Business Ethics Outlook 2006-07

While the Hewlett-Packard pretexting scandal and stock options backdating have dominated recent headlines, new ethical challenges for American businesses are already emerging. Staff, scholars, advisory board members, and executives from the business community convened at Santa Clara University this fall to outline the Business Ethics Outlook: five crucial business ethics issues on the horizon.

The Business Ethics Outlook was first presented by a panel of distinguished experts at a meeting of the Center's Business and Organizational Ethics Partnership Oct. 24, 2006. A brief overview of the issues and presenters appears below: A press briefing on the Outlook was held Oct. 26.

Business and Personal Information
What is an organization's responsibility for data privacy?

"Chase reveals data security breach." "Another breach at Wells." "Files hint `pretexting' may be common among firms." "Whistle-blower says AT&T gave spy agency access to network." These recent headlines point to a critical ethical issue facing American businesses: Who is responsible for data security? the consumer? the company storing the data? the data security firm? the third party auditor who loses a computer with customer records? the software manufacturer whose program can be hacked? the federal government arguing that the information is crucial for national security? How should a company balance potential harms and costs in the protection of privacy?

Al Hammond, director, Broadband Institute of California
director, law and public policy, SCU Center for Science, Technology, and Society

Private Equity and Business Ethics
Are we in a new era of corporate raiders?

The breakup of Knight-Ridder and the attempts by Kirk Kerkorian to remake General Motors are just two recent illustrations of the growing power of private equity investors including hedge funds. Often using mechanisms put in place to protect shareholders, private equity is taking "strategic positions" in companies-then buying, selling, and breaking them up at an increasing rate. Compensation of private equity managers is based on getting in, doing a deal, and getting out. Have we ushered in a new era of equity investors eschewing long-term results in favor of short-term? Does the short-term focus drive out concern for employees, the community, and ethics?

Robert Finocchio, former CEO, Informix
dean's executive professor, Leavey School of Business

Fooling with the Free Market
Is the (market) price always right?

A Memphis hotel that raised its room rates from 31 to 105 percent in the week following Hurricane Katrina was recently required to pay refunds in one of many price gouging cases to come out of that disaster. And anti-gouging legislation aimed specifically at gas prices passed the U.S. House of Representatives and awaits action in the Senate. Yet many economists-Freakonomics author Steven Levitt among them-argue that such regulations are likely to backfire and impede recovery from disasters and shortages. On the other side of the question, cities all over the country are considering living wage ordinances that would set a minimum wage for all businesses contracting with the municipality. Should the market always be free to set wages and prices, or are there moral goals that should guide the "invisible hand"?

William Sundstrom, professor of economics, Santa Clara University
Read William Sundstrom's Comments

What is the Role of Business in…Immigration, Global Warming, Free Trade, Health Coverage
How should business weigh in on the great public issues of our time?

Currently American businesses are in the business of providing medical insurance, vetting the immigration status of workers, lobbying for or against subsidies and tariffs, and determining sustainability policies. But are these really issues for businesses or are they matters only for public policy makers? Do businesses have a duty to do something about global warming, for example, or the uninsured, or the undocumented, or should they argue the issues strictly from self-interest?

Debra Dunn, former senior vice president of corporate affairs and global citizenship, Hewlett-Packard

Different Countries; Different Values
When should businesses "do as the Romans do" and when should they leave?

When Google, Yahoo, and Microsoft agreed last year to acquiesce to the Chinese government's policies restricting access to certain information on the Internet, they began a new chapter in an old story: the issue of how businesses should deal with governments that may have different attitudes than the United States on such key issues as human rights, women's rights, intellectual property, and bribery. As American businesses go global, they must decide how to operate in countries where corruption is rife or where native workers are subject to repression. They must navigate boycotts by the United States or other governments or non-governmental organizations. In 1977 Leon Sullivan promulgated a set of principles for companies operating in South Africa. Is it time for a new set of Sullivan principles for the 21st century?

Kirk O. Hanson, executive director, Markkula Center for Applied Ethics
honorary chair, Center for International Business Ethics, Beijing

The 2005-06 Business Ethics Outlook was developed by the Markkula Center for Applied Ethics Emerging Issues Group in consultation with the presenters and others. The Emerging Issues Group meets weekly to discuss ethical issues in the news. Current members include:

Jim Balassone, MCAE executive-in-residence
Jerry Ceppos, former vice president, news, Knight Ridder; MCAE Advisory Board
David DeCosse, MCAE director, campus ethics
Kirk Hanson, MCAE executive director
Scott LaBarge, SCU associate professor, philosophy and classics
Margaret R. McLean, director, biotechnology and ethics
Peter Minowitz, SCU associate professor, political science
Judy Nadler, MCAE senior fellow in government ethics
Almaz Negash, MCAE, director, global leadership and ethics
Miriam Schulman, MCAE, director, communications

October 2006