Business ethics Archives - Page 2 of 3

June 27, 2013March 19, 2018

Law versus ethics – a visual approach: Part 1 Venn diagrams / Set theory

When teaching business ethics – especially when using moral dilemmas from business life -, the class discussions often touch the topic of the relation between law and ethics. Even when I explicitly ask for moral/ethical arguments, many participants respond with references to legal frameworks. In the last few months I have repeatedly used this topic for a short visual exercise. I have asked my students/participants to draw a picture to illustrate their understanding of the relationship between law and ethics. And the results are just great!

From now on, I will post every once in a while a few pictures that I collected during these exercises. Today I will start by sharing the broad set of responses that use some sort of Venn diagram, i.e. that would roughly fall into the set theory, i.e. all those visualizations that use circles, squares etc. to put law and ethics into a relation by referring to their relative dimension.

The classic visualization, that typically about 20% of all participants will develop, roughly looks like this:

The basic point of this illustration is usually the overlap. As explanation for such illustrations, participants will typically mention, that there is an overlap between law and ethics, but that both of them can also be isolated. Accordingly the picture allows for:

actions that are legal but not ethical
actions that are ethical but not legal
actions that are legal and ethical
actions that are neither legal nor ethical

Sometimes the same idea is brought into slightly different forms, such as this squared version:

The artist of the picture above did two important modifications compared to the classical version: (1) He drew the law box to be significantly smaller than the ethics box. (2) He positioned the two boxes in a way, that the law box is almost completely included within the ethics box (only a small portion of law is not ethical to his understanding), while the ethics box has lots of space outside of the law box.

And very much in line with this last point there are often quite a few variations of the classical picture that either rather focus on the overlap or on the discrepancies between law and ethics. One participant brought this into the following nice picture:

The three different variants are supposed to illustrate differences between different countries (law) or societies (ethics) – different being understood as different in history or geography. The participant explained that in some countries/societies there is/was more overlap than in others.

Quite often I also see two clearly opposing variants of the classical version: More often law is being embedded within ethics:

Much more rare is the following illustration, where ethics is embedded in law:

It is worth noting that these two concentric models implicitly assume that there is either:

nothing legal that is unethical (1st picture)
or nothing ethical that is illegal (2nd picture)

Another interesting picture was designed by a student who wanted to express his conviction that law can be perceived as the common ground within a society between very different individual ethical belief systems:

Interestingly you could also think about an exact inversion of this model, so that Ethics would bee seen/understood as something universal whereas law would be country specific, multifold and only partially overlapping with Ethics and/or the law in other countries.

The following picture is already a bit of a preview to other versions that I will share in later posts:

This picture also shows two overlapping forms, but has two important differences compared to the classical version:

Ethics is shown as circle and law as triangle: The implicit connotation is that law is more edgy/sharper than ethics.
The ethics circle is shown on top of the law triangle: Law seems to have a certain character as basis for ethics.

In order to provide some structure and stimulate the thinking process, I sometimes also draw a picture that is fairly close to the classical model:

The basic idea of this 2×2 matrix is to not to show relative size of the boxes, but to allow for a conceptual discussion with my participants. The South-West and the North-East corner of this matrix don’t require a lot of imagination. So I typically divide the class into two groups:

one group searching for examples of ethical behavior that is illegal (North-West);
the other group searching for examples of unethical behavior that is legal (South-East).

Re 1: Frequent business-related examples include:

whistle-blowing in all variants,
stories like the German government buying CDs that were stolen in Switzerland and contain information about German tax evaders,
some types of legal violations done by investigative journalists,

or non-business examples such as:

parking in a non-parking zone in medical emergency situations,
mutiny against oppressors,
tyrannicide.

Re 2: Frequent business-related examples include:

higher levels of pollution than technically feasible but within legal framework
some forms of discrimination in international contexts
decisions to shut down mobile telecommunication services during demonstrations/revolution

or non-business examples such as:

marital infidelity in Western Europe,
private waste of resources such as water/energy/food.

