Blog Post 3: Corporate Ethical Responsibility

Corporate Ethical Responsibility

Summary

With the growth of the tech industry and the widespread influence tech companies have in today’s society, the actions of these companies have been under more scrutiny and inspection than in the past. This has led to the realization that there are many issues of corporate ethical responsibility in tech. One of the first issues has to do with the size of companies like Microsoft, Google, and Amazon. The size of these companies allows them to almost monopolize their respective industries by using aggressive tactics to force other companies out of the field or undercut competitors and eventually acquire them. An early example of this behavior is evident in the case of Microsoft and Netscape from the 90s and early 2000s. Microsoft used their dominance as the provider of the most used operating system to push their browser, Internet Explorer, on users and force Netscape out. By 2002, Internet Explorer reached a peak of 96% of the web browser usage share. More recent example exist as well. Amazon was able to lower their prices on baby products to undercut their competitor, diapers.com. By undercutting diapers.com, Amazon was able to destroy their revenue. Ultimately, Amazon was able to buy Quidsi, the parent company of diapers.com, for $540 million.

Another issue comes with how tech companies handle users’ personal data. Facebook has been at the forefront in this area with multiple prominent scandals. The first of these came in early 2018 with the Cambridge Analytica scandal. It was discovered that a personality-quiz app for Facebook developed by Aleksandr Kogan was allowing data about the users that took the quiz as well as these users’ friends to be collected by Cambridge Analytica. Cambridge Analytica ultimately got information about 50 million Facebook users which they were able to use for political purposes. Another Facebook data scandal focused on Facebook’s data sharing with other companies. Bing got access to Facebook users’ friends, Netflix and Spotify got access to users’ messages, and Amazon got users’ names and contact information. With people valuing privacy, the way in which tech companies handle user data could lead to ethical issues.

A third issue is the allegations of censorship on social media platforms. Recently, Twitter has been under scrutiny for alleged bias in their moderation of accounts and have been accused of “shadow banning” accounts. Most of the accusations against Twitter claim that the censorship is based on political affiliation. Facebook has also been accused of censoring accounts based on political affiliation. In 2016, a former Facebook employee announced that workers would routinely suppressed news stories that would be interesting to conservative users. Although Twitter and Facebook have denied these allegations, censorship on social media platforms continues to be a topic of discussion.

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Critique of Corporations with Outsized Influence

Problem Description

Internet enterprises, such as Google and Amazon, have often been accused of favoring their own products in search results, advertising, and sale patterns. Each company, in its own way, utilizes its power as a technical giant and a controller of big data to heavily influence consumers to buy their products over the products of smaller corporations. As they do this, they constantly acquire new or failing companies that are strained by their data manipulation and bring them under their corporate entities. Then they use these new companies to grow ever larger, oppress ever more smaller businesses, and acquire company after company.

As these corporate giants grow, they gain more and more power over consumers and the average citizen and their power and influence begins to rival that of governments. Amazon, Google, Apple, and Microsoft together have a valuation that far exceeds the gross domestic product of most countries worldwide. Furthermore, each company gathers massive amounts of data on people which gives them more leverage over the average citizen than some governments. They could, and in some cases do, use this data to influence nearly every aspect of people’s private and public lives. In this way they exercise control over populations that governments cannot reproduce and, therefore, have overpowered the governments in many countries and are on the path to be above limitation by any government entity.

Ethical Problem

As previously stated, internet enterprises like Google and Amazon have tremendous power over their consumers and the human population entirely. These corporations are growing so rapidly that it almost seems like they can do no wrong. We, as a population, are choosing to buy products and use apps that these companies are making even though we know they are collecting massive amounts of our data. However, these companies won’t stop collecting this data due to the fact that corporations do not get punished as harshly as one person would. Instead they may only feel shame for being caught or for making a mistake with sharing one’s data, but feeling shame isn’t enough to guide people in order to create social harmony. The collection of these large amounts of data also gives these corporations more leverage over the average citizen than some governments. Our ethical framework believes that social harmony is brought about by having a highly centralized government where a ruler has full control of punishment and favor. The action talked about above is unethical due to the fact that these companies exercise control over populations that the government cannot reproduce, and, therefore would be disrupting the social harmony in place by having more power than the central government.

