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CHAPTER 1 Law, Ethics, Business An Introduction

Law must be stable, and yet it cannot stand still.

— ROSCOE POUND

Neither fire nor wind, birth nor death, can erase our good deeds.

— BUDDHA

Business has become, in the last half century, the most powerful institution on the planet. The dominant institution in any society needs to take responsibility for the whole.… Every decision that is made, every action that is taken, must be viewed in light of that kind of responsibility.

— DAVID KORTEN

Law is not a static phenomenon, yet in certain ways it appears bounded and clear cut. Where it holds jurisdictional authority, law provides a set of rules for behavior. When these rules are broken, behavior is punishable. If you have been driving carelessly and hit another car, you might pay money damages. If you are caught stealing, you might go to jail. If you are caught polluting, you may be forced to stop. The creation of law and the delivery of sanctions for rule breaking are contested processes. How law is made, how it is enforced, and how it is interpreted are always in dispute, constantly changing, and responsive to the power relations that surround it. Still, we can identify its purposes: law both sets behavioral standards and sets up a system for compliance with them. Within the reach of a legal system, we are on notice that we must meet its standards or risk penalty. Chances are we were not directly involved in the making of the rules—we may even disagree strongly with them—but we understand that the legal system shadows us anyway. It may be the closest we can get to a shared reality.

Ethics, on the other hand, presents a menu of options, often disconnected from official sanctions.1 While law concerns what we must do, ethics concerns what we should do. Suppose you work for an advertising agency and have just been offered a chance to work on a new ad campaign for a certain fast-food chain. Burgers, fries, and sodas are legal products. Under the First Amendment of the U.S. Constitution, fast-food companies

1We distinguish ethics from “professional ethics,” which are binding on those with professional licenses for the practice of law or accounting, for example. Indeed, licensing authorities have enforcement powers not unlike those of legal authorities to sanction those who violate their professional codes of ethics.

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have the legal right to get their messages out to consumers. But you may believe that their ads are particularly attractive to children, who are at risk of becoming accustomed and even addicted to the empty calories that make them fat and unhealthy. Although no law requires it, you may feel you should decline to participate in the campaign. Or suppose a company manufactures a pesticide that can no longer be sold in the United States because the Environmental Protection Agency has banned its primary ingredient, but that can be sold in places like India or Africa, where environmental regulations are far less stringent. Legally, the company is free to sell its pesticide overseas; but should it?

Ethical preferences are not preselected for us by legislators or by judges; they involve critical consciousness, engaging each of us in a process of bringing reason and emotion to bear on a particular situation. The right way to behave is not necessarily a matter of aligning our actions with the norm—a community or religious norm, for instance— although it may be.

The question of what should be done in a given situation, of the right way to live our lives, is complicated by divergent and overlapping cultural inputs. Within the borders of the United States, and globally, we are confronted with a kaleidoscopic array of ethical traditions. Does this mean that there can be no such thing as consensus, no agreement about what is good behavior? While there are differences among communities, we might identify a core set of values rooted in the kind of beings we are: We are all self-conscious, self-aware. We are all equipped to think rationally and to feel emotionally. And we are, by nature, dependent upon one another.

Today, almost half of the 100 largest economies in the world are multinational corporations. Comparing corporate revenues to the gross domestic product of nations, Walmart, BP, Exxon Mobil, and Royal Dutch/Shell all generated more income than Saudi Arabia, Norway, Denmark, Poland, South Africa, and Greece in 2005. The largest 200 companies in the world account for more than one-fourth of the world’s economic activity. By 2002, they had twice the economic clout of the poorest four-fifths of humanity. Business has powerful effects on our natural environment. It strongly affects what we eat, how we transport ourselves, what our communities look like, and how we take care of ourselves when we are sick. In many ways, the impact of global business has been beneficial. Multinationals provide new jobs, pay taxes, and produce new or less expensive goods and services. They introduce technology, capital, and skills to their host countries and raise the standard of living. On the other hand, multinationals have been blamed for hastening the collapse of traditional ways of life; for taking advantage of weak and/or corrupt governments to exploit resources in developing countries; for implementing questionable safety, environmental, and financial practices; and for profiting from unsustainable technologies while blocking technologies antithetical to their interests. Multinational corporations are implicated in some of the world’s most pressing problems— the growing disparities between rich and poor, for example, and global climate change.

As bearers of a diverse set of cultural achievements, we need to find points of agreement, both in legal and ethical terms, as to how human societies can best flourish. And as participants in the global economy, we need to discover ways of tempering the tremendous power of the market so that the planet and its inhabitants will thrive.

In this chapter we introduce values—and a tension between values—that will thread throughout this book. On the one hand, the value of maximizing individual freedom of choice, our right to think and act as we wish, as long as we don’t infringe on someone else’s rights to do the same; on the other hand, the value of building community, our duty as interdependent social beings to care about and for one another. We start with a case that raises questions about the relationship between law and ethics. Then we look at

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the 2010 BP oil spill in the Gulf of Mexico through five different ethical lenses, introducing the basic tools for ethical analysis that you will be using throughout this book. A brief description of the legal structure of corporations is followed by a recent Supreme Court decision establishing a corporate right to freedom of speech in the context of campaign financing. Finally, we read about “strategic” corporate social responsibility and its recognition of the mutually-advantageous linkages between business and society.

Freedom versus Responsibility: A Duty to Rescue?

In this first case, a man is sued for failing to do anything to rescue his drowning friend. While we only know the story as told by the widow—the case is dismissed before the facts can be fully investigated by both sides in a trial setting—we can see how, in this kind of scenario, the law views the conflict between freedom and responsibility.

YANIA v. BIGAN Supreme Court of Pennsylvania, 1959

155 A.2d 343

JONES, Benjamin R., Justice

… On September 25, 1957 John E. Bigan was engaged in a coal strip-mining operation in Shade Township, Somerset County. On the property being stripped were large cuts or trenches created by Bigan when he removed the earthen overburden for the purpose of removing the coal underneath. One cut contained water 8 to 10 feet in depth with side walls or embankments 16 to 18 feet in height; at this cut Bigan had installed a pump to remove the water.

At approximately 4 p.m. on that date, Joseph F. Yania, the operator of another coal strip-mining operation, and one Boyd M. Ross, went upon Bigan’s property for the purpose of discussing a business matter with Bigan, and, while there, [were] asked by Bigan to aid him in starting the pump. Bigan entered the cut and stood at the point where the pump was located. Yania stood at the top of one of the cut’s side walls and then jumped from the side wall—a height of 16 to 18 feet—into the water and was drowned.

Yania’s widow [sued], contending Bigan was responsible for Yania’s death. She contends that Yania’s descent from the high embankment into the water and the

resulting death were caused “entirely” by the spoken words … of Bigan delivered at a dis- tance from Yania. The complaint does not allege that Yania slipped or that he was pushed or that Bigan made any physical impact upon Yania. On the contrary, the only inference deduc- ible from the … complaint is that Bigan … caused such a mental impact on Yania that the latter was deprived of his … freedom of choice and placed under a compulsion to jump into the water. Had Yania been a child of tender years or a person mentally deficient then it is conceivable that taunting and enticement could constitute actionable negligence if it resulted in harm. However, to contend that such conduct directed to an adult in full possession of all his mental faculties constitutes actionable negligence is … completely without merit.

[The widow then claims] that Bigan … violated a duty owed to Yania in that his land contained a dangerous condition, i.e., the water-filled cut or trench, and he failed to warn Yania of such condition.… Of this condition there was neither concealment nor failure to warn, but, on the contrary, the complaint specifically avers that Bigan not only requested Yania and Boyd to assist him in starting the pump to remove the water from the cut but “led” them to the cut itself. If this cut possessed any potentiality of danger, such a

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condition was as obvious and apparent to Yania as to Bigan, both coal strip-mine opera- tors. Under the circumstances herein depicted Bigan could not be held liable in this respect.

Lastly, [the widow claims] that Bigan failed to take the necessary steps to rescue Yania from the water. The mere fact that Bigan saw Yania in a position of peril in the water imposed upon him no legal, although a moral, obligation or duty to go to his rescue unless Bigan was legally responsible, in whole or in part, for placing Yania in the perilous position. “[The deceased] voluntarily placed himself in the way of danger, and his death was the result of his own act.… That his undertaking was an exceedingly reckless and dangerous one, the event proves, but there was no one to blame for it but himself. He had the right to try the experiment, obviously dangerous as it was, but then also upon him rested the consequences of that experiment, and upon no one else; he may have been, and probably was, ignorant of the risk which he was taking upon himself, or know- ing it, and trusting to his own skill, he may have regarded it as easily superable. But in either case, the result of his ignorance, or of his mistake, must rest with himself and can- not be charged to the defendants.” The law imposes on Bigan no duty of rescue.

Order [dismissing the complaint] affirmed.

QUESTIONS 1. What happened in this case? If Yania couldn’t swim, why did he jump?

2. Identify each of the arguments made by Yania’s widow. For each, explain how the judge dealt with it.

3. According to the judge, Bigan would have been liable in this case under certain circum- stances that did not apply here. What are those circumstances?

4. Suppose you could revise the law of rescue. Would you hold people responsible for doing something to help others in an emergency? If so, what circumstances would trigger a duty to rescue? How much would be required of a rescuer?

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Justifying the “No Duty to Rescue” Rule The men who wrote the Bill of Rights were not concerned that government might do too little for the people, but that it might do too much to them.

— RICHARD POSNER2

The ruling in Yania v. Bigan is still valid. While there are some exceptions, in general, in the U.S. legal system, we do not have a duty or responsibility to rescue those who are endangered.

There are both philosophical and practical reasons against imposing a duty to res- cue. Traditionally, our society has tended to grant maximum leeway to individual free- dom of choice. Requiring that people help one another in emergencies would infringe on that freedom by forcing people to act when they might choose not to. Further, imposing an affirmative duty to rescue presupposes that there is agreement that rendering assis- tance is always the right thing to do. Is there really such consensus? Beliefs and opinions about the right way to behave in a given situation might vary widely across our diverse societies. If we are to grant genuine respect to each person’s freedom of conscience, shouldn’t we insist on legal enforcement of “right” behavior only when it is unavoidable?

2 Jackson v. City of Joliet, 715 F. 2d 1200, 1203 (7th Cir. 1983), in which Judge Richard Posner explains why someone in need of emergency assistance has no constitutional right to it.

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Shouldn’t we reserve punishment or liability for the times when people actively injure others, and allow rescue to be a matter of personal choice? In a sense, those who do not choose to rescue are not behaving badly; rather, they are merely doing nothing. As U.S. Supreme Court Justice Oliver Wendell Holmes once said, “While there is properly in law a duty not to harm, there is not … a negative duty not to allow harm to happen.”

In the next excerpt, nineteenth-century philosopher John Stuart Mill describes the con- nection between individual freedom of choice and the law of the liberal democratic state.

ON LIBERTY John Stuart Mill

Over himself, over his own body and mind, the individual is sovereign.… This, then, is the appropriate region of human liberty. It comprises, first, the

inward domain of consciousness; demanding liberty of conscience, in the most com- prehensive sense; liberty of thought and feeling; absolute freedom of opinion and sentiment on all subjects, practical or speculative, scientific, moral, or theological.… Secondly, the principle requires liberty of tastes and pursuits; of framing the plan of our life to suit our own character; of doing as we like, subject to such consequences as may follow; without impediment from our fellow-creatures, so long as what we do does not harm them, even though they should think our conduct foolish, perverse, or wrong. Thirdly, from this liberty of each individual, follows the liberty, within the same limits, of combination among individuals; freedom to unite, for any purpose not involving harm to others: the persons combining being supposed to be of full age, and not forced or deceived.

No society in which these liberties are not, on the whole, respected, is free, whatever may be its form of government; and none is completely free in which they do not exist absolute and unqualified. The only freedom which deserves the name is that of pursuing our own good in our own way, so long as we do not attempt to deprive others of theirs, or impede their effort to obtain it. Each is the proper guardian of his own health, whether bodily, or mental and spiritual. Mankind are greater gainers by suffering each other to live as seems good to themselves, than by compelling each to live as seems good to the rest.

Creating a legal duty to rescue would not only run into resistance on philosophical grounds. There would also be practical objections. How would we enforce such a rule? Where would we draw the line? Must a person attempt to rescue even if it would be terribly dangerous? Should a rescuer be compensated by the victim for any injuries suf- fered? Who, in a crowd, are the potential rescuers: The closest witnesses? Anyone at the scene? Anyone aware of the incident?

Radical Change? Lawgivers make the citizens good by training them in habits of right.… This is the aim of all legislation, and if it fails to do this it is a failure.

— ARISTOTLE, NICHOMACHEAN ETHICS

While the Anglo-American tradition emphasizing individual freedom of choice is a major reason our legal system demands no duty to rescue, law professor Steven Heyman argues that recognition of a duty to rescue is in line with that very tradition. His article

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appeared in a communitarian journal. Communitarians are concerned with reviving the notion of shared responsibility and interconnectedness at a time when, they believe, too many people view social change solely in terms of defining and enforcing an ever- growing number of personal rights.

He begins his essay by mentioning two famous examples in which bystanders chose to ignore those who desperately needed help. The first incident happened one night in March 1964. Twenty-eight-year-old Kitty Genovese was returning home to her apart- ment complex in a quiet, respectable neighborhood in Queens, New York. Manager of a bar in another part of Queens, she was arriving late; it was 3:00 a.m. As she left her red Fiat and began walking to her apartment, she saw a man walking towards her. He chased her, caught up with her, and attacked her with a knife. She screamed, “Oh my God, he stabbed me! Please help me! Please help me!” People opened windows, someone called out, “Let that girl alone,” and several lights went on. But as more than a half hour passed, none of the witnesses did anything more. The killer had time to drive away, leav- ing Ms. Genovese collapsed on the sidewalk, and then to drive back to stab her again. Thirty-eight people later admitted they had heard Ms. Genovese’s screams, but no one even called the police until after she was dead.3

The second incident happened many years later. In 1983, in New Bedford, Massa- chusetts, a young woman went into a bar to buy a pack of cigarettes. She was gang-raped on the pool table while customers watched and even cheered.4

THE DUTY TO RESCUE: A LIBERAL-COMMUNITARIAN APPROACH Steven J. Heyman5

Rescue and the Common-Law Tradition

Consider two notorious incidents: the 1964 slaying of Kitty Genovese and the 1983 New Bedford tavern rape. In both cases, neighbors or bystanders watched as a young woman was brutally and repeatedly assaulted, yet they made no effort to intervene or call for help. Under current doctrine, their inaction breached no legal duty, however reprehensible it may have been morally.

Suppose, however, that a police officer had been present at the time. Surely we would not say that the officer was free to stand by and do nothing while the attack took place. The state has a responsibility to protect its citizens against criminal vio- lence. It performs this function largely through its police force. An officer who unjus- tifiably failed to prevent a violent crime would be guilty of a serious dereliction of duty, which might result in dismissal from the force or even criminal prosecution. Thus the officer would have a legal duty to act. But what if there is no officer on the scene? In that situation, the state can fulfill its responsibility to prevent violence only by relying on the assistance of those persons who are present.

Contrary to the conventional view, there is strong evidence that, for centuries, the common law of England and America did recognize an individual duty to act in precisely such cases. According to traditional legal doctrine, every person was

3 A. M. Rosenthal, Thirty-Eight Witnesses: The Kitty Genovese Case (Berkeley, CA: University of California Press, 1999). 4 This incident is the basis of a film, The Accused, with Kelly McGinnis and Jody Foster. 5 Steven J. Heyman, “The Duty to Rescue: A Liberal-Communitarian Approach” from The Responsive Com- munity 7(3), Summer 1997, pp. 44–49. Reprinted by permission.

