The venture capitalist looked me straight in the eyes and uttered the words that every hungry entrepreneur wants to hear: "I can offer your company a real competitive edge." My partners and I were searching for seed capital to launch an Internet company. But we also needed talent—a network of experienced workers that would help us to execute our business plan successfully. So we were keen to learn how this particular investor was going to give us the vaunted "competitive edge."
"I run a sweatshop with more than 300 software engineers in Shanghai," he explained, absent any remorse at his choice of words, let alone his business practice. "We pay them a fraction of what we’d pay to build a technology system here in the United States," he added proudly.
Unbridled capitalism very well may be the most effective way to generate financial wealth. But a religious ethic does not accept that claim at face value. It takes the matter a step further: Generate wealth for whom?
When the spirit informs culture, our social goals to create wealth coincide with our ideals of human development. The process is a virtuous circle. Work is sanctified by its contribution to the well-being of others, especially the less fortunate. It helps the worker to achieve fulfillment, and fulfillment increases the wealth of all.
The following principles are a starting place for business workers to evaluate the values that drive their company, and a "measuring stick" for citizens in holding accountable their local businesses (which often are also global).
PRINCIPAL ONE: Company directors and management will consider their work force valuable team members, not merely hired labor.
Vital Signs: Does the company offer a generous equity and/or profit-sharing program, promote strong union relations, encourage employee involvement in corporate governance, provide strong retirement benefits, and limit the wage gap between management and employees?
The corporate firm arose in the capitalist economy as the private possession of a small base of financiers. Workers were treated as corporate assets, much like the physical plant, raw materials, and technology. This mindset increases the risk of treating the corporation as a commodity to be auctioned off in securities markets. Lost jobs become a casualty of profit-taking.
Businesses, of course, are dynamic. They grow, change, compete, succeed, and sometimes fail. In times of downturn, businesses may have to cut their operating costs. At such times when lay-offs are unavoidable, an ethical company will support its employees and help them to find new jobs, as was exemplified by Malden Mills in the mid-1990s.
Three of Malden Mills factories in Lawrence, Massachusetts, burned to the ground in December 1995. In the year preceeding the fire, Malden Mills had sold $400 million worth of fabric—particularly the synthetic fleece Polartec. CEO Aaron Feurstein, whose grandfather founded the business, prioritized providing for his employees during the disaster. Rather than taking the insurance money and walking away, he continued to pay the workers who lost their jobs for 90 days, plus full health-care benefits for 180 days. It cost him $10 million.
But within three months Malden Mills factories were re-built and the work force was back in place. Through mutual loyalty between the owner and workers, Malden Mills’ production doubled and product quality increased. After losing nearly everything in 1995, Malden Mills—including the CEO, workers, and the community in Lawrence—is a thriving and very profitable business.
PRINCIPAL TWO: A company will think of itself as a part of a community, not just a "market."
Vital Signs: Does the company offer a generous return on investment to the local community, support local housing and educational initiatives, especially those geared toward the economically disadvantaged, and offer innovative means for training and entry-level work for the unemployed?
Business is not a closed community. It exists and thrives to the extent that it serves and does not harm society. That principle has focused the entrepreneurial activities of Anita Roddick, founder of The Body Shop. Nearly 25 years ago she opened her first store in England, motivated in part by her dislike of commercial cosmetics and marketing practices. From the start, Roddick refused to buy from suppliers that tested cosmetics on animals, monitoring suppliers to ensure compliance.
In each store consumers can find information on product contents and on current social campaigns. The company has supported campaigns against child poverty, domestic violence, and nuclear tests, while promoting women’s rights and protecting endangered species. In 1988, The Body Shop International deliberately located its soapworks factory in a depressed Glasgow, Scotland neighborhood to create jobs, while The Body Shop Canada commits 20 percent of its profits to local projects in high-risk neighborhoods. For many years the firm has donated its products to food banks and battered women’s shelters.
The Body Shop’s activities go beyond the occasional act of charity, as is echoed in the company’s mission statement, "to dedicate our business to the pursuit of social and environmental change."
PRINCIPAL THREE: A company will take every possible care to ensure the quality and safety of the products it brings to the public.
Vital Signs: Does the company have an exceptional quality control program, place user utility above planned obsolescence, take responsibility when any of its products become a public hazard, and design for the health and safety of its consumers?
Companies make choices about new products, from the time research is approved through every development stage to marketing the finished product. Those choices can and should be ethical. Without the commitment to redesign, consultation, and vigilance, the likelihood of costly failures—both in human and economic terms—increases.