When explicitly asking for drawings/visualizations for the relation of law and ethics one shouldn’t be surprised to get pictures such as the ones above. They all have clear messages and important lessons, but in future posts you will find that some participants come up with totally different ways of illustrating this relationship.

Stay tuned and/or send me your pictures!

March 1, 2012March 19, 2018

The just end of a company?

Are ethically suspicious, corrupt or unethical companies less successful than ethical corporations? We might want that – but empirical research is unfortunately inconclusive. Many companies with dubious business practices operate very successfully at the market place. All of us can certainly list some examples.

But as soon as a company goes down the drain that was criticized recurrently as being unethical, the public seems to react with great satisfaction. This is currently the case with Germany’s largest drugstore chain. The company Schlecker is a privately owned business that grew rapidly after its start in 1975 and successfully expanded into several international markets. But at the same time the company repeatedly made it to the press with many different negative news. The highly secretive organization was criticized in particular for the way it treated its employees. Among other issues, trade unions and the press condemned exploitation, low wages, excessive workload and the fact that Schleckerseems to have spied on its employees in several of the 5,400 stores. The company was found to have kept negative lists about “problematic” employees and to have actively prevented the formation of workers councils.

Management tried to play the public criticism down, but new issues surfaced over and over again. – Even after the founder and owner, Anton Schlecker, stepped down as CEO and handed over control to his two children, Lars and Meike, who started remodeling and re-imaging activities. Early 20110 the trade union Verdi accused Schlecker of forcing permanently employed staff members into new contracts as temp workers with lower wages and inferior working conditions. This criticism was picked up by the government – and Germany’s Federal Ministry of Labour and Social Affairs, Ursula von der Leyen, announced to start official investigations. Again Schlecker’s dingy image was confirmed in the public.

Schlecker had ignored an important lesson: All companies are dependent upon several different stakeholders that are relevant for survival. Most importantly next to the owners/investors (in this case the patriarch Anton Schlecker) are employees and customers. To be sustainably successful, companies need to constantly balance the potentially conflicting interests of these – but also many other – stakeholder groups. This is where Schlecker failed: The drugstore giant continuously ignored the interests of its employees – until this even started to have effects on a second stakeholder group: the customers. They finally didn’t want to shop from a company that was famous for treating its employees poorly and stayed away. The business model that was based on continuous growth and expansion was at stake.

The attempt to change the negative image came to late. In 2010 the company started a remodeling of its stores and tried to access new – desperately needed – customer segments. The company stopped the practice of using temp workers and came to a collective agreement with the trade union Verdi. But even now many activities failed: The attempt to access new customers in the internet lead to a major data leakage – sensitive data of 150,000 customers became visible. Schlecker also introduced a new slogan with a wild mix of German and English language: “For you. Vor Ort.” The slogan was criticism by a group of language purists – to which the head of corporate communication responded with a letter that leaked to the public and provoked vivid reactions: The PR person wrote that he – as person with an academic education in humanities – would also disapprove the usage of “Denglish” (a term used to describe the mixture of German and English), but the “average Schleckercustomers” rather had a “low to medium level of education”. Again Schlecker was perceived as company that only focused on the interests of the owner and did not show respect for the other stakeholders.

Such dilettante mistakes prevented the planned success of the transformation. On January 20, 2012 the company had to file bankruptcy. As the company was operating as a non-incorporated, private firm (“registered merchant”/”eingetragener Kaufmann”) Anton Schlecker will be liable personally. According to press reports he might even run into personal bankruptcy.

This might now be perceived to be the just consequence for an unbalanced or even unethical management style. But we shouldn’t forget one important aspects: Yesterday the liquidator announced that almost half of the employees will need to be laid off and almost half of the store will be closed. The story illustrates that unbalanced management will harm all stakeholders in the long run – but it is very unfortunate that the ones suffering most will again be the employees. So shouts of triumph about Anton Schlecker’s suffering are completely inappropriate.

September 3, 2011April 3, 2019

Offering services – that are “misused”?

