may now go into a new phase now that the initial experiment is over. As he says:

"At the start of the project lots of people were telling us this is impossible, this is totally illegal, you can’t do it. But it’s possible, it’s doable and we’ve just done it. We have almost 2000 notes in circulation... I’m not sure it’s having huge mass appeal – we’re not getting tens of thousands of people using it – but we’re certainly getting a committed group of people who are seeing the value of it. The next really big step is the continuity of it."

And that really is where we'll see if this turns out to be anything more than an interesting experiment. Having now discovered who's spending what and where, Nold has been turning his thoughts to the large employers in the neighbourhood, especially the major banks, many of whom have their headquarters nearby, and whose staff have been using the Bijlmer Euros. Perhaps they can be persuaded to have a rethink about the social and economic value of money in the communities that border their offices.

We think it would be a fascinating development to have a major financial player involved in supporting a alternative currency like this in Amsterdam. And if they don't get involved, it looks like Nold will be taking things in new directions. He's already planning a book about the project to serve as a model for others, and is even plotting to set up an alternative financial organization to support low cost overseas remittances."We want to become a bank," he says boldly, "to see if we can get rid of Western Union." Finance, it seems, is the new art.

Living proof of the power of capital?

2010-10-26T16:18:00.000-04:00

This post comes from one of our occasional guest bloggers, Dr Laura Spence,from Royal Holloway, University of London. She's also the unofficial Crane and Matten photographer having been responsible for our latest profile pic to the right, (as well the one it replaced). Thanks Laura!

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While Crane & Matten have been enjoying a well earned break, I had an intriguing and thought-provoking week here in the

. On Monday I was invited to a talk by Bill and Melinda Gates, the entrepreneur behind Microsoft and his wife. The purpose of their talk was to spread the word on an initiative called the ‘Living Proof project’. They asked the audience to tell the story further, which I am happy to do here.

Akthough focusing only on US investments, Living Proof reminds us of the progress that investment in sustainable development has resulted in over recent decades. The Bill and Melinda Gates Foundation have played a substantial role in these improvements alongside government aid and the work of charities and other institutions globally (though interestingly not much mention was made of the contribution, such as it might be, of business).

Some of the incredibly encouraging facts that Bill and Melinda presented are worth registering: 5.4 million child deaths were averted through immunisation between 2000 and 2009; we are nearing the eradication of polio; 98 million fewer people are going hungry in 2010compared to 2009; in Africa measles deaths dropped by 92% between 2000 and 2008.

No-one is suggesting that poverty and public health are not still critical problems globally, but progress has been made. Aid is a large part of the reason for these wonderful improvements in the lives of the poorest. Highlights of their talk can be seen at: http://www.one.org/international/livingproof/share/?rc=email , or for the full blown version, go to http://www.one.org/international/blog/?p=3988 .

Meantime, I have been pondering what it is that makes people like Bill and Melinda Gates, who have dedicated a large part of their lives to generating vast wealth, switch focus and seek to give it all (indeed, 95% in their case) away. They are not the only ones to take this route (think of James Carnegie, William Hesketh Lever, George Cadbury, Thomas Holloway). And I should say I don’t mean to have a dig at Bill and Melinda. I wish others would take a leaf out of their book. But what is it that motivates such a shift?

It would be easy to assume that in some cases it is to assuage guilt for spectacular financial success by means not always bathed in moral glory. Well, maybe. But there appears to be something more going on. Accepting moral responsibility for the power that wealth delivers must also play a role. Being released from the shackles of complex, large organizations with multiple priorities may be another reason. Or is it a question of the enormous gratification – better surely than any number of diamonds or private jets – that must come with saving lives? Perhaps ensuring a positive social legacy is also a driver. There again, thy may just be in a position to do good, and willing and able so to do. This phenomenon of refocusing on public good post-career is not just a privilege of the private sector. Pop stars, and politicians, all represented ably at the Bill and Melinda Gates talk, have also been known to do this.

You do have to wonder though, if some of the people we deem the most successful in our society have ideas of philanthropy in later life, why don’t they get thinking about what they can do NOW, with the tools at their disposal. Why do many of us fail to adequately ‘do good’ during our day jobs? This was part of the discussion at a workshop I was involved in last Wednesday on Social Enterprise. This enigmatic concept broadly encompasses the idea of an organization that has social or environmental drivers as the PRIMARY goal. It is a huge phenomenon and is an area to watch in terms of research and, more importantly, its actual impact on pressing global problems.

Last Wednesday also saw the UK government announce the details of a strategic spending review intended to reduce the UK debt, which will cause a great deal of pain over the next few years. While the axe has been taken to nearly every aspect of public spending and the benefits and welfare system in our country, miraculously the investment in foreign aid has been pretty much spared. Though I didn’t spot him there, maybe the Chancellor was listening to the message from Bill and Melinda Gates. I sincerely hope a few business leaders will too.

Laura Spence

Photo by Johnny Vulcan. Reproduced under Creative Commons Licence


Mermaids protesting the BP oil spill. Photo by Johnathaneric.