Friday, December 17, 2010

Ends and Means, Means and Ends

Especially at this time of year, when people are so crazed by the spirit of love and charity that they will get into fistfights over parking spaces at the shopping mall, it's important to review some ethics basics.

For instance: Do the ends ever justify the means?

I don't like to say, "Never". Mostly because whenever I say I'd "never do X", within approximately 30 seconds I'm doing X. Always for the best of reasons, of course.

So I'll just answer my question with a little wriggle-room: Almost never.

Here's a great example from today's New York Times:

As Abby Goodnough writes in her article, "On its face, it seemed reasonable enough: a bone marrow registry sending recruiters to malls, ballparks and other busy sites to enlist potential donors."

What a worthy enterprise! Who could argue against having more people sign up to help those suffering from formerly-incurable diseases?

The devil, as they say, is in the details.

If you were a young man, hanging out at the mall with some friends, would you be more likely to respond positively to a request to "be a hero" if those words were said to you by a paunchy middle-aged guy in floods, or by a pretty young model in a short skirt and high heels?

I thought so.

You could argue that this was smart marketing (assuming there were some attractive young men in the model pool too, preferably not in short skirts and heels).

But models aren't free, of course. The donor registry, Caitlin Raymond International, apparently hired them at a cost of about $60,000 per week, according to Goodnough's article.

The registry is a nonprofit subsidiary of UMass Memorial Medical Center in Worcester, MA. An estimated 185,000 potential donors were recruited in New England.

The hospital "said Thursday that it had stopped seeking donors in New Hampshire and using models altogether."

Why no New Hampshire donors? Because the registry's practices are being investigated by the New Hampshire state attorney general's office. The AG is interested, not just because of questionable marketing tactics, but also because of extremely questionable billing procedures: those who agreed to the DNA cheek swab were not told that their insurance companies would be billed for the test, to the tune of $4,300 each.

Goodnough notes that "New Hampshire passed a law in 2006 requiring insurers to pay for tissue-typing tests for potential bone marrow donors. But at the time, ... proponents told lawmakers that each test would cost $100 or less." Oops. All of a sudden, we understand why New Hampshire seemed like such a good recruiting arena, don't we?

There's no question that more of us should learn about donation -- of blood, of marrow, of organs -- and that more of us should donate all of these.

But: isn't there a more transparent way of getting information out than by hiring sweet-talking high-heeled models, and by hoping no one will notice that the insurers are being billed, big-time?

Did the hospital really have that little confidence in the worth of the work it was doing that it needed to resort to these kind of tactics?

When this many people are being enlisted, do the tests really cost $4,300 a shot, and if so, how could New Hampshire legislators have been given a figure almost 98% lower?

Not to mention: don't you think there was a better use for $60,000 per week?

Tuesday, November 30, 2010

Who Writes Medical Textbooks? You Might be Surprised.

Last week, I wrote a post about dental products manufacturers underwriting articles, and even entire issues, in dental practice journals. This week, I get to write about pharmaceutical companies writing whole books.

This does not make me happy.

Today's New York Times carries an article by Duff Wilson about a 1999 textbook on the treatment of psychiatric disorders that was apparently written by GlaxoSmithKline (then SmithKline Beecham).

Pharmaceutical companies and medical instrument manufacturers have in the past been accused of playing too important a part in the writing of articles, but "to ghostwrite an entire textbook is a new level of chutzpah," to quote Dr. David A. Kessler, a former FDA commissioner.

The book ("Recognition and Treatment of Psychiatric Disorders: A Psychopharmacology Handbook for Primary Care") was "written" by Dr. Charles B. Nemeroff (who was at Emory University's medical school at the time) and Dr. Alan F. Schatzberg (then at Stanford's medical school). In the book's preface, the "authors" thanked SmithKline Beecham for an "unrestricted educational grant."

According to Wilson's article, Drs. Nemeroff and Schatzberg insist that SmithKline "had no involvement in content."

But a 1997 letter from the associate editorial director of Scientific Therapeutics Information suggests a somewhat different scenario. The letter was attached to a "complete content outline", notes that "we have begun development of the text", names the primary technical writer (not either Dr. Nemeroff or Dr. Schatzberg), and presents a proposed timeline, which includes dates for drafts to be submitted to "co-authors / APPI / sponsor".

"APPI" is the publishing arm of the American Psychiatric Association, and was the publisher of the book.

Guess who "sponsor" is.

Peer-reviewed medical journals now require full disclosure -- as Wilson put it, "whose idea it was, who wrote the first draft, and who edited."

Don't you think medical textbooks should meet those same standards? Of course you do.

Tuesday, November 23, 2010

Full Disclosure is Better than Full-Body Scans

Pretend, for a moment, that you are a dentist.

If you read an article in the Journal of the American Dental Association that tells you that a "cone-beam CR scanner" would provide a safe and effective way to identify tooth and jaw problems earlier and more effectively than older methods like X-rays, you might consider investing in such a gizmo for your office, right?

In fact, there's an entire issue in the JADA dedicated to the wonders of this new technology. Sounds even better, right?

Now ... what if I tell you that the entire issue is underwritten by a cone-beam scanner manufacturer. Still as interested?

I thought not.

Today's New York Times has a long article by Walt Bogdanich and Jo Craven McGinty on this new technology, and about concerns that children, who are particularly vulnerable to the pernicious effects of radiation, are being exposed to excessive levels of radiation in their dentists' chairs.

Individual scans, properly administered, are not dangerous, but the effects are cumulative, so children (and adults) should not be scanned unless there's a genuine need.

An expert in 3-D technology like the cone-beam scan is quoted as saying that "a cone-beam scan produces no more radiation than a whole-body scan at the airport," while another expert argues that "cone-beam scanners can be several hundred times as powerful." (Never mind that there are questions being raised about the radiation levels to which frequent travelers may be exposed.)

The real question is, Why are we exposing children and adolescents to radiation if it isn't necessary?

According to the Times, cone-beam CT scans produced "significantly higher" levels of radiation than traditional dental imaging techniques, without sufficient scientific data to prove that it provides better results.

That's not to say that traditional techniques are perfectly safe. Dentists have been advised not to use old, slow "D-speed" X-ray film "because it requires more radiation than faster film". But about 70 percent of dentists are still using D-speed film.

The Times offered its readers an important sidebar: "What Patients Might Want to Ask the Dentist about X-Rays". It is important to know why a particular technique is being recommended, and that a proper lead shield is being used to protect you (or your child) from unnecessary exposure.

But an even more important question to ask might be why obvious conflicts of interest keep getting by us.

At the end of their lengthy article, Bogdanich and McGinty point to the continuing education credits that dentists can earn "by reading about cone-beam technology in a new magazine, Orthodontic Practice - US, and then answering 10 simple questions appended to the end."

The article is credited to Dr. Edward Y. Lin, a Wisconsin orthodontist, who is a strong supporter of cone-beam scanning. That's fine; different dentists certainly have different opinions about the value of the technology, and Dr. Lin said that "the company did not pay him to write the article or to appear in its full-page advertisement in the same issue."

What company would that be? Imaging Sciences, a scanner manufacturer. For whom Dr. Lin has been a paid lecturer.

In other words: How many lectures paid for that article?

Tuesday, November 9, 2010

Illegal vs Unethical vs Stupid

Imagine this situation: you have a conflict with your boss. It's not a huge deal, but it's been simmering away for a while, and you're ticked off about it. You're convinced that you're not getting a fair deal -- after all, your boss is your boss, right? So you vent a little to your co-workers in the lunchroom, or around the water-cooler.

Or on Facebook.

Is this a firing offense?

Here's the actual situation: An ambulance service company had asked an EMT employee to prepare a response to a customer complaint about her work, but denied her representation by her union. Later that day (from home), the employee posted a derogatory comment about her supervisor on her personal Facebook page; some of her friended colleagues piled on. She was suspended and later fired for those postings, which violated company Internet policies.

According to the National Labor Relations Board, that was a violation of workers' rights: your right to complain about your boss does indeed extend to social media sites.

"The labor relations board announced last week that it had filed a complaint against an ambulance service, American Medical Response of Connecticut, that fired an emergency medical technician, accusing her, among other things, of violating a policy that bars employees from depicting the company 'in any way' on Facebook or other social media sites in which they post pictures of themselves," writes Steven Greenhouse in an article in today's New York Times.

In addition, the NLRB found "that the company’s blogging and internet posting policy contained unlawful provisions, including one that prohibited employees from making disparaging remarks when discussing the company or supervisors and another that prohibited employees from depicting the company in any way over the internet without company permission." (The complete board release is here.)