Yesterday I was cycling through Berlin when I made an interesting observation:

In two weeks there will be elections for the state and city of Berlin. Only a few major parties are likely to pass the 5% threshold that is set by German election laws. (Any party that collects less than 5% will not make it into the parliament.) But in addition to the 5 main parties there are 13 other parties competing in Berlin. One of them is a far right wing party called “Die Freiheit” (“The freedom”). They are a party that is at the very far end of the political spectrum and intentionally provoking and polarizing, especially with anti-Islam, anti-foreigner and Euro-skeptic propaganda.

Yesterday they were driving through the streets with trucks covered with banners and their slogans, e.g.: “Kick the overly indebted countries out of the Euro”, “Stop islamistic parallel societies” (a poster with a German flag in the background in which you can find the Turkish symbol of the moon and the star in the red part of the German flag), or “Zero tolerance for criminals”.

Non of this would be a topic for a business ethics blog. But while the big, established and rich parties usually buy (or lease) entire buses and paint them, the party “Die Freiheit” obviously decided to rent trucks. And while they were driving around the city everybody could simultaneously see the party banners — AND the name of the rental company: “LEX Autovermietung” (i.e. “LEX car rental”).

Accidentally, I was on my way to a (different) car rental company. And so I was immediately thinking: Would I rent a truck from a company that also rents cars to political parties that subsequently use the trucks for political advertisement (way outside of the the main-stream political spectrum)? The party is legal and can run for the election. (According to German law there is a [very complex and difficult] process to prohibit political parties if they openly reject the constitution; which “Die Freiheit” doesn’t.) But aren’t their political objectives harmful to the friendly coexistence within the city? Is it ok to rent trucks to them?

On the other hand – if the car rental company was rejecting “Die Freiheit”, should they also reject other parties? Which ones? All? All except for those that are represented in the parliament? All except the one supported by the owner of the company? How about the employees? And if the company decided to prohibit the rental of trucks to “Die Freiheit”: How should they enforce this?

Is there any responsibility of the rental company with respect to their customers’ usage of their trucks? For questions like this many quote the legendary knife producing company and its alleged position of not being responsible if somebody uses their knife to kill someone. Is this true for the car rental company? Are they not responsible for the usage of their cars – especially as long as the usage is legal?

These were some of my questions while cycling to the rental company. And as I was preparing to rent a car myself, I was imagining that the party might have fixed the posters on the trucks while still on the premises of the rental company.

I have to confess: implicitly and subconsciously I was inferring that the rental company supported the party and their political agenda.

Fortunately, I decided to use this situation to blog a few questions on a companies responsibility vis-à-vis the usage of its products / services by the customers. I did a bit of research on the rental company and found an interesting website and coincidence:

“Politically Incorrect” is a right wing blog in Germany. In November 2009 they reported about a demonstration of Muslims in the German city of Dresden that was (amongst others) demanding the closure of the website “Politically Incorrect”.

Interestingly most of the users / supporters of “Politically Incorrect” are anti-Muslim, and the webpage makes advertisement for the party “Die Freiheit”. But what do we find in this report about the “Muslim demonstration”? A picture of some people speaking while standing on the cargo area of a truck – rented from the very same rental car company – “LEX Autovermietung”!! Not as a big surprise a user called “Rudi Ratlos” leaves a comment (comment 218) stating that the LEX rental car company will be added to his personal boycott list (“LEX-Autovermietung kommt auf meine Boykottliste.”).

So, ironically LEX-Autovermietung seems to be serving two seemingly opposing camps of the political spectrum. What a nice lesson in neutrality and independence of a company…

May 28, 2011March 19, 2018

Proximity of stakeholders and cultural/national biases

I just finished the ETP Salon – an short executive education program exclusively for alumni of ESMT‘s Executive Transition Program. We discussed the broad topic of “Learning from crisis” from various different perspectives. During our discussions we touched a topic with interesting ethical questions:

After the earthquake, tsunami and subsequent problems with the Fukushima nuclear power plant, many international corporations immediately offered their expatriates to return to their home countries (see e.g. the German online portal “SPIEGEL Online“).

