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Ethical Analysis of Case Studies

The Case Studies appear in Ethics and the Conduct of Business by John Boatwright J. N. Hooker Carnegie Mellon University October 2003

Case 5.1 Two Whistle-Blowers

Synopsis1 A quality control inspector, Chuck Atkinson, tried to get his superiors at Brown & Root to observe safety regulations in the construction of a nuclear power plant. Frustrated, he finally reported the problem to government regulators. At this point he lost his job and comfortable salary, and he was blacklisted. He was forced at one point to support his family by gathering cans on the highway for scrap aluminum. Brown & Root eventually fixed the safety problems, and Atkinson believes that his activism was the primary reason they did so. He states, Ill always sleep at night. A Difficult Dilemma Whistle-blowing is one of the hardest ethical dilemmas to approach rationally, since the employee tends to be under intense pressure from superiors, coworkers and family. Whistleblowers often pay a high cost, involving not only economic loss but possibly family breakup, loss of friends, and psychological or physical illness. Another difficulty with whistle-blowing is that the factual situation is murky. It is very hard to predict whether the employees efforts will bear fruit in the long run, or how severe the reprisals will be. Even if one finds the right ethical principles, it may be impossible to apply them due to the lack of information. Loyalty Interestingly, arguments both for and against whistle-blowing tend to cite loyalty to the firm. One should blow the whistle, rather than simply quit the job, because one owes it to the company to prevent it from going astray. One should not blow the whistle because it would harm the company and ones fellow employees. A Kantian analysis can help sort out the issues. The Kantian case for loyalty is that disloyalty can normally accomplish its aim only by presupposing loyalty. Atkinson can embarrass Brown & Root into building a safe nuclear plant only if the company hangs together well enough to build a plant. A company or other organization can hang together only if its members support the organization, sometimes by making sacrifices, and sometimes by overlooking ethical lapses. Yet when does loyalty require sacrifice, and when does it require ethical compromise?

We focus on the first of the two whistle-blowing stories, since the second deals primarily with attorneyclient privilege and requires specialized knowledge of legal ethics.

Sacrifice. If the viability of an organization requires the heroic sacrifice of its members at critical junctures, then its members are obligated to make this sacrifice, when the occasion arises, if they rely on the organization to accomplish their purposes. This sort of logic may apply to members of emergency rescue teams, a police department or armed forces. However, if the organizations success normally does not require extreme sacrifice, then loyalty may be observed in more moderate ways. This seems to be the case with a business corporation. So a Kantian loyalty argument does not seem to require Atkinson to make the sacrifice he did, although other arguments may impose a stronger obligation. Compromise. Does loyalty obligate Atkinson to help cover up the safety violations? Lets start with the more basic question as to whether ethics can require one to make ethical compromises. In a sense, it can. An act that is wrong when considered in isolation may be right in the context of a larger situation. To use an old example, lying in general is wrong, but lying to the Nazi Gestapo to protect innocent people in hiding is right. The test is whether ones rationale for acting is generalizable. Lying to conceal the location of innocent people is generalizable, since it achieves its purpose even if everyone lies for this purpose.2 There is no evidence, however, that the viability of construction firms depends on covering up safety violations. In fact there is evidence to the contrary. So loyalty does not require Atkinson to stay with the firm and help conceal the violations.

In Artistotelian ethics, loyalty is a good thing because it is an essential part of being human. Aristotle would be repulsed by a business world in which relationships are based purely on economic incentives and evaporate as soon as the incentives change. This is a depraved existence that stunts the realization of human potential, much as does a life of poverty. It is a further question, however, what loyalty means in a particular context. Aristotle might argue that in the army, loyalty means nothing unless it entails being prepared to sacrifice life or limb. Loyalty in a business corporation has a different character. The Aristotelian and Kantian perspectives seem to draw similar conclusions from loyalty arguments. Quitting the Job Even though firm loyalty does not compel Atkinson to participate in questionable activity, family loyalty is another matter. Even the easiest alternative, resignation, can result in unemployment and negative consequences for the family. Family obligation can be a major consideration, particularly when its survival is threatened, or if one lives in a culture where strong family connections play a pivotal role. These issues are too large to consider here. Suffice it to say that only a comfortable lifestyle seems at stake in Atkinsons case. His family will have the necessities in any event, and his children can still succeed in life and make positive contributions by dint of diligent study and parental encouragement. (Special circumstances such as disability or the possibility of divorce may change the argument.) Family loyalty should normally be consistent with Atkinsons quitting his job.

If one is prepared to lie in other exceptional circumstances as well, then ones overall rationale must be checked for generalizability.

