SAGE Brief Guide to Business Ethics
Publication Year: 2012
Subject: Business Ethics (general)
This guide to business ethics provides key terms and concepts related to business ethics in a short, easy-to-use format. It provides objective coverage of theories, corporate social responsibility, human resources issues, consumer protection, and ethical issues in marketing and advertising. It is an ideal supplement for business ethics courses or as a reference for students and practitioners who would like to learn more about the basics of business ethics.
- Front Matter
- Back Matter
- Theories of Ethics: Overview
- Virtue Ethics
- Social Ethics
- Normative Ethics
- Ethics of Care
- Ethics of Management
- International Business Ethics
- Strategy and Ethics
- Corporate Governance
- Stakeholder Theory
- Ethics of Finance
- Ethical Issues in Pricing
- Corporate Citizenship
- Corporate Social Responsibility (CSR) and Corporate Social Performance (CSP)
- Employee Protection and Workplace Safety Legislation
- Employee Rights Movement
- Equal Opportunity
- Affirmative Action
Copyright © 2012 by SAGE Publications, Inc.
All rights reserved. No part of this book may be reproduced or utilized in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system, without permission in writing from the publisher.
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Library of Congress Cataloging-in-Publication Data
Sage brief guide to business ethics.
Includes bibliographical references.
ISBN 978-1-4129-9721-8 (pbk.)
1. Business ethics.
HF5387.S236 2012 174′.4—dc22 2011006042
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Commerce is by its very nature a normative enterprise. It is concerned with creating value for owners and other constituencies, ranging from the firm's immediate stakeholders, such as employees, customers, and suppliers, to the entire society within which the business operates. As a field of study, business ethics aims to specify the principles under which businesses must operate to behave ethically. Thus, business ethics focuses on issues such as those that have recently attracted so much public scrutiny: executive compensation, honesty in accounting, transparency, treatment of stakeholders, and respect for the environment. These are, in fact, perennial questions that accompany the long history of human economic activity and that will also be present through an indeterminate future.
Although defining business ethics has been somewhat problematic, several definitions have been proposed. For example, Richard De George defines the field broadly as the interaction of ethics and business, and although its aim is theoretical, the product has practical application. Manuel Velasquez defines the business ethics field as a specialized study of moral right and wrong. Unfortunately, a great deal of confusion appears to remain within both the academic and the business communities, as other related business and society frameworks, such as corporate social responsibility, stakeholder management, sustainability, and corporate citizenship, are often used interchangeably with or attempt to incorporate business ethics. This Brief Guide to Business Ethics is not designed to offer any easy answers about what business ethics is or to oversimplify any of the complex relationships between these frameworks. Rather, its aim is to provoke thought and raise questions about the key concepts in the field—about the history of these concepts and they way in which they have continued to evolve over time, about the key scholars and practitioners who have shaped our understanding of these concepts, and about the many ways in which they relate to and interconnect with each other.[Page x]Format
This guide to business ethics provides key terms and concepts related to business ethics in a short, easy-to-use format. It is intended to act as a companion for business ethics courses or as a reference for students and practitioners who would like to learn more about the basics of business ethics.
The text is divided into seven sections that contain important keywords that relate to those sections: What is Business Ethics?; Theories of Ethics; Ethics of Business and Management; Employee and Human Resources Issues; Consumer Issues; and Ethics of Advertising, Marketing, and Public Relations. Each keyword entry is a comprehensive essay written by a scholar of business ethics. Entries address such critical topics as ethical decision making, international business ethics, ethics of finance, and consumer and employee rights, and include a list of references and suggested readings. In the back of the book, you will also find three appendixes. Appendix A, Problematic Practices, includes entries on businesses and industries that have encountered ethical issues as well as key incidents that have shaped the way we think about business ethics today. A correlation table in this appendix also provides suggested pairings between the problematic practices and the entries in the text, so that instructors have an idea of which concepts are illustrated in the problematic practices entries. Appendix B provides a list of business ethics organizations and—for further exploration and research—Appendix C provides a list of key business ethics periodicals.Acknowledgments
We would like to acknowledge and thank Robert Kolb, editor of SAGE's award-winning Encyclopedia of Business Ethics and Society, whose contributions provided the foundation for this companion text.—The Editors of SAGE
Appendix A: Problematic Practices[Page 341]Suggested Pairings Table*
Problematic Practices Related Entries Archer Daniels Midland
- Ethics of Management
- Ethical Issues in Pricing
- Corporate Governance
- Ethics of Finance
Ethics and the Tobacco Industry
- Adverting Ethics
- Consumer Rights
- Consumer Rights
Merck & Co.
- Corporate Social Responsibility
- Corporate Social Performance
- Consumer Issues
- Employee Protection & Workplace Safety Legislation
- Employee Rights Movement
Triangle Shirtwaist Fire
- Employee Protection and Workplace Safety Legislation
- Employee Rights Movement
- Consumer Protection Legislation
- Consumer Rights
*This correlation table provides suggested pairings between the problematic practices that follow and the entries that appear throughout the text, so that instructors have an idea of which concepts are illustrated in the problematic practices entries.[Page 342]Archer Daniels Midland
Founded in 1902 and incorporated in 1923, Archer Daniels Midland (ADM) is one of the largest agricultural processors in the world. It supplies many of the inputs for agricultural production, buys the crops from the field, processes them into food for humans and animals, fuels, and chemicals, and sells them all over the economy—and lobbies, very successfully, to obtain and retain the legislation that makes the entire operation profitable.
It is profitable. In the fiscal year ending June 30, 2005, ADM reported net earnings of $1,044 billion, or $1.59 per share, compared with $495 million, or $0.76 per share, in the previous year. Profits were up in Europe, South America, and Asia. So the board of directors declared a cash dividend of $0.085 per share on the company's stock—ADM's 315th cash dividend and 295th consecutive quarterly payment, 73 years of uninterrupted dividends. Clearly, they are doing something right.
In addition to being profitable, ADM tries to be environmentally friendly, and often succeeds. In the same fiscal year, ADM won two United States Environmental Protection Agency Presidential Green Chemistry Awards for a way to reduce volatile toxins in paints and a way to lower trans fats and oils in vegetable oils.
It is not always easy to be good. ADM stands at the heart of an enormous network of companies and activities, owning or controlling the entire agricultural enterprise through direct ownership or joint ventures with other companies. Its position entails that it controls the entire food chain, from the decision on what to plant, from the seed, through the machine that plants the seed and the pesticides and herbicides that help that seed to prosper, through the tending and harvest of the crop, through all processing and distribution of the products, to the very shelf in the supermarket (or repose in the chuckling fat of the fast-food French fries cooker). In the course of its vertically integrated enterprises, it is often difficult to discover the market price of a product that, for instance, is created from crops on an ADM farm and immediately sent back to another ADM farm to feed hogs. Just such a product is lysine, a corn-based dietary supplement for farm animals that is widely used across several countries. Yet it turns out to be possible for one to cheat, and price fix, on this product, for that's just what [Page 343]ADM was caught doing in 1996; they ended up paying a record fine of $100 million for price-fixing. That wasn't the end of their problems: Two years later the government brought separate criminal charges against three top executives for conspiring in the crime, collected more fines, and sent the executives briefly to jail. Later, the European Union added its own penalties; in all, ADM had to budget over a quarter of a billion dollars for all expenses connected to the price-fixing incident.
ADM has maintained its agenda in Washington largely through very generous political contributions to both parties, amounting to some $2 million per year. A large part of its Washington lobbying agenda has been to urge, as the petroleum resources decline, the adoption of a provision requiring that ethanol should be a part of every gas station and oil reform. (The concern for oil scarcity has a lot to do with the fact that ethanol is produced from corn; at this point ADM controls more than 50% of the ethanol capacity in the world.) Conservatives and liberals alike have objected to this huge subsidy, but it continues.—Further ReadingsArcher Daniels Midland [Web site]. Retrieved September 17, 2005, from http://www.admworld.com2000). Rats in the grain: The dirty tricks and trials of Archer Daniels Midland, the supermarket to the world. New York: Four Walls Eight Windows.(1995). The spirit of the soil: Agriculture and environmental ethics. London: Routledge.([Page 344]Enron Corporation
Enron Corporation's December 2, 2001, Chapter 11 reorganization filing was the largest bankruptcy in history, until it was exceeded in 2002 by WorldCom. Enron, headquartered in Houston, Texas, had grown quickly into a superficially giant and well-regarded company. It rapidly collapsed following the sudden disclosure of massive financial misdealing, which revealed the company to be a shell rather than a real business. During 2001, Enron stock fell to about $0.30—an unprecedented collapse for a blue-chip stock.
The Enron scandal helped propel passage of the McCain-Feingold Bipartisan Campaign Reform Act of 2002 (March). While Enron was neither the biggest nor the most important source of political funds, it had been active in making political contributions and attempting to influence legislators. Part of the Enron scandal involved political connections to President George W. Bush (former governor of Texas) and Vice President Dick Cheney (formerly CEO of a Texas-headquartered company). In May 2005, a U.S. appeals court dismissed a related lawsuit against the vice president on the grounds that an administration must be free to seek confidential information (including Enron) concerning energy policy.
Enron, quickly followed by WorldCom, helped propel the Sarbanes-Oxley Act of 2002 (July), the most significant change in U.S. securities laws since the early 1930s. As shocking as the sudden bankruptcy of a blue-chip company was, the subsequent revelations were worse: The traditional U.S. corporate governance watchdogs—attorneys, auditors, and directors—had either aided and abetted the responsible executives or been grossly negligent in the supervision of those executives. The United States and several other countries were rocked by multiple revelations of corporate scandals that ultimately also included analysts; auditors; banks; brokerages; mutual, hedge, and currency trading funds; and the New York Stock Exchange.Arrogance, Corruption, Greed, and Ruthlessness
Enron was not the first or the last or the largest of the corporate scandals in recent years. Nevertheless, Enron became, above all other companies, the [Page 345]emblem for management fraud, director negligence, and adviser misconduct. Enron is easily the most widely studied and best documented of the recent corporate frauds. Enron was a prolonged media event.
The high education levels and intelligence of Chairman Kenneth L. Lay (Ph.D. in economics), CEO Jeffrey K. Skilling (Harvard MBA and top 5% Baker Scholar), and CFO Andrew Fastow (Northwestern MBA) raised serious questions about business school treatment of ethics and law. In January 2005, the documentary movie Enron: The Smartest Guys in the Room, based on Bethany McLean and Peter Elkind's 2003 bestseller of the same name, premiered at the Sundance Film Festival in Utah. Spring 2005 releases took place in Austin and then Houston. The theme of the book and the movie is that smart guys can outsmart themselves as well as everyone else.
The most astonishing aspect of the Enron scandal was that a significant number of executives had engaged in improper actions despite the company having in place the key elements and best practices of a comprehensive ethics program. There was a detailed 64-page “Code of Ethics” with an introductory letter from Chairman Ken Lay and a “Statement of Human Rights Principles” together with a sign-off procedure on the code for each employee, an internal reporting and compliance system, visible posting of corporate values (banners in the headquarters building, signs in the parking garage, and so forth), and an employee-training video—Vision and Values—discussing ethics and integrity. Enron issued a 2000 annual report on corporate responsibility. The “Code of Ethics,” like other Enron paraphernalia, was later auctioned on eBay. The Smithsonian Institution reportedly obtained a copy of the code for its permanent collection.