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entitled to protection by the government against violence and injury. In return for this protection, individuals had an obligation not merely to obey the law, but also, when necessary, to actively help enforce it.… Thus, individuals at the scene of a violent crime had a duty to intervene if they could do so without danger to themselves. If they could not, they were required to notify the authorities.

With the development of modern police forces in the 19th century, this tradition of active citizen participation in law enforcement gradually declined. In recent dec- ades, however, it has become increasingly clear that effective crime prevention requires the efforts of the whole community—a recognition that is reflected, for example, in neighborhood crime watch and community policing programs.…

Rescue and the Liberal Tradition

A duty to prevent violence finds support not only in the Anglo-American common-law tradition but also in liberal political theory. According to Locke and other natural rights theorists, individuals enter into society to preserve their lives, liberties, and proper- ties. Under the social contract, citizens obtain a right to protection by the community against criminal violence. In return, they promise not only to comply with the laws, but also to assist the authorities in enforcing those laws. In this way, Locke writes, the rights of individuals come to be defended by “the united strength of the whole Society.” In On Liberty, John Stuart Mill recognizes a similar duty on the part of indi- viduals.… Mill agrees “that everyone who receives the protection of society owes a return for the benefit,” including an obligation to bear one’s fair share of “the labours and sacrifices incurred for defending the society or its members from injury.”

In addition to endorsing a duty to prevent violence, liberal thought suggests a way to expand that duty into a general duty to rescue. According to liberal writers, the community has a responsibility to preserve the lives of its members, not only against violence but also against other forms of harm. For example, Locke, Black- stone, and Kant all maintain that the state has an obligation to relieve poverty and support those who are unable to provide for their own needs. In Locke’s words, both natural right and “common charity” teach “that those should be most taken care of by the law, who are least capable of taking care of themselves.” Of course, this is also a major theme in contemporary liberal political thought.…

Rescue and Communitarian Theory

Communitarian theory supports and deepens the argument for a duty to rescue. On this view, community is valuable not merely as a means to the protection of individ- ual rights, but also as a positive human good. Human nature has an irreducible social dimension that can be fulfilled only through relationships with others. The community has a responsibility to promote the good of its members. But this can be fully achieved only within a society whose members recognize a reciprocal obligation to act for the welfare of the community and their fellow citizens. A core instance is the duty to rescue.

Of course, some might doubt whether contemporary society is characterized by the kind of community required for a duty to rescue. Community is not simply given, however; it must be created. Common action, and action on behalf of others, plays a crucial role in creating relationships between people. Thus the adoption of a duty to rescue might not merely reflect, but also promote, a greater sense of community in modern society.

The Contours of a Duty to Rescue

Advocates of a duty to rescue usually propose that it be restricted to cases in which one can act with little or no inconvenience to oneself. But this does not go far enough. Because its purpose is to safeguard the most vital human interests, the duty should not be limited to easy rescues, but should require an individual to do

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anything reasonably necessary to prevent criminal violence or to preserve others from death or serious bodily harm. Rescue should not require self-sacrifice, however. Thus the duty should not apply if it would involve a substantial risk of death or seri- ous bodily injury to the rescuer or to other innocent people.

This responsibility falls on individuals only in emergency situations when no offi- cer is present. Moreover, the duty would often be satisfied by calling the police, fire department, or rescue services.…

In performing the duty to rescue, one acts on behalf of the community as a whole. For this reason, one should receive compensation from the community for any expense reasonably incurred or any injury suffered in the course of the rescue. Any other rule would mean that some people would be required to bear a cost that should properly be borne by the community at large, simply because they happened to be at a place where rescue was required.…

Far from diminishing liberty, the recognition of a duty to rescue would enhance it by strengthening protection for the most basic right of all—freedom from criminal violence and other serious forms of harm. And by requiring action for the sake of others, a duty to rescue also has the potential to promote a greater sense of commu- nity, civic responsibility, and commitment to the common good.

QUESTIONS 1. According to the writer, a change in our law—a new duty to rescue—might

change the way people think, heightening their awareness of one another as members of a community, and leading them to be more responsive to one another. Do you think law can have such power? Can you think of any examples where a change in the law seemed to improve the moral climate of our society?

2. Do you think law should be used as a tool for shaping a shared moral climate? Why or why not?

WHEN RESCUE IS REQUIRED

The law recognizes a number of exceptions to the “no duty to rescue” rule. Many states impose criminal penalties, for example, for failing to report child abuse or an accident in which someone is killed. Only a few states—Rhode Island, Vermont, Wisconsin, Hawaii, and Minnesota—impose a more general duty to rescue by stat- ute. In theory, violators would be fined. In fact, however, the statutes are rarely, if ever, invoked.

One means of finding a legal duty to rescue is through contract law. Certain persons assume contractual responsibilities to help others or to prevent them from being harmed. A lifeguard, for instance, cannot ignore a drowning swimmer, nor can a firefighter let a building burn. While a person could be disciplined or fired for refusing to attempt rescue under such circumstances,6 to commit to a dangerous job such as policing or firefighting is itself a statement of willingness to risk one’s life to save lives—to risk rescue as a part of an ordinary day’s work. In fact, of the 343 firefighters killed on September 11, 2001, 60 were not on duty that day, but responded to the alarm as if they were.

6 For reasons of public policy, however, civil lawsuits against police, fire, or other government workers are rarely permitted.

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When people—trained or not—volunteer to rescue, they become legally bound to take reasonable care in finishing what they have started. In one case, an 80- year-old woman had a stroke while she was shopping at a department store. A sales- clerk led her to the store infirmary and left her unattended for six hours. By the time help arrived, her condition was irreparably aggravated, and the store was held liable for failing to carry through on the rescue attempt.7 Liability is imposed in this kind of case for making a bad situation worse: The person in trouble may be lulled into a false sense of security, believing they will be helped, and other would-be rescuers may not realize assistance is needed.

Another exception to the “no duty to rescue” rule applies when a person has endangered another, even indirectly, or has participated in creating a dangerous sit- uation. When professionals in a mental institution release a violent psychotic with- out taking measures to make certain he will be properly medicated, they may be putting members of the public in danger. When organizers of a rock concert sell general admission tickets to a performance of a wildly popular group and do not provide lane control, they may be held responsible for the fatal result as fans are suffocated in the crush to gain entry.

Finally, a set of exceptions is triggered when there is a “special relationship” be- tween the person who needs help and the person who must take responsible action. Special relationships may be based on their custodial, rather intimate nature, such as that between a parent and child or between a teacher and young pupils. Or such relationships may exist because of an economic connection, such as that between an employer and employees or between a provider of public transportation and its passengers. In either type, the relationship involves a degree of dependency. The law allows those who are dependent to expect reasonable protection from harm and requires the more powerful to provide it. A father must make some effort to save his drowning infant, and a city transportation system must take reasonable steps to protect its subway riders from criminal attacks.

Ethical Decision Making: A Toolkit

We have been looking at the way U.S. law addresses the question of balancing two important values, that of freedom—the freedom of individuals like Mr. Bigan to choose not to help in an emergency, for example—and that of responsibility—the responsibility we might have to respond to one another in certain circumstances.

Suppose a business decision, although legal and profitable in the short term, causes harmful effects on people and on the natural environment. Again, there is interplay between freedom and responsibility, but here we will focus more on ethics than on law.

Ethics and the Gulf Oil Spill of 2010 The tragedy unfolding on our coast is the most painful and powerful reminder yet that the time to embrace a clean energy future is now.

—PRESIDENT BARAK OBAMA, (JUNE 15, 2010)

7Zelenko v. Gimbel Bros. Inc., 287 N.Y.S. 134 (1935).

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BP CEO Tony Hayward said he would just like to get his life back. You know, I say give him life plus 20.

—JAY LENO

While much ethics is indeed about individual behavior, the best even of that has considered individuals as they are situated in various nested relationships such as family, nation, class, gender, and humanity. Any rules for individuals that ignore context and situation are probably well ignored.

—HENRY SHUE

One of the largest oil companies in the world, BP (formerly British Petroleum) is a mul- tinational corporation headquartered in London. It has subsidiaries worldwide, including two in North America. BP possesses drilling rights in the Macondo Prospect, off the coast of Louisiana in the Gulf of Mexico. In order to access the crude oil there, BP leased a rig from Transocean, the world’s biggest offshore drilling company. With more than 26,000 employees and a fleet of 136 vessels, Transocean operates in some 30 countries. BP also hired Halliburton, the second largest oilfield services company, to cement and seal off the well once drilling was complete. Halliburton employs more than 50,000 peo- ple and provides services in 70 countries.

While all three of these mega-firms would play a part in this scenario, it was BP’s responsibility to address safety. And safety was certainly at risk. In recent years, as the world’s appetite for oil has grown and as the political complexities of obtaining it in the Middle East have increased, companies like BP have been focusing on new sites and new technologies for oil extraction. Since the 1990s, they have been exploring deep sea drilling in the Gulf of Mexico and elsewhere. Deepwater drilling in the Gulf is particu- larly hazardous due to the high-pressure mix of oil and natural gas trapped in pockets within a twisted landscape of salt on the seabed. Huge bubbles of gas can move suddenly to the surface with volcanic force. According to geophysicist Roger Anderson of Colum- bia University’s Lamont-Doherty Earth Observatory, many of the ultra-deep wells in the Gulf of Mexico are full of natural gas; the dangerous bubbles that come up the pipes are called “kicks.” Anytime a company enters a new deposit, he says, “it’s unknown what you’re going to find.”8

So BP had to consider the risk of a “blowout,” a destructive gusher of oil and/or natural gas. Industry-wide, the most commonly used safety device is a valve called a “blow-out preventer” (BOP). Located on the sea floor, it is designed to pinch through the well pipe to cut off any leak. BOPs, operated manually or automatically through a system of sensors, are not fool-proof, however. They can fail in extreme weather condi- tions, and they can clog during the cementing of a well or during an explosion.

BP could have installed a so-called “acoustic cut-off switch,” which would activate the BOP remotely in case the rig was damaged or destroyed. Although these switches were legally required in Norway and Brazil, they were not mandated in the United States. In fact, for a decade, while U.S. lawmakers considered this safety option, BP had been lobbying hard against any such regulation, arguing that acoustic switches were too expensive—$500,000 each—and would sometimes cause unnecessary shut-downs. These would be costly too: BP’s rental rate for Transocean’s rig, for instance, was about $500,000 per day.

8 Faye Flam, “The Dangers of Deep-Sea Oil Drilling,” The Philadelphia Inquirer, June 7, 2010.

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Although Transocean would be drilling at greater than usual depths in the Gulf of Mexico, BP was also aware that blowouts rarely occurred, and that the first line of defense, the BOP, would normally control any blowout.

As we know, the unlikely happened. On April 20, 2010, there was an explosion on Deepwater Horizon. The rig burned and sank over the next two days; 11 Transocean workers were killed and 17 others were injured. A leak 5,000 feet below sea level began to gush oil, ultimately releasing an estimated 4.9 million barrels of crude oil into the Gulf of Mexico over 87 days before it was capped. This was the largest marine oil spill in history.9

We now ask: Were the decisions made by BP before, during, and after the Gulf Spill ethical?

There are many different ways to answer this question. Ethical analysis, unlike much quantitative analysis, can be a messy, complex business, without a clear and definitive outcome. However, we do have tools at our disposal to help us make these complicated assessments.

First, let’s turn to an approach that will be familiar to you. It amounts to the bed- rock principle of strategic management; it underlies the entire free market system. This value system is so embedded in both business theory and business reality that we might fail to recognize it as not only an economic perspective, but also as an ethical one.

Free Market Ethics A basic assumption of classic microeconomic theory is that the overriding goal of any business is to be profitable. As trustees (fiduciaries) of the shareholders, managers have a primary responsibility to try to improve the value of shareholder investment. In fact, under the law of corporations, managers are answerable to the owners of a company— its stockholders—if they fail to take reasonable care in running it.

Milton Friedman, a well-known free market economist and a proponent of this view, has written:

In a free enterprise, private property system, a corporate executive is the employee of the owners of the business. He has a direct responsibility to his employers. That responsibility is to conduct the business in accordance with their desires, which gen- erally will be to make as much money as possible while conforming to the basic rules of society, both those embodied in law and those embodied in ethical custom.… In a free society, there is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.10

Friedman argues it is wrong for managers to use corporate resources to deal with problems in society at large. Decisions regarding what might be best for society should be made in the political arena, and implementation of policies agreed upon there should be funded by tax dollars. For managers to make those kinds of decisions themselves, and to use corporate monies to pay for them, is the equivalent of theft—theft of stockholders’ resources.

9 Information for this introductory background has been gleaned from pp. 1–3 of Tim Lemper, Josh Bruce, and Mimi C, “The BP Spill in the Gulf of Mexico: A Case Study in U.S. and International Legal and Ethical Issues,” presented at the Academy of Legal Studies in Business, August 2010 in Richmond VA. 10 “The Social Responsibility of Business is to Increase its Profits,” New York Times, September 13, 1970.

Law, Ethics, Business 11

Let’s apply Friedman’s thinking and free market ethical theory to BP’s decision. First of all we might ask, is deepwater drilling for oil in the Gulf of Mexico likely to be profit- able for BP?

Consider demand: At present, global consumption of oil is at 80 million gallons a day, and an upward trend continues, as people in developing nations learn to want what the developed world has—goods and services that are fossil fuel dependent—and are increasingly able to afford those habits of consumption. And while renewable energy is expected to cut into the virtual monopoly of fossil fuels, there remains a great deal of uncertainty as to when and to what extent this will occur.

Consider supply: About ten per cent of the world’s more than 1.3 trillion gallons of oil reserves—over 800 billion barrels—lies miles under the ocean floor. Given the combi- nation of strong global demand for hydrocarbons, robust oil prices, and technical advances that have allowed companies to go further offshore and thousands of feet beneath the seabed to extract energy resources, deepwater oil and gas production has expanded rapidly in recent years—up nearly two-thirds since 2000. Most of the new areas for exploration are in the so-called “golden triangle,” along the coast of Western Africa, South America, and the Gulf of Mexico—their once-joined geological formations having been separated by the continental drift that became the Atlantic Ocean. And while deepwater oil comprises a fraction of total global production, its potential is vast. Financial analysts forecast a vigorous future for it in the next 10 to 15 years.11

With an estimated 30-40 billion barrels in oil and gas reserves, the Gulf of Mexico represents a development opportunity for companies like BP, a place where they can enjoy close proximity to the United States and low offshore tax rates. By 2000-2001, deepwater drilling accounted for the majority of oil production in the Gulf. In 2009, BP announced it had located a giant oil deposit about 200 miles south of Louisiana, one of a dozen such discoveries.12 BP is the most active oil firm in the area, but it is not alone; by the end of 2009, the deep waters of the Gulf of Mexico were dotted with more than 35 drilling vessels.13

Considering overall strategic direction, then, it seems that continuing its deepwater oil exploration and production work in the Gulf will sustain profits and give BP a com- petitive advantage.

