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

  •  WORK ENVIRONMENT: Kids in the Workplace

    Saturday, Apr. 26, 2014
    Source: Pixabay

    As American women continue to exit the workforce at an increasing rate, talk is turning to ways of making working and having children more compatible. The proposed solution? Allowing employees to bring kids to the workplace. In a recent survey asking whether employers should let workers bring kids to work, 61% responded yes, with limits; 26% responded no; and 13% yes. Proponents argue that the added flexibility for parents would quell the exit rates and increase productivity through relieving stress. While just about anyone could agree that a group of loud kids running the office isn’t preferable, others point to another concern: fairness to workers without kids. Many feel that parents should not receive special privileges, so to level the playing field, nonparents should be permitted to adapt the workday to their lifestyles as well. Should kids be allowed in the workplace? Are employees with kids entitled to more flexibility than those without children?

      Kirk: Maybe it’s my age, but this trend leaves me cold. I don’t see how a worker with children to care for could at the same time concentrate and be productive. I applaud firms that offer daycare, particularly onsite daycare; but please, not in the office. Then again, I do think parents are should receive extra help from the company; child rearing is a common good that benefits the whole community.

      Patrick: I think the answer to this question comes down to the particular company and their culture, not to mention their facilities (cubicles and kids don’t go well together). The key here should be to get everyone at the company on the same page and coming to a clear understanding of where the line is. Management should take into account the lifestyle and wellbeing of their employees, along with the demands of the job, and look for measures that are mutually beneficial: whether that be offering onsite yoga or daycare.

    Kids should be welcome in offices, with limits (Al Jazeera America)

    A Framework for Thinking Ethically (Markkula Center)


    NEXT STORY: Paying Employees to Quit

  •  AMAZON: Paying Employees to Quit

    Tuesday, Apr. 22, 2014
    Source: Softpedia

    Amazon has made headlines recently for a surprising policy: it pays its workers to quit, but not in order to reduce the size of its workforce. Amazon believes that an employee who takes the offer should not be at the company in the first place. CEO Jeff Bezos explained the program by stating, “In the long-run, an employee staying somewhere they don’t want to be isn’t healthy for the employee or the company.” The cost of poorly motivated workers is well documented, with Gallup estimating that $450 to $550 billion a year is lost in the United States alone — Amazon’s “Offer” starts at $2,000 and tops off at $5,000. A few have suggested this policy may reduce the likelihood that employees will press for that are really needed, and will instead take the money and run. Is “paying employees to quit” a practice that should be accepted and widely adopted?

      Kirk: I think this gimmick is a terrible idea. I believe a company has an obligation to create a healthy environment that motivates its workers. This approach would seem to reject that responsibility, preferring to shed anyone who does not like the existing conditions. Companies need the ideas and suggestions of workers who see troublesome cultural practices and policy problems. By driving them away, the company signals that it does not want employees' input. This will not create a culture of constant improvement and mutual respect.

      Patrick: I share Kirk’s concerns, but I also think that Amazon might be on to something here. For one, paying dissatisfied employees to leave signals to other workers that Amazon is serious about protecting its culture and success. On the financial side, the policy will likely save Amazon money in recaptured productivity as well as avoiding more expensive severance packages. The fear is that companies will completely outsource culture management with these “pay to quit” deals — and at that point, workers will quit for free.

    Why is Amazon paying workers up to 5K to quit? (USA Today)

    A Framework for Thinking Ethically (Markkula Center)


    NEXT STORY: Unilever announces sustainable living program

  •  THE GOOD NEWS: Unilever's Sustainable Living Plan

    Friday, Apr. 11, 2014
    Source: Wikipedia

    Unilever announced this week that all its factories across Europe are now sending zero non-hazardous waste to landfills. Now on par with its North America factories, the effort in Europe is part of the larger “Unilever Sustainable Living Plan.” The Plan aims to substantially decrease waste by the year 2020, despite large increases in production.

    Already, Unilever has reduced total waste sent for disposal by 66% per ton of production since 2008. Management credits the cultivation of the “zero mindset” that included empowering employees to create projects to solve sustainability related problems. Not to mention, their efforts have saved Unilever factories over $23 million in disposal costs!

