Post 3

Summary of Corporate Ethical Responsibility

One of the hottest topics in technology these days is data privacy and to what extent corporations use, exploit, and sell your data. Corporations like Google, Amazon, and Facebook have copious amounts of information on every one of their customers, and occasionally they sell this information to advertisers in order to turn a profit. The question, then, is whether or not selling this private data is ethical. Facebook, for example, collects data on all of its users including, but not limited to, pages the person likes, where the person clicks, and what ads the person clicks on. They also specify in their terms of use that they can sell whatever information users give them to advertisers so they can receive targeted ads. Should they be able to do this? Facebook’s only real source of revenue is advertisement, so it makes sense that they should be able to leverage the data people give them to increase that revenue. However, people were upset with the obscure ways Facebook was using that data. Should Facebook be transparent with their use of consumer’s data? Is it unethical not to be? Further, should Facebook be responsible for the actions of the company they sell data to? To what extent? I think it is reasonable to hold Facebook accountable if they sell personal data to criminal organizations, but if a seemingly benign organization misuses data sold to them from Facebook, is that Facebook’s fault? These are questions the world is currently wrestling with and there is no clear answer.

Another interesting issue in corporate ethics is philanthropy or social responsibility. In the eyes of the law, corporations are people, so should they have the same ethical responsibility as people? Should they be required to give back to the community philanthropically? Equally important is the question of whether or not corporations who are giving back to the community are actually being ethical in these actions. For instance, a company that gives $1 million to environmental efforts may only be slightly offsetting the severe environmental impact their facilities have. In that case, their actions shouldn’t even be considered philanthropic. The short clip we watched in class posed an interesting solution - taxes. Instead of talking back and forth about whether or not companies should be or are philanthropic, we should simply increase their taxes and have the government provide public goods with the money that corporations would have hypothetically spent.

A topic that hasn’t quite impacted the tech sphere as much as the financial sphere, but may soon become of utmost importance is the punishment of corporations. In the eyes of the law, a corporation has many of the constitutional rights of an individual person; however they cannot be punished in the same way. You cannot jail a company, because the company isn’t really an entity. So, then, how is a company punished? Generally, through fines. However, these fines often seem very small compared to the extent of the perceived crime of the corporation. Additionally, besides completely closing a corporation down, a fine can never be on the same level as a jail sentence. A fine is a setback; jail is life changing. So then, how can a corporation be held responsible for its actions? Laws are essentially enforced ethical codes, and we clearly don’t have a well defined ethical code for how corporations should act. What should be done about this? Should new laws be put in place with harsher punishments? Should corporations be fined more? Should more C-Suite members of offending companies go to jail for the actions of their corporation? This matter is being decided far too slowly and soon big ethical violations will appear from tech companies like Amazon, Google, and Facebook and there will be no laws in place to handle them.

Critique: Facebook Shares User Data

In 2018, Facebook had what seemed like an endless number of scandals, most of which it handled extremely poorly. Some of them were not directly its fault, but the responses Facebook had for many of these was lackluster to the say the least. One particularly bad scandal for Facebook occurred in December 2018.

On the 18th of December 2018, The New York Times released a report revealing that Facebook shared personal user data with more than 150 companies - including Netflix, Amazon, Microsoft, and Spotify. This report showed that Facebook shared much more data than it had previously admitted to, and long after it had claimed to have cut off all access to that same information. According to the Times report, Amazon was given access to “Facebook users’ names and contact information through their friends.” Meanwhile, Netflix and Spotify were given access to Facebook users’ private messages.

In this particular scenario, the unethical action in question is the fact that Facebook lied about what it was doing with its users’ data. Facebook had previously claimed that it stopped giving other companies access to personal user data, and it very well might have for a while. But, when the user data was suddenly worth so much, Facebook had no problem going back on its promise to its users and selling more of their data. Facebook took advantage of the access it has to so much personal data to make more money.

The aristotelian framework focuses primarily on making sure people live virtuously by adhering to the idea of the “golden mean”. Individuals, and corporations, have a responsibility to treat others with respect and always be honest. Corporations in particular have a responsibility to their employees, their users, and the industry as a whole to be honest and transparent about what they do with all the information they have access to.

Facebook’s sharing of its users’ personal data without their consent and especially after it had said that it would cease doing so directly goes against what our framework believes to be ethical behavior. Facebook gives its users the option to set various privacy preferences for their data, personal information, and photos. Facebook claims to listen to its users and not share any data that they do not want shared. However, it is obvious in this scandal and many others that Facebook does not truly take its users’ interests and wishes into account. Facebook has a responsibility to its users to protect their data and their privacy, but they are consistently failing to do so. Facebook is not acting virtuously by going behind its users’ backs and selling their data to the highest bidder.

