Santa Clara University


Business Ethics in the News

A discussion of the week's top business ethics stories by Kirk O. Hanson, Executive Director of the Markkula Center for Applied Ethics and John Courtney Murray S.J. University Professor of Social Ethics

The following postings have been filtered by category Corporate Social Responsibility. clear filter
  •  Who Should Pay for Maternity Leave?

    Thursday, Aug. 21, 2014

    Source: Pixabay

    Paid maternity leave, rather family leave, is just about universally considered a good practice, and one that should be supported. From promoting family life to allowing women to stay in the workforce, there are many benefits, but there has been an unintended consequence. Family leave policies can lead to discrimination against women, as firms hire male counterparts to avoid the higher leave costs associated with female employees. Many have framed the problem as “how do we remove the incentive to discriminate against women?”

    But I think something is missing from this debate: should companies bear the cost of family leave in the first place? Or should the taxpayers pick up the tab in the form of a tax break or government assistance?

    To start, it must be said that providing paid family leave may very well be in the company’s long-term economic interest. For one, paid leave encourages women to return to their previous roles, sparing the company the cost of hiring and training a replacement. Further, these types of benefits establish something more than a purely transactional relationship with employees, where the worker feels no affiliation or commitment to the company.

    But the question gets more interesting if we presume that paid family leave is bad for the company’s bottom line, which many think is the case. To answer this, one must consider the role that corporations play in society, rather corporate social responsibility. Two perspectives dominate the debate.

    The first, stakeholder theory argues that the corporation has responsibilities to all stakeholders — all which are affected and contribute to the corporation’s success. Proponents of the theory claim that doing so often leads to maximizing shareholder value, despite no longer considering it the only criteria of success. Under this view, a company can attempt to balance the interests of their employees with those of the shareholder, perhaps justifying the provision of paid family leave.

    Another view of the corporation is that exists purely to maximize shareholder value. In many ways, the legal basis for most corporations supports this conclusion, under the notion of fiduciary responsibility; that is, the corporation must act in the best interest of the shareholders, the owners of the company. From this, the answer to our question appears to be no, companies should not be expected to provide family leave if it is against their economic interests. Given this interpretation, the government should step in to cover the cost, or perhaps create a mandatory paid leave requirement, effectively taking the decision out of business’ hands.

    Mandating that companies provide paid leave seems to be a convenient way out of having to address this dilemma: society no longer expects them to provide paid family leave, the law demands it. But this solution begs the question, and inadvertently takes a stand on the issue above: corporations should bend (and can be forced to bend) to serve public interests. This is not new. The minimum wage, health care coverage requirements, and other legislation are other examples. But the question remains, is this fair to business owners?

    The point here is that regardless of the outcome chosen, we are at the same time defining what the corporation is and its role in society. A fact that should be front and center in this debate.

    By Patrick Coutermarsh

    A Framework for Ethical Thinking (Markkula Center)


    NEXT POST: 5 Ethical Responsibilities of Corporation Boards

  •  CISCO: Are Tech Firms Responsible for the Misuse of Their Products?

    Thursday, Mar. 6, 2014
    Source: Wikipedia

    In a decision carefully followed by the tech sector and human rights activists, a US court cleared Cisco Systems of any wrong doing for human rights abuses in China. The lawsuit claimed that Cisco was liable for Beijing’s use of Cisco’s networking technology to find, arrest, and torture political activists. The lawsuit was filed under the 1789 Alien Tort Law, which allows foreign nationals redress in US courts for human rights abuses among other claims. The Chinese plaintiffs argued that not only did the technology facilitate the abuses, but Cisco also “actively customized, marketed, and provided support for its monitoring and censorship technologies.” The Maryland court found that Cisco’s technology remained a neutral product with numerous legitimate uses, and did not find evidence that Cisco tailored the technology to facilitate the human rights abuses alleged. Cisco’s General Counsel responded to the decision claiming that both Congress and the Commerce Department permit the sale of the technology in question, and that the technology has “helped billions of people around the world to access information.” With the legal proceeding settled, the questions remains: do technology firms have an obligation beyond compliance to ensure their products are not used to further human rights abuses?

      Patrick: There’s no free lunch, not even in technological advancement. The same product that allows billions of people to access information that was before inaccessible also can be used to facilitate human rights abuses. Technology’s moral value is often determined by the intentions of those using it. In this case, it comes down to whether Cisco actively customized and marketed the product to governments for the purpose of tracking and detaining individuals, and unfortunately it’s also a case of he said, she said. It’s unreasonable to expect companies to account for every possible misuse of their products, but active participation in those abuses is unacceptable.