Using Friedman’s analysis, we also need to ask whether the BP’s actions were legal. Now that the calamitous spill has happened, the regulatory environment is in flux. The Obama administration imposed a moratorium on deepwater14 drilling in the Gulf of Mexico pending safety studies, in summer 2010. It was lifted in October 2010, as new safety regulations were put in place. However, at the time when BP made its decision not to install the acoustic back-up switch, there was no legal requirement to do so. Milton Friedman would contend that corporations have every right to voice their opinions by, for example, lobbying vigorously—as BP did—against more costly safety mandates. Friedman would point out that corporate political activity should focus on increasing

11Manouchehr Takin, a senior analyst at the Centre for Global Energy Studies (CGES), quoted in Sarah Arnott, “Shell defends deepwater oil drilling, as profits soar,” The Independent, July 30, 2010. http://www.inde pendent.co.uk/news/business/news/shell-defends-deepwater-oil-drilling-as-profits-soar-2039028.html. Last visited August 7, 2010. 12 Deepwater Oil Exploration, Wikinvest http://www.wikinvest.com/concept/Deepwater_Oil_Exploration. Last visited August 7, 2010. 13 Ben Rooney, “BP Biggest Player in Deepwater Oil,” June 14, 2010. http://money.cnn.com/2010/06/11/news/ companies/BP_deepwater_drilling/index.htm. Last visited August 7, 2010. 14 Defined as drilling more than 1,000 feet under the seabed.

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shareholder value. Corporate resources should be deployed solely to increase the value of shareholder investment. The more expensive acoustic switch would only make sense, in this analysis, if it would enhance profits.

With perfect hindsight, we can see that it might have done so. The back-up switch— operated remotely to activate the BOP—might have prevented the explosion—the deaths, the injuries, the lost rig—and might have prevented the spill. Again, with perfect hind- sight we can see that such a choice would have saved BP at least $20 billion in clean-up costs, untold amounts in criminal and civil lawsuits, and severe reputational damage with inevitable consequences to the bottom line. Through the summer of 2010, video images of oil spewing into the water were a constant, then-CEO of BP Tony Hayward complained that he “wanted his life back,” and as BP’s shockingly poor safety record was being uncovered, public outrage reached a tipping point. From boycotts of BP gas stations to Internet contests to rename the company that had recently branded itself as “Beyond Petroleum,”15 this outrage was palpable. At least in the short term, BP lost stock value as a result of the spill; for the first time the company was unable to pay investors dividends, halting them until 2011.16 By mid-summer 2010, the company had lost more than $100 billion in market value, the worth of its stock halved since the rig explosion.17

Although the company has pockets deep enough to pay the legal claims against it and cleanup costs, and although the stock price will probably rebound, the spectacle of the 87-day gusher will leave BP with a lasting stigma. As oil gushed into the Gulf, there was talk of its vulnerability to a takeover by rival Exxon Mobil, and news that the British government would not intervene to prevent such a move.18

While these cascading negative effects are now evident, at the time BP made the decision about the back-up switch a catastrophic oil spill was an outside possibility. And even factoring in such an event, BP might have gone ahead as planned. The com- pany had been generating strong profits—$14 billion in 2009—and would survive even an epic disaster. The public’s attention span is notoriously short. Outrage can be forgot- ten; the need for oil is an American mantra. BP management might have noted how Exxon Mobil, responsible in 1989 for (until the Gulf spill) the biggest oil spill in U.S. history, had managed to stave off claims through vigorous defense litigation and had still not made payments to commercial fishermen nearly 20 years later. So even if BP foresaw the possibility of a major spill, moving forward with the Deepwater Horizon contract and continuing deepwater oil production in the Gulf of Mexico appeared be an ethical choice in microeconomic terms, well-aligned with shareholder interests.

With the this approach, there would be no need to be concerned with the interests of other stakeholders—except to the extent that these too might impact profits. BP’s decision would not be made out of concern for the families whose livelihoods might be dependent on tourism or fishing in Gulf waters, in other words, or out of concern for the thousands of birds and sea creatures at risk should a spill occur. In any case, just before Deepwater Horizon exploded, the potential for calamity might have seemed vague and

15 Some entries to the renaming contests: Blame Proof, Bad People, Black Pelican, Best Polluter, Behind Politics, Breaking Promises. For more: http://www.greenpeace.org.uk/files/tarsands/index.html Last visited August 8, 2010. 16 “BP Stops Dividend Payments During Oil Spill,” CBS News Business, June 16, 2010, http://www.cbsnews. com/stories/2010/06/16/business/main6588695.shtml. Last visited August 8, 2010. 17Michael Kunzelman, “BP has lost more than $100B in value since oil spill started,” USA Today, http://www. usatoday.com/money/industries/energy/2010-06-25-bp-stock_N.htm. Last visited August 8, 2010. 18 James Moore, Bloomberg Businessweek, July 12, 2010. http://www.businessweek.com/globalbiz/content/jul2010/ gb20100712_341314.htm. Last visited August 8, 2010.

Law, Ethics, Business 13

unlikely, while what was sharply in focus was the fact that BP was 43 days behind sched- ule. Delays had already cost the company more than $21 million in rig rental rates. It made sense, according to the free market approach to ethics, to push on.

Notice how this analysis meshes with a belief in expanding freedom of choice for individuals—and in minimizing government interference with that freedom. Such think- ing, which we saw supporting the “no duty to rescue” rule, has been key in the develop- ment of both our market economy and our legal system. The underlying assumption is that we can best progress as a society if we grant as much leeway as possible to private preference, allowing people (and private associations of people, like corporations) to do what they think best with their own resources—as long as they do not infringe of the rights of others to do the same.

Utilitarianism: Assessing Consequences Through much of Western history, the most influential ethical reference point has been religious; the rules to be followed were God-authored and were “written on men’s hearts.” It was a radical break with tradition, then, for eighteenth-century philosopher and social thinker Jeremy Bentham to suggest an entirely new frame of reference. Ethical behavior, he argued, was not a matter of pleasing God, but of bringing about as much happiness as possible for the greatest number of people. According to Bentham, the definitive moral standard is that of “utility,” requiring us to consider the consequences of an act (or a social policy) for all those affected by it. One of Bentham’s followers, nineteenth-century philosopher John Stuart Mill, would become the best-known propo- nent of this ethical approach, known as utilitarianism.

According to the principle of utilitarianism, the right way to behave in a given situ- ation is to choose the alternative that is likely to produce the greatest overall good. Cost- benefit analysis, the sort of efficiency calculation that is common to business decision making—what BP might have used to assess the profitability of deepwater oil produc- tion—is based on notions of utility. As an ethical theory, however, utilitarianism asks us to compare the harms and benefits of an action not just for the decider, but for all who will be affected by the decision. In the BP scenario, this would mean, at the least, not only weighing the effects of the decision on BP’s investors, but also looking at the consequences to other important stakeholders, including, for example, the workers who were killed or injured in the Deepwater Horizon explosion, the people living in the coastal areas of the Gulf of Mexico, and the wide array of living creatures contaminated by the oil, and the American public overall.

In a utilitarian analysis, we will want to evaluate both short and long-term conse- quences to these stakeholders, paying close attention to the size of each group, the nature of the effects on each group, and the likelihood that particular consequences would actu- ally ensue. Ultimately, if the benefits that flow from a decision appear to outweigh the harms, we would identify that decision as ethical. Let’s try to make this kind of complex utilitarian calculation in the Gulf scenario.

We have already assessed the consequences for one stakeholder group—BP share- holders—in the discussion above. Certainly this is a significant group, with major inves- tors including large British insurance companies, U.S. money management firms, Norwegian, Kuwaiti, Chinese and Singaporean government-controlled investment funds. Americans own half of BP’s stock, and many British pension funds are dependent on the fortunes of the company. Significant loss of stock value would have ripple effects within thousands of individual lives. Yet as we have explained, it is likely that BP’s stock will regain value as time goes by. As of mid-July 2010, it was estimated the spill would cost $37 billion in clean up, fines, and compensation claims. Assuming BP alone (and

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not its partners) pays for all of that, the final sum would be more like $29 billion after tax deductions, an amount that would not strain BP’s finances; the company was expected to generate $30 billion in 2010. Its “proven” oil and gas reserves were worth $220 billion, and the company held additional assets and equity worth $40 billion. Clearly, BP will not be going bankrupt, and can withstand the burden of costs related to the spill.19 In sum, although we cannot forecast them perfectly, the kinds of conse- quences that shareholders might suffer here are financial, are spread out over thousands of individuals, and may be insignificant in the long-term.

As we turn to other stakeholder groups, we notice that they are affected much more negatively. Most tragically, 11 people were killed and 17 injured as the Deepwater Horizon exploded and sank. Although the number of people in this group is small, losses of life and health weigh heavily on the scale as we assess the consequences of BP’s decision to forego the back-up switch. Of course at the time the decision was made, the failure of the BOP may have seemed unlikely, and utilitarian analysis would factor that in, but it would also factor in the extent of the possible harm, so extreme in this case.

Many have described the post-spill Gulf as a gigantic chemical experiment, with as- yet unknown effects on its delicate ecosystem. We know that, from the well-head 5,000 feet below the surface, nearly 5 million gallons of crude oil gushed into the Gulf for about three months. We also know that BP sprayed 1.8 million gallons of a chemical dispersant on the spill, causing much of it to break into tiny droplets and form several massive “plumes” with oil contaminants spiraling through the water column. As this book was being written, in the summer of 2010, only some of the environmental conse- quences of this disaster were evident—others had yet to unfold.

By July 2010, one third of the Gulf’s fishing area—more than 80,000 square miles—had been closed,20 affecting the livelihoods of thousands in coastal Louisiana and Mississippi. Here is a glimpse into what happened as nearly 2 million acres of Louisiana’s oyster beds were declared off-limits:

Hundreds of oystermen have stopped fishing. Processors have shut down. Gulf res- taurants have closed, and chains such as Red Lobster have yanked the briny morsels off their menus.… That’s only the beginning. Scientists fear generations of larvae and mollusks could be wiped out, destroying harvests for years.

After the Deepwater Horizon rig explosion, … Louisiana officials decided to use Mis- sissippi River water to push back encroaching oil. Culverts built into the river’s levee system were opened, redirecting freshwater into saltwater estuaries. The resulting change in salinity can be fatal to the mollusks. State scientists started checking beds two weeks ago. Their early findings: a wide spread of dead oysters.21

This article goes on to explain how deeply-embedded oyster harvesting (and oyster- appreciating) is in the local culture (“The oyster is to Louisiana what corn is to Iowa or

19 John Schwartz, “Weighing the Possibility of Bankruptcy for BP,” New York Times July 10, 2010; “Tallying BP’s Bill on the Gulf Coast,” New York Times, July 14, 2010. 20 Jeff Goodell, “The Poisoning,” Rolling Stone, July 21, 2010. The impact has been huge on the Gulf’s $2.4 billion seafood industry. 21 P.J. Huffstutter, Nicole Santa Cruz and Ashley Powers, “Oil Spill Threatens Gulf Oyster Industry, Liveli- hoods, Seattle Times, July 18, 2010. http://seattletimes.nwsource.com/html/nationworld/2012391634_oysters19. html. Last visited August 11, 2010.

Law, Ethics, Business 15

oranges to Florida—part sustenance, part identity.”), and how important the $1 billion oyster industry has been to a region recently ravaged by Hurricane Katrina. While loss to livelihood is one of the consequences of the Gulf Spill for which people can make compensable claims, there is some question about how quickly they will be paid. (Recall the decades-long struggle of Alaskan fisheries against Exxon Mobil for recovery costs.) And if fish and seafood supplies are tainted long term—or even perceived to be—conse- quences will be both profound and impossible to measure. This is one of the challenges of the utilitarian calculus: How do we put a number on the loss of a way of life? These kinds of ripple-effects can be felt most deeply by the most vulnerable. Along the Gulf coast, African American and immigrant communities which have recently been battered by Hurricane Katrina have been hit especially hard, both economically and psychologi- cally; children in the area are suffering higher rates of depression since the Spill.

The Gulf is one of the most productive natural environments on the planet. Every spring, great migrations of fish and birds arrive there to spawn and lay their eggs. The area nurtures 1,200 fish species, millions of migratory birds, mammals like bottlenose dolphins, and endangered creatures like sea turtles. One of the most tragic aspects of the oil spill was its timing, in the middle of “biological spring,” just as the Gulf had burst into new life, with birds returning to nest and baby pelicans cracking out of the eggs in their rookeries. The oil spill has already killed hundreds of birds, dolphins, and sea turtles—we know because we have found and counted them.22 But what we still don’t know, and won’t know for many years, is how the enormous spill is affecting and will affect the creatures at the lower end of the food chain—the smaller fish, their eggs and larvae, the “filter feeders” like oysters which are nourished by the water they pump through themselves, down to the tiny plankton that is the basis for the entire eco- system. There is tremendous uncertainty as to the damage that is occurring under the surface, within the huge plumes of water mixed with oil. Experts worry that toxicity will be locked into the food chain for years, doing damage that will be difficult to trace back to BP. As Mark David, director of Tulane University’s Institute on Water Resources Law & Policy put it, “If you end up with a bunch of dead fish five years from now, it becomes very hard to prove BP killed them.”23 It is often difficult, in a utilitarian anal- ysis, to untangle the various harms—and the benefits—that flow from a complex situation.24

According to Jeremy Bentham, when we evaluate consequences for those affected by an action, we should include all those who are capable of experiencing pain or pleasure. Human beings can experience pain or pleasure, but so can all sentient beings—all are con- scious of such feelings. The salient inquiry, according to Bentham, is not “can they rea- son,” but rather “can they suffer?” For the purposes of utilitarian analysis, then, we can

22 As of July 2010, rescue workers had found dead, or alive but oiled, some 4,000 birds, 700 sea turtles, dozens of dolphins and a whale. This count excludes the hundreds of birds that have been left in order to avoid dis- turbing their nesting areas. 23Matthew Brown, “Teams Begin to Tally Losses and Costs of the Oil Spill,” The Philadelphia Inquirer, July 32, 2010. 24 In mid summer 2010, scientists detected several plumes between 2,000 and 4,000 feet below the surface. These huge—15 miles long and 5 miles wide, in one instance; 22 miles long and 6 miles wide in another— rivers of oil are likely to affect the Gulf through two mechanisms: The first is oxygen depletion. By May 2010 scientists were estimating 30 percent less oxygen inside the plumes. The second is toxic after-effects. We have no idea how these gigantic oil-contaminated undersea rivers will affect fish and other sea creatures, nor for how long. As Lisa Levin of the Scripps Institution of Oceanography puts it, “All the zones of life interact, and now they’re probably all being hammered.” Sharon Begley, “What the Spill Will Kill, Newsweek, June 14, 2010.

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assume that now, and for many years to come, there will be considerable suffering on the part of vast numbers of living creatures related to the oil spill of 2010. Again, measuring that pain would be an impossible exercise, but we can sense its scope and magnitude.

There are a myriad other effects of the Gulf spill that are now or will someday be felt, most of them negatively, by other stakeholders. The tourism business in Florida has taken a big hit, for example, and although BP will eventually pay claims, the damage to perception cannot be easily repaired, and the Florida coast may endure years of economic aftershock.

As we have traced the after-effects of BP’s decision not to employ a back-up switch, we see mostly harmful consequences. But if we widen our lens to examine BP’s strategic decision to be a major participant in deepwater oil extraction in the Gulf of Mexico, we can detect an array of benefits. The U.S. economy is deeply reliant on energy, and on oil. To the extent that the U.S. oil supply is compromised, the economy itself is compro- mised. The Gulf is the source of 30 percent of the crude oil consumed in the United States,25 and as we have seen, BP is the biggest player in the deepwater oil production in the Gulf. There can be no doubt that if BP discontinued its efforts, we would see neg- ative reverberations for millions of U.S. citizens, who would have to pay more to build, heat and cool homes and businesses, to purchase food, and to fill the tanks of their SUVs, for example.