The publicized “values” of Enron were respect, integrity, communication, and excellence. The real “ethical” climate at Enron was a combination of arrogance (or hubris), corruption, greed, and ruthlessness. The gap between words and deeds at Enron was dramatic. This gap suggests that it is not particular corporate governance devices that matter most but the probity and integrity of individuals in relationship to the ethical climate within a company.
The executives were arrogant in attitude and conduct. The company strategy was one of revolutionizing trading by breaking traditional rules. The “vision” at Enron was to become the world's leading energy company—in reality, by any means necessary. There were rumors of sexual misconduct by executives. Expensive vehicles and power-oriented photogenic poses were commonplace.
[Page 346]The weight of evidence suggests that the lure of wealth had suborned the corporate governance watchdogs. It turned out that the directors must have been asleep at the switch or mesmerized by the rising stock price. It turned out that the external attorneys and auditors could not afford to lose such a successful client. Enron executives did not hesitate to bully the external safeguards, such as analysts, when and if necessary. A corruption machine was at work, whether intentionally or inadvertently.
In the 1987 film Wall Street, the character named Gordon Gekko announces that greed is good. Enron—whose logo became known as “the Crooked E”—epitomized that slogan. Greed is a morally disturbing paradox at the heart of the market economy. Bernard Mandeville, in the Fable of the Bees, or Private Vices, Publick Benefits (1714), argued that individual vices and not individual virtues produce public benefits by encouraging commercial enterprise. An economic actor engages in selfish calculation of interest or advantage. This consequentialist perspective emphasizes outcomes over intentions or means. The Enron executives carried this perspective to its logical extreme. Adam Smith's telling criticism in The Wealth of Nations of the East India Company's personnel suggests that he would hardly be surprised.
The company culture embodied ruthlessness toward outsiders and insiders alike. Skilling emphasized a process of creative destruction within the company. The rank and yank system of employee evaluation by peer review, reportedly installed by CEO Skilling, annually dismissed the bottom 20% of the employees—and perhaps corruptly rather than objectively. It has been reported that traders were afraid to go to the bathroom because someone else might steal information from their trading screen. In such a culture, no one would report bad news. In such a culture, individual achievement was everything and teamwork was nothing. Enron culture emphasized bonuses, hardball, take no prisoners, and tacit disregard for ethics and laws.The Rise of Enron
Ken Lay, then CEO of Houston Natural Gas, formed Enron in 1985 by merger with InterNorth. Lay had worked in federal energy positions and then in several energy companies. He was an advocate of free trade in energy markets and had experience in political influence peddling. Enron was originally involved in transmission and distribution of electricity and natural gas in the United States. It also built and operated power plants and gas pipelines, and similar [Page 347]industrial infrastructure facilities, globally. Allegedly, bribes and political pressure tainted contracts around the world—most notoriously a $30 billion contract with the Maharashtra State Electricity Board in India.
Jeff Skilling was a senior partner at McKinsey & Co. and in the later 1980s worked in that capacity with Enron. Skilling joined Enron in 1990 as chairman and CEO of Enron Capital & Trade Resources. In 1996, he became president and COO of Enron. The company morphed into an energy trading and communications company that grew to some 21,000 employees, and its stock price rose to about $85. Enron grew to the seventh largest publicly listed company in the United States. Strategy emphasized bold innovation in trading of power and broadband commodities and risk management derivatives — including highly exotic weather derivatives. Trading business involved mark-to-market accounting in which revenues were booked, and bonuses awarded, on the basis of effectively Enron-only estimates of the value of contracts. Fortune magazine named Enron “America's Most Innovative Company” for five consecutive years (1996–2000). Enron made Fortune's “100 Best Companies to Work for in America” list in 2000. The company's wealth was reflected in an opulent office building in downtown Houston. Business school cases on Enron's business practices and culture were circulated for teaching purposes. Skilling served briefly as CEO of Enron from February to August 2001. Then, he abruptly resigned from Enron and Lay took over as CEO.The Fall of Enron
Following the bankruptcy filing, there were multiple investigations, including one commissioned by the Enron board of directors and directed by William C. Powers Jr., dean of the University of Texas at Austin's law school. The U.S. Department of Justice announced (January 9, 2002) a criminal investigation of Enron, and various congressional hearings began (January 24, 2002). The hearings also revealed the role of Sherron Watkins, a certified public accountant, who had warned Lay about Fastow's offshore devices after Skilling suddenly resigned. Watkins's experience helped propel into law the whistle-blower protection elements of the Sarbanes-Oxley Act. The investigations emphasized two key matters, revealing how Enron had been built as an empty house of cards.
Enron was deeply involved in manipulating the California energy crisis. John Forney, a former energy trader, was indicted in December 2002 on [Page 348]11 counts of conspiracy and wire fraud and pled guilty. Tape recordings revealed Enron traders on the phone asking California power plant managers to get a little creative in shutting down plants for repairs. Forney was a Star Wars fan. His “Death Star” strategy involved shuffling energy around the California power grid to generate state payments relieving congestion. Death Star deliberately created congestion. He named other devices JEDI (Joint Energy Development Investments) and Chewco (after the character of Chewbacca).
The other key revelation concerned CFO Andrew Fastow's creative use and alleged partial ownership of offshore special purpose entities (SPEs) or limited partnerships. These devices separated debt from revenues and kept mark-to-market losses off Enron's books temporarily. Fastow had been a CFO Magazine award for excellence winner. Fastow was indicted (November 1, 2002) on 78 counts, including fraud, money laundering, and conspiracy. He and his wife, Lea Fastow, former assistant treasurer of Enron, accepted a plea agreement (January 14, 2004) in exchange for testifying against other Enron defendants. Mr. Fastow received a 10-year prison sentence and a loss of $23.8 million; Mrs. Fastow received (for income tax evasion charges in concealing Mr. Fastow's gains) a 5-month prison sentence and 1 year of supervised release, including 5 months of house arrest. The Enron board had waived conflict of interest rules in its own Code of Conduct to permit Fastow to oversee some of these SPEs. Most important were the “Raptors” (after Jurassic Park creatures) or “LJM1” and “LJM2,” named for Fastow's wife and two children. It was alleged that Fastow had engaged in unauthorized self-dealing and benefited directly from these supervised devices.
The Enron bankruptcy resulted in the criminal conviction for obstruction of justice and, thus, forced auditing license surrender of its auditor Arthur Andersen, which collapsed. The audit partner assigned to Enron, David Duncan, pled guilty to ordering large-scale destruction of work documents. Some 28,000 Arthur Andersen employees had to find other employment. On May 31, 2005, the U.S. Supreme Court unanimously overturned the firm's conviction on grounds that the trial judge's jury instructions were too vague and broad. Federal prosecutors decided in November 2005 not to retry the case. Duncan was allowed to withdraw his guilty plea, although other charges could be filed against him.
As of July 2005, there had been 16 guilty pleas and six convictions (one thrown out) in the Enron cases. Former Merrill Lynch bankers and Enron executives were convicted in the Nigerian barge trial. (One executive was found innocent.) Nonexistent barges (to be built) were flipped between Enron and [Page 349]Merrill Lynch to generate paper profits and bonuses. In July 2005, three former executives of Enron Broadband Services (EBS) were acquitted of some charges; the jury deadlocked on other charges against them and two other defendants. The charges had argued intentional overpromotion of EBS's value. The judge dismissed the remaining charges against all defendants. In November 2005, a special grand jury issued three streamlined indictments against the five codefendants. Skilling was indicted in February 2004 and Lay in July 2004, both on multiple counts. Both pled not guilty; their trials had not commenced as of November 2005. The prosecution wanted to try with Lay and Skilling the former chief accounting officer of Enron Rick Causey. He had pled not guilty to more than 30 charges of fraud. He was indicted in January 2004.Employees and Shareowners
Enron's bankruptcy had serious effects for many individuals and organizations. The Houston Astros paid Enron $5 million to rename Enron Field as Astros Field, subsequently changed to Minute Maid Park. Playboy (August 2002) featured a pictorial “The Women of Enron.” David Tonsall, former Enron employee, became rapper “N Run” (i.e., Enron and “never run”) on a December 2003 CD Corporate America.
Shareowners lost virtually everything. Several employees lost their jobs and their life savings that they had invested in Enron stock. Like former Arthur Andersen employees, former Enron employees may have damaged résumés. The Enron bankruptcy reorganization was a lengthy affair under a new management and bankruptcy examiner. The state of California is attempting recovery of monies from various parties. Eventually, shareowners and employees may begin partial financial recoveries from various parties, including banks and insurance companies. As of November 2005, Citigroup had settled for $2 billion, J. P. Morgan Chase for $2.2 billion, and the Canadian Imperial Bank of Commerce for $2.4 billion. These figures represent the largest securities class-action settlement on record, and there are still a number of other prominent defendant banks remaining. The U.S. bankruptcy court finalized a settlement in May 2005 of about $3,500 on average for more than 20,000 current and former employees (about $69 million total). Civil lawsuits are still proceeding against Lay, Skilling, Enron, and others. The directors of Enron (and WorldCom) personally paid damages.—[Page 350]Further Readings2003). The number: How the drive for quarterly earnings corrupted Wall Street and corporate America. New York: Random House.(2002). House of cards: Confessions of an Enron executive. College Station, TX: http://Virtualbookworm.com., & (2002). Pipe dreams: Greed, ego, and the death of Enron. New York: PublicAffairs.(2002). Anatomy of greed: The unshredded truth from an Enron insider. New York: Carroll & Graf.(2005). Conspiracy of fools: True story of the Enron scandal. New York: Broadway Books.(Enron traders caught on tape [Electronic version]. (2004, June 1). CBS Evening News. Retrieved from http://www.cbsnews.com/stories/2004/06/01/eveningnews/main620626.shtml2003). Enron: The rise and fall. New York: Wiley.(2002). What went wrong at Enron: Everyone's guide to the largest bankruptcy in U.S. history. New York: Wiley., & (2003). Enron and the raptors [Electronic version]. CPA Journal. Retrieved from http://www.nysscpa.org/cpajournal/2003/0403/features/f042403.htm, , & (2002). The role of the board of directors in Enron's collapse. In Hearing before the House Committee on Energy and Commerce, Subcommittee on Oversight and Investigation. 107th Congress, testimony of R. K. Jaedicke, Enron Board of Directors, Chairman of Audit and Compliance Committee.(2003). The smartest guys in the room: The amazing rise and scandalous fall of Enron. New York: Portfolio., & (Persons of the year—The whistleblowers: Cynthia Cooper of WorldCom, Coleen Rowley of the FBI, Sherron Watkins of Enron. (2002, December 30, to 2003, January 6). Time, 160(27).Rapoport, N. B., & Dharan, B. G. (Eds.). (2004). Enron: Corporate fiascos and their implications. New York: Foundation Press.2003). How two Wall Street Journal reporters uncovered the lies that destroyed faith in corporate America. New York: HarperBusiness., & (2003). Power failure: The inside story of the collapse of Enron. New York: Doubleday.(with ). (2003). Ethical conflicts at Enron: Moral responsibility in corporate capitalism. California Management Review, 45(4), 6–19.([Page 351]Ethics and the Tobacco Industry
Health advocates assert that tobacco is the first or second leading cause of preventable death among humans, contributing to cancer, lung disease, and coronary heart disease, among other ailments, and that the addictive properties of cigarette ingredients prevent smokers who desire to quit from doing so. While cigarettes are the primary culprit, other tobacco products, such as cigars and pipe tobacco, are potentially equally or even more dangerous, but because they are less prevalent, they do not pose public health risks on the same scale as cigarettes. Smokeless (chewing) tobacco is said to cause other health problems, such as mouth cancer. The risks of tobacco use are not limited to users of tobacco, since carcinogens, or cancer- causing agents, can be passed on to others through second-hand smoke and from a pregnant or nursing mother to her child; cigarette smoking contributes to an inordinate share of building and house fires, and the health care costs associated with tobacco are borne by the public at large. As a result of these health and economic risks, governments and nongovernmental organizations have increasingly treated tobacco as a public health hazard and have sought to economically impair the tobacco industry through aggressive regulation and litigation, thus reducing its harmful impact.
