What Makes Business Work? The Little Things.

I hear all too often this really dumb joke: "Business Ethics? Isn't that an oxymoron?" No, in fact, 'business ethics' isn't a contradiction. Business just isn't possible without some kind of ethics, some kind of reason to trust each other. Do unethical things happen, in business. Yes, sure. But those instances simply must be the exceptions that prove the rule. Of course, it's easy to take for granted just how many little details of commercial & professional life require us to simply assume that other people are going to do what they say they're going to do. Here's an example.

From the Vancouver Sun: Lawyer's embarrassing antics are a drain on public purse

Vancouver lawyer Sheldon Goldberg has appeared in court while the wrong accused was in the dock as his client.

He recently precipitated a mistrial causing months of expensive court proceedings to be thrown out the window.

Yet for two days last week, a Law Society of B.C. disciplinary panel considered judicial complaints only about his apparent overbooking of court time and his refusal to properly reply to the provincial regulatory body's inquiries.

Suspended for three months over incompetence last year, Goldberg has been a thorn in the side of the legal system for a long time. He was also suspended for a month in 2005.

Goldberg is in regular conflict with judges, and Provincial Court Judge William Kitchen triggered these latest proceedings.

In July 2007, Goldberg made arrangements for three conflicting court appearances in Surrey and Vancouver on the same day.

I don't have any particular point of view on Mr. Goldberg's behaviour, or of the Law Society's apparent inaction. My aim here is just to point out how much a system like the legal system — or any business — takes for granted, in its everyday operations, that people are going to do simple, straightforward things like keep their word, show up when & where they say they will, etc. And to point out that when people simply stop doing so, things tend to fall apart pretty quickly.

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Thanks to JD & JB for pointing out this story.

Ethics of Supporting Your Local Economy

Hard economic times bring about a desperate search for solutions, both local and global. Some of the ideas that arise are good; others aren't. Here's a story about one such supposed solution, namely the idea of supporting local business.

From the WSJ's Independent Street blog: How the Locals are Trying to Save Small Businesses

Fed up with seeing local small businesses being ravaged by the economic downturn, some people are taking matters into their own hands. They’re trying to reverse the fortunes of mom-and-pop stores by becoming more organized in “buying local.”

– In Fort Myers, Fla., people driving by Clancey’s Restaurant saw this huge sign outside: “Support the local economy. Patronize locally owned businesses.” Local businesses there say that for every $100 spent at a chain or national business, only $14 stays in town, but when spent at locally owned businesses, the amount triples to $45.
....
In Chicago, two entrepreneurs established a Web site this month, SupportREconomy.com, to sell $2 green “R Local Stimulus” wristbands to benefit designated 10 small businesses and charities in the area. The grassroots effort aims to donate 20% of the profits to local pharmacies and grocery stores. Since the launch in mid-March, 250 wristbands have been sold, said Joana Fischer, the co-founder.

What the blog doesn't explore is whether this is a good thing. Some will take that as obvious. But I don't think it is.

First, such efforts seem to be rooted in the notion that economic benefit to own community are more important than economic benefit to other people's communities. Now, stores and factories and jobs in your own community might well be more important to you than stores and factories and jobs in other people's communities. That might make it individually prudent for you to support local business, but that doesn't (by itself) make it ethical. Ethically, the jobs (for example) of employees of a factory in a neigbouring community are just as important as the jobs of employees of a factory in your home town. If you buy local, you're helping someone locally, but you're hurting someone, somewhere, too. That doesn't make buying local bad — you've gotta spend your dollars somewhere, and can't spend them everywhere. But you shouldn't think buying local is automatically great.

Second, think about such efforts from a big-picture point of view. Picture not just your community coming together to buy local, but every community doing so. The result would be very little change in net purchasing, but there could be serious reductions in efficiency and hence a net decrease in total utility (i.e., in total wealth or total happiness). Example: People in Town A are good at making shirts, but bad at making pants. People in Town B are good at making pants, but bad at making shirts. Trade between the two towns allows everyone to get higher-quality goods, at lower prices. Buying locally means people in Town A get good shirts and lousy pants, and people in Town B get good pants and lousy shirts. In effect, efforts to promote buying locally raise barriers to trade, and barriers to trade usually hurt all concerned. And when you've got behaviour that is individually rational but collectively damaging, you've got the makings of a classic social dilemma.

(Note that the notion of supporting local business overlaps only incompletely with the recently-popular idea of eating locally. Eating locally can be — but isn't always — a way to reduce carbon footprint. From an ethical point of view, the effect on efficiency of production needs to be considered, too. But that's a blog entry for another day.)

Cloned Milk, Spoof Websites, and 'Astroturfing'

Some of you may have noticed that I run another blog, the Biotech Ethics Blog. It's mostly a place where I post news stories, with minimal commentary and minimal discussion. But one item I posted recently has clearly touched a nerve. It was an entry called CyClone Dairy: "Perfect Cows. Perfect Milk." It's about a website I found for something supposedly called Cyclone Dairy, a dairy that brags that all of its milk is from cloned cattle.

Now, it's true that the FDA has given approval, in principle, for the sale of milk from cloned cattle. But contrary to what this website implies, it's not actually on the market yet. (I blogged about that here.)

Note also that the CyClone Dairy website includes no contact information — this apparently is supposed to be a company that wants to sell milk, but not to be contacted by buyers.

Note also that their Frequently Asked Questions page raises the question of ethics, but says simply "Are there any ethical issues about cloning? No."

Add to that the fact that the domain name "cyclonedairy-dot-com" has been registered via a proxy, effectively rendering the true registrant anonymous — which a real company basically would not do.

So, the site is clearly a spoof, presumably by someone trying to stir up opposition to milk-from-clones or to biotechnology in general. Or maybe it's some kind of art project. Who knows?

But the comments on the blog posting have also been interesting. There's been some clear posturing & baiting, and one accusation of astroturfing (i.e., an effort at giving the fake impression of grass-roots concern.)

So, someone is messing with us. And I realize I'm playing into their hands by posting this, raising awareness of their site. I'm sure whoever's behind it will unveil the secret, eventually...presumably after milking it for all it's worth.

Leaving A.I.G.

The retention payments kept some A.I.G. employees around longer than they otherwise would have stayed. Ask yourself this: would you stay, and try to save the company, under the current conditions?

