Deep Thought

If, as Aristotle says, it's impossible to do injustice to oneself (since no one suffers injustice willingly) then is it also impossible for a corporation to do injustice to itself?

If so, then the only ethical obligation any person (or corporation) has is toward others.

Volcker seeks return of Glass-Steagall

And it's about time! Here's an excerpt from the full NYT article:

"Glass-Steagall was watered down over the years and finally revoked in 1999. In the Volcker resurrection, commercial banks would take deposits, manage the nation’s payments system, make standard loans and even trade securities for their customers — just not for themselves. The government, in return, would rescue banks that fail.

On the other side of the wall, investment houses would be free to buy and sell securities for their own accounts, borrowing to leverage these trades and thus multiplying the profits, and the risks.

Being separated from banks, the investment houses would no longer have access to federally insured deposits to finance this trading. If one failed, the government would supervise an orderly liquidation. None would be too big to fail — a designation that could arise for a handful of institutions under the administration’s proposal.

“People say I’m old-fashioned and banks can no longer be separated from nonbank activity,” Mr. Volcker said, acknowledging criticism that he is nostalgic for an earlier era. “That argument,” he added ruefully, “brought us to where we are today.”"

Amazing Moyers!

This latest interview (and essay) on regulating corporate freedom of speech is outstanding. Moyers gets cornered on why the business of journalism should get special freedom. I've never seen him get so flustered.

To me, this debate underscores something never mentioned here, i.e., that if business were more ethical we wouldn't have this regulatory dilemma. It's not really corporations who act. It's the individuals leading them. And there is no reason those individuals should act less ethically professionally than they do (or should) personally.

The assumption made is that corporate free speech is biased by definition since it is completely interested with increasing short-term profit. But I don't see why this must be the case. In fact, there are a growing number of counterexamples to that thesis. Indeed, they would seem to represent the very essence of corporate social responsibility.

The promissory agreement to further the interest of shareholders first is the corporate motivator. But there is also no reason why shareholders should consider merely short-term financial gain to the exclusion of all else. Socially-responsible corporations for example would not automatically lobby to sacrifice consumer safety requirements in the interest of higher profits.

Thus, if corporations behaved more civically, there would be little reason to gag their speech. It's the arguable abuse of their great influence today that threatens to drown out citizens' voices which is the problem. As with monopolies, it's the abuse of power that is dangerous. Not necessarily the power itself.

Medical Research Masking

The NYT has just exposed a disturbing trend: Medical research funded and ghostwritten for pharmaceutical companies to promote their drugs. For example, a for-profit company such a Wyeth offers to write an article, often requiring extensive review of existing literature in a particular area, say, hormone therapy, by sending a query to a professor at a prestigious medical school, such as, say, Columbia. The company also offers to pay the professor for the privilege of having her name on it, say, $25,000. The author merely has to review the article then submit it to a top medical journal without any indication of its true provenance. 

Just such a case was recently exposed from materials in litigation over Wyeth's development and marketing of menopause drugs. Wyeth had also used such practices to promote its diet drug Fen-Phen, subsequently removed from the market after it had been correlated with serious heart-valve damage. As a result, Columbia has drafted new research ethics rules:

"A new policy at Columbia took effect in January. It prohibits medical school faculty, trainees and students from being authors or co-authors of articles written by employees of commercial entities if the author’s name or Columbia title is used without substantive contribution. The policy requires any article written with a for-profit company to include full disclosure of the role of each author, as well as any other industry contribution.

But Dr. Elliott, University of Minnesota bioethicist, said universities should go further than mere disclosure, prohibiting faculty members from working with industry-sponsored writers. Policies asking only for disclosure “allow pharmaceutical companies to launder their marketing messages,” he said."

Unfortunately, Columbia has not been joined by the majority of other medical schools in drafting such a policy, though Duke is a notable exception. I think Professor Elliott has it right here. If the research is good, it should be able to stand on its own merits without having to bear the imprimatur of a professor at a prestigious university--especially of one who did little more than review the article for a hefty sum.

