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What is an Ethical Company?

September 13, 2011

I’ve been experimenting…

And researching this concept of an ‘ethical company’. What is it? How do you know?

The issue is convoluted.

Is an ethical company one that sells a valuable product? Is it one that does its best to honor its investors? Hows about one that uses fair work practices? The top search for Google today has been Living Social, and the deal the company cut with Whole Foods, a company regularly cited as a moral company. Their deal offers a coupon that costs $10, that is worth $20 dollars at any Whole Foods store, and at the time of this post, they were sold out at a million deals.

I do feel like this Living Social site is clever 

It encourages local businesses to offer deals, contributing to a local economy. Businesses sign a contract agreeing to honor a certain number of coupons. Living Social sells these coupons in a “deal-of-the-day”, and anyone who wants buys them, and the two companies split the earnings from the purchases.

The idea is based on the assumption that the local businesses are either able to give a certain amount of merchandise away for free, or they’re willing to decrease their profit margins, all in exchange for bringing new faces into their establishment. In general, this is a pretty cool idea. Obviously they don’t exclusively work with independent local businesses (as seen with this Whole Foods thing) but as it is, it’s a good way to spur local economies and develop community.

Some problems…

In doing a little bit of research, it turns out that their contracts aren’t strictly negotiable. I was reading the post on the Homebrew Exchange about their experience with Living Social, and it turns out that they tried to stipulate that there would be a limit of one gift certificate per person, thereby limiting their projected losses. Living Social apparently included that customers could buy multiple deals, if they were being given as gifts, and apparently the site’s shopping cart function allows people to buy as many as they want. As a result, the business wound up having to cut profits significantly more than they anticipated. And apparently this isn’t an isolated event.

So is which is more important?

The energy injected into local markets by getting local residents out and about, or that Living Social does what’s best for their profits at the expense of local businesses?

Ethisphere

In looking for ethical companies, probably the most well-known auditor is Ethisphere, a company that generates a list of companies that live up to its ethical standards. This is a wonderful idea, and on the surface seems like a great undertaking. After all, I was looking for companies to invest in, and the first place I started was by googling “ethical companies”.

The organization shows which companies make the list, but do not divulge the reasons for each company’s selection. I came across a blog that elaborates on the failings of the list, that actually calls the process a joke. Apparently 15 of the companies to make it on the list from 2009 were a part of the Business Ethics Leadership Alliance (BELA). Apparently Suzanne Hawkins was the executive director of BELA, and does freelance consulting for General Electric. This, of course biases the ranking GE receives (a three-time winner, BTW). To sum up the complaint: it looks like at least 15 companies are voting for themselves.

While this undercuts the legitimacy of the list, it’s not the most frustrating aspect of this organization.

The most irritating thing is that the companies aren’t actually ethical

That’s not completely true, but the fact that there are companies that make the list that are committing a multitude of ethically untenable actions ranging from humanitarian crimes to ecological disasters is ridiculous. Here are some companies to make the list:

CocaCola/PepsiCo

Coke, a major producer of  a delicious soft-drink and corrosive battery-cleaner has been incriminated in anti-organized labor practices, ecological damage, and murder. It’s believed that they had paramilitary groups target union leaders in Guatemala and Colombia back in the 70s and the debate continues through 2004.

Also, they are criticized for depleting water supplies in regions that are already short on water in India, as well as having something like 30 times the European legal limit on pesticides IN THEIR PRODUCTS. In addition, they have been appropriating culturally important land in India.

Caterpillar

Caterpillar, the heavy machinery company has been violating emissions standards, and was recently forced to pay a crap-ton in fines for not meeting standards. They also maintain contracts with the Israeli Defense Force, and their machinery is outfitted for and used in combat situations, where earthworks are required. They are also regularly used to bulldoze Palestinian homes, which according to the Israeli government, falls into the same category as other “counterterrorism” operations. Along the same lines, the company has been involved in the militarization of the US-Mexico border, and the Israeli-West Bank border.