Few companies have shown more of a disregard for that kind of moral responsibility than the Dow Corning Corporation. The company introduced silicone gel breast implants in 1963. Even though medical research indicated that up to 40 percent of women suffered from scar tissue hardening around the implant, it was not until 1989 that a public health group persuaded a judge to order the U.S. Food and Drug Administration to release data on breast implant studies. In January 1992 the FDA discovered that Dow Corning, in response to litigation, had for 20 years sealed memos reporting staff concerns about the safety of its implants.
PRINCIPAL FOUR: A company will treat the environment as a silent "stakeholder," a party to which it is wholly accountable.
Vital Signs: Does the company invest in, produce, or promote products and services beneficial to the environment; work at creative pollution prevention programs; recycle or use recyclable parts; produce or promote alternative fuels (natural gas, wind power, solar energy); ensure groundwater safety; and search for ways to reduce and eliminate waste from its operations?
The environment does not have a vote in running our society. It is not a stockholder and has no say in running our corporations. Nevertheless, it provides the atmosphere, many of the resources, and the very ground and climate within which all business takes place.
The plight of Eco-Foam pellets, a substitute for plastic foam peanuts in packing boxes or other containers, illustrates the reluctance of many companies to make environmentally sound choices. National Starch and Chemical makes Eco-Foam from renewable resources instead of petroleum-based products. Yet because Eco-Foam costs roughly 25 percent more than plastic foam pellets, only a few companies are willing to make the switch. That’s unfortunate; not every expense—like environmental costs—shows up on the balance sheet.
On the other hand, the story of 3M, the maker of Scotch tape and Post-it Notes, shows that pollution reduction at times can be financially lucrative. Its Pollution Prevention Pays (3P) program began in 1975 with the goal of reducing inefficient uses of resources. Over the next 20 years, 3M has been able to cut contaminant emissions by 134,000 tons, waste water by 17,000 tons, sludge and solid wastes by 426,000 tons—all of which saved 3M more than $500 million.
PRINCIPAL FIVE: A company will strive to diversify the kind of people who lead and manage its affairs.
Vital Signs: Are women and minorities represented among the company’s executive management and directors? Does the company promote women and minorities in due course; have a strong family benefits plan, including domestic partnership options; show preferential options for women and minority subcontractors; employ the disabled; seek out minority clients and consumers? Does the company engage in negative image advertising or force out older employees?
Two people who are equally qualified deserve the same chance, and two people doing the same work deserve the same rewards (or penalties). This is the most obvious sense of equality in the workplace, and also the most likely to cause furor when it is violated.
But as deplorable as unequal treatment may be, it pales to the more subtle policies of exclusion. Most U.S. businesses still have a shameful record on equal access. At present, 137 of the Fortune 500 companies do not have a single woman or member of a minority group on their board of directors. The CEOs of the 150 top-ranked high-tech companies are overwhelmingly white; only one African American made the club. The ethical enterprise will not only diversify itself by gender and race, but also by age and family status.
PRINCIPAL SIX: A company will pursue international trade and production based on reciprocal exchanges that respect the same rights accorded its own people.
Vital Signs: Is the company policy designed to protect human rights? Does the company promote consistent standards for workers’ health and safety; pay employees a sustainable living wage; regularly audit contracts with foreign entities to ascertain if bribes have been made to any foreign nationals in the procurement or implementation of contracts? Does the company employ (or contract with other companies who employ) children under the age of 15 (or younger than the age for completing compulsory education in the country of manufacture)?
The aim of international commerce and therefore of foreign investment, it is argued, is to bring benefits to other nations and to enhance their socioeconomic welfare, in return for being allowed to do business there. The long shadow of colonialism and its ugly younger sibling neo-colonialism dims our hopes that these conditions are ever met.
Several years ago it was exposed that a Honduran firm that supplies The Gap subcontracted its work out to a factory where children worked 13-hour days in harsh conditions for 35 cents an hour. The factory was in a maquiladora free trade zone. The public uproar forced The Gap to quickly mend its torn image and more closely monitor its production on foreign soil.
More mixed is the policy of Levi Strauss, which has set the minimum age of 14 for child factory workers. The company buys from more than 600 suppliers in 59 nations. It has stopped doing business in China and Burma due to their human rights records. In Bangladesh, Levi Strauss has arranged for factories using child labor to pay the children’s wages while they attend school and then to hire them back during school vacations and upon graduation. In this way the children do not lose their jobs and the supplier keeps its contract.