The fact that companies such as Wyeth feel they must cloak their research this way reveals they have something to hide. Of course if the research is sound then perhaps (as they would surely argue) they are merely the victims of prejudice as any article explicitly authored by Wyeth would likely be subject to greater scrutiny by medical journals and practitioners themselves. But their status as for-profit companies marketing a product should indeed make us more skeptical of any research they promote. As I see it, there are two main reasons why this practice is unethical:

1. It creates a conflict of interest between the professor's civic duty and the economic interest in selling a product. As such, it blurs marketing and medicine.

2. Ghostwriting is essentially a form of plagiarism in which one passes off the work of another as one's own. While it doesn't exactly rob any single author (since they are payed for their services) it keeps us from ever tracing them--and institutions such as Wyeth--as the actual origins of the research in question. As a result, it's like robbing intellectual history itself.

It's easy to understand why so few medical schools have adopted reformist policies on this problem. They, like their professors, are in a race to maintain prestige. And having their name on more articles in more places maintains that prestige. The same goes for the journals themselves, which seek to publish work by prestigious academics. It's a bit like the classic case of hockey helmets in the NHL. Before they were required, most players didn't want to wear them since they presented a competitive disadvantage by reducing visibility and maneuverability against players not wearing them. But players were usually in favor of making helmets mandatory, which eventually occurred.

Because of this game-theoretical problem, government regulation may very well need to be applied to effect real and lasting change in the medical industry, as U.S. Senator Charles Grassley has argued.

Journalism's Long Slouch Down

Much has been said over Walter Cronkite's passing. But few have hit the nail on the head as well as Amy Goodman, Glenn Greenwald, and now Frank Rich.

It's depressing and embarrasses us all that mainstream media in mourning Cronkite could not even emulate his integrity in the slightest by mentioning that the reason he was most respected was for having the guts, every now and then, to tell the people the truth they needed to hear even against the government's wishes. In so doing, he managed to rescue the nation from collective and willful blindness. Even the Lehrer News Hour failed to say this, taking the safer path of framing its coverage around Cronkite's near-monopoly, which is only part of the story. He also had a courage no one seems to have at his level anymore. Indeed, he came to deplore what he saw as a failure of his generation, which included Edward R. Murrow, to transmit its journalistic values to the next.

Honest reporting is not primarily what the big news networks seem to do anymore--despite the fact that they hold most of the immense resources required to carry-out penetrating investigative journalism on national and international scales. Essentially, this is because they trade friendly coverage or "spin" for access.

For example, TPM's Zachary Roth shows just how low the media stooped in begging Gov. Sanford to grant them interviews. David Gregory of NBC's Meet the Press even promised that his show would allow Sanford "to frame the conversation as you really want to...and then move on." Even if this was mere posturing to get him on the show, it's unseemly behavior that creates inappropriate expectations. Roth sadly concludes:

"When you read the emails by Gregory, King, Stephanopoulos and others, you start to understand why most major network interviews with politicians tend to be a lot less hard hitting than they need to be to really hold their subjects accountable. The politicians themselves have the power to make or break the networks, by granting or withholding access. That ends up meaning that, consciously or not, the networks soften their approaches--both in their pitches, and in their actual interviews--in exchange for that access.

That's how the world works, and it's hard to know what to do about it."

The problem here may be that network news is simply run as business. And this strategy seems frankly best for business--at least for now. The question to me is whether it is possible in this highly competitive information age, for a mainstream news network to build a reputation on good old fashioned integrity and muckraking.

Judging by the slogans espousing objectivity we hear more and more (take Campbell Brown's "no bias, no bull") and consumer polls, this kind of thing would seem to be in demand--but perhaps most viewers only think they want objectivity while actually prefering subjectivity and bias that suits their preconceptions. Even so, I would hope enough reasonable and responsible viewers are out there for at least one network to truly distinguish itself in this way instead of peddling empty promises as Fox, the cable news leader does perhaps most preposterously of all, with its claim of being "fair and balanced" and so-called "no spin zone."