Preventing Harm Whistleblowers deal with more than loyalty obligations, since their companies may do harm to customers or the public. Even if employees do not contribute to the harm, should they try to prevent it? Simply resigning does not resolve the matter, since the companys wrongdoing will continue. This is where the ethical situation becomes particularly complicated. This is not really a whistle-blowing issue, but a general question of what kind of sacrifice one should make to prevent others from doing harm. The simplest position one might take is that stepping in is laudable but an act of supererogation (going beyond the call of duty), since one is not responsible for the misdeeds of others. Yet it is easy to construct counterexamples. Is it permissible to stand by, for example, if a companion drops stones from an overpass onto passing cars? The factual ambiguities of Atkinsons situation make it hard to derive an clear obligation to blow the whistle. However, two related obligations seem clear: He should determine the facts as clearly as possible, for instance by talking with engineers about the actual extent of the danger. He should investigate past actions of the Nuclear Regulatory Commission to assess what they might do in the present case. He should act cleverly to minimize his losses, by looking at several options and thinking them through carefully. For instance, he might consider an anonymous leak, or find ways to bring pressure to bear on the relevant executives. He should consult an attorney in confidence. Scoundrels get away with doing what they do by being smart. Why shouldnt moral persons be equally smart?

If Atkinson finds the safety risk to be a serious one that cannot be removed without his personal sacrifice, he can look again at whether the sacrifice is warranted. It is hard to analyze the issue further, given the lack of information in the case description. Even if Kantian ethics is noncommittal, Atkinson may subscribe to a philosophy or religion that imposes stronger obligations. His remark about sleeping at night suggests that he values integrity, or wholeness, which is an important concept in the ethical thought of both Plato and Aristotle. If he acted in violation of his principles and therefore in contradiction to who he really is, he would be at war with himself.

Case 5.2 A Whistle-Blower Accepts a Deal

Synopsis An auditor employed by a pharmaceutical company submits documentation to the FDA to support approval of new drugs. He suspected inaccuracies in the information he provided for one particular drug and discovered that the project director had in fact falsified data. When he reported this to his superiors, the company board of directors offered the auditor a deal. If he would not interfere with the FDAs imminent decision to approve the drug, the company would discontinue the drug and request the FDA to withdraw approval due to mistakes in marketing projections. The aim was to avoid the bad press that would result from public knowledge of the falsification. The auditor accepted the deal, the company kept its word, and the project director

quietly resigned. No further scandals of this sort have occurred, but the company made it harder for the auditor to investigate possible cover-ups. Telling the Truth The issue is whether the auditor should have accepted the deal rather than telling the FDA the truth. He did not lie in the sense of making statements he knew to be false at the time. But he perhaps deceived the FDA by failing to correct misinformation he had provided. Deception is wrong in general because it presupposes honesty and is therefore ungeneralizable. One can deceive only if people in general do not deceive merely for convenience. Honesty between human beings is fundamental because it is the precondition for communication and therefore for human relationships of any sort. There is perhaps less at stake in the pharmaceutical case, however, because the communication was actually between a corporation and a government agency, not between human beings. In fact one might argue that the submitted documents were simply part of bureaucratic procedure and did not really deceive. The message they conveyed was not their specific content but an assurance that the company would not market a substandard druga message that the company conveyed in good faith. The data simply provide an investigative tool to be used if the FDA suspects noncompliance: the more information companies provide, the easier it is to catch them in a lie. The auditor also sent a secondary message that data were correct to the best of his knowledge at the time. But this message was true and remained true after the errors came to light. The primary message that the company would not market a substandard drug also remained true. So there were no messages for the auditor to correct. This is a clever argument but makes many assumptions (which is often the case with arguments that sound a little too clever). (a) It assumes that the auditor can trust the company to follow through with its end of the bargain. This is perhaps not an issue since the he can go to FDA at any time he suspects noncompliance. (b) The argument assumes that the FDA will not ask the auditor further questions about the test data, since he would be obligated to tell what he knows. (c) Most importantly, it assumes that the submitted information really is just part of bureaucratic formality and serves no other purpose. If the FDA uses the information to inform its policy making, or passes it along to medical research teams, then the auditor is guilty of deception. So one might argue that the deal may be ethical but only under these strong assumptions.

Case 6.1 The Aggressive Ad Agency

Synopsis In 1987 Microsoft introduced its spreadsheet program Excel to compete with Lotus 1-2-3. Microsoft also happened to be looking for a new ad agency. It received a bid from an up-andcoming agency, Rossin Greenberg Seronick and Hill (RGSH). To attract Microsofts attention, RGSH offered the services of two new employees who recently worked for Lotus. RGSH said

the employees were intimately acquainted about Lotus thoughts about Microsoftand their plans to deal with the introduction of Excel. The Employees Position3 The former Lotus employees were in a position that is all too familiar today. Companies require employees to sign sweeping nondisclosure agreements and pledge secrecy about everything but the color of the bathroom tile. The main rationale for keeping business secrets is that secrecy is an essential part of the competitive system from which employees choose to benefit. The argument is essentially a Kantian one. The only reason the former Lotus employees could learn company secrets in the first place is that employees in general keep these secrets. By telling the secrets to their new employer they would indulge in a type of behavior that is possible only because others in their position resist it. It is a classic case of Kantian inconsistency. The former Lotus employees should therefore maintain confidentiality, with or without a nondisclosure agreement. Nondisclosure agreements can complicate the ethical situation because they are so broad. There is nothing wrong with asking employees not to reveal competitive strategy or specific trade secrets. Yet these agreements may ask departing employees to forget a wide range of knowledge and skills acquired on the job. Part of what it means to be a professional is to use the skills at ones command to do ones job as well as possible. In this case the Kantian argument applies to the employer. The company can benefit from professionals in the first place only because they bring to bear the know-how and experience they acquired during prior activities. The company should therefore allow professionals to take their know-how with them when they depart, unless it represents a specific trade secret the employees agree in advance not to divulge.