For decades, the big tobacco companies sought to downplay the health risks of tobacco products and categorically to deny claims that their products were addictive. In stark contrast to the health realities, various brands of cigarettes were associated through advertisements with social sophistication and glamour, friendship, rugged outdoorsmanship, recreation, and, generally, the good life. Historically, tobacco's place in society was more complex, a traditional pleasure among the native peoples of the Americas transported by explorers to Europe and then by commercial sailors to the Middle East and Asia. In these regions, tobacco took hold among the populace but received a mixed reception among political and religious leaders, who saw it as a pagan vice. As the global market for tobacco grew, however, its economic value became clear, and it became a key commodity grown and exported by [Page 352]European settlers in the southern United States as well as an exotic import from afar, hence the even contemporary references to “Turkish” and “Oriental” leaf and the famous Camel brand with images of the Near East. After industrialization, tobacco became an important enough commodity for political interests to coalesce to defend it from its detractors, for if big tobacco were suddenly to falter, the consequences for tobacco-dependent economic actors would be potentially catastrophic. At stake were the livelihoods of low-paid field laborers, high-paid executives, and those within the supply and distribution chains that linked them. Also at stake were an aesthetic view promoted by proponents of the smoking lifestyle and the search among researchers and developers for the perfect flavor. In recent years, faced with mounting regulatory pressure and litigation, big tobacco companies have become more transparent about the health risks and have been exploring new forms of innovation in product development and social responsibility to prop up their increasingly perilous economic reality. Fascinatingly, and possibly too late to flourish again, the tobacco industry has both been the target of the full range of ethical criticism that can be directed at business and demonstrated the potential for business to engage more constructively in the ethical debate on whether there is a place for dangerous products in the good life.Ethical Criticism of the Tobacco Industry
The ethical criticism directed at the tobacco industry begins with the fact that its products are unhealthy, whether or not consumed in moderation. While other consumer goods pose risks to consumer well-being—for example, household cleaners may contain hazardous chemicals; prepared snacks may be high in sodium, fat, or sugar; and consumer electronics pose modest dangers to the laypersons who install them—the direct costs to individuals and the associated external costs to society of smoking cigarettes are perceived by critics to disproportionately outweigh any compensating benefits. Used as directed, cigarettes are high-probability, high-impact risks that are not only fundamentally unsafe but even more unsafe the more they are used.
In a free society, consumers generally are perceived to have the right to “choose their poison,” but another ethical concern posed by cigarettes is that consumers may not have unfettered choice. Critics have charged that in the past decades, tobacco companies concealed evidence about the health risks [Page 353]of their products; manipulated studies to understate those risks; adjusted product formulae to increase the potency of nicotine, an addictive ingredient; and publicly denied that their products were addictive to fend off public concern and oversight by drug regulators. Not only were consumers making decisions about smoking based on incomplete information; those smokers who wished to quit were in effect incapable of free choice while battling addiction. The concern for consumer choice is even more pronounced with minors, who, even with complete information available to them, may make irrational choices when bombarded with advertisements that speak louder of the attractiveness of the smoking lifestyle than volumes of less accessible scientific data speak of the risks. Critics have further charged that advertising in sports venues inaccurately implies that cigarettes can be integral to a healthy lifestyle and that using cartoon characters as spokespersons specifically encourages youth to smoke. Until the early 1990s, tobacco representatives commonly took the position that restrictions on advertising restricted free speech, but this debate has for the most part been settled in favor of substantial restrictions as a matter of public interest.
Less unique to the tobacco industry but relevant nonetheless is the vulnerability of tobacco products to counterfeiting, in which inauthentic products bear name brand packaging, and the gray market, in which authentic products are purchased inexpensively in one market and subsequently diverted to be sold at below-market prices in a more expensive market. Cigarettes are vulnerable to these schemes in part because price gaps are significant from market to market due to varying regulatory practices and tax premiums and partly because the per unit price is reasonably high relative to the physical size and weight of the product. While tobacco manufacturers may not accept responsibility for these business practices, critics have charged them with complicity and with keeping suspect company. Another affair in which tobacco's role was too coincidental to ignore concerned the leveraged buyout of the tobacco giant RJR Nabisco in 1988, in which some company executives sought personal financial windfalls that would have entailed actions that were of dubious value to the company and the well-being of its employees. This episode occurred at the tail end of a decade in which investment bankers and junk bond traders rose and fell and prefigured the accounting scandals of the turn of the next century, in which executives benefited at the apparent expense of other stakeholders.[Page 354]Constraints on Industry Growth
At the heart of the tobacco controversy is the question of whether the mere fact of consumer demand for cigarettes justifies the continued supply. This economic question has been answered in the affirmative to justify the market for firearms, pornography, violent entertainment, and other ironically labeled consumer “goods.” The question includes consideration of manufacturers’ and marketers’ potential moral obligation to attempt to shape consumer perceptions regarding what will promote social well-being. While most free market theorists would contend that companies taking on such a moral obligation would smack of paternalism, tobacco companies have nevertheless, through marketing and advertising campaigns, shaped consumer perceptions regarding the place of cigarettes in the good life. Critics have suggested that in doing so they have kept the demand for cigarettes artificially high by allowing nicotine addiction to perpetuate consumer dependence on them and by withholding data that would allow consumers to make informed choices.
Because tobacco products have been part of the fabric of social relations and consumer habits since well before the health risks were documented, they bred cultural dependence among consumers, which led to economic dependence among suppliers. In the recent heyday of the industry's growth, spanning the third quarter of the 20th century, this economic dependence was rather a matter of economic flourishing, with Philip Morris, RJR Nabisco, British American Tobacco, and some of their lesser-known competitors among the United States’ and the world's most financially successful corporations, enjoying brand visibility, strong margins, a solid consumer base in developed countries, and prospects for continued growth in untapped markets. The ubiquitous availability of cigarettes in large retail outlets, convenience stores, restaurants, and vending machines—anywhere the multipack-a-day consumer could obtain them to satisfy the need—required a complex supply, distribution, and sales network that could get the cigarette from the tobacco fields to the space between the smoker's second and third fingers. Consumers’ smoking habits supported, among others, growers and harvesters, processors, truckers and shippers, paper suppliers and packagers, advertisers and marketers, warehousers, sales agents, and retailers—from grocers to gas station clerks to restaurateurs, who stood to pocket more when diners who smoked lingered at the table longer, ordering a few extra drinks.
An extension of the economic argument in support of the tobacco industry has thus been that any interference in this complex economic system would [Page 355]have unintended, harmful consequences for all these actors. To illustrate the complexity of this system, consider that tobacco farmers long benefited from governmental subsidies and that debate over the continuation of those subsidies was complicated by the fact that ending them might actually increase tobacco production (to compensate for lower margins with higher quantity) and lower prices (leading to increased consumption). However, in recent decades, regulation of the tobacco industry, especially in the United States, has accelerated, catching up with and finally surpassing the rate at which the tobacco companies envisioned their own expansion.
This regulation includes taxes and tariffs on tobacco products, which have grown to the point that as much as 80% of the cost of a pack of cigarettes in countries such as Denmark and Portugal and routinely more than half the retail price in many developed countries including the United States goes to government entities. The justification for such high taxes includes the argument that high product costs deter excessive smoking and the right of the government to recover costs that it will inevitably have to incur for the provision of health care. Also, the demand for cigarettes among young people has been demonstrated to diminish significantly with price increases. Historically, however, the tobacco industry has argued, to little sympathy, that these taxes were discriminatory since smokers are on average poorer than nonsmokers and thus spend a disproportionate amount of their income to support their habit. Notably, the percentage of the retail price that goes to taxes tends to be substantially lower in less prosperous countries.
As far back as 1954, personal injury litigation in the United States has cited adverse health effects caused by the tobacco industry, but until the 1990s, such litigation was largely unsuccessful given the relative inconclusiveness of scientific data and the imbalance of legal resources brought to the cases by the tobacco companies in comparison with what individual plaintiffs could afford. However, by the mid-1960s, the antitobacco movement took an important, if isolated, step forward when in the wake of a surgeon general's report on tobacco health risks, the Federal Trade Commission (FTC) instituted a new rule that finally resulted in warning labels appearing on cigarette packs and advertisements concisely affirming the risks posed by the product. The tobacco companies contended that if tobacco products posed any dangers, then they were no different from many other consumer goods that pose dangers to those who use them, but the FTC countered that there were no safe levels of cigarette consumption.
[Page 356]Tobacco companies continued with a united front to balk in the absence of conclusive clinical evidence in support of the surgeon general's claims, appealing to an age-old philosophical debate over whether any scientific evidence can ever properly be deemed conclusive, denying first the apparent link between tobacco and lung cancer and eventually the apparent link between nicotine and cigarette addiction. Despite this resistance, the report was seminal in opening the door to new regulatory strategies requiring tobacco companies to take actions, such as disclosure of risks, seemingly contrary to their own interests. Concern for the welfare of minors later resulted in regulatory proposals to restrict the placement and content of cigarette advertisements. Notwithstanding the written warnings on their products, tobacco companies continued to challenge their validity in other forums, but by the 1980s, the FTC had approved a rule requiring rotating written warnings on cigarette packages and ads that somewhat more explicitly depicted the direct and indirect risks of cigarettes to consumer, including fetal, health. In 1993, when the Environmental Protection Agency declared smoke to be a carcinogen, it was clear that the industry was increasingly subject to the scrutiny of multiple regulators. Nevertheless, as recently as 1994, tobacco executives summoned to testify before Congress uniformly denied that cigarette smoking was addictive and were successful, at least temporarily, in stonewalling the Food and Drug Administration's (FDA's) attempts at appropriate regulatory oversight of tobacco. But the increasing tide of public concern and class action personal injury litigation led finally to a breaking of the ranks among the leading producers of tobacco, so that in 1996, Liggett, then the smallest of the five major tobacco companies in the United States, settled health claims with several states and publicly admitted the deadly potential of tobacco use. These and other developments culminated in the historic Master Settlement Agreement of 1998 (MSA) between participating manufacturers and 46 state attorneys general and six U.S. territories (the other states were covered in separate agreements). Among other provisions, the MSA spelled out restrictions on the placement and content of advertisements, particularly restricting any venues and branding characters that would appeal to young people; lobbying activity; cigarette pack sizes; merchandising; and other activities that in effect seek to expand the consumer market for tobacco products. In addition, the MSA contained provisions for public access to information; the establishment of a national foundation for further coordinated public education and study on tobacco health risks; and payments for Medicaid reimbursement—the original [Page 357]focus of the MSA, thus illustrating the enhanced power of litigation to twist the arm of big tobacco. Once again, however, unintended consequences have caused an ironic intersection of interests, as state budgets for even non-health-related expenditures have benefited from the influx of tobacco industry funds, which would dissipate if the industry were to collapse.
