Module 5 Reading and Objectives
Module 5 Reading: pages 357-385
Module 5 Objectives:
In this Module we will…
*Assess what qualifies as a reasonable contract.
*Survey that policies of various companies that have been accused of violating contract laws.
*Consider the degree to which advertising is a form of contract and assess when ads stray into the realm of deception.
*Examine an undercover operation which showed that Sears had systematically overcharged customers for unneeded car repairs.
*Assess how much government control there should be in the writing and enforcement of contracts.
Module 5 Commentary
This module reading opens with a bizarre anecdote regarding Paul Ceglia, the guy who sued Mark Zuckerberg, founder of Facebook, for squeezing him out of the operation. Cegliaproduced a two-page contract as part of his own defense but careful scrutiny revealed that he had added “page one” on his own, and then doctored it to make it look real by baking it in the sun (the clothes pins which he used to hang it left marks). This is a rather blunt instance of contract fraud, and not your everyday type of story, but it does set the tone for the subject of this module–the ethical requirements of contracts and the laws which advance and support those requirements. To start, we might note that reading and understanding contracts, even relatively minor purchase contracts, can be an arduous process. Consider the catalog for NCA&T, or consider the standard college syllabus. These documents seem to grow more comprehensive and complicated every semester. On this head, the text quotes a summary remark from a 2009 contract dispute: “An insured should not have to consult a long line of case law or law review articles and treatises to determine the coverage he or she is purchasing under an insurance policy.” And yet, this is often what happens with contracts, even for relatively basic purchases, like Dish on Demand package or an Internet service. There are a range of interesting cases in this reading but I thought we could focus on two in this commentary which touch on everyday experiences. The first is car repair. Sears auto shops generate of a lot of income for the company, almost 10% of the 19 billion that it makes overall per year. In the 1990s a series of undercover operations revealed that Sears mechanics were overcharging in 90% of brake-repair cases by an average of $223 per customer. Closer inquiry revealed that Sears had a repair incentive program in place in which mechanics were offered promotions and pay raises if they generated sufficient repair revenue. Indeed in many instances, a mechanic’s baseline salary was based on fulfilling such incentives. And if mechanics failed to keep their revenue up, according to the investigation, then they were often demoted or let go. Critics have argued that this policy almost forces employees to overcharge their customers. Even worse, said one critic, is that Sears was using its 100-year-old name (which supposedly is a name that inspires consumer trust) as a marketing tool. In response to the investigations Sears retracted its mechanic incentive program, fired a few top management people, and made a public apology, mixed with some remarks of innocence, of course. Profits for the company quickly dropped however, so much so, that there was pressure to reinstate the mechanic incentive program, which the company in fact did (partially) in 1994. I think to most of us it seems like a very basic and egregious conflict of interest to instate a program such as this, where workers at a company get rewarded for shafting customers in effect, and yet many businesses flirt with this sort of thing when they pay employees on commission. There are alternative models. If you have ever bought a car at Car Max then you know that there is no percentage-based commission. Sales people get a flat fee for every car they sell, whether it costs $10,000 or $50,000. (Incidentally, the flat commission is something like $150, which any car salesperson will tell you is not very much.) The company argues that this policy discourages the kind of scams and price-manipulation that so-often happens with car sales. Should this model be enforced as a matter of public policy? What about the old injunction, “buyer beware.” Should the government be allowed to step in and police the payment structure for mechanics at Sears? On a lighter note (I guess) is the account presented on page 362 which cites a New York Post investigation into the length of Subway’s “foot-long” sandwich. Reporters for the paper discovered that some four out of seven sub sandwiches measure only eleven inches, or slightly less. Subway’s response in its defense was that the “Footlong” is just a casual name for the item and not a testament to its exact length. Now, a bunch of disgruntled long-time Subway customers and a team of lawyers have filed a class-action lawsuit on grounds of “decepetive advertising.” This may sound funny but it raises interesting questions about all kinds of claims made in advertising, which amount to a form of contract. I work in Rockingham County and every day I drive past a housing development called Oak Hills Estates. I look out my car window….no oaks, no hills, and no estates, at least not by any reasonable definition of that term. Or, another case, I also drive past a coffee shop which says it offers the “best coffee in the world.” Now, I don’t think anyone would have a problem with the coffee shop, right?, because the claim is obvious hyperbole. But what about the housing development and what about subway? Next time you see or hear an advertisement pay attention to this sort of thing. You will find that such claims are everywhere, and if so, does that lawsuit against Subway stand a chance? I mean that It seems that if we go after Subway and hold it to a certain exact standard then a lot of other advertisements would come under fire too, if we are going to be consistent. Hard to draw a line here, no?
Here is a CNN account of the Subway “footlong” and one of the allegations of false advertising that have emerged.
