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

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.

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

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 

Is too much transparency a bad thing?

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 about politics?

Those of you who have followed this blog and our work over the last years will know that we have taken a special interest in the political role of private corporations. So what are the vibes here at the UN Global Compact Summit?

Well, the general gist seems to be that most of whom are quite happy to pass on more responsibility for the environment, human rights etc. (i.e. the ten principles) to the private sector. The most poignant role in this probably put forward by the UK's new Minister for International Development, Alan Duncan. I liked him when I lived in the UK, but was a bit underwhelmed by what he said. Basically he is a pink Thatcherite, talking about shareholder value and how companies can combine this with development. He ducked questions on BP and whether there is a role for governments in preventing these disasters, which was a bit weak, I found.
A refreshing accent was set by Mike Bloomberg and what the City of New York is doing. He was kind of cool, I found, saying that the City's carbon footprint is now at a third of the average American city. He said the City is willing to lead, but he expects business to do its part as well.


So far well and good. If we release corporations into this sphere though, what about democracy and political principles. There is next to no discussion on this here, apart from the occasional reference to more accountability and transparency. Maybe that should be put on the agenda for the next decade. But this will make it a really warranted area of further research for the academic community. How to make this shift in governance of societies one which is really in the interest of those who are governed? Currently, our best hope is that we will be governed by all those 'benign dictators', which are currently gathered here.

Microcredit as loan sharking?

Microfinance - the design and delivery of specialist financial services to poor consumers - doesn't often make it onto the front pages of the global media. So it was no surprise that the front page story about microcredit on the International Herald Tribune (and the New York Times) today ended up focusing on some of the industry's more unsavoury elements. Prime among these are the sky high interest rates that some microcredit organizations charge their low income customers - in Mexico, for instance, the average rate is currently some 70%, although the global average is around 37% (which is still considerably higher than rates for "normal" lending). Neil MacFarquhar, the NYT reporter lays the blame squarely on the takeover of microcredit by "a raft of banks and financial institutions", which he claims has got microfinance advocates "wringing their hands over the direction it has taken" and created a "fracas over preserving the field's saintly aura"

Such debates about the direction and financing of microcredit are hardly hot off the press. In fact, in our recently published Business Ethics textbook, we've written a case on Microfinance ("Targeting the poor with microfinance: hype or hope for poverty reduction?") that deals with exactly these concerns. Now we like to claim the book is cutting edge, but we don't expect to break the news ahead of the New York Times. Still, MacFarquhar's critique is timely in some respects in that it does at least put an important debate around microfinance in the mainstream at last. And it helps put to rest a little of the unabashed enthusiasm that tends to accompany a lot of discussion about microfinance. But in other respects, the article is rather uneven in its criticism and probably rather misses the point with its castigation of banks.

There are in fact three quite distinct issues at stake here. The first concerns what a fair price for poor consumers to pay might be in terms of interest rates. Microcredit consumers almost by definition represent a higher cost to serivce for financial institutions because they are difficult to reach and do not fit the existing banking infrastructure. As we say in our case, "providing financial services to the poor may not be as risky as once thought, but it remains expensive because of the large numbers of small transactions that need to be processed and the considerable resources that need to go into developing education and outreach services." This is why much microcredit began as a nonprofit exercise funded by donations. But when it comes to for profit providers, are lenders bound by a "fair price principle" that may not be in evidence in other markets? Isn't the fair price what consumers are willing to pay? Well, not exactly. Fair prices are those that are transparent, understandable, and where customers have an opportunity to switch. These are conditions that are not always met in microcredit markets, suggesting that some kind of addition protections may indeed be necessary to prevent exploitation.

The second issue is about what it takes for microfinance to really take off and go mainstream. First we derided banks for ignoring poor people. Now that microcredit organizations have shown that it can be profitable (and relatively low risk) to target them, we still deride the banks for greedily entering the market. But in reality, few large banks have yet to take up microcredit with much enthusiasm. And even those that have, typically only have a small percentage of their business accounted for with microloans. Despite what MacFarquhar hints at, microfinance is still not a big bank phenomenon and much of the microfinance world is still looking to further its inroads into the commercial sector to prove that its not just charity but actually good business as well.

And firnally, the third major issue is whether microfinance actually has any major effect on poverty reduction. This "fierce debate" as MacFarquhar terms it, is a crucial one for the long term complexion of microfinance, because without substantial impacts on poverty, microfinance has far less attraction to the development world (though it will stay in vogue for the finance industry whilst it maintains it sheen of profitability mixed with principles). And the truth is, the definitive answer to that one is still not apparent. In our case, we put it like this:

"The evidence on the impact of microfinance on poverty alleviation is limited. In part, this is simply due to the relative youth of the industry, as well as the very real problem of providing any definitive correlations given the range of variables involved in determining poverty levels. Despite numerous case studies of successful initiatives, hard empirical evidence is lacking.At best, the existing evidence seems to suggest that, on average, microfinance reduces vulnerability and dependence among client groups, even if it doesn’t necessarily make them richer."

Critics therefore suggest that efforts should be targeted at other approaches to poverty reduction whilst advocates, even in the absence of hard evidence, still endorse the more organic, inclusive and bottom-up approach to develoment represented by microfinance. This argument isn't likely to go away any time soon, but the need is clearly there to develop more sophisticated impact assessment tools to gauge its effectiveness.

So the upshot is, the picture is probably rather more messy than the New York Times presents it, but also somewhat more nuanced. Microcredit is not about big banks versus nonprofit providers battling for the heart and soul of a "saintly" practice, but about a form of lending that can and will be practiced in a variety of ways to serve a variety of ends.