    Over 75% of Unilever's factories achieve zero non-hazardous waste to landfill

    A Framework for Thinking Ethically


    NEXT STORY: Clawback Policies and Executive Accountability

  •  G.M.: Clawback Policies and Executive Accountability

    Tuesday, Apr. 8, 2014
    Source: Wikipedia

    As details continue to emerge on G.M.’s faulty ignition switches in the Chevrolet Cobalt, linked to 13 deaths, one substantial question is left unanswered: Who decided that the 90 cents it would have taken to fix each switch was too much? Shareholders will inevitably get stuck with the bill for the cost of litigation and fines, but many fear that the executives involved will get a free pass. Returning past pay is an outcome some are pushing for, but it is highly unlikely in this case. G.M.’s compensation policies, particularly for recovery of bonuses, are generally limited to only accounting fraud—not unethical behavior. Similar to the majority of U.S. corporations, these clauses only require returning pay when the misconduct is intentional, and even then, only the highest ranking executives are subject. Advocates are pushing to increase the scope and severity of these "clawback policies" to cover siutations like G.M.'s faulty ignition switch. Are expanding these “clawback policies” a step in the right direction?

      Patrick: If one thing is clear, it’s that we don’t know the full story behind the G.M. faulty ignition switch mishap. Regardless of the particulars, I think expanding the jurisdiction of these clawback policies is a surefire way for Boards to send the message that they are proactively hedging against this type of behavior. At the same time, I think there is a danger of over expanding the policy, as I can see it leading to an increase in scapegoating individuals for behavior that permeates an organization. Then again, that’s part of the job for top executives.

    The Wallet as Ethics Enforcer (NY Times)

    A Framework for Thinking Ethically (Markkula Center)


    NEXT STORY: Mozilla CEO Under Fire for Prop 8 Contributions

  •  MOZILLA: Mozilla CEO Under Fire for Prop 8 Contributions

    Monday, Mar. 31, 2014
    Source: Wikipedia

    Mozilla, the makers of the popular web browser Firefox, is facing a media firestorm in protest of their recent promotion of Brendan Eich to CEO. Eich was an internal promotion for the company, having been CTO since 2005, but it’s Eich’s $1000 contribution to the 2008 anti-gay marriage “Proposition 8” that sparked the controversy. Mozilla, a nonprofit organization, is heavily committed to “keeping the web open” as well as values such as equality and inclusivity. In response to Eich’s promotion a number of key employees and developer groups called for his resignation on Twitter and other social media sites. Eich responded in a personal blog post that he would continue Mozilla’s effort of “commitment to equality in everything we do.” Critics are largely unsatisfied by the response, demanding either a retraction and apology from Eich or his resignation. Complicating matters, three of Mozilla’s six board members resigned this week, citing their desire to hire an outsider with expertise in mobile computing. Can a CEO have personal values that conflict with the values promoted by the organization?

      Kirk: If Eich were anything but the CEO (or perhaps a C-level executive), this would be a nonissue. Employees are clearly entitled to have their own views on matters, regardless of whether they conflict with those of the company. The question is, when does one’s personal values become inextricably linked to the identity of the company? It’s safe to say that CEO is on the other side of that threshold. Eich’s blog post reiterating his commitment to equality and inclusivity at Mozilla is a step in the right direction, but the critics’ demands for a full explanation are not unwarranted.

      Patrick: This is a tough one. In my book, Eich is entitled to his personal beliefs, but employees are well within their right to question the new CEO’s ability to reflect the company’s values. Like mixing Diet Coke and Mentos, some things just don’t go together. It leaves me wondering what the CEO hiring committee expected to happen here, particularly given the desire to hire a mobile oriented CEO by half the board. This case also leaves us with an interesting question: does Mozilla’s commitment to inclusiveness and openness demand that they embrace Eich and his views, despite disagreeing with them?

    Objecting to new CEO, resignations sweep Mozilla board (CNET)

    Inclusiveness at Mozilla (Eich)

    A Framework for Thinking Ethically (Markkula Center)


    NEXT STORY: Is Oculus Leaving Early Backers Out to Dry?

  •  OCULUS VR: Leaving Early Backers Out to Dry?

    Friday, Mar. 28, 2014
    Source: llh3

    In the wake of Facebook’s $2 billion buyout of virtual reality startup Oculus VR, a number of Oculus’ 9,522 early backers are up in arms. In an ongoing trend, Oculus took to crowd funding site Kickstarter to raise seed money for their company, and it was an outright success raising over $2.4 million. While the backers “invest” knowing they receive no ownership in the company (instead receiving early access to products or memorabilia), many of the backers feel that the Oculus pulled a “bait and switch” by taking the Facebook deal: “I might as well have handed my money right to Facebook and I feel a little sick.” Adding insult to injury, as recent as last month, Oculus’ founder assured backers that he had no intention of selling the company. Backers flocked to Oculus believing that the company was their best hope for an independent platform for virtual reality gaming, but now “it’s Facebook’s platform.” Did Oculus wrong their Kickstarter cofunders? Do companies owe anything to their early internet “backers?”