In late May 2010, as BP’s pipe was spewing thousands of gallons of crude oil a day, the Obama administration imposed a six-month moratorium on new deepwater projects and suspended operations on more than 30 exploratory wells. In response to industry complaints, on June 22, 2010 District Court Judge Martin Feldman overturned the order, describing the “irreparable harm” it would cause. An excerpt from his opinion gives us a glimpse of the type of injury that might result should BP turn away from its Gulf oil development strategy:

Gulf of Mexico drilling activities rely upon a vast and complex network of technol- ogy, assets, human capital and experience. Indeed, an estimated 150,000 jobs are directly related to offshore operations. The government admits that the industry pro- vides relatively high paying jobs in drilling and production activities. Oil and gas production is quite simply elemental to Gulf communities. There are currently approximately 3600 structures in the Gulf, and Gulf production from these struc- tures accounts for 31% of total domestic oil production and 11% of total domestic, marketed natural gas production.… [D]eepwater oil exploration and production in the Gulf … employ[s] over 11,875 people.26

Our utilitarian analysis, as it attempts to address a range of stakeholders and the full range of consequences to them, leaves us with a more fine-grained picture but also with a host of uncertainties. On balance, it is no longer clear that BP’s decisions were ethical. The harms to human and environmental stability caused by the spill seem to weigh heavily against the benefits to the local and U.S. economy of deepwater drilling itself.

Deontology: Rights and Duties In contrast to the utilitarian concern with consequences, and with maximizing social welfare, deontological ethics is marked by steadfastness to universal principles—for example, respect for life, fairness, telling the truth, keeping promises—no matter what

25 Erwin Seba, “Nearly Half Gulf of Mexico Oil Production Shut,” The Economist, July 25, 2010. http://www. reuters.com/article/idUSTRE66O24A20100725. Last visited August 12, 2010. 26Hornbeck Offshore Services et.al. v. Salazar, 2010 U.S. Dist. LEXIS 61303 (E.D. La., June 22, 2010)

Law, Ethics, Business 17

the consequences. At the core of this approach to making ethical choices is the under- standing that moral action should be guided by certain overriding rights and duties.

The most famous deontological thinker, eighteenth-century German philosopher Immanuel Kant, believed that human beings could reason their way to a set of absolute rules for right behavior. A person should never lie, according to Kant, even when lying seems to produce a good result. Suppose someone running away from a murderer tells you where he is going to hide, and then the murderer rushes up to ask you where the first person went. Wouldn’t this be a good time to lie? Kant would say there is never a good time, even in this example.

Moral behavior, then, is a matter of holding, without exception, to certain principles. Kant believed that each person has the right to be treated with respect as the equal of every other, and that each person has the corresponding duty to treat everyone else with respect as an equal.

He arrived at this by means of his categorical imperatives. The first of these states that people should be willing to have the reasons for their actions become universal prin- ciples. That is, people should be willing to live in a world where an action they chose to take would be repeated for the same reasons whenever the same situation arose, even if they wound up on the receiving end of such actions.

Think of BP’s decision regarding the acoustic back-up switch. If we apply Kant’s first categorical imperative, the decision maker should ask: Would I want to live in a world where multinational corporations drilling for oil in sensitive coastal regions cut costs by forgoing the use of safer technology? Perhaps the BP decision makers would defend such decisions, but the Kantian universalizing framework asks the decision- makers to imagine themselves at the short end of the stick. What if BP’s then-CEO Tony Hayward found the English Channel—the body of water where he went to watch a yacht race in June 2010–befouled the way the Gulf was? Assuming other BP managers would be similarly upset by pollution in their home waters, in deontological terms, their actions would fall short of being ethical. We might also frame the question more broadly: “Whenever anyone is in a situation where it would be possible to save money by curtailing safety protections, what if they did so?” If BP managers valued their lives, they would not want to live in a world where this was the general rule. How would they feel stepping into a car, a subway, or an airplane?

In another formulation of the categorical imperative, Kant states that we should have respect for the intrinsic value of other people and not just use them as means to achieve our own purposes. By this Kant did not mean that people should never use other people at all. People “use” one another in mutually beneficial ways all the time. For example, in a typical contractual transaction, each party to the agreement gives something up to get what it wants. Each party “uses” the other: When you purchase gas- oline, you “use” the oil company’s product and it “uses” you to pay for it. Kant would have no objection here. Rather, he believed it was unethical for people to use others only as a means to accomplishing their own purposes, with no mutual benefit attached. So, if an oil company uses slave labor to build an oil pipeline in Southeast Asia, it would be violating this Kantian categorical. Here one party— the more powerful one—is effectively able to remove the free will of the other, to make it do what it wants the way a puppeteer pulls a marionette’s strings. What is lost—of great ethical value in deontology—is the right to autonomy, the right to make fully informed decisions for oneself about how to live one’s life.

Let’s look at BP’s decision-making immediately after the Deepwater Horizon explo- sion. First of all, although the company was using submersible robots to work on and to film the undersea gusher from the start, it would not permit scientists to have access to

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the site or to any information the company had about the leak. Meanwhile BP announced that the rate at which oil was flowing into the Gulf was relatively minimal; for the first few days after the rig exploded, it claimed the pipe was leaking 1,000 barrels (42,000 gallons) a day. A week into the spill, Sky Truth, a small nonprofit group that uses satellite images to monitor environmental crises, estimated the flow at 5,000 barrels (210,000 gallons) per day.27 The next day, the government, over BP’s objections, raised its estimate of the flow-rate to 5,000 barrels. By May 4, BP was admitting to Congress that the rate could be 60,000 barrels, the equivalent of an Exxon Valdez spill every four days.28 But throughout this time, BP had much grimmer data in hand. Internal company documents that became public in late June revealed that BP had predicted, in the case of a failure of the BOP, a flow rate “as high as 100,000 barrels per day.” Speaking to the media about this, Congressman Ed Markey, chairman of the House Select Committee on Energy Independent and Global Warming, noted that even as BP was telling the gov- ernment the leak was 5,000 barrels a day it knew better:

It was their technology; it was their spill camp, they’re the ones that should have known right from the beginning, and either to limit their liability or because they were grossly incompetent, they delayed a full response to … this disaster.29

In deontological terms, the fact that BP withheld accurate and important informa- tion, combined with its superior access to it, violated the categorical imperative. In effect, the more powerful entity in this situation was preventing other people from making fully-informed decisions about critical aspects of their lives—with the rescue of the Gulf hanging in the balance.

As BP repeatedly downplayed the size of the spill, it also argued that any attempts to measure it were both impossible and unnecessary.30 Experts sharply disputed both asser- tions. Scientists at the Woods Hole Oceanographic Institute in Massachusetts, for instance, have been using ultrasound to measure flow rates at the ocean floor for dec- ades, and were ready to apply the technique to the Gulf spill, but were rebuffed. As for the importance of calculating the size of the spill, scientists say that its size relates directly to the scope of the damage that can be expected onshore and in the ocean. Envi- ronmental groups argue that understanding the flow-rate is also the key to understand- ing how to prepare an appropriate response capacity for the future. An accurate spill-rate number, they say, should be the touchstone of any plan to deal with the next deepwater accident.31

As we examine BP’s actions from this angle, we see them falling short of several deontological principles. Kantian thinking maintains that certain fundamental rights should not be violated under any circumstances. Just as lying would never be accept- able with this approach, neither would an infringement of one of these basic rights. Primary among these is the right to life and to health. BP, in its decision regarding the acoustic back-up switch, put the lives and health of workers at risk—and as we

27 Julie Cart, “Tiny Group has Big Impact on Spill Estimates,” LA Times, May 1, 2010. 28 John M. Broder, Campbell Robertson and Clifford Krauss, “Amount of Spill Could Escalate, Company Admits,” New York Times, May 4, 2010. 29 Justin Gillis, “Size of Spill Underestimated, Scientists Say,” New York Times, May 13, 2010. 30 As BP spokesperson Tom Mueller put it on May 14, 2010: “We’re not going to take any extra efforts to cal- culate the flow there at this point. It’s not relevant to the response effort, and might even detract from it.” Doug Suttles. BP COO, Global Exploration said of the leak, “Since the beginning, we’ve said it’s impossible to get a precise number.” 31 Id., Gillis.

Law, Ethics, Business 19

know several were killed in the rig explosion. In the aftermath, as the company per- sisted in withholding spill-rate data, it hampered the response. In essence, BP was lying. Here too, the right to health was at stake, as any hope for the health of the Gulf, and of the people who depend on it for a livelihood, would rest on the best pos- sible clean-up and recovery.32

In response to the spill, BP made heavy use of a dispersant called Corexit, spraying nearly 2 million gallons on the water’s surface and injecting it at the gusher to fragment the oil. This was the first time that chemical dispersants were used over such a vast area, so the whole process was experimental. Again, BP—not the government, and not the environmental scientific community, was in control. Dispersants cause the oil on the sur- face to form small droplets and sink. The effect is to dramatically reduce the size of an oil slick.33 According to Jeff Goodell of Rolling Stone:

BP argued that dispersing the spill reduced the number of brown pelicans and sea turtles coated in oil, and prevented it from reaching fragile shorelines, where it is difficult to clean and deadly to breeding grounds for shrimp and other sea life. But the chemicals also benefited the company by effectively covering up the spill, break- ing it up into thousands of smaller slicks that don’t look so bad on the nightly news. “It’s about PR,” says Steiner, the scientist whose expertise helped contain the Valdez disaster. “It’s about keeping the oil out of sight, and out of the public mind, so fewer people really understand what is happening in the Gulf and get outraged by it.” During the Valdez response, he adds, Corexit earned a telling nickname: “Hides-it.”34

To the degree that BP’s decision on the dispersants was intended to cover up the extent of the damage to the Gulf, the company’s behavior violates Kantian principles.

One difficulty with deontology is the confusion created when different universal rights and duties crop up in the same ethical problem and seem to conflict with one another. How does one decide which absolute value should prevail? Consider the intensity of conflicting beliefs on the question of abortion. Both the right-to-life and the pro-choice factions are convinced that their points of view derive from natural rights; both embrace referents that each of them consider beyond debate, beyond com- promise. We can see this kind of conflict playing itself out in the post-spill scenario in the Gulf. While some argue we need a moratorium on deepwater drilling to ensure that safety and environmental concerns are prioritized—in line with the right to life and health—others will argue (on the same grounds) that the Gulf should be re-opened immediately to the fishing and shrimping industries, and to all extractive energy projects.

Virtue Ethics: Habits of Goodness For some critics, both the utilitarian and deontological frameworks are inadequate in a fun- damental sense; while both set forth logical bases for deciding what might be called moral minima—the floor beneath which no one should drop in terms of ethical choices—they are silent on the concept of moral excellence. They also focus on the moral acceptability of

32 Tim Webb and Ed Pilkington, “U.S. Congressman Says Company’s Worst-case Assessment of Leak was 20 Times Higher Than Public Estimate,” The Guardian, June 20, 2010. 33 Because the surface oil was greatly reduced by the dispersants, collecting it by skimming was more difficult. Only 67,000 barrels were skimmed. 34 “The Poisoning, July 21, 2010.

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actions. Virtue ethics, on the other hand, directs our attention to what human beings are capable of being, on how they can cultivate the habits of good character that will naturally lead them to their fullest potential.

This strand of thinking derives from Aristotle, who argued that people develop their moral abilities, called virtues, through training, by being repeatedly exposed to demon- strations of decent behavior within families and communities. We learn to become cou- rageous, generous, just, honest, cooperative, and cheerful gradually, as we become habituated to living in social settings where these qualities are exhibited and valued. Ethics, then, is not a matter of teasing out the correct choice given a series of knotty dilemmas; it is instead a lifelong conditioning process. In harmonious relationship with their communities, people thrive, learning the habits that allow them to excel at everything they are capable of doing. In a sense, they assimilate habits of generosity, temperance, fairness and courage the way a chameleon takes on the colors around itself. People who have been raised within a virtuous community are able to behave virtuously, applying ethical principles to concrete situations in a rather seamless and natural way.

Virtue ethics does raise its own set of questions, however. What does it mean to define moral character in term of one’s community? What community? At present, too many people are living in family environments in which relatedness endures in spite of severe economic and psychological stresses. Half the population of the world lives in poverty. If children grow up in hardship, where the natural environment is harshly degraded and the social fabric is weakened, does the transmittal of virtuous habit become a luxury? If families cannot effectively teach virtue to their young, what are the alterna- tives? Schools? Religious communities? How do we judge which moral community is best?35 And what do we mean by community in the business context? Where is the com- munity touchstone in the Gulf Spill scenario?

To answer this question about a large company like BP, we must examine what is called “corporate culture.” Here one scholar describes what is meant by the culture of an organization:

The pattern of basic assumptions that a given group has invented, discovered, or developed in learning to cope with its problems of external adaptation and internal integration, and that have worked well enough to be considered valid, and, therefore, to be taught to new members as the correct way to perceive, think, and feel in rela- tion to those problems.

More colloquially, a company might describe its culture as “the way we do things around here.”

35 Julie Ragatz, Associate Director of the Center for Ethics in Financial Services at The American College, answers the question this way: “The virtuous person is one who thrives mentally, physically and in community with others (socially). [No matter where they have been raised], people who are ungenerous and unjust will not get along with other people. People who lack courage will be anxious and fearful, people who are intem- perate will be physically sick. People who are rageful are ill in all aspects. While there are differences among communities, most agree that there is a core set of virtues rooted in the sort of beings we are—namely beings who depend on others, have emotions and a self-consciousness, have physical bodies and can think rationally.” Ragatz goes on to talk about conflicts among communities and their effects on virtue development: “Commu- nities overlap in a series of concentric circles, the virtue of integrity demands that a person carry the same moral values and commitments at work, at home and in her community engagement. Fractured people, people who espouse one value in church and a different one in the boardroom cannot by definition flourish.”

Law, Ethics, Business 21

What forces inside a company determine the type of culture that develops inside it? What forces outside a company might influence that process?

BP is the fourth largest company in the world. It is third largest of the six “super- majors,” the giant multinational energy (oil and natural gas) corporations. A quick sketch of its history: In 1908, when a wealthy Englishman struck oil in Iran, the Anglo- Persia Oil Company was formed. This was a colonial operation, partially owned by the British Empire. Eventually, as the countries in the region (and the world) began to shed their colonial status and to nationalize their natural resources, British Petroleum (as it was then called) had to regroup and reset its corporate strategy. The government sold its stake in the company in 1995, and it came under the leadership of John Browne, a bold, charismatic dealmaker.

In the late 1990s, at a cost of $200 million, Browne launched an enormous corporate re-branding exercise, changing the company’s name from British Petroleum to BP, coin- ing the slogan ‘‘Beyond Petroleum’’ and redesigning its corporate insignia. Instead of the more than 70-year-old British Petroleum shield, the new logo was a yellow white and green sunburst, suggesting the company was looking past oil and gas toward an eco- friendly future of renewable energy. Billboards announced, for example, that BP was partnering with Urban Park Rangers to release four bald eagles into upper Manhattan, or that BP “believes in alternative energy. Like solar and cappuccino.” At the end of each ad, was the sly comment, “It’s a start.”

Originally conceived as pure public relations, this massive re-imaging seemed to have caught the imagination of CEO Browne. He began consulting with Greenpeace and pledged to spend $1 billion on solar technology. Instead of joining companies like Exxon, who with President Bush were challenging the science behind global warming and calling for more research, Browne argued that the U.S. should sign the Kyoto Proto- col, the world’s first treaty for addressing greenhouse gas emissions.’’ Companies com- posed of highly skilled and trained people can’t live in denial of mounting evidence gathered by hundreds of the most reputable scientists in the world,’’ he declared, speak- ing at Stanford University in 2002. Ironically, given BP’s core mission, he was advancing the case for reduced consumption of fossil fuels: ‘‘Climate change is an issue which raises fundamental questions about the relationship between companies and society as a whole, and between one generation and the next.’’