The New York Times today published this letter, from Jake DeSantis, an executive vice president of the American International Group (A.I.G.)’s financial products unit: Dear A.I.G., I Quit!. The letter is addressed to CEO, Edward Liddy. Here are the first paragraphs:

DEAR Mr. Liddy,

It is with deep regret that I submit my notice of resignation from A.I.G. Financial Products. I hope you take the time to read this entire letter. Before describing the details of my decision, I want to offer some context:

I am proud of everything I have done for the commodity and equity divisions of A.I.G.-F.P. I was in no way involved in — or responsible for — the credit default swap transactions that have hamstrung A.I.G. Nor were more than a handful of the 400 current employees of A.I.G.-F.P. Most of those responsible have left the company and have conspicuously escaped the public outrage.

After 12 months of hard work dismantling the company — during which A.I.G. reassured us many times we would be rewarded in March 2009 — we in the financial products unit have been betrayed by A.I.G. and are being unfairly persecuted by elected officials. In response to this, I will now leave the company and donate my entire post-tax retention payment to those suffering from the global economic downturn. My intent is to keep none of the money myself.

I take this action after 11 years of dedicated, honorable service to A.I.G. I can no longer effectively perform my duties in this dysfunctional environment, nor am I being paid to do so. Like you, I was asked to work for an annual salary of $1, and I agreed out of a sense of duty to the company and to the public officials who have come to its aid. Having now been let down by both, I can no longer justify spending 10, 12, 14 hours a day away from my family for the benefit of those who have let me down....

I'm not sure I've got anything new to say on this. But do read the whole letter. It puts a human face on the notion of pulling the rug out from someone, after you've promised to compensate them for their work; and it provides some support for my suggestion that failure to honour the contracts would do serious damage to A.I.G.'s prospects.

Some of you will scoff at the letter, or at the idea that a wealthy man like DeSantis could in any sense be a 'victim.' Fine. My guess is that the shareholders of whatever company employes Mr. DeSantis next will be a happier lot than the shareholders of the company he's leaving.

Ah Sugar Sugar!

Lots of people have weird ideas about food. And that includes weird ideas about sugar. Some people seem to think that white sugar isn't as, I dunno, not as groovy, somehow, as other kinds of sugar because it's more "refined" (though I'll bet you a dozen honey-glazed donuts that 9 out of 10 people can't tell you what "refined" really means in this context). And when people have weird ideas about food, the food marketers of the world are not exactly predisposed to offering clear, unbiased corrective information on the topic.

From the NY Times: Sugar Is Back on Food Labels, This Time as a Selling Point

Sugar, the nutritional pariah that dentists and dietitians have long reviled, is enjoying a second act, dressed up as a natural, healthful ingredient.
From the tomato sauce on a Pizza Hut pie called “The Natural,” to the just-released soda Pepsi Natural, some of the biggest players in the American food business have started, in the last few months, replacing high-fructose corn syrup with old-fashioned sugar.

The trouble? It's a sham.

Though research is still under way, many nutrition and obesity experts say sugar and high-fructose corn syrup are equally bad in excess. But, as is often the case with competing food claims, the battle is as much about marketing as it is about science.

"As much?" No, it's arguably far more about marketing. As far as I can tell, the battle between sugar and HFCS has a lot in common with the battle between Coke and Pepsi, or between Marlboro and Camel. Choose your poison.

Taking -- And Enforcing -- Responsibility for Litter

Litter is a classic example of what economists refer to as a "negative externality." A negative externality is basically a cost, resulting from a transaction, but imposed on people not party to the transaction. Voluntary transactions are efficient when all the costs and benefits are borne by those who are part of the transaction. When others are forced to pay costs, that means the buyer isn't paying the full cost of the good, and so too much of that good is likely to be purchased, from a social point of view. Economists call that "inefficient." The rest of us call it annoying, and unfair. What can, or should, businesses do to help?

From the BBC: Store owner takes on litterbugs

A village shopkeeper is marking sweet wrappers and drinks bottles with the names of children who buy them in a bid to discourage them from littering.

Yvonne Froud, 52, took action after becoming fed up with the rubbish collecting in Joys Green in the Forest of Dean, Gloucestershire.

She said the village, particularly the children, had taken the campaign on board.

"It's made a great difference. The whole village is a lot cleaner."

It's a neat idea (no pun intended). Of course, it only works because Froud's shop is in a small town, and she literally knows all of her customers by name. So there's no way for kids to give a fake name & avoid accountability.

Two thoughts occur:
1) Is some version of this possible, or desirable, in larger towns where the shopkeepers don't know their customers by name? Presumably it's not impossible, from a technological point of view: swipe an ID card at the till, the register prints out small ID stickers that the cashier slaps onto each item, etc. Worth it? Probably not, though maybe there's a simpler way that I'm not thinking of.

2) As far as the BBC story mentions, the policy only applies to kids. My guess is that it only applies to kids because adults wouldn't accept Froud's well-intentioned meddling — even if they ought, ethically, to welcome it.

Madoff's Accountant Charged

Left hand, meet right hand. Right hand, meet left hand.

From Business Week: Prosecutors charge Madoff's accountant with fraud

Bernard Madoff's longtime accountant was arrested on fraud charges Wednesday, accused of aiding the man who has admitted cheating thousands of investors out of billions of dollars in the past two decades.

The charges against David Friehling, 49, come as federal authorities turn their attention to those who they believe helped Madoff fool 4,800 investors into thinking that their longtime investments were growing comfortably each year. Friehling is the first person to be arrested since the Madoff scandal broke three months ago....

How did it happen? Apparently, Friehling was on the one hand "pretending" to do at least some minimal sort of audit. But apparently not telling the people who could have checked his work:

The SEC accused Friehling of lying to the American Institute of Certified Public Accountants for years, denying he conducted any audit work, because he was afraid that his work for Madoff would be subject to peer review.

In other words, the left hand (AICPA) wasn't in communication with the right hand (investors). Essentially, Friehling was flying under the radar of professional peer-review; no one checks your work if no one knows you're doing the work. I sense an opportunity for a regulatory connecting of dots, here.
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Addendum: The fact that AICPA was in the dark came out back in December. See CNN Money: Madoff's auditor... doesn't audit?.

Change My Mind on AIG Retention Payments

If I'm wrong, help me understand why. Seriously.

Over the last 2 days, I've twice supported, on this blog, a very unpopular view. I've argued that, ethically, AIG is right to honour its legal obligation to pay $165 million in retention bonuses.

I've defended that view on two entirely separate grounds.