I'm not going to rehash all the public details of the case, but it does seem as though everyone involved behaved badly.

And while I agree with the NLRB position, the employee's behavior strikes me as, well, dumb.

Yes, the EMT is ticked off right now and wants to vent with her friends. I understand that, and empathize. That's what water coolers and (after hours!) the neighborhood bar are for. But what happens when she applies for another job, and the prospective employer, in conducting the background check, comes across this posting?

Now put yourself in that employer's shoes: You don't know all the circumstances of the dispute (any more than I do). Maybe the employee is right; maybe her boss is right. But wouldn't her response (the posting) strike you as a little intemperate? Could such behavior escalate? While she may have all the qualifications you are looking for, in an environment of high unemployment, what are the chances you can't find someone who hasn't been posting negative comments about her boss?

How many articles do we have to read about people posting embarrassing pictures or comments about themselves or others before it sinks in that the Internet is forever.

Wednesday, October 27, 2010

Is $750 Million Enough to Get Your Attention?

In the largest criminal (and civil) payment for the manufacture of adulterated drugs, GlaxoSmithKline yesterday agreed to pay $750 million to settle complaints that it had knowingly sold contaminated and/or ineffective products.

The complaints all stem from a plant in Cidra, Puerto Rico, since closed. (News articles from the New York Times here, The Guardian here, National Public Radio here; there are many, many more.)

In a statement, a GlaxoSmithKline (GSK) senior vice president said, "We regret that we operated the Cidra facility in a manner that was inconsistent with current Good Manufacturing Practice (cGMP) requirements and with GSK's commitment to manufacturing quality. GSK worked hard to resolve fully the manufacturing issues at the Cidra facility prior to its closure in 2009 and we are committed to continuous improvement in our manufacturing processes."

This is an apology? And what is "cGMP" anyway -- not making people sick when they use your product?

So ... just how serious were those "manufacturing issues"? NPR's Scott Hensley termed some of the "sobering":
  • Nausea medicine Kytril and antibiotic ointment Bactroban could have been contaminated with bacteria.
  • A special coating on Paxil CR pills cracked, leading to medicine that wasn't effective.
  • Tablets of Avandeamet, a diabetes drug, were sometimes too strong or too weak.
  • Different medicines were mixed up in the same bottles.
How were these "sobering" issues first uncovered?

Following a Food and Drug Administration (FDA) warning letter in 2002, Cheryl Eckard, then a GSK global quality assurance manager, was sent to the Puerto Rico plant to lead a team of 100 experts to fix the cited problems.

According to Gardiner Harris and Duff Wilson's article in the New York Times,
[Cidra] was GlaxoSmithKline's premier manufacturing facility, producing $5.5 billion of product each year. But Ms. Eckard soon discovered that quality control was a mess: the water system was contaminated; the air system allowed for cross-contamination between products; the warehouse was so overcrowded that rented vans were used for storage; the plant could not ensure the sterility of intravenous drugs for cancer; and pills of differing strengths were sometimes mixed in the same bottles.
Ms. Eckard complained to her supervisors, and was ignored. Instead, she was fired. A ten-year GSK employee, she turned to the FDA and sued the company. The complete complaint can be found online here; it does not make for pleasant reading. Ms. Eckard will receive $96 million, one of the highest whistle-blower awards for health care fraud.

The three-quarters of a billion dollars that GlaxoSmithKline is paying to settle the charges is the largest ever paid for the manufacture of adulterated drugs, but is only the third highest that drug companies have paid in the last two years. Pfizer agreed to pay a total of $2.3 billion in September 2009 to settle charges relating to Bextra, Zyvox, Lyrica, and other drugs (I wrote about that settlement, here), and Eli Lilly agreed to pay a total of $1.4 billion in January 2009 to settle charges related to its Zyprexa drug.

The key difference in the GSK case is that nearly all prior settlements dealt with illegal marketing issues (e.g., in the Pfizer case, a government investigation showed that Pfizer actively promoted off-label use of Bextra, by providing all-expenses-paid trips, and even kickbacks, to doctors). As the Times article noted, this GSK case "is the first successful case ever to assert that a drug maker knowingly sold contaminated products." (emphasis added)

It should also be noted that 2009 profits were up 20% over the previous year (Financial Channel article here), to 5.5 billion pounds (some $8 billion). At which point $0.75 billion doesn't sound so bad. According to Market Watch, third-quarter 2010 sales and profits are down, larger due to lower sales of Avandia (a troubled diabetes drug) and Valtrex (used to treat certain herpes infections). The company had in July set aside $750 million in anticipation of reaching an agreement with the government regarding the Cidra manufacturing complaints.

I have written before that the starting point of business ethics is contractual: I agree to provide a fair product (or service), and you agree to pay me a fair price. After that, the arguments can start.

When it comes to pharmaceuticals, the floor below which we must not go is: It's safe; it's effective; it's not contaminated; it's what I say it is.

GSK went down to the sub-basement on this one. Very senior heads should roll.

Monday, October 25, 2010

My Back Hurts -- Pass Me One of Your Vicodins Please

If you're taking illegal drugs at work, and test positive on a random drug test, you'll be fired. What if you're taking prescribed drugs for pain or anxiety?

Should you be fired for testing positive for those prescription painkillers?

It's actually a more complicated issue than it might sound.

What if you're taking prescription painkillers so that you can get back to work? What if you're taking painkillers as a result of injuries sustained on the job? What if you're taking a painkiller that was prescribed to one of your colleagues, who offered you one of his pills because your back hurts, and you forgot to bring your medication with you? What if ...

I'll stop here -- there are endless variations possible, but you get the picture.

Katie Zezima and Abby Goodnough have a long article in today's New York Times about how prescription drug testing may pose a new kind of "quandary" for employers, some twenty years "after the Supreme Court first upheld the right to test for drugs in the workplace."

It used to be that companies only tested for illegal drugs, but more and more companies are testing for prescription painkillers, anxiety medication, and more.

In one example in the Times story, a 22-year employee (not a 22-year-old, but someone who had been with the company for 22 years) was fired for taking a medication which had been prescribed by her doctor for back pain because she had tested positive for that drug, which the company, "which makes car parts, had suddenly deemed unsafe."

Now trimming car window molding, which was this woman's job, is not an office job. There is far more dangerous equipment around the factory floor than staplers. Employees may be working in closer proximity than the next cubicle, and if someone on the line has an accident or is impaired, there is substantial risk to those nearby. (Note: this particular employee is suing for discrimination and invasion of privacy, and her company would not comment for the article, citing the ongoing lawsuit.)

But how impaired is too impaired? In this tough economy, a lot of people who have jobs will do anything to keep those jobs. If it means popping a bunch of pain pills to keep working on the line, they will do that.

The employee who was fired said that "she understood [the company's] safety concerns but believed the company should have worked with employees who take prescription drugs rather than fire them. She said,
If the medicine they're taking is not good for them or the workplace, then there should be some sort of program where they can teach us how that affects you or see if something can be worked out. But that was not an option for us.
The automotive parts manufacturer decided that it wanted to "provide a safe environment" and would consider all drugs "unsafe if its label included a warning against driving or operating machinery, but doctors say many users function normally despite such warnings."

I can understand that the manufacturer preferred to have a blanket policy: All drugs of this type will be banned. Such a policy is easier to explain, easier to administer, and should be easier to defend in a court of law (although we'll have to wait and see whether it can be successfully defended). But is it ethically better?

In general, I don't like hard-and-fast rules for how to treat people because people themselves aren't "hard and fast". Some people respond better to "carrots" and some react better to "sticks". In the case of medications, different people react to different medications differently. Some people get "up" on "downers"; some people get slow and logy on "uppers".

Moreover, the Times article points out that setting rules about prescription drug use at work can easily run afoul of the Americans with Disabilities Act which "prohibits asking employees about prescription drugs unless workers are seen acting in a way that compromises safety or suggests they cannot perform their job for medical reasons."

Other employees at the plant said in interviews that there were some people there who used illegal drugs, and that some passed around prescription drugs (along the lines of, "Sorry, I don't have any Tylenol for your headache, but I'll give you one of my OxyContins.").

With an employee who has been working for you for 22 years -- assuming you're really worried about line safety ... don't you think you could have found a different, non-line position for her?

I wouldn't mind a "no illegal drugs" blanket rule, and I wouldn't mind a "no prescription drug sharing" blanket rule. But firing people for using a properly-prescribed drug properly, without any evidence that it's affecting their ability to perform their job?

That's going too far.

Tuesday, October 19, 2010

Fool Me Once...

I'm not a health-care industry analyst, so why am I writing about Johnson & Johnson for the fourth time this year?