    Cisco cleared in rights case, as tech center watches (Yahoo)

    Maryland Court Dismisses Landmark Case (Electronic Frontier)

    A Framework for Thinking Ethically (Markkula Center)


    NEXT STORY: Unilever Forms Partnership to Support Smallholder Farmers

  •  2014 WINTER OLYMPICS: Corporate Sponsors Hit With Mass Protests

    Wednesday, Feb. 5, 2014

    The 2014 Winter Olympics are fast approaching, but it’s not the athletes that are getting the attention, it’s the protestors. Their target? The top 10 corporate sponsors of the Olympics. Protests are primarily due to Russia’s stance on gay rights, coming to a head with a law passed this June by the Russian Parliament banning “propaganda of nontraditional sexual relations.” At a Coca-Cola PR event swarmed by protestors in London, a poster read, “Coca-Cola sponsors anti-gay Russian Olympics. Boycott Coke!” All Out, an LGBT-rights group responsible for many of the protests, recognize Coca-Cola’s good record on supporting gay rights in the United States, but is calling on it to do more: “At the very least, they should speak out, consistently with their own values.” Corporate sponsors contribute a substantial portion of the budget for the Olympics, and some say this gives them the ability and obligation to influence how the games are run for the better. On the other hand, speaking out may undermine the company’s relation with the IOC and hosting country. Are the corporate sponsors of the Olympics obligated to use that “seat at the table” to advance social goals? Is it inconsistent of Coca-Cola not to expand their advocacy for gay rights into this sponsorship?

      Kirk: I am sympathetic with corporate complaints that they cannot take on every social issue involving every business or event partner they work with. Nonetheless, there are some events so prominent and some partners so odious that the corporate sponsor should voice its disagreement with the behavior or policy of the partner. Coca-Cola, according to a website called Adbranch, was one of three beverage sponsors of Hitler's showcase 1936 Olympics in Berlin. I hope the company regrets this decision. But does Putin's personal identification with the Sochi Olympics and the actions of the Russian Parliament rise to the level where Coca-Cola must withdraw, or at least voice their disagreement. I would say yes, they should at least voice their disagreement prominently, though I would then be tolerant of their continuing as a sponsor. Their claim to be a liberalizing influence requires that they be strongly on record in Sochi as being supportive of gay rights.

      Patrick: I think the primary issue here is whether multi-national corporations are obligated to keep a consistent message across all areas of operation. In my view, yes, multi-nationals should have a consistent message across the board. If the corporation decides to take a stand, whether it is on principle or for the goodwill of its customer base, it is obligated to follow through with that position. This isn’t to say that we should expect them to take a stand on every issue at hand, but if there isn’t a commitment to consistency, it’s not a position the corporation should be taking; especially in the age of social media where it will get out quick if that's the case. Now, Coca-Cola isn’t necessarily supporting the views of the Russian parliament on gay rights, but in this case, I think that silence constitutes an inconsistency in its message. A secondary issue is on the nature of the Olympic games, and whether they should be insulated from political discourse — what do you think?

    Corporate Sponsors Faulted for Sochi Participation (Al Jazeera America)

    A Framework for Thinking Ethically (Markkula Center for Applied Ethics)



  •  MCDONALDS: How Many Minutes Does It Take To Eat A Happy Meal?

    Friday, Jan. 17, 2014
    How many minutes does it take to eat a McDonald's “happy meal?” A New York City McDonald’s has walked into a firestorm, as the leaders in the local borough's Korean community are calling for a national boycott of the fast food chain. For sometime now, elders in the Korean community frequent a particular McDonald’s daily, arriving at 5 AM and staying nearly until closing.
    So what’s the problem? Each person buys no more than a cup of coffee each, tipping the scales at $1.09, while on other days the group will split a small packet of fries between them. The store manager first posted a “20-minute time limit” above the tables (there’s your answer), but when the group refused to leave, called the police to escort the elderly patrons out. The store management has defended the decision by contending that the elders were driving away business. Korean community leaders understand the business concern, but argue that its business interest is superseded by the respect that elders are entitled to in Korean communities—an entitlement that McDonald’s infringed on by “treating them like criminals.” Is it reasonable to limit the amount of time customers sit in the restaurant? Is McDonald’s obligated to align its values with those of the Korean community that it operates in?

      Kirk: I think McDonald’s was insensitive to the cultural factors in play, but did not necessarily act unethically. No business is obligated to provide what is essentially a public service: providing a place for the elderly to spend the day. But, in this case, McDonald’s clearly should have gone further to help the community address the need for places for the elderly to congregate. McDonald’s might contribute cash toward the creation of such a space; it might even provide contributions of food a day a week. There IS a general ethical obligation to try to help the community deal with its problems, and there is an ethical obligation to do much more before violating the local cultural norms; in this case, respect for the elderly.