Click on the link for a thorough and very incisive article on the accusations of auto repair fraud at Sears. Pay attention to how this diverges a bit from the presentation of the case in our text.
“The Social Network” is a film describing the founding of Facebook and some of the drama which characterized the early days of the company, including wicked contract disputes by its various founders. Here is a pivotal scene in the movie,.
Module 6 Reading and Objectives
Module 6 Reading: pages 387-422
Module 6 Objectives:
In this module we will….
*Survey the dilemmas faced by businesses as they try to forge international standards.
*Examine the ethical view called moral relativism which claims that there are no universal ethical standards.
*Examine the Moral Objectivst’s response to relativism.
*Assess how relativism and objectivism bear on current attempts to create a uniform worldwide business climate.
*Survey a host of labor issues that underscore just how uneven codes for workers are in various parts of the world.
Module 6 Commentary
We live in a global society, it is often said, and certainly the world of commerce has no borders, or fewer and fewer all the time. But when dealing in trade across various cultures, it seems we need a shared set of values or standards that apply to all actors. The text operates with the presumption that we can in fact forge such standards, and perhaps you do too. But there is a school of ethical theory which believes that no such standards exist, and this school, called moral relativism, may present a serious challenge to many of the points in our Module 6 reading, so I though it would be a good idea to revisit moral relativism in a little more detail here, at the very least to see what an international code of business practices would be up against, theoretically speaking. When we briefly studied moral relativism in Module 1 (page 15) we looked at the premise that there is no one code of values that applies to all people in all places at all times. Relativism states that there are no moral codes that apply to all people, or that morality varies from culture to culture. The basic point is this: Morally speaking I come into the world a blank slate, and I receive concepts of virtue and vice based on what my particular culture believes. My attitudes on issues like marriage, showing respect, raising children, sexuality, etc. are shaped and defined by the fact that I live in 21st century America. If had I lived some place else, like India, or at some other time, like in ancient Greece, I might have very different views of right and wrong. Morality is relative to my cultural background; hence the name relativism. Moral relativism may be contrasted with Moral Objectivism, the view that there are some codes that apply to all people, no matter when or where they happen to live. Such codes are called absolute, or objective or universal. So, moral relativism is the view that moral or ethical statements vary from culture to culture, and are thus all equally valid, so society’s opinion of “right and wrong” is really better than any other. The basic idea is that there is no ultimate standard of good or evil, so every judgment about right and wrong is purely a product of a culture’s preferences. There is no ultimate standard of morality, according to moral relativism, and no statement or position can be considered absolutely “right or wrong,” “best or worst.” Many arguments for relativism rest on the idea that different practices equal different morals. Consider this example, devised originally by the ancient Greek historian Herodotus: Culture A burns the dead. Culture B eats the dead. Therefore right/wrong in regard to dealing with the dead is relative to what your culture says. Or, you might come from culture C, which says that the dead ought to be buried. The point is that the relativist looks at these varying practices and concludes that there must be no objective universal standard that applies to all people. And of course we can compare cultures on other issues too, like drinking or abortion or marriage, etc. The world exhibits wide diversity when it comes to all of these customs. And the relativist concludes from such diversity that there are no codes that apply to all people (no objective codes). In response to this, the moral objectivist might ask the following question: Does diverse behavior (on the surface) really entail diverse ethical codes? Perhaps these radically different practices are just various ways of expressing the same core moral value. Culture A burns the dead. Culture B eats the dead. But even though they express themselves differently, they share the same core moral value: Show respect for the dead. As you read, keep this argument in mind. Rachels discusses this point in section 2.5 of the chapter, entitled, Why There is Less Disagreement Than It Seems. Moral objectivists have a number of reasons for claiming that relativism is weak and even incoherent: They say for one thing that it restricts us from judging the customs of other societies. Let’s look at a concrete illustration from a book called Patterns of Culture written in the 1930s by an Anthropologist named Ruth Benedict. Benedict describes a group of native Americans from the Pacific Northwest known as the Kwakiutl. They have a custom in which hardship or grief may be dealt with by lashing out at anyone, even if that person had nothing to do with the hardship. Benedict writes,
Among the Kwakiutl it did not matter whether a relative had died in bed of disease, or by the hand of an enemy, in either case death was an affront to be wiped out by the death of another person. The fact that one had been caused to mourn was proof that one had been put upon. A chief’s sister and her daughter had gone up to Victoria, and either because they drank bad whiskey or because their boat capsized they never came back. The chief called together his warriors, “Now I ask you, tribes, who shall wail? Shall I do it or shall another?” The spokesman answered, of course, “Not you, Chief. Let some other of the tribes.” Immediately they set up the war pole to announce their intention of wiping out the injury, and gathered a war party. They set out, and found seven men and two children asleep and killed them. “Then they felt good when they arrived at Sebaa in the evening.”