This case provides a good exercise in sorting out factual, legal and ethical issues: The employees position Factual issues: Are the employees willing to divulge information about Lotus? Did they sign a nondisclosure agreement with Lotus? Legal issues: Does the nondisclosure agreeement (if any) allow them to talk about Lotus? Can they legally do so even without an agreement? Ethical issues: Are the employees ethically obligated honor a broadly-written nondisclosure agreement that they had little choice but to sign? Even if they signed nothing, should they treat their discussions with Lotus as confidential? The agencys offer Factual issues: Is RGSH in fact offering provide confidential information about Lotus plans? Are the employees aware of this offer? Legal issue: Is it legal for RGSH to make such an offer? Ethical issues: Should RGSH make the offer, legal or not? Should it make it without the consent of the employees? With their consent? Implications for Microsoft Factual issues: Would Microsoft harm its reputation by engaging RGSH? Would Lotus sue? Would it win the suit or be in a position to extract a favorable settlement? What if Microsoft not only hired RGSH but actually learned about Lotus plans and acted on the information? Legal issue: Are there grounds for a lawsuit? Ethical issues: Aside from the legal issue, should Microsoft hire RGSH? Is it right to obtain or act on inside information about a competitors plans? Only the ethical issues are addressed here.

With or without a nondisclosure agreement, the former Lotus employees can and should apply their know-how but should not divulge a specific trade secret or business plan. The latter is not the kind of knowledge that enhances their skill as professionals. It is know-that rather than know-how. The nondisclosure agreement may apply to more than specific trade secrets and business plans. But if it requires employees to withhold their general expertise from future employers, it is unethical and is therefore not ethically binding. (Whether it is legally binding is not addressed here.) The employees perhaps should not have signed the agreement in the first place, or should at least have tried to renegotiate the terms, but that is a different issue.4 If there is a risk of being sued by Lotus, the employees must consider this risk, since they owe it to themselves and their employer not to become involved in litigation. Yet the more unreasonable terms of such agreements tend to be hard to enforce legally. The Agencys Offer The same Kantian argument that binds the former Lotus employees applies to RGSH. The firm can carry out competitive strategy in the first place only because employees generally respect confidentiality. It is inconsistent, and therefore unethical, to ask these two employees to betray confidentiality. It follows that RGSH cannot ethically offer inside information to Microsoft. The offer is either a lie, which is unethical, or it presupposes the unethical act of obtaining the information. Implications for Microsoft Likewise, Microsoft should respect the same confidentiality practices that make its own business strategy possible. Microsoft may try to weasel out if this obligation by claiming that it expects and will accept no specific information about Lotus. It will simply accept marketing advice from RGSH. If RGSH relies on inside information from Lotus, that is its decision and not Microsofts. This argument is clearly specious. The whole point of confidentiality is to prevent other firms from pre-empting strategic plans. Pre-emption does the same damage whether other firms know the plans directly, or only their ad agencies know them. Part of respecting confidentiality is therefore using ad agencies that respect it.

Case 6.2 The Conflict of an Insurance Broker

Synopsis A major museum currently obtains insurance from Haverford, through its insurance broker Ashton & Ashton (A&A). It is time for renewal of the policy, and A&A obtains several bids. There is one lowball bid from a shaky company called Reliable. If A&A conveys the Reliable
One might argue that many nondisclosure agreements are nonbinding legally and ethically because they are adhesion contractsemployees have no choice but to sign them, since they are generally required in the industry. So there is no mutual consent and therefore no contract.