First, I argued that the payments should be made because they were promised, contractually, and it's ethically important to honour contracts. We are duty-bound to uphold the law, even in defence of people we think are unethical or even criminal. (I even admitted, then, that the contracts might have been poorly-thought-out in the first place, but they're still valid.)

Next, I argued that violating the contracts (by not making the payments) would be wrong because it could have disastrous effects. Namely, it would make it harder for AIG to attract and retain talent, and generally make it hard for AIG to make promises credibly.

So, I gave two very different reasons: one based on bad consequences, one based on rights and duties. Both arguments point in the same direction.

Lots of people offered counter arguments. "They're all crooks." "Why reward poor managers?" "Contracts are broken all the time." "It's symbolic." Etc. I didn't find any convincing.

But I pride myself on being reasonable; in fact, being open to reason(s) and counter-arguments is a professional requirement. So I have to ask myself: "What would it take to get me to change my mind on this?"

Two things come to mind. If you could show me either, it would weaken my support for the retention payments. If you could show me both, I guarantee I'd change my conclusion.

1) Show me that the individuals receiving the payments are culpable. (Culpability on its own doesn't obviate one's rights, but at least then you could make an argument that these payments are analogous to the "proceeds of crime.") If only some of them are culpable, tell me why it's fair to punish the innocent, along with the guilty.

2) Show me that failing to meet this contractual obligation would not hobble AIG, arguably the most important corporation in America. I'd like some evidence (not just conjecture) that a) there are qualified people (ones who won't demand retention bonuses!) ready to step in at AIG and replace those who leave, and that b) AIG's ability to make credible promises won't seriously be shaken.

(p.s., this is a great exercise. I recommend it to everyone. Set out in writing what would change your mind. If the answer is "nothing," then you're operating on ideology or passion alone. And that's your right; just don't expect to convince anyone who doesn't already share your view.)

What Should AIG's Liddy Do?

What on earth should Edward Liddy do? Liddy was asked a year ago by the US government to take over as CEO of beleaguered insurance company, A.I.G. I'm not sure why anyone would want such a job. (Liddy is being paid $1/year, plus equity grants which give him a vested interest in seeing the company do well). Anyway, tough job.

Latest challenge on Liddy's agenda: the recent dustup over $165 million in bonuses scheduled to be paid to executives. Bonuses? To executives? At A.I.G.? Why give bonuses to a bunch of people who so mismanaged their own company, and indeed contributed to destabilizing the entire U.S. economy? How on earth could that be ethical?

I blogged about this yesterday . I said I thought A.I.G. should honour the contracts, pay the bonuses. I argued that — distasteful as it might be — we ought to hold our noses and support Liddy's intention to pay those bonuses. They are, after all, part of legally binding contracts. And though ethics and the law are not equivalent, honouring the law is ethically important. It's just unethical to toss important rights out the window simply because we don't approve of the people who benefit from them. I even offered a rather unflattering comparison: we supply state-appointed attorneys to (accused) child molesters (or even to ones who have confessed). Part of what it means to be a nation of laws is that the law protects even those we think unworthy. (Almost no one agreed with me, yesterday. I got accused of being an apologist, insensitive to the plight of those harmed by A.I.G.'s wrongdoing, etc.)

But yesterday I overlooked the significance of one fact: the bonuses in question are not performance bonuses. They're retention bonuses, designed to keep people from fleeing the company for greener pastures. (Andrew Ross Sorkin, writing for the NY Times, explains this well: The Case for Paying Out Bonuses at A.I.G.) So, these bonuses are not backward-looking 'rewards'...they're forward-looking incentives.

OK, so, knowing all that, ask yourself this: what's Liddy to do, if he really wants to rescue A.I.G.? To answer that, I think Liddy needs to know two things.

First, he needs to know whether the bonuses were a good idea in the first place. That is, are the people receiving these retention bonuses people worth retaining? Let's assume, for the sake of argument (but I happen to think it's a realistic assumption) that they're mixed bag. Some of them are smart & honest, others are deadwood, and still others are untalented and/or dishonest.

Second, he needs to know whether, legally, he could in principle get away with breaking these contracts. Opinions seem to differ on that question. Glenn Greenwald, writing for Salon, says "yes." A.I.G.'s external counsel says "no." Let's assume, for sake of argument, that he could.

So, we're assuming a) that Liddy could weasel out of paying the bonuses, and b) that the employees in question are of mixed quality. So, Liddy has a genuine, non-obvious choice to make.

Here, as far as I can tell, are the 3 things that would follow a decision not to enforce the contracts:
1) A lot of people would cheer. They'd feel like they'd been granted just a little bit of vengeance, like they'd seen a little justice done.
2) Capable employees would flee A.I.G. (According to the NYT's Sorkin, 'word on the street' is that A.I.G. personnel are already being recruited by other firms.) That might include some of the execs who were owed bonuses; and it might include other A.I.G. employees who realize the company's promises aren't worth much. And do not assume they'd all be easy to replace. Would you take a job at A.I.G., if you were qualified? I wouldn't, in part because...
3) A.I.G.'s credibility for signing contracts would be shot. No one in their right mind would accept employment, or supply goods or services.

Seriously. What should Liddy do?

A.I.G. Bonuses, Ethics, and the Rule of Law

It's not unethical to pay people money you are contractually obligated to pay them. Even if doing so makes you, or other people, want to pull your hair out. It's the right thing to do. Not always because the person getting the money deserves it, in some abstract sense, but because you promised.

From the NY Times: A.I.G. Paying $165 Million in Bonuses After Federal Bailout

The American International Group, which has received more than $170 billion in taxpayer bailout money from the Treasury and Federal Reserve, plans to pay about $165 million in bonuses by Sunday to executives in the same business unit that brought the company to the brink of collapse last year.

Word of the bonuses last week stirred such deep consternation inside the Obama administration that Treasury Secretary Timothy F. Geithner told the firm they were unacceptable and demanded they be renegotiated, a senior administration official said. But the bonuses will go forward because lawyers said the firm was contractually obligated to pay them....

You don't have to like it, any more than you have to like providing state-appointed attorneys to child molesters (not that I'm comparing...well, you know.) Anyway, the point is: there are some things a civilized people governed by laws (rather than by the passions of the moment) have to uphold. The right of the accused to assistance in his defense is one; the right to speak (even if what you say is abhorrent) is a second; and the fulfillment of contracts is another.

The key source of outrage here is the fact that A.I.G. execs did such a miserable job, and yet are being rewarded with public money. Isn't that worth violating even legally-binding contracts? Two points need to be made about that.