Dow Chemical (Corning)

Apparently Dow Chemical made the list in 2010, in spite of being responsible for Agent Orange and the world’s largest industrial disaster, in Bhopal.

Others include:

yes, even Whole Foods (anti-union)

Google (privacy issues)

Sodexo (agribusiness and genetic monopolization)

 So what makes an ethical company?

It’s usually easy to pick out the unethical companies. They’re the ones who’ve caused death, environmental destruction, and inhumane working conditions. The hard part is finding a good company. I’ve found a couple that I feel are basically good, such as Gore, which often is voted one of the best companies to work for, due primarily to their horizontally structured management. Zappos is another one, although they’re owned by Amazon now. Something I’ve noticed is that it seems like the best companies are usually not publicly traded, which makes investing in them tricky.

good luck finding an ethical company

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6 Comments leave one →
  1. September 13, 2011 11:35 pm

    I definitely agree with your goal of finding a good company, I’m all about the idea of voting with your dollars. Imagine though, the problem of finding a good person: Mother Teresa is cited as a great person but has had some controversy intolerant Catholic views of homosexuality with her. Nelson Mandela has done amazing and impressive things with his battle against apartheid, but was originally arrested for his part in a bombing plot. In judging people we tend to do a lot of weighing and judging and on the whole I imagine we’d call most people good (especially in a binary choice of good vs. bad). For companies I think there probably wouldn’t be as high a proportion of good, but certainly more than zero.
    I think maybe the flipside of your question is more important, how can you avoid a truly despicable company, one that acts with no eye towards the well being of its workers, the safety of its consumers or stewardship of the environment.

  2. Robin Roche permalink
    September 14, 2011 10:19 am

    How about a small company that provides a service and treats their employees fairly and is generous with it’s benefits? Cornerstone Advisors, Inc. Where the partners work as hard as the staff.

    • September 14, 2011 11:00 am

      From what I recall, they have a good track record with supporting other ethical businesses, and were formed from a popular movement of people in the field

  3. Orion permalink
    September 15, 2011 12:28 am

    Here’s the thing about investment: you can buy shares in a private company *if they feel like letting you*. It’s about, as one might expect, personal relationships and/or financial need.

    Here’s the thing about publicly traded companies: they are *legally bound* to maximize return for their shareholders. They are (generally) not legally required to fulfil any ethical obligations suggested by anyone.

    Defense departments are the biggest spenders in the world. This means it could be *actionable* mismanagement for a board or CEO to veto a defense contract (from a recognized government) on anti-militarist principle. This is regardless of whether they sell excavation machinery, assault rifles, or ballpoint pens.

    Also, talking about levels of displacement is difficult but necessary here. The Caterpillar products are closer to people getting killed than the Bic product that signs the order to use them. The guns are closer still. What about the refinery that provides steel to the gunsmiths? Are they closer than Caterpillar? Bic? They might be serving all three. If one resource company deals with hundreds of military contractors, how bad are they?

    How culpable are food growers who sell to the military to make rations? They’re maintaining the bodies of the ones who do the actual killing after all.

    That’s all just about working with military. Not about the ones that actually poison, murder, impoverish, rob, or otherwise destroy us.

  4. Orion permalink
    September 20, 2011 6:59 am

    For a nice internet-argument about corporate ethics, in this case specifically about censorship, see this post and all the comments:
    http://playthisthing.com/apple-suppresses-dissent

    Plus this bit (linked to from the other one):
    http://www.samefacts.com/2005/10/moral-philosophy/should-corporations-serve-only-their-shareholders/

  5. Orion permalink
    September 23, 2011 4:26 pm

    Very busy blog about indigenous/evrironmental/human rights news:

    http://bsnorrell.blogspot.com/

    http://bsnorrell.blogspot.com/2011/09/censored-news-celebrates-fifth.html
    http://bsnorrell.blogspot.com/2011/09/wikileaks-us-feared-indigenous-self.html
    http://bsnorrell.blogspot.com/2011/09/rattlesnake-island-final-decision.html

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