It's to say, "I told you so."

And I'm not happy about it.

Back in January (here), I wrote about how long it took McNeil Consumer Healthcare, a J&J division, to respond to consumer complaints about odd smells in some bottles of over-the-counter medications. At that time, I wrote,
As a consumer, I have plenty of generic non-branded choices for pain relief. Unless I have a good reason to trust J&J to provide me with a higher level of product quality, why would I pay extra for Tylenol or Motrin?
I wrote again about McNeil in March (here), about the steps the company was taking to address the funny-smell problem (traced to chemicals leaching from wooden pallets that were used to transport and store product packaging materials), and contrasted the company's behavior with the "gold standard" comments J&J got in 1982 for its Tylenol recall.

And then in August, news broke of more problems, this time at the DePuy Orthopaedics unit and Acuvue contact lens. It was the ninth product recall for J&J this year. In that post (here), I quoted an investment banker who follows the company:
No. 1, is there a systemic issue at J&J? No. 2, is this [the DePuy hip-replacement recall] reflective of that systemic issue? And, No. 3, is there more to come?
I also noted that all these recalls were starting to affect J&J's bottom line.

And now it seems to be affecting consumer behavior.

Andrea Gardner, for American Public Media's Marketplace program today, reports that more and more parents are realizing that "there is no boogieman in the [generics] bottle", which could have a huge, long-term impact on companies like J&J.

Gardner notes (full story here) that she usually bought generics for herself, but bought branded products to care for her infant. With the recall of Infant Tylenol in April, she turned to generic acetaminophen. Will she go back when production ramps up again?

Gardner quotes a pharmaceutical industry analyst, who thinks that she, and other mothers like her, will return to the fold. There will be "a barrage of ads from J&J in 2011 and '12, with a message of trust, and changes made in the wake of the recall," he believes.

But: today's New York Times reports that McNeil is now voluntarily recalling eight-hour Tylenol caplets made at its Fort Washington PA plant, before that plant was closed.

Can a massive advertising campaign really make consumers forget everything they've heard this year? Fool me once.... Fool me twice.... Fool me thrice....

At some point, consumers can't be fooled anymore.

Thursday, October 14, 2010

In Whose Universe Was Robo-Signing a Good Idea?

Given that all 50 state attorneys general are looking into current foreclosure practices (full article from New York Times here), it seems likely that some of the practices weren't OK in the legal universe.

Taking "hair stylists, Walmart floor workers and people who had worked on assembly lines" and making them "foreclosure experts" without any formal training, as reported by AP's Michelle Conlin (full story here) certainly isn't OK in the ethical universe.

But ... beyond all that? ... it was stupid in the corporate universe too.

Of depositions released Tuesday, Conlin writes,
The depositions paint a surreal picture of foreclosure experts who didn't understand even the most elementary aspects of the mortgage or foreclosure process -- even though they were entrusted as the records custodians of homeowners' loans. In one deposition taken in Houston, a foreclosure supervisor with Litton Loan couldn't define basic terms like promissory note, mortgagee, lien, receiver, jurisdiction, circuit court, plaintiff's assignor or defendant. She testified that she didn't know why a spouse might claim interest in a property, what the required conditions were for a bank to foreclose or who the holder of the mortgage note was. "I don't know the ins and outs of the loan, I just sign documents," she said at one point.
If it weren't so pathetic, it might be funny.

If you're a bank with a whole lot of mortgage loans that might or might not, well OK, probably are, bad ... wouldn't you want people looking at the documents who could figure out which ones were really really bad and which ones might be salvageable?

I wrote last month about the recurring problem of a passion for new sales as opposed to servicing and satisfying the customers you have, and part of this problem is related to that one. In the go-go years, banks spent billions to build their mortgage machines. With the market on a seemingly nonstop upward rise, actually servicing mortgages became an afterthought.

But when the bubble popped, a new army of trained employees was needed, and the banks were very slow to hire such talent. Enter the robo-signer (for those of you who haven't been following this story closely, some bank employees were signing off on literally thousands of foreclosure every month without reviewing the files, as is legally required. To keep up with the flow of paperwork, they just kept signing -- a robot could have done it just as well.).

The Times' Eric Dash and Nelson Schwartz note that "banks had few financial incentives to invest in their servicing operations... A mortgage generates an annual fee equal to only about 0.25 percent of the loan's total value, or about $500 a year on a typical $200,000 mortgage. That revenue evaporates once a loan becomes delinquent, while the cost of a foreclosure can easily reach $2,500 and devour the meager profits generated from handling healthy loans." (click here for full story)

So once again, we see that incentives work ... as long as we know what exactly we're incentivizing.

And one might argue that, if the cost of a foreclosure is so much higher than the profit, it might pay to do the triage and find as many homeowners whose loans could successfully be modified as possible....

The scandals are going to get worse, I fear, before they get better. Felix Salmon's Reuters blog makes a strong case that the investment "banks had price-sensitive information on the quality of the loan pool which they failed to pass on to investors in that pool. That’s a lie of omission, and if I was one of the investors in one of these pools, I’d be inclined to sue for my money back."

Maybe I should have gone to law school.

Friday, September 17, 2010

Good Analysis, Bad Method

I nearly wrote a blogpost last week about customer service, or the decline thereof, based on a nice piece by James Suroweicki in The New Yorker (click here for full story), He accurately analyzes a problem I've been railing against for a lot of years:
The real problem may be that companies have a roving eye: they’re always more interested in the customers they don’t have. So they pour money into sales and marketing to lure new customers while giving their existing ones short shrift, in an effort to minimize costs and maximize revenue. The consultant Lior Arussy calls this the “efficient relationship paradox”: it’s only once you’ve actually become a customer that companies put efficiency ahead of attention, with the result that a company’s current customers are often the ones who experience its worst service. Economically, this makes little sense; it’s more expensive to acquire a new customer than to hold on to an old one, and, these days, annoyed customers are quick to take their business elsewhere. But, because most companies are set up to focus on the first sale rather than on all the ones that might follow, they end up devoting all their energies to courting us, promising wonderful products and excellent service. Then, once they’ve got us, their attention wanders...
This attitude has never made any sense to me. It is, as Suroweicki writes, always more expensive to get a new customer than to keep an old one, so, in a tight-money environment, why wouldn't you spend less to keep rather than more to acquire?

My guess has been -- I don't have any research to prove it -- that it's the sex appeal. It's simply sexier, a bigger rush, to land a new customer than to keep an old one happy. (I wonder if this is why so many people seem to be better at courtships than at marriages?)

In response to the article, one reader responded as follows (I haven't found the "letters to the editor" section on the magazine's website, so I'm providing the text rather than a link):
Many years ago, I owned a small business. Two members of my staff handled customer-service calls. They were told that they didn't have to listen to customers screaming at them but that, instead of hanging up, I preferred they give the really tough calls to me. I would begin every conversation the same way: "Mr. Jones, I understand there's a problem, and I'm here to solve it. But, before we get to that, there are a few things I'd like you to know. On the way to work today, I got two flat tires. When I finally got to my desk, I found a letter from the I.R.S. telling me that I'm being audited for the past three years. And, as if that weren't enough, I just got a call from my son's school. I was told that he has been suspended indefinitely. But enough about me, Mr. Jones. How can I help you?" At that point, I could hear the wind go out of Mr. Jones's sails, and a calm discussion would ensue. If you can get people to take a deep breath, and put things in perspective, customer service can work more effectively for those on both sides of the divide."
The analysis is correct: If you can get people to put things in perspective, customer service can work more effectively.

But the method? Lying to your customers as a way to do customer service?!?!

I don't think so.

Most customers don't call customer service screaming for blood immediately. Something else has gone wrong along the way. Usually, it's a sequence of indifference that makes them madder and madder, so that by the time they have gotten to the business owner or the vice president or whomever, they're steaming. Or it's the call-center-from-hell automation system (press "1" for a different problem than yours, press "2" for something else entirely, press "Mom" on your speed dial if you want someone who cares).

The way to deal with infuriated customers isn't to lie to them at this point -- by the way: just imagine, Mr. Ex-Small Business Owner, how your former customers will feel when they read your letter -- but to deal with their problem immediately before they get so angry they can't "put things in perspective."

In other words, your customer-service representatives should have had not just the responsibility of dealing with customers' problem, but the authority to see to it that the customers were satisfied.

Whatever it took.

Oh, that open-ended offer is going to get me into trouble.

Not really.

Most customers aren't out for blood. They have a problem, and they want it fixed. And they want to be treated respectfully and honestly.

