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PHIL 215
Lecture #10
Today: 1. Remaining Schedule: TODAY: see below NEXT WEEK: International Business Issue & Globalization LAST CLASS: Corporate Social Responsibility 2. Today: A. Finish Advertising B. Sales: Bribery & Gift-Giving C. Equity / Diversity Issues D. Ethic of Investing

A. Nestle Baby Formula Scandal

1970-90 (Continuing) 70% of worlds baby formula $12 Billion / year Fraud in the global south.

Issues:
1. Deception / Fraud: - Medical Testimony / Imagery: Paying actors to say they are doctors. - Medical Claims: Baby Formula is better than breastmilk - FALSE!!! Main ingredient in baby formula is ASH 2. Very Expensive 3. Mixing It with Dirty Water (because there is lack of clean water supply in global south) 4. Manipulation (Convinced good mothers to do this, even modern western women) 5. Damage (World Health Organization estimates 500,000 - 1 million children in the global south dead due to this over a 20 year period)

Migration:

Advertising efforts moved from the West to 3rd world countries due to lack of legal restrictions. - Tobacco - Asbestos - Pharmaceuticals Drug testing: - The first version of birth control pill tested in Haiti. (At the time, it was 35 times more potent than what it is currently - this is how drug testing strategy works)

Advertising Rules of T:
1. Obey laws 2. No fraud 3. Special care with childrens advertising 4. *No misleading advertising: average consumer standard 5. *Adhere to community standards of decency / propriety. * - ethics quandries Advertisers justification for 4 & 5 is to cut through the clutter - the only way to make advertising stand out is to take risks and push the boundaries of community standards.

Is Advertising Wrong in General?

Vance Packard: Hidden Persuaders J.K. Galbraith: Affluent Society 1. Advertising plays on & enhances peoples unhappiness, dissatisfaction, envy. This is not virtuous + has bad consequences. 2. Wade: Advertising creates false wants & deliberately encourages confusion between market goods (something that can be bought) & non-market goods (something that cannot be bought). 3. Packards line: Advertising is the suspension of intelligence long enough to suck money out of it - Creation of a false picture of reality that you want to believe it: fantasy. 4. Kantian Objection: - Lying / deception - Bad intentions: whatever buttons need to be pushed. 5. Waide: Focus on youth. - Partly because youth is gullible - Mostly because of brand loyalty: get them before 25 - Manipulative & exploitation 6. Galbraith: Advertising is designed to maximize aggregate demand by taking and rationalizing PLANNED OBSOLESCENCE

Defenders of Advertising:

1. 2. 3. 4. 5.

Free speech Encourages competition Doesnt create non-existent need, it just plays on whats already there You say manipulation, we say FUN! (Legitimate cut through the clutter) Whats the alternative? - Ban advertising? - Government-only advertising? 6. Consumer has to take responsibility Buyer Beware!

Bribery:
TIM (RIM) example. - Competitor against USA / EU companies - Foreign government official says that he demands a $100,000 bribe just to move his companys product up the level of government for comparison. - Research needed to decide if this is worth it; Due Diligence: 1. Bribery was legal in that country 2. Bribery was actually expected culturally 3. Bribery is illegal in Canada 4. Our share-holders wont agree*

Policies on Bribery / Gift-Giving:

Prohibitive - Nothing - No way! - Toyota CDA Mixed Approach - Dollar Limit ($500) - Durability of good / experience - Most businesses will say: If its a shared experience, it doesnt count as a bribe; counts a legitimate business expense. Permissive - If its legal + advantageous, do it!

Law in North America:

Bribery only applies to public officials, or those professionals possessing public trust: - doctor, lawyer, accountant, etc It is illegal for North American companies to bribe a public official anywhere in the world (F.C.P.A)

Do Intentions Matter? Does Conditionality Matter?

Yes, morally, but only yes legally if evidence is given. (Hiden their intentions; conditions)

Equity / Diversity Places

1. Bare Minimum in Non-Discrimination (required by law):
Non-Discrimination means that differential treatment can only be justified on grounds materially related to the job, such as competence & merit. Differential treatment based on reasons irrelevant to the job - such as race, gender, religion, sexual orientation - is illegal & a violation of rights.

2. Equity Hiring / Promotion Practices (Affirmative Action in USA)

(The law for public sector + private sector bidder on government business) For others, volunteer-only Different Kinds: 1. Points (e.g. University degree, +100 pts; Bilingual, +50 pts; Minority, +50 pts; and so on) 2. Quota 3. Tie-Breaker Only required to prove you have a program in place (dont actually need to show results) 4 Target Groups for Benefit: Physically Challenged; Women; Visible Minorities + Aboriginals A note on Merit - People tend to define merit in their own image: overcoming the same difficulties / challenges.

2A: Evidence of Effect?

North America is the most progressed in this regard compared to the rest of the world. Evidence: In Canada: almost no statistically significant impact has been shown. Possibly because of a) short period of data collection and b) enforcement of these policies is extremely lax. In USA: the top most slice of income & education clearly benefits from these policies. The bottom-most slice: no benefit whatsoever.

3. Other, Related Policies

1. No tolerance policy for sexual harassment 2. Family-Friendly Workplaces: special accommodations for parents; on-site/subsidized day care; etc. Aside: Womens dilemma with Career Track vs. Money Track.

3. Diversity Management: efforts at hiring across genders & races; & promoting, too. Especially in North America & globalization: good business, too. 4. Equal Pay for Work of Equal Value 5. Reducing Wage Gaps. How big? Some legitimate wage difference? Some wrongly caused wage gaps.

Ethics of Investing:
1. Tainted Profits Principle
Norm: Chase Highest Returns Ethical Investing - chase highest returns, provided they fulfill ethical principles Tainted Profits Principle: dont invest in anything which generates profits off the misery of others. e.g. Blood diamonds: profits of which funds wars / conflicts; Industries which exploit children; Bitter Chocolate - 70% of the worlds cocoa bean comes from Ivory Coast in West Africa: collectors are kidnapped young children ~6-9 years old working dusk-to-dawn for $1 / day. What are we responsible for knowing as consumers?

2. Enabling Wrong Principle

Dont invest in anything which enables wrong: illness, environmental destruction, exploitation of the poor, the children, women.

3. Ethical Funds
Negative Screening: dont invest in A, B, C:
- Tobacco - Nuclear - Alcohol - Textiles (Child Labour) - Pornography - Weapons - Major / Obvious Polluter

Positive Screening: only invest in X, Y, Z:

- Equity policies - Share I.P. ownership employee inventors

- Profit-sharing - Ombudspersons - % of women / minorities.

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