Exploitation –

In a recent talk (available in full length at Youtube; see embedded below) Matt Zwolinski, a political philosopher at the University of San Diego, argues that what is usually considered exploitation can at least be perceived to be morally better than the behavior most of us demonstrate in face of catastrophes and emergencies – namely neglect/ignorance/inactivity.

The argument presented by Zwolinski is pretty powerful, especially when considering morality (as consequentialists do) as aiming at the creation of the greatest good for the greatest number (or the minimization of suffering). When looking at cases of exploitation (such as price gouging or the working conditions in sweatshops in developing economies) with a rational, logical perspective, it seemingly is difficult to object to Zwolinski’s argument – even though our moral intuition, our gut feeling and emotions, might clearly say something different: The exploiter does at least provide some value/benefit to the victim of the exploitation, but the inactive people (like ourselves) don’t do anything for them. So how could exploitation be bad but neglect acceptable?

How can we resolve the puzzle? Should we ignore the moral intuition on basis of the rational argument and just move forward by accepting exploitative behavior on basis of the benefits for all involved parties? When looking at the situation short-term this seems to be a compelling conclusion, but I would still tend to disagree: One possible reason to condemn exploitation (and even to introduce legislation against certain types of exploitation, such as price gouging) can be understood to have a social dimension: Through the condemnation of exploitation and through anti-exploitation legislation, we all (and as a consequence entire societies) signal to all of their members that unfair behavior is not acceptable.

In the short-term exploitation might bring real benefits for the involved parties of the exchange (individuals, groups, organizations) – be it the exploiters or those that are being exploited. But in the long-run societies might have a significant benefit, from punishing (through moral despise or possibly even through legal sanctions) the exploiters. To substantiate this point: let’s look at examples of exploitation that Zwolinski doesn’t address: How about black-mailing? Such cases might also bring benefit for all both involved parties, but there are good reasons to morally condemn them and I guess that even Zwolinski wouldn’t defend them.

I fully agree with Zwolinski’s point that neglect / inaction is morally vastly undervalued – and that we should pay more attention to driving people to become active for the benefit of all involved parties. But I just don’t buy the argument, that this would be a good reason to accept exploitation – not even from a normative perspective.

I believe that Zwolinski’s argument against neglect (by criticizing three types of biases) is well substantiated – but there are at least two fundamental problems:

  1. The overall presentation commits a logical fallacy: Just because Zwolinski can show that neglect is bad doesn’t make exploitation any better (not even if exploitation was less bad than neglect). There are good reasons to sanction exploitation to ensure that those who act, act positively in a more general sense, irrespective of benefits for the exploited party. Exploitation is not only appalling because of “the way in it affects the vulnerable people that are taken advantage off” (32:20 min), but also because it is a behavior that if generalized/generally accepted will be (a) either a violation of basic moral principles/rules (Deontological perspective), (b) or yield severely negative long-term consequences (Consequentialist perspective). And there is of course no reason to believe that there are only two options – neglect or exploitation. The moral disdain people show for exploitation might aim at opening our eyes for the simple fact that we could look for non-exploitative ways to solve our problems. Just to use Zwolinski’s examples: After a natural catastrophe – why can’t business help to supply the goods to people in need in a non exploitative way? Couldn’t they simply set maximum amounts of goods to be handed out per customer to avoid out-of stock? Couldn’t they try to get more goods and simply add the additional cost to the price, instead of charging the truly excessive prices that have frequently been charged in the past? How about sweatshops: Even if life and working conditions in sweatshops are already above the average in certain countries, couldn’t the large importers of textiles do more in order to ensure good and safe working conditions, e.g. through collaboration with broader stakeholder networks?
  2. A recent study by Jim A. C. Everett,  David A. Pizarro, and Molly J. Crockett (Published in the Journal of Experimental Psychology; see also here and here) came to the conclusion that “agents who express dontological moral judgments are more valued as social partners”. Now this is obviously irrelevant from a normative perspective (because all people or at least in the people in the study might all be showing a morally undesirable behavior), but I rather would read this as an example of the social dimension that Zwolinski seems to neglect or at least down play: Only looking at marginal improvements/better consequences (which – I agree – can sometimes [at least seemingly] be morally imperative) might on the other hand sometimes have negative long-term/overall consequences. And in the cases that Zwolinski discusses (namely price gouging and sweatshops) I do believe that the moral condemnation is justified as defending it might bring relatively better results than the neglect/inaction that most of us show. But it comes at the cost not only of the people who are being exploited but also at the cost of seemingly accepting a behavior that should (normatively) change.

The just end of a company?

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

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

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

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

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

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

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

Proximity of stakeholders and cultural/national biases

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

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

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

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

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

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

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

A question of life and death

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

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

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

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

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