The first thing to do is to listen. Really listen. Let them tell the whole story without interruption, even if it's the 238th variation on the theme that you've heard. It's not the 238th for them (at least, we hope not! And if it's the 238th for you ... well, you have a set of problems all your own that need fixing, don't you?).

Acknowledge that the customers' issues are real problems, whether you think they are or not. It's real to them. (Note that your lawyers may not like this suggestion: "You're laying yourself open in the event of a lawsuit," they will warn. Ignore them. If you deal with the problem promptly, and fix it, there won't be a lawsuit. Suits come about because you've screwed up.)

Ask your customers what it would take to make it right. Unlikely as it may seem to you, most of them are quite reasonable: "The toaster broke the day after the warranty expired." Do they want your store, your savings, or your first-born child in recompense for this disaster? No. "Gee, all I really want is to get it fixed or replaced."

Then fix it, or replace it. Done.

And you, Mr. Ex-Small Business Owner, haven't had to get involved. You haven't had to waste your more-valuable (or at least more expensive) time. And best of all, you haven't had to lie to your customers.

Monday, September 13, 2010

A Fee That Developers Love and an Ethicist Hates

Here a fee, there a fee, everywhere you look a new fee.

We've gotten used to them -- the fee airlines charge to check your bag (or the fee that they charge for your carry-on), the fee for parking in a previously-free lot, the fee for ... you name it.

But yesterday's New York Times introduced me to a new fee: the "resale fee" (or "capital recovery fee" or "private transfer fee") that some real-estate developers are charging, permitting them to collect 1% of the sale price every time the property changes hands, for up to 99 years. [Full article, by Janet Morrissey, here]
A growing number of developers and builders have been quietly slipping "resale fee" covenants into sales agreements of newly built homes in some subdivisions. In ... [one particular] contract, the clause was in a separate 13-page document -- called the declaration of covenants, conditions and restrictions -- that wasn't even included in the closing papers and did not require a signature.
I find it hard to believe that I'd be legally liable for a fee that I haven't been told about and that I don't have to sign for, but let's ignore the legality for a moment and think about the ethics.

I'm not alone in having ethical qualms about this, fortunately. Morrisey quotes Justin Ailes, director of government affairs at the American Land Title Association: "The idea that someone who has no ownership stake or interest can continue to collect revenue off of a property that they may have built up to 99 years ago exploits an already complex transaction and doesn't pass the smell test."

The concept is also opposed by the National Association of Realtors and the Center for Responsible Lending, among others.

Developers, apparently, see this "as a creative way to get new financing."

In fact, according to the chief operating officer of Freehold Capital Partners, it's a "win-win deal" for developers and home owners, because "the fee is a fair and equitable way to spread development costs [including building roads and other infrastructure], and results in lower costs to the average homeowner."

The home page for the Freehold Capital Partners website has a link for a brochure with more information on "capital recovery fees" which are described as "a real estate financing solution designed to more efficiently structure the economics of real estate projects." Who could argue with so laudable a fiscal goal?..... Just give me a second.

Now, no one can deny that some developers, like some homeowners, are currently upside down on their loans and are in deep financial trouble.

But neither can anyone deny that this is a singularly shady way to try to get out of the situation.

There are plenty of homeowners who rode the surge in home prices upwards by flipping a series of houses, and are now holding the bag and crying for help. Since they're not as essential to the overall economy as the major banks who encouraged them in this risky behavior, the homeowners are not likely to get much of a government bail-out. Whether they should is a topic for another day.

Should the developers be eligible for government help? That too is another issue.

But, to use Ailes' "smell test", the developers' "resale fee" is the wrong way to go.

In one example the Times used, not only did the homeowners not learn of the resale fee until after the closing, but even the home builder was not aware of the fee.

Even if a prospective owner learns of the fee at the time of the closing -- does that strike you as fair? Given the number of houses a prospective buyer has probably visited, the negotiations that he or she has gone through to reach an agreed-upon price, the inspections and banking arrangements, and everything else that's involved in buying or selling a house, this fee seems like adding insult to injury. Moreover, given that a standard mortgage is 20% down (sometimes less), a 1% resale fee will amount to 5-10% of the buyer's downpayment -- which is significant, and not something to be thrown at you when you're signing the final papers on your dream house.

Thursday, September 9, 2010

The Buck Stops Where?

According to a 193-page report released yesterday, British Petroleum (BP) has concluded that "multiple companies and work teams" were responsible for the devastating 20 April 2010 Deepwater Horizon disaster.

Per the executive summary (here; BP press release here),
The team did not identify any single action or inaction that caused this accident. Rather, a complex and interlinked series of mechanical failures, human judgments, engineering design, operational implementation and team interfaces came together to allow the initiation and escalation of the accident. Multiple companies, work teams and circumstances were involved over time.
This sounds just like a mea culpa, doesn't it? Well, maybe not.

In fact, it sounds more like an effort to deflect as much culpa onto other parties as possible, especially Transocean (which owned the rig) and Halliburton (the rig's cement contractor).

Note that on the same day that BP's report was issued, news came from the Gulf that the well still has not been fully sealed (New York Times story here), "as engineers worked to better understand the well's condition."

The report laid out a number of significant errors, human and mechanical. Some are well-known, such as the failure of the "blow-out preventer" (which was raised from the ocean floor over the Labor Day weekend and will be analyzed by government investigators); others are less familiar, such as the particular cement slurry that was used at the bottom of the well.

Both Transocean and Halliburton have raised objections to BP's findings.

Tiernan Ray, on his Barron's blog, reported that Transocean said, "This is a self-serving report that attempts to conceal the critical factor that set the stage for the Macondo incident: BP’s fatally flawed well design. In both its design and construction, BP made a series of cost-saving decisions that increased risk – in some cases, severely." (Side notes: I like calling the biggest oil-spill disaster ever an "incident", don't you? "Macondo" refers to the Macondo Prospect, the part of the Gulf of Mexico in which the Deepwater Horizon well was located.)

Halliburton's response was a little more measured, and did not specifically deny some of the more serious allegations, saying only: "Halliburton remains confident that all the work it performed with respect to the Macondo well was completed in accordance with BP’s specifications for its well construction plan and instructions.... The well owner is responsible for designing the well program and any testing related to the well. Contractors do not specify well design or make decisions regarding testing procedures as that responsibility lies with the well owner." (Full response in Ray's blog, here)

In the end, we may learn that actions taken by Halliburton and Transocean did indeed have an impact on the scale and scope of the disaster. But being (partially) at fault is not the same thing as being responsible. It was BP's well; Halliburton and Transocean were contracted by BP; the buck should stop with BP.

Tuesday, August 31, 2010

What Does Fairness Have to Do with the Price of Eggs?

The starting point of business ethics is contractual: I agree to provide a fair product (or service), and you agree to pay me a fair price.

After that, the arguments start.

What's a "fair" price?

When we're on the provider side of the equation, we generally want the price to be as high as possible; as consumers, we want the price to be as low as possible.

In an effort to maximize sales and minimize costs, some producers are willing to go very low indeed.

And what's a "fair" product?

At the very least, it would be safe.

I've been following, as I'm sure many of you have been too, the ongoing story of the recall of eggs from two leading U.S. producers, Wright County Egg and Hillandale Farms. Since 13 August, when the recall began, more than half a billion eggs have been recalled, and since this spring, some 1500 cases of salmonella have been linked to affected eggs.

Today's New York Times carries an article by William Neuman that outlines some of the findings from federal inspections at the Iowa egg farms: "Barns infested with flies, maggots and scurrying rodents, and overflowing manure pits" were among the appetizing details reported.

"Both companies said that they had acted quickly to correct problems and were continuing to cooperate with regulators," the article claims.

But the problems reported as so egregious that management at Wright County Egg and Hillandale Farms must have been aware of the situation. For example, at Wright County Egg, inspectors found "pits beneath laying houses where chicken manure was piled four to eight feet high." Not something you're likely to, um, overlook.

Wright County Egg is owned by Austin ("Jack") DeCoster, who is no stranger to run-ins with federal and state regulations. As reported by Mary Clare Jalonick for the Huffington Post, fines into the millions of dollars have been assessed against DeCoster for health and safety violations at his Maine operations as well as labor violations at his Iowa "farms" (full article here).

I use quotation marks around "farm" because what I think of as a farm bears little resemblance to the industrial complexes that are, for example, Wright County Egg.

In the meantime, the FDA has released a new "draft guideline" for the prevention of salmonella in shell eggs (many egg producers sell shell eggs to consumers and also send eggs to "breaking plants" where the eggs are pasteurized -- which kills the salmonella bacteria -- and sold in liquid form, usually to food manufacturers). Will these new guidelines prevent another huge salmonella outbreak?

