The New York Times recently carried a blog post by columnist and Nobel Prize-winning economist Paul Krugman about US president-elect Donald Trump and the worries that Trump would be unable, or simply unwilling, to disentangle his business dealings from ...

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Trump, and Why Corruption Matters

The New York Times recently carried a blog post by columnist and Nobel Prize-winning economist Paul Krugman about US president-elect Donald Trump and the worries that Trump would be unable, or simply unwilling, to disentangle his business dealings from his activities as president.

Krugman argued that the real danger was not that Trump’s entanglements would foster corruption and that said corruption would bring trump profits. The problem, Krugman argued, is the way such entanglements would warp the incentives of the world’s most important decision maker.

This is just right, as far as it goes. The problem isn’t that Trump might make money. If he ends up richer after a term as president than he was before, that in itself is not necessarily a problem. (Barack Obama, for example, is wealthier today than he was 8 years ago. Book royalties — hardly blameworthy — are the main source of that wealth.) No, the problem is that the desire to make money, or even a subconscious awareness of the opportunity to make money, will affect the way Trump, and the senior policy makers he appoints and for whom he sets an example, make decisions. When Foreign Policy A is, let’s say, “revenue neutral,” whereas Foreign Policy B stands to benefit Trump, or his blind trust (if he establishes one) or his kids, what are the odds that Policy B will win the day? And will it matter to Trump that Policy B isn’t as good for America as Policy A would have been?

This, at a first approximation, is the real problem with conflict of interest. A conflict of interest is a situation in which a decision-maker is entrusted with making important decisions on behalf of someone else, and in which that decision-maker has some further, “outside” interest (often, but not always, financial) which may stand to influence their decision making. The problem here is not the opportunity for enrichment; the problem is that the responsibility to put someone else’s interests first, to do what’s right for them is in jeopardy. The professional literature on conflict of interest is pretty much consistent on this point.

But I would argue that the real worry is one step more subtle than this. As my colleague Wayne Norman (Duke University) and I have argued in print, the real problem with conflict of interest is not just that this decision maker will make bad decisions this time, or even that this decision maker will make bad decisions all the time. The real risk is loss of faith — loss of faith in the entire institution in which the decision-maker is embedded. So, were a judge to adjudicate a case involving a loved one, the risk is not (merely) that she might render a bad decision. The risk is that onlookers would begin to doubt the objectivity of the judicial system as a whole. When a physician prescribes expensive medications made by a company in which she just happens to own stock, the real risk is not that this won’t be the right medicine, but that patients will come to doubt, quite generally, the motives underlying their physicians’ decision-making.

Do people already mistrust politicians? Sure. Survey results bear that out. But the mistrust of politicians is, in North America at least, not universal and hasn’t resulted in, for example, widespread abandonment of political participation. Most of us are still capable of being shocked.

So the real risk inherent in the nearly inevitable entanglement of Donald Trump’s financial and political lives is not that he’ll make money, and not (just) that he’ll make bad policy decisions. It’s that the Trump era will make corruption, or even just the routine mishandling of conflict of interest, normal, the kinds of things we all take for granted.


    
 


Business Needs to Let Government Lead on Education

“What can corporations do to help remedy the skills shortage that many see as limiting economic growth?”

This was one of the more provocative questions asked at a panel discussion I recently attended, put on by the Economic Club of Canada, and called “Canada’s Skills Challenge: The Economic Case for Improving Workplace Essential Skills.”

Various answers to the question above were suggested, including encouraging corporations to invest more in training their own employees.

But the most succinct answer came from panelist and former Canadian Prime Minister Paul Martin. Martin suggested, roughly, that the most important thing corporations can do is this: when governments try to invest in education, at all levels, stay out of the way.

Mr Martin didn’t elaborate regarding what forms of interference he had in mind, what kinds of getting-in-the-way he wanted corporations to forego. But it’s not hard to imagine. Lobbying, both public and private, is not unlikely to occur when companies think that governments are spending too much money on one thing, and (as a natural result) too little on others.

In calling for corporations to stay out of the way of government investment in education, Mr Martin was essentially calling for corporate social responsibility in its purest form. Many activities that get labelled “CSR” don’t in fact have much of a social element to them. But here, Mr Martin was asking corporations to hold back, to forego activities that they see as being in their (or their shareholders’) interests. And he was asking them to hold back, in this case, specifically because it’s in the public interest for them to do so.