First, let's not forget that although there is surely plenty of blame to go around within the walls of A.I.G., it's highly unlikely that every single one of the people who is owed a bonus payment was derelict in their duties. I'm not sure it's fair to want to punish everyone.

Second, if people are owed bonuses despite having done a lousy job, that means a mistake was made when the bonus system was set up. Putting appropriate incentive structures in place is, believe it or not, a challenging corporate governance problem. It looks like bad choices were made in setting that system up at A.I.G. And, unfortunately, those are bad choices that the U.S. taxpayer inherits (along with many others, no doubt) as the new de facto owners of A.I.G. It was a miscalculated (perhaps inept) promise, but the solution is not to renege on that promise now.

The Business Case, and Ethics Case, for Business Aviation

Over the last couple of months I've blogged a couple of times about ethics in the use of corporate jets. (See here and here.)

Last Friday, I participated in a 'webinar' sponsored by the National Business Aviation Association, called The Business Case for Business Aviation. My co-panelists were people who know a lot more about the aviation side than I do, including people who run Aviation departments for major corporations. They had interesting stuff to say about utilization policies, and the role aviation plays in the day-to-day affairs of a big company.

I kept my own comments pretty brief. I made two key points:

1) Appropriate use of aircraft is a matter of governance and accountability. At well-governed organizations, decisions promote the stated goals of the organization, whether those be be profits, expansion of market share, reduction in carbon footprint, etc. That means that at well-governed organizations, corporate jets will only be used in ways that advance legitimate corporate objectives. And that's true for private firms, publicly-traded firms, nonprofit organizations, etc., and it's true whether or not a company is getting some form of aid from the government.

2) The ethics case is part of the business case for business aviation. Business today depends on the goodwill of many stakeholders. In order to argue that corporate aviation makes good business sense, a company also has to justify their choices to key stakeholders, whether those be shareholders or taxpayers or someone else. Stakeholders who aren't convinced can make life difficult. So, even a tool (e.g., an aircraft) that a company finds operationally useful can become impractical if the ethics case can’t be made to key stakeholders

Water-Injected Meat in China: Is the Profit Motive to Blame?

It seems that human ingenuity really is limitless...at least when it comes to new and devious ways to adulterate food in profit-maximizing ways.

And yes — *sigh* — the evidence, yet again, is a case from China.

From China Journal:
Water-Injected Meat: The Next Chinese Food Scandal?

Along with the recurring scandals, China’s food industry is plagued by a number of troubling “open secrets.” Everybody knows about them, it seems, and it’s no big deal until someone gets hurt and then it becomes a very big deal.

The latest open secret may be the practice of injecting meat with water to raise the weight (and hence value) of the product. This week, Feng Ping, a CPPCC delegate and expert at the China Meat Products Integrated Research Center, publicly challenged the lack of government oversight that has allowed the practice to go on for over 20 years, according to the Chinese-language Southern Weekend. (An English summary of the report, from Shanghai Daily, is available here).

According to the report, the practice, in its more gruesome-sounding forms, involves either forcing water into the stomachs of pigs and cattle shortly before slaughter, or injecting water into the hearts of recently slaughtered animals, so that the water will quickly flow into the animals’ flesh through the blood vessels. Another method involves simply soaking chunks of meat in water to absorb the liquid.

Eek. Lovely.

OK, now while my first paragraph above pandered shamelessly to your cynicism about profit seeking, I'm next going to try to convince you that the problem, here, isn't profit-seeking.

The problem in cases such at this can no more be laid at the feet of profit-seeking than can the problem of thugs cornering people in alleyways and stealing their wallets. This isn't just a case of profit-seeking. It's a case of profit-seeking-by-socially-non-preferred methods. There are good ways to seek profits (ways that go by names like "innovation" and "improved efficiency") and there are bad ways to seek profits (ways with names such as "lying" and "stealing"). In fact, here's a rule of thumb: next time someone screams "profit motive," remind them how little that explains. Ask them, "OK, sure. Someone wanted to make a profit. But what was the particular means of profit-making here, why was it objectionable, and how did they end up getting away with it?

(For more on the distinction between socially preferred and socially non-preferred ways of seeking profit, see the terrific paper "Business Ethics Without Stakeholders," by my pal Joe Heath. You can find it on Joe's page.)

Layoffs @ Total, Despite Record Profits

A few weeks back, I blogged about layoffs at profitable companies. "Profitable" is one thing; how about "record-breaking" profits? Check this out: the French oil giant, Total, has announced that it's laying off 550 people. This, despite making a "record profit of EUR 13.9 billion in 2008."

From Expatica: France slams 'scandalous' Total job cuts

France on Tuesday attacked the "scandalous" behaviour of its biggest company, oil giant Total, after it said it would slash jobs despite reaping the highest annual profit in French corporate history.

"That a group like Total, which made billions in profits, isn't able to set an example in terms of employment at a time like this sticks in my throat," said Employment Minister Laurent Wauquiez.

"They'd be well advised to change their behaviour quickly," warned Wauquiez, who said the move by Total was "scandalous" but did not elaborate on how the government might make the company change its mind.

This great quotation deserves attention:

"Total says it makes 90 percent of its profits abroad, but it should not forget where it comes from and what it owes to France," said one protestor.

Two quick thoughts:
1) It's not at all clear whether Total owes France an obligation never to reduce its workforce, or even not to reduce it during bad economic times. I think obligations should be established before the fact, rather than shouted about during the crisis.
2) The process of criticism during events like this might well be regarded as part of the process of establishing just what a corporation's (informal, socially-enforced) obligations are.

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Thanks to BusinessAPE.

Lessig on Conflict of Interest: Money Poisons Trust

Law prof Lawrence Lessig is one smart dude. I've been a fan since his brilliant 1999 book, Code and Other Laws of Cyberspace. These days his work (as a scholar and as an activist) is focused mostly on political corruption.

In this blog entry, Lessig makes a great point about just why Conflict of Interest is a problem: And again: the point: DEFINE: "Good Soul Corruption"

I'm not even accusing anyone of anything unethical. My charge is that by (a) introducing legislation that has no good public policy justification behind it and which (b) does not benefit your own constituents while (c) being disproportionately supported in financial contributions by the single industry that would benefit from the legislation, you invite the charge (as 88% of citizens in my district believe) that "money buys results in Congress." WHETHER OR NOT "money bought" this result, you have committed this wrong. The wrong is the relationship, and the suggestion the relationship begs. It is not -- and again, NOT -- that the person accused is "being paid off" by anyone.