bid to the museum, the museum will probably accept it. A&A receives 10-15% of the premium as commission, 17% in the case of Haverford. Should A&A present the low bid? If it does not, could it be accused of conflict of interest? Conflict of Interest The conflict of interest matter is easy to resolve. A conflict of interest is present whether or not A&A presents the low bid. The issue is whether the conflict should influence A&As decision. The answer is, of course not. A&A must decide what is best for the client and do it, appearances notwithstanding. Professionals deal with conflicts of interest all the time, although it is best to avoid them when possible. Part of what it means to be a professional is to make professional judgments regardless of the incentives. How Many Choices? A harder issue is how many choices A&A should present to its client. There are two basic policies. One is to present the client a full range of representative bids, give advice, and let the client decide. A second policy is to make some decisions for the client by screening out bids that the broker thinks are clearly inappropriate. A resolution of this issue requires looking at the basic role of professionals. Professions exist so that we can know what to expect from people who provide services: we know that a someone in a physicians white coat will have training and competence in medicine, that someone with an engineering degree will use technical knowledge to provide safety and reliability, and so forth. So professional duties are largely defined by expectations. This implies, interestingly, that professional duties pose a question of fact (what do people expect?) rather than a question of value. As a rule, brokers are expected to give advice and not make decisions. This is not true of all professionals. A physician, for example, may not only advise against a particular drug but may refuse to prescribe it. Physicians generally present only the alternatives that they believe are appropriate for the patient. Brokers, however, are generally expected to present the full range of alternatives. There are two undertones in this case, however. One is the suggestion is that the museum is unwilling or unable to make the right decision, even after hearing A&As advice. Yet it is the museum directors responsibility to make these decisions. If high insurance premiums forced the museum into bankruptcy, for example, the museum director would take the heat for this, even if A&A actually made the decision. An insurance broker has neither the right nor the responsibility to run a museum. A&A can be as emphatic and detailed as it wants, however, when it advises the museum to reject the lowest bid. A second undertone is that the museum may discount this advice because of A&As financial incentive to recommend a more expensive policy. A&A should compensate for this, one might argue, by suppressing the low bid. The problem here is to find an ethical way to overcome the clients distrust (assuming it really exists), since it is a brokers duty to give reliable advice. Suppressing an option is not an ethical way, as just argued. Another option is to lay out the pros and cons that A&A itself considers when giving advice. Perhaps the museum would find this approach credible, due to its own internal logic, even though it suspects A&As motives.

Case 6.3 Procter and Gamble Goes Dumpster Diving

Synopsis John Pepper, Chairman of Procter and Gamble, learned that one of his contractors was searching the trash bins outside Unilever. The sleuths found some information about Unilevers competitive strategy. Pepper fired the executives overseeing the espionage. He went directly to Unilever to confess the misdeed and give assurances that P&G would not use the information. Unilever, however, played hardball by threatening lawsuits. It offered a settlement in which P&G would pay Unilever $10-20 million in damages, dismiss the employees that saw the information, and accept monitoring by a third party for some years. Should Pepper accept the settlement? Industrial Espionage The case seems to assume that this instance of espionage is unethical. It states that, according to the Society of Competitive Intelligence Professionals, dumpster diving is unethical when the bins are on private property. There may be an issue of trespassing if the bin is on private property, which may the origin of this curious proviso in the ethics code. The primary ethical question, however, revolves around the practice of espionage as such. If it is unethical, then it is unethical no matter where the dumpster is located. A certain amount of information gathering seems perfectly ethical, such as scrutiny of advertising, annual reports, and the products themselves. The Kantian test of how far one can go is generalizability. If intelligence activity breaches trust that makes that activity possible, then it is unethical. For example, it is unethical to engage an employee to spy on his company. That employee can spy only because his company trusts him, and his company trusts him only because employees in general are not spies. Spying may be ethical when there are special considerations that make the activity generalizable, such as spying for national defense. But selling soap does not fit into this category. Searching through Unilevers trash bins, aside from being a bit ridiculous, is likewise ungeneralizable and therefore unethical. The material is available in the trash only because companies generally do not stoop to this level. The ethical situation might be different if it were common practice to search dumpsters, and Unilever simply forgot to shred its documents. Companies collectively decide what kind of world they want to live in. If they keep pushing the envelope as to what kind of chicanery is accepted practice, their world keeps getting nastier, and pretty soon it begins to look like organized crime. This slippery slope argument is not needed, however, to show that pushing the envelope is unethical. It is unethical because it is ungeneralizable in the Kantian sense. As for whether Pepper should accept the Unilever settlement, this is an ethical issue (as all management decisions are), but it also requires knowledge of legal and corporate strategy. I dont have this sort of expertise and will therefore not attempt an analysis.

Case 7.1 Psychological Testing at Dayton-Hudson

Synopsis Dayton Hudson, owner of Target stores, required applicants for security jobs to fill out Psychscreen questionnaires. The tests asked very personal questions about ones religion and sex life. The questions had no direct relation to the job but presumably indicated personality traits that were desirable for security personnel. There was, however, no evidence that the testing resulted in better employees, and there was evidence that it had 61% false positive rate, meaning that 61% of rejected employees were nonetheless suitable for the job. Three employees sued the company for invasion of privacy, although the outcome of the case is not stated. Utilitarian and Kantian Analyses The facts of the case immediately defeat any utilitarian argument for a company policy of giving psychological tests. The tests make no positive contribution to the company and do substantial harm by excluding a large number of qualified applicants. The Kantian argument against invasion of privacy is straightforward. Invasion of privacy is possible only if privacy is normally respected, since otherwise there would be no privacy to invade. It remains to be determined, however, whether the psychological tests actually invade privacy. This requires an analysis of what privacy is. The Role of Privacy A brief look at the cultural function of privacy gives more insight into exactly what it is and why it is important. Privacy makes intimacy possible. To respect privacy is to avoid intruding upon or learning about intimate aspects of ones life. Intimate aspects are those that people reveal only to those whom they trust not to take advantage of what they know, such as family members, lovers, or long-term friends. Intimacy is important because it allows members of a family or other close-knit group to work together efficiently to survive in a hostile environment. One can imagine how difficult it would be for a family to operate if its members were afraid to reveal their personal lives to each other. Privacy is also important psychologically, as it provides relief from the stress of having to be on guard about everything one does. Different societies define intimacy somewhat differently, depending on what is more important for survival: some emphasize sexual privacy, some the privacy of the home, and some even the privacy of ones salary. As technology becomes more effective at collecting factual information, privacy of medical and economic data becomes more important, since such data can be used as a tool to manipulate others. The Kantian argument tells us to respect what is private, but one must determine what kind of information gathering is in fact an invasion of privacy. It might be argued that Dayton Hudsons snooping is not really invasion of privacy, because business firms and other organizations serve a survival function in U.S. society similar to that of the family in traditional societies. Like members of a family, members of a firm must have some degree of intimate knowledge of each other if the organization is to operate efficiency. This argument has some merit, but the firm nonetheless differs enormously from the traditional family. Firms routinely dismiss employees in hard times or for incompetence, whereas families traditionally cling together in all but the most extreme circumstances. Firms use their intimate knowledge to manipulate or bring lawsuits against employees, whereas families normally do not betray confidence. Sharing of intimate information is not possible in the workplace, nor is it necessary. If one looks at the details of particular cases, it is not hard to imagine how firms such as Dayton Hudson can do their work