It’s tempting to see tacit support for education as a win-win, a move that’s both in the public interest and in the interests of corporations. Corporations, after all, benefit quite directly from having access to highly-educated, highly-skilled employees. But of course, the situation is more complex than that. Any given corporation is likely to get the full benefits of its lobbying activities, but only a tiny, probabilistic share of the benefits of public investment in education. So what we have here is a classic ‘social dilemma’—a situation in which everyone could do better if everybody held back, but any given individual (or in this case, corporation) has reason to act in a more straightforwardly self-interested way.

So the kind of tacit support for investment in education that Mr Martin was calling for is certainly a matter of social responsibility. But it would be pollyannaish to think it’s also profit-maximizing, for companies. Supporting government investment in education isn’t necessarily a win-win for corporations, at least not in the short run. But it’s still the right thing to do.

 

Chris MacDonald is director of the Jim Pattison Ethical Leadership Program at the Ted Rogers School of Management, Interim Director of the Ted Rogers MBA at Ryerson University, and founding co-editor of Business Ethics Highlights.


    
 


When Should Apology Be Followed by a Change in Policy?

At a crucial October 4th home game, a fan of the Toronto Blue Jays (my home town team) threw a can of beer that just missed hitting Baltimore Orioles outfielder Hyun Soo Kim. Outrage rightly ensued, as did a fervent and ongoing attempt to identify the perpetrator—relying solely on grainy video evidence.

The next day, the Blue Jays organization posted the following apology on its Facebook page:

blue_jays_apology

Needless to say, the organization was apologizing for something that wasn’t its fault. But it was a necessary public relations move, and probably the right thing to do.

The only mis-step comes in the 4th paragraph, where the apology turns to the question of changes in policy: “We will…enact heightened security measures and alcohol policies that will ensure the fan experience and safety of everybody involved.”

What’s wrong with that? First, it’s a false promise. Not false in that they won’t enact new measures, but false in thinking that it will “ensure…safety of everybody involved.” No policy (short of shutting down the stadium) can do that.

But the main problem is that it doesn’t make sense to change policies in light of a single, relatively minor incident. Organizations generally need policies in one of two kinds of situations:

1) When a problem is common and persistent. In these cases, numerous small offences add up to a significant problem. (This is why we have anti-littering laws—no single gum-wrapper does much harm, but if everybody littered constantly, our cities would be unliveable.)

2) When even occasional (or single) instances of a particular behaviour are going to result in tragic consequences.

And oh yes, one further condition that applies in either case above: the policy needs to be likely to actually prevent the behaviour in question.

None those applies to the present situation. Beer cans being tossed onto the field is not a common or persistent problem. And while being hit in the head by a can could indeed cause substantial harm, and while the statement posted is vague about the policy changes being considered, no plausible alcohol policy is going to be 100% effective in preventing yahoos from occasionally throwing things onto the field in malicious ways. It could happen at a dry stadium (a can of something else could be tossed instead.) It could happen at stadium where beverages are sold only in plastic cups (shoes could be tossed, or umbrellas, or…). And so on.

But my point here isn’t really about baseball. It’s about the nature of policy-making in general. Lawyers are fond of saying that hard cases make bad law. It’s likewise the case the rare, idiotic behaviour makes bad policy.

And oh yeah…LET’S GO BLUE JAYS!


    
 


Global Compact International Yearbook 2016 published

The idea of sustainability is based on the certitude that we have planetary boundaries. The WWF vividly illustrates this with “Earth Overshoot Day.” It describes the day of the year on which human demands on natural resources exceed the capacity of the earth to reproduce these resources. „We need new ways of living that will end the suffering, discrimination and lack of opportunity that define the lives of billions of people around the world, and that drive instability and conflict,“ says Ban Ki-moon, UN secretary General in his note in the new „Global Compact International Yearbook“, edition 2016. … [visit site to read more]

    
 


Training: “How to do Business with Respect for Children’s Rights” | 19 – 20 October 2016 | Cologne

UNICEF, Deutsches Global Compact Netzwerk and twentyfifty ltd. are pleased to invite you to attend the 2016 event of the forthcoming UNICEF global training package on the steps businesses can take to manage their impacts on children, and to integrate children’s rights into business processes. … [visit site to read more]

    
 


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