As long as there are producers out there like DeCoster -- who seems to think of fines as merely another cost of doing business -- I suspect the FDA's efforts will be insufficient.

Egg production can be done humanely and safely, but .... it will come at a higher price. That seems fair.

Friday, August 27, 2010

What's Going On at J&J?

Back at the dawn of time, when I was in business school, Johnson & Johnson was held up as the gold standard for handling product recalls, for its swift response when cyanide-laced Tylenol capsules in a handful of Chicago-area stores caused seven consumer deaths in 1982. The company immediately pulled every single Tylenol off every single store shelf in the United States.

As I have written before (here), there was some surprise at the time that a company would react so dramatically, with so little (apparent) consideration for immediate profit concerns. The long-term effect was terrific consumer loyalty.

But that loyalty seems to have been taking a beating lately.

"More than two years after the Food and Drug Administration began receiving complaints about the failure of a hip replacement implant made by the DePuy Orthopaedics units of Johnson & Johnson, the company said Thursday that it was recalling two kinds of hip implants, " reports Natasha Singer in today's New York Times. [Full article here]

In addition, as Singer also noted, the FDA earlier this week sent the company a warning letter, claiming that DePuy was marketing one device without "marketing approval or clearance ... which is a violation of the law" and marketing another "for unapproved uses".

Earlier this year [see my blogpost on that subject here], two years of complaints from consumers about moldy-smelling bottles finally led J&J to recall an assortment of OTC products from its McNeil Consumer Health Care unit (including ... Tylenol!)

Earlier this week, J&J recalled millions of its Acuvue contact lenses sold in Japan and several other countries. As noted by the Associated Press, that was the ninth recall of a J&J consumer product in a year.

Singer quotes a health-care investment banker: "No. 1, is there a systemic issue at J&J? No. 2, is this [the hip-replacement recall] reflective of that systemic issue? And, No. 3, is there more to come?"

That banker isn't the only one asking that question. I am too, and I'll bet a lot of other consumers are as well.

The recalls are also having an immediate effect on the bottom line.

In Katharine Hobson's late July Wall Street Journal blogpost, she reported that the McNeil recalls "cut $200 million from the [second] quarter’s sales and will pare an estimated $600 million from sales for all of 2010."

But -- as was the case in 1982 -- profits can recover. Trust? Not so much.

Wednesday, August 11, 2010

If the CEO Does It, Does That Make It OK?

Ethics is easy when the stakes are low, or when doing the right thing makes you look good: You find your neighbor's wallet on the sidewalk, and return it to him promptly.

It gets more difficult as the stakes go up.

The most recent case is that of Mark Hurd, who was until last Friday chief executive officer of Hewlett-Packard.

As reported by numerous news outlets (click here for Colin Barr's article for Fortune / CNN), Hurd resigned following an accusation of sexual harassment of a marketing contractor with whom he developed a personal relationship. In the course of its internal investigation, H-P determined that Hurd had not violated its sexual harassment policy, but violated its "standards of business conduct" policy, having repeatedly filed inaccurate expense reports in amounts ranging from $1,000 to $20,000, apparently in an effort to keep the relationship secret (Hurd is married).

Hurd reportedly first offered to repay the improperly expensed items, but the board insisted that he step down.

In the words of CNET's Erica Ogg, "Hurd's resignation marks a stunning end to what had been by most accounts a wildly successful five years at the helm of what is now the largest computer company in the world, measured by total revenues." H-P share prices dropped nearly 10% in late trading on news of Hurd's departure.

In an email to the New York Times, which was first reported by UK-based, Oracle's chief executive officer Larry Ellison blasted the H-P decision as "the worst personnel decision since the idiots on the Apple board fired Steve Jobs many years ago."

"In losing Mark Hurd, the H.P. board failed to act in the best interest of H.P.’s employees, shareholders, customers and partners," Mr. Ellison wrote. "The H.P. board admits that it fully investigated the sexual harassment claims against Mark and found them to be utterly false."

Well, maybe, Mr. Ellison. But what about those pesky "inaccuracies" in expense reporting? Such behavior is generally considered to be a for-cause firing offense. Or is it only a firing offense if you're a junior-level employee? Doesn't this remind you of President Nixon's remark to David Frost that if the president does it, it's not illegal?

Not to mention that a junior-level employee with falsified expense reports wouldn't receive a nice little severance payment of more than $12 million....

Friday, August 6, 2010

How Would You Define "Conflict of Interest"?

... That's what I thought. Me, too.

Today's New York Times carries an excellent, if depressing, piece by Gretchen Morgenson: "Exotic Deals Put Denver Schools Deeper in Debt".

It turns out that not-as-financially-savvy-as-they-thought-they-were individuals weren't the only ones targeted for bizarre financial instruments in the runup to the Wall Street implosion.

According to Morgenson's article, early in 2008, the Denver Board of Education, seeking to fill a $400 million hole in its pension fund, turned to JP Morgan Chase for help.
The bankers said that the school system could raise $750 million in an exotic transaction that would eliminate the pension gap and save tens of millions of dollars annually in debt costs -- money that could be plowed back into Denver's classrooms, starved in recent years for funds.
Yeah, I know. It smells, now. But then (the deal closed just weeks after the failure of Bear Stearns), well, let's just say that there were still a lot of house-flippers out there, and the Denver school board, as Morgenson puts it, "essentially made the same choice some homeowners make: opting for a variable-rate mortgage that offered lower monthly payments, with the risk that they could rise, instead of a conventional, fixed-rate mortgage that offered larger, but unchanging, monthly payments."

To date, the school system has apparently paid at least $25 million more in interest and other fees than it had originally expected. While they would like to renegotiate, to undo the deal completely, Denver would have to pay a huge "termination" fee.

The deal is getting extra attention in part because Michael Bennet, the superintendent of schools who, with the system's operating officer, pushed hard for the deal, is now a United States senator from Colorado.

But I found this paragraph the most telling, and the most depressing:
A spokesman at JPMorgan, which led the Denver deal, declined to comment. Royal Bank of Canada, which acted as the school system's independent adviser even though it participated in the debt transaction, declined to comment. Denver school officials said that they had agreed to sign a conflict waiver with Royal Bank of Canada. [Emphasis added]
Even though it participated in the debt transaction?!?! How could one ignore that level of conflict of interest?

I am not going to throw all the blame for this at Royal Bank of Canada, however. It would be easy to say, Oh those horrible greedy bankers, and leave it at that.

Sadly, there seems to be a fair amount of responsibility to spread around.

For example, unlike many school superintendents, now-Senator Bennet had extensive private-sector financial experience. Morgenson reports that "Mr. Bennet handled investments and structured financial deals for the Anschutz Investment Company, a private concern owned by the billionaire Philip Anschutz that has a stakes in telecommunications and oil." The district's chief operating officer (and currently superintendent), Thomas Boasberg, also had private-sector experience, having been a mergers and acquisitions deal maker for a telecommunications company.

Morgenson further reports that, according to then-members of the board of education, "the bankers' presentations for the 2008 debt deal outline its risks only in broad terms... [and] had not discussed problems in the variable-rate debt market that arose the previous year -- a development that would have alerted them to troubles they might have had securing a manageable rate on the debt they were refinancing."

Of course, if we're looking at responsibility, it's worth asking those same board members, How is it that it was OK with you that "for years, the school system had not met its required annual pension payments to ensure a fully funded plan"?

Friday, July 30, 2010

If You Must Recall, Please Do So Loudly

Let's say that I am a pet food manufacturer, and some of my products are being linked to outbreaks of salmonella (among people feeding my products to their pets). I announce a recall.

How loudly do you want me to announce that?

Pretty damn loudly, I'd think.

Today's New York Times carries an article by William Neuman, reporting on a frozen-mouse recall. Apparently frozen mice are popular among reptile owners: just thaw and feed (I like snakes and other reptiles, but I am suppressing considerable squeamishness here. May I just say, Ewwww.).

MiceDirect, based in Cleveland GA, sells mice (from "small pinkies" to "jumbo adults"), rats ("pinkies" to "mammoth") and chicks. (Sorry, I'm having another squeam moment here. Deep breath.)

The website currently carries a "Recall Notice: May 2009 - July 23, 2010" hot link right at the top of its home page, but that has not been the case for long.

According to the Times report, "The company's recall notice was not prominently posted on its Web site until Thursday. And neither the company's site nor the F.D.A.'s site gave clear instructions on what to do with mice that customers still had." (emphasis added)

A reptile owner, who "bought 10,500 mice from MiceDirect early this year", when contacted by the Times said that "he had not heard about the recall until a reporter called him Wednesday."