The incentive for tobacco companies to enter into a settlement so evidently contrary to their interests was to reduce the litigation burden and potential share price volatility associated with fighting numerous similar cases, but the MSA has not led to a cessation in litigation against the tobacco industry within the United States. Internationally, there are few, if any, legal systems as conducive to class action and product liability litigation as that of the United States, so while the momentum for legal action against tobacco companies has not waned, there remain questions about the extent of the international threat to tobacco industry interests. The 2005 World Health Organization Framework Convention on Tobacco Control has sought to provide model instruments for its 168 signatory countries to enact legislation to reduce the demand for tobacco products through price and nonprice measures and also to reduce its supply by inhibiting illicit trade activities and sales of tobacco to minors.
Local interests have also sought action against tobacco, as demonstrated by the 2003 ban in New York City on tobacco use in all workplaces and most public venues, such as restaurants and bars, which as a sign of the times stimulated more copycat legislation than did a similar 1985 ban in Vail and Aspen, Colorado. Whereas bars were once a smoker's haven and restaurant space was long governed by an imaginary demarcation between smoking and nonsmoking sections, smoking is now increasingly a private activity, or when done in public, it is relegated to places such as sidewalks, where the space between smokers and nonsmokers is less simple to define. Well before the New York City legislation in bars and restaurants, smoking was banned from other public spaces, such as airplanes, and many workplaces.
Investors have further punished tobacco companies through nonlegal means by filtering tobacco stocks out of so-called socially responsible investment funds. Along with alcohol, defense contracting, gambling, and firearms, tobacco industry stocks are routinely classified as “sin” stocks, which are excluded from socially responsible investing (SRI) portfolios. While SRI capital continues to be a relatively minor proportion of the overall investment capital, that proportion is gradually increasing and represents yet another squeeze on tobacco companies’ operating margins.[Page 358]Preventing Asphyxiation
Far from eliciting sympathy for tobacco companies, the pressures from outside that seem to be contributing to the slow and painful asphyxiation of the tobacco industry—witness the 50% reduction in smoking rates among men in the United States, Canada, and the United Kingdom between 1960 and 2001 — are increasingly being applied to other consumer goods. Increasing consumer consciousness of health and wellness has led to legislation demanding clearer labeling on the nutritional content of foods and beverages. Packaged consumer goods manufacturers have had to comply with good manufacturing practices to ensure product safety from food-borne disease and potential allergen contamination. Restaurants have come under formal and informal demands to use healthy ingredients or to disclose the presence of trans fats in meals. Such pressures have spawned self-regulation, such as voluntary action by soft drink manufacturers and marketers to restrict school sales and serving sizes of high-calorie, low-nutrition products.
These developments have their roots in the experience of the tobacco industry and its often innovative but ultimately futile attempts to resist adaptation to social norms regarding two fundamental ethical questions. First, to what extent do consumer goods manufacturers have moral obligations to support the well-being of consumers beyond the economic laws of supply and demand? For a long time, tobacco companies advanced a pure economic argument in defense of their product, while critics gradually restricted the applicability of that argument to adults who were free to choose, a dwindling population. Second, what should be the standard for truth telling and disclosure when scientific certainty about the effects of product consumption is unattainable? Again, tobacco companies’ defense proved only temporarily effective as scientific certainty about tobacco-induced health risks drew ever closer.
As the ethical risks to the tobacco industry have increasingly become economic realities, tobacco companies have resorted to other forms of innovation to improve corporate performance. One step has been product innovation, which began with the introduction of filters in the early 1950s, matured with the availability of so-called lite (low tar, low nicotine) product varieties, and more recently has manifested itself in the pursuit of the smokeless cigarette. While filters arguably made cigarettes marginally less unhealthy, lite cigarettes have been the target of litigation contending that companies essentially set forth deceiving claims about their relative safety for consumer health, and smokeless [Page 359]cigarettes struggle to provide the same satisfaction to consumers who choose to smoke. Another form of product and marketing innovation has been to develop cigarette varieties and advertising campaigns aimed at a specific consumer demographic, though this approach has been criticized for preying on less well-informed consumers. Likewise, producers have sought to prioritize international growth, since regulation on tobacco products outside the markets in developed countries is not typically as restrictive and consumers may be less well-informed. This has continued to spawn seemingly disingenuous advertising and marketing practices, in which tobacco companies have complied with restrictions in developed countries while handing out free cigarettes in promotions in less regulated markets. Pursuing such growth, however, has proved risky as real-time media coverage has increased the risk to the reputation of companies seeking to hawk their wares to unsuspecting consumers while disapproving investors look on. Meanwhile, the introduction of measures such as the 2005 World Health Organization Framework Convention on Tobacco Control has helped international regulators catch up. Another corporate strategy has seen cycles of diversification and disaggregation. With the introduction of other packaged consumer goods into their product portfolios, tobacco companies were able to reduce the risk of concentration and volatility to which they were vulnerable when they were exclusively dependent on tobacco, while leveraging economies of production and distribution scale since food products and tobacco products are often sold in the same retail venues. However, those economies have waned as tobacco has been perceived at times as dragging down the food side of the business, or vice versa, as tobacco purists have argued that tobacco companies would do best to focus on their core customers.
Perhaps even more interesting to watch has been the innovative transformation of some tobacco companies into odd paradigms of corporate social responsibility. It is no longer unusual for tobacco companies to promote and undermine their own interests simultaneously, making their products available to those who choose to use them while offering help and comprehensive information to customers who seek to quit and actively engaging in youth smoking prevention initiatives. Interested in preserving the stability of market share among a dwindling pool of smokers, in some cases tobacco companies have come to invite regulators such as the FDA in rather than continuing the fight to keep them out. Long engaged in active lobbying of politicians, big tobacco now manages its reputation through corporate support for the arts, education, and other community-building initiatives. Not wanting to shed the heritage of foreign royalty and American presidents, who [Page 360]were active in the tobacco business, and unable to deny a history of nonparticipation in constructive debate about health and the public interest, tobacco companies have increasingly sought to refresh their image with a balanced approach to perpetuating the industry. This approach recognizes that (addiction aside) there are still and may always be individuals who enjoy smoking and have a right to do so, while it appears to accept accountability for creating a framework for compliance and social responsibility that encourages open dialogue to put the decision to smoke in the hands of the consumer. While there continue to be skeptics regarding the sincerity of this approach, in theory it addresses the fundamental ethical questions challenging the tobacco industry and other consumer goods manufacturers and marketers. It remains to be seen whether the tobacco industry is sustainable in the broad sense of the term—socially, since its products are harmful to the health of its target consumer; environmentally, as its products originate from the soil and subsequently pollute the air with carcinogens; and economically, while the verdict on its financial performance remains in doubt.
What is beyond reasonable doubt is that there are many lessons to be learned by all industries from the experience of the tobacco industry: first, that economic questions cannot be wholly emptied of ethical content; second, that the accelerating pace of information availability and regulatory sophistication will inevitably catch up with attempts to restrict adequate disclosure; and third, and a consequence of the other lessons, that the decision about what consumer goods are good for social well-being is not exclusively up to the manufacturer or its business partners, government regulators, or the individual consumer. What is good is not a simple question of right or wrong but must rather emerge as an outcome of constructive debate and continuing dialogue among all parties in pursuit of an elusive, uncertain conclusion.—Further Readings2004). British American Tobacco and Formula One. British Medical Journal, 329(7457), 104–106. http://dx.doi.org/10.1136/bmj.329.7457.104, , , & (2004). Complicity in contraband: British American Tobacco and cigarette smuggling in Asia. Tobacco Control, 13(Suppl. 2), ii96–ii111. http://dx.doi.org/10.1136/tc.2004.009357, , , , & (Feldman, E., & Bayer, R. (Eds.). (2004). Unfiltered: Conflicts over tobacco policy and public health. Cambridge, MA: Harvard University Press.[Page 361]2004). Moving East: How the transnational tobacco companies gained entry to the emerging markets of the former Soviet Union—Part I: Establishing cigarette imports. Tobacco Control, 13, 143–150. http://dx.doi.org/10.1136/tc.2003.005108, & (1996). Ashes to ashes. New York: Alfred A. Knopf.(Legacy Tobacco Documents Library, University of California, San Francisco [Web site]. Retrieved from http://legacy.library.ucsf.edu2003). The tobacco industry documents: An introductory handbook and resource guide for researchers. London: London School of Hygiene and Tropical Medicine., , & (2005). CSR business as usual? The case of the tobacco industry. Journal of Business Ethics, 61, 387–401. http://dx.doi.org/10.1007/s10551-005-7444-3, & (2004). The price of smoking. Cambridge: MIT Press., , , , & (2003). Altria means tobacco: Philip Morris’ identity crisis. American Journal of Public Health, 93(4), 553–556. http://dx.doi.org/10.2105/AJPH.93.4.553, & (WHO Framework Convention on Tobacco Control. (2003). Retrieved November 25, 2006, from http://www.who.int[Page 362]Ford Pinto
One of the best-known and infamous cases in corporate ethics and social responsibility involves the Ford Pinto. The case involved the decision by the Ford Motor Company during the 1970s not to recall its Pinto model, despite knowledge of a dangerous fuel tank design flaw and the potential loss of life that would result. It also involved, for the first time, charges that were brought against a corporation not just for negligence but for murder.
In 1976, Ford was the second largest manufacturer of automobiles, with revenues of $30 billion a year and net income of almost $1 billion. Due to concern over competition over subcompact vehicles from Germany and Japan, Ford President Lee Iacocca was determined to manufacture a car at or below £2,000 and for less than $2,000. Whereas normal development and production of an automobile takes more than three and a half years from start to finish, the Pinto was a rush project, beginning in 1968 and taking just over two years to reach the showrooms. As a result, engineering design decisions came after style decisions to a greater degree than normal. The Pinto's style required that the fuel tank be located behind the rear axle, leaving only 9 or 10 inches of “crush space” between the rear bumper and rear axle. In addition, bolt heads were exposed that were capable of puncturing a fuel tank on rear impact.
Crash tests revealed that when the Pinto was struck from behind at even slow speeds the fuel tank could be punctured, causing fuel leakage. Any stray sparks could then ignite the spilling gasoline, causing the car to become engulfed in flames. If the fuel tank design was to be modified however, or a rubber bladder installed, the vehicle could pass the rear impact test. The crash test information was forwarded to the highest levels of Ford management.
Despite being fully aware of this information, the company continued with the production of the Pinto and was able to justify the decision on the basis of several reasons. First, the company met all applicable federal safety standards. Second, the car was comparable in safety with other cars then being produced. Third, in the early 1970s consumers were more concerned with price than safety, leaving little incentive for firms to spend money promoting [Page 363]the safety of their vehicles. Fourth, changing the design would lead to little trunk space, an important selling feature for cars.
The fifth and most controversial reason for sticking with the design was based on a cost-benefit analysis conducted by Ford. An internal study suggested that it would be more cost effective to continue with the same fuel tank design rather than change it. The study indicated the cost to improve the design of all Ford vehicles using the flawed fuel tank to be $137 million ($11 per vehicle × 12.5 million vehicles), which was much greater than the cost to society of just over $49 million. Ford's estimate of the cost to society was based on a 1972 study by the U.S. National Highway Traffic Safety Administration, which estimated the cost of a human life to be approximately $200,000, with the cost of a serious burn injury being approximately $67,000. These amounts included categories such as future productivity losses, medical costs, property damage, legal costs, and employer losses. The amount of $49 million was based on the estimated cost to society of the expected 180 burn deaths (180 × $200,000), 180 serious burn injuries (180 × $67,000), and 2,100 burned vehicles (2,100 × $700).