On the first sight, this seems to be the right thing to do: After sending their employees to Japan, companies can be understood to have an obligation to ensure their physical well being (see also here). Most of these expatriate employees will have been based in the greater area around Tokyo. The nuclear emission might not have passed the thresholds yet, but the threat was imminent.

So where is the ethical issue when companies act as they ought to do?

The issue lies in the scope / limitation of the target group of such rescue programs: Large international companies (such as Siemens, GE, DHL, Starbucks, McDonald’s etc.) certainly employ more Japanese people in Japan than expatriates. Is it fair just to help the expatriates? Why?

What are the limits of a company’s obligation to help it’s employees?
Is this just a question of numbers, i.e. the argument that even the large multinational companies just cannot afford/manage to bring all their employees out of the country and therefore have to limit their effort so a small number?
Or is the difference only driven by demand? The Japanese employees just might not have wanted to leave the country and/or they might not have been able to relocate to another country e.g. because they didn’t have the necessary visas or financial resources.
Is there a bias towards the people from the “own” country? (Which anyway is getting less and less clear: As employees, customers and investors of multinational companies nowadays usually do not come mainly from only one country, we know less clearly what the “own” country of a company is.) Are the expatriates closer to the company than the Japanese employees?
Is there a certain element of nationalism, e.g. the assumption that at the end of the day people should end up in their “own” country – so let’s bring back the Germans to Germany, the French to France etc. and sort everything
To see how messy it quickly gets, let’s just take the fictitious example of Hans. Hans was born in Japan as son of German parents that worked for Toyota. He spent most of his life in Japan. But after his studies in Japan he was hired by Volkswagen in Germany. He went to Wolfsburg. But after two years Volkswagen decided to send him as an expatriate (due to his passport and German work contract) to Japan. Compare this situation to Hiroki: Hiroki was born as son of a Japanese couple that lived and worked for Volkswagen in Germany. After his studies in Germany he decided to get to know the country of his parents. There he joined Volkswagen on basis of a local contract. What is the difference in Volkswagen’s obligations to help Hans or Hiroki?

And then you can change the question one more time: How about the large Japanese companies that employ international staff in their headquarters? How about the French, English, American, Indian or South African employees of Sony in Minato, Tokyo? Should they be sent “back” while their colleagues stay in Japan?

May 24, 2011March 19, 2018

A question of life and death

When teaching business ethics to managers and MBA students most of the topics and cases we discuss are serious issues. We even often discuss dilemmas that (potentially) have heavy consequences for involved parties. When talking about damages to the environment, the effects of poverty and inequality or the potentially damaging side effects of products on consumers and others (e.g. tabacco), we even occasionally touch questions of health and life.

However in most settings, managers don’t have to decide about life and death directly and personally. Usually there are intermediate actors that seemingly reduce the individual responsibility. And this is a certain contrast to many of the most famous dilemmas (such as the trolley car dilemma) that are discussed in the ethical literature for decades and centuries.

But right now there is such an issue of life and death in a business setting. It is going on for more than three months now and was brought back to our attention today:

According to news reports, TEPCO, the Japanese company operating the nuclear power plants in Fukushima, made public that a melt-down did not only occur in reactor 1 but also in 2 and 3. And as the situation is still very serious, we have to ask about the moral implication of having employees work in an environment that violates the normal thresholds for nuclear contamination.

Most of us will highly appreciate the fact that several workers fight hard to limit the disastrous effects of the earthquake, tsunami and subsequent melt down. But they are at the same time employees of TEPCO. Is is / can it be legitimate for a company to asks its employees to risk their lives? Can managers be justified to send employees into contaminated workplaces – even if the employees agree to do so on a voluntary basis? Is this only justified when the employees try to prevent bigger harm to society or can companies also look for volunteers that risk their lives/health just for the commercial success of the company?