Ethical VanitiesTHINK.CHANGE.DO

Acknowledgements & Co-Conspirators

Pat Auger Grahame Dowling Jordan Louviere Paul Burke Russell Belk Giana Eckhardt Christine Eckert Nidthida Lin (Perm-Ajchariyawong) Joachim Schwalbach

Michal Ulrych, Vichit Laoledchai, Thomas Birtchnell, Sandra Peter, Omer Konacki, Michael McGee, Steve Cook, Sandra Kleinsasser, Anja Schwerk

Acknowledgements & Supporters

Australian Research Council Alexander von Humboldt

Foundation (Germany) Rockefeller Foundation (US) Cambridge U. P. (UK) Various corporations, NGOs

and universities Particularly UTS and Robert

Button and Jane Westbrook

A Disclaimer

The Basic Logic of Today’s Talk

Corporate Social Responsibility arises ONLY when the human components accept and act upon their responsibility

The corporation is “us” as: Managers Workers Investors Customers

The dilemma is that we rarely act with a level of responsibility that we demand from companies

No Hurry Moderate Hurry High Hurry0%

20%

40%

60%

80%

63%

45%

10%

Those Helping

The Complexity of Context, The Fallacy of Generalization

The “Good Samaritan” Experiments Context trumps ‘values’ (up to a point?)

The Lesson of the Good Samaritan Experiments

Ironically, a person in a hurry is less likely to help people, even if he is going to speak on the parable of the Good Samaritan. Some literally stepped over the victim on their way to the next building! The results seem to show that thinking about norms does not imply that one will act on them. Maybe that “ethics become a luxury as the speed of our daily lives increases”. Or maybe peoples’ cognition was narrowed by the hurriedness and they failed to make the immediate connection of an emergency.

Darley & Batson (1973)

A More Managerial Perspective: Truthful or Cynical?

What is Required?

We need to understand the reality of individual behavior: In an environment that allows us to understand the trade-offs that

we make as ordinary [consumers, workers, investors, …, members of the the society]

When there are costs to our behavior And the consequences are potentially unknown

This is an enormous task What follows is just a glimpse of the inconvenient reality that we

seem to be uncovering

Why is This Critical?

Basing corporate and social policy on “myth”, “anecdote” and “opinion lacking scientific evidence” Is costly and inefficient

Bad policy and products/services that fail Dangerous socially

Implies the sanctity of one opinion over another based on power and persuasion rather than transparency and evidence

THE MYTH OF THE ETHICAL CONSUMER

ETHICAL VANITIES I

Consumer Social Responsibility: Do We Care When We Consume?

According to LOHAS about 30 percent of U.S. adults—more than 63 million consumers—now purchase goods and services with a nod toward the products’ health, environmental, social justice and sustainability value. The marketplace, worth $227 billion a year, is expanding at a healthy pace and is projected to reach $1 trillion annually by 2020. (LOHAS, 2006)

70 percent of respondents believed that a firm’s business ethics had “some influence” on their purchasing decisions. (Uusitalo & Oksanen, 2004)

YET, What does this imply about behavior?

The Problem of Believing What People Say: Unconstrained Queries Willingness to Pay or Action

What matters in purchasing? Utilitarians Anti-Utilitarians

Brand 51% 11%

People paid enough to live on 3% 96%

Damage to the environment 22% 98%

Animal testing 12% 79%

Human rights record of the country of production 7% 66%

Who are these people? Utilitarians Anti-Utilitarians

Females 77% 47%

MBA Degree 11% 3%

Amnesty Intl Supporter 8% 34%

Machiavellianism 98 92

Moral Relativism 3.29 2.90

Price Premium Utilitarians Anti-Utilitarians

Child Labor 12% 16%

Dangerous Work Conditions 12% 9%

Minimum Wages 12% 13%

Animal testing 9% 8%

Biodegradability 12% 13%

Animal By-products 10% 10%

+

Might imply significant differences

Until you examine whetherthis translates into any differencein willingness to pay or act

Tough Tradeoffs

Product A

Pro

duct

B

Hi

Hi

Lo

Lo

Functionality

Product A

Pro

duct

B

Good

Good

Bad

Bad

Ethics

Dilemma Situation = Ethics opposes Functionality (Good => Lo)

Non-Dilemma Situation = Ethics supports Functionality (Good => Hi)

Price is varied so that Functionality and Ethics are not “Free”

Functionality Trumps Ethics & Ethics Responds to Price

THE MYTH OF THE ETHICAL

WORKER

ETHICAL VANITIES II

Worker Social Responsibility: Do We Care When We Consider Our Job Contracts?