Despite reported incidents of burning vehicles, Ford still decided not to recall the Pinto. In addition, the company managed to successfully lobby the U.S. government for 8 years not to implement a key government safety standard that would have required Ford to modify its fire-prone gas tank or even warn the public of the danger. Several high-profile deaths were reported in the media, and a civil suit was settled in 1978 when a jury awarded $125 million, later reduced to $6 million, for what the judge called Ford's callous indifference to human life. Following the death of three teenage girls in 1978, Ford went on trial in 1980 with the charge of criminal conduct, the first time a company experienced such a charge. It was only after the law became effective in 1977 that the Pinto was made with a rupture-proof fuel tank design. In 1978, Ford finally recalled all Pintos made between 1970 and 1976 and replaced the Pinto with the Ford Escort after 1980. Some estimate that more than 500 people died in burn deaths related to the Ford Pinto.
It's not clear whether Ford learned anything from the Pinto experience, based on its actions (or inaction) during the Ford Explorer versus Bridgestone/Firest one scandal in 2000 when many drivers and passengers died or were seriously injured due to rollovers and/or tire blowouts. Ford appears to have known of rollover problems for some time before taking any action and continued to blame Bridgestone/Firestone. On May 25, 2001, Ford placed advertisements in [Page 364]several newspapers such as USA Today signed by its CEO Jacques Nasser and Chairman Bill Ford stating that customer safety has always been and always will be their first priority. Based on the Ford Pinto case, however, many might suggest that Ford provided an example of a company that disregarded the safety of its customers out of concern for their bottom line.—Further Readings1992). Pinto fires and personal ethics: A script analysis of missed opportunities. Journal of Business Ethics, 11 (5/6), 379–390. http://dx.doi.org/10.1007/BF00870550(1992). The Ford motor car. In Business ethics: Concepts and cases ((3rd ed., pp. 110–114). Englewood Cliffs, NJ: Prentice Hall.[Page 365]Merck & Co., Inc.
Merck & Co. Inc., a large U.S. public pharmaceutical company, has faced several important ethical and social responsibility tests over the years. Established in 1891, Merck discovers, develops, manufactures, and markets vaccines and medicines in more than 20 therapeutic categories. The company has approximately 60,000 employees and sells products in approximately 150 countries. Worldwide sales in 2005 were more than $22 billion. The firm has always had a “patient first” approach to doing business as indicated by George Merck, the son of the founder, who stated that Merck tries never to forget that medicine is for the people, not for the profits. This view is currently reflected in the company's values, which states that Merck's business is preserving and improving human life. Although the firm has faced many challenges, two of the more significant ethical and social responsibility issues confronted by Merck include whether to produce and distribute a drug to help cure river blindness and whether to recall its arthritis drug Vioxx.
In terms of the first major issue faced by Merck, river blindness is an eye and skin disease caused by a worm that is transmitted to humans through the bite of a fly. The baby or larval worms then move through the body migrating in the skin and the eye causing itching, severe skin disease, and after repeated years of exposure, blindness. Merck researchers discovered that it was highly likely that by spending tens of millions of dollars they could develop the cure for river blindness. The problem was that the millions of people afflicted by the disease lived in parts of the world (primarily Africa) where they could not afford to pay for the drug. Other pharmaceutical companies, foundations, governments, and health organizations were not interested in paying for the development of the drug. Other concerns related to the risk of side effects for humans that might then affect the sales of Merck's animal drug, or that the human drug might be diverted into the black market, undercutting sales of the animal drug. The company also risked creating a precedent both internally among its researchers and externally among the public that might be difficult to meet in the future in terms of developing other important drugs with little or no financial return expected.
[Page 366]Despite the costs and the risks, Merck, through the leadership of its CEO Roy Vagelos, decided to spend the money. The drug, known as Mectizan, was not only developed but also distributed by Merck for free for years beginning in 1987. The decision did end up having indirect financial benefits for the firm, which according to Dr. Vagelos related primarily to the recruitment of top researchers. In December 2002, the World Health Organization declared river blindness virtually eradicated as a world disease, with the program reaching 40 million people annually in more than 30 countries.
The second major ethical and social responsibility issue places Merck in a potentially more negative light. The issue involves what has been perceived as Merck's delayed decision to recall its arthritis drug Vioxx, despite apparent knowledge of numerous deaths caused by the drug. Merck pulled its $2.5 billion-a-year drug off the market on September 30, 2004, when a study indicated that it doubled the risk of heart attack and stroke in patients who took the drug for more than 18 months. The issue appears similar to that faced by A. H. Robins Company, which was eventually forced into bankruptcy in the mid-1980s after facing lawsuits due to its allegedly defective “Dalkon Shield” intrauterine birth control device.
Plaintiffs claim that Merck knew of the additional risk of heart attacks based on previous clinical studies, but failed to warn doctors and consumers of the risk. From 1999 to 2004, more than 20 million Americans took Vioxx. By the end of 2005, Merck faced close to 10,000 lawsuits in the United States. The firm is also being sued in Europe, Australia, Brazil, Canada, Israel, and Turkey. As of April 2006, Merck had already spent hundreds of millions of dollars to defend four cases, with two wins and two losses (with judgments against Merck for $253 million in Texas and $13.5 million in New Jersey). The company continues to refuse to pursue a global settlement and is appealing the cases it has lost. Some estimate that the company may have to defend more than 100,000 Vioxx lawsuits leading to possible liability of up to $50 billion (U.S.) for Merck, since epidemiologists estimate that 100,000 people might have suffered heart attacks because of the drug. It is still unclear how Vioxx will ultimately affect the future prospects of Merck, and whether Merck will be able to withstand the current legal assault.—[Page 367]Further Readings2006, April 12). Merck jury adds $9 million in damages. New York Times. Retrieved from http://www.nytimes.com/2006/04/12/business/12vioxx.html(1991). Merck & Co. Inc.: Addressing Third World needs (A and B). Boston: Harvard Business School Press., , & (Merck Corporate. [Web site]. The Merck mectizan donation program. Retrieved from http://www.merck.com/about/cr/policies_performance/social/mectizan_donation.htmlMerck Corporate. [Web site]. VIOXX information center. Retrieved from http://www.merck.com/newsroom/vioxx_withdrawal2006). Business ethics: Concepts and cases ((6th ed.). Upper Saddle River, NJ: Prentice Hall.[Page 368]Nike, Inc.
Nike, Inc. is a high-profile sporting goods and apparel company that engages in the design, development, and marketing of footwear, equipment, and accessory products worldwide under brand names such as NIKE, Cole Haan, Converse, Starter, Hurley, and Bauer. The company, which is headquartered in Beaverton, Oregon, sells its products through a mix of independent distributors, licensees, and subsidiaries in approximately 120 countries worldwide. Nike has experienced substantial financial and marketing success since its founding in the 1960s and is now the largest sport ing goods company in the world (in terms of market capitalization). Despite its success, the company has been the target of much criticism in recent years for alleged abusive or “sweatshop” labor practices in its subcontractors.
Nike was founded as an athletic shoe company by Phil Knight and Bill Bowerman in 1962 under the name Blue Ribbon Sports. In 1972, the company changed its name to Nike, after the Greek goddess of victory. Knight had been a track athlete and business student at the University of Oregon, where Bowerman was his coach. While getting his MBA at Stanford, Knight devised a strategy for the manufacturing of athletic shoes overseas that would take advantage of lower-cost off-shore production capabilities. The plan was for Nike to be essentially a design, marketing, and distribution company with all the production performed by subcontractors operating overseas.
This strategy proved highly successful. Nike started subcontracting in Japan and then moved its sourcing operations to South Korea and Taiwan to take advantage of lower cost of production in these locations. As the economies of South Korea and Taiwan developed, Nike continued to move its sourcing operations to even cheaper locations such as China, Indonesia, and Vietnam.
In the fiscal year 2005, Nike had revenues of $13.7 billion and employed about 24,000 people directly and another 650,000 in more than 800 supplier factories worldwide. The company has operations in several locations including Oregon, Tennessee, North Carolina, and the Netherlands in addition to its Niketown and Nike Factory Store retail outlets. It has several subsidiaries: Cole Haan (casual luxury footwear and accessories), Bauer Nike Hockey [Page 369](hockey equipment), Hurley International (teen-oriented sports apparel for surfing, skateboarding, and snowboarding), Converse (athletic footwear), Nike IHM, Inc. (cushioning components used in Nike footwear), and Exeter Brands Group, which includes Starter and licenses other Nike brands. Nike became a publicly traded company in 1980, and its New York Stock Exchange ticker symbol is NKE.
One of the key components of Nike's strategy has been the use of celebrity athletes as endorsers for its products. Its endorsers have included some of the biggest names in sports such as Michael Jordan (after whom the famed “Air Jordan” shoes were named), Lance Armstrong, Tiger Woods, Kobe Bryant, and Jerry Rice.
In the late 1980s, Nike found itself at the center of controversy brewing over alleged sweatshop labor working conditions in its subcontractor factories in developing countries. Critics alleged that a number of labor-oriented problems existed in these factories including (1) wage and salary concerns—both the payment of low wages and the use of various schemes to cheat workers out of the wages to which they were entitled, (2) unsafe/unhealthy working conditions, (3) excessive working hours and forced overtime, (4) harsh and abusive disciplinary tactics, (5) the use of child labor, and (6) active opposition to unionization efforts by the workers. According to some critics, such as labor activist Jeff Ballinger, the opposition to unionization was the key concern because, it was reasoned, with effective union representation the other issues could be resolved.
Several incidents contributed to the notoriety Nike quickly acquired on these issues. There were several worker fatalities reported in Nike subcontractor factories in the early 1990s. In addition, reports started circulating of Nike's involvement with the use of child labor in its subcontractor factories. A picture purported to be of a child worker in a Nike subcontractor factory in Pakistan sewing soccer balls appeared in Life magazine in 1996. It was later learned that the photo was staged (soccer balls are sewn before they are inflated but the ball the child was holding had already been inflated). Nevertheless, Nike was perceived by the general public as a leading culprit in the exploitation of child labor. The company was lampooned in comic strips such as Doonesbury and by late night talk show hosts such as Jay Leno and David Letterman (e.g., one of the top 10 signs you are at a bad summer camp: you spend all day sewing swooshes on Nike sneakers). Critics also parodied Nike's “Just Do It” slogan by suggesting that Nike “Just Stop It.”
[Page 370]There are several ironies related to Nike's strategy that contributed to the publicity this controversy received. The fact that Nike's shoes were highprestige luxury items sold to well-to-do children (and sometimes not-so-well-to-do children) in the United States and other western countries contrasted sharply with working conditions being portrayed in the media and the perceived exploitation of child labor.
In addition, Jeff Ballinger, who had been working to organize Nike subcontractor factories in Indonesia in the late 1980s and early 1990s, was able to point out the disparity in the money Nike paid celebrity endorsers versus what workers were paid to make Nike shoes. In the August 1992 issue of Harper's magazine, Ballinger was quoted as saying that an Indonesian worker making Nike shoes in Java would have to work 44,492 years to make what Nike paid Michael Jordan in one year. This criticism was an example of how Ballinger and other critics were able to use Nike's celebrity endorsement strategy against the company. Although Ballinger would later concede that Nike was no worse than other firms in the industry, Nike's name became synonymous with the term sweatshop labor in the eyes of much of the general public.
Labor-affiliated critics of Nike's overall strategy and labor practices were concerned both with the loss of jobs to overseas production and what they referred to as a “race to the bottom.” According to this line of argument, the exploitation of low-paid workers overseas in harsh working conditions put downward pressure on wages and working conditions of workers in the United States. Thus, it was both a matter of labor solidarity and self-interest that led union activists to criticize Nike's labor practices and to call for reforms.
