Author Archives: Chris MacDonald

‘Utmost Good Faith’ Between Adversaries?

Not much has yet been written about the quasi-adversarial relationship that obtains between consumers and the companies from which they buy goods and services, at least not in those terms.

And it’s clear, I think, that the relationship is quasi-adversarial. In game-theoretic terms, it’s a ‘mixed motive’ game — one in which cooperation of some form is useful, but in which each party has some incentive to deviate from maximally cooperative behaviour. When Apple sells me a computer, they would ideally like to squeeze as much money out of me as possible, while giving me a product as cheap-to-produce as possible. And my own preferences are the exact opposite. We both benefit from doing business together, but our interests in the interaction are not quite aligned. In fact, in terms of pure dollars and cents, the transaction between Apple and me is a zero-sum game: every extra dollar they charge for their computer is a dollar out of my pocket and into their corporate coffers. It’s not a fully-adversarial relationship, but it’s still one that needs some rules to keep it civilized.

In this regard, it’s good to know about the legal concept of uberrima fides. This is a legal doctrine, relating specifically to insurance contracts, which says that “all parties to an insurance contract must deal in good faith, making a full declaration of all material facts in the insurance proposal.” The relationship between insurer and insured, in other words, is a game that must be played by very strict rules.

The concept of uberrima fides doesn’t mean the insurer and insured are on the same team, metaphorically speaking. So it implies a relationship quite different from, say, a fiduciary one. A fiduciary relationship, as a famous legal judgment once put it, requires “the punctilio of an honor the most sensitive.” In a fiduciary relationship (e.g., the relationship between lawyer and client), the commercial aspect of the relationship takes a back seat, and one party (e.g., the lawyer) is expected to put the other party’s interests ahead of their own. In a relationship subject to the uberrima fides standard, the relationship is still at least partly adversarial, but the adversaries in question are expected to play very strictly according to the rules. This makes particular sense for the relationship between insurer and insured, presumably, because both parties are so highly vulnerable to gamesmanship and dissimulation on the part of the other.

This suggests, I think, that we think of various kinds of buyer/seller relationships as existing along a spectrum, from the aggressively adversarial to the utterly fiduciary. The question, then, is not which rules should apply to buyer/seller relationships in general. The question, rather, is which rules should apply to what kinds of buyer/seller relationships, and why.

Football, Business, and the Rules of the Game

The scandal currently engulfing Football’s New Orleans Saints illustrates some important points about adversarial ethics, and in particular holds lessons for business ethics.

The scandal concerns the fact that over a number of years, members of the team (and at least one assistant coach) maintained a “bounty pool,” which paid out money to players who succeeded in inflicting serious injuries on players from opposing teams. Football is a tough sport; so what’s the problem?

The problem, of course, is that even tough games need rules, including rules designed to keep the game worth playing.

Drawing on Joseph Heath’s work on adversarial ethics in business, I argue that the limits on adversarial behaviour in business can be defined as those limits that keep the ‘game’ beneficial from a social point of view. Free, competitive markets are enormously beneficial, and behaviour that threatens the benefits of markets robs them of their moral justification.

For the fuller version of my argument, see my blog posting for Canadian Business magazine: New Orleans Saints football scandal highlights limits of competition.

Politicians and Professors

Some professors go into politics. Some politicians later become professors. But is there any reason to think the rules of the two “games” should be the same?

See this article by David D. Perlmutter, in the Chronicle of Higher Education: Why Politicians Should Be More Like Professors. Perlmutter points out that President Barack Obama has sometimes been accused of being “too professorial.” But just what, asks (Professor!) Perlmutter, is wrong with that? He suggests several ways in which it might actually be good if politicians adopted a more professorial demeanor. His final suggestion is that politicians need to be more like professors in their willingness to work together to solve shared problems. “More than in any other trade, professors will sit down, work together with people with whom they hold deep ideological differences, and get the job done.” As for politicians: “It’s fine to be partisan about ideas,” he says, “but governing must be collaborative.”

By way of prescient rebuttal, see this piece by our friend (and sometime professor) Andrew Potter, writing in the Ottawa Citizen: Gangster Politics.