PRINCIPAL SEVEN: A company will nurture an organizational culture that encourages its employees to give critical feedback on unethical practices, and even "blow the whistle" when their voices are ignored.
Vital Signs: Does the company clearly communicate the values and norms of its own conduct policy, and train its managers and workers in how to appropriately deal with ethical dilemmas that regularly arise in its field? Does the company view employees who raise critiques as disloyal subjects or try to prevent executives at the top from being held responsible for any mistakes or problems?
"Blowing the whistle" implies stepping out of the corporation and exposing its wrongdoing, most often to the media or to a government agency. A review of American corporate history suggests that whistle blowers nearly always emerge more impoverished and embittered for the experience.
Quaker Oats gives its workers exemplary encouragement to apply ethical standards: "As part of the Quaker team you are required to report any dishonest or illegal activities....It is grounds for dismissal for any Quaker manager to initiate or encourage reprisals against any person who in good faith reports known or suspected...violations." Company employees also are given phone numbers to make reports or seek advice.
PRINCIPAL EIGHT: A company will protect the privacy rights of its suppliers, customers, and employees.
Vital Signs: Does the company clearly represent how it uses customer data? Does the company sell customer data to other commercial enterprises without customer consent; monitor every Web page and every e-mail that workers access; or use confidential information about its suppliers to assist their competitors?
Communications networks make it increasingly simple for private information to be gathered, correlated, and retrieved.
The European Union has arrived at a strong ethical stance on privacy. It has crafted legislation prohibiting companies from using customer information in ways customers never intended—for example, selling it to other companies for use in marketing. The law affects an enormous range of information that U.S. companies collect about people in the daily course of business, from credit card transactions to magazine subscriptions to phone records, not to mention electronic footprints that people leave when they visit Web sites. EU authorities insist that the United States fails to provide adequate consumer protection from companies that collect and resell personal data, and on that basis may prohibit U.S. firms from engaging in electronic commerce in Europe.
PRINCIPAL NINE: A company will deliver what it promises, and promise what it can deliver.
Vital Signs: Is the company honest in its communication? Does it inform about the products and services it offers without misrepresentation; act in good faith throughout the transaction process; and sell without marketing hype and self-image manipulation? Does the company create expectations that it cannot meet?
Classical free market economists tell us that people make rational, free choices based on their self-interest and complete information. Commercial practices are rarely that respectable. Much of advertising seeks to persuade, entice, inspire, and even shame the buying public into a sale. They seek to reinforce insatiable consumption that links people’s identity inexorably to their property. Ironically, advertising agencies are finding that younger consumers are skeptical of hype and image, and are more attracted to no-frills ads that stress product value. Building trust goes beyond delivering the right message to making good on company promises.
PRINCIPAL TEN: A company will not seek to generate any revenue from practices that threaten life.
Vital Signs: Does the company invest in, or make revenue from, alcohol, drugs, tobacco, firearms or military weapons, gambling, or nuclear power; initiate or maintain investments in countries where there is a pattern of ongoing and systemic violation of human rights; buy from suppliers that test materials on animals; or profit from pornography?
An ethical business needs to align its mission and code of conduct with a "right livelihood," putting aside all investments and activities that disrespect the value of life.
Royal Dutch/Shell is one of the most egregious violators of that ethic. Having "successfully" resisted pressure to cease its operations in South Africa during the 1980s as the walls of apartheid began to crack, the oil company repeated its callous pattern in the 1990s with substantial investments in a dictatorially run Nigeria.
In 1995, Ken Saro-Wiwa, an internationally acclaimed author, was arrested by the Nigerian military junta along with eight other tribal Ogoni people. After a show trial, the junta executed all nine. Before he died, Saro-Wiwa appealed to the international community "who buy oil from Nigeria to come to the aid of the Ogoni people and stop this genocide."
For 30 years the Nigerian oil consortium—of which Royal Dutch/Shell has a 30 percent stake—has run the Ogoni oil fields, pumping out over half of Nigeria’s output of 2 million barrels of oil per day. But the official Shell response to the execution of the "Ogoni Nine" held that a private firm should not interfere in Nigerian domestic politics.
DAVID BATSTONE, a founding editor of Business 2.0 magazine, recently joined Sojourners as executive editor. He also writes a weekly column on the digital economy that can be found at www.Iconocast.com.