The criticisms of Nike got traction on the nation's college campuses where chapters of Students Against Sweatshops began to form. Students and faculty involved began demanding to know who was making the collegebranded gear (e.g., hats, sweatshirts, T-shirts) being sold in the college bookstores and under what conditions they were being made. About the same time, mid-1990s, a boycott of Nike products over sweatshop labor concerns began to pick up steam.
Both critics and supporters of Nike concede that Nike's problems were exacerbated by its initial response to the criticism. This was to disavow any responsibility for labor problems in its subcontractor facilities on the grounds that it did not make the shoes—they are made by its subcontractors. Nike subsequently enlisted former Atlanta Mayor and UN Representative Andrew Young to investigate its subcontractor factory operations in Vietnam. When a [Page 371]generally upbeat report was issued, Young was criticized for bias and sloppy research methods.
In November 1997, the New York Times stated that in an inspection report that was prepared for the company's internal use only, Ernst & Young wrote that workers at the factory near Ho Chi Minh City were exposed to carcinogens that exceeded local legal standards by 177 times in parts of the plant and that 77% percent of the employees suffered from respiratory problems. The article leaked several excerpts from this report that detailed the unsafe and unhealthy working conditions in Nike's factories.
While Nike was at the center of the controversy over alleged sweatshop labor practices, other firms and parties became embroiled in it as well. When morning talk show host Kathie Lee Gifford's line of clothing was criticized for being made with abusive labor practices, she investigated the allegations herself and confirmed some of the charges. Ms. Gifford then became an advocate for improving working conditions in the apparel industry.
As the criticism mounted regarding the use of sweatshop labor in the apparel and footwear industries, the federal government got involved. During the Clinton Administration, the White House convened a meeting of industry, labor, and activist representatives to address issues of sweatshop labor in the apparel industry. Originally called the Apparel Industry Partnership, this group came to be known as the Fair Labor Association whose purpose was to promote adherence to international labor standards and improve working conditions worldwide.
A turning point in Nike's response to critics was Phil Knight's appearance at the National Press Club in May 1988. In his speech, Knight conceded that Nike bore responsibility for conditions in its subcontractors’ factories and that many of the critics’ complaints about those factories were valid. Furthermore, he pledged to reform Nike's labor practices with respect to child labor, worker development, and safe working conditions. More specifically, Knight promised to raise the minimum age of all sneaker workers to 18 and apparel workers to 16, adopt clean air standards, advance microloans to workers, and expand its monitoring program. Following this speech Nike undertook a number of institutional changes to carry out Knight's promises. Notably, Nike changed its response to this controversy from defensive to proactive and began to take the lead in efforts to reform working conditions in poor countries. In addition, Nike has become more proactive in addressing criticisms of the company. Nike representatives have participated in forums at professional [Page 372]associations such as the Academy of Management and the International Association of Business and Society. Nike has also welcomed researchers into its factories and it has hosted college study abroad groups visiting countries in which its subcontractors operate. How much of this response was due to a sincere belief that the company had acted wrongly in the treatment of its subcontractor workers and how much was due to business expediency to silence the critics is uncertain.
Nike is one of the first companies to publicly publish a list of its active subcontractors/suppliers in an effort to establish transparency and also to gain efficiency for monitoring and inspections by collaborating with other companies who use the same subcontractors. As of May 2005, Nike is also recognized by four institutions that gauge according to their own specific criteria whether a company should be considered a socially responsible investment. These are FTSE4 Good Index Series, Dow Jones Sustainability Index, Ethibel Investment Register, and KLD Broad Market SocialSM Index.
Furthermore, Nike has also published a 113-page Corporate Responsibility Report FY 04 freely available on its Web site. While the company painstakingly details its efforts at engaging its five most important stakeholders, namely consumers, shareholders, business partners, employees, and the community, it recognizes that for the future they need to focus on the following priority issues with respect to workers and factories: freedom of association; harassment, abuse, and grievance procedures; payment of wages; hours of work; environment; and safety and health. The report notes that its biggest challenge is in China, which accounts for 180,000 contract workers in more than 110 factories. China accounts for 36% of its manu factured footwear and has a large and fast-growing domestic market for Nike goods. However, upholding its code of conduct in China is a difficult problem for Nike due to local laws that prevent independent labor organizing. Several other problems exist, such as the lack of clarity about the law and its monitoring, falsification of information related to wages by factories, and social problems caused by temporary migration of workers from rural China to manufacturing provinces. Nike believes that engagement with its stakeholders, including the Chinese government, and building partnerships in China is the long-term solution to improving labor conditions there.
Because Nike has been so closely tied to the sweatshop labor controversy, the underlying debate about the ethics of sweatshop labor is particularly relevant to the Nike case. Many critics have argued that companies like Nike have [Page 373]a responsibility to see to it that their subcontractors provide better than market-derived or legally mandated wages and working conditions in their operations in developing countries. Others though have argued that if such companies were to do so, there would be less incentive to invest in these developing countries and the benefits of economic growth would be forfeited.
As of this writing, critics and supporters of Nike are still very far apart on the quality of working conditions and the extent of labor abuses in Nike subcontractor factories. However, there does seem to be fairly widespread agreement that the criticisms leveled against the company have brought about an improvement in these conditions since the controversy started.—andFurther Readings2003). Sweatshops and respect for persons. Business Ethics Quarterly, 13(2), 221–242., & (1992, August). The new free trade heel: Nike's profits jump on the backs of Asian workers. Harper's Magazine, 285, 46–47.(1997). The great non-debate over international sweatshops. British Academy of Management Annual Conference Proceedings, September, 240–265. Nike homepage. Retrieved November 28, 2005, from http://www.nikebiz.com(2002). Hitting the wall: Nike and international labor practices. Boston: Harvard Business School. (Original work published 2000)(1997, November 8). Nike shoe plant in Vietnam is called unsafe for workers. New York Times, p. A1.(2001). Nike and its critics. Organization & Environment, 14(2), 207–237. http://dx.doi.org/10.1177/1086026601142007([Page 374]Triangle Shirtwaist Fire
The Triangle Shirtwaist Factory is best known as the site of a deadly fire that blazed for 18 minutes in the late afternoon of March 25, 1911. On the ninth floor of the Asch Building, which housed the factory just off Washington Square in New York City, hundreds of young women and girls were trapped by fire. Thirty or more workers jumped to their death on the pavement below, while more than 100 working girls burned on the factory floor. The resulting public outrage prompted the creation of the New York Factory Investigating Commission. This commission launched an era of remedial factory legislation.
Throughout the late 19th and early 20th centuries immigrant girls and women were recruited to work in the garment industry sweatshops. Italian, Jewish, Polish, and Slavic women worked long hours in these unventilated and minimally heated factories. Although female workers were actively recruited into the recently organized International Ladies’ Garment Workers’ Union (ILGWU), the founders of the union believed that women had neither the ability nor the commitment to sustain leadership roles in the union.
The garment industry was thriving as working women became eager consumers of ready-made clothing. As profit opportunities grew for factory owners, they cut wages, put more workers in smaller spaces, and introduced strict workplace monitoring to reduce pilferage and wasted time. Firsthand accounts of life in the factories describe them as cramped and filthy. In November 1909, a mass meeting of factory workers convened in New York to demand better wages and improved working conditions. When the male leaders hesitated to commit to a plan, a 15-year-old Ukrainian-born girl stood up and called on her fellow workers to strike. The response to her call began the Uprising of the Twenty Thousand.
Within 2 days, 20,000 to 30,000 factory workers in New York went on strike. The walkout quickly spread to Philadelphia and became an important milestone in the women's labor movement. For 3 months the workers picketed in the cold, withstanding the hardships of weather and lost wages in hopes of improved conditions, hours, and wages in the sweatshops. In February 1910, an arbitrated settlement was reached with most of the factory owners, although [Page 375]some refused to sign the agreement. One of these was the Triangle Shirtwaist Factory, where Clara Lemlich, the instigator of the Uprising, worked.
Triangle's ninth-floor factory rooms had inadequate fire escapes, no sprinklers, and exit doors locked from the outside to prevent worker theft of materials. When fire broke out, spreading quickly through hanging fabric and paper patterns, 500 women and girls were trapped inside. A few escaped by running to the roof, or getting the last run of the elevator downstairs, but many resorted to jumping out the windows, crashing to the ground as appalled observers watched. By night, 146 corpses were piled on the 26th Street pier.
In December 1911, the owners of the Triangle Shirtwaist factory went on trial for manslaughter. Despite enormous public outrage and grief, the all-male jury returned a verdict of not guilty, in response to the judge's insistence that the owners could only be found guilty if the jury believed that they knew the workshop exit door to the stairway was locked. However, over the subsequent 3 years, 36 new laws were enacted following the recommendations of the Factory Investigating Commission to reform the state labor code and mandate safer working conditions in factories. One commission member was Frances Perkins, who later became secretary of labor in the Roosevelt administration.—Further Readings1991). We will rise in our might: Workingwomen's voices from nineteenth-century New England. Ithaca, NY: Cornell University Press.(1987). Liability rules and accident prevention in the workplace: Empirical evidence from the early twentieth century. Journal of Legal Studies, 16, 305–328. http://dx.doi.org/10.1086/467832(1982). Out to work: A history of wage-earning women in the United States. Oxford, UK: Oxford University Press.(1994). The Triangle Shirtwaist factory Fire of 1911: Social change, industrial accidents, and the evolution of common-sense causality (ABF Working Paper #9315). Chicago: American Bar Foundation.(1946). The Roosevelt I knew. New York: Viking Press.(1962). The Triangle fire. New York: J. B. Lippincott.([Page 376]Tylenol Tampering
One of the most significant examples of business ethics and corporate crisis management involved the actions of Johnson & Johnson (J&J) during the Tylenol tampering crisis. In the fall of 1982, a subsidiary of United States–based J&J, McNeil Consumer Products, learned that seven people in Chicago had died from taking Extra-Strength Tylenol capsules that had been laced with cyanide. The management was convinced that the tampering did not occur at its plants, meaning that it must have taken place once the product had reached Illinois. J&J faced a dilemma, how best to handle the crisis without damaging the reputation of the company, when the company had quickly established that it could not be held liable for the tampering.
Reports on the firm's decision-making process during the crisis indicate that the company placed the safety of its customers first, before considering profit implications. A nationwide voluntary recall took place, involving approximately 31 million bottles of Tylenol, representing more than $100 million in sales. Consumers were told not to use any type of Tylenol product until the cause of the tampering had been established. Production and advertising of Tylenol ceased. The company offered to exchange all Tylenol capsules that had been purchased for Tylenol tablets. Relations were quickly established with the Chicago police, the FBI, and the Food and Drug Administration (FDA). A toll-free crisis phone line was set up for concerned consumers. Senior executives, including CEO James Burke, were readily accessible to the media. As part of a longer-term response, the company reintroduced Tylenol capsules with new triple-seal tamper-resistant packaging. Despite the firm having its market share drop from 33% to 18%, it wasn't too long before the company was able to recover its position. Following a second tampering incident in 1986, J&J made the decision to offer Tylenol in a caplet form, as opposed to a capsule form. No one was ever convicted of the tampering incidents and subsequent deaths.
Probably the most significant aspect of how J&J handled the crisis was the apparent corporate culture that existed at the time. According to J&J executives, turning to the firm's credo enabled the firm to make the right early [Page 377]decisions that led to the comeback phase. The credo, initially written in 1943, stated that the firm had obligations to society beyond merely profit maximization or enhancing shareholder value.