At the same time, Browne was building the company up to be the world’s second- largest oil company (after Exxon). He presided over a wave of cost-cutting and con- solidation, as BP took over some of its American competitors, fired thousands of employees—many of them engineers--and streamlined itself significantly, so that it came to rely more on outside contractors. Browne distinguished himself in the indus- try as a risk-taker, chasing after some of the most expensive and potentially lucrative projects. He set aggressive profit goals, pushing managers to cut costs sharply in order to meet quarterly targets. By 2002, BP had gross revenues of $174 billion, 15,500 ser- vice stations in the United States, and was operating in 100 countries. In seven years, under Browne’s leadership, share value had jumped 80 percent. And in the midst of the Beyond Petroleum PR blitz, BP was producing almost 3.5 billion barrels of oil and gas annually.

We can investigate BP’s culture by a process of triangulation. We can look at the company’s aspirations—at the values it claimed to support. We can find out what employees and experts can tell us about how the company was run, noting how those values were operationalized. And we can observe whether BP’s actual track record—its behavior—reflected its values.

First, the aspirations. The company’s Web site presents “Our Values:”

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BP wants to be recognised as a great company—competitively successful and a force for progress. We have a fundamental belief that we can make a difference in the world.

We help the world meet its growing need for heat, light and mobility. We strive to do that by producing energy that is affordable, secure and doesn’t damage the environment.

BP is progressive, responsible, innovative and performance driven.

• Progressive: We believe in the principle of mutual advantage and build productive relationships with each other, our partners, and our customers.

• Responsible: We are committed to the safety and development of our people and the communities and societies in which we operate. We aim for no accidents, no harm to people and no damage to the environment.

• Innovative: We push boundaries today and create tomorrow’s breakthroughs through our people and technology.

• Performance driven: We deliver on our promises through continuous improvement and safe, reliable operations.36

Now let’s look at how the company was run, and how it performed. In 2005, a 20-foot geyser of volatile chemicals ignited at a BP plant in Texas City. Fifteen workers were killed and more than 170 people were injured. The plant, built in 1934, was long overdue for capi- tal investment. Routine maintenance that might have prevented the accident had been delayed due to pressure to cut expenses. And there had been unstable leadership—five managers in six years.37 Perhaps most telling was this comment from a report completed two months before the explosion, compiled by the Telos Group, a consulting firm: “We have never seen a site where the notion ‘I could die today’ was so real.” A U.S. government investigation found the explosion was “caused by organizational and safety deficiencies at all levels of BP,” fining the company a then-record $21 million for more than 300 safety violations.

A year later BP was responsible for another horrific accident: 267,000 gallons of oil leaked in Prudhoe Bay in Alaska, the worst spill in that area—and again, the cause was preventable. Investigators found corrosion throughout miles of BP’s pipe network, which was poorly maintained. Here too, the company paid more than $20 million in fines.38

In 2005 there were serious problems at Thunder Horse, BP’s 15-story offshore production platform in the Gulf of Mexico. This was supposed to be BP’s crowning glory, with the potential to produce 20 percent of the Gulf’s oil, but because a valve

36 http://www.bp.com/sectiongenericarticle.do?categoryId=9002630&contentId=7005204. Last visited August 13, 2010. 37 According to Tom Kirchmaier, professor at Manchester Business School, Lord Browne ran BP as if it was a financial firm, with managers rotating into new positions, handed challenging profit targets, and rotated out again before the consequences of their decisions were upon them. 38 In 2009, OSHA inspectors revisited BP’s Texas City facility and discovered more than 700 safety violations, proposing a record fine of $87.4 million. Most of this was for the company’s failure to abide by the prior Texas City settlement. And in March 2010, just before the Deepwater Horizon explosion, OSHA found yet more safety violations at BP’s Ohio refinery, for a $62 million fine. According to one OSHA administrator, “Senior management told us they are very serious about safety, but we observed that they haven’t translated their words into safe working procedures and practices, and they have difficulty applying the lessons learned from refinery to refinery or even from within refineries.” Sarah Lyall, “In BP’s Record, a History of Boldness and Blunders,” New York Times, July 13, 2010.

Law, Ethics, Business 23

had been installed backwards, Hurricane Dennis flooded the vessel. Then other flaws emerged—faulty welding, full of cracks and breaks. Thunder Horse had to be dismantled.

The similarities that run through these instances of failure on the part of BP also showed up in early investigations of the Deepwater Horizon explosion of 2010: All were high-risk ventures, marked by rushed and shoddy work, and a disregard for safety. Chairman of the House Energy and Commerce Committee Henry A. Waxman, when questioning former CEO Tony Hayward as the Gulf was gushing BP’s oil, said:

There is a complete contradiction between BP’s words and deeds.… BP cut corner after corner to save a million dollars here and a few hours there. And now the whole Gulf Coast is paying the price.

We see a striking dissonance between BP’s stated values (“We are committed to the safety and development of our people and the communities and societies in which we operate. We aim for no accidents, no harm to people, and no damage to the environment.”) and its relentless sacrifice of safety for the sake of results. As assistant to the Secretary of Labor for OSHA Jordan Barab has said, “BP has systemic safety and health problems. They need to take their intentions and apply them much more effec- tively on the ground, where the hazards actually lie.”39 Such a strategy seems to have been adopted by BP rival Exxon. Scarred by its own experience of a major spill in Alaska, Exxon is now number one for safety among the oil majors. Before drilling a well, it runs complex modeling programs to forecast whatever obstacles might be encountered. Exxon trains its contractors to recognize risky behavior, and asks employ- ees for suggestions for safety improvement. Contrast this with a confidential survey of rig workers that was taken a month before the Deepwater Horizon explosion. Many expressed concern about safety and felt they would be punished for reporting problems or mistakes.40

We come away from this analysis of the culture of BP with a sense that the “Beyond Petroleum” campaign and the company’s official statements valuing safety and the pro- tecting the environment amount to little more than empty rhetoric. In terms of virtue ethics, then, BP has much to do to close the gap between its aspirations and its ways of doing business. And given these mixed messages, we can imagine how difficult it has been for BP employees to develop the kind of virtuous habits they would need—courage, for example, even heroism—to confront a culture that repeatedly rewards speed and risk- taking over other values.

Ethic of Care The ethical theories we have looked at so far assume that decisions about the right thing to do are ultimately private, made by individuals in isolation. Whether using their intel- lectual powers or responding to trained habit, people act as autonomous beings, as free agents in this process. But suppose we began ethical analysis with a different understand- ing? Suppose we start with the assumption that people are deeply connected to one another in webs of relationships, and that ethical decisions cannot be made outside the context of those relationships? Ethics becomes a matter of nurturing and reinforcing the

39 Jad Mouawad, “Fast-Growing BP Also Has a Mounting List of Spills and Safety Lapses,” New York Times, May 9, 2010. 40 Robbie Brown, “Official Denies BP Put Cost Ahead of Safety at Oil Rig," New York Times, July 23, 2010. As of June 2010, BP had 760 OSHA fines for “willful” safety violations. Exxon Mobil had only one.

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ties we have with one another. This alternative view has become known as the “ethic of care,” as it is based on caring for others.

The ethic of care is based on the work of feminist psychologist Carol Gilligan, who studied moral development. Her research initially led her to believe that men and women approached moral issues from different perspectives. While most men had an individualistic focus on abstract rights and justice, women tended to focus on caring, on supporting human interconnectedness—an approach that Gilligan saw as underva- lued, and which she characterized as “a different voice.” Over time this understanding has shifted: Rather than a split between male versus female ethics, it is thought that both of these approaches can be accessed by either men or women.

To analyze the Gulf Spill from the perspective of the ethic of care, we will want to consider the network of relationships in this complex scenario to try to determine which are the most important, the most fundamental. We will do this by putting the Gulf Spill in context, both widening our lens to include relevant broader circumstances, and nar- rowing our focus to absorb some of the specifics, the particular details that make this event distinctive. Both macro and micro contextual clues will be useful. Finally, as we get to the point of establishing which are the most crucial relationships, the ethic of care requires us to think about how best to nourish and sustain them. This perspective is less concerned with following a set of abstract principles to avoid harm than with the relatively messy business of proactively caring for others. It asks us to be creative in dis- covering workable compromises to support the relationships that matter most.

So let’s start with the broader context. Starkly evident in the bigger picture surrounding the Gulf Spill is the global hunger for energy—and for oil. Just days before the Deepwater Horizon explosion, the International Energy Agency forecasted that global oil demand would hit a record high in 2010 and would continue to rise as world economy recovers,41

in spite of the recent world financial crisis. The demand for oil has remained strong in the United States since the late 1970s; developing countries are catching up fast. In June 2010 in fact, China overtook the U.S. in energy consumption—posting record crude oil imports of 5.4 million barrels per day. (In terms of per capita rates, the U.S. still leads: The average American still consumes about 10 times as much oil as the average Chinese.)

Meanwhile, obtaining the supply to meet eager demand has become more difficult. “Conventional” (near-shore and shallow) oil reserves are largely depleted, and so extrac- tion has focused on those that are “unconventional,” as companies squeeze oil out of rocks like sandstone or drill deep into water and then deep underground. Accessing oil in these locations is something like an extreme sport, rife with environmental and health risks.42 According to Robert Bea, professor of engineering at the University of California Berkeley who has worked on offshore oil installations:

This is a pretty frigging complex system. You’ve got equipment and steel strung out over a long piece of geography starting at surface and terminating at 18,000 feet below the sea floor. So it has many potential weak points.… The danger has

41 Susan Lyon, Rebecca Lefton, Daniel J. Weiss, “Quenching Our Thirst For Oil,” Center for American Progress, April 23, 2010. http://www.americanprogress.org/issues/2010/04/oil_quench.html. Last visited August 17, 2010. While the World Energy Outlook projects oil demand will hit 105 million barrels per day by 2030, a recent New York University study found that official projections like these were far too conservative, predicting total demand in 2030 at 138 mbd. 42 The risks of deepwater drilling for oil is comparable to other fossil fuel energy extraction processes: moun- taintop removal mining for coal, or example, or “fracking” (fracturing with water and chemicals under high pressure) into rock for natural gas.

Law, Ethics, Business 25

escalated exponentially. We’ve pushed it to the edge in this very very unforgiving environment, and we don’t have a lot of experience.43

A prominent feature of the Gulf Spill context, for the major energy firms, includes the pressure of world financial markets, which expect good news on a quarterly basis. So the majors compete fiercely, amidst powerful incentives to cut costs and mount high- risk, potentially lucrative ventures.

Add to this government oversight that was almost the inverse of government over- sight.44 The Minerals Management Service (MMS), a division of the federal Department of the Interior, was charged with issuing leases and regulating drilling on the Outer Con- tinental Shelf. But for decades, it actually functioned to rubberstamp energy projects, dis- allowing virtually none, and granting exemptions so that firms were not required to provide “environmental impact statements.”45 The MMS, staffed with individuals with industry experience and ties, facilitated a round of back-scratching that had little to do with the public interest, granting leases, collecting payments, and sending them back to Washington. Meanwhile the oil industry kept up a flow of generous political donations: In the 2010 election cycle, for example, oil and gas contributed nearly $13 million to congressional candidates, about 71 percent of them Republicans. And for the part decade, the oil industry has been one of the most powerful lobbying groups in Washing- ton, spending nearly a billion dollars since 1998.46 These expenditures appear to be pro- ducing results. While he campaigned for the presidency with a host of green and alternative energy promises, Barack Obama was the recipient of energy industry support. According to the Center for Responsive Politics, over the past 20 years BP has given more than $3.5 million to federal candidates, with the largest chunk going to Obama. These donations came from both BP employees ($638,000) and from the company’s political action committees (BP-related PACs supplied $2.89 million). In the spring of 2010, just three weeks before the Deepwater Horizon exploded, President Obama pro- posed expanding offshore oil exploration.47

Now if we examine some of the specific contextual details surrounding the Gulf Spill, we see that the MMS was aware of problems that deepwater drilling operators were having with that key equipment component, the blowout preventer or BOP. The agency had studies from 2002 and 2004 revealing malfunctions of the so-called “blind shear ram” blades inside the BOPs that were designed to slice through pipes and seal

43 Quoted in John McQuaid, “The Gulf Oil Spill: An Accident Waiting to Happen,” Yale Environment 360, May 10, 2010. 44 Observers have noted an intriguing similarity: Both the Securities and Exchange Commission and the now- dismantled Minerals and Management Service were rife with anti-government culture. Both operated on the assumption that industry was to be trusted. There were staffers at both agencies who were watching porn on government computers instead of worrying about what might be going on either the trading floor or the ocean floor. Paul M. Barratt, “Surviving the Spill,” Bloomberg Business Week, June 7-13, 2010. 45 In 2009, BP’s Deepwater Horizon lease received such an exemption, based on company analyses downplay- ing the likely size of an offshore spill, stating the “most likely size” would be 4,600 barrels. The actual spill has been estimated to be about 25 times that size. 46 David M. Hershzenhorn and Eric Lightblau, “Tricky Balance For Politicians for Oil States,” New York Times, June 18, 2010. 47 Erika Lovley, “Obama Biggest Recipent of BP Cash,” Politico, May 5, 2010. http://www.politico.com/news/ stories/0510/36783.html. Last visited August 18, 2010. Although Obama was the biggest recipient of BP’s sup- port in the 2008 election cycle, Democrats received only 40 percent of their contributions. Moreover com- mentators have suggested that Obama’s willingness to open up offshore drilling was a strategic move to make a federal green energy bill more likely.

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blown out well-heads. According to experts, the integrity of the blind shear ram is the key, the most crucial factor for safety in deepwater drilling. In a rare instance of adopting a reg- ulation, the MMS began requiring companies to submit evidence that their blind shear rams would function under high pressure conditions. Yet in 2009, when the agency reviewed BP’s application to begin drilling the Macondo well, it ignored its own rules. MMS approved the permit without proof that BP’s BOP could actually shear pipe and seal a well at 5,000 feet. It never asked for and never reviewed BP’s own data—a report completed in 2000 pointing to vulnerabilities in this critically important piece of equipment.48

Another contextual detail surrounding the Gulf Spill is the way decisions had to be made under pressure, and by representatives of different companies with different ways of doing business. As we recall, Deepwater Horizon was BP’s operation, but the work was done on a Transocean rig leased by BP (for about a half million dollars a day), and Halliburton was hired to provide cementing services, to reinforce and seal off the well as drilling was completed. University of California Berkeley engineer Robert Bea has described a problem with fragmented responsibilities here:

Each of these organizations has fundamentally different goals. BP wants access to hydrocarbon resources that feed their refinery and distribution network. Halliburton provides oil field services. Transocean drives drill rigs, kind of like taxicabs. Each has different operating processes.49

And each of them had different orientations. On April 20, 2010, BP was trying to seal the well and move on; its concerns were cost and speed—the project was already more than a month behind schedule. On the rig itself, Transocean workers were more concerned with controlling the well. This culture clash would come to a head shortly before the explosion. At an investigative hearing in May 2010, Douglas H. Brown, chief mechanic for Deepwater Horizon, said he witnessed a “skirmish” on the rig the morning of the blast between a BP well site leader and members of Transocean’s drilling crew. According to Brown, it was sparked by BP’s insistence that they displace protective, heavy drilling mud with lighter saltwater before the well was sealed with a cement plug. “I remember the company man saying ‘this is how it’s going to be,’” Brown testified.50

He recalled the Transocean installation manager grumbling as they left this meeting, “Well, I guess that’s what we have those pinchers for,” referring to the shear rams on the BOP, implying that removing the drilling mud would risk an emergency. Hours later, the rig exploded.