In a philosophical debate, what everyone involved is trying to get at is the truth. As a result, each party has a vested interest in the discussion remaining as rational and free of bias as possible. Even better, the truth is what economists call a “non-rival good” – many people can partake in the truth at the same time without anyone’s share being diminished.

In contrast, what is at stake in the political realm is not truth but power, and power (unlike truth) is a “rival good” – one person or group can wield power only at the expense of another.

Unfortunately, the very essence of politics makes partisanship inevitable….

In general, if you’re going to propose new norms for a game, it’s good to have a clear understanding of what is really at stake in that particular game, first.

Farmers, Organics, & the Ethics of Industry Organizations

Over at my Food-Ethics blog, I just posted a short piece called “Caution on ‘Green’ Claims for Organics”. It’s about a suggestion, from the head of a UK farming organization, for organic farmers to be cautious about claims that their produce is, categorically, more environmentally-friendly than non-organic foods.

The interesting thing from the point of view of adversarial ethics has to do with the role of industry associations. Industry associations are a mechanism by which businesses that would normally compete against each other engage in certain forms of cooperation. The catch is that some forms of in-group cooperation are socially beneficial (or at least innocuous) while others are pernicious. For example, when companies cooperate on standard-setting (so that, e.g., competing models of computers can all use the same peripherals), that’s a good thing. When they cooperate on prices, that’s called price-fixing, and it’s bad for consumers (and is illegal in most places). In the case cited above, the organization is calling for a stop to in-fighting over the virtues (in the strong, moralized sense of that word) of various products. Whether that’s socially beneficial depends, in part, on the significance of the moral debate that the organization is hoping to stifle.

Organic Farmers “Cheating”

Any time standards are established for the production of some product, and if money can be made by skimping on those standards…well, skimping is liable to start happening. Nowhere is that worry more obvious today than in the realm of organic agriculture.

See this little note from The Morning Sentinal: ‘Cheating’ organic farmers mostly from overseas

The brunt of the problem is with overseas farmers who sell much of the certified-organic food in the domestic, American and Canadian retail markets. Who’s watching them? Well I’ll tell you. for the most part, they’re watching themselves. And they undercut American and Canadian organic farmers like Thoet four times out of five.

Clearly, if people in China, Mexico and Indonesia are cheating, we need to start field testing on a surprise basis to weed them out. I’m not sure why exactly that message bothers some organic farmers, like Thoet, but the good news is that the overwhelming majority of organic farmers in North America agree completely….

Notice here the multi-layered competition:

  • American organic farmers are competing with each other;
  • American organic farmers are competing with with American non-organic farmers;
  • American organic farmers are competing with foreign organic farmers (or maybe “organic” farmers);

It’s also worth noting that, perhaps less obviously, American organic farmers are competing with American farmers who adhere to a “nearly organic” method of farming, but who do not or cannot meet the standard necessary to gain the regulated designation “Organic.”

In each case there’s a competitive environment, subject to a more-or-less formal set of rules; and in each case, the opportunity exists to break rules, or to game them in various ways. Notice also that, when one sees oneself as playing several separate games at once, one has in principle the opportunity to justify cheating at one game by appealing to the rules of the other games. (For instance, “Yes I know I was bending the rules for USDA Organic, but it’s more important that we beat out imports from Indonesia!”) Does this happen in practice?

(See also: The Challenges of Organic Certification, over at my Food Ethics blog.)

Skins and the Edge of Indecency

Last week there was some controversy over MTV’s “edgy” teen drama, “Skins.” I’m quoted giving a business-ethics perspective on the show in this story, by the NYT’s David Carr: “A Naked Calculation Gone Bad.”

What if one day you went to work and there was a meeting to discuss whether the project you were working on crossed the line into child pornography? You’d probably think you had ended up in the wrong room.

And you’d be right.

Last week, my colleague Brian Stelter reported that on Tuesday, the day after the pilot episode of “Skins” was shown on MTV, executives at the cable channel were frantically meeting to discuss whether the salacious teenage drama starring actors as young as 15 might violate federal child pornography statutes.

Over at my Business Ethics Blog, I focused on the way the Skins controversy serves as an example of how a kind of corporate group-think can end up producing a product that might, on second thought, not be such a good idea.