Facebook’s actions go against not only its responsibility to be honest and transparent, but its responsibility to act in its users’ best wishes. By selling its users’ private data, Facebook took its own best interests into account over that of its users. Users give Facebook access to their personal information, trusting that it will do its best to protect their privacy, not go and sell the very data they have sworn to protect. Facebook has acted extremely selfishly and then proceeded to hide its actions from its users.

How should have Facebook acted? According to the Aristotelian ethical framework, there are two potential actions Facebook could have taken in order to have acted ethically in this situation.

First, Facebook could have stuck to its promise to its users and not sold its data to other companies. Because Facebook had told its users it would no longer sell their data, the best course of action for Facebook to have taken was to take its users interests into account and kept its promise to them. By keeping its promise and protecting its users’ personal data, Facebook would have maintained trust, honesty, and transparency between itself and its users, and thus acted in an ethical manner.

Second, Facebook could have, upon breaking its promise to its users and selling their data, been honest and released a statement telling its users what it had done with their data. Although not the most ideal, this course of action would have been more ethical than not doing anything at all, which is what Facebook ended up doing. By being honest and owning up to its mistake, Facebook would have acted ethically and potentially more easily gained the trust of its users back.

Because Facebook chose to hide its actions, it not only broke a promise to its users, but then lied to them about it. If Facebook would have done anything differently, it could have acted ethically.

Comparison Between Two Proposed Methods

Two proposed methods for solving unethical corporate behavior come from distinctly different philosophies. One is that free market forces will act against unethical corporations, such as boycotts or movements that affect a corporation’s bottom line. This solution is based in the fact that consumers will “vote with their wallets” for corporations that act ethically, and unethical corporations will be forced to change their ways in order to continue making a profit. Another proposed method is that corporations are forced to adhere to ethical standards through regulation and legislation by the government.

Both of these solutions come from the notion that corporations will always require some kind of concrete incentive in order to act ethically. They both stem from the view that corporations are dedicated to improving shareholder value first and foremost, and anything else is second priority, especially ethical behavior. However, the proposed methods have very different philosophies supporting them. The first is based in the philosophy that government intervention in business and commerce matters is unnecessary because the free market will regulate itself. If the consumers are unhappy about a certain corporation they will boycott their products and buy from a different corporation that does act ethically. The second is based in the philosophy that the free market requires regulation because corporations make it so that it is no longer free, and consumers simply don’t have the power to enforce ethical standards. Regulation by the government makes it so that the corporations must follow a set of ethical standards, with violators experiencing punishments such as fines, sanctions, or perhaps prison time for owners and executives. This is a different incentive but still a concrete and material one that, with proper enforcement, would shift corporate behavior towards a more ethical goal.

A good real-world comparison of these solutions in action is antitrust laws and the rise of corporate boycotts on social media. Industry monopolies represent a lack of fairness and competition, and are therefore unethical. Antitrust laws in the United States have existed since the 19th century, when they were used to break up the monopolies of industries such as oil and steel, and they are a great example of regulation to force corporations to behave ethically. These laws were once again used to break up the telecommunications monopoly in the mid 20th century and to force Microsoft to give up its monopoly over the PC industry, and now they are once again being brought up in regards to Google, Facebook, and Amazon. The free market solution is the only one that would work in this situation because a monopoly eliminates the free market, and consumers have no choice but to support the monopoly’s actions, whether ethical or not, especially in the case of companies as ubiquitous as Google or Facebook. The second example in this comparison is boycotts, which have been exacerbated by the instant nature of social media and the Internet. Nowadays, if a company acts unethically, the consumer has significantly more power than in the past to “vote with their wallet”: they can discuss it with their friends instantly, share it on social media, and write articles about it so that the message that “everyone should not purchase goods from this company because they act unethically” is spread far and wide almost instantly. Corporations now devote significant time and money into their appearance and portrayal online because they know how fast the wildfire of outrage can spread. This free market solution is often more effective in these scenarios than the regulatory one because it is difficult to set an ethical standard by which companies should abide and enforce that standard universally from a government standpoint. The consumers, however, exercise their freedom of speech and enforce the set of standards they believe is correct.