Major public issues such as a company’s reputation for strong ethical practices have become critical factors in choosing where to work, even to the point where many employees are prepared to sacrifice pay or promotion in order to work for organizations that are actively engaged in good social responsibility practices [underline added].

More specifically, concerns about ethical behavior outweigh concerns about the environment by all generations, when making employment choices.

(Kelly Services Annual Workplace Survey, 2010)

Worker Social Responsibility: Unconstrained/MBA

Company

Job

Corpor

ate re

putatio

n

Wor

kpla

ce re

puta

tion

Social’ r

eputatio

n 3.00

3.25

3.50

3.75

4.00

Unconstrained Rating

Company

Job

Corpora

te re

putatio

n

Work

place

reputa

tion

Social r

eputatio

n 0

5

10

15

20

25

30

35

Top 5 Reasons Mentioned

Pe

rce

nt

The rating scale is: 1 = completely irrelevant; 2 = not very relevant; 3 = relevant; 4 = very relevant; 5 = absolutely critical

Salary Sacrifice: The Ultimate Question (MBAs)

Salary/CompensationTime Demands

Promotion OpportunitiesCity / Size

Bonus SplitTravel Demands

Location (Country)Corporate Reputation

Workplace ReputationSocial Reputation

Signing BonusPension

Overseas TravelStock Option

Contract Length

Relative Importance (Percent)

But What of the Ordinary Worker? Surely They Care!

Salary/CompensationOvertime Paid

Time DemandsTravel DemandsContract Length

Corporate ReputationPromotion Opportunities

Family PoliciesCity / Size

Workplace ReputationProfessional Devlpmnt

Union WkplaceCommunity Wk

PensionFlex Schedule

Social Reputation

Impact Weights

THE MYTH OF THE SOCIALLY RESPONSIBLE

INVESTOR

ETHICAL VANITIES III

Investor Social Responsibility: Do We Care When We Consider Our Investment Choices?

For years, the notion of socially responsible investing (SRI) — putting your money into companies that represent and uphold your personal values — was considered a fringe strategy. No longer. Last year, $2.71 trillion — roughly one of out every nine dollars under professional management in the United States — was invested in companies based on their environmental or social records, according to the Social Investment Forum.

Northern Trust – Promoting their SRI Funds, 2010

Superannuation Allocations

Pension Allocation Game

Low Risk/Return

Low Medium Risk/Return

Medium Risk/Return

High Medium Risk/Return

High Risk/Return

0 2 4 6 8 10 12 14 16 18 20

Allocations (Percent of Portfolio)

Socially Responsible Normal Investment

Low Risk/Return

Low Medium Risk/Return

Medium Risk/Return

High Medium Risk/Return

High Risk/Return

0% 10% 20% 30%

Underallocation Percentage

Overall, the under allocation is about 20 percentage points

INDIVIDUAL SOCIAL RESPONSIBILITY

ETHICAL VANITIES IV

http://www.6billionothers.org

So What Do We Make of This?

The problem with people who have no vices is that generally you can be pretty sure they’re going to have some pretty annoying virtues.

Elizabeth Taylor

[We must] make the best of mankind as they are, since we cannot have them as we wish

George Washington speaking of his troops (1775)

As I grow older, I pay less attention to what men say. I just watch what they do.

Andrew Carnegie

So What Do We Make of This?

It is good to have hopes and aspirations about human behaviour

But we must not allow these to delude us to the reality of that behaviour

We cannot base policy (either corporate or social) on hope and aspiration alone

We must integrate this with how people live their everyday lives in many guises

We must be careful not to insist that our institutions behave better than we ourselves are capable

But that does not imply that we do not demand change nor can we change

Thank You and Questions?

More information at: www.mythoftheethicalconsumer.com

How Context Matters