without prying into intimate facts about its employees. In particular, the Psychscreen questionnaire is unnecessary (indeed ineffective) and therefore unethical. There may be cases in which firms cannot function without some knowledge of an employees personal habits. They may, for instance, ask operators of dangerous equipment for urine samples. But even in these cases there are usually other and better ways to determine competence. An airline pilot, for example, has a record of past performance and interaction with other crew members that should indicate any propensity toward irresponsibility.

Case 7.2 Three Challenges to Employee Privacy Synopsis 1: Dating at Wal-Mart Wal-Mart prohibits married employees from dating anyone other than their spouses. In one instance, the company learned that a single male and married female employee were romantically involved when she was served custody papers at the store. Wal-Mart fired both employees, on two grounds: extramarital affairs can cause turmoil in the workplace, and Wal-Mart aims to cultivate a family-oriented, down-home image. Not a Privacy Issue Invasion of privacy is not an issue here, since Wal-Mart relied only on public knowledge and made no attempt to snoop. The issue is whether Wal-Mart was right in dismissing employees for what they did in their private lives. Common law in the United States follows the employment-at-will doctrine: employers can dismiss employees at any time for any reason or no reason, unless an employment contract provides otherwise. However, what is permitted under common law may be unethical (or even illegal by statute, as in the case of race-based hiring). The ethical issues surrounding employment discrimination are complex, but the Wal-Mart case is too silly to deserve close analysis. If a private relationship becomes a problem on the job, Wal-Mart can dismiss the employees involved on that ground. It is neither ethical nor practical to restrict personal behavior when it has no effect on company success. Synopsis 2: Is Email Private? The Los Angeles Times disciplined a reporter for guessing the passwords of coworkers and reading their email. But Nissan fired two employees after reading, in their password-protected email, sexual comments about their supervisor. Companies often claim that they must monitor email to make sure the system is not abused. 5 Opponents of this practice say that workers should at least be put on notice that their email is not private, while others oppose reading email under any circumstances.

Carnegie Mellon University uses this justification for reserving the right to monitor all information that passes through its networks, presumably including email messages.


Confidentiality The Kantian argument for respecting confidentiality is simple. Violating confidence is possible only if confidentiality is possible, and confidentiality is possible only if people respect it. It is unethical to read private communications that exist only because private communications are normally respected. It is therefore unethical for a company to read email that employees believe is private. If email is not private, the company should explicitly warn employees of this fact, to avoid misleading them. It is a further question whether companies should provide employees an email system that respects privacy. The utilitarian answer to the question is straightforward and has been implemented for centuries. Since there is obvious value in providing for confidential communication, and the cost of doing so is minimal, it makes sense to have first class mail, which could be electronic as well as hard copy. A national law could prohibit the interception of first class email by anyone other than the addressee, even if it is delivered over a company intranet. After all, companies are not allowed to open first-class letters that it delivers to office mailboxes. Until such a law is enacted, it seems equally prudent for companies and other email handlers to provide for private first class email and respect its confidentiality. Synopsis 3: Video Surveillance In California, Consolidated Freightways installed cameras in mens restrooms to monitor possible drug dealing. It claimed that the cameras did not pan toilets and urinals. California law prohibits video surveillance in areas where there is a reasonable expectation of privacy. In Illinois, an Amoco chemical laboratory installed a camera in the ceiling of a womens locker room in order to catch a pair of lovers who were thought to rendezvous in the locker room. Other employees filed suit. Reasonable Expectation of Privacy The whole point of designating a mens restroom is to create an expectation of privacy. Anyone in the restroom should be able to assume that he is observed only by other men in the restroom, whether he is standing in front of the mirror or elsewhere. The surveillance camera is obviously illegal, and it is unethical on that basis alone. The Amoco case is laughable and scarcely deserves serious consideration.