The proposal that is more favorable according to Aristotelian ethics is the free market solution, because it involves individuals acting ethically and using reason to uphold virtue, which is necessary to achieve true happiness. Each consumer is acting ethically because they are refusing to support unethical behavior. A government forcing corporations to act ethically, while still upholding virtue, is not as praiseworthy an approach as individuals acting virtuously, according to Aristotle. That being said, Aristotle would most likely argue that the actual solution in this situation is that the corporations themselves should realize that they are acting unethically and change their ways without any sort of incentive or outside force. Corporations are entities composed of individuals, and each of those individuals has an incentive to act ethically - true happiness and internal harmony. If these individuals continue to act unethically, especially if they know their actions are unethical, they will never be truly happy. After all, the Supreme Court has ruled that corporations are people, legally, and therefore they have the same ethical obligations that Aristotle places on individual persons. Corporations may see increasing earnings as the goal, but Aristotle would argue that they will never be truly happy if they don’t act virtuously, using their reason and knowledge to determine the “golden mean”.

Proposal to Enforce Corporate Social Responsibility

Aristotelian ethics aims to teach and correct the behavior of individual men. The only framework that Aristotle had for defining and judging collective action was the city, as governed by a single man or small group. This resembles a corporation in that a corporation is controlled by a CEO or a board of directors whose directives are carried out by members of the larger group. This structure distributes responsibility in both the city and the corporation. This distributed responsibility was not as much of a concern for Aristotle. The two forms of punishment for a city that collectively misbehaved were a decline or war with neighboring cities. Both of these affected the city as a whole, and so each citizen had a vested interest in the ethical behavior of the city. Corporations take a different place in society that Aristotle could not have comprehended. They are intertwined with the economy of so many countries affect the lives of so many people that they cannot be treated the same way that collectives were treated by Aristotle: punishment cannot be distributed fully across the collective.

If Aristotle’s framework for collective ethical repercussions does not apply, we have to institute punishments that align for Aristotle’s system for individuals. We must treat corporations like people. The goal of just punishment in Aristotle’s conception is to form ethical individuals that will act virtuously, or failing that, continently. For a corporation, virtue includes treating its employees and customers fairly and honestly, giving back to the community, and providing transparency and open access to confirm that is acting virtuously. As with Aristotle’s philosophy applied to individuals, the ideal situation is that a corporation would desire these virtues. If that is the case, then no enforcement policy is needed. However if a company is only continent, and desires (as many do) to only make money, however they can, then regulation and punishment is needed to ensure that those companies act correctly even if their desires are misaligned. These regulations should be aimed at ‘rehabilitating’ the companies, instead of a retributive system.

Practically that would look like incentives for good behavior and disincentives for bad behavior. For instance, many corporations receive tax breaks and subsidies for things like health care and the building of infrastructure. By tying part or all of that money to virtuous actions on behalf of company, like prompt cooperation with the IRS and SEC, and clear and concise terms of service. On the other side, when bad behaviour must be punished, the punishment should not be geared towards hobbling the company. Punishments should be targeted towards correcting the behavior of companies. This could look like increased scrutiny for a period of time, to ensure that god corrective actions are being taken. It might look like removing assistance and government contracts from companies that do not conform to ethical standards. The punishment would certainly involve consumers putting public relations and monetary pressure on companies that do not live up their ethical standards.

A good example of these punishments is the Volkswagen fuel efficiency scandal. Volkswagen gamed standard fuel emissions tests in order to claim that the efficiency of their cars was significantly better than it really was. While the act of changing the way the car output emissions was not illegal, lying about the true fuel efficiency constituted a fraud against the public. Volkswagen was ultimately fined 2.8 billion dollars and the CEO of Volkswagen was charged with criminal fraud. These actions were taken both as retribution against a company and to serve as a deterrent to other companies against similar frauds. However, research in the criminal justice field has shown that exorbitant punishments often do not works as deterrents for a simple reason: criminals don’t think they will get caught. As such, these large fines do not serve as an appropriate disincentive for bad behavior. It would be much more effective for the government to create a disincentive that also serves to correct the behavior. For instance, FBI experts could review the software for the cars’ emissions control. This would force Volkswagen to play by the rules and be honest and open about their policies. It would also serve as a disincentive, because it means sharing proprietary software with law enforcement. A good example of good positive incentives are government assistance for hiring disabled employees and veterans. This gives companies a reason to serve the men and women who have served our country, and to include in the workforce citizens who would otherwise be left out. The work allows them to be more virtuous by remaining active, and contributing to society makes the companies more virtuous.