In other words, while finding yourself in a conflict of interest (COI) is not unethical, doing something avoidable that put yourself into a COI, and thereby threatens public trust in an important institution, is.

Take 4 minutes to watch the short presentation video embedded in Lessig's blog entry. It's a wonderfully effective presentation, and works well to drive home Lessig's point about COI.

Madoff's Confession

Every business major should be required to memorize this.

From the Associated Press: Text of Bernard Madoff's court statement. Here's the first paragraph:

Your Honor, for many years up until my arrest on December 11, 2008, I operated a Ponzi scheme through the investment advisory side of my business, Bernard L. Madoff Securities LLC, which was located here in Manhattan, New York at 885 Third Avenue. I am actually grateful for this first opportunity to publicly speak about my crimes, for which I am so deeply sorry and ashamed. As I engaged in my fraud, I knew what I was doing was wrong, indeed criminal. When I began the Ponzi scheme I believed it would end shortly and I would be able to extricate myself and my clients from the scheme. However, this proved difficult, and ultimately impossible, and as the years went by I realized that my arrest and this day would inevitably come. I am painfully aware that I have deeply hurt many, many people, including the members of my family, my closest friends, business associates and the thousands of clients who gave me their money. I cannot adequately express how sorry I am for what I have done. I am here today to accept responsibility for my crimes by pleading guilty and, with this plea allocution, explain the means by which I carried out and concealed my fraud...

(I first blogged about Madoff back in December: Madoff: Biggest Financial Scam in History)

Marketing to Kids

Some people hate advertising. Others love it. But one thing that tends to make even zealous defenders of advertising cranky is advertising to kids.

But it's good to see contrarian views. So, here's Giles Gibbons (a consultant at Good Business), writing in Ethical Corporation magazine: BrandWatch focus: marketing to children – Why brands should sell to kids

Marketing to children is an issue that’s not going anywhere. Whenever we conduct research with consumers into whether they think companies should be able to target promotional messages directly at children the overwhelming reaction is that this is something that no responsible company would do.

And commentators are no different. They also tend to react in a knee-jerk way....

Gibbons basically argues that the concerns tend to be overstated, and responsible advertisers already know how to avoid key problems. He may have a point there. Of course, part of the reason advertisers know what behaviours to avoid is that consumer activists have hammered them for their excesses.

Gibbons ends with a less-convincing point:

Not only do many products and brands have a positive impact on children, they are also often best placed to get through to them. The very influence brands have over children and their appeal can be turned to deeply positive ends.

The example he chooses is an unfortunate one:

McDonald’s happy meals have been subject to barrages of criticism in the past on the grounds that they encourage children to eat unhealthy food. Rather than remove them altogether, the company has moved to ensure they include healthier options – water and carrot sticks as opposed to soft drinks and fries. No doubt many still feel that the very existence of McDonald’s is an outrage but this would be to ignore the possibility that they might be an excellent way to introduce some healthier options to the very children that are hardest to reach.

I don't see how marketing an unhealthy meal to kids, and then caving in to critics by marketing a less-unhealthy (but still not great) meal to kids teaches them anything positive about nutrition. That might just be one weak example. Gibbons ends with a more general point:

The potential to effect positive change holds true across all child-friendly brands. Messages on bullying, or the environment, or online safety that come from a cool brand – like Hello Kitty – can have far more impact than the strictures of parents and schools.

That's a more promising, but still unsubstantiated, claim. Besides, it might well be that cool brands can have a positive impact. But what we should be concerned with is the net effect, not just finding an upside to an otherwise worrisome trend.

Web-Based Rating Systems for Physicians

Information asymmetry — big differences in knowledge about a product — is a big problem in the marketplace. Consumer empowerment basically boils down to finding various remedies to such asymmetries. Jim Sabin over at the Health Care Organizational Ethics Blog had this nice blog entry 2 days ago, on an attempt to empower patients by letting them post comments, online, about their experiences with particular physicians: Up with Zagat! Down with Patient Waivers!

I recently discussed the collaboration between Wellpoint and Zagat for rating physicians and concluded that the benefits of web-based rating systems outweigh the risks. Since writing that post I have come upon (a) a very informative report about physician-rating websites by Ruth Given and (b) a seven year old physician protection enterprise called "Medical Justice."

Anonymous online rating systems can make your mouth go dry, if you're the one being rated -- regardless of whether you're a business whose product is being rated, a professor whose teaching is being rated, or a physician whose bedside manner is being rated. For docs, that's where Medical Justice steps in. According to that organization's website, the solution is what they call (and what they charge to facilitate) a "mutual privacy contract" between physicians and patients. According to the organization's website...

Mutual privacy agreements are designed to address the emergence of now over 40 generally anonymous physician rating sites. "Mutual privacy" means that patients are granted additional privacy protections by the doctor above and beyond those mandated by law.

In return, patients agree not to post to anonymous doctor-rating websites. Good idea? Sabin (himself a physician and educator) says "no."

...the idea of asking new patients to sign a contract eschewing physician-rating sites and sweetening the deal with "additional privacy protections" is unseemly. Meaningful privacy protections are fundamental moral obligations - they're not chits to use as enticements for patients to sign a contract. If a physician greeted me by asking me to sign such a contract I'd be out of the office in an instant and badmouthing the physician shortly thereafter.

Sabin is right. Contractual solutions might be apt for many kinds of straightforward commercial transactions. But the relationship between physician and patient is a special one, one that necessitates a level of trust that seems incompatible with crude contractual solutions.

Lobbyists, Ethics, Earmarks

Lobbyists are not the most beloved creatures on earth. The very word "lobbyist" is practically an accusation these days. And that's too bad, because there's nothing bad, in principle, about what they do for a living. Fundamentally a lobbyist is a spokesperson. They speak to lawmakers and regulators, on behalf of a company or interest group, and thereby attempt to influence laws and policies. The worry, of course, is that they're too good at their jobs, and that that gives the people they work for too much influence.

Here's the story, from the Associated Press: THE INFLUENCE GAME: Lobbyists defend earmarks

What's it like to be at Washington's political ground zero? Ask Dave Wenhold, who trudges to work with two bull's-eyes pinned to his back.
He's a lobbyist and he earns part of his living fighting for special-interest earmarks, those prized pots of money that lobbyists vie for and critics decry.

So, why not just keep them away from lawmakers entirely? Well, first, because to petition your government is a fundamental democratic right. And if it's my right to have my say, it's also got to be my right to send someone to speak for me — after all, we're not all eloquent, and we can't all travel to where the lawmakers are. Note also that decision-makers actually need input, lest they make poorly-informed decisions. And it's not just drug companies and such that employ lobbyists: so do charities and universities and municipal governments, for example.