Case 7.3: Ford Meter Box Ford Meter Box Company does not hire workers who smoke. Employees must not only refrain from smoking on company property, but they must submit to a periodic blood test that checks for the presence of nicotine. The rationale is that smokers cost the company substantially more in health care bills and days off. Two Issues This case involves both a privacy issue (the nicotine test) and a personal freedom issue (the smoking ban). If no blood test were required, the no-smoking rule would be analogous to similar rules in many professions. Strict anti-smoking rules have become commonplace and accepted in the USA, perhaps as an expression of the countrys Puritanical streak. There are grounds for questioning this phenomenon, and it could lead to a slippery slope: companies could refuse to


employ individuals who are overweight, have cancer in the family, have dangerous hobbies, an so forth, in order to cut costs. But since smoking bans are already widespread, the freedom issue in this case is less urgent than the privacy issue. The main question, then, is whether a company should require blood tests. It is part of the larger question of whether companies should require medical examinations, access to medical records, and so forth, to limit costs and liability. (U.S. law normally prohibits employers from requiring access to medical records, although they can typically require medical exams to check for conditions related to job duties.) There are at least two Kantian arguments against this invasion of privacy. One is the general argument already given: Ford cannot provide the kind of high-trust environment that justifies intimate knowledge of its employees, nor is knowledge of their nicotine level necessary to do business. A second argument weighs against excessive externalizing of costs. Some persons inevitably have health problems or disabilities, and someone must bear the expense. If every company tried to externalize health care costs through invasive medical exams and screening, the government or society in general would carry the full load. Taxes and social costs would be much higher, and Fords very existence as a profitable corporation would be threatened. It is unethical for Ford to make an exception for itself by trying to reduce its share of health care costs below the norm.

Case 7.4 Lotus MarketPlace: Households Synopsis Lotus Development Corporation made a deal with a credit bureau (Equifax, Inc.) to distribute a CD called Marketplace:Households that contained purchasing behavior of thousands of households. Associated software used the CD to generate targeted mailing lists. Purchasers of the CD (at a cost of $695) did not have direct access to the data on the CD, but only to a mailing list of 5000 names that resulted from specifying the desired profile. Additional mailing lists could be generated at a cost of $400 each. The motivation behind Marketplace:Households was to provide small businesses the same access to marketing data already enjoyed by large corporations. To minimize abuse, Lotus sold the CDs only to reputable companies and included dummy names and addresses that would allow it to intercept any direct marketing literature they mailed. The American Civil Liberties Union and other groups howled in protest. They saw Marketplace:Households as an invasion of privacy, since information collected by Equifax for loan and mortgage approval should not be released in this way. Confidentiality of Information The case description emphasizes the wide distribution of consumer data as the main ethical concern. However, if the information is confidential, then it is unethical to sell it to even one company. It is unethical on Kantian principles for Equifax to release the information if it relied on a presumption of confidentiality to get the information. It seems likely that it did. Consumers released detailed information about their financial situation, information that they would not ordinarily release, specifically to obtain a mortgage or other loan. It is therefore unethical for Equifax/Lotus to release credit information, to one company or to a thousand, unless Equifax warns consumers that the data will not be treated confidentially.


What if fine print in the loan application warns the consumer? The presence or absence of some clause in the paperwork is ethically irrelevant. The relevant factor is the mutual understanding that actually occurs. Since Equifax can presume that the consumer will probably overlook such warnings in the flood of paperwork that accompanies a loan application, then it is deceiving the consumer. Equifax should make sure consumers are aware that confidentiality will not be respected The Policy Issue There is also a complicated policy issue at stake. One might argue on utilitarian grounds that credit bureaus should be prohibited from selling personal information at all, since otherwise consumers would have an incentive to withhold or falsify information, thus undermining the credit industry. Or one might argue that it is enough to require clear disclosure of the confidentiality terms, much as is done by truth-in-lending laws, so that consumers can favor companies that respect privacy. These issues are now being worked out in the marketplace and in legislatures. A Flood of Advertising This case also raises the ethical status of direct marketing in general. Is it wrong to irritate consumers with junk mail, spam, and telemarketing calls? A Kantian analysis asks whether such behavior undermines the system that make it possible. Telemarketing seems the most clearly unethical. Answering a telephone call is disruptive, and people pick up the phone because they expect to receive a legitimate message that justifies the interruption. Telemarketing is possible only because most people do not abuse the telephone in this way. A telemarketing call masquerades as a legitimate call and is therefore based on a form of deception. This is perhaps why there is currently strong popular support for do-not-call laws. Junk mail is less odious. People seem to have accepted it, perhaps because it is usually easy to identify junk letters, and there is no deception. (The stupid mailings that masquerade as bills or other important notices may be unethical.) The postal system continues to serve its purpose despite being clogged with junk mail. In fact, junk mailings subsidize the delivery of legitimate first-class letters. There has been much outcry about spam, even though it is relatively unobtrusive and can be deleted with a keystroke.6 Perhaps again people object to an element of deception, since it is often harder to identify spam than postal junk mail. Also one might argue that spam is unethical on the ground that if all advertisers followed the same direct marketing policy as spammers now follow, the usefulness of email would be undermined. Consumers would receive thousands of emails a day, making it impossible to find legitimate email. It is unclear at this point if this is true, but even now, spam that masquerades as legitimate mail, due to a misleading caption or point of origin, is unethical because it deceives.