      Patrick: I sympathize with the disgruntled backers, but Oculus is in the clear here. For one, Oculus raised an additional $16 million from traditional sources. Second, consulting or “even keeping in the loop” 9,522 backers is the equivalent of opening up the company’s boardroom to the general public. The only thing Oculus owes its early backers is the items offered in exchange for the contribution: t-shirts, posters, and development kits. Beyond that, Oculus ought to treat the early backers as loyal enthusiasts. No more, no less.

    Cofunders of the Maker of Oculus Rift Denounce a Facebook Buyout (NY Times)

    Oculus Rift (Kickstarter)

    A Framework for Thinking Ethically (Markkula Center)


    NEXT STORY: Keurig Backs Clean Water Initiatives

  •  THE GOOD NEWS: Keurig Green Mountain Invests In Clean Water Initiatives

    Thursday, Mar. 20, 2014
    Source: Wikipedia

     Wednesday, Keurig Green Mountain announced an $11 million commitment to address local and global water challenges. The partnership is aimed at improving water access, conservation, and watershed restoration. Here are the four partners:

    Later this year, Keurig is also hosting the first ever Keurig Green Mountain Water Summit to convene water experts to address the global water crisis.

    Being 98% of a cup of coffee, quality water is a must for a solid cup of joe. Kudos to Green Mountain for thinking beyond their immediate interests and turning this fast fact into a meaningful campaign.

    Working With Others For Clean Water (Keurig Green Mountain)

    A Framework for Thinking Ethically (Markkula Center)


    NEXT STORY: Ackman vs. Herbalife - selling short and trashing the company

  •  HERBALIFE: Selling Short and Trashing the Company

    Tuesday, Mar. 18, 2014
    Source: Wikipedia

    Billionaire investor, William Ackman got his wish this month as the Federal Trade Commission has launched in investigation into allegations that Herbalife is a pyramid scheme. In December of 2012, Mr. Ackman began a high profile campaign against the direct seller of vitamins and health supplements, betting $1 billion that the company’s stock would fall. Since then, Mr. Ackman’s hedge fund Pershing Square has enlisted the help of PR firms to organize protests, conferences, and letter writing campaigns, in addition to converting a number of high ranking politicians to its cause — most notably, United States Senator Edward J. Markey. Mr. Ackman claims that Herbalife generates the majority of its profits from recruiting new distributors, as opposed to sales of goods to consumers. Herbalife, which reached a record $4.8 billion in sales last year, has aggressively denied the claims, even launching a massive campaign of its own. The case raises the question whether a short seller can use political tactics and advocacy for “victims” to further his own financial position.

      Kirk: I have no doubt that many others will copy Ackman’s strategy, but there is something distasteful about appearing to advocate for the public interest while actually only looking out for one’s self-interest. Regulators and lawmakers will have to watch that they don’t find themselves in a conflict of interest. Senator Markey should find it uncomfortable to be in partnership with Ackman.

      Patrick: There are definitely some concerns here — market manipulation, political influence for sale, and the like — but what if Herbalife is actually a pyramid scheme? Yes, Ackman stands to gain from their potential downfall, but if he’s right it’s an instance of the profit mechanism in the financial markets bringing about greater transparency and maybe even justice. The great fear is that, as Kirk mentions, other investors launch smear campaigns against perfectly legitimate businesses in hope of cashing in on their investments.

    After Big Bet, Hedge Fund Pulls the Levers of Power (NY Times)

    A Framework for Thinking Ethically (Markkula Center)


    NEXT STORY: Chipotle Steps Forward on Climate Change

  •  THE GOOD NEWS: Chipotle Lists Climate Change as a Material Risk

    Wednesday, Mar. 12, 2014
    Source: Wikipedia

    In its 10-K annual report, Chipotle listed “increasing weather volatility or other long-term changes in global weather patterns” as a material risk that could inhibit their ability to provide a number of their most popular ingredients. A Chipotle spokesperson shrugged off questions on the disclosure stating, “It’s routine financial disclosure, nothing more than that.” But climate change advocates see this as a significant advancement. They argue that Chipotle’s disclosure will set the precedent for shareholders of other companies to demand that their company either do the same or explain why climate change is not a material risk. We see this as a great step forward in corporations participating in meaningful dialogue on climate change, and we give all the credit to Chipotle for making the first move.

    Why Chipotle's Warning About Guacamole And Climate Change Are Not 'Routine' (Think Progress)

    A Framework for Thinking Ethically (Markkula Center)