Investigative environmental journalist John McQuaid, writing about the Deepwater Horizon disaster as “a classic ‘low probability, high impact event,’” points to the assumption that was being made—by BP and by all the big oil companies doing deepwater drilling— that a major catastrophe was so unlikely it was not worth considering.51 He writes:

BP and other companies tend to measure safety and environmental compliance on a day-to-day checklist basis, to the point of basing executive bonuses on those metrics.

48 David Barstow, Laura Dodd, James Glanz, Stephanie Saul and Ian Urbina, “Between Blast and Spill, One Last, Flawed Hope,” New York Times, June 21, 2010. 49McQuaid, Ibid. 50 Ian Urbina, “BP Used Riskier Method to Seal Well Before Blast,” New York Times, May 26, 2010. 51McQuaid views the government, in the form of the MMS, as complicit in that assumption.

Law, Ethics, Business 27

But even if worker accident rates fall to zero, that may reveal nothing about the risks of a major disaster.

Their resistance to planning for possible disaster is rooted, he reports, in a fear of stimulating public resistance their projects. But if the oil majors had created worst-case response plans, they would have had in place mechanisms for addressing the kind of event that occurred on April 20, 2010. They might have had a good strategy for dealing with, for example, the failure of a BOP, or a hurricane blowing into a major spill. Instead, after lobbying hard and successfully against any government requirement that they do formal disaster analyses, the companies all possess absurdly inadequate response documents. They are all the same. They all discuss arrangements to rescue walruses— which do not inhabit the Gulf of Mexico—and they all offer contact information for marine biologist who has been dead since 2005.52

Now that we have carefully laid out the context, we can return to the ethic of care and its primary question: Which are the most important relationships in this scenario, and how can we creatively construct ways of sustaining them? There are many different relationships of significance here, between the oil companies and the government, for example, or between the companies and their employees. But we might realize at this point that the most critically important relationships encompass more. One of the most compelling relational connections in the story of the Gulf Spill exists between the people living in the coastal Gulf of Mexico and the Gulf itself. Here are the comments of eighth- generation oysterman Kenneth Voisin, whose oyster harvesting processing company lost more than half of its business during the Spill:

I don’t think much of the nation understands—they think this is about money and jobs,” he says. “But it’s beyond that. It’s about life. It’s about who we are.… The Cajun way of life is fiercely independent.… Because we live in a place with the most glorious abundance of food.… We’ve always been able to turn to our surroundings to support us. Now our surroundings are threatening us because of the oil.

A similar web of relationships is of overriding importance. The scientific evidence is now overwhelming that human activity in burning fossil fuels for energy is driving climate change. This means we can trace a connection from our use of oil to global increases in drought, flooding, storms, and extinctions. It also means we can trace a connection from our use of oil to global increases in pollution, poverty, governmental corruption, and ethnic warfare. As surreal as it seems, we are positioned as a species on a fossil-fuel burning trajectory to irreparably affect the natural environ- ment, and to destroy its ability to support our very existence. Perhaps, then, the most significant relationship we might identify as we think about the Gulf Oil Spill is vast— connecting the people now living on the planet, the planet itself, and humans yet to be born.

How might we keep that essential relationship healthy and strong? Depending on where we are, and who we are, and what role we can play, this will vary. The ethic of care encourages compromise and flexibility in knitting valuable relationships closer.

52 Congressional questioners accused the oil companies of “Xeroxing” one another’s plans. Tim Webb and Ed Pilkington, “U.S. Congressman Says Company’s Worst-case Assessment of Leak was 20 Times Higher Than Public Estimate,” The Guardian, June 20, 2010.

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Here are a few ideas for sustaining the irreplaceable relational network that links humans with the natural world:

Corporations, particularly the energy majors, could alter their policies and practices in the light of the BP Spill, coordinating with the scientific community and govern- ment regulators to develop responsible energy policies. A level playing field works best for all players. Reasonable standards can stimulate innovative solutions and can complement the incentives of a competitive economy. Responsible energy policies might include appropriate disclosure rules that protect environmental health and safety, well-crafted crisis response plans, and government subsidies for alternative energy research and development.53 Corporations could also lobby for the U.S. to take a leadership role in reaching the compromises needed to re-energize the world’s first treaty to reduce carbon emissions, the Kyoto Protocol.

Individuals, like you and me, could alter our habits, learning about how to make day-to-day and long-term choices that shrink our carbon footprints. As writer Peter Maass has put it, responding to the question of whether it made sense for consumers to boycott BP in the wake of the BP Spill:

It little matters whether we fill our tanks at BP or Exxon stations. What matters is that we visit gas stations less often.54

As we look through the different ethical prisms at the Gulf Oil Spill of 2010, we see a spectrum of indicators for the way we must remake our world. All of us, singly and collectively, will need to engage our moral imaginations to make our futures possible.

Why Ethical Theory? Having explored several approaches to ethics, we may feel unsettled by the journey, uncertain how useful it has been. Yet this unresolved aftertaste may be exactly appropri- ate. There are no easy answers at the intersection of law, ethics, and business. The best we can hope for may be a reflective approach, combining one or more frameworks to reach several possible solutions, and then comparing the solutions to see if they “agree.”

Ideally, familiarity with these theories will support you in at least two ways as you face business dilemmas in the future. First, the models for analysis can spark creative thinking, as you brainstorm ways of handling the ethical questions that will confront you. Second, they offer you a means of explaining your thinking to others, and of advo- cating for new ideas. Knowing the theoretical basis for ethical decision making can help you understand your own position, and help you articulate it to your superiors, your co- workers, and those who report to you in the company.

There is a familiar “language” in the business world for most decision-making: cost- benefit analysis. Ethical theory offers you another language, making you “bilingual” in complex situations.

53 As of this writing, the Obama administration had announced a new set of such subsidies. Matthew Wald, “Finding New Ways to Fill the Tank: Federal Money Flows Into Research on Gas Substitutes,” New York Times, August 19, 2010. 54 Peter Maass has written Crude World: The Violent Twilight of Oil, about the relationships between our relentless search for depleting oil supplies and world poverty, governmental corruption, and strife. This quote is from one of his blog posts: “To BP or Not to BP: Here’s Why a Spill-Inspired Boycott Doesn’t Make Sense.” June 7, 2010.

Law, Ethics, Business 29

Corporate Governance

CORPORATE ROLES, RIGHTS, AND RESPONSIBILITIES

Shareholders Shareholders are, collectively, the owners of a corporation. As their holdings rise in value, they profit; when their shares lose value, shareholders lose. They may be pri- vate shareholders—individual investors, both large and small—or they may be insti- tutional shareholders, such as pension funds, mutual funds, insurance companies. The legal liability of shareholders is limited by law to the amount of investment they make in the company. Their rights include:

• Receipt of true and accurate financial reports • Dividends whenever dividends declared • Attendance at shareholder meetings • Vote (by proxy or in person), on:

Membership of board of directors Significant mergers and acquisitions Changes in charter or by-laws Proposals by management or shareholders

Shareholders can also hold managers and directors accountable by bringing shareholder derivative suits (see below).

Board of Directors Board members are elected by shareholders from a slate provided by management. They can be “inside directors” with ongoing or previous contractual relationships with the company, or “outside” or “independent directors” with no financial rela- tionship with the company other than as a member of its board. Directors are held by law to a duty of loyalty. They cannot interfere with corporate opportunities, com- pete with the corporation, take secret profits or engage in other forms of self-dealing at the company’s expense. They are also required to abide by a duty of care—to act in good faith and as reasonably prudent persons in their role as directors. These two duties are known as fiduciary duties, to be carried out by those who are entrusted with responsibility for other peoples’ investments.

The board may create committees and delegate certain powers to them; since the Sarbanes-Oxley Act of 2002, all public companies must have audit committees made up of independent directors, which hire independent public accountants to supervise the audit of company financial records.

In a broad oversight function, the board sets company policy and goals. In addition, it:

• Presents financial data to shareholders • Hires and fires management • Slates membership of the board and of its committees • Is authorized to file lawsuits on behalf of the corporation to recover damages

Officers and Management The chief executive officer (CEO or President) of a company and other officers are appointed by the board of directors, and must report to the board about the ongoing

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operations of the corporation. Like the directors, management is held to both a duty of loyalty and a duty of care, and must.

• Run the company on a day-to-day basis • Implement decisions made by the board of directors • Prepare reports for the board of directors and shareholders

Corporations, Public Policy, and Money [There are two key distinctions between the arena of the market and the arena of politics.] The first is that while markets allow persons to make choices on an individual basis, politics involves a collective process of decision-making. The second is that while choices in the marketplace are transactional in nature, political decision making has a deliberative character.

—JEFFREY NESTERUK55

“I was in one board meeting, and I said, ‘I started this [company] to do positive things with the world and do good in The Amazon, not necessarily to get a big payout.’… And one of [the angel investors] looked me in the eye and said, ‘Well, the problem is, then you went out and took $9 million of other people’s money.’”

—GWENDOLYN BOUNDS56

Corporations are said to be “creatures of statute;” they exist because state laws allow human beings to organize themselves into entities that separate ownership and manage- ment functions as the outline above delineates. Although the legally-defined structure appears to confer a degree of representative democracy to the corporate form, with investors having the ability to vote on proposals and to sue for misconduct of managers and board members, the shareholders of a corporation have limited power to influence or control the decisions of corporate officers and directors. “Minority shareholders”— those who own so little stock with voting rights that they will always be outvoted by other shareholders—have even less control.57

Corporate law is structured to protect the ability of officers and directors to run a company as they see fit. According to the business judgment rule, there is a presump- tion is that, in making a business decision, the directors of a corporation act on an informed basis, in good faith and in the honest belief that the action taken is in the best interests of the company. Unless there has been “an abuse of discretion,” the busi- ness judgment of corporate directors will be respected by the courts. In theory, share- holders can hold directors or officers accountable for a breach of fiduciary duties through what is called a shareholders derivative lawsuit. These suits are initiated by individual shareholders on behalf of the corporation as a whole, against persons or enti- ties that have harmed the company—most often one or more of its own directors or

55 Jeffrey Nesteruk, “Response: Enriching Corporate Theory,” 42 AM.BUS.L.J. 91 (2005). 56 Gwendolyn Bounds, “The Perils of Being First,” WSJ, Mar. 19, 2007, at R 1. 57 In Chapter 6 you will read about the hurdles shareholders face when they attempt to make proposals and bring them to a vote.

Law, Ethics, Business 31

officers for breach of fiduciary duty.58 In most states, shareholders must first make a “demand,” asking the Board if they may sue. These and other pre-conditions limit the frequency of shareholders derivative suits.

Critical to understanding the role of corporations in American society is a legal fic- tion created by the courts in the late nineteenth century: the idea that a corporation is a “person” entitled to Constitutional protections.

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Citizens United, a nonprofit corporation with an annual budget of $12 million, receives support from individual donations and for-profit corporations. In January 2008, Citizens United released to theatres Hillary: The Movie, a 90-minute negative documentary about then-Senator Hillary Clinton. Later, the group wanted to make it available through video-on-demand, but feared doing so would violate the Bipartisan Campaign Reform Act of 2002 (BCRA). That federal election law banned corporations and unions both from using general treasury funds to make contributions to candidates and from using indepen- dent expenditures for “electioneering communication”—speech that expressly advocates the election or defeat of a candidate within 30 days of a primary or 60 days of a general election. Violations carried both civil and criminal penalties. Citizens United challenged the BCRA in court as a violation of its First Amendment rights. In January 2010, the Supreme Court ruled in favor of Citizens United, overruling precedent cases, including Austin v. Michigan Chamber of Commerce (1990). The case turned on differing interpre- tations of the First Amendment protection for free speech and—as the following excerpts make clear—the role of corporations in the political process.

CITIZENS UNITED v. FEDERAL ELECTION COMMISSION

United States Supreme Court, 2010, 130 S.Ct. 876

Justice KENNEDY delivered the opinion of the Court. He is joined by Chief Justice ROBERTS, Justices SCALIA, ALITO, and THOMAS (in part).

… Speech is an essential mechanism of democracy, for it is the means to hold officials accountable to the people.… The right of citizens to inquire, to hear, to speak, and to use information to reach consensus is a precondition to enlightened self-government and a necessary means to protect it. The First Amendment “has its fullest and most urgent application to speech uttered during a campaign for political office.”…

For these reasons, political speech must prevail against laws that would suppress it.… Laws that burden political speech are “subject to strict scrutiny,” which requires the Government to prove that the restriction “furthers a compelling interest and is narrowly tailored to achieve that interest.”…

If the First Amendment has any force, it prohibits Congress from fining or jailing citi- zens, or associations of citizens, for simply engaging in political speech.…

[The precedent case, Austin, justified a Michigan state law that banned corporations from using corporate funds to support electoral candidates, finding a compelling govern- mental interest in preventing the “corrosive and distorting effects of immense

58 In other words, shareholders attempt to bring a suit that they believe the board of directors should have brought against persons or entities that have harmed the company, including suits individual officers or members of the board guilty of wrongdoing.

32 CHAPTER 1

aggregations of wealth that are accumulated with the help of the corporate form and that have little or no correlation to the public’s support for the corporation’s political ideas.” Justice Kennedy rejects that reasoning:]

If the anti-distortion rationale were to be accepted … it would permit Government to ban political speech simply because the speaker is an association that has taken on the corporate form.…

[T]he Austin majority undertook to distinguish wealthy individuals from corporations on the ground that “[s]tate law grants corporations special advantages—such as limited liability, perpetual life, and favorable treatment of the accumulation and distribution of assets.” This does not suffice, however, to allow laws prohibiting speech. “It is rudimen- tary that the State cannot exact as the price of those special advantages the forfeiture of First Amendment rights.”…

Austin interferes with the “open marketplace” of ideas protected by the First Amendment.… It permits the Government to ban the political speech of millions of associations of citizens.59…

The censorship we now confront is vast in its reach. The Government has “muffle[d] the voices that best represent the most significant segments of the economy.”… And “the electorate [has been] deprived of information, knowledge and opinion vital to its function.” By suppressing the speech of … both for-profit and nonprofit [corporations], the Government prevents their voices and viewpoints from reaching the public and advis- ing voters on which persons or entities are hostile to their interests.…

“[T]he First Amendment protects the right of corporations to petition legislative and administrative bodies.”… Corporate executives and employees counsel Members of Con- gress and Presidential administrations on many issues, as a matter of routine and often in private.… When that phenomenon is coupled with [the BCRA] the result is that smaller or nonprofit corporations cannot raise a voice to object when other corporations, including those with vast wealth, are cooperating with the Government. That cooperation may sometimes be voluntary, or it may be at the demand of a Government official who uses his or her authority, influence, and power to threaten corporations to support the Govern- ment’s policies. Those kinds of interactions are often unknown and unseen. The speech that [the BCRA] forbids, though, is public, and all can judge its content and purpose.…

When Government seeks to use its full power, including the criminal law, to com- mand where a person may get his or her information or what distrusted source he or she may not hear, it uses censorship to control thought. This is unlawful. The First Amendment confirms the freedom to think for ourselves.…

[After concluding that independent expenditures by corporations do not give rise to corruption or the appearance of corruption, the Court addresses another justification put forward to defend the ban.]

The Government contends further that corporate independent expenditures can be limited because of its interest in protecting dissenting shareholders from being compelled to fund corporate political speech.… There is … little evidence of abuse that cannot be corrected by shareholders “through the procedures of corporate democracy.”…

For the reasons above, it must be concluded that Austin was not well reasoned.… Austin is undermined by experience since its announcement. Political speech is so ingrained in our culture that speakers find ways to circumvent campaign finance laws.… Corporations, like individuals, do not have monolithic views. On certain topics corporations may possess valuable expertise, leaving them the best equipped to point out errors or fal- lacies in speech of all sorts, including the speech of candidates and elected officials.