What is going on here? A man loses his sister and his niece so he randomly kills nine people who had nothing to do with it to make himself feel better. Now, if you did something nasty to me I might seek some sort of punishment for you in order to make myself feel better. That is called retributive justice, we see it in many places, most notably perhaps in the Bible (an eye for an eye), and it makes sense to a lot of people. But the Kwakiutl have something completely different going on. It’s not like you do something nasty to me and I seek justice against you. It’s like, you do something nasty to me and I punch the person sitting next to you. Should the Kwakiutl be allowed to practice this custom? Should someone step in and police their behavior? If you are an ethical relativist, your answer to that last question would certainly be no, for all the reasons described above.
Maybe some of you would call yourselves relativists in this particular case. Hey, it’s their culture and who am I to step in and police them, you might say. I wouldn’t want them coming to Greensboro, NC and telling me what I can or cannot do, so why do I have any right to do that to them. Live and let live. But if we take this principle and apply it consistently, we may run into some very disagreeable conclusions. Forget the Kwakiutl for a moment and replace the nine innocent deaths with six million Jews. Strictly speaking, the relativist would have no grounds for saying “stop” to Hitler than she would for saying stop to the Kwakiutl. And that position, to many, including Rachels, is deeply problematic. Along with this critique of relativism I want to presents an argument in support of moral objectivism, the view that there are some codes that apply to all people, and the view which seems to be the basic operating position in our text. Imagine a culture in which there is no value placed on telling the truth. Let’s think that through. Imagine that this commentary that I’vewritten is a complete crock, and you are going to get an F on the exam because I have been lying to you about relativism. You can’t complain to my supervisors because our culture places no value on truth telling and that means I am allowed to lie to you. So, you take your F and leave campus and stop for lunch at a restaurant. You ask your server if the pasta has gluten in it because you can’t eat gluten. He says it doesn’t even though he’s not sure because he’s too lazy to check and he knows he won’t get in trouble because lying is permissible. So now you’ve got and F and you’re in the hospital with a severe allergic reaction to your lunch. The person standing over your bed likes the idea of being a doctor even though she never went to medical school. She has lied her way into the position, with no retribution of course, and now you are being treated by someone with no credentials and you wind up dead. The end. You can see how quickly something like a disregard for truth-telling could ruin your day. the moral objectivist’s point is that it is impossible to imagine such a culture. Having some regard for honesty is an objective code, he says; it is universal. Despite this sort of defect it is important to present some positive aspects of the relativist’s outlook. Defenders say that relativism guards against the danger of assuming that our preferences are based on some absolute standard, and that is what helps us check that disdain or repugnance we might feel for those whose practices differ from our own, so we don’t just assume the Callatians, or the Ancient Greeks, or the people down the street, are morally repulsive. Thus, though the theory seems to have many faults, it does offer some genuine insight…it encourages tolerance and discourages arbitrary prejudice. This commentary has strayed a bit from the immediate reading in the text, but I thought (given the very brief attention we paid to relativism in Module 1) that it would be a good idea to give more careful consideration to what the international business community is up against when it attempts to forge standards that would apply to all participants worldwide. Global trade is not going away. Isolation is bad economic policy (look at North Korea). Thus it seems the only way forward is to devise some standards of trade that apply to all of us. In conclusion, I’d like to draw attention to various cross-cultural iterations of the golden rule, listed on page 389. When we look at something like this, it seems that a unified point of view may not be so far-fetched. The question is whether the sort of consensus presented on page 389 can translate into commerce. Is that plausible?
We love our gadgets and our buying power. We also know that our buying power rests on the fact that people who make the goods are paid very little. Recent findings have revealed that Chinese factory workers earn between 99 cents $1.35 an hour and work 12-14 hour days with no set day off. If we did try to develop the sort of international standards described in this module, what would that do to our status as consumers?
On page 409 of our text the Nestle baby formula scandal is introduced. The case underscores just how hard it can be to take a product from one market and insert it into another. For many in the United States formula feeding is a viable option because we have refrigeration, purified water and disposable income. Nestle aggressively marketed its baby formula around the world, however, in places where these amenities are not available to many people, and where breastfeeding is a much safer, healthier, and affordable option, The scandal erupted in the 1970s and dragged on for years. Some have argued quite reasonably that by promoting bottle feeding (rather than breast feeding) in places where the practice could not be sustained, Nestle contributed to the death or illness of many infants.
It has been called the worst industrial disaster in history. A gas leak from an American factory in Bhopal India in 1984 killed over 10,000 people in its immediate wake, but today over thirty years later, the effects are still with the community. Should the Bhopal plant have been operating using US safety and environmental standards? (It was not.)