Salmonella linked to MiceDirect was first reported in Great Britain in August 2008, and in the United States in January of this year. A spokesperson for the Centers for Disease Control said that British officials informed the CDC of the outbreaks in 2009; the FDA (which regulates pet food companies) was also informed.

An FDA spokesperson, on the other hand, said that her agency was "checking to see if it had a record of the 2009 contact from the CDC" and was not told of the American outbreak until May of this year. In early July, officials of both agencies conducted an inspection at MiceDirect, and the FDA informed the company on 21 July that tests of the product and plants had found salmonella. Two days later, the company agreed to a recall.

Don't you think that MiceDirect should have taken a proactive stance after the first, British reports of salmonella?

So do I, especially in light of the fact that, to date, "more than 400 have people have fallen ill there, about two-thirds of them ...children under 10." An epidemiologist at the Health Protection Agency's Center for Infections noted that "although shipments of tainted mice were halted last year, people continue to get sick there.... perhaps because snake owners, unaware of the dangers, continue to use mice kept in their freezers."

Since pet owners have the mice delivered directly to their doors, the company has their contact information. They should have reached out to them immediately, loudly, and persistently.

Saturday, July 24, 2010

BigFood -- The Gift That Keeps Giving, Alas

Assuming, of course, that you write a blog about ethics in business. Or the lack thereof.

I've written twice already about food rules (here and here) and about the ways major companies like Kellogg's, ConAgra, and McDonald's skirt the minimal rules that are out there in their marketing to children.

There had been some indication that the Food & Drug Administration was finally getting tough, but according to today's New York Times, the progress has stalled. William Neuman writes,
A report to Congress from several federal agencies — expected to include strict nutritional definitions for the sorts of foods that could be advertised to children — is overdue, and officials say it could be months before it is ready. Some advocates fear the delay could result in the measure being stripped of its toughest provisions.
While I'm fine with arguing about the specifics of the proposed new rules (the "level for saturated fats would be set so low it would exclude peanut butter," for example), I'm dismayed to see how this administration is caving to big business.

My favorite quote from the business side was from Dan Jaffee, executive vice president for government relations for the Association of National Advertisers:
The proposal was extraordinarily restrictive and would virtually end all food advertising as it’s currently carried out to kids under 18 years of age.
And that would be so terrible, Mr. Jaffee, why?

It's not the 10-year-olds, after all, who are out there in the supermarkets buying Froot Loops (12 grams of sugar per serving, compared to proposed limit of 8 grams). It's their parents. So why do I look for stronger government controls rather than tell the parents to do their job and practice saying, "NO!"

First of all, let's be realistic here. I'm not suggesting that Froot Loops be banned. Nor am I suggesting that all advertising be banned. But poor eating habits and childhood obesity are serious problems, and I think that we should be helping parents address these issues, not throwing up libertarian roadblocks all over the place.

Are American parents all spineless wusses? Hardly. But many of them are tired. They are picking their battles and caving because of the "Please, Mommy, Pleeeeeeeeeeeeeeeease" factor, and the "If-you-don't-I'll-have-a-temper-tantrum-right-here-in-the-store" factor (I pulled those stunts myself as a child.).

And why are the children pulling these stunts? Because marketers know exactly how to play on children's credulity (I still remember the disappointment of realizing that "Sea Monkeys" -- aka brine shrimp -- didn't look like the cartoon images on the back of my comic book) and tastes (the bolder and brighter the colors, the more alluring).

Moreover, even if the advertising were limited only to children's television programming, it might be easier for parents to control their children's exposure. But it isn't. It's everywhere. It's in movies (hello, product placement and tie-ins!); it's in magazines and billboards; it's on the television screens in doctors' waiting rooms, for crying out loud.

Advertising directly to children (defined as under 12) is limited in many EU countries, and forbidden in Norway and Sweden, and in the province of Quebec. That's not a reason why the US should do the same ... but it's not a reason to oppose restrictions or a ban either.

Let's give parents real help to raise a generation of healthy kids.

Friday, July 9, 2010

Why Would You Treat the Honest as Though They Were Dishonest...

...instead of simply firing the @$$ of the dishonest?

The first time I heard about this latest corporate hoop, I laughed -- how ludicrous, I thought.

The second time, I thought, Blog post!

Even with "family-friendly" companies, it is now apparently commonplace to ask new employees to provide marriage certificates and "proof" that the marriage is still active, if they want to sign up for health-care benefits for their spouses. (For children's coverage, birth certificates are required, but apparently not proof that the child is still around.)

Clearly, there were people out there gaming the system in one way or another, getting coverage for those who weren't entitled to such coverage. (And people wonder why I'm in favor of national health insurance. Single-payer, too.)

It seems to me that if such gaming were so serious, the solution is to let employees know that lying about beneficiaries and their relationships to same is a firing offense.

You catch 'em out, you fire 'em.

Sadly, it's not the first time that I've found corporations -- which are usually quick enough to fire without cause (a.k.a. massive layoffs) -- unwilling to step up and fire for cause.

In a previous life, when I joined one company and asked about company credit cards, I was told, "Oh we don't do that anymore. We used to have them, but some of the field reps abused the privilege, so they were all taken away."

In other words, the honest were punished as well as the dishonest.

I know that the corporations will argue that it's because of our increasingly litigious society: that it's easier to pile on extra hoops for everyone to jump through than to risk lawsuits for an unfair dismissal.

So here again you have the situation where the honest are treated as though they were dishonest.

Easier maybe, but hardly more ethical.

Monday, June 28, 2010

Who's to Blame? Who's Responsible?

I've been thinking about blame and responsibility a lot lately, and about the differences between them.

When I was a child, there wasn't much difference, actually. If my father said, "Who's to blame for this mess?" instead of "Who's responsible for this mess?" -- well, either way, it meant that I was in trouble.

But as we get older, things get more complicated. Often, it's not so easy to determine who's the guilty party.

Who's to blame for the disastrous oil spill in the Gulf of Mexico? British Petroleum. It's their well, their plan; the buck has to stop at their desk.

But who's responsible? Ah, now that's more complicated: there are a great many threads in that weaving.

There's TransOcean, of course, and Halliburton, and other BP subcontractors, both individual and corporate.

Beyond that -- there's each and every one of us who drove when we could have walked or biked, who bought cars that were a little less fuel-efficient because they were a little more comfortable, who thought "Drill Baby Drill" sounded easier / more macho / more "in control" than did "Conserve Baby Conserve", who opposed higher gas taxes and tougher CAFE standards, who ... oh, you get the picture.

And I'm guilty -- and therefore just as responsible -- too. I'm going to do better, I swear.

There are other areas of our consumer lives in which we need to think and act more responsibly; Nicholas Kristof's column in yesterday's New York Times, "Death by Gadget", offers an important example.

Kristof points out that an essential ingredient for cellphones, computers, and gaming devices is a mineral called tantalum, which is mined in (among other places) Congo. You may have heard of tantalum under another name, "coltan", which is short for columbite-tantalite, from which the elements niobium and tantalum are extracted.

Proceeds from tantalum mining are financing one of the bloodiest and most barbaric conflicts happening in the world today, with more than 5.4 million deaths since 1996 due to the war and its aftermath. Beyond the deaths are the atrocities. Eastern Congo is now considered to be the most dangerous place in the world to be a woman or a girl, as rape is used as a weapon of war.

A brief video on coltan mining -- which is horrific in its own way, forget about the profits -- was produced by the Pulitzer Center in 2007 and is available here.

Does my cellphone contain tantalum from Congo? I don't know. Tantalum is also mined in countries from Australia to Mozambique to Brazil. So maybe my phone is "clean". But I have no way of knowing.

As Kristof reports, "activists are harassing companies like Apple, Intel and Research in Motion get them to lean on their suppliers and ensure the use of, say, Australian tantalum rather than tantalum peddled by a Congolese militia."

Until now, most manufacturers have accepted "statements from suppliers that they do not source in eastern Congo, with no verification. Auditing the supply chains at smelters to determine whether minerals are clean or bloody would add about a penny to the price of a cellphone, according to the Enough Project," writes Kristof. (If you click through to the Enough Project website, you'll find, among other things, a great video that spoofs the "I'm a Mac" / "I'm a PC" ads.)

The easy thing for us consumers to do is to wait for the manufacturers to do the right thing.

The better thing is to encourage those manufacturers. The next time you're buying a new phone, a new gaming device, a new laptop, ask the salesperson, "Is this built with conflict-free tantalum?"

Chances are, they won't know.

But it should encourage them to ask their supervisors, and for those supervisors to ask suppliers, and it will work its way up the chain.