Rapid changes in technology—and the creative dynamic inherent in the concept of free expression—counsel against upholding a law that restricts political speech in certain media

59 Kennedy notes that most of the 5.8 million for-profit corporations filing tax returns in 2006 are “small corporations.” More than 75% of them have less than $1 million in receipts per year. Ninety-six percent of the 3 million businesses that belong to the U.S. Chamber of Commerce have fewer than 100 employees.

Law, Ethics, Business 33

or by certain speakers. Today, 30-second television ads may be the most effective way to convey a political message. Soon, however, it may be that Internet sources, such as blogs and social networking Web sites, will provide citizens with significant information about political candidates and issues. Yet [the BCRA] would seem to ban a blog post expressly advocating the election or defeat of a candidate if that blog were created with corporate funds.… The First Amendment does not permit Congress to make these categorical distinc- tions based on the corporate identity of the speaker and the content of the political speech.

Due consideration leads to this conclusion: Austin should be and now is overruled. We return to the principle … that the Government may not suppress political speech on the basis of the speaker’s corporate identity. No sufficient governmental interest justifies limits on the political speech of nonprofit or for-profit corporations.

Justice SCALIA, with whom Justice ALITO joins, and with whom Justice THOMAS joins in part, concurring.

…The dissent says that when the Framers “constitutionalized the right to free speech in the First Amendment, it was the free speech of individual Americans that they had in mind.” That is no doubt true. All the provisions of the Bill of Rights set forth the rights of individual men and women—not, for example, of trees or polar bears. But the individual per- son’s right to speak includes the right to speak in association with other individual persons. Surely the dissent does not believe that speech by the Republican Party or the Democratic Party can be censored because it is not the speech of “an individual American.” It is the speech of many individual Americans, who have associated in a common cause, giving the leadership of the party the right to speak on their behalf. The association of individuals in a business corporation is no different—or at least it cannot be denied the right to speak on the simplistic ground that it is not “an individual American.”…

The [First] Amendment is written in terms of “speech,” not speakers. Its text offers no foothold for excluding any category of speaker, from single individuals to partnerships of individuals, to unincorporated associations of individuals, to incorporated associations of individuals—and the dissent offers no evidence about the original meaning of the text to support any such exclusion.… [T]o exclude or impede corporate speech is to muzzle the principal agents of the modern free economy. We should celebrate rather than condemn the addition of this speech to the public debate.

Justice STEVENS, with whom Justice GINSBURG, Justice BREYER, and Justice SOTOMAYOR join, concurring in part and dissenting in part

… In the context of election to public office, the distinction between corporate and human speakers is significant. Although they make enormous contributions to our society, cor- porations are not actually members of it. They cannot vote or run for office. Because they may be managed and controlled by nonresidents, their interests may conflict in fun- damental respects with the interests of eligible voters. The financial resources, legal struc- ture, and instrumental orientation of corporations raise legitimate concerns about their role in the electoral process. Our lawmakers have a compelling constitutional basis, if not also a democratic duty, to take measures designed to guard against the potentially deleterious effects of corporate spending in local and national races.…

[T]he Framers and their contemporaries … held very different views about the nature of the First Amendment right and the role of corporations in society. Those few corporations that existed at the founding were authorized by grant of a special legislative charter.… Corporations were created, supervised, and conceptualized as quasi-public entities, “designed to serve a social function for the state.” It was “assumed that [they] were legally privileged organizations that had to be closely scrutinized by the legislature because their pur- poses had to be made consistent with public welfare.”…

The individualized charter mode of incorporation reflected the “cloud of disfavor under which corporations labored” in the early years of this Nation. Thomas Jefferson famously fretted that corporations would subvert the Republic. General incorporation

34 CHAPTER 1

statutes, and widespread acceptance of business corporations as socially useful actors, did not emerge until the 1800’s.…

Unlike our colleagues, [the Framers] had little trouble distinguishing corporations from human beings, and when they constitutionalized the right to free speech in the First Amendment, it was the free speech of individual Americans that they had in mind. While individuals might join together to exercise their speech rights, business corporations, at least, were plainly not seen as facilitating such associational or expressive ends.… [I]t seems to me implausible that the Framers believed “the freedom of speech” would extend equally to all corporate speakers, much less that it would preclude legislatures from taking limited measures to guard against corporate capture of elections.…

[O]ver the course of the past century Congress has demonstrated a recurrent need to regulate corporate participation in candidate elections to “‘[p]reserv[e] the integrity of the electoral process, preven[t] corruption, … sustai[n] the active, alert responsibility of the individual citizen,’” protect the expressive interests of shareholders, and “‘[p]reserv[e] … the individual citizen’s confidence in government.’”… Continuously for over 100 years, this line of “[c]ampaign finance reform has been a series of reactions to documented threats to electoral integrity obvious to any voter, posed by large sums of money from corporate or union treasuries.”…

Austin set forth some of the basic differences [between human beings and corpora- tions]. Unlike natural persons, corporations have “limited liability” for their owners and man- agers, “perpetual life,” separation of ownership and control, “and favorable treatment of the accumulation and distribution of assets … that enhance their ability to attract capital and to deploy their resources in ways that maximize the return on their shareholders’ investments.” Unlike voters in U.S. elections, corporations may be foreign controlled. Unlike other interest groups, business corporations have been “effectively delegated responsibility for ensuring society’s economic welfare”; they inescapably structure the life of every citizen. “‘[T]he resources in the treasury of a business corporation,’” furthermore, “‘are not an indication of popular support for the corporation’s political ideas.’”…”‘They reflect instead the economi- cally motivated decisions of investors and customers. The availability of these resources may make a corporation a formidable political presence, even though the power of the corpo- ration may be no reflection of the power of its ideas.’”

It might also be added that corporations have no consciences, no beliefs, no feelings, no thoughts, no desires. Corporations help structure and facilitate the activities of human beings, to be sure, and their “personhood” often serves as a useful legal fiction. But they are not themselves members of “We the People” by whom and for whom our Constitu- tion was established.…

Corporate “domination” of electioneering, can generate the impression that corporations dominate our democracy. When citizens turn on their televisions and radios before an election and hear only corporate electioneering, they may lose faith in their capacity, as citizens, to influence public policy. A Government captured by corporate interests, they may come to believe, will be neither responsive to their needs nor willing to give their views a fair hearing. The predictable result is cynicism and disenchantment: an increased perception that large spenders “‘call the tune’” and a reduced “‘willingness of voters to take part in democratic governance.’” To the extent that corporations are allowed to exert undue influence in electoral races, the speech of the eventual winners of those races may also be chilled. Politicians who fear that a certain corporation can make or break their reelection chances may be cowed into silence about that corporation. On a variety of levels, unregulated corporate electioneering might diminish the ability of citizens to “hold officials accountable to the people,” and disserve the goal of a public debate that is “uninhibited, robust, and wide-open.”…

When corporations use general treasury funds to praise or attack a particular candi- date for office, it is the shareholders … who are effectively footing the bill. Those share- holders who disagree with the corporation’s electoral message may find their financial investments being used to undermine their political convictions.…

Law, Ethics, Business 35

At bottom, the Court’s opinion is … a rejection of the common sense of the American people, who have recognized a need to prevent corporations from undermining self- government since the founding, and who have fought against the distinctive corrupting poten- tial of corporate electioneering since the days of Theodore Roosevelt. It is a strange time to repudiate that common sense. While American democracy is imperfect, few outside the major- ity of this Court would have thought its flaws included a dearth of corporate money in politics.

QUESTIONS 1. What are the primary arguments advanced by Justice Kennedy, writing for the major-

ity, against the reasoning of the Austin case and against the restrictions of BCRA? He mentions that shareholders who do not agree with the political views supported by cor- porate expenditures are protected by “corporate democracy.” What might he mean by that? Given what you have read about corporate legal structure, do you agree?

2. Articulate the differing views of the corporation that emerge from the opinions in this case.

3. Elsewhere in this case, Justice Kennedy writes:

Favoritism and influence are not … avoidable in representative politics. It is in the nature of an elected representative to favor certain policies, and, by neces- sary corollary, to favor the voters and contributors who support those policies. It is well understood that a substantial and legitimate reason, if not the only reason, to cast a vote for, or to make a contribution to, one candidate over another is that the candidate will respond by producing those political outcomes the supporter favors. Democracy is premised on responsiveness.…

He goes on to argue that “[t]he appearance of influence or access, furthermore, will not cause the electorate to lose faith in our democracy.… The fact that a corpora- tion, or any other speaker, is willing to spend money to try to persuade voters presup- poses that the people have the ultimate influence over elected officials.” Does corporate spending on political advertising have the effect of enhancing your faith in the democratic process?

4. Dissenting Justice Stevens notes that some corporations have advocated bans on elec- tioneering because they fear officeholders will “shake them down for supportive ads” and they will find themselves in “an ever-escalating arms race with their competitors, and the public trust in business will be eroded.” Do you agree that election spending controls might create limits that corporations might welcome? Why/why not?

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Corporate Social Responsibility as Strategy

The notion that corporations have a responsibility to their stakeholders—not only their stockholders—is not new. Waves of scandal—defense contracting in the 1970s, insider trading in the 1980s, the financial fraud that bankrupted companies like Enron and WorldCom and led to the mortgage-credit-banking debacles and the recession of 2008— were accompanied by public relations problems for corporations, a certain amount of public soul-searching on their part, and calls, sometimes heeded, for a ratcheting up of government regulation. Most businesses will strive to be ethical in order to stay out of crisis management mode—until and unless the profit imperative simply becomes too strong. Even an organizational culture that supports ethical decision making can be put at risk when the pressures of market competition overwhelm it.

36 CHAPTER 1

In the second decade of the twenty-first century, business is coming to understand that sustainability requires that it to attend to the triple-bottom line: profits, people, and the planet. Michael E. Porter, professor at Harvard Business School, and Mark R. Kra- mer, senior fellow at Harvard’s Kennedy School of Government, co-founded FSG Social Impact Advisors, an international nonprofit consulting firm. In this article they urge businesses to take a proactive or “strategic” approach to Corporate Social Responsibility (CSR), in which companies can zero in on what they do best to benefit both themselves and the larger society. Strategic CSR, they write, goes beyond philanthropy and beyond mitigating any harmful impacts a firm might have on its surroundings, to take advantage of an important reality: the mutual dependence of business and society.

STRATEGY & SOCIETY: THE LINK BETWEEN COMPETITIVE ADVANTAGE AND CORPORATE SOCIAL RESPONSIBILITY

Michael Porter and Mark R. Kramer 60

Integrating Business and Society

Successful corporations need a healthy society. Education, health care, and equal opportunity are essential to a productive workforce. Safe products and working con- ditions not only attract customers but lower the internal costs of accidents. Efficient utilization of land, water, energy, and other natural resources makes business more productive. Good government, the rule of law, and property rights are essential for efficiency and innovation. Strong regulatory standards protect both consumers and competitive companies from exploitation. Ultimately, a healthy society creates expanding demand for business, as more human needs are met and aspirations grow. Any business that pursues its ends at the expense of the society in which it operates will find its success to be illusory and ultimately temporary.

At the same time, a healthy society needs successful companies. No social pro- gram can rival the business sector when it comes to creating the jobs, wealth, and innovation that improve standards of living and social conditions over time. If govern- ments, NGOs, and other participants in civil society weaken the ability of business to operate productively, they may win battles but will lose the war, as corporate and regional competitiveness fade, wages stagnate, jobs disappear, and the wealth that pays taxes and supports non-profit contributions evaporates.

Leaders in both business and civil society have focused too much on the friction between them and not enough on the points of intersection. The mutual dependence of corporations and society implies that both business decisions and social policies must follow the principle of shared value. That is, choices must benefit both sides.…

[Porter and Kramer identify “inside-out linkages,” or points at which businesses can impact society—from waste disposal to hiring practices. Inside-out linkages can exist all along a company’s “value chain,” the series of operations it performs to pro- duce goods or services. The authors also note “outside-in linkages,” or ways in which the external environment impinges on business operations—from the quality of the labor pool, to the nature of consumer demand, to the way government creates and enforces rules and officers incentives. Outside-in linkages, according to Porter and Kramer, provide the “competitive context” for any business.]

60Michael Porter and Mark R. Kramer, “Strategy & Society: The Link Between Competitive Advantage and Corporate Social Responsibility,” Harvard Business Review 84(12), December 2006. Used by permission of Harvard Business Publishing.

Law, Ethics, Business 37

Choosing Which Social Issues to Address

No business can solve all of society’s problems or bear the cost of doing so. Instead, each company must select issues that intersect with its particular business. Other social agendas are best left to those companies in other industries, NGOs, or govern- ment institutions that are better positioned to address them. The essential test that should guide CSR is not whether a cause is worthy but whether it presents an oppor- tunity to create shared value—that is, a meaningful benefit for society that is also valuable to the business.

Our framework suggests that the social issues affecting a company fall into three categories that distinguish between the many worthy causes and the narrower set of social issues that are both important and strategic for the business.

Generic social issues may be important to society but are neither significantly affected by the company’s operations nor influence the company’s long-term com- petitiveness. Value chain social impacts are those that are significantly affected by the company’s activities in the ordinary course of business. Social dimensions of competitive context are factors in the external environment that significantly affect the underlying drivers of competitiveness in those places where the company operates.

Every company will need to sort social issues into these three categories for each of its business units and primary locations, and then rank them in terms of potential impact. Into which category a given social issue falls will vary from business unit to business unit, industry to industry, and place to place.

Supporting a dance company may be a generic social issue for a utility like Southern California Edison but an important part of the competitive context for a cor- poration like American Express, which depends on the high-end entertainment, hos- pitality, and tourism cluster. Carbon emissions may be a generic social issue for a financial services firm like Bank of America, a negative value chain impact for a transportation-based company like UPS, or both a value chain impact and a competi- tive context issue for a car manufacturer like Toyota. The AIDS pandemic in Africa may be a generic social issue for a U.S. retailer like Home Depot, a value chain impact for a pharmaceutical company like GlaxoSmithKline, and a competitive con- text issue for a mining company like Anglo American that depends on local labor in Africa for its operations.…

Creating a Corporate Social Agenda

[Porter and Kramer argue that companies can and should engage in “responsive CSR,” acting as good corporate citizens with philanthropic activity and taking care to address any harmful impacts they might have caused. Such CSR is fittingly “respon- sive to stake-holders,” they write, but “it cannot stop there.”]

Strategic CSR

For any company, strategy must go beyond best practices. It is about choosing a unique position—doing things differently from competitors in a way that lowers costs or better serves a particular set of customer needs.…

Strategic CSR moves beyond good corporate citizenship and mitigating harmful value chain impacts to mount a small number of initiatives whose social and busi- ness benefits are large and distinctive. Strategic CSR involves both inside-out and outside-in dimensions working in tandem. It is here that the opportunities for shared value truly lie.

Many opportunities to pioneer innovations to benefit both society and a com- pany’s own competitiveness can arise in the product offering and the value chain. Toyota’s response to concerns over automobile emissions is an example. Toyota’s Prius, the hybrid electric/gasoline vehicle, is the first in a series of innovative car

38 CHAPTER 1

models that have produced competitive advantage and environmental benefits. Hybrid engines emit as little as 10 percent of the harmful pollutants conventional vehicles produce while consuming only half as much gas. Voted 2004 Car of the Year by Motor Trend magazine, Prius has given Toyota a lead so substantial that Ford and other car companies are licensing the technology. Toyota has created a unique position with customers and is well on its way to establishing its technology as the world standard.

