What would Mama say?

A common ethics test is to imagine what your mother would say if she knew what you were doing. In business, the equivalent is to imagine the consequences if your company’s behaviour were on the front page of the newspaper.

As I write this column, the two big business ethics stories are Volkswagen cheating on its emissions from diesel cars, and drug companies imposing huge price increases on certain rarely used generic drugs. It strikes me that these incidents involve two key common elements. Each required the application of specialized knowledge by professionals (software engineers at VW, and pharmacists or other scientists who could identify drugs ripe for profit). And each delivered a “juicy” media story (deceived car owners and heartless drug pricing). What I find interesting is the convergence of the two — how the media report on stories involving specialized knowledge.

It is hard for the media to explain the subtleties of the issues involved in the sound bites they have available. Some years ago, I recall being interviewed on the radio about the NDP’s (then) assertion that having deferred taxes on your balance sheet was an indication of tax loopholes that unscrupulous companies were taking advantage of. Explaining the concept of deferred tax at 7 a.m. to people getting ready for work was a challenge. I doubt I changed any minds.

I don’t have any specialized knowledge about emissions software or drug pricing, but I searched hard to understand the back stories. For example, apparently the US has tough diesel emissions policies in part to protect domestic car companies, who don’t make diesel cars. So perhaps the software engineers saw their cheating as a way to even the playing field. And I still can’t figure out why the companies selling the rarely used generic drugs have so much power — do they have exclusive rights, even though the drugs are generic, or is there just no economic incentive for other companies to manufacture the small quantities needed by patients? I want to know more.

The fact that the media struggle to properly report on stories involving complex issues can be used as an excuse by companies to dismiss criticism. But it’s hard to condone what Volkswagen and Valeant (and other drug companies) are alleged to have done. And I believe that the media (including social media) play a vital role in reining in unethical behaviour by shining a light on it.

Ethical lapses don’t happen overnight. Software engineers designing emission controls have to balance performance with environmental concerns. Then someone realized that cheating the testing protocols was much more effective than tweaking the emission controls. The ethical line was crossed, and the cheating was discovered (by other experts). But it was the media that flamed the public uproar and caused every board of directors to ask what its own company was doing.

The pharmaceutical companies have for years been arguing that the high cost of R&D justifies enormous drug prices. Then some generic drug companies (and investors seeing a goldmine) jumped on the bandwagon and pushed the envelope in terms of the magnitude of the price increases. But physicians raised their voices about the impact on their patients, the media grabbed hold of the story and the public (and politicians) were engaged.

The trajectory is always the same. Clever scientists and professionals push the envelope and then someone gets too greedy and crosses a line. Other clever scientists and professionals (often working for the government or an NGO) find out. The media run with the story, and the public gets engaged. The perpetrators criticize the media for simplifying and dramatizing the story, but the bad stuff gets fixed (at least for a while).

A common ethics test is to imagine what your mother would say if she knew what you were doing. In business terms, the equivalent is to imagine the consequences if the behaviour of your company were on the front page of the newspaper. The media coverage might be simplistic or even unfair, but it’s still a good test to apply.