Interestingly, Carnegie Mellon forbids spam on its email system but routinely engages in telemarketing calls to solicit donations.


Case 11.1 Dow Cornings Breast Implants Synopsis For some years Dow Corning manufactured breast implants, originally designed for women who had undergone mastectomies. Testing was performed only on dogs, but the tests provided no clear evidence that the implants would cause harm when properly used. Anecdotal evidence involving human patients, however, suggested that silicone oozing out of the implants could cause autoimmune diseases. The company sometimes told its salespeople to conceal the oozing by wiping the implants clean just before displaying them to surgeons. A court ruled the implants defective in a 1991 product liability suit and found that Dow Corning fraudulently deceived customers. This gave rise to a series of lawsuits, and in 1994 Dow Corning agreed to contribute $2 billion to a settlement fund. In 1995 the company filed for bankruptcy. In recent years extensive studies have failed to confirm that silicon or any other design defect of the implants causes the autoimmune symptoms, which seem to be a generalized reaction to a foreign substance in the body. Strict Liability The lawsuits took place in the USA, where courts have enforced the theory of strict liability since the early 1960s. On this theory, a company must pay for damages caused by a defective product, no matter how hard it tried to make the product safe. Dow Corning may not have tried very hard, but this is legally irrelevant to product liability; the only question is whether the breast implants were defective. Dow Cornings attempt to deceive customers relates to a different legal issue: whether it was guilty of fraud, which is a tort. Due Care Deception is unethical, but there is a more basic ethical issue that the legal analysis does not address: did Dow Corning try hard enough to ensure safety?7 At the very least the company managers were imprudent by conducting too little research to minimize expected costs, and they have an ethical duty to be prudent. Yet even if they were financially prudent, one can ask whether they took sufficient precautions medically. The fact that silicone now appears to be safe is irrelevant. What matters is whether Dow Corning acted ethically given the state of knowledge at the time. Too much caution can be as harmful as too little, since it deprives patients of treatment. A utilitarian analysis seeks a schedule of testing and product releases that maximizes benefit and minimizes harm. The medical and regulatory communities have developed protocols with this aim in mind, and the utilitarian solution has probably been worked out as best can be done in the current state of the art. Dow Cornings duty, from a utilitarian point of view, was to follow best practices as they were known at the time. Obviously, the company should have fully disclosed what it knew about the implants.

In many parts of the world, including the European Union, due care is the legal criterion, rather than strict liability.


Distributive Justice A difficulty with the utilitarian analysis is that it may not provide for distributive justice. It may be wrong to make a few women much worse off even if this is offset by many women who are better off, and even if overall utility is maximized. The criterion for Rawls, simply put, is whether the least fortunate persons after the release of breast implants are worse off than the least fortunate beforehand. (This test must be applied whether or not the adverse reactions are due to a product defect.) The least fortunate before the implants are women who have had mastectomies. The least fortunate afterwards are women who have mastectomies and an adverse reaction to an implant. If the latter group is worse off than the former, then Dow Cornings actions are unjust. Interestingly, a Rawlsian analysis seems to condemn implants used for purely cosmetic purposes of breast enlargement, if there is even a slight risk of a bad reaction. The least fortunate beforehand are women with small breasts (if this can be considered a misfortune), and the least fortunate afterward are women with implants and painful reactions. On the other hand, Rawls can approve of drugs that cure serious illness, even if a minority of patients suffer an equally serious side effect. Those with the illness are the least fortunate beforehand, and the least fortunate afterwards are a smaller group of people with the side effect. It is possible that best practices in the medical community are not purely utilitarian but actually incorporate a Rawlsian viewpoint. An investigation of this would make an interesting research project. Case 11.2 Volvos Bear Foot Misstep Synopsis At a monster truck rally in Vermont, a huge Bear Foot truck drove over the roofs of several cars an crushed all but a Volvo. Volvos advertising agency recreated this scene for a highly acclaimed television commercial. However, the agency reinforced the Volvo and partially sawed through the roof supports of the other cars. The agency claimed that this was necessary for production purposes. Yet the State of Texas sued Volvo for consumer fraud based on deceptive advertising. Deceptive Advertising This is clearly not a case of deceptive advertising. Advertising is deceptive when it deceives the customer about the product. The Volvo stunt was not deceptive because Volvos really can stand the weight, and the other cars cannot. If Volvo had reason to believe that the Vermont event was a freak, that would be another matter, but Volvos engineering calculations suggested that the opposite is true. The dramatization was not deceptive as advertising but was deceptive in the broader sense that it probably led some viewers to believe they were seeing a real demonstration rather than a dramatization. One expects to see dramatizations in a movie or TV drama, but perhaps not in an ad of this sort. This could make the ad unethical, but the problem is easily overcome by adding a caption, Dramatization of an actual event, at the bottom of the screen.