Urbi, a Mexican construction company, has prospered by building housing for disadvantaged buyers using novel financing vehicles such as flexible mortgage pay- ments made through payroll deductions. Crédit Agricole, France’s largest bank, has differentiated itself by offering specialized financial products related to the environ- ment, such as financing packages for energy-saving home improvements and for audits to certify farms as organic.

Strategic CSR also unlocks shared value by investing in social aspects of context that strengthen company competitiveness. A symbiotic relationship develops: The success of the company and the success of the community become mutually rein- forcing. Typically, the more closely tied a social issue is to the company’s business, the greater the opportunity to leverage the firm’s resources and capabilities, and ben- efit society.

Microsoft’s Working Connections partnership with the American Association of Community Colleges (AACC) is a good example of a shared-value opportunity arising from investments in context. The shortage of information technology workers is a significant constraint on Microsoft’s growth; currently, there are more than 450,000 unfilled IT positions in the United States alone. Community colleges, with an enroll- ment of 11.6 million students, representing 45 percent of all U.S. undergraduates, could be a major solution. Microsoft recognizes, however, that community colleges face special challenges: IT curricula are not standardized, technology used in class- rooms is often outdated, and there are no systematic professional development pro- grams to keep faculty up to date.

Microsoft’s $50 million five-year initiative was aimed at all three problems. In addition to contributing money and products, Microsoft sent employee volunteers to colleges to assess needs, contribute to curriculum development, and create faculty development institutes. Note that in this case, volunteers and assigned staff were able to use their core professional skills to address a social need, a far cry from typi- cal volunteer programs. Microsoft has achieved results that have benefited many communities while having a direct—and potentially significant—impact on the company.

Integrating Inside-out and Outside-in Practices

… Activities in the value chain can be performed in ways that reinforce improvements in the social dimensions of context. At the same time, investments in competitive con- text have the potential to reduce constraints on a company’s value chain activities. Marriott, for example, provides 180 hours of paid classroom and on-the-job training to chronically unemployed job candidates. The company has combined this with support for local community service organizations, which identify, screen, and refer the candi- dates to Marriott. The net result is both a major benefit to communities and a reduction in Marriott’s cost of recruiting entry-level employees. Ninety percent of those in the training program take jobs with Marriott. One year later, more than 65 percent are still in their jobs, a substantially higher retention rate than the norm.

Creating a Social Dimension to the Value Proposition

At the heart of any strategy is a unique value proposition: a set of needs a company can meet for its chosen customers that others cannot. The most strategic CSR

Law, Ethics, Business 39

occurs when a company adds a social dimension to its value proposition, making social impact integral to the overall strategy.

Consider Whole Foods Market, whose value proposition is to sell organic, natu- ral, and healthy food products to customers who are passionate about food and the environment. Social issues are fundamental to what makes Whole Foods unique in food retailing and to its ability to command premium prices. The company’s sourcing emphasizes purchases from local farmers through each store’s procurement pro- cess. Buyers screen out foods containing any of nearly 100 common ingredients that the company considers unhealthy or environmentally damaging. The same stan- dards apply to products made internally. Whole Foods’ baked goods, for example, use only unbleached and unbromated flour.

Whole Foods’ commitment to natural and environmentally friendly operating prac- tices extends well beyond sourcing. Stores are constructed using a minimum of virgin raw materials. Recently, the company purchased renewable wind energy credits equal to 100 percent of its electricity use in all of its stores and facilities, the only Fortune 500 com- pany to offset its electricity consumption entirely. Spoiled produce and biodegradable waste are trucked to regional centers for composting. Whole Foods’ vehicles are being converted to run on biofuels. Even the cleaning products used in its stores are environ- mentally friendly. And through its philanthropy, the company has created the Animal Com- passion Foundation to develop more natural and humane ways of raising farm animals. In short, nearly every aspect of the company’s value chain reinforces the social dimensions of its value proposition, distinguishing Whole Foods from its competitors.

Not every company can build its entire value proposition around social issues as Whole Foods does, but adding a social dimension to the value proposition offers a new frontier in competitive positioning.…

The Moral Purpose of Business

Corporations are not responsible for all the world’s problems, nor do they have the resources to solve them all. Each company can identify the particular set of societal problems that it is best equipped to help resolve and from which it can gain the great- est competitive benefit. Addressing social issues by creating shared value will lead to self-sustaining solutions that do not depend on private or government subsidies. When a well-run business applies its vast resources, expertise, and management talent to problems that it understands and in which it has a stake, it can have a greater impact on social good than any other institution or philanthropic organization.

QUESTIONS 1. How do Porter and Kramer support the claim that business and society are

interdependent?

2. According to the writers, how should a business begin to position itself in terms of strategic CSR? How could BP do so?

3. Porter and Kramer write: “For any company, strategy must go beyond best prac- tices. It is about choosing a unique position—doing things differently from compe- titors in a way that lowers costs or better serves a particular set of customer needs.” What does this mean with regard to strategy for CSR?

4. When immigration reform re-appeared on the nation’s legislative agenda in 2007, Bill Gates and other leaders in the high tech field entered the debate, advocating changes in the law to make it easier for highly skilled software engineers to gain legal entry to the United States. How would Porter and Kramer characterize their lobbying for changes in the law?

40 CHAPTER 1

Chapter Problems 1. Analyze this scenario from the standpoint of law and of ethics: For years, Dr.

Eddingfield, a licensed physician, had been the Hurley family doctor. When Hurley became dangerously ill, he sent a messenger to Dr. Eddingfield, who told the doctor of Hurley’s sickness, explained that no other doctor was available, and offered to pay Eddingfield’s fee. At the time, none of his other patients needed attention, and Dr. Eddingfield was free to help the sick man, but he chose not to help. Mr. Hurley died.

2. Research: a. Although in the United States there is no general “duty to rescue,” other

countries do have such requirements. In France, Germany, and Russia, for example, bystanders may not legally ignore a fellow citizen who needs help in an emergency. What can you find about laws that require rescue in other parts of the world?

b. Several states, including Wisconsin, Vermont, Hawaii, Rhode Island, and Min- nesota, also have such legislation. Many states require certain persons to report specific kinds of crimes, most often child abuse. Find and compare two state statutes.

c. While rescue is not required in the United States, it is encouraged by the exis- tence in every state of “Good Samaritan” laws, protecting people who assist in an emergency from liability in most circumstances. Locate the Good Samaritan law in your home state. Describe it in your own words. Does it protect those who do not have medical training?

3. Leslie Bender, professor of law at Syracuse University, has written about the ethic of care and how it might reframe the law of negligence. Instead of the traditional tort standard that measures whether a defendant has behaved “reasonably, or prudently by guarding against foreseeable harm,” she imagines a standard that would measure whether a defendant has demonstrated “concern and responsibility for the well- being of others and their protection from harm.” Turning to the “no duty to rescue” rule, and the first case in this chapter, Yania v. Bigan, Bender would have us look at Yania, the “drowning stranger,” in the light of this “new legal perspective, informed by … notions of caring, responsibility, interconnectedness and cooperation.” What matters now, she writes, is that “someone, a human being, a part of us, is drowning and will die without some affirmative action.”

The drowning stranger … no doubt has people who care about him—parents, spouse, children, friends, colleagues; groups he participates in—religious, social, athletic, artistic, political, educational, work-related; he may even have people who depend upon him for emotional or financial support. He is interconnected with others. If the stranger drowns, many will be harmed.… When our legal sys- tem trains us to understand the drowning stranger story as a limited event between two people, both of whom have interests at least equally worth protect- ing, and when the social ramifications we credit most are the impositions on per- sonal liberty of action, we take a human situation and translate it into a cold, dehumanized algebraic equation. We forget that we are talking about human death or grave physical harms and their reverberating consequences.…61

61 “A Primer of Feminist Theory and Tort,” 38 J. Leg. Educ. 3 (1988).

Law, Ethics, Business 41

Bender goes on to argue that any duty to act would be shaped by the particular context of the situation, in line with the ethic of care. How would a rule like this have played out in Yania? What might Bigan’s duty have been? What are the pros and cons of adopting such a rule in other cases where accidental harm was not directly caused by defendants?

4. Writer and investigative journalist Peter Maass has pointed out the devastation caused by the pursuit of oil reserves in the developing world. In Nigeria, throughout some 30 years of oil extraction, the government was “a carnival of corruption,” with a series of military dictators siphoning off the oil wealth into foreign bank accounts. Meanwhile, hundreds of spills ruined farmland and fisheries. Social inequalities grew, as did tribal violence. For years the Niger Delta, the heart of the oil- producing region, has been the scene of terrible pollution and of an undeclared and brutal civil war.

How should companies respond to such a situation? Should they try to improve infrastructure (education, environment)? Should they try to influence government policies? Should they consider not operating within a failed state?

5. Part of the financial reform legislation passed by Congress in July 2010 was a requirement that all extractive industries—oil, coal, natural gas, and oil—make pub- lic the payments they make to foreign governments for these resources. Any extrac- tive company that is registered with the SEC—including those which are not U.S.-based but operate within the U.S.—will have to publish such figures. Those in the transparency movement are pleased with this new regulation. According to George Soros, founder of Open Society Institute:

This law sets a new, higher global standard for financial transparency. Making public the revenues that governments receive from oil, gas and mining companies will make those governments more open and more accountable to their citizens— and will also make these industries more transparent to investors. This is a victory for everyone who recognizes that financial transparency is essential for government and corporate accountability.

Research: Find out what BP (or any other oil major) has published in response to this transparency rule. For one of the foreign nations for which it has given pay- ment information, what can you find out about the standard of living of ordinary citizens, and the oil-related pollution of their environment?

6. In August 2010, the world’s first “green oil” deal was negotiated: Ecuador agreed to leave as much as a fifth of its total oil reserves underground, in exchange for $3.6 billion, to be paid by wealthy nations. The oil lies beneath one of the most bio- diverse rainforests on the planet, the Yasuni National Park, where one hectare con- tains more tree species than all of North America. The deal, backed by Greenpeace and the World Wildlife Fund, will protect the ecosystem, the indigenous tribes who live there, and will “lock up” fossil fuel that would have added 407 metric tonnes of CO2 to the atmosphere. The compensation the Ecuadoran government receives— about half of the value of the oil if it were extracted—will be invested in renewable energy projects. Who are the stakeholders in this scenario? Analyze it by using the five ethical theories that were introduced in this chapter.

7. Environmentalist David Orr says that bringing U.S. energy use within sustainable limits will have two parts. The easy part will be passing laws regulating the use of fossil fuels. More difficult will be the second part: changing the culture of

42 CHAPTER 1

consumption. Orr says “the frantic search for more money and more stuff” is not making us happier, but is actually “profoundly disquieting.” The research on happi- ness shows that, “beyond some fairly minimal level of comfort, we find satisfaction in our friendships and social relationships. It’s what brings us together that makes us really happy and makes life satisfying.” What ideas might be at the convergence of the human need for sociability and the planet’s need for humans to consume less? Can you make connections between these ideas and ethical theory?

8. Plato believed that the rulers of the ideal society should be paid no more than four times what the lowliest member of that society was paid. In the United States in 1980, CEO compensation was estimated to be 42 times that of average employees; by 2005, it was 411 times. In 2009, the average CEO of a Standard and Poors 500 Company earned $9.25 million in salary and stock options. The $700 billion govern- ment bailout of 2008 rescued many major financial institutions whose leaders had steered the U.S. into the worst economic crisis since the Great Depression. While millions of jobs, homes, and retirement savings were lost, senior executives in the financial sector were rewarded with enormous pay packages. In 2009, for example, Thomas Montag CEO of Bank of America received nearly $30 million. Lloyd Blank- fein, CEO of Goldman Sachs and Walid Chammah, CEO of Morgan Stanley were each given about $10 million.62

Analyze executive compensation with the ethical toolkit. How would Milton Friedman want to recompense corporate executives? How would a utilitarian? A deontological thinker? What would a virtue ethicist have to say about executive compensation? What would be the response of the ethic of care?

9. The BCRA (the law at issue in Citizens United) restricted both corporations and labor unions from making “independent expenditures” to finance elections. Both, however, were free to form Political Action Committees (PACs) that in turn could contribute to political campaigns and/or political advertising. a. PACs are highly regulated and must make detailed monthly reports to the Fed-

eral Elections Commission. What argument can you make that the right to form PACs should have led to a different outcome in this case?

b. Consider corporations and labor unions. How are they alike? Different? Should the law treat both the same when it comes to controlling political spending?

10. As part of their commercial due diligence efforts, most major banks already address environmental risk, focusing on potential legal liability that their borrowers may face. But should banks be concerned when borrower activity fall short of being ille- gal, yet still threatens the environment and/or contributes to climate change? Recently HSBC has limited its relationships with companies that produce palm oil, which is associated with deforestation. Rabobank of Holland uses a checklist of con- ditions that must be met by oil and gas firms before they are approved for loans, including commitments to protect water quality and to improve environmental per- formance. And as of August 2010 the U.S.-based banking giant Wells Fargo announced it would curtail its involvement with companies that are engaged in mountaintop removal mining. How would Porter and Kramer react to these prac- tices? Are they in line with strategic CSR?

62 http://www.aflcio.org/corporatewatch/paywatch/. Last visited August 23, 2010.

Law, Ethics, Business 43

CHAPTER PROJECT

Walking the Talk?63

Preparation: Come to class with the name of a company that claims to be a socially responsible enterprise.

If you have a laptop, be sure to bring it to class. (Your professor may specifically assign some students to bring laptops to be certain there are enough.)

In-class project: The teacher and/or class will select a number of companies to evaluate, depending on the size of the class. For example, a class of forty-eight students might evaluate four companies with twelve students assigned to each company.

For each company, students will be further divided into four groups for in-class research to assess the degree to which their company “walks the talk.”

GROUP A: Company Self-image • What does the company’s Web site say about its commitment to social

responsibility? • Has the company issued any type of report about its social responsibility? • If so, does it seem to follow the GRI (Global Reporting Initiative) standards?

Was the data verified by a third party? • Does the company mention any awards or recognition it has received?

GROUP B: Outside Rankings • Is the company listed on any outside rankings lists? If so, how does it rank? • What can you find out about the entity that made the rankings? • Has the company received any awards or recognition for its social responsibility?

GROUP C: Government Regulation • What is the company’s record with the relevant government agency? (EPA for

environmental impact; EEOC for diversity and civil rights issues; FTC for mar- keting/consumer relations; FDA for health/medical issues; OSHA for workplace safety concerns) Does the company seem to have had any violations/fines?

• Has the company partnered with any government agency to set standards or make improvements?

GROUP D: News Reports • Has the company been in the news for a reason that casts a negative light on its

“talk?” Can you find any evidence of mismanagement? • What is the company’s record with respected non-governmental Organizations

(NGOs)

63 Christina C. Benson, Chapter Project: Walking the Talk. [This chapter project is a shortened variation of a teaching exercise presented by Christina C. Benson to the Academy of Legal Studies in Business Master Teacher Symposium, in August 2010. It has been edited and reprinted with permission of the author.]

44 CHAPTER 1

De-briefing your findings: Immediately: The class regroups to share its findings and to compare the snapshot records of different companies. Results should be posted to a class blog, WIKI, or blackboard within 24 hours of class.

Upon reflection: After reading all of the results, each group should re-evaluate its company. Devise a rating scale from “A” to “F,” grade your company and explain why you think the company deserves the grade you have assigned. Cite specific evi- dence and information you relied upon in assessing and grading.

For example, if the company can be commended for progress it has made, then give specific examples of genuine efforts. Highlight those that go beyond compliance with the law and regulations to reflect that the company has a proactive and system- atic approach. Conversely, if there are shortcomings in the company’s record, give specific examples. Discuss how well you think the company has addressed and resolved prior problems, and what more it could/should do.

Law, Ethics, Business 45