If enough people are not truly willing (or able) to seek hard-hitting news that reports and analyses (and at times opines) inconvenient and unwelcome truths, then the news market fails. At that point, which may already be upon us, we may need to protect and/or regulate it.

Thankfully, the national news industry still retains some of its traditional mission via the family-controlled public trusts of the New York Times and the Washington Post (though the Post's reputation was recently somewhat blemished on this score) and the non-profit and government-funded Corporation for Public Broadcasting. But these last remaining strongholds of investigative journalism may prove to be precious few in an increasingly bewidlering world of infotainment and advertorial distraction. If so, the danger is that the American people may fail to act, from sheer ignorance of--and disinterest in--all the news they'll never get.

The Downside of Social Responsibility

The NYT just ran an interesting report on an interview with Jeffrey M. Peek, CFO of CIT, a bank on the brink of bankrupcy in part because it acted more responsibly during the mortgage bubble:

"Perhaps Mr. Peek’s real failing was that he didn’t take enough foolish risks. Although Mr. Peek was a former top Merrill Lynch executive, he didn’t lead CIT into bundling mortgages into toxic derivatives, he didn’t get into credit-default swaps, he didn’t create a trading desk that swung for the fences and he didn’t build a company that was so big that it posed systemic risk. In other words, he acted a little too responsibly. So when CIT’s moment of crisis arrived, the F.D.I.C. looked it over and decided it wasn’t too big to fail. To Mr. Peek’s surprise, it turned out to be too small to save."

That is deeply ironic. And explains much on the roots of the economic crisis. Banks it would seem--that are still standing--gambled shrewdly that even under a collapse, they would remain (if not become) too big too fail. It's not clear that even with this attitude CIT would have become too big to fail, but this is a sobering reminder of how smaller and more responsible companies get left out of the bailouts. The Fed should step in at times like this.

More on CSR When Doing Business in China

The NYT just printed another interesting article on this issue, which seems to be getting more attention, namely, what responsibility (if any) does a multinational corporation (MNC) have to work for democratic social change when operating in China? Michael Santoro, Professor of business ethics at Rutgers, has just written a book about it and is quoted in the NYT piece, saying:

“Multinational corporations do possess great power, wealth, and influence, and therefore they do have a responsibility to help to shoulder the burdens of enforcing human rights,” he writes.

Speaking to executives at a forum in Beijing to introduce his book, Dr. Santoro said they needed to show “backbone and courage.”

“It is unacceptable that no major business has initiated a court action against any level of Chinese government for anything,” he said.

“It’s also dangerous to your future economic well-being. That is not the kind of country that you want to be investing large sums of money in, because the future, without a settled rule of law, is very uncertain,” he said.

In making a legal call to arms, Dr. Santoro wants Western businesses to reconsider some of their “shortsighted and self-defeating presuppositions” about the best way of promoting their interests in China. But some people on the ground feel that it is a confrontation in court that would be self-defeating. Clare Pearson, who runs ethicaledge, a consultancy in Beijing, said Dr. Santoro was wearing cultural blinders.

“Companies aren’t the new missionaries,” Ms. Pearson said. “The last thing you want to do is to get somebody to lose face in public,” she said, advising, “Get close before you get critical.”

It's an interesting argument. And I don't see that there is much disagreement necessarily between Santoro and Pearson here. It sounds like Santoro might concede that as far as doing business in China goes, yes, do get close before you get critical. But once you are close--don't forget the second part, which should at least sometimes include court actions on such issues as internet freedom and judicial independence. Perhaps we'll start to see some of that now. Of course just getting close might already require making significant ethical concessions as the Dell and HP case presents in my post below. It would be interesting to know what Santoro would say about that.

My own recent book includes a chapter by Duane Windsor, professor of business ethics at Rice, on the duty of MNCs to provide basic health services, i.e., to help erradicate epidemics, in developing countries in which they operate. He argues that when it can be done relatively easily and at low cost it must be, for it is both a "moral obligation and a strategic necessity."