You can also go to the Raise Hope for Congo website, where you can learn more, pledge to buy conflict-free electronics, and start to take action.

As Kristof says, "No phone or tablet computer can be considered 'cool' if it may be helping perpetuate one of the most brutal wars on the planet."

It's time for us all to be responsible.

Monday, June 7, 2010

Are Your Communications On Message? How About "On Reality"?

Yesterday's New York Times had a wonderful, pathetic example of what happens when reality collides with corporate happy-speak.

On page 11 of the A-section (for those of you who haven't recycled yesterday's news already), there's a full-page ad from BP headlined, "We will get it done. We will make this right."

In the body of the ad, there are these claims: "We have organized the largest environmental response in this country's history. More than three million feet of boom, 30 planes and over 1,300 boats are working to protect the shoreline. When oil reaches the shore, thousands of people are ready to clean it up."

Sounds good, doesn't it? (Actually, sounds like the very least that BP could do.)

Unfortunately, there's a news article just a few pages later, from John Leland in Pensacola Beach, FL (click here), headlined "Local Officials Simmer Over BP Recovery Efforts".

In it, Leland quotes William A. Lee, executive director of the Santa Rosa Island Authority (which oversees Pensacola Beach):
We called BP at 4:30 this morning and told them to send cleanup crews... It's 9:30 and they're not here. There's supposed to be 30 or 40 skimmers out there to protect Pensacola Beach. Do you see any? BP dropped the ball.
The cleanup crews, according to reports from the Times and NPR, arrived around 11.30. Oops.

Remember "Under-promise, over-deliver"?

Friday, May 21, 2010

What's Good for a "Working Mother" May Not Be Good...

...for working women in general.

Not if the women in question find themselves stuck in a pink-collar ghetto.

That, at least, seems to be a take-away from this week's ruling that Novartis Pharmaceuticals -- a regular on Working Mother magazine's "100 Best Companies to work for" -- must pay $250 million in punitive damages for discriminating against female sales representatives.

The jury decision for the class-action case opens the door to additional compensatory damages, which some reports have estimated could run as high as $1 billion. The jury awarded $3.3 million in compensatory damages to the 12 women who testified, but there are nearly 5,600 others who fall into the covered class.

In a Reuters piece that appeared in yesterday's New York Times, the president of Working Mother Media was quoted as saying that the magazine's criteria for its award relied on programs such as flextime, telecommuting, and paid maternity leave.

On its website, here's what Working Mother says "we love" about Novartis:
Being there for the kids isn’t the only reason this East Hanover, NJ–based pharmaceutical company offers its employees flexible schedules. “I’ve used my arrangements to allow more time for friendships, community activities, fitness and personal interests,” says mom Laurie Letvak, an MD who serves as global program head for its Glivac and Tasigna division and now compresses her weeks after years as a part-time worker. Jobsharers, telecommuters and other flex fans can rely on the firm’s easily customizable child-care offerings, including discounts on fulltime care at national chains with budget-friendly backup (just $15 to $25 per day) and in-home sick care ($5 per hour). Impressively, anyone who saves $4,000 in a pretax child-care account is gifted another $1,000 by the company. Summer camp fairs and college coaching programs help make life a little easier for the parents of older kids.
Which is all well and good ... except that the lawsuit claimed Novartis systematically discriminated against women in pay and promotion, and was especially discriminatory against women who got pregnant.

As Ann Woolner notes caustically in her article for Bloomberg Businessweek, "You can't keep the numbers up when you're out on maternity leave, and forget about staying on a management track."

"Women who sold pharmaceuticals for Novartis said that some of the doctors to whom they would pitch products expected something on the side. They groped, they propositioned, and one fellow stuck his tongue in the ear of a startled sales rep," Woolner reports.

The support that the women reps got from the company was less than stellar: "When one of the women complained, her supervisor, also a woman, reminded her that the physicians she saw were valuable to Novartis."

I think we can take that to mean that sales reps were not valuable.

The jury's verdict is one of the largest ever in a gender discrimination case.

Abigail Field at Daily Finance, following Susan Beck at Am Law Litigation Daily, thinks that might be because the jury realized that Novartis, and its lawyers, "just didn't get it." They both note that, in Field's words, the "defense's closing argument was laced with sexist stereotypes and must have left jurors with the impression that the company really didn't respect women." (Field's article is here; Beck's, which requires premium subscription to access, is here.)

That Novartis "didn't get it" may be one reason why the company chose not to settle out of court, as is more typical. (Or it could just be that, in comparison to Novartis' core net income in 2009 of $10.3 billion, $250 million doesn't sound like much.)

Among the most damning "dont' get it" quotes from the closing argument of Richard Schandig, a partner with Vedder Price: "I've never seen anybody cry so much on the witness stand in my life ... She didn't have very much to cry about ... It's like she had been knifed. Honestly. What was wrong with this woman? She was so fragile."

Best of all, Schandig referred to one witness as "that little blond that came up here from Texas."

No, this wasn't last week's episode of Mad Men. It was, maybe, a reminder that we still have a long way to go.

Friday, May 14, 2010

In a Rescue, What's the First Thing You Do

... after the actual physical rescue?

If your answer is, "Cover your a*& and have the victims sign release forms," you too can be an oil company executive.

We have all been following the story of the Deepwater Horizon blowout and subsequent oil spill. The economic devastation to Gulf Coast communities, the environmental damage, the human toll, the apparent lack of oversight by the federal Minerals Management Service -- there's a lot here for an ethicist to absorb.

I'd like to concentrate on just one aspect of the story. Here's the scenario:

The Deepwater Horizon oil rig has just blown up and sunk. Survivors, traumatized by the deaths and disaster they have witnessed, want nothing more than to go home and be able to assure their loved ones that they are indeed OK. But before they can do that ... there are forms to sign.

The Damon Bankston, a cargo boat attached to the rig when the blowout occurred, picked up survivors from lifeboats.

What happened next? According to New York Times reporters Ian Urbina and Justin Gillis,
The men were kept aboard the rescue ship, in the middle of the ocean, for a full 12 hours. Worse than the wait, [the interviewed survivors] ... said, was being forbidden to call their families. The men were told that the Coast Guard wanted to conduct interviews before the workers spoke to family or anyone else.

Rumors spread that the BP executives who had visited the rig were up on the Bankston’s bridge using the ship’s radio or a satellite phone to call home. (Complete article is here.)

NPR correspondent Joseph Shapiro interviewed one young survivor, who told him that when the Coast Guard arrived, papers were handed out, and they were told, "You need to sign these. Nobody's getting off here until we get one from everybody ... And then at the bottom it says something about ... this can be used as evidence in court...."

Even when the survivors got back to land, their ordeal wasn't over. The group were taken first to a hotel to meet with representatives from Transocean (owner of the Deepwater Horizon rig) and the Coast Guard. Urine samples for a mandatory drug test were collected, and the representatives handed out forms which the exhausted survivors were told to initial, which said, "I was not injured as a result of the incident or the evacuation." (Click here for the complete NPR piece)

According to the Associated Press, an attorney for 10 of the Transocean workers said that, "These men are told they have to sign these statements or they can't go home. I think it's pretty callous, but I'm not surprised by it."

Survivors' families waited at least 12 and in many cases more than 24 hours before receiving word that their husbands, fathers, brothers, and sons were alive.

Is this what you'd call ethical?

Me, neither. These men have been traumatized by a disaster, and the company shows its concern for them by traumatizing them all over again.

Thursday, May 6, 2010

When in Rome, Should You Do as the Romans Do?

Not according to Economist columnist "Schumpeter", who argues in this week's edition that "when in Rome, behave like a Swede."

The columnist makes the case that doing the right thing is smart business.

I'd really like to think that people do the right thing because it's the right thing to do.

But I know that there are lot of folks out there who think that, in the "jungle" of business, it's eat or be eaten, and if that means you have to slip a couple of bills into someone's hands or cut some other ethical corners, well, that's just part of being a tough business person.

In other words, it's a macho thing.

Sadly for the macho among us, hard analysis indicates that they're wrong.

"Schumpeter" points to research by Wharton School economist Philip Nichols and by World Bank researchers David Kaufmann and Shang-Jin Wei; their paper, "Does 'Grease Money' Speed Up the Wheels of Commerce?", is available online here.

I know what you're thinking: What do those eggheads know?

Well, among other things, they know that "companies that pay bribes actually end up spending more time negotiating with bureaucrats. The prospect of a payoff gives officials an incentive to haggle over regulations. The [World Bank] paper also found that borrowing is more expensive for corrupt companies, probably because of the regulatory flux."