So, what can we do?
1) Governments can put safeguards in place. Countries like Canada and the U.S. (and many others) have rules governing the behaviour of lobbyists. They usually have to register, for example: no secret lobbyists are allowed. Also, they're allowed to talk to lawmakers, but not to give them money. Further, there are rules to limit the "revolving door" phenomenon, which sees lobbying firms and government agencies swapping personnel and practically guaranteeing conflict of interest. And so on. Of course, figuring out just the right set of safeguards — to maximize benefit and minimize risk — is hard.
2) The lobbyists can exercise ethical restraint. Individual restraint in a competitive domain is hard. Acting together is a little easier, though by no means trivial. The American League of Lobbyists, for example, has it's Code of Ethics. Yes, plenty of room for skepticism there.

I think this might be one of the hardest problems in and around business ethics. Everyone agrees that businesses ought to obey "the rules of the game." But how should they, and their representatives, behave when they get the opportunity to influence the rules themselves?

Hard Times: Ethics on the Chopping Block?

When hard times come along, should ethics be the first thing you cut, or the last thing?

Over at the Research Ethics Blog, my friend Nancy Walton has posted an interesting (and frightening) story about cuts in the world of bioethics: Ethics on the chopping block.

Here are the basics:

The University of Tenneessee is considering closing down The Department of Human Values and Ethics in the College of Medicine along with a number of other science and medicine programs.
....
Across the globe in New Zealand, the government will sign off on disbanding the country's Bioethics Council on Monday. The Bioethics Council was created in 2002 in response to public concern that the government was making decisions — in an ad hoc and unadvised manner — on complex and controversial biotech and genetic issues ....

Nancy's analysis of why these are stupid moves is thought-provoking, and goes beyond the obvious. She points out that, in the world of bioethics, at least (and I would argue elsewhere too), ethics departments serve outreach, advocacy, and educational roles that go beyond their literal job descriptions.

My own question is whether we should expect the same bad moves in the corporate world, during this global economic downturn. We already know there have been layoffs. But has anyone heard of any CSR or Ethics & Compliance departments being cut at major corporations? If anyone knows of any current examples, post a comment below or email me.

Ethics & Overuse of Cost-Free Resources

How much water does it take to make a latte? That's the question asked (and answered) in this cool little flash video from the World Wildlife Fund: How Much Water?.

The answer: 200 litres (about 53 U.S. gallons). That number is shocking, and it's intended to be. What the video points out is that each ingredient of the latte — from the milk, to the coffee beans, to the paper that makes up the cup — requires water to grow or manufacture it. But the video is a wonderful little piece of awareness-raising, and a good opportunity to highlight an economic concept that is crucial to understanding questions about sustainability:

Cost-free (or underpriced) resources get overused. It's significant that the video chose to highlight water inputs, rather than, say, petroleum inputs. All the ingredients of your latte also require petroleum inputs (for energy to run the factories, for transportation, etc.) But petroleum products always cost money, and in fact are relatively expensive, so manufacturers have a built-in reason to use less, wherever they can. But at least some water-inputs are essentially free (e.g., water drawn from a private well) or are subject to flat-rate municipal pricing (such that using more doesn't cost more). Manufacturers have no intrinsic reason to conserve a resource like that. So, you either need to a) find a way to charge, or to charge more, e.g., by taxing the product, or b) rely on changing attitudes and raising ecological awareness.

Note that the video isn't particularly an indictment of lattes or latte drinkers. All foods and manufactured products and indeed all services require resource inputs. So don't leap to feeling guilty about your 200-litre-latte. Whatever you might have had in lieu of that latte would have taken up some water resources, too. I suppose that means that we need not just "awareness," but awareness of differences among products, and awareness of differences that can actually lead to changes in our behaviour.

Personal Genomics: the Ethics of Shared Uncertainty

I'm a Visiting Professor this term at the wonderful Keck Graduate Institute of Applied Life Sciences (KGI). Yesterday afternoon I gave a talk there, called "Direct-to-Consumer Genetic Testing: Consumer Empowerment or High-Tech Fortune-Telling?"

I didn't talk about genetic testing in general, but rather specifically about at-home genetic tests (a.k.a. "personal genomics" services) sold by companies like 23andMe, Navigenics, and deCode.

The scientific consensus (among academic and clinical geneticists, anyway) seems to be that such tests aren't worth much. You see, these services involve doing genetic tests based on a statistical method known as "genome wide association studies" (GWAS). Basically, rather than identifying a gene responsible for a particular illness, such studies look for statistical correlations between certain genetic "markers"' and illnesses. Sometimes those correlations are "suggestive" but statistically weak: it's very often not clear that testing "positive" for a genetic marker associated, statistically, with some disease, actually tells an individual much about personal risk, or what to do about it.

So, is it ethical (or under what conditions is it ethical) to sell a product the utility of which is very much in doubt?

In my talk yesterday, I examined a range of possible comparison classes & categories of products currently on the market to which we might compare personal genomics services. Are they like pharmaceuticals: potent, potentially dangerous, and in need of serious regulation? Are they more like medical scans (x-rays, MRIs) and tests like home-pregnancy tests? Are they more like self-help books, which are never guaranteed to help, but which are (probably) harmless and might just help some people? Or are they like the "services" provided by fortune-tellers: utterly uninformative, but hey maybe fun? I don't think the answer is easy.

I suggested in the talk that one of the keys to this, from a business ethics point of view, is framing it in terms of the information available to the buyer and the seller. Though they're optimistic about what customers will gain from their products, these companies are mostly pretty modest about that, and acknowledge that they just don't know how useful their products will be to individuals. Maybe individuals who get tested will be more health-aware as a result. Maybe they'll reevaluate lifestyle choices in positive ways. The companies are — and ought to admit to being — a bit uncertain about this. But if they're uncertain, and if they're open about that, then there's no clear sense in which consumers particularly need to be protected. Information asymmetry is dangerous: when the seller knows a lot more about the product than the buyer does, the buyer can find themselves duped. And certainly there will typically be huge information asymmetries with regard to the science behind personal genomics. But it seems to me that there isn't much asymmetry regarding knowledge about how useful the product is. And it seems to me that it's not unethical to market a product in the fact of shared (honest) uncertainty.