      Patrick: Let’s look at this from the other side. McDonald’s has aggressively expanded its McCafé brand in attempt to draw business from Starbucks and similar coffee shops. Do you think that Starbucks could get away with 20-minute time limits? No way; you could order a small hot chocolate and spend the whole day there, Wi-Fi included. The key consideration here is that Starbucks presumably benefits from creating that “neighborhood coffee shop feel” that goes hand in hand with letting people stay as long as they please. In the McDonald’s case, I think it comes down to this: if the local community wants to express the value they put on respect for elders, and wants local businesses to do the same, they should frequent the McDonald’s MORE for hosting the elderlies daily hangout, even if it means there are less tables available. Vote with your dollar people.

    Korean Community Leaders Urge McDonald's Boycott (NY Times)

    A Framework for Thinking Ethically (Markkula Center)



  •  GMOs: Should Corporations Curb Their Political Power in Local Elections?

    Monday, Nov. 4, 2013

    Tomorrow, Washington state residents will vote on Initiative 522, a law that would require genetically modified foods sold in stores to be labeled “clearly and conspicuously.” While the debate on labeling is as contentious ever, Initiative 522 made the news for another reason: for raising more money than any other initiative campaign in Washington state history. Proponents of labeling have raised a respectable $8.4 million, the majority of which coming from small donations and advocacy groups. But the record setting belongs to the campaign against 522. Backed by out-of-state biochemical and food-industry corporations, the No on I-522 Committee has raised over $22 million. The law on this is clear. In the Citizens United case in 2010, the Supreme Court ruled that corporations are entitled to make unlimited contributions to political campaign ads and other political tools. The question remains, are Monsanto, Coca-Cola, and Kellogg—contributors to No on I-522—unfairly influencing the political process? Even if legally permissible, should they hold back on their financing of Initiative 522 ads?

      Patrick: With 20 other states considering similar initiatives, and growing support from Congress at the Federal level, Initiative 522 cannot be viewed in isolation. It is certainly troubling that an out-state corporation can potentially sway a local or state level election (we’ll find out for sure Tuesday), but we have to recognize that these corporations are very much stakeholders in this decision. Initiative 522 may very well set the precedent for how this matter is decided on a national level: a legitimate concern of these corporations. Provided that corporations stay within the bounds of campaigning regulations, I don’t see it reasonable to compel corporations to “hold back” their legal powers to influence political decisions. Whether unlimited campaign contributions should be a right granted to corporations is another story.

    Washington could be the first state to require labels on GMOs. Here are the stakes. (Washington Post)

    Foes of food-labeling Initiative 522 set funding record (Seattle Times)

    A Framework for Thinking Ethically (Markkula Center for Applied Ethics)



  •  NFL: Broadcast Blackouts and the Public Good

    Friday, Nov. 1, 2013

    In her final days as Chairwoman of the FCC, Mignon Clyburn has her sights set on nixing the FCC’s enforcement of broadcast blackouts. Most commonly used by the NFL, blackouts occur when a game has not been sold out, resulting in the game not being televised in areas within close proximity to the stadium. Roger Goodell, Commissioner of the NFL, defends the policy by claiming that blackouts drive people to games, in turn bolstering the stadium experience. In recent years, blackouts have come under heavy scrutiny causing the NFL to ease up on its definition of sold out: now standing at 85%. Leading the charge is a group of sports economists who claim that blackouts have no effect on ticket sales and only serve to punish consumers. While the NFL can bypass the FCC’s ruling by amending their contracts with providers, it still leaves the question: is the broadcast blackout an unethical business practice?

      Patrick: The first thing that needs to be said is that using blackouts is a dumb business practice. Blackout rules force networks and sponsors, who stand to lose the most from a blackout, to buy thousands of tickets to meet the “sold out” requirement. Now, with the reports showing that they have no effect on attendance, it makes one wonder why this is even a question. But, is it ethical? Probably not. While there are a number of ways to approach this one, including the discrimination between local and national customers, the fact that most stadiums are funded with public money offers a quick fix. Local residents invest in the stadium to have the option of going out to watch the game, not to be forced to do so.

    Acting FCC Chairwoman Clyburn looks to gut NFL blackout rule (LA Times)

    A Framework for Thinking Ethically (Markkula Center for Applied Ethics)



  •  CONSCIENCE: Do Corporations Have a Conscience?