But it’s also worth noting (for purposes of this blog) that TV is fiercely competitive. Viewers generally benefit from that competition, as in any industry, but there are limits on competitive behaviour. What are the relevant limits, here? TV is relatively loosely regulated. The Federal Communications Commission does regulate TV (see their rules here) but their main focus is on avoiding ill-defined “indecency.” But their process has to begin with objections from someone in the community. And what we take to be “indecent” is surely evolving, a fact that broadcasters are both subject to and contributing to. Something more like “bright line” might be found in child pornography laws, the spectre of which has been raised in the controversy over Skins. But even there, there’s plenty of room for interpretation, and plenty of room for broadcasters, in a competitive game, to play along the edges of the rule.

Competitive Ethics in the Dairy Industry

Over at my Food Ethics Blog, I’ve just posted a short entry on regulating competitive behaviour in the dairy industry: Using, Regulating and Testing for Antibiotics in Milk. The key point, there, from the perspective of ethics for adversaries, lies in looking at the obligations that competitors have to those they server (consumers of milk, in this case) compared to the obligations they have to other members of society. In sports terms, it’s the comparison between what a baseball team owes its fans, versus what it owes to people whose windows might be smashed by a stray ball.

Bankers Bonuses and Multi-Level Structured Competition

Here’s an interesting story about structured competition within an organization. By Michael Flaherty and Sarah White, as appearing in the Globe and Mail: Gap in bankers’ bonuses spurs discontent

Annual bonuses at top global banks are causing friction that could drive an outsized round of defections as weaker profits and tougher rules widen the pay discrepancy between star performers and everybody else.

That growing difference between a small number of top-fee earning investment bankers and the bulk of their colleagues may see an exodus from big European and Wall Street banks to smaller upstarts or different industries in the weeks and months ahead….

Actually, what we see here are several nested levels of structured competition:

  • Competition between bankers, structured by the banks that employ them, in order to incentivize them for maximum productivity;
  • Competition between banks (structured by the legal and regulatory environment) to see who can offer an incentive structure that attracts (and retains) the best talent;
  • Competition between industries to see which industry can attract (and retain) the best talent, at least to the extent that such talent is mobile and involves transferrable skills.

Did I miss any layers?

Each of those competitive structures of course implies its own set of ethical norms, both for those who design the institution and for those who are subject to it. The intersection between, and conflict between, those alternative sets of competition-specific ethical regimes, seems a fertile ground for investigation.

Is Business (Like) War?

This Bnet blog entry by Margaret Heffernan is right up our alley: Debunking the Myth that Business is “War”

Much of what Heffernan says about the differences between business and war is true. But some of the disanalogies are more important than others. She notes, for example, that one important difference is that “It is possible for societies to flourish without war — but they won’t do so without business”. Others are weaker. She points out for example that “In business, your adversary will never be defeated.” That’s not always true (sometimes competitors are driven into bankruptcy). And sometimes adversaries are not defeated in war: sometimes one or both sides opts to limp off the field. Who won the Korean war in the 1950s or the Iran-Iraq war in the 1980s, for instance? Neither side was really “defeated”, though though both suffered serious losses.

There are significant similarities between war and business, and not just in the simplistic sense that is often appealed to as a way of justifying the most brutal of business behaviours.

Both war and business are, in the sense in which this blog is interested, structured competitions. In both cases, competitors seek to win, but they generally do so in a way that observes at least some rules. Focusing on the differences obscures the fact that both war and the market represent structured competitions with social benefits. Now, of course, the idea that war as an institution has benefits may be hard to swallow — at least until we make some qualifications.

First, I’m talking about the kind of limited war that we saw most frequently during the 20th century, wars fought by professional armies on battlefields, constrained (at least to some extent) by the laws of war, including most significantly the Geneva Conventions. Second, we need to think of the costs and benefits of that kind of war in comparison to other ways of doing things. To see the social benefit of that way of solving international disagreements, you only need to look at what the alternatives are: wars of population-against-population, wars fought using chemical and biological weapons, etc. So while war of a certain kind isn’t — unlike the market — a competition designed to produce a net benefit, it is a competition designed to produce less bad outcomes than might otherwise be obtained.