Case 11.3 The Target Marketing of Cigarettes Synopsis In 1990 R. J. Reynolds Tobacco Company introduced a new brand of cigarette, Uptown, targeted at sophisticated, urban blacks. Louis Sullivan, U.S. Secretary of Health and Human Services at the time, charged that Uptown was deliberately and cynically targeted toward black Americans, a group [that is] already bearing more than its share of smoking-related illness and mortality. There was evidence that cigarettes and alcohol were already advertised more heavily in black neighborhoods than white neighborhoods. Aware of the political implications of the controversy, Reynolds withdrew the brand. Tobacco and Justice Selling and advertising tobacco products to any group already raises ethical issues, but the case description emphasizes the particular targeting of this brand. Sullivan seems to suggest that selling cigarettes to blacks in particular is worse than selling them to most other groups. The ground for this claim seems to be that the tobacco industry not only harms its customers but is unjust in its distribution of harm: it injures blacks more than other groups. Reynolds should therefore refrain from targeting the black consumer. It is unclear why harming unequally is worse than harming equally, but one might argue that it does not matter. If selling cigarettes is bad, then Reynolds should not sell them to anyone. If it is good, then Reynolds does blacks a favor by targeting them more than other groups. Meeting a Need for Self-Destruction There is an intermediate view, however. Perhaps it is ethical to make cigarettes available to fully informed adults, but not to persuade them to smoke. One might even argue that human beings have a need for self-mutilation, since the practice occurs in a wide variety of cultures. Perhaps the tobacco industry legitimately serves this basic need, but it should not try to create a greater need with aggressive advertising. Sky diving equipment, bungee cords, and race cars meet a similar need, and we do not say these industries are unethical, as long as they do not push their products too hard.8 If this analysis is correct, Sullivan might argue that the industrys vigorous efforts to sell to blacks cross the line of proprietyalthough it is unclear why cigarette advertising in general does not cross the line, given its aggressive nature.

Case 15.1 Nike in Southeast Asia Synopsis Nike sells shoes by associating its brand name with such glamorous figures as Michael Jordan, but it does not actually make the shoes. It buys them from contractors operating in such low-wage countries as Indonesia. Workers toil in dangerous, crowded sweatshops for $1.24 a day. The government overlooks labor law violations in order to attract foreign investment, and the army suppresses organized labor. As criticism of these practices grew, Nike initially washed its hands of the matter by denying responsibility for what its contractors were doing. Later it argued that it does these workers a favor by providing thousands of jobs that pay (slightly) more

Although we might judge these industries more harshly differently if their products were addictive.


than the prevailing wage rate. It also paid a $2 million promotional fee to Michael Jordan in 1992, which was more than the entire Indonesian payroll that year. Inequality At first thought, the ethical issue here seems to center on inequality. Even granting that Nike makes Indonesians better off economically, one can question the staggering inequality between those who make the shoes and those who wear and profit from them. Yet once the inequality argument is put forward, economists immediately respond that artificially raising the wage rate would do more harm than good. For instance, it would drive local manufacturers out of business and retard the long-term development of the Indonesian economy. At this point the arguments pro and con seem to resolve nothing, and one is left unable to defend a profound uneasiness about a world in which half the population lives on less than $2 a day. A Chaotic Situation The ethical problems go far beyond concerns about inequality, however. Most evident are the social problems created by rapid adjustment to an industrial economy. One need only read a little Charles Dickens to recall the social breakdown that occurred in the West during its industrial revolution. Countless children, for example, were abandoned in the street, and a shockingly large fraction of them died in orphanages. Only over a period of many decades did Western society adjust to the new economy and curb the worst abuses, even though industrialization was an indigenous phenomenon to which Western countries could adjust on their own terms. Countries like Indonesia are forced to adjust more rapidly to a system that is alien to their history and culture, on terms dictated by the dominant Western powers. Cultural differences bring further complications. Western society is rule-based and eventually dealt with abuses by heavy reliance on law enforcement and a transparent rule-based economy. Indonesian society is relationship-based, and its efforts to mimic the Western solution, difficult as it was to implement in the West, meet even greater difficulties because Indonesian culture provides little support for it. It is therefore a mistake to see Western business as simply going into a developing country and improving its wretched conditions. Western business is going into a chaotic situation in which a rich and highly developed cultural heritage, already disrupted by Western colonialism, struggles to incorporate an alien economic system. The complexity of the ethical problem might be appreciated by imagining a scenario in which wealthy Chinese merchants set up factories in nineteenth century England to take advantage of child labor. The merchants pay subsistence wages, although slightly higher than the prevailing rate, and return all profits to China, which is rich and powerful enough to dominate world trade. They justify their activities by claiming that they help to develop the British economy. What exactly are their ethical obligations? Cultural Understanding The issues are too involved for adequate treatment here, but a good starting point would be to consult with Indonesians about how their society might adjust to rapid industrialization. A simplistic solution like raising wage rates may fail, but careful investment in infrastructure, guided by Indonesian priorities, might help move the country in the direction it chooses. Some Western corporations already subsidize schools, utilities and other infrastructure in host countries, which benefits all parties.