    Monday, Oct. 28, 2013

    In the wake of the Affordable Care Act (ACA), in particular the provision that companies must offer a wide range of contraceptives under their coverage, those in opposition are taking to the courts with a novel argument: the ACA violates their companies’ religious conscience. Three appellate courts have heard the case—two striking down that religious expression applies to corporations and one left undecided—meaning this issue may be on its way to the Supreme Court. Corporations have a long precedent of being considered “persons” on a range of issues, but many fear the consequences of granting corporations free expression of religion. For one, corporations could select new hires, as well as terminate employees, for partaking in perfectly legal behavior that happens to violate the company’s religious code; for example, becoming pregnant out of wedlock, or marrying someone of the same sex. On the other hand, the plaintiffs claim that their companies are an extension of their religious lives and should be granted the same protections. So what do you think? Do corporations have a “religious conscience?”

      Patrick: Granting corporations a “conscience” would be worst-case scenario for promoting ethical business practices. For one, the plaintiffs’ argument is self-defeating. They argue that their companies’ have religious standing by extension of their own individual rights to religious expression, not by virtue of the corporation itself. Religious reflection, prayer, and decision making do not happen at the corporate level: it’s the people that make up the corporation that engage in matters of conscience. “Corporate conscience” guarantees only one outcome, the complete undermining of the conscience of its employees. Perhaps the biggest impediment to ethical business is the belief that individual autonomy is reserved only for those at highest pay grade. Corporations are made up of people. It’s time we remember that.

    Can corporations pray? The next expansion of corporate 'personhood' (LA Times)

    A Framework for Thinking Ethically (Markkula Center for Applied Ethics)



  •  MARATHON OIL: When Wasting Resources is Better for the Bottom Line

    Monday, Oct. 21, 2013

    1,500 fires are burning bright in North Dakota. The culprit? The intentional burning of natural gas. In a process called “flaring,” oil companies burn the natural gas that rises up in the process of drilling for oil. Relative to oil, natural gas is a cheap commodity, resulting in the oil companies not having an economic incentive to build the necessary pipelines to make use of the natural gas. While the process inflicts less environmental harm than simply releasing the gas, flaring produces climate-warming carbon dioxide into the atmosphere. The practice is expanding rapidly, and today, the value of flared gas in North Dakota has reached approximately $100 million a month. Do businesses have an ethical obligation to make use of all available resources, even if it hurts their bottom line?

      Patrick: Corporate social responsibility is a hot topic, but is still coming to terms with implementation concerns in light of corporate fiduciary duties. Under our current system, expecting corporations to intentionally take losses is equivalent to stretching them in opposite directions. For now, the solution is to artificially create the economic incentive for sustainable business practices; whether that be landowners taking a hard line on making use of natural gas when negotiating, or government subsidies for the pipelines necessary to transport the natural gas. Of course sustainable business is the desired endpoint: it’s just a question of how we get there.

    Oil Companies are Sued for Waste of Natural Gas

    A Framework for Thinking Ethically



  •  GUN MANUFACTURERS: Can Gun Manufacturers Advocate Their Narrow Economic Interests?

    Thursday, Apr. 18, 2013

    The defeat of new gun control legislation, despite polls that indicated the vast majority of the American people supported it, has focused renewed attention on the political lobbying of corporations, in this case gun manufacturers. If, as critics charge, the National Rifle Association is primarily funded by gun manufacturers, is there anything ethically wrong with this arrangement? Is it wrong for a company to spend significant amounts of money lobbying for laws and regulations that serve its economic interests? Is there any obligation to consider the social or human effects of the political position advocated? Is there any obligation to respect the will of a substantial majority of the American people?

      Kirk: We want to protect the political rights of all individuals and institutions. Where we hesitate are cases where companies seem to frustrate the “popular will” and inflict damage to individuals or the environment solely to serve their economic interests. We respect those companies that understand their dual obligation to represent their shareholders AND the good of society. In my view, the gun manufacturers are way over the line in this case, promoting their own profits regardless of the continued carnage from unregulated guns. The NRA, their chosen instrument, has demonstrated a disdain for the truth, for the popular will, and for the victims of gun violence.

      Patrick: Companies are expected, if not obligated, to attempt to influence policy in the interest of their shareholders. The NRA and gun manufacturers are by no means exempt from moral transgressions, but this problem goes above single actors: it's a political problem. Current campaign contribution practice and regulation yield too much power to special interest groups and will inevitably lead to similar circumstances for a number of other industries. Sure, we can hold the NRA in contempt for leveraging their clout to influence policy, but can we blame them?

    Senate Blocks Drive For Gun Control

    A Framework for Thinking Ethically



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