As a direct consequence of the Tylenol murders, U.S. Congress approved in 1983 a new “Tylenol Bill” that made maliciously tampering with consumer products a federal offense. In 1989, the FDA set national requirements for all over-the-counter products to be tamper-resistant.
Unlike many other firms, which often fail to react quickly on discovering potential danger to their stakeholders, J&J is remembered as a company that possessed an ethical corporate culture enabling the firm to handle the Tylenol tampering crisis quickly, openly, and honestly. By doing so, J&J was able to protect and enhance its corporate reputation into the future.—Further Readings[Page 378]2005). Johnson and Johnson's Tylenol scare: The classic example of responsible crisis management. In R. F.Hartley (Ed.), Business ethics: Mistakes and successes (pp. 303–314). Hoboken, NJ: Wiley.(1989). A matter of trust. Management Accounting, 71(6), 12–13.(2006). The Tylenol crisis: How effective public relations saved Johnson and Johnson. In J. W.Weiss (Ed.), Business ethics: A stakeholder and issues management approach (pp. 89–96). Mason, OH: Thomson/South-Western.(1983). An anniversary review and critique: The Tylenol crisis/reply. Public Relations Review, 9(3), 24–35. http://dx.doi.org/10.1016/S0363-8111%2883%2980182-9, & (
Appendix B: Business Ethics Organizations[Page 379]Center for Ethical Business Cultures
The Center for Ethical Business Cultures works to encourage current and future business leaders to build ethical cultures in their organizations and high standards of integrity in their communities.Council for Ethical Leadership
The Council for Ethical Leadership is a worldwide association of leaders in business, education, and other professions working together to strengthen the ethical fabric of business and economic life. The Council identifies and responds to issues important for ethical economic practices and assists in the resolution of these issues.Ethics Resource Center
ERC is a nonprofit, nonpartisan research organization, dedicated to independent research that advances high ethical standards and practices in public and private institutions.European Business Ethics Network
The European Business Ethics Network, EBEN, is the only international network dedicated wholly to the promotion of business ethics in European private industry, public sector, voluntary organizations, and academia.[Page 380]Institute of Business Ethics
The IBE was established to encourage high standards of business behavior based on ethical values. The UK-based institute works to raise public awareness of the importance of doing business ethically and collaborate with other UK and international organizations with interests and expertise in business ethics.Institute for Global Ethics
The Institute for Global Ethics is dedicated to promoting ethical behavior in individuals, institutions, and nations through research, public discourse, and practical action.International Association for Business and Society (IABS)
IABS is a learned society devoted to research and teaching about the relationships between business, government, and society.International Business Ethics Institute
The International Business Ethics Institute focuses on fostering global business practices to promote equitable economic development, resource sustainability, and just forms of government.Society for Business Ethics
The Society for Business Ethics (SBE) is an international organization of scholars and others interested in the field who are engaged in the academic study of business ethics.
Appendix C: Business Ethics Periodicals[Page 381]
This appendix presents a selected guide to periodicals that are for researchers, practitioners, and the interested layperson. The reader seeking articles on business ethics will find a number of significant research journals and annual series. In addition, there are many trade magazines (those read by primarily businesspeople) and popular press sources. Other “born digital” resources, such as online-only journals, society newsletters, and Web sites also may be useful, peripherally. The publications discussed here are primarily English language, although their contents may be international in scope. Also highlighted are the electronic databases currently most effective for finding articles in these periodicals and the few research-related born digital resources.Core Academic Journals
Relatively few academic journals are devoted to business ethics and cover a full range of topics and methodological approaches associated with the field. Generally, the three publications doing both are the field's core journals Journal of Business Ethics, Business Ethics Quarterly, and Business & Society. Their readership predominantly consists of theorists and practitioners. All three contain articles that are theoretical, empirical, or literature reviews. Other regular features include book reviews, thematic issues, conference announcements, and calls for papers. The publishers’ Web sites for these three journals offer free e-mail alerts for the tables of contents of each new issue, as do several of the other journals mentioned later in this appendix.
Journal of Business Ethics (JBE) began in 1982 as a quarterly, but has expanded to seven volumes per year (28 issues), with a circulation of [Page 382]approximately 7,500 institutional subscriptions worldwide. Its audience is academics and anyone else interested in business ethics topics. From 1997 to 2003, articles that focused on education were published separately in Teaching Business Ethics (ISSN 1382–6891, Kluwer). Currently, this topic is reincorporated into JBE. Similarly, the International Journal of Value-Based Management (ISSN 0895–8815, Kluwer, 1988–2003) became integrated into JBE. (ISSN 0167–4544; Springer; URL: http://springerlink.metapress.com/openurl.asp?genre=journal&issn=0167-4544)
Business Ethics Quarterly, launched in 1991, is the official publication of the Society for Business Ethics and has a paid circulation of more than 1,050. Six to twelve double-blind peer-reviewed articles appear per issue. The intended audience is researchers, teachers, and business practitioners who are interested in conceptual and methodological aspects of business ethics, especially those approaches that address international business, economics, and values. (ISSN 1052–150X, Philosophy Documentation Center; URL: http://www.pdcnet.org/beq.html)
Business & Society: A Journal of Interdisciplinary Exploration has appeared quarterly since 1960 and presently has a circulation of more than 700. This official publication of the International Association of Business and Society focuses on social issues in management and business ethics. The articles address ethics and values, business-government relations, corporate governance, environmental management, and international issues. In addition to research and book reviews, it provides relevant dissertation abstracts. (ISSN 0007–6503, Sage; URL: http://bas.sagepub.com)Other Scholarly Journals
Since business ethics research is often interdisciplinary in nature, many useful articles appear in the periodicals of other fields. Also, material can be found in journals that focus entirely on a single topic within the field of business ethics. Below is a selected list of significant peer-reviewed journals of both kinds, presented in alphabetical order. Which titles among them are most important depends on the reader's focus and research interests. Some of the most highly regarded research titles among this group are Academy of Management Review, Business & Society Review, Business Ethics: A European Review, and Organization Science. Typical supplemental contents are conference announcements and book reviews.
[Page 383]Academy of Management Review, a highly regarded management journal, has appeared quarterly since 1976 and features a number of articles each year on ethics-related topics. In addition to research, book reviews, and announcements, there is a Publications Received list. (ISSN 0363–7425, Academy of Management; URL: http://aom.pace.edu/amr)
Business & Professional Ethics Journal, published quarterly since 1981, contains articles that compare professions or cover ethics topics in areas like marketing, health care management, human resources, and global labor. Half of the issues reprint selected papers from international conferences. More recently, the journal has appeared irregularly and incorporates the publication Professional Ethics (ISBN 1063–6579, 1992–2004). (ISSN 0277–2027, University of Florida Center for Applied Philosophy and Ethics in the Professions; URL: http://www.ethics.ufl.edu/BPEJ)
Business and Society Review: Journal of the Center for Business Ethics at Bentley College has appeared quarterly since 1972. Each issue has about a dozen articles by academics and practitioners that contain scholarly research, commentary, policy analysis, or book reviews. Some issues are thematic. (ISSN 0045–3609, Blackwell; URL: http://www.blackwellpublishing.com/journals/BASR)
Business Ethics: A European Review is considered a top business ethics journal by many, appearing quarterly since 1992. It covers current issues and emerging concerns, from a European perspective, on topics related to the ethical practices of corporations and individuals. The audience is academics and businesspeople. (ISSN 0962–8770, Blackwell; URL: http://www.blackwell-synergy.com/loi/beer)
Corporate Governance: An International Review (CGIR), produced bimonthly since 1992, publishes research on trends in the development and improvement of organizations’ governance, boards, and directors. CGIR frequently includes articles about ethics-related issues. (ISSN 0964–8410, Blackwell; URL: http://www.blackwellpublishing.com/journals/CORG)
Corporate Governance: The International Journal of Business and Society, published five times a year since 2001, includes articles on real-world performances of boards and CEOs and corporate social responsibility. Articles are research, policy analysis, or case studies, occasionally gathered into thematic issues. (ISSN 1472–0701, Emerald; URL: http://www.emeraldinsight.com/cg.htm)
[Page 384]Corporate Reputation Review: An International Journal, appearing quarterly since 1996, produces articles on reputation management, highlighting best practices and current trends. Article treatments include research, case and industry studies, and policy analysis. (ISSN 1363–3589, Palgrave Macmillan; URL: http://www.henrystewart.com/corporate_reputation_review)
Electronic Journal of Business Ethics and Organization Studies, is an online journal published in Finland, semiannually since 1996. It contains research, primarily in English, and is open access (free to readers) online. (ISSN 1239–2685, University of Jyväskylä, Business and Organization Ethics Network, School of Business and Economics; URL: http://ejbo.jyu.fi/index.cgi?page=cover)
Ethics in Film is an online journal, begun in 2005, that focuses on using film to teach ethics, including business ethics examples. (ISSN not available, Center for Business and Society, University of Colorado; URL: http://www.ethicsinfilm.com)
Greener Management International: The Journal of Corporate Environmental Strategy and Practice, produced quarterly since 1993, has articles and case studies with an international scope that focus on environmentally sustainable business practice. Recent examples of thematic issues have included sustainable performance and business competitiveness, chemical risk management, and greening supply chain management. (ISSN 0966–9671, Greenleaf; URL: http://www.greenleaf-publishing.com)
International Journal of Business Governance and Ethics, published quarterly since 2003, focuses with interdisciplinary perspectives on aspects of corporate social responsibility and ethical decision making within organizations. (ISSN 1477–9048, Inderscience Publishers; URL: http://www.inderscience.com/ijbge)
Journal of Business Ethics Education (JBEE) began publishing quarterly in 2004. Currently, it is the only journal exclusively devoted to articles on teaching business ethics, since content for the former Teaching Business Ethics is now reincorporated into JBE, and the Journal of Management Education is more broadly focused. JBEE contains research articles and curriculum materials. (ISSN 1649–5195, Senate Hall and Carnegie Bosch Institute; URL: http://www.senatehall.com/journals.php?journal=5)
Journal of Corporate Citizenship, produced quarterly since 2001, publishes articles that link theory with practice about corporate citizenship, addressing [Page 385]global and local perspectives. (ISSN 1470–5001, Greenleaf; URL: http://www.greenleaf-publishing.com/jcc/jccframe.htm)
Journal of Management Education has appeared bimonthly since 1975 with articles on teaching business students and managers. Ethics-related items appear in nearly every issue. Articles may be theoretical and empirical research, essays, reviews of instructional materials, as well as teaching tools, such as exercises and assignments that use discussion, case method, role playing, and writing. The December issue has an annual index. (ISSN 1052–5629; URL: http://www.sagepub.com/journal.aspx?pid=181)
Journal of Public Policy and Marketing (JPPM) published semiannually since 1982, JPPM contains articles on social, ethical, public policy, and economic aspects of marketing. (ISSN 0748–6766, American Marketing Association; URL: http://bear.cba.ufl.edu/centers/jppm)
Organization Science, one of the top research journals in management, began publishing in 1990. Its bimonthly issues focus on systems and behavior in organizations, drawing from the fields of management, sociology, psychology, economics, and communications. Usually, there are several ethics-related articles per year. (ISSN 1047–7039, Institute for Operations Research and the Management Sciences; URL: http://www.marketingpower.com/content1056C342.php)
Review of Social Economy, published quarterly since 1948, is the official publication of the Association for Social Economics and concentrates on topics like the relationships between social values, economics, and ethics. Themes include social justice, poverty, income distribution, gender, environment, and humanism. (ISSN 0034–6764, Routledge; URL: http://www.tandf.co.uk/journals/titles/00346764.asp)
Teaching Business Ethics appeared quarterly from 1997 to 2003 and is now incorporated into Journal of Business Ethics (see above). (ISSN 1382–6891, Kluwer Academic)
Zeitschrift fuer Wirtschafts und Unternehmensethik (Journal of Business, Economics and Ethics), begun in 2000, is published three times per year. Theoretical and empirical articles are primarily in German, but some are in English, and all articles have English abstracts. (ISSN 1439–880x, Rainer-Hampp-Verlag; URL: http://www.zfwu.de)[Page 386]Annual Book Series
Annual series have been a key format for distributing business ethics articles, especially before many journals published ethics-related articles regularly. Below is a selected list of the most relevant ones, presented in alphabetical order.