(Here are 2 previous blog entries on the topic: Genomics & Personalized Medicine and Genetic Testing: Ethical to Market a Not-Very-Useful Product?.)

Private Food Inspectors

This is a good (and awful) story. Here are some good bits. Commentary will follow.

From the NY Times: Food Problems Elude Private Inspectors.

When food industry giants like Kellogg want to ensure that American consumers are being protected from contaminated products, they rely on private inspectors like Eugene A. Hatfield. So last spring Mr. Hatfield headed to the Peanut Corporation of America plant in southwest Georgia to make sure its chopped nuts, paste and peanut butter were safe to use in things as diverse as granola bars and ice cream.

The peanut company, though, knew in advance that Mr. Hatfield was coming....

And while Mr. Hatfield was inspecting the plant to reassure Kellogg and other food companies of its suitability as a supplier, the Peanut Corporation was paying for his efforts....

Federal investigators later discovered that the dilapidated plant was ravaged by salmonella...nine are believed to have died and an estimated 22,500 were sickened.

Funniest quote from an un-funny story:

“The contributions of third-party audits to food safety is the same as the contribution of mail-order diploma mills to education,” said Mansour Samadpour, a Seattle consultant who has worked with companies nationwide to improve food safety.

See also:

Robert A. LaBudde, a food safety expert who has consulted with food companies for 30 years, said, “The only thing that matters is productivity.” He added that “you only get in trouble if someone in the media traces it back to you, and that’s rare, like a meteor strike.”

OK, here's the problem. A big, big part of what allows the productivity levels enjoyed in modern societies is division of labour. That means, among other things, that most of us don't product our own food. Plus, we demand an enormous variety of foods. Those two facts together imply an enormously complex food production and distribution system. A system that complex is going to have gaps, and opportunities for negligent, or lazy, or undertrained workers and managers to screw things up. Add to that the fact that we (naturally) want this bounty delivered to us as cheaply as possible (a desire satisfied by a vigorously competitive food retail market). That means an incentive for just about everyone to cut corners. Frankly, I'm surprised how few people die.

OK, three points to make.

1) Some heads need to roll. Don't want to judge from one or two newspaper stories, but sounds like something pretty close to criminal negligence in some of these cases. I'd like to hear of more people going to jail for it. That might wake a few people up.

2) I need... you need, we consumers need ... good stats about which foods are deadliest. Are there patterns? Are some foods just bad wagers? It's a bad idea to judge based on one or two high-profile cases. Frankly, I'm tempted to avoid anything that a) comes from a factory, and that b) isn't cooked. But I want more info.

3) As a society, maybe we need to think of food like we think of cars: something we love that just happens to kill some people. Now, our love of cheap, varied food and our acceptance of a certain degree of risk doesn't mean food producers shouldn't do better — much, much better even — at producing food safely, any more than our tolerance of thousands of highway deaths relieves auto manufacturers of the obligation to make cars safer.

Environmentally Friendly Ammo

Lead is a useful metal. It's also toxic. Lead poisoning is one of the oldest known industrial hazards — the ancient Romans, for example, were aware that lead, though handy, was hazardous to your health. In recent decades, lead poisoning is mostly associated with old paint, and in particular with children being exposed to it. But the phrase "lead poisoning" is also used as a cute term for being shot — most bullets, after all, are made of lead. Grim humour to be sure. But as it turns out, the lead in bullets really is a source of poisoning...but the problem here isn't with the bullets that hit their mark; it's with the ones that miss. Every shot that a hunter fires, for example, if it misses its mark, ends up as a pollutant, either lying in a lake or accidentally ingested by some animal.

The solution? See this story, from the Globe & Mail's Report on Business: Banking on bullets for the granola set.

Stephen Leahy doesn't want to take guns away – he just want to make their bullets greener.

The chairman and chief executive officer of North American Tungsten Corp. Ltd. hopes demand for the metal his company produces will increase as tungsten's use as an environmentally friendly alternative to lead gains in popularity.

Tungsten can now be used as a non-toxic substitute for lead in fishing lures, wheel weights and protective X-ray vests.

But Mr. Leahy is most excited about the potential to use tungsten in bullets and buckshot.

A few months ago I asked:

if you think product X is unethical (or maybe just morally "problematic"), can you engage in a constructive discussion about how to make that product more acceptable (while still selling it) or how to sell it more ethically?

Seems to me here's a good example where the answer is clearly "yes." I think the world would be a much better place with way fewer guns in it. Fewer guns and fewer bullets. Well, guns & bullets aren't going away. But if you're going to make 'em, might as well make 'em green.

"Organic:" Not Synonymous With "Ethical"

The market for organic foods (etc.) continues to fascinate me. For some people, "organic food" basically means "ethical food," or at least symbolizes the idea that the way food is produced — in particular, whether chemical herbicides and pesticides are used in its production — matters. To other people, organic food is a joke: there's no evidence that it's safer, but plenty of evidence that it helps certain yuppies distinguish themselves from the masses.

My main concern is that people know what the "organic" label (or the "GM free" label or the "Fair Trade" label or the "Free Range" label) does and doesn't mean. So I was interested to see this article, from the NYT: It’s Organic, but Does That Mean It’s Safer?

MOST of the chicken, fruit and vegetables in Ellen Devlin-Sample’s kitchen are organic. She thinks those foods taste better than their conventional counterparts. And she hopes they are healthier for her children.

Lately, though, she is not so sure.

The national outbreak of salmonella in products with peanuts has been particularly unsettling for shoppers like her who think organic food is safer.

Mostly the article is about contamination, and the fact that organic foods, just like "normal" foods, can be subject to contamination by bacteria, rat feces, etc. Maybe that's not surprising, unless you happen to assume that "organic" really means "grown by hand and lovingly packaged by a sweet old couple who consider themselves stewards of the Earth." Which, um, it doesn't. But still, a reminder that crummy business practices abound, even among the organic crowd, is a useful thing.

Another interesting facet of the NYT story is its mention of the fact that there are lots of kinds of food ethics, lots of different things people different people care about with regard to their food:

Some shoppers want food that was grown locally, harvested from animals that were treated humanely or produced by workers who were paid a fair wage. The organic label doesn’t mean any of that.

“They’re questioning the social values around organics,” Ms. Demeritt said.

Local, humane, fair-trade, organic...and safe, too, right?