How they Should Have Acted

Given the outlined situation, it is clear that the sin of these corporations, according to our ethical framework, is the failure to restrain their unbridled growth of power and influence, both becoming so great in magnitude that they rival that possessed by governments and end up threatening social harmony. Thus, to get right with our framework, these corporations would need to find ways to disseminate their power as well as become more conscious of their influence and how they use it. To more specifically address the former, these corporations would need to pursue business strategies that preserve competitive markets. For example, they should refrain from buying out every nascent tech company that shows promise. For the latter, corporations should be more transparent in their practices and communications, and should limit their pull in dealings with other companies by establishing fair terms. Note that if the corporation did see to decreasing its power in the first place, then of course its influence would diminish without having to take specific measures to get this result.

Its an odd thing to consider a corporation voluntarily releasing its hold on market share or ensuring full disclosure in its dealings, as a free market economy pressures it to do the opposite and punishes it if it doesn’t. Therefore, it seems that for a legalist ethic to guide a nation, there would be a need for intense regulation and scrutiny of market activity, as well as for instituting harsh punishments for not adhering to regulations.

Solutions to Unethical Behavior

Summary

One method of addressing unethical corporate behavior is to rely on the pressure consumers can bring. Increasing, consumers are broadening their expectations of the companies with which they do business. Where purchasers may once have been content to judge corporations by the value of their products, many now judge too the values that the corporation holds. With this in mind, one possibility is to trust consumers to base their purchasing decisions not only in the value that they gain but also in the way that the company carries itself ethically. In this way, society can determine ethical standards fairly democratically, in theory disallowing small powerful groups to dictate the morality of an entire people. However, this system places a great deal of trust in individuals, both in their altruism and in their knowledgeability. The fact that unethical companies can often offer lower prices makes it difficult to trust consumers as they benefit from cheaper goods. Furthermore, even if the public maintains its goodwill, many people are uninformed and can even be actively deceived by companies that wish to skirt ethical responsibilities.

One alternative to allowing consumer behaviors to modulate business practice is to empower the government to punish or reward businesses based on their behavior. In this system, a smaller group of more powerful people would be able to work in a concerted way to pass laws and write regulations to force businesses to act ethically. The threat of direct financial damage, or even further punitive measures, could frighten business executives into acting responsibly. This method could be more effective than consumer activism because the government is more single-minded and individually powerful. On the other hand, governmental regulation has the potential to elevate the ethical beliefs of some powerful people over those of society at large. Furthermore, in a democratic society, the ethical priorities of legislative and administrative bodies could change suddenly, creating a potentially confusing business environment. Finally, in many systems of government, it is difficult to create effective laws, much less to do so quickly, potentially giving unethical business an advantage as they try to navigate around the legal barriers intended to restrain them.

Comparison

Both of these methods are reward-based; neither changes the inclination of a corporation to act ethically or not, but seek to change its behavior through appealing to their self-interest. This takes the moral burden off of corporations by not encouraging them to pursue things besides profit, but by making ethical behavior more profitable than unethical behavior.

The first method, consumer activism, is a grassroots movement where consumers refuse to support companies that act unethically. Since corporations need consumers to trust them, they are likely to adapt to consumer behavior with little struggle. After calls to boycott the NRA, many of their business partners cut ties. Additionally, companies sought to distance themselves from mass shootings; for example, Dick’s Sporting Goods stopped selling assault weapons. This approach can be a problem when dealing with monopolies, however, since consumers may not be left with a choice in their spending power. An additional issue is that it depends on the current social climate; after the initial drive to correct a corporation’s behavior, consumers may lose interest, allowing the corporation to return to its previous behavior.

Government regulation and subsidies may have greater effects on monopolies and better long-term reach. Overturning a regulation is a lengthy process, and requires agreement between multiple parties (though the same can be said about enacting it). Subsidies can promote an otherwise unprofitable industry and encourage development of certain products. For example, Elon Musk’s Tesla has reaped billions in government subsidies, promoting fuel efficient electric vehicles. However, there is concern that these subsidies may have unintended effects or come as a burden to taxpayers. Additionally, the top-down nature of regulation is more likely to cause the government and corporations to clash, which may lead to fallout (e.g., bribery and corruption, political division).