Moreover, the "hidden costs of corruption are almost always much higher than companies imagine. Corruption inevitably begets ever more corruption: bribe-takers keep returning to the trough and bribe-givers open themselves up to blackmail. Corruption also exacts a high psychological cost on those who engage in it..."

Our macho business guy is snorting here, I know: "High psychological cost? Only if they're spineless wimps to begin with."

Or not.

Still, if those reasons don't convince you, how about this?

"Schumpeter" also points out that "the likelihood of being caught is dramatically higher than it was a few years ago."

Whistle-blowers have more ways of getting information out, and getting it in front of a lot of people. Prosecutions are up. Prison sentences are getting longer and fines are getting bigger.

So if you aren't impressed with the "do the right thing because it's the right thing" argument, ask yourself: How would you have liked to be the Siemens CEO, having to explain to your shareholders why you had to pay $1.6 billion in American and German fines to settle bribery allegations? (click here for a Guardian story from December 2008 on the settlements)

Thursday, April 29, 2010

Could We Please Stop Talking about "Clean Coal"?

... or "cheap coal" for that matter.

The fact is, it's neither clean nor cheap.

Coal-fired electric power plants might look like a cheap way to produce energy, but only if you concentrate on how much a ton of coal will cost you on the open market today (for what it's worth: as of last week, according to Energy Information Administration, the highest Btu coal, from Northern Appalachia, would run you $62.75).

Make no mistake, there's no way to make that power clean, however.

And when you count more than just the market -- don't get me started on the impact of mountain-top removal -- coal's not cheap, either.

As if the disaster at the Massey Energy's Upper Big Branch mine in West Virginia on 6 April wasn't enough, there's now word that two miners are missing following a roof collapse at Alliance Resource Partners' Dotiki Mine in Kentucky (read news reports from the Associated Press here and from Bloomberg here).

The Upper Big Branch catastrophe killed 29 miners, the worst US mining disaster in four decades. And now two more men won't be coming home.

Does that sound "cheap" to you?

Business Week has an excellent analysis up on the sorry state of regulation, at least as far as protecting miners is concerned. The 2006 Mine Improvement and New Emergency Response Act (The MINER Act -- get it? Oy. I hate cutesy acronyms.) came in the wake of another catastrophic West Virginia mine disaster, at the Sago Tmine in which 12 miners were killed.

According to the article: "The act raised the maximum penalty for safety violations, forced mine operators to build emergency underground shelters with oxygen, water and food, and required installation of more modern communication devices." That all sounds good, doesn't it?

Let's take a closer look.

The Dotiki mine, according to news reports, was ranked seventh in the number of "significant and substantial" violations since 2009 (for data junkies, the website of the Mine Safety and Health Adminstration is a great resource). A "significant and substantial" violation means that the MSHA inspector considers that "there exists a reasonable likelihood the hazard contributed to will result in an injury or illness of a reasonably serious nature" (click here for full MSHA document).

Why would a mine that has such a record be operating?

As Business Week's Jeff Plungis and Holly Rosenkrantz report, "While the new law did result in more citations and higher fines, the Labor Department's Mine Safety and Health Administration in 2007 added 10 criteria that inspectors had to meet before a mine could be shut down for a 'pattern of violations'... Only one mine has ever been ordered closed for a pattern of violations... That order, issued in November 2008 to a Patriot Mining LLC mine in Virginia, was revoked when one of the violation findings was withdrawn..."

Does that sound "clean" to you?

So miners keep getting injured and dying, and fines have come to be seen as a cost of doing business. And we don't really notice until there's a major disaster, like Upper Big Branch (the Dotiki roof-fall is not leading most of today's news reports).

Meanwhile, by challenging citations (there's a helpful link right on MSHA's home page: "How to contest citations"), the industry pushes off the date when penalties might have to be paid.

According to Business Week, the "backlog of challenged cases ... has grown to more than 16,000 today from fewer than 1,500 in 2005" (emphasis added).

The current regulations don't even have baby-teeth; all they can do is gum a violator. It's time to stop pretending that miners' lives are valuable, and time to start acting as though we really believed that. A respectful minute of silence is good; tough legislation would be much better.

Thursday, April 22, 2010

How "Informed" Should "Informed Consent" Be?

As informed as you can possibly make it, of course.

I've been thinking about "informed consent" a lot lately, ever since I read the first articles and reviews about "The Immortal Life of Henrietta Lacks". Rebecca Skloot's nonfiction account of the culturing of cervical cancer cells taken from Lacks -- without her permission -- in 1951 is transfixing. (New York Times book reviews are here and here; a "health" section article is here)

Skloot's book reminds us just how recent some concerns about informed consent are. Henrietta Lacks died in Johns Hopkins Hospital's "colored ward"; she and her family were never asked about the research use of her cells, nor were they ever compensated financially (as reviewer Lisa Margonelli noted, "HeLa [as the cells are known, from the first two letters of Lacks' first and last names] has helped build thousands of careers, not to mention more than 60,000 scientific studies, with nearly 10 more being published every day...").

Skloot's book (quoting Margonelli again) criticizes "science that insists on ignoring the messy human provenance of its materials. 'Scientists don't like to think of HeLa cells as being little bits of Henrietta because it's much easier to do science when you dissociate your materials from the people they come from,' a researcher named Robert Stevenson tells Skloot in one of the many ethical discussions seeded throughout the book."

We like to think things have changed since the early '50s. Not only would Ms. Lacks no longer have been required to stay in the hospital's "colored ward", but we would certainly ask her permission today. Anyone who has been treated for almost anything these days is familiar with the "sign here" routine of consent forms.

But how much have things really changed?

Today's Times carries an article by Amy Harmon on the payment of $700,000 by Arizona State University to members of the Havasupai tribe in settlement of complaints about the misuse of tribal members' blood samples. The university will also return blood samples and provide other forms of assistance to the tribe.

According to the article, members of the Havasupai tribe provided blood samples to university researchers in 1990, "in the hope that they might provide genetic clues to the tribe's devastating rate of diabetes." A broad consent form was prepared, and donors signed that form. Later, the tribal members learned that the blood samples had been used to study for genetic variants that would be linked to diabetes, but also for schizophrenia, metabolic disorders, alcoholism, and more. Studies were published reporting "a high degree of inbreeding" and that "the tribe's ancestors had crossed the frozen Bering Sea to arrive in North America", and more.

All of it interesting research, no doubt, and some of it valuable, but all of it unethical.

The geneticist responsible for the original studies, Dr. Therese Markow, now a professor at the University of California, San Diego, insisted that she was "doing good science", and that those who have complained "failed to understand the fundamental nature of genetic research, where progress often occurs from studies that do not appear to bear directly on a particular disease."

The consent forms were purposely broad, Dr. Markow said, because "English was a second language for many Havasupai, and few of the tribe's 650 members had graduated from high school. They were always given the opportunity to ask questions, she said, and students were also instructed to explain the project and get written and verbal consent from donors."

Should I list all the things that are wrong with the previous paragraph? Well, for starters:
  • If you are genuinely concerned about the English-language skills of your prospective donors, how about having the forms translated into their native language, or at the very least providing skilled translators?
  • If you're planning on using the samples for more than one test, tell the prospective donors. Maybe you don't know where the research might take you. Tell them that, too.
  • Is the Havasupai culture one that encourages asking questions of people perceived to hold power or not? If not, you could ask, "Do you have any questions?" until the cows come home, and never hear any. That wouldn't mean that there were no questions.
It was only by sheer accident that the misuse of Havasupai blood samples was discovered, according to the Times article. One tribe member, who had attended college, was visiting at the University and was invited to a student's doctoral presentation. The research on which that dissertation was based was derived from research with the Havasupai DNA. The tribal member "understood little of the technical aspect, but what she heard bore no resemblance to the diabetes research she had pictured when she had given her own blood sample years earlier."

During the post-presentation question period, she asked whether he had permission to use the donated tribal blood for this purpose.

"The presentation was halted. Dr. Markow and the other members of the doctoral committee asked the student to redact that chapter from his dissertation."

Could anything be more damning?

But it's not just cultural and language barriers that all too often make "informed consent" anything but. There's also timing.

When a friend underwent surgery a few years ago, just before being wheeled into the operating room, already hospital-gowned and mentally prepared, he was handed a clipboard and pen to sign the "consent form" permitting the surgeon to use tissue removed in the operation for research purposes.

If he hadn't signed, the operation wouldn't have gone forward. So of course he did. But let's not pretend that his experience was "informed consent."

Research needs to be done. But not by trampling over the human subjects who make that research possible. Even if it's just in the name of "efficiency".