Annual Editions: Business Ethics has run from 1989 to present, reprinting articles from diverse academic journals and popular magazines that focus on basic concepts drawn from many perspectives. (ISSN 1055–5455, McGraw-Hill/Dushkin; URL: http://www.dushkin.com/annualeditions/ae-list.mhtml)
IABS Proceedings, published since 1990, includes papers presented at annual meetings of the International Association for Business and Society, the producers of Business & Society. (ISSN not available; URL: http://www.iabs.net)
International Business Ethics Review covers international aspects of corporate social responsibility. The International Business Ethics Institute of Washington, D.C., has turned out three to five academic articles annually since 1997 but began more frequent publication in 2005. The print copies are free on request. (ISSN not available; URL: http://www.business-ethics.org/iberpub.asp)
Issues in Business Ethics has appeared irregularly since 1990, producing single-topic volumes that are collections of previously unpublished scholarly articles on ethics in international management. (ISSN 0925–6733, Springer-Verlag Dordrecht; URL: http://www.springer.com/sgw/cda/frontpage/0,11855,5-40385-69-;33114156-0,00.html)
JAI Press (now called JAI/Elsevier) generates several annual titles, each with original research articles. The most notable include the following:
Research in Ethical Issues in Organizations (ISSN 1529–2096, 1999 to present)
Research on Professional Responsibility and Ethics in Accounting (ISSN 1574–0765, 1995 to present; called Research on Accounting Ethics prior to 2004)
Research in Corporate Social Performance and Policy (ISSN 0191–1937, 1978–1998)
JAI also publishes Advances in Bioethics, Research in Social Problems and Public Policy, and others. (URL: http://www.elsevier.com/wps/find/books_browse.cws_home?pseudotype=SER)
[Page 387]Ruffin Series in Business Ethics, appearing biennially since the 1990s, publishes the papers delivered at the renowned lecture series at the Darden School sponsored by the University of Virginia's Olsson Center for Applied Ethics and the Ruffin Foundation. (ISSN not available, Philosophy Documentation Center; formerly published by Oxford University Press, 1998–2004; URL: http://www.pdcnet.org/ruffin.html)
Soundings: A Series of Books on Ethics, Economics and Business has appeared irregularly since 1987, produced by the University of Notre Dame Press. (ISSN not available; URL: http://www3.undpress.nd.edu/dyn/series/36)
Transparency International, based in Berlin, Germany, has two annual publications that are available free online: Global Corruption Report,http://www.globalcorruptionreport.org, and Corruption Perceptions Index,http://www.icgg.org/corruption.cpi.html (copublished with the International Center for Corruption Research).Trade Journals, Newsletters, and the Popular Press
Some periodicals are used primarily for locating news, trends, commentary, and case study material. Below is an alphabetical list of selected publications that are geared toward researchers, businesspeople, students, and the public:
- Business Ethics: The Magazine of Corporate Responsibility (BE), formerly Business Ethics Magazine, publishes quarterly with a circulation of about 10,000 (current issue is free online). BE covers trends and includes special features like reports on teaching ethics in MBA programs, interviews with corporate leaders, awards, and an annual ranking of the “100 Best Corporate Citizens.” (ISSN 0894–6582, New Mountain Media; URL: http://www.business-ethics.com)
- The Conference Board's Research Reports and Executive Action Reports frequently include publications that address ethics topics, with items such as “Why Ethical Leaders are Different,” “Using Ethical Analysis to Guide Offshoring,” and “Corporate Citizenship Reporting: Best Practices.” (ISSN 0732–572X; URL: http://www.conference-board.org/publications)
- Compact Quarterly: Corporate Citizenship in the World Economy is the official newsletter (free online) of the United Nations’ Global Compact, which began in 1999 as an initiative promoting corporate responsibility worldwide by encouraging company participation in adhering to principles promoting [Page 388]human rights, labor standards, the environment, and anticorruption. (ISSN not available, United Nations; URL: http://www.enewsbuilder.net/globalcompact)
- CQ Researcher, a weekly, frequently publishes issues on business ethics topics that are particularly good for basic overviews of subjects currently appearing in the U.S. and international news. Each issue includes a chronology of the topic, pro/con arguments, and essays. Past issues have addressed the following: “Whistle blowers,” “Disabilities Act,” “Religion in the Workplace,” “Lobbying Boom,” “Corporate Crime,” “Child Labor and Sweatshops,” “Drug Company Ethics,” “Asbestos Litigation,” “Diversity in the Workplace,” and “Contingent Work Force.” (ISSN 1056–2036, Congressional Quarterly; URL: http://www.cqpress.com/product/Researcher-Online.html)
- Ethics Newsline, free online, summarizes each week's ethics-related news, and includes features like statistics, quotes, research reports, commentary, charts, and illustrations. (ISSN not available, Institute for Global Ethics; URL: http://www.globalethics.org/newsline/members/index.tmpl)
- Ethics Today, produced by the Ethics Resource Center, Washington, D.C., is a monthly free e-mail newsletter and accompanying Web site that contains news, white papers, research reviews, and educational resources on organizational ethics (formerly Ethics Journal, ISSN 1060–0698, 1991–1996). (ISSN not available; URL: http://www.ethics.org/erc-publications/newsletter.asp)
- Ethikos: Examining Ethical and Compliance Issues in Business has come out semimonthly since 1987, focusing on corporate ethics programs and reporting on experiences with corporate compliance programs (incorporates Corporate Conduct Quarterly, ISSN 1061–8775, 1991–1999). (ISSN 0895–5026, Ethics Partners, Inc.; URL: http://www.singerpubs.com/ethikos)
- European Business Ethics Newsletter, biannual since 2003 (free online), publishes news and announcements related to the activities of the European Business Ethics Network. (ISSN none available; URL: http://www.ebenuk.org/info_resources.html)
- Philosophy for Business, appearing monthly since November 2003 (free online) from the International Society for Philosophers, features articles and book reviews for a broad audience about the philosophical aspects of business. (ISSN not available; URL: http://www.isfp.co.uk/businesspathways)
- Society for Business Ethics Newsletter has been published twice a year since 2004 (free online) by the producers of Business Ethics Quarterly and includes items like [Page 389]conference calendars, calls for papers, job announcements, and other association business. (ISSN not available; URL: http://www.societyforbusinessethics.org)
Online databases allow simultaneous searching of hundreds of periodicals, across a broad chronological range. They save the researcher time by searching widely for relevant articles, covering both the journals typically devoted to business ethics and those from allied fields that occasionally produce ethics-related articles.
More than 12 commercial services may be used effectively to locate articles on business ethics. The major, broad-based management databases are the primary choices to research business-ethics-related topics because they cover the largest range of relevant academic literature, as well as news, commentary, case studies, and policy analysis articles. The leading databases cover six or more journals that are central to business ethics, along with a significant number of other academic and trade journals of secondary importance to the field. They are as follows:
ProQuest's ABI/Inform Global
EBSCO's Business Source Premier
Another strong resource, the Bibliography of Business Ethics Articles (http://www.isbee.org/biblio/EthicsArticles.php), is available online at no charge. Created and maintained as a project of the International Society of Business, Economics, and Ethics, it contains about 4,000 citations (dating from 1992 to present) that are handpicked from nine central business-ethics-related journals. This bibliography of high-quality sources is easily accessible, although it has limitations, compared with commercial databases, in terms of the range of journals, the citation-only format, how fast new content is added, and its search engine's features.
Secondary choices for research databases on business ethics topics are the major interdisciplinary academic databases or those others that are dedicated to specific disciplines (e.g., philosophy, psychology). They contain fewer of the periodical titles that publish business ethics research. Listed in order of most-to-least coverage are
[Page 390]Expanded Academic,
International Bibliography of the Social Sciences,
Business Periodicals Index,
Business and Company Resource Center,
Social Science Index,
IBZ/Internationale Bibliographie der Geistes- und Sozialwissenschaftliche Zeitschriftenliteratur (International Bibliography of Periodical Literature in the Humanities and Social Sciences),
IBR/Internationale Bibliographie der Rezensionen Geistes- und Sozialwissen schaftliche Literatur (Inter national Bibliography of Reviews of Scholarly Literature in the Humanities and Social Sciences),
Dietrich's Index Philosophicus, and
Social Science Citation Index.
Other highly specialized databases may be useful occasionally, depending on the research topic. Examples are Communication Abstracts, Criminal Justice Abstracts, Environmental Science and Pollution Management, POESIS, PsycINFO, Religion Index, Risk Abstracts, and Worldwide Political Science Abstracts.
A notable feature of commercial databases is that they provide a controlled vocabulary that not only assists searching by subject (e.g., corporate social responsibility) but also by specific article treatments, so that researchers can combine their subjects with keywords such as “case studies,” “peer review,” “editorial,” or “statistical” (keywords vary by database). Free Internet search engines, even Google Scholar, currently do not offer this kind of powerful search refinement feature.
Google Scholar does outperform the commercial databases in one area: The contents published in annual book series, many of which are original research articles, currently are ignored by these commercial database sources, with the exception of the Ruffin Series, which is available through ABI/Inform and [Page 391]POESIS. Google Scholar is providing some incomplete, but promising, indexing that uncovers the material in these annual series. Comprehensive tracking of items in annuals, however, is best done from each publisher's Web site.Miscellaneous Digital Resources
Useful Web sites that support business ethics research come in a variety of forms, with links to business ethics periodicals, news, or other documents. BELL: The Business Ethics Link Library (http://libnet.colorado.edu/Bell/front page.htm) is a comprehensive collection of resources compiled by the business library at the Leeds School of Business, University of Colorado, that primarily provides many dozens of examples of the codes of ethics of business and organizations. BELL also serves as a useful first stop for links to ethics periodicals, education programs, and other ethics and corporate social responsibility online resources. In addition to the alreadymentioned newsletters by the Ethics Resource Center, European Business Ethics Network, and the Society for Business Ethics, there presently are two well-established English language Internet sites that contain news, commentary, announcements, and the occasional case study. They are the business ethics section of Manage ment Logs, http://www.managementlogs.com/business_ethics.html, a Web log by more than 12 international contributors, and RISQ: Review of International Social Questions,http://www.risq.org/category4.html, a publication by 18 international researchers, journalists, and policy makers. These sites host journalistic reporting and interviews and have supplemental features like notifications for new content, useful links, and interactive discussions. More sites such as these are likely to appear as interest in and the study of business ethics become more widespread.—Further ReadingsUrlich's periodicals directory. (Annual). New Providence, NJ: R. R. Bowker. Retrieved from http://www.ulrichsweb.com/ulrichsweb