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Legalist Take

Given both proposed methods for solving unethical corporate behavior, the second method would be the more favorable option according to the legalist point of view. Although both methods are reward-based, the first proposed method depends on the social climate and does not always result in laws being created to punish or reward companies that are acting ethically. If the consumers lose interest or are not left with a choice in their spending power, there will not be an incentive for the corporations to act accordingly and ethically. Given this, the second proposed method of empowering the government to punish or reward businesses based on their behavior is the more favorable option. As stated before, the government is more single-minded and individually powerful than consumer activism. Although it is difficult to create effective laws quickly, it is in the best interest of legalists to pursue this proposal. The objective of a legalist society is to create and maintain rules to determine if each action is write or wrong. When new rules are added or different actions that do not fall into the current rules occur, the government needs to ensure that it will maintain in control. Therefore according to this framework, people who abide by the laws enforced by the government will be rewarded and those who do not abide by the laws will be punished. This framework follows the idea that rules need to be made so that those following them will be rewarded. Thus, given that creating and amending rules, or laws, to maintain in control is the objective of the legalist ethical framework, the second proposal would be the more favorable option for it.

Overview

In the legalist point of view social responsibility means legal responsibility, as the betterment of society comes through adherence to the law established by the bodies governing that society. The major factor that drives most businesses in a capitalist market is profit, not enforcement of ethics. Though the legalist framework would not punish corporations simply for chasing profit, it would punish corporations if that pursuit of profit led to a violation of the law, which is inherently a violation of social responsibility in the eyes of Legalism.

In order to enforce its idea of corporate social responsibility, a legalist governing body would rely on forces such as peer surveillance to ensure that a corporation or the heads of a corporation are not violating the law/being socially irresponsible. Legalism would likely uphold the idea that a corporation is a legal person as in the United States because this would mean that corporations could surveil and report any legal violations from each other as a form of competition and punishments could be carried out by treating corporations as people who need to follow the law. It is also likely that when a corporation is caught violating the law that the violating corporation would be publicly punished and made an example to other corporations and the rest of society. The punishment to the corporation would likely include investigations into every employee of the company to see which employees were willingly contributing to the bad practices of the corporation. A legalist body would also likely be more cautious when dealing with larger corporations such as Amazon or Google. To make sure that these large corporations are following the law they might install their own agents in the company or require the company to report all sources of earnings and expenses to the governing body to make sure that social responsibility is being upheld.

The legalist system would encourage corporations to follow the law by instilling fear with these public punishments. Though social responsibility in other frameworks may be considered something that should come from the goodness of the members of a corporation, legalism would require social responsibility as a prerequisite to participating in the markets that the legalist ruling body has jurisdiction over.

Example

Our proposed solution to unethical corporate responsibility would fix this issue in the instance of the Amazon marketplace. For context, Amazon sees what commodity items are selling well, produces their own versions using low-tier materials, and promotes their own product on their website. This drives their original competitors away, as they receive less and less revenue and cannot compete with the marketplace’s own product.

In the modern legal framework, this can be viewed as a breach of the Sherman Antitrust Act, a law that prohibits monopolies in America. By controlling the largest marketplace in the country, a service that can be seen as a public utility. While not technically a public utility, the common vernacular of utilities has been adapting to include the services people use on a day by day basis, such as the World Wide Web. With this viewpoint, Amazon’s treatment of their competitors on their own marketplace could be an example of a monopoly breaking the Sherman Antitrust Act.

As a consequence, our framework requires more caution when investigating and punishing Amazon, but the immediate problem to solve would be control of the marketplace itself. Since Amazon makes use of certain American utilities, such as the United States Postal Service, punishment can begin by prohibiting the USPS to deliver packages from Amazon. There are workarounds to this, such as using a 3rd party service that technically is not owned by Amazon, but the legalist framework would observe this behavior and stop it from advancing.

On top of stopping the problem at hand, there must be an example made of Amazon so that no marketplace in the future decides to repeat this infraction. Amazon could be fined for this, but when a company has enough money, a fine simply becomes an extra cost of business. Instead, their company would be investigated and dealt with accordingly. To make the marketplace more fair, they will not be able to promote their own products unfairly. When a user asks to sort by relevance or average user rating, the results will be actual and the sales data will be given to the government as proof. Going an extra step further, their company would be fractured, so that they no longer can control the marketplace as well as the physical merchandise. Since this might be more extreme than what is warranted, it would only be necessary if their actions continued and they make no changes to improve.