----------
p.s., I've blogged about organic foods and such a few times previously. See also:

• Ethics of Organic Farming
  
• Organic Certification & the Role of the Firm
  
• WalMart & Organic Foods
  
• Organic Everything: Mattress Edition
  

Ethical Investing and Weapons

Ethics-based investing is a big deal these days. Individuals and institutions know that the money they invest isn't an abstraction, but actually amounts in some way to participating in the production of goods and services, and so plenty of them care what sorts of companies and what sorts of industries they invest in. If you wouldn't work for Haliburton, why would you invest in them? If you wouldn't take tobacco-company money, why would you give the tobacco industry your money?

The latest news on this front: U.S.-based aviation & defense industry giant Textron is under fire from a large Norwegian fund for making cluster bombs.

Here's the story, from Defense News: Defense Stocks and Ethics: Norwegian Pension Fund Objects to Cluster Bombs

Textron has become the latest defense firm to be blacklisted by Norway's $380 billion Government Pension Fund-Global (GPFG), the largest of Norway's sovereign wealth funds.

The decision to divest $36 million in Textron shares, announced by the GPFG's administrative board Jan. 31, was based on a report and an exclusion recommendation from the fund's Ethics Council, said Kristin Halvorsen, Norway's finance minister.

"Textron produces cluster weapons, which are banned pursuant to the Convention on Cluster Munitions," Halvorsen said. "We cannot participate in the funding of this type of production."

The convention was signed Dec. 3 by more than 100 countries, but not the United States, China or Russia.

(FYI, here's the Wikipedia page about the Convention on Cluster Munitions.)

Now, $36 mil is a lot of dough. But to put this into perspective, that amount constitutes about 1/3 of 1% of Textron's $12 billion market capitalization. So it's not like Textron is likely to care much. But then, the GPFG's goal can't plausibly be to punish Textron, anyway, or to change the way the company does business. The fund's goal is surely symbolic, and perhaps an attempt to keep its hands clean. How to keep one's hands clean in a complicated world is clearly a big topic. For now, I'll just point back to my posting from last week, about bulldozers, and ask: which company is "dirtier"? A hypothetical company that makes 99 civilian products and one nasty weapon, or a hypothetical company that makes only civilian products, 1% of which end up being used for military tasks?

High-Tech Medicine, Crappy Products, and Evidence

Yesterday I blogged about companies (and witch doctors!) selling things without sufficient reason to believe they actually work. Among other things, I said "There are good reasons why drug companies are forced to do randomized, double-blind, clinical trials."

Some of you may have inferred from that blog entry that I love Big Pharma and Big Medicine (because, after all, they use science) and hate purveyors of "natural" medicines with their reliance on "traditional" and "folk" knowledge.

Not true.

Here's a story from yesterday's NYT, slamming crappy practices in high-tech medicine: Regardless of Quality, Medical Scans Cost the Same

When Gail Kislevitz had an M.R.I. scan of her knee, it came back blurry, “uninterpretable,” her orthopedist told her.

Her insurer refused to pay for another scan, but the doctor said he was sure she had torn cartilage that stabilizes the knee and suggested an operation to fix it. After the surgery, Ms. Kislevitz, 57, of Ridgewood, N.J., received a surprise: the cartilage had not been torn after all.

She had a long rehabilitation. And her insurer paid for the operation. But her knee is no better.

The focus of the story is on the use of outdated machines, and on the conflict of interest inherent in physicians ordering expensive (i.e., profitable) tests conducted on machines they themselves own. The neglected angle is the poor state of knowledge about the kinds of ailments such scans are often used for. Note that Ms. Kislevitz's doctor was "sure" she had torn cartilege, which she didn't. Sometimes fancy scans just add an illusion of certainty in situations like that.

Now, as to the distinction between high-tech medicine and "traditional" medicine: at least people (and companies) in high-tech medicine don't (i.e., can't) deny that having evidence would be good.

Fake Cures, Witch Doctors, and "Evidence"

This is a horrific story. And maybe I'm about to make a horrific comparison. Feel free to let me know.

Here's the horrific story, about thugs dismembering Albino children in Tanzania, because of the black-market value Albino body parts have for their supposed medicinal value and luck-bringing properties: Halting the slaughter of Albino innocents.

Under cover of darkness, a group of men charge into young Viviana's room in the middle of the night, pin her pale form immobile, and hack off one of her little legs as her sister screams in horror.

Viviana, shockingly, is among the lucky ones. The commotion draws the attention of neighbours, and the attackers slip off into the night without finishing the job. She is left an amputee, but alive.

The single albino leg will fetch upwards of $1,000 in a gruesome market controlled by powerful Tanzanian witch doctors, who grind the bones into potions and repurpose them as good luck charms for struggling miners and fishermen.

What to say? Horrific. Unspeakable. I mean, the murder & dismemberment is awful. But it makes you want to pull your hair out when you realize that the reason for these deaths is so ridiculous: the attribution of "magic" powers to Albinos. I mean, those potions and charms won't work, right? Right? Hmm, but the witch doctors say they work. And they've got plenty of satisfied customers, apparently. I mean, what could be better than first-hand experience to prove that a product works?

OK, you see the issue. Now, hop across the ocean with me, from Tanzania to Texas...

From the Wall Street Journal Law Blog: Man Oh Mannatech! Company, Founder, Settle False Marketing Claims

The multi-level marketing world – the same industry that gave forth Amway and other home selling networks – got a black eye this week.

Mannatech Inc., a maker of dietary supplements, agreed to pay $6 million to settle a lawsuit brought by the Texas attorney general. The state alleged that the Coppell, Texas company made false claims about its health benefits and marketed products as cures and treatments for diseases.

What evidence did Mannatech have for its claims? Why, first-hand experience, of course.

...the company’s annual employee-sponsored event, called MannaFest. Part bonding session, part Christian revival, Mannafest in 2007 in Dallas included numerous sales associates and consumers who stepped on the stage and testified how they had taken Mannatech products and recovered or had found relief from their paralysis, their tumors, and their lesions.

I don't want to belabour the comparison. Mannatech didn't murder anyone. They're not witch doctors. But they still were making claims they couldn't support, and taking people's money. What such companies and their customers need to learn about is the limits of personal testimonials. There are good reasons why drug companies are forced to do randomized, double-blind, clinical trials. To understand better, you just need to take a peek at the enormous literature on cognitive bias, which details the enormous number of ways in which first-person testimony can go awry. People have a tendency to see correlations, and even causes, where none exist. They tend to mis-estimate relevant probabilities. They tend to mis-remember key events. Reputable companies test their products in ways that minimize those effects. When you're selling things -- especially when you're taking money from people desperate